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Atari Inc – ‘10-Q’ for 6/30/96

As of: Wednesday, 8/14/96 · For: 6/30/96 · Accession #: 940180-96-373 · File #: 0-27338

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

 8/14/96  Atari Inc                         10-Q        6/30/96    2:33K                                    Donnelley RR & So… 12/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      16     72K 
 2: EX-27       Financial Data Schedule                                2      5K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Exhibits and Reports on Form 8-K Financial Statements (Unaudited): Management's Discussion and Analysis of Financial Condition and Results of Operations Submission of Matters to a vote of Security Holders
1	1st Page - Filing Submission
2	Item 1. Financial Statements (Unaudited):
8	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
12	Item 4. Submission of Matters to a vote of Security Holders
"	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 16 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 June 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 August 1, 1996, there were 66,181,791 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                                                  

                                                        [Enlarge/Download Table]

                                                                                            Page
                                                                                                
Item 1.   Financial Statements (Unaudited):                                                     

          Consolidated Balance Sheets as of December 31, 1995 (audited) and June 30, 1996   3   

          Consolidated Statements of Income for the three months and the six months ended       
          June 30, 1995 and 1996                                                            4   

          Consolidated Statements of Cash Flows for the six months ended June 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 4    Submission of Matters to a vote of Security Holders                               12  

Item 6.   Exhibits and Reports on Form 8-K                                                  12  

Signatures                                                                                  15  

10-Q 3rd Page of 16 TOC 1st Previous Next ↓Bottom Just 3rd
PART I.  FINANCIAL INFORMATION                                                  
Item I.  Financial Statements (Unaudited)                                       

GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                           December 31,         June 30,    
                                                              1995                1996      
                                                          -------------        -----------  
                                                            (audited)          (unaudited)  
                                                                  (in thousands)            
                                                                                            
ASSETS                                                                                      
Current assets:                                                                             
 Cash and cash equivalents                                $       82,799      $      59,976 
 Short-term investments                                            9,563              9,767 
 Receivables, net                                                 83,191             63,226 
 Inventories, net                                                 48,512             44,514 
 Royalty advances                                                 29,577             48,757 
 Deferred income taxes                                            14,046             15,465 
 Prepaid expenses and other current assets                         1,914              4,246 
                                                          ---------------     --------------
   Total current assets                                          269,602            245,951 
Property and equipment, net                                        5,670              6,954 
Goodwill, net                                                     21,286             20,740 
Investments                                                           --              2,794 
Other assets                                                       1,011              1,422 
                                                          ---------------     --------------
   Total assets                                           $      297,569      $     277,861 
                                                          ===============     ==============

LIABILITIES AND STOCKHOLDER'S EQUITY                                                        
Current liabilities:                                                                        
 Accounts payable                                         $       87,366      $      64,946 
 Accrued liabilities                                              44,452             35,599 
 Royalties payable                                                23,466             25,507 
 Deferred income                                                   3,824              5,347 
 Income taxes payable                                              4,738              4,390 
 Current portion of long-term liabilities                          1,184              1,536 
 Due to related party                                                955                159 
                                                          ---------------     --------------
   Total current liabilities                                     165,985            137,484 
Other long-term liabilities                                        7,788              6,506 
                                                          ---------------     --------------
   Total liabilities                                             173,773            143,990 
                                                          ---------------     --------------

Commitments and contingencies                                                               

Stockholders' equity:                                                                       
  Common stock, $.01 par, 150,000,000 shares authorized,                                    
   62,687,416 shares issued and outstanding                          627                627 
  Additional paid-in capital                                     112,763            112,763 
  Retained earnings                                               10,406             20,481 
                                                          ---------------     --------------
   Total stockholders' equity                                    123,796            133,871 
                                                          ---------------     --------------

   Total liabilities and stockholders' equity             $      297,569      $     277,861 
                                                          ===============     ==============

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)

                                                        [Enlarge/Download Table]

                                               For the Three Months     For The Six Months  
                                                   Ended June 30,         Ended June 30,    
                                               --------------------    -------------------- 
                                                 1995        1996        1995       1996    
                                               --------    --------    --------   --------- 
                                                   (in thousands, except per share data)    
                                                                                            
Net sales                                      $ 30,298    $ 72,032    $ 64,420   $ 140,934 
Cost of goods sold                               17,440      41,144      36,368      81,687 
Selling and distribution expenses                 5,358      16,191      10,924      29,561 
General and administrative expenses               4,028       5,873       7,347      12,885 
                                               --------    --------    --------   --------- 
  Operating income                                3,472       8,824       9,781      16,801 
Merger costs                                        ---      (1,573)        ---      (1,573)
Interest and other income, net                      125         918         254       2,459 
                                               --------    --------    --------    -------- 
  Income before income taxes                      3,597       8,169      10,035      17,687 
Provision for income taxes                        1,457       3,381         318       7,599 
                                               --------    --------    --------    -------- 
  Net income                                   $  2,140    $  4,788     $ 9,717    $ 10,088 
                                               ========    ========    ========    ======== 
Pro forma adjustment to income tax  provision                             3,997             
                                                                       --------             
Pro forma net income                                                   $  5,720             
                                                                       ========             
Net income per share                                        $  0.08                $   0.16 

Weighed average shares outstanding                           62,687                  62,687 

The accompanying footnotes are an intergal 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,   
                                                           ---------------------
                                                             1995        1996   
                                                           --------    ---------
                                                              (in thousands)    
                                                                                
OPERATING ACTIVITIES:                                                           
 Net income                                                $   9,717   $ 10,088 
 Adjustments to reconcile net income to net cash provided                       
  by operating activities:                                                      
   Depreciation and amortization                                 389      1,228 
   Deferred income taxes                                      (5,756)    (1,419)
   Deferred income                                             1,065        216 
   Changes in operating assets and liabilities:                                 
    Receivables, net                                          17,620     19,965 
    Inventories, net                                          (5,300)     3,998 
    Royalty advances                                         (10,725)   (19,180)
    Due to related party, net                                 (1,697)      (796)
    Prepaid expenses and other current assets                 (1,338)    (2,332)
    Accounts payable                                          (1,117)   (22,420)
    Accrued liabilities                                       (1,675)    (8,853)
    Royalties payable                                           (723)     2,041 
    Income taxes payable                                       1,803       (348)
    Other                                                       (861)      (358)
                                                            ---------  ---------
     Net cash provided by (used in) operating activities       1,402    (18,170)
                                                            ---------  ---------
INVESTING ACTIVITIES:                                                           
 Purchases of investments                                        ---     (2,794)
 Purchase of property and equipment                           (2,862)    (2,064)
 Purchases of short-term investments, net                        ---       (204)
 Proceeds from disposal of property and equipment                ---         32 
 Purchases of Slash Corporation, net of cash acquired of                        
  approximately $516,000                                         461        --- 
                                                            ---------  ---------
       Net cash used in investing activities                  (2,401)    (5,030)
                                                            ---------  ---------
FINANCING ACTIVITIES:                                                           
 Issuance of Series A preferred stock and warrants            15,015        --- 
 Proceeds from issuance of note to a related party            15,225        --- 
 Repayment of notes                                          (10,471)       --- 
 Distributions to stockholders                                (6,000)       --- 
 Long-term liabilities                                          (510)       377 
                                                            ---------  ---------
       Net cash provided by financing activities              13,259        377 
                                                            ---------  ---------

 Net increase (decrease) in cash and cash equivalents         12,260    (22,823)
 Cash and cash equivalents - beginning of year                 1,217     82,799 
                                                            ---------  ---------
 Cash and cash equivalents - end of period                  $ 13,477   $ 59,976 
                                                            =========  =========

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

Page 5  

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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 Six Months Ended June 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 publisher of consumer       
software, in exchange for 2.35 million 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.                                                                   

WizardWorks and FormGen (collectively the "Aquired 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      
occured on January 1, 1994.                                                     

The following represents the summarized results of operations for the 
period prior to the consummation of the transaction, which is the three         
months ended March 31, 1996, on a seperate company basis and combined basis:    

                                                                [Download Table]

                            GT Interactive       Acquired        Pro Forma 
                             Software Corp.      Companies       Combined  
                           ------------------  --------------  ------------
                                               (in thousands)              
                                                                           
Net revenue                $   62,270           $   6,632       $   68,902 
Operating income                7,745                 232            7,977 
Net income                      5,100                 200            5,300 

Page 6  

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

NOTE 3-Inventories, net                                                         

Inventories consists of the following:                                

                                                                [Download Table]

                                                  December 31,        June 30,  
                                                      1995              1996    
                                                 --------------    -------------
                                                          (in thousands)        
                                                                                
Finished goods                                     $  51,545         $  51,205  
Raw materials                                          3,648             2,633  
                                                  -----------       ----------- 
                                                      55,193            53,838  
Less: reserve for obsolescence                         6,681             9,324  
                                                  -----------       ----------- 
                                                   $  48,512         $  44,514  
                                                  ===========       =========== 

NOTE 4-Supplemental Cash Flow Information                                       

                                                                [Download Table]

                                                            For the Six Months  
                                                              Ended June 30,    
                                                          ----------------------
                                                            1995          1996  
                                                          --------      --------
                                                              (in thousands)    
                                                                                
Issuance of Common Stock in connection with the                                 
 acquisition of Slash Corporation                         $ 20,000      $    -- 
Cash paid for income taxes                                   3,980         9,336
Cash paid for interest                                         170            43

NOTE 5-Subsequent Event                                                         

   On July 9, 1996, the Company acquired all of the outstanding common stock
of Humongous Entertainment, Inc., a premier developer and publisher of quality  
children's software, in exchange for 3,458,375 shares of the Company's common   
stock. This acquisition has been accounted for as a pooling of interests.       

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

OVERVIEW                                                                        

The Company is a leading publisher, merchandiser and distributor of   
consumer software. 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 three broad product categories: (i)  
front-line published software; (ii) value-priced software; and (iii) 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 six months 
ended June 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. 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 publisher of value-priced    
interactive entertainment, edutainment and productivity software. WizardWorks   
publishes and distributes consumer software developed by external developers    
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 Corp. ("FormGen"), a leading        
publisher of interactive entertainment PC shareware and software.               

   WizardWorks and FormGen (collectively the "Acquired Companies") have each
been accounted for as a pooling of interests, whereby the Company exchanged     
3,382,777 newly issued shares of its common stock for all the outstanding shares
of the Acquired Companies' common stock. Accordingly, the Company's Financial   
Statements for the six months ended June 30, 1995 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 calender quarter and are typically lower during the   
second calender quarter.  This seasonality is primarily a result of the         
increased demand for consumer software during the year-end holiday buying       
season.                                                                         

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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,  
                                       ----------------        ---------------- 
                                        1995      1996          1995      1996  
                                       ------    ------        ------    ------ 
                                                                                
Net sales                               100.0  % 100.0  %      100.0  %  100.0 %
Cost of goods sold                       57.6     57.1          56.5      58.0  
Selling and distribution expenses        17.7     22.5          17.0      21.0  
General and administrative expenses      13.3      8.1          11.4       9.1  
                                       ------    ------        ------    ------ 
Operating income                         11.4     12.3          15.1      11.9  
Merger costs                               --     (2.2)           --      (1.1) 
Interest and other income, net             .4      1.3            .4       1.8  
                                       ------    ------        ------    ------ 
Income before income taxes               11.8     11.4          15.5      12.6  
Provision for income taxes                4.8      4.7            .5       5.4  
                                       ------    ------        ------    ------ 
Net income                                7.0  %   6.7  %       15.0  %    7.2 %
                                       ======    ======        ======    ====== 

     Net sales for the three months and six months ended June 30, 1996 increased
approximately $41.7 million or 138% and $76.5 million or 119%, respectively, as 
compared to the three and six months ended June 30, 1995. This growth in net    
sales for the three and six months ended June 30, 1996 was primarily            
attributable to the introduction of newly published front-line titles, such as  
Heretic: Shadow of the Serpent Rider, Gender Wars, Kingdom O'Magic and Duke     
Nukem 3D, the continuing strong sales of Doom and Doom-related products and the 
expansion of the Company's value-priced line of software. In addition, an       
increase in the number of mass merchant stores supplied and serviced by the     
Company, an increase in the shelf space available to the Company from its       
existing mass merchant customers and an increase in sales from its existing mass
merchant shelf space contributed to the growth in net sales. 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. Additionally, during the six months ended June 30, 1996, the Company     
released Just Me & My Dad and Vikings: Strategy of the Ultimate Conquest.       

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, 1996 increased approximately $23.7 million or 136% and    
$45.3 million or 125%, respectively, as compared to the three and six months    
ended June 30, 1995. Costs of goods sold as a percentage of net sales for the   
three months ended June 30, 1996 decreased to 57.1% from 57.6% for the three    
months ended June 30, 1995. This decrease was primarily due to a change in      
product mix toward the Company's higher margin published front-line and         
value-priced products, which increased to approximately 50% of net sales during 
the three months ended June 30, 1996 compared to approximately 32% during the   
three months ended June 30, 1995. During the six months ended June 30, 1996,    
cost of goods sold as a percentage of net sales increased to 58.0% from 56.5%   
for the comparable period of the prior year. This increase was primarily due to 
a change in product mix driven by mass merchants for third party software       
products which yielded the Company lower margins. The percentage increase was   
partially offset by a shift in the overall Company mix toward the Company's     
higher margin published front-line and value-priced products, which increased to
approximately 52% of net sales during the six months ended June 30, 1996        
compared to approximately 44% during the six months ended June 30, 1995.        

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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 $10.8    
million or 202% and $18.6 million or 171% during the three and six months ended 
June 30, 1996, respectively, compared to the comparable periods of the prior    
year.  The increase was due to the additional advertising costs to support the  
growth of the Company's published products and an increase in shipping costs    
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 to support its growth.  Selling and distribution  
expenses as a percentage of net sales for the three and six months ended June   
30, 1996 increased to 22.5% and 21.0%, respectively, compared to 17.7% and 17.0%
during the three and six months ended June 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 six months ended June 30, 1996 increased             
approximately $1.8 million or 46% and $5.5 million or 75%, respectively, as     
compared to the three and six months ended June 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 six      
months ended June 30, 1996 decreased to 8.1% and 9.1%, respectively, from 11.4% 
and 13.3% for the three and six months ended June 30, 1995, respectively.       

   In the near term, selling and distribution and general and administrative
expenses are expected to rise, reflecting additions to the sales, distribution, 
operational and administrative infrastructure associated with the Company's     
anticipated growth.  These expenses are expected to decline over time as a      
percentage of the Company's net sales, though there are no assurances to this   
effect.                                                                         

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

Interest and other income, net increased approximately $.8 million and
$2.2 million for the three and six months ended June 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.               

LIQUIDITY AND CAPITAL RESOURCES                                                 

    As of June 30, 1996, the Company's principal sources of liquidity included
cash and short-term investments of approximately $69.7 million.  Cash used in   
operating activities for the six months ended June 30, 1996 amounted to         
approximately $18.2 million as compared to cash provided by operating activities
of $1.4 million for the six months ended June 30, 1995.  This decrease is       
attributable to the internally generated funds used to support the Company's    
growth and fluctuations in relative levels of receivables, inventory, royalty   
advances, accounts payable and income taxes payable.  The relative level of     
inventory to accounts payable as of June 30, 1996 increased compared to June 30,
1995 primarily as a result of the timing of sales and the scheduled payment of  
the accounts payable.                                                           

  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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Except for historical information contained in this Form 10-Q, the    
information set forth herein may include forward looking statements that are    
dependent on certain risks and uncertainties.  Important factors that could     
cause actual results to differ materially from the anticipated results include, 
but are not limited to, world-wide business and industry conditions, adoption of
new hardware systems, software development requirements and their impact on     
product launches, company customer relations and other risks detailed, from time
to time, in the Company's SEC filings including, but not limited to, the Annual 
Report on Form 10-K for the fiscal year ended December 31, 1995.                

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Part II.- OTHER INFORMATION                                                     

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

(a)       The Company held its Annual Meeting of Stockholders on June 20, 1996. 

(b)       The directors elected at the meeting were:                            

                                                                [Download Table]

                              For                 Withheld       Non-Voting
                              ---                 --------       ----------
                                                                           
Kenneth Cayre                 55,677,069          45,700         3,581,870 
Jordan A. Levy                55,677,069          45,700         3,581,870 
William E. Ford               55,677,569          45,200         3,581,870 

         Other directors whose terms of office continued after the meeting are
as follows:                                                 
         Joseph J. Cayre, Stanley Cayre, Jack J. Cayre, Ron Chaimowitz, Steven
A. Denning.                                                 

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

                                                                [Download Table]

                                       For         Against  Abstain  Non-Voting
                                       ---         -------  -------  ----------
                                                                               
Ratification of Arthur Andersen LLP                                            
as the Company's independent auditors  55,721,469  1,200    100      3,581,870 

Item 6.  Exhibits and Reports on Form 8-K                                       

(a)  Exhibits                                                                   
-------------                                                                   

The following exhibits are filed as part of this report:      

Exhibit No.    Description                                                      
-----------    -----------                                                      

2.1            Agreement and Plan of Reorganization by and among GT Interactive 
               Software Corp., GT Acquisition Sub, Inc., WizardWorks Group, Inc.
            and the Stockholders of WizardWorks Group, Inc. dated June 24,
            1996 (incorporated herein by reference to the exhibit with the
         corresponding number filed as part of the Company's Current
Report on Form 8-K filed July 9, 1996).           

2.2            Escrow Agreement by and among GT Interactive Software Corp.,     
         Paul D. Rinde, as the Stockholder Representative of Wizard-
          Works Group Inc., and Republic National Bank of New York, as
       Escrow Agent, dated June 24, 1996 (incorporated herein by
          reference to the exhibit with the corresponding number filed
       as part of the Company's Current Report on Form 8-K filed
July 9, 1996).                                    

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
(File No. 33-98448)).                             

27.1           Financial Data Schedule.                                         

____________                                                                    

     Page 12

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(b) Reports on Form 8-K                                                         
-----------------------                                                         

     A report on Form 8-K, dated June 24, 1996 was filed with the Securities and
Exchange 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.                              

GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES    
PRO FORMA STATEMENTS OF OPERATIONS  

The following pro forma statements of operations give effect to the merger of GT
Interactive Software Corp. (the "Company") and WizardWorks Group Inc. and       
Candel, Inc., the parent company of FormGen Corp., (collectively the "Acquired  
Companies"), which were accounted for as poolings of interests.  The pro forma  
statements of operations combine the results of operations of the Company for   
the three years ending December 31, 1995 with the results of operations of the  
Acquired Companies for the three years ended December 31, 1995.  These pro forma
financial statements should be read in conjunction with the historical financial
statements appearing elsewhere in this Quarterly Report on Form 10-Q, Current   
Report on Form 8-K filed on July 9, 1996 and the Annual Report on Form 10-K for 
the fiscal year ended December 31, 1995.                                        

                                                        [Enlarge/Download Table]

                                FOR THE YEAR ENDED DECEMBER 31, 1995                                 
                                ------------------------------------                                 

                                GT Interactive         Acquired                           Pro Forma  
                                Software Corp.         Companies        Adjustments       Combined   
                                --------------      --------------     --------------  --------------
                                                              (in thousands)                         
                                                                                                     
Net sales                       $      204,135      $       24,861     $      (3,223)  $      225,773
Cost of goods sold                     129,552               9,821            (3,048)         136,325
Selling, general and                                                                                 
 administrative expenses                43,290              13,293               ---           56,583
                                --------------      --------------     --------------  --------------
Operating income                        31,293               1,747              (175)          32,865
Interest and other income, net             609                 163               ---              772
                                --------------      --------------     --------------  --------------
Income before income taxes              31,902               1,910              (175)          33,637
Provision for income taxes               9,262               1,330               (75)          10,517
                                --------------      --------------     --------------  --------------
Net income                      $       22,640      $          580     $        (100)  $       23,120
                                ==============      ==============     ==============  ==============


                                FOR THE YEAR ENDED DECEMBER 31, 1994                                 
                                ------------------------------------                                 

                                GT Interactive        Acquired                            Pro Forma  
                                Software Corp.        Companies         Adjustments       Combined   
                                --------------      --------------     --------------  --------------
                                                              (in thousands)                         
                                                                                                     
Net sales                       $       85,176      $       14,853     $          ---  $      100,029
Cost of goods sold                      47,470               6,128                ---          53,598
Selling, general and                                                                                 
 administrative expenses                17,366               6,905                ---          24,271
                                --------------      --------------     --------------  --------------
Operating income                        20,340               1,820                ---          22,160
Interest and other income, net              30                 (10)               ---              20
                                --------------      --------------     --------------  --------------
Income before income taxes              20,370               1,810                ---          22,180
Provision for income taxes               1,661                 770                ---           2,431
                                --------------      --------------     --------------  --------------
Net income                      $       18,709      $        1,040     $          ---  $       19,749
                                ==============      ==============     ==============  ==============

Page 13 

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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES  
PRO FORMA FINANCIAL STATEMENTS (CONTINUED)  

                                                        [Enlarge/Download Table]

                                  FOR THE YEAR ENDED DECEMBER 31, 1993                                      
                                  ------------------------------------                                      

                                  GT Interactive         Acquired                              Pro Forma    
                                  Software Corp.         Companies         Adjustments         Combined     
                                -----------------   -----------------   -----------------  -----------------
                                                                (in thousands)                              
                                                                                                            
Net sales                         $       10,306      $        7,769      $           --     $       18,075 
Cost of goods sold                         4,050               3,271                  --              7,321 
Selling, general and                                                                                        
 administrative expenses                   5,325               4,052                  --              9,377 
                                -----------------   -----------------   -----------------  -----------------
Operating income                             931                 446                  --              1,377 
Interest and other income, net                 1                  22                  --                 23 
                                -----------------   -----------------   -----------------  -----------------
Income before income taxes                   932                 468                  --              1,400 
Provision for income taxes                    89                 197                  --                286 
                                -----------------   -----------------   -----------------  -----------------
Net income                        $          843      $          271      $           --     $        1,114 
                                =================   =================   =================  =================

Note: The adjustments made to the above pro forma statements of operations      
reflect the elimination of sales and purchases between the Company and the      
Acquired Companies, the elimination of the gross profit remaining in ending     
inventory relating to these sales and the income tax effect of these            
eliminations.                                                                   

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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: August 14, 1996

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

Page 15     

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  Exhibits
  --------

                                                                [Download Table]

Exhibit No.  Description                                                   Page
----------   -----------                                                   ----
                                                                               
2.1         Agreement and Plan of Reorganization by and among GT               
            Interactive Software Corp., GT Acquisition Sub, Inc., Wizard-      
            Works Group, Inc. and the Stockholders of WizardWorks Group,       
            Inc. dated June 24, 1996 (incorporated herein by reference to      
            the exhibit with the corresponding number filed as part of         
            the Company's Current Report on Form 8-K filed July 9, 1996).      

2.2         Escrow Agreement by and among GT Interactive Software Corp.,       
            Paul D. Rinde, as the Stockholder Representative of                
            WizardWorks Group, Inc.,and Republic National Bank of New          
            York, as Escrow Agent, dated June 24, 1996 (incorporated           
            herein by reference to the exhibit with the corresponding          
            number filed as part of the Company's Current Report on form       
            8-K filed July 9, 1996).                                           

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 (File        
            No. 33-98448)).                                                    

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:	8/14/96	15
	8/1/96	1
	7/9/96	7	16	8-K
For Period End:	6/30/96	1	10
	6/28/96	6	8
	6/24/96	6	16	8-K
	6/20/96	12
	3/31/96	6
	12/31/95	2	16
	10/20/95	12	16
	6/30/95	2	10
	6/23/95	8	9
	2/28/95	8
	12/31/94	13
	1/1/94	6
	12/31/93	14
				List all Filings

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Atari Inc – ‘10-Q’ for 6/30/96

As of: Wednesday, 8/14/96 · For: 6/30/96 · Accession #: 940180-96-373 · File #: 0-27338

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