<PAGE>   1



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549




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




For the quarterly period ended March 31, 2001        Commission File No. 0-27338


                                INFOGRAMES, INC.
             (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.)




                      417 FIFTH AVENUE, NEW YORK, NY 10016
                    (Address of principal executive offices)




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

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes /X/ No / /

         As of May 7, 2001, there were 69,768,101 shares of the registrant's
Common Stock outstanding.
<PAGE>   2
                                INFOGRAMES, INC.
                  MARCH 31, 2001 QUARTERLY REPORT ON FORM 10-Q
                                TABLE OF CONTENTS




PART I - FINANCIAL INFORMATION



<TABLE>
<CAPTION>
                                                                                                              PAGE

   Item 1. Financial Statements:


   <S>     <C>                                                                                               <C>
           Consolidated Balance Sheets as of June 30, 2000 and March 31, 2001                                   3

           Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended
           and the Nine Months Ended March 31, 2000, and for the Three Months Ended and the Nine Months
           Ended March 31, 2001                                                                                 4

           Consolidated Statements of Cash Flows for the Nine Months Ended March 31,
           2000 and 2001                                                                                        5

           Notes to the Consolidated Financial Statements                                                       7


   Item 2. Management's Discussion and Analysis of Financial Condition and Results
           of Operations                                                                                        16

   Item 3. Quantitative and Qualitative Disclosures about Market Risk                                           24



PART II - OTHER INFORMATION


   Item 1. Legal Proceedings                                                                                   25

   Item 6. Exhibits and Reports on Form 8-K                                                                    28


  Signatures                                                                                                   29
</TABLE>
<PAGE>   3
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

                                INFOGRAMES, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                 JUNE 30,         MARCH 31,
                                                                                   2000             2001
                                                                              -----------       ------------
                                                                                                 (UNAUDITED)
ASSETS

Current assets:
<S>                                                                           <C>               <C>
    Cash and cash equivalents                                                 $   13,463        $     13,143
    Marketable securities                                                          2,847                 576
    Receivables, net                                                              36,458              50,644
    Inventories, net                                                              32,575              33,874
    Income taxes receivable                                                        1,357                 273
    Prepaid expenses and other current assets                                      7,591               6,188
                                                                              ----------          ----------
       Total current assets                                                       94,291             104,698
Property and equipment, net                                                       17,412              16,057
Investments                                                                        7,421               7,413
Goodwill, net                                                                     40,857              32,496
Other assets                                                                      10,118              11,239
                                                                              ----------          ----------
       Total assets                                                           $  170,099      $      171,903
                                                                              ==========          ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable                                                           $  69,472           $  51,360
    Accrued liabilities                                                           38,170              29,026
    Credit facility                                                               31,139              34,888
    Revolving credit facility-related party                                       98,543               1,320
    Royalty payable                                                               18,678              15,059
    Bank overdraft                                                                 3,355                  --
    Deferred revenue                                                                  58               1,808
    Due to related party                                                          26,345              17,524
                                                                              ----------          ----------
       Total current liabilities                                                 285,760             150,985

Long-term debt                                                                   124,320             103,940
Deferred revenue                                                                      --               1,750
Other long-term liabilities                                                        2,239               1,841
                                                                              ----------          ----------
       Total liabilities                                                         412,319             258,516

Commitments and contingencies                                                         --                  --

Stockholders' deficit:
    Common stock, $0.01 par value, 300,000 shares authorized, 20,785 and 20,453
       shares and 69,747 and 69,512 issued and outstanding at June 30,
       2000 and March 31, 2001, respectively                                         208                 697
    Additional paid-in capital                                                   293,284             486,236
    Accumulated deficit                                                         (533,323)           (570,992)
    Accumulated other comprehensive income (loss)                                    933                (201)
    Treasury shares at cost 332 and 235, at June 30, 2000 and March 31,
       2001, respectively                                                         (3,322)             (2,353)
                                                                              ----------          ----------
       Total stockholders' deficit                                              (242,220)            (86,613)
                                                                              ----------          ----------
       Total liabilities and stockholders' deficit                             $ 170,099          $  171,903
                                                                              ==========          ==========
</TABLE>





  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                     Page 3
<PAGE>   4
                                INFOGRAMES, INC.
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                               .          Three Months Ended                         Nine Months Ended
                                                              March 31,                                December 31,
                                                 ----------------------------------          ----------------------------------
                                                    2000                    2001               2000                    2001
                                                 -----------             ----------          ----------              ----------
<S>                                              <C>                     <C>                 <C>                     <C>
Net revenues                                     $  63,608               $  70,768           $ 264,737               $ 237,819
Cost of goods sold                                  91,393                  36,960             245,149                  97,765
                                                 -----------             ----------          ----------              ----------
    Gross profit                                   (27,785)                 33,808              19,588                 140,054
Selling and distribution expenses                   39,105                  20,963             119,311                  66,443
General and administrative expenses                 38,063                  14,445              70,133                  49,873
Research and development                            15,325                  10,647              55,621                  39,968
Restructuring costs                                  5,832                   2,116              37,948                   2,116
Merger costs                                            --                      --                  --                   1,700
Gain on sale of line of business                        --                      --                  --                   5,501
Depreciation and amortization                       12,702                   4,469              20,967                  13,375
                                                 -----------             ----------          ----------              ----------
    Operating loss                                (138,812)                (18,832)           (284,392)                (27,920)
Interest expense, net                                4,600                   2,508              15,871                  11,176
Other (expense) income                                (916)                    (90)               (418)                  1,427
                                                 -----------             ----------          ----------              ----------
    Loss before provision for income taxes        (144,328)                (21,430)           (300,681)                (37,669)
Provision for income taxes                          24,407                      --              43,000                      --
                                                 -----------             ----------          ----------              ----------
    Net loss from continuing operations           (168,735)                (21,430)           (343,681)                (37,669)
Loss from discontinued operations                       --                      --                 477                      --
Extraordinary item - gain on early
  extinguishment of debt                                --                      --               1,888                      --
                                                 -----------             ----------          ----------              ----------
     Net loss                                    $(168,735)              $ (21,430)          $(342,270)              $ (37,669)
                                                 ===========             ==========          ==========              ==========

Basic and diluted net loss per share
  from continuing operations                     $   (8.17)              $   (0.31)          $  (20.13)              $   (0.71)
Basic and diluted net loss per share
  from discontinued operations                          --                      --               (0.03)                     --
Basic and diluted gain per share
  from extraordinary item                               --                      --                0.11                      --
                                                 -----------             ----------          ----------              ----------
Basic and diluted net loss per share             $   (8.17)              $   (0.31)          $  (20.05)              $   (0.71)
                                                 ===========             ==========         ===========              ==========
    Weighted average number of shares
      outstanding-basic and diluted                 20,645                  69,734              17,075                  53,086
                                                 ===========             ==========         ===========              ==========


Comprehensive income (loss):
    Net loss                                     $(168,735)              $ (21,430)         $(342,270)              $ (37,669)
    Foreign currency translation gain (loss)           934                    (171)             2,453                    (997)
    Unrealized gain (loss) on securities             1,767                     780              1,767                    (137)
        Comprehensive income (loss)              -----------             ----------          ----------              ----------
                                                 $(166,034)              $ (20,821)         $(338,050)              $ (38,803)
                                                 ===========             ==========         ===========             ===========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                     Page 4
<PAGE>   5
                                INFOGRAMES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                  NINE MONTHS ENDED
                                                                                                      MARCH 31,
                                                                                          ----------------------------------
                                                                                              2000                    2001
                                                                                          -----------             -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                       <C>                     <C>
    Net loss                                                                              $(342,270)              $ (37,669)
     Adjustments to reconcile net loss to net cash used in operating activities:
       Depreciation and amortization                                                         20,967                  13,375
       Accrued interest                                                                       1,461                   4,819
       Write-off of deferred financing costs in connection with GAP securities
          exchange                                                                            8,985                      --
       Write-off of deferred financing costs in connection with early extinguishment
          of debt                                                                             3,188                      --
       Amortization of deferred finance fees                                                    718                     717
       Deferred income taxes                                                                 51,316                      --
       Write-off of assets in connection with restructuring charges                          30,391                   1,409
        Loss from discontinued operations                                                       477                      --
       Extraordinary gain on General Atlantic Partners, LLC 0% subordinated
          convertible note                                                                   15,649                      --
       Issuance of Common Stock in lieu of partial royalty payment                            4,208                      --
       Issuance of Common Stock pursuant to Employee Stock Purchase Plan                        581                      --
       Changes in operating assets and liabilities:
            Receivables, net                                                                 95,792                 (14,042)
            Inventories, net                                                                101,154                  (1,510)
            Marketable securities                                                                --                   2,133
            Royalty advance                                                                   7,985                      --
            Due to related party, net                                                         2,482                  17,829
            Income taxes receivable                                                            (577)                  1,084
            Prepaid and other current assets                                                  4,670                   1,293
            Other assets                                                                         --                  (2,341)
            Accounts payable                                                                (62,275)                (17,896)
            Accrued liabilities                                                              22,325                 (10,178)
            Royalties payable                                                                (2,561)                 (3,006)
            Income taxes payable                                                             (1,726)                     --
            Deferred income                                                                      --                   1,750
            Long-term liabilities                                                               680                   1,352
            Bank overdraft                                                                       --                  (3,355)
            Other                                                                            (1,876)                   (590)
                                                                                          -----------             -----------
               Net cash used in operating activities                                        (38,256)                (44,826)
                                                                                          -----------             -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of property and equipment                                                      (5,739)                 (3,802)
                                                                                          -----------             -----------
               Net cash used in investing activities                                         (5,739)                 (3,802)
                                                                                          -----------             -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings, net                                                                         (35,114)                 48,736
    Redemption of preferred stock                                                           (30,000)                     --
    Conversion of 955 warrants by Infogrames Entertainment S.A. at $0.05 per share               --                      48
    Issuance of California US Holding Inc. 5% subordinated convertible note                  50,000                      --
    Issuance of General Atlantic Partners, LLC subordinated note                             20,000                      --
    Issuance of subordinated Cayre Notes                                                     10,000                      --
    Proceeds from exercise of stock options                                                    (199)                      8
    Issuance of common stock to Infogrames Entertainment S.A                                 48,677                      --
                                                                                          -----------             -----------
                   Net cash provided by financing activities                                 63,364                  48,792
                                                                                          -----------             -----------
    Effect of exchange rates on cash and cash equivalents                                        50                    (484)
                                                                                          -----------             -----------
    Net increase (decrease) in cash and cash equivalents                                     19,419                    (320)
    Cash and cash equivalents - beginning of period                                           9,137                  13,463
                                                                                          -----------             -----------
    Cash and cash equivalents  - end of period                                            $  28,556               $  13,143
                                                                                          ===========             ===========
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                     Page 5
<PAGE>   6
                                INFOGRAMES, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)






NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The accompanying interim consolidated financial statements of
Infogrames Inc. and Subsidiaries (the "Company") have been combined as of
December 16, 1999, with those of Infogrames North America, Inc., ("INA"), as a
result of a merger (the "Merger") between the Company and INA. The effective
date of the Merger was October 2, 2000 and was accounted for on an "as if
pooled" basis. Since December 16, 1999, the Company and INA have been under the
common control of Infogrames Entertainment, S.A. ("IESA"). In the opinion of
management, the accompanying consolidated financial statements 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. These interim consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Transitional Report on Form 10-K for the
three months ended June 30, 2000 and the Company's Information Statement on Form
14-C dated September 12, 2000.

RECLASSIFICATIONS

         Certain reclassifications have been made to the prior years'
consolidated financial statements to conform to classifications used in the
current period.

PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All intercompany transactions and
balances have been eliminated.

NET INCOME (LOSS) PER SHARE

         Basic earnings per share ("EPS") is computed as net earnings divided by
the weighted average number of shares of common stock outstanding for the
period. Diluted EPS reflects the potential dilution that could occur from shares
of common stock issuable through stock-based compensation plans including stock
options, restricted stock awards, warrants and other convertible securities
using the treasury stock method. The convertible debt, warrants and all shares
issuable under stock-based compensation plans would be anti-dilutive and,
therefore, have not been considered in the diluted EPS calculation for the three
and nine months ended March 31, 2000 and 2001, respectively.

GOODWILL

         Goodwill is currently amortized using the straight-line method over
periods not exceeding 5 years. Management reassesses quarterly the
appropriateness of both the carrying value and remaining life of goodwill,
principally based on forecasts of future undiscounted cash flows of businesses
acquired.


                                     Page 7
<PAGE>   7
MARKETABLE SECURITIES

         Management classifies equity securities as available-for-sale
securities under the provisions defined in the Statement of Financial Accounting
Standards No. 115, " Accounting for Certain Investments in Debt and Equity
Securities." Management determines the appropriate classification of its
investments at the time of purchase and reevaluates such determination at each
balance sheet date. Available-for-sale securities are carried at market value
with the unrealized gains and losses reported as a component of accumulated
comprehensive income.


REVERSE STOCK SPLIT

         On April 6, 2000, the Company's Board of Directors approved a
one-for-five reverse stock split of the issued and outstanding shares of the
Company's common stock, which became effective June 26, 2000. All periods have
been restated to reflect the reverse stock split.



NOTE 2 - MERGER AND ACQUISITIONS

INFOGRAMES NORTH AMERICA MERGER

         On October 2, 2000 the Company completed a merger with INA, a
wholly-owned subsidiary of its majority shareholder IESA, ("the "INA Merger").
This transaction was treated as a common control business combination accounted
for on an "as-if pooled" basis. The following outlines the transactions
consummated by the Company as of October 2, 2000 :

     a)   The Company and IESA entered into a distribution agreement, which
          provides for the distribution by the Company of IESA's products in the
          United States, Canada and their territories and possessions, pursuant
          to which the Company will pay IESA 30% of the gross profit on such
          products, while retaining 70% of the gross profit for the Company.

     b)   All outstanding debt under the Company's revolving credit agreement
          ("the Credit Agreement") and certain intercompany payables between the
          Company and IESA were converted into the Company's common stock at
          $6.40 a share. The balance of the Credit Agreement and certain
          intercompany payables prior to the merger was approximately $128.6
          million which converted to 20,089,224 shares of the Company's common
          stock. In addition, the Company amended the Credit Agreement with IESA
          to provide for an aggregate commitment of $50 million with primarily
          the same terms as the previous facility. The Credit Agreement expires
          on June 15, 2001.

     c)   All warrants held by IESA and California U.S. Holdings, Inc. ("CUSH")
          were exercised for an aggregate of 955,000 of the Company's common
          stock at $0.05 per share.

     d)   The Company assumed a $35.0 million revolving credit facility (the
          "BNP Credit Facility") with BNP Paribas ("BNP") which matures on June
          15, 2001. The facility has an interest rate of LIBOR plus 65 basis
          points per annum for fixed LIBOR loans, payable at maturity or
          quarterly and at maturity for loans with maturities in excess of 90
          days. For floating loans, an interest rate of BNP prime rate minus 1%
          per annum is charged, payable monthly. The facility fee was $17,500
          paid at closing and the commitment fee for the unutilized amount of
          the facility is 30 basis points per annum payable quarterly in
          arrears.

     e)   The Company issued 28,000,000 shares of common stock in exchange for
          all the outstanding shares of INA valued at approximately $5.1 million
          as of October 2, 2000.


                                     Page 8
<PAGE>   8
ONE ZERO MEDIA

         On November 4, 1998, the Company acquired One Zero Media, Inc. ("OZM"),
an internet entertainment content company, in exchange for approximately 458,000
newly issued shares of the Company's common stock and stock options to purchase
approximately 117,000 shares of the Company's common stock. Total consideration
of this transaction, including acquisition costs, was approximately $17.2
million, which was allocated to net assets acquired and goodwill. The
acquisition was accounted for as a purchase. On March 31, 1999, the Company
decided to sell OZM within the next six months and therefore OZM is accounted
for as a discontinued operation. OZM was sold in July 1999 for $5.2 million in
cash. This resulted in a loss from discontinued operations of $19.5 million,
$0.5 million of which is recognized in the nine months ended March 31, 2000.


NOTE 3 - INVENTORIES, NET

         Inventories consist of the following:

<TABLE>
<CAPTION>
                                                JUNE 30,          MARCH 31,
                                                  2000              2001
                                              -----------------------------
                                                      (IN THOUSANDS)
             <S>                              <C>              <C>
             Finished goods                   $  75,247        $  54,322
             Return inventory                     3,249            3,449
             Raw materials                        2,180            1,396
                                              ---------        ---------
                                                 80,676           59,167
             Less: Reserves                      48,101           25,293
                                              ---------        ---------
                                              $  32,575        $  33,874
                                              =========        =========
</TABLE>


NOTE 4 - COMMITMENTS AND CONTINGENCIES


LITIGATION

Scavenger

         On September 18, 1997, Scavenger, Inc. ("Scavenger"), a software
developer, filed a lawsuit against the Company in Supreme Court, New York
County, claiming that the Company breached a software development contract
between the parties dated November 28, 1995. The contract provided for the
development of four personal computer games, Amok, Scorcher, Into the Shadows
and Mudkicker. The Company paid royalty advances of $2 million ($500,000 per
game) in January 1996. Scavenger delivered and the Company accepted Amok and
Scorcher, but Scavenger did not deliver Into the Shadows or Mudkicker. The
Company paid an additional royalty advance of $500,000 upon delivery of Amok.

         The complaint alleges four causes of action: (1) breach of contract in
the amount of $1.9 million claimed as royalty advances for Amok and Scorcher
(first cause); (2) breach of contract in the amount of $2.4 million claimed as
additional royalty advances for Into the Shadows and Mudkicker (second cause);
(3) breach of contract in the amount of $5 million allegedly due above the
additional royalty advances (third cause); and (4) consequential damages in the
amount of $100 million based on the allegation that the Company's failure to pay
the additional royalty advances forced Scavenger out of business and Scavenger
allegedly was worth $100,000,000 as of January 1997 (fourth cause). The Company
asserted three counterclaims: (1) breach of contract for failure to deliver Into
the Shadows and Mudkicker seeking at least $5 million in damages (first
counterclaim); (2) breach of contract for failure to deliver Scorcher timely and
the failure to deliver Amok and Scorcher in conformance with the quality
requirements of the software development contract seeking at least $5 million in
damages (second counterclaim); and (3) unjust


                                     Page 9
<PAGE>   9
enrichment seeking the return of the $2.5 million in royalty advances paid to
Scavenger (third counterclaim).

         By Order entered March 3, 2000, the Court granted Scavenger's motion
for partial summary judgment as to the first cause of action and denied the
motion as to the second cause. Judgment was thereupon entered March 14, 2000 in
the amount of $2.4 million ($1.9 million plus interest accrued), which was
affirmed by Order of the Appellate Division, First Department entered June 8,
2000. Motions to the Appellate Division, First Department and to the Court of
Appeals for leave to appeal to the Court of Appeals were denied. In January
2001, the Company paid approximately $2.6 million (including accrued interest
from date of judgment) satisfying the partial summary judgment.

         In an Order entered June 21, 2000, the Court denied the Company's
motion for summary judgment dismissing the third and fourth causes of action.
The Company simultaneously moved for reargument of and appealed from that
portion of the June 21, 2000 Order denying partial summary judgment on the
fourth cause. By Order entered September 8, 2000, the Court granted reargument
and, on reargument, dismissed the fourth cause of action (and the Company
withdrew its appeal). Scavenger unsuccessfully moved for reargument of the
September 8, 2000 Order, and is now appealing from the September 8, 2000 Order
to the Appellate Division, First Department.

         By Order entered December 19, 2000, the Court separately ruled with
respect to each of the Company's counterclaims that the Company cannot seek to
recover as a measure of damages any of the royalty advances paid under the
software development contract. Subject to this limitation, the Court otherwise
sustained the Company's first counterclaim for damages for the undelivered games
Into the Shadows and Mudkicker. The Court dismissed the second counterclaim
finding that the Company had not shown provable damages other than the $1.5
million in royalty advances paid on Amok and Scorcher which the Court held could
not be recovered. The Court also dismissed the third counterclaim for unjust
enrichment, which sought to recover the entire $2.5 million in royalty advances
paid to Scavenger. The Company is appealing this dismissal only as to the $1
million in royalty advances paid for the undelivered Into the Shadows and
Mudkicker.

         By Order entered January 8, 2001, the Court granted a motion by the
Company to dismiss the second cause of action, a motion prompted by and premised
on the reasoning of the Court's March 3, 2000 Order granting partial summary
judgment on the first cause of action as well as of the Appellate Division,
First Department's June 8, 2000 Order of affirmance. Scavenger has appealed from
the January 8, 2001 Order.

         By Order entered March 1, 2001, the Appellate Division, First
Department granted the Company's motion to consolidate for oral argument on the
same date in the June Term the three pending appeals from the September 8 Order,
the December 19 Order and the January 8 Order. On April 24, 2001, Scavenger
served a motion for reargument or renewal in the Supreme Court addressed to the
January 8 Order.

Herzog

         In January, February and March 1998, ten substantially similar
complaints were filed against the Company, its former Chairman and its former
Chief Executive Officer, and in certain actions, its former Chief Financial
Officer, in the U.S. District Court for the Southern District of New York. The
plaintiffs, in general, purport to sue on behalf of a class of persons who
purchased shares (and as to certain complaints, purchased call options or sold
put options) of the Company during the period from December 15, 1995 through
December 12, 1997. In their consolidated and amended complaint, the plaintiffs
allege that the Company violated the federal securities laws by making
misrepresentations and omissions of material facts that allegedly artificially
inflated the market price of the Company's common stock during the class period.
The plaintiffs further allege that the Company failed to expense properly
certain prepaid royalties for software products that had been terminated or had
failed to achieve technological feasibility, or had insufficient sales to recoup
the paid advances, which misstatements purportedly had the effect of overstating
the Company's net income and net assets. By order dated January 23, 1999, the
plaintiffs were granted leave to file a second consolidated and amended
complaint, which added claims under the federal securities laws against the
Company's former independent auditors, Arthur Andersen LLP. The Company


                                    Page 10
<PAGE>   10
and Arthur Andersen LLP each filed motions to dismiss the second consolidated
and amended complaint. By order and opinion dated November 29, 1999, the
District Court granted the motion to dismiss. Plaintiffs appealed from the
dismissal of the action, and on July 11, 2000, the Court of Appeals for the
Second Circuit issued an opinion and judgment reversing the dismissal of the
complaint as to the Company and individual defendants (but not as to Arthur
Andersen LLP) and remanding the action to the District Court. On July 21, 2000,
the Company filed with the Court of Appeals a petition for rehearing with
suggestion for rehearing en banc. On September 1, 2000, the Court of Appeals
denied the petition for rehearing and suggestion for rehearing en banc. The case
was returned to the District Court, where it is now pending.

James

         On April 12, 1999, an action was commenced by the administrators for
three children who were murdered on December 1, 1997 by Michael Carneal at the
Heath High School in McCracken County, Kentucky. The action was brought against
25 defendants, including the Company and other corporations in the videogame
business, companies that produced or distributed the movie The Basketball
Diaries, and companies that provide allegedly obscene internet content. The
complaint alleges, with respect to the Company and other corporations in the
videogame business, that Carneal was influenced by the allegedly violent content
of certain videogames and that the videogame manufacturers are liable for
Carneal's conduct. The complaint seeks $10 million in compensatory damages and
$100 million in punitive damages. The Company and approximately 10 other
corporations in the videogame business have entered into a joint defense
agreement and have retained counsel. By order entered April 6, 2000, the Court
granted a motion to dismiss the complaint. Plaintiffs have filed a motion to
vacate the dismissal of the action. On June 16, 2000, the Court denied the
motion to vacate. On June 28, 2000, plaintiffs appealed the dismissal of the
action to the Court of Appeals for the Sixth Circuit. Plaintiffs' and
defendants' final appellate briefs were submitted on November 30, 2000.

McGovern

         On or about September 11, 2000, Jane Bassler and Paul McGovern, as
shareholders of the Company, commenced a derivative action on behalf of the
Company in Delaware Chancery Court, New Castle County, against IESA, CUSH, and
the individual members of the Company's board of directors since November 1999.
The action alleges that IESA, as controlling shareholder of the Company and
through its nominees on the Company's board, has engaged in certain self-dealing
actions. The first cause of action, asserted against certain defendants, alleges
breach of fiduciary duty. The second cause of action, asserted against CUSH,
alleges aiding and abetting. The third cause of action, asserted against certain
defendants, alleges breach of fiduciary duty in order to divest their own
investment in the Company on terms beneficial to them. The complaint seeks on
behalf of the Company a declaration that the defendants have breached their
fiduciary duties to the Company; the imposition of a constructive trust on all
profits and gains defendants have received as a result of the wrong alleged;
damages in favor of the Company; and attorneys' fees and costs for plaintiffs.
On September 19, 2000, Bassler voluntarily dismissed her claim without
prejudice. On May 7, 2001 plaintiff McGovern voluntarily dismissed this action
without prejudice.

Sanders

         On April 19, 2001, a putative class action was commenced by the family
of William David Sanders, a teacher murdered on April 2, 1999 in a shooting
rampage committed by Eric Harris and Dyland Klebold at the Columbine High School
in Jefferson County, Colorado. The action was brought against 25 defendants,
including the Company and other corporations in the videogame business,
companies that produced or distributed the movie The Basketball Diaries, and
companies that provide allegedly obscene internet content. The complaint
alleges, with respect to the Company and other corporations in the videogame
business, that Harris and Klebold were influenced by the allegedly violent
content of certain videogames and that the videogame manufacturers are liable
for Harris' and Klebold's conduct. The complaint seeks a minimum $15,000 for
each plaintiff and up to $15 million in compensatory damages for certain
plaintiffs and $5 billion in punitive damages, injunctive relief in the form of
a court established "monitoring system" requiring video game companies to comply
with rules and standards set by the court for marketing violent games to
children. The Company has not yet been served but intends to vigorously defend
this action if and when properly served.


                                    Page 11
<PAGE>   11
         The Company believes that these complaints are without merit and
intends to defend itself vigorously against these actions. Additionally, the
Company is involved in various claims and legal actions arising in the ordinary
course of business, the ultimate resolution of which the management of the
Company believes will not be material to the Company's results of operations or
financial condition.


CREDIT FACILITIES

         On September 11, 1998, the Company entered into the Credit Agreement as
subsequently amended, with First Union National Bank as agent for a syndicate of
banks (the "Banks"), expiring on March 31, 2000. Under the Credit Agreement, the
Company borrowed approximately $71 million for ongoing working capital
requirements, letters of credit and other general corporate purposes, secured by
domestic accounts receivable and inventory and other assets of the Company. To
induce the Banks to amend the Credit Agreement, the Company issued the Banks
warrants to purchase, at an exercise price of $0.05 per share, an aggregate of
150,000 shares of the Company's common stock. Of these, warrants to purchase
55,000 shares of the Company's common stock were immediately exercisable,
warrants to purchase 50,000 shares of Company's common stock became exercisable
on October 31, 1999 and warrants to purchase the remaining 45,000 shares of the
Company's common stock (the "Bank Warrants") became exercisable on February 28,
2000 if the Credit Agreement was not repaid prior to that date.

         As of February 15, 2000, IESA entered into an agreement with the Banks,
pursuant to which IESA assumed the Banks' interest in the Credit Agreement. In
connection with the assumption by IESA of the Credit Agreement, (i) the maturity
date was extended from March 31, 2000 to June 30, 2000, (ii) the interest rate,
which was the Prime Rate plus 1.0% or LIBOR plus 2.5% at the option of the
Company, was set at LIBOR plus 2.5%, (iii) a $250,000 amendment fee, which would
have been payable to the Banks on March 31, 2000 unless the Credit Agreement was
refinanced by February 16, 2000, was reduced to $125,000 and paid to IESA, (iv)
certain mandatory prepayment restrictions and operational covenants were revised
to be less restrictive and (v) revisions were made to provide alternative letter
of credit facilities to the Company. In addition, warrants to purchase 45,000
shares of the Company's common stock, at an exercise price of $0.05 per share,
were issued to IESA.

         On June 29, 2000, IESA and the Company amended the Credit Agreement to
increase the aggregate commitment available under the facility to $125 million
and to extend the maturity date to September 30, 2000.

         On June 30, 2000, the Company had outstanding borrowings under the
Credit Agreement of approximately $98.5 million and no letters of credit
outstanding. Outstanding borrowings under the Credit Agreement are classified as
current in the consolidated balance sheet as of June 30, 2000, accrued interest
of $2.5 million was recorded but not yet paid under the Credit Agreement as of
June 30, 2000.

         In conjunction with the INA Merger, which closed on October 2, 2000,
all the amounts outstanding under the Credit Agreement and certain intercompany
payables were converted into approximately 20 million shares of the Company's
common stock at a price of $6.40 per share. The Company amended the Credit
Agreement with IESA (the "New Credit Agreement") to provide for an aggregate
commitment of $50.0 million, and to extend the maturity date from September 30,
2000 to December 31, 2000. On December 22, 2000, the Company and IESA amended
the New Credit Agreement to extend the maturity date to June 15, 2001. For
additional information relating to the INA Merger, see Note 2 Merger and
Acquisitions. As of March 31, 2001, the outstanding borrowings under the Credit
Agreement were approximately $1.3 million, of which $0.3 million is related to
accrued interest. As of March 31, 2001, there are $1.0 million of letters of
credit outstanding.

         In connection with the INA Merger, the Company assumed a $35.2 million
revolving credit facility with BNP which matures on June 15, 2001. The facility
has an interest rate of LIBOR plus 65 basis points per annum for fixed LIBOR
loans, payable at maturity or quarterly and at maturity for loans with
maturities in excess of 90 days. For floating loans, an interest rate of BNP
prime rate minus 1% per annum is charged, payable monthly. The facility fee was
$17,500 paid at closing and the commitment fee for the


                                    Page 12
<PAGE>   12
unutilized amount of the facility is 30 basis points per annum payable quarterly
in arrears. The financial covenants which have been informally agreed to have
been satisfied as of March 31, 2001. As of March 31, 2001, the Company had
approximately $34.9 million outstanding borrowings under the BNP Credit Facility
of which a nominal portion relates to interest.



LONG-TERM DEBT


Long-term debt consists of the following at March 31, 2001: (in thousands)

<TABLE>
<CAPTION>

<S>                                                          <C>
5% subordinated convertible note with IESA.................. $   64,703
GAP 0% subordinated convertible notes.......................     39,237
                                                             ----------
                                                               $103,940
</TABLE>

The above indebtedness matures in full on December 16, 2004.


                                    Page 13
<PAGE>   13
NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                     NINE MONTHS ENDED
                                                                                         MARCH 31,
                                                                                --------------------------
                                                                                 2000                2001
                                                                                --------           -------
                                                                                        (IN THOUSANDS)
<S>                                                                             <C>                 <C>
Warrants issued in connection with New Credit
    Agreement, as amended                                                          375                  --
Warrants issued to General Atlantic Partners LLC and acquired by
    Infogrames Entertainment S.A                                                 8,833                  --
Warrants issued in connection with short-term note                                 150                  --
Discount on GAP 0% Subordinated Convertible Notes                               14,351                  --
Conversion of revolving credit facility into shares of the Company's common
    stock by Infogrames Entertainment S.A at $6.40 per share                        --              128,571
Deferred financing costs in connection with long term debt                       4,776                   --
Issuance of stock in exchange for the assets of Infogrames North America            --                  280
Conversion of Infogrames North America related party balances with
    Infogrames Entertainment, S.A                                                   --               51,345
Sale of treasury stock in lieu of partial royalty payment                           --                  600
Common stock issued in lieu of partial royalty payment                           4,208                   --
Cash paid for interest                                                           5,470                5,250
Cash paid for taxes                                                                102                   --
</TABLE>


NOTE 6 - RESTRUCTURING RESERVES

         On June 30, 2000, the Company recorded a restructuring reserve of
approximately $9.8 million, included in accrued liabilities, as detailed below.
In connection with the shutdown of European operations, certain reserves related
to inventory and receivables were deemed to be unnecessary in light of actual
operating experience. Thus, $2.6 million of such reserves were reversed in the
second quarter of Fiscal 2001. On, March 14, 2001, the Company announced and
commenced a plan to shutdown its San Jose, California facility and recorded a
charge of $2.1 million. This charge consists primarily of severance and related
disposal of assets that will no longer be used.

         The following table sets forth activity for the restructuring reserves
during the nine months ended March 31, 2001: (IN THOUSANDS)


<TABLE>
<CAPTION>
                              BALANCE                                                  BALANCE
                              JUNE 30,                    CASH                        MARCH 31,
                               2000          CHARGES      PAYMENTS       OTHER          2001
                              --------      --------      --------      --------      --------
<S>                           <C>           <C>           <C>           <C>           <C>
Severance                      $ 5,530        $  706      $ (5,361)           --       $   875
Shutdown of European
operations                       4,306            --            --        (2,619)        1,687
Shutdown of San Jose
facility                           --          1,410            --            --         1,410
                               -------       -------      --------      --------       -------
Restructuring reserve          $ 9,836       $ 2,116      $ (5,361)     $ (2,619)      $ 3,972
                               =======       =======      ========      ========       =======
</TABLE>


                                    Page 14
<PAGE>   14
NOTE 7 - GAIN OF SALE OF LINE OF BUSINESS

         On December 1, 2000, the Company entered into a contract to sell all
its property in and rights to the Duke Nukem line of business to an outside
party. The Company received consideration in the form of common stock of the
purchaser valued at $5.5 million at the date of the transaction and a $6.0
million promissory note. The $5.5 million stock value was recognized in
operating income during the previous quarter. The Company subsequently sold such
stock in January 2001 for approximately $6.2 million. The note is payable upon
completion of certain requirements by a independent developer and will be
recognized as income at that time. The Company expects the independent developer
to fulfill all requirements under this contract during the Company's 2002 fiscal
year.


NOTE 8 - OPERATIONS by REPORTABLE SEGMENTS

     The Company has two reportable segments: publishing and distribution.
Publishing is comprised of core gaming, leisure and children's publishing.
Distribution activities primarily include the sale of third party software
products to various mass merchants and other retailers.

     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies.

     The Company's reportable segments are strategic business units with
different associated costs and profit margins. They are managed separately
because each business unit requires different planning, merchandising and
marketing strategies.

The following unaudited summary represents the consolidated net revenues by
reportable segment for the nine months ended March 31, 2001: (in thousands)

                         Publishing        Distribution        Total
                         ----------        ------------        -----

Net revenues              177,883             59,936          237,819



                                    Page 15








<PAGE>   15
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,
worldwide 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 filings with the Securities and Exchange
Commission, including, but not limited to, the factors described on pages 9
through 14 of the Company's Transitional Report on Form 10-K for the three
months ended June 30, 2000.

OVERVIEW

         The Company develops, publishes, and distributes interactive
entertainment for leisure entertainment, gaming enthusiast's and children's
markets for a variety of platforms. The Company employs a portfolio approach to
achieve a broad base of published products across most major consumer software
categories. Since it began operations in February 1993, the Company has
experienced rapid growth and its product and customer mix has changed
substantially.

         Publishing and distribution of interactive entertainment software are
the two major activities of the Company. Publishing is divided into Core Gaming,
Leisure and Children's publishing. 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 revenues attributable to each category. In
addition, a particular product's margin may depend on whether it has been
internally or externally developed and on the platform published. Furthermore,
the Company's margins may vary significantly from quarter to quarter depending
on the timing of its new published product releases. Distribution activities
primarily include the sale of third party software products and to the extent
that mass merchants require greater proportions of these products, some of which
may yield lower margins, the Company's operating results may be negatively
impacted.

         The worldwide interactive entertainment software market is comprised
primarily of software for two distinct platforms: PCs and dedicated game
consoles. The market has grown dramatically in recent years with its growth
driven by the increasing installed base of multimedia PCs and current generation
game console systems. In addition, the development of enabling multimedia
technologies, the proliferation of software titles, the development of new and
expanding distribution channels and the emergence of a strong international
market for interactive entertainment software have spurred the rapid expansion
of the interactive entertainment market.

         There has been an increased rate of change and complexity in the
technological innovations affecting the Company's products, coupled with
increased competitiveness for shelf space and buyer selectivity. The market for
Core Gaming titles has become increasingly hit-driven, which has led to higher
production budgets, more complex development processes, longer development
cycles and generally shorter product life cycles. The importance of the timely
release of hit titles, as well as the increased scope and complexity of the
product development and production process, have increased the need for
disciplined product development processes that limit cost and schedule overruns.
This in turn has increased the importance of leveraging the technologies,
characters or storylines of such hit titles into additional interactive
entertainment software products in order to spread development costs among
multiple products. In this environment, the Company is determined to achieve a
balance between development done by its own internal development studios and
that done by third party developers.

         The distribution channels for interactive software have changed
significantly in recent years. Traditionally, consumer software was sold through
specialty stores. Today, consumer software is increasingly sold through mass
merchants such as Wal-Mart, Kmart and Target, as well as major retailers,
including Best Buy, CompUSA, Costco and Babbage's. The Internet and on-line
networks also present a new channel through which publishers and distributors
can distribute their products to end users.


                                    Page 16
<PAGE>   16
         Sales are recorded net of expected future returns. Management
continually assesses and re-evaluates the rate of returns and price protection
based on business conditions and market factors.


                                    Page 17
<PAGE>   17
RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                    MARCH 31,                      MARCH 31,
                                                        ---------------------------      ---------------------------
                                                            2000             2001            2000            2001
                                                        -----------     -----------      ----------       ----------
<S>                                                        <C>               <C>            <C>               <C>
Net revenues                                                100.0%           100.0%          100.0%           100.0%
Cost of goods sold                                          143.7             52.2            92.6             41.1
Gross Profit                                                (43.7)            47.8             7.4             58.9
Selling and distribution expenses                            61.5             29.6            45.1             27.9
General and administrative expenses                          59.8             20.4            26.5             21.0
Research and development                                     24.1             15.0            21.0             16.8
Restructuring costs                                           9.2              3.0            14.3              0.9
Merger costs                                                  0.0              0.0             0.0              0.7
Gain on sale of line of business                              0.0              0.0             0.0              2.3
Depreciation and amortization                                20.0              6.3             7.9              5.6
                                                        ----------       ----------      ----------       ----------
    Operating loss                                         (218.2)           (26.6)         (107.4)           (11.7)
Interest expense, net                                         7.2              3.5             6.0              4.7
Other (expense) income                                       (1.4)            (0.1)           (0.2)             0.6
                                                        ----------       ----------      ----------       ----------

Loss before provision for income taxes                     (226.9)           (30.3)         (113.6)           (15.8)
Provision for income taxes                                   38.4             (0.0)           16.2             (0.0)
                                                        ----------       ----------      ----------       ----------
    Net loss from continuing operations                    (265.3)           (30.3)         (129.8)           (15.8)
Loss from discontinued operations                             0.0              0.0            (0.2)             0.0
Gain on early extinguishment of debt                          0.0              0.0             0.7              0.0
                                                        ----------       ----------      ----------       ----------

Net loss                                                   (265.3)           (30.3)         (129.3)           (15.8)
                                                        ==========       ==========      ==========       ==========
</TABLE>



         THREE MONTHS ENDED MARCH 31, 2001 VERSUS THE THREE MONTHS ENDED
         MARCH 31, 2000

         Net revenues for the three months ended March 31, 2001 increased
approximately $7.2 million, or 11.3%, to $70.8 million from $63.6 million, as
compared to the 2000 period. This increase is attributable to the addition of
sales of the former Hasbro Interactive product which are now published through
the Company in conjunction with IESA's acquisition of Hasbro Interactive in
January 2001. Additionally, the increase is attributable to the continued
success of products such as Driver 2 and Driver Greatest Hits for Playstation
and Unreal Tournament for Playstation 2.

         Total publishing revenue increased 44.0% to $47.0 million for the three
months ended March 31, 2001 from $32.6 million in the comparable 2000 period.
Approximately 75.9% of such revenues related to PC product revenues and 24.1% of
such revenues related to console games for the three months ended March 31,
2001, as compared to 72.1% and 27.9%, respectively, in the comparable 2000
period. Both the increase in publishing revenue and the increase in PC product
sales during the three months ended March 31, 2001 are attributable to the sales
of former Hasbro Interactive products such as Roller Coaster Tycoon. These new
products contributed approximately $16.3 million in net revenues for the three
months ended March 31, 2001 of which 80.0% were PC product related.
Additionally, the Company's continued success of console products such as Driver
2 and Driver Greatest Hits for Playstation and Unreal Tournament for Playstation
2. Those products amounted to $7.0 million in net revenue for the three months
ended March 31, 2001.


                                    Page 18
<PAGE>   18
         Cost of goods sold for the three months ended March 31, 2001 decreased
approximately $54.4 million, or 59.6%, to $37.0 million from $91.4 million in
the comparable 2000 period. Cost of goods sold as a percentage of net revenues
decreased to 52.2% for the three months ended March 31, 2001 as compared to
143.7% in the comparable 2000 period. The 2000 period included special charges
of $46.7 million to reserve substantially all of the international inventory and
a portion of domestic inventory which the Company did not expect to resell.
Additionally, the decrease in cost of goods sold as a percentage of net revenues
for the three months ended March 31, 2001 is attributable to the Company's
reduced emphasis on third party distribution and the increase in PC product
sales in the quarter. Typically, third party distribution and console product
carry a higher cost of goods as compared to published titles and PC product,
respectively.

         Gross profit increased to a profit of $33.8 million for the three
months ended March 31, 2001 from a loss of $27.8 million in the comparable 2000
period. This increase is primarily due to increased sales volume and changes in
cost of goods sold as described above. Gross profit is primarily impacted by the
percentage of sales of PC product as compared to the percentage of sales of
console product. Gross profit may also be impacted from time to time by the
percentage of foreign sales, the level of returns and price protection and
concessions to retailers and distributors. The Company's margins on sales of PC
product are higher than those on console software (currently, Playstation 2,
Playstation 1, Dreamcast, Nintendo 64 and Game Boy Color) as a result of
significantly lower PC software product costs. Gross profit as a percentage of
net revenues increased to positive 47.8% during the three months ended March 31,
2001 from negative 43.7% in the comparable 2000 period. This increase is due to
the Company's reorganization efforts to reduce costs, decrease its distribution
business and implement better business processes that have enabled it to manage
both internal and channel inventory more efficiently and effectively.
Additionally, gross profit as a percentage of net revenues increased due to
royalty income on international sales. In the 2000 period, the Company recorded
full European sales offset by the cost of goods sold. As part of its
reorganization efforts to reduce costs, the Company only receives royalty income
on product sold in Europe offset by minor royalty costs.

         Selling and distribution expenses primarily include shipping expenses,
sales and distribution labor expenses, advertising and promotion expenses and
distribution facilities costs. During the three months ended March 31, 2001,
these expenses decreased approximately $18.1 million, or 46.4%, to $21.0 million
from $39.1 million in the comparable 2000 period. Selling and distribution
expenses as a percentage of net revenues for the three months ended March 31,
2001 decreased to 29.6% as compared to 61.5% in the comparable 2000 period. For
the three months ended March 31, 2001, the Company's reorganization efforts
reducing its distribution business have led to significant cost reductions. The
Company is also realizing the cost savings of outsourcing its distribution
function in this period as compared to the prior period where a portion of the
Company's distribution function remained in-house. Additionally, the Company has
refocused its marketing efforts to reduce costs.

         General and administrative expenses primarily include personnel
expenses, facilities costs, professional expenses and other overhead charges.
These expenses in the three months ended March 31, 2001 decreased approximately
$23.7 million, or 62.0%, to $14.4 million from $38.1 million in the comparable
2000 period. General and administrative expenses as a percentage of net revenues
decreased to 20.4% for the three months ended March 31, 2001 from 59.8% in the
comparable 2000 period. The 2000 period included special charges of
approximately $16.6 million related to receivable write-offs, senior management
severance packages and other costs incurred as a result of the reorganization of
operations due to IESA's acquisition of a controlling interest in Infogrames,
Inc. Additionally, the Company has further reduced costs in the 2001 period due
to internal consolidation and reorganization efforts.

         Research and development expenses primarily include the payment of
royalty advances to third-party developers on products that are currently in
development and direct costs of internally developing and producing a title.
These expenses for the three months ended March 31, 2001 decreased approximately
$4.7 million, or 30.5%, to $10.6 million from $15.3 million in the comparable
2000 period. Research and development expenses, as a percentage of net revenues,
decreased to 15.0% for the three months ended March 31, 2001 from 24.1% in the
comparable 2000 period. The decrease in research and development expenses for
the three months ended March 31, 2001 is primarily due to fewer arrangements
with external developers and the strategic use of its existing internal research
and development group. Research and


                                    Page 19
<PAGE>   19
development expenses incurred by the Company's internal development studios,
which primarily include Humongous, Legend and Reflections, were approximately
40.3% for the three months ended March 31, 2001 as compared 69.6% in the
comparable 2000 period.

         The Company incurred restructuring charges of $5.8 million and $2.1
million for the three months ended March 31, 2000 and 2001, respectively. The
2000 charges resulted from the shutdown of European operations, the Company's
de-emphasis on its distribution business and the write-down of goodwill related
to its value priced division. Effective March 14, 2001, the Company announced
and commenced a plan to shutdown its San Jose, California facility, recording a
charge of $2.1 million. This charge consists primarily of severance and the
disposal of assets that will no longer be used.

         Depreciation and amortization for the three months ended March 31, 2001
decreased approximately $8.2 million, or 64.8%, to $4.5 million from $12.7
million in the comparable 2000 period. This decrease is attributable to the
write-off of fixed assets and of all goodwill, other than the goodwill for INA,
Legend and Reflections studios, in connection with the Company's reorganization
plans in the comparable 2000 period offset by $6.8 million of amortization
expense from the INA merger.

         Interest expense, net decreased approximately $2.1 million for the
three months ended March 31, 2001 to $2.5 million from $4.6 million in the
comparable 2000 period. The decrease in the three months ended March 31, 2001
was attributable to lower borrowings in 2001 as compared to the 2000 period.



         NINE MONTHS ENDED MARCH 31, 2001 VERSUS THE NINE MONTHS ENDED
         MARCH 31, 2000

         Net revenues for the nine months ended March 31, 2000 decreased $26.9
million or 10.2% from $264.7 million to $237.8 million. This decrease is
attributable to the Company's decreased emphasis on third party distribution and
its decision to close European operations in conjunction with the purchase by
IESA. This decrease was partially offset by an increase attributable to the
addition of sales of the former Hasbro Interactive product which are now
published through the Company in conjunction with IESA's acquisition of Hasbro
Interactive in January 2001 and the continued success of products such as Driver
2 and Driver Greatest Hits for Playstation and Unreal Tournament for Playstation
2.

         Total publishing revenue for the nine months ended March 31, 2001
increased 22.0% to $177.9 million from $145.8 million in the comparable 2000
period. Approximately 61.8% of such revenues related to PC product revenues and
38.2% of such revenues related to console games for the nine months ended March
31, 2001, as compared to 64.6% and 35.4%, respectively, in the comparable 2000
period. Both the increase in publishing revenue and the increase in console
product during the nine months ended March 31, 2001 are attributable to the
Company's continued success of Driver 2 and Driver Greatest Hits for Playstation
and Unreal Tournament for Playstation 2. Those products alone amounted to $53.2
million of net revenues for the nine months ended March 31, 2001. Additionally,
publishing revenue increased due to sales of the former Hasbro Interactive
products such as Roller Coaster Tycoon which contributed approximately $16.3
million in net revenues for the nine months ended March 31, 2001.

         Cost of goods sold for the nine months ended March 31, 2001 decreased
approximately $147.3 million or 60.0% to $97.8 million from $245.1 million from
the comparable 2000 period. Cost of goods sold as a percentage of net revenues
decreased to 41.1% for nine months ended March 31, 2001, as compared to 92.6% in
the comparable 2000 period. The 2000 period included special charges of $51.6
million. These special charges were to reserve substantially all of the
international inventory and a portion of domestic inventory which the Company
did not expect to resell. Additionally, the decrease in cost of goods sold as a
percentage of net revenues for the nine months ended March 31, 2001 is
attributable to the Company's reduced emphasis on third party distribution.
Typically, third party distribution carries a higher cost of goods as compared
to published product.

         Gross profit increased to $140.1 million for the nine months ended
March 31, 2001 from $19.6 million in the comparable 2000 period. This increase
is primarily due to increased sales volume and changes in cost of goods sold as
described above. Gross profit is primarily impacted by the percentage of


                                    Page 20
<PAGE>   20
sales of PC product as compared to the percentage of sales of console product.
Gross profit may also be impacted from time to time by the percentage of foreign
sales, and the level of returns and price protection and concessions to
retailers and distributors. The Company's margins on sales of PC product are
higher than those on console software (currently, Playstation 2, Playstation 1,
Dreamcast, Nintendo 64 and Game Boy Color) as a result of significantly lower PC
software product costs. Gross profit as a percentage of net revenues increased
to 58.9% for the nine months ended March 31, 2001 from 7.4% in the comparable
2000 period. This increase is due to the Company's reorganization efforts to
reduce costs, decrease its distribution business and implement better business
processes that enabled it to manage both internal and channel inventory more
efficiently and effectively. Additionally, gross profit as a percentage of net
revenues increased due to royalty income on international sales. In the 2000
period, the Company recorded full European sales offset by the cost of goods
sold. As part of its reorganization efforts to reduce costs, the Company only
receives royalty income on product sold in Europe offset by minor royalty costs.

         Selling and distribution expenses primarily include shipping expenses,
sales and distribution labor expenses, advertising and promotion expenses and
distribution facilities costs. During the nine months ended March 31, 2001,
selling and distribution expenses decreased approximately $52.9 million, or
44.3%, to $66.4 million from $119.3 million in the comparable 2000 period.
Selling and distribution expenses as a percentage of net revenues for the nine
months ended March 31, 2001 decreased to 27.9% as compared to 45.1% in the
comparable 2000 period. For the nine months ended March 31, 2001 the Company's
reorganization efforts reducing its distribution business have led to
significant cost reductions. The Company is also realizing the cost savings of
outsourcing its distribution function in this period as compared to the prior
period where a portion of the Company's distribution function remained in-house.
Additionally, the Company has refocused its marketing efforts to reduce costs.

         General and administrative expenses primarily include personnel
expenses, facilities costs, professional expenses and other overhead charges.
These expenses in the nine months ended March 31, 2001 decreased approximately
$20.2 million, or 28.8%, to $49.9 million from $70.1 million in the comparable
2000 period. General and administrative expenses as a percentage of net revenues
decreased to 21.0% for the nine months ended March 31, 2001 from 26.5% in the
comparable 2000 period. The 2000 period included special charges of
approximately $16.6 million related to receivable write-offs, senior management
severance packages and other costs incurred as a result of the reorganization of
operations due to IESA's acquisition of a controlling interest in Infogrames,
Inc. Additionally, the Company has further reduced costs in the 2001 period due
to internal consolidation and reorganization efforts. The decrease was offset by
an $11.0 million write down of receivables during the current nine month period.

         Research and development expenses primarily include the payment of
royalty advances to third-party developers on products that are currently in
development and direct costs of internally developing and producing a title.
Research and development expenses for the nine months ended March 31, 2001
decreased approximately $15.6 million, or 28.1%, to $40.0 million from $55.6
million in the comparable 2000 period. Research and development expenses, as a
percentage of net revenues, decreased to 16.8% for the nine months ended March
31, 2001 from 21.0% in the comparable 2000 period. The decrease is primarily due
to savings from shutting down European operations and the Singletrac Studio as a
part of the Company's reorganization plan. During the 2000 period, the Company
incurred research and development expenses of $21.4 million from both Europe and
Singletrac as compared to only $3.1 million in the nine months ended March 31,
2001. Additionally, this decrease has resulted from more strategic use of
existing internal research and development groups and a reduction in contracts
with external developers. Research and development expenses of the Company's
internal development studios, Humongous, Legend and Reflections, decreased to
41.5% of total research and development expense for the nine months ended March
31, 2001 as compared to 67.7% in the comparable 2000 period.

         The Company incurred restructuring charges of $37.9 million and $2.1
for the nine months ended March 31, 2000 and 2001, respectively. The 2000 period
charges resulted from the shutdown of European operations, the Company's
de-emphasis on its distribution business and the write-down of goodwill related
to its value priced division. Effective March 14, 2001, the Company announced
and commenced a plan to shutdown its San Jose, California facility and recorded
a charge of $2.1 million. This charge consists primarily of severance and the
disposal of assets that will no longer be used.


                                    Page 21
<PAGE>   21
           The Company incurred expenses of $1.7 million or 0.7% of net revenue
related to the merger with INA during the nine months ended March 31, 2001. The
costs include various consulting, legal, and accounting fees.

         The Company recorded a gain on sale of line of business for the nine
months ended March 31, 2001 of approximately $5.5 million. This is related to
the sale of the Duke Nukem franchise as the Company refocuses its catalog from
specialized gaming product to mass market gaming product. The Company expects to
record an additional $6.0 million gain after an independent developer fulfills
an obligation to the purchaser, which is expected to occur in fiscal year 2002.

         Depreciation and amortization for the nine months ended March 31, 2001
decreased approximately $7.6 million, or 36.2%, to $13.4 million from $21.0
million in the comparable 2000 period. This decrease is attributable to the
write-off of fixed assets and of all goodwill, other than the goodwill for INA,
Legend and Reflections studios, in connection with the Company's reorganization
plans in the comparable 2000 period offset by $6.8 million of amortization
expense resulting from the INA merger.

         Interest expense, net decreased approximately $4.7 million to $11.2
million from $15.9 million in the comparable 2000 period. The decrease in the
nine months ended March 31, 2001 was attributable to lower borrowings in 2001 as
compared to 2000.




LIQUIDITY AND CAPITAL RESOURCES

         Cash and cash equivalents were $13.1 million at March 31, 2001 compared
to $13.5 million at June 30, 2000. As of March 31, 2001, the Company had a
working capital deficit of $46.3 million compared to $191.5 million in working
capital deficit at June 30,
2000.

         During the nine months ended March 31, 2001, $48.8 million was provided
by financing activities. The Company utilized its borrowings from its credit
facilities to fund $44.8 million net cash used in operating activities which
resulted from operating losses and reduction in accounts payable for past due
accounts.


CREDIT FACILITIES

         On September 11, 1998, the Company entered into a Credit Agreement as
subsequently amended, with First Union National Bank, as agent for a syndicate
of banks (the "Banks"), expiring on March 31, 2000. Under the Credit Agreement,
the Company borrowed approximately $71 million for ongoing working capital
requirements, letters of credit and other general corporate purposes, secured by
domestic accounts receivable and inventory and other assets of the Company. To
induce the Banks to amend the Credit Agreement, the Company issued the Banks
warrants to purchase, at an exercise price of $0.05 per share, an aggregate of
150,000 shares of the Company's common stock. Of these, warrants to purchase
55,000 shares of the Company's common stock were immediately exercisable,
warrants to purchase 50,000 shares of Company's common stock became exercisable
on October 31, 1999 and warrants to purchase the remaining 45,000 shares of the
Company's common stock (the "Bank Warrants") became exercisable on February 28,
2000 if the Credit Agreement was not repaid prior to that date.

         As of February 15, 2000, IESA entered into an agreement with the Banks,
pursuant to which IESA assumed the Banks' interest in the Credit Agreement. In
connection with the assumption by IESA of the Credit Agreement, (i) the maturity
date was extended from March 31, 2000 to June 30, 2000, (ii) the interest rate,
which was the Prime Rate plus 1.0% or LIBOR plus 2.5% at the option of the
Company, was set at LIBOR plus 2.5%, (iii) a $250,000 amendment fee, which would
have been payable to the Banks on March 31, 2000 unless the Credit Agreement was
refinanced by February 16, 2000, was reduced to $125,000 and paid to IESA, (iv)
certain mandatory prepayment restrictions and operational covenants were revised
to be less restrictive and (v) revisions were made to provide alternative letter
of credit facilities to


                                    Page 22
<PAGE>   22
the Company. In addition, warrants to purchase 45,000 shares of the Company's
common stock, at an exercise price of $0.05 per share, were issued to IESA.

         On June 29, 2000, IESA and the Company amended the Credit Agreement to
increase the aggregate commitment available under the facility to $125 million
and to extend the maturity date to September 30, 2000.

         On June 30, 2000, the Company had outstanding borrowings under the
Credit Agreement of approximately $98.5 million and no letters of credit
outstanding. Outstanding borrowings under the Credit Agreement are classified as
current in the consolidated balance sheet as of June 30, 2000, accrued interest
of $2.5 million was recorded but not yet paid under the Credit Agreement as of
June 30, 2000.

         In conjunction with the INA Merger, which closed on October 2, 2000,
all the amounts outstanding under the Credit Agreement and certain intercompany
payables were converted into approximately 20 million shares of the Company's
common stock at a price of $6.40 per share. The Company amended the Credit
Agreement with IESA (the "New Credit Agreement") to provide for an aggregate
commitment of $50.0 million, and to extend the maturity date from September 30,
2000 to December 31, 2000. On December 22, 2000, the Company and IESA amended
the New Credit Agreement to extend the maturity date to June 15, 2001. For
additional information relating to the INA Merger, see Note 2 Merger and
Acquisitions. As of March 31, 2001, the outstanding borrowings under the Credit
Agreement were approximately $1.3 million, of which $0.3 million is related to
accrued interest. As of March 31, 2001, there are $1.0 million of letters of
credit outstanding. As of May 7, 2001, the Company had approximately $3.3
million, of which $0.3 million is related to accrued interest debt under the New
Credit Agreement and approximately $0.1 million of letters of credit
outstanding.


         In connection with the INA Merger, the Company assumed a $35.2 million
revolving credit facility with BNP which matures on June 15, 2001. The facility
has an interest rate of LIBOR plus 65 basis points per annum for fixed LIBOR
loans, payable at maturity or quarterly and at maturity for loans with
maturities in excess of 90 days. For floating loans, an interest rate of BNP
prime rate minus 1% per annum is charged, payable monthly. The facility fee was
$17,500 paid at closing and the commitment fee for the unutilized amount of the
facility is 30 basis points per annum payable quarterly in arrears. The
financial covenants which have been informally agreed to have been satisfied as
of March 31, 2001. As of March 31, 2001, the Company had approximately $34.9
million outstanding borrowings under the BNP Credit Facility of which a nominal
portion relates to interest. As of May 7, 2001 the Company has approximately
$35.1 million outstanding under the BNP Credit Facility of which $0.2 million
relates to interest.

         The Company believes that existing cash and cash equivalents, together
with cash expected to be generated from operations, cash available under the
Credit Agreement and the continued financial support as IESA deems necessary
will be sufficient to fund the Company's operations and cash flows.


RECENT ACCOUNTING PRONOUNCEMENTS

         Statement of Financial Accounting Standards No.133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No.133"), establishes
accounting and reporting standards for derivative instruments and for hedging
activities. SFAS No. 133 requires companies to recognize all derivative as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company adopted SFAS No.133, amended by
SFAS No.138 in the first quarter of fiscal year. The adoption of SFAS No.133 did
not have a material effect on the Company's financial statements.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No.101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company adopted SAB 101 in the first quarter of fiscal 2001. The adoption of
SAB 101 did not have a material effect on the Company's financial statements.


                                    Page 23
<PAGE>   23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Due to the global nature of the Company's operations, the Company is
subject to the exposures that arise from foreign exchange rate fluctuations. The
Company's objective in managing its exposure to foreign currency fluctuations is
to minimize net earnings volatility associated with foreign exchange rate
changes. The Company may enter into foreign currency forward exchange contracts
to hedge foreign currency transactions which are primarily related to certain
receivables denominated in foreign currencies. The Company's hedging activities
do not subject it to exchange rate risk because gains and losses on these
contracts offset losses and gains on the assets, liabilities, and transactions
being hedged. The Company has no derivatives activity as of March 31, 2001 and
May 7, 2001.

         The Company is not exposed to material future earnings or cash flow
exposures from changes in interest rates on long-term obligations since the
majority of the Company's long-term obligations are fixed rates of interest.


                                    Page 24
<PAGE>   24
PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

LITIGATION

Scavenger

         On September 18, 1997, Scavenger, Inc. ("Scavenger"), a software
developer, filed a lawsuit against the Company in Supreme Court, New York
County, claiming that the Company breached a software development contract
between the parties dated November 28, 1995. The contract provided for the
development of four personal computer games, Amok, Scorcher, Into the Shadows
and Mudkicker. The Company paid royalty advances of $2 million ($500,000 per
game) in January 1996. Scavenger delivered and the Company accepted Amok and
Scorcher, but Scavenger did not deliver Into the Shadows or Mudkicker. The
Company paid an additional royalty advance of $500,000 upon delivery of Amok.

         The complaint alleges four causes of action: (1) breach of contract in
the amount of $1.9 million claimed as royalty advances for Amok and Scorcher
(first cause); (2) breach of contract in the amount of $2.4 million claimed as
additional royalty advances for Into the Shadows and Mudkicker (second cause);
(3) breach of contract in the amount of $5 million allegedly due above the
additional royalty advances (third cause); and (4) consequential damages in the
amount of $100 million based on the allegation that the Company's failure to pay
the additional royalty advances forced Scavenger out of business and Scavenger
allegedly was worth $100,000,000 as of January 1997 (fourth cause). The Company
asserted three counterclaims: (1) breach of contract for failure to deliver Into
the Shadows and Mudkicker seeking at least $5 million in damages (first
counterclaim); (2) breach of contract for failure to deliver Scorcher timely and
the failure to deliver Amok and Scorcher in conformance with the quality
requirements of the software development contract seeking at least $5 million in
damages (second counterclaim); and (3) unjust enrichment seeking the return of
the $2.5 million in royalty advances paid to Scavenger (third counterclaim).

         By Order entered March 3, 2000, the Court granted Scavenger's motion
for partial summary judgment as to the first cause of action and denied the
motion as to the second cause. Judgment was thereupon entered March 14, 2000 in
the amount of $2.4 million ($1.9 million plus interest accrued), which was
affirmed by Order of the Appellate Division, First Department entered June 8,
2000. Motions to the Appellate Division, First Department and to the Court of
Appeals for leave to appeal to the Court of Appeals were denied. In January
2001, the Company paid approximately $2.6 million (including accrued interest
from date of judgment) satisfying the partial summary judgment.

         In an Order entered June 21, 2000, the Court denied the Company's
motion for summary judgment dismissing the third and fourth causes of action.
The Company simultaneously moved for reargument of and appealed from that
portion of the June 21, 2000 Order denying partial summary judgment on the
fourth cause. By Order entered September 8, 2000, the Court granted reargument
and, on reargument, dismissed the fourth cause of action (and the Company
withdrew its appeal). Scavenger unsuccessfully moved for reargument of the
September 8, 2000 Order, and is now appealing from the September 8, 2000 Order
to the Appellate Division, First Department.

         By Order entered December 19, 2000, the Court separately ruled with
respect to each of the Company's counterclaims that the Company cannot seek to
recover as a measure of damages any of the royalty advances paid under the
software development contract. Subject to this limitation, the Court otherwise
sustained the Company's first counterclaim for damages for the undelivered games
Into the Shadows and Mudkicker. The Court dismissed the second counterclaim
finding that the Company had not shown provable damages other than the $1.5
million in royalty advances paid on Amok and Scorcher which the Court held could
not be recovered. The Court also dismissed the third counterclaim for unjust
enrichment, which sought to recover the entire $2.5 million in royalty advances
paid to Scavenger. The


                                    Page 25
<PAGE>   25
Company is appealing this dismissal only as to the $1 million in royalty
advances paid for the undelivered Into the Shadows and Mudkicker.

         By Order entered January 8, 2001, the Court granted a motion by the
Company to dismiss the second cause of action, a motion prompted by and premised
on the reasoning of the Court's March 3, 2000 Order granting partial summary
judgment on the first cause of action as well as of the Appellate Division,
First Department's June 8, 2000 Order of affirmance. Scavenger has appealed from
the January 8, 2001 Order.

         By Order entered March 1, 2001, the Appellate Division, First
Department granted the Company's motion to consolidate for oral argument on the
same date in the June Term the three pending appeals from the September 8 Order,
the December 19 Order and the January 8 Order. On April 24, 2001, Scavenger
served a motion for reargument or renewal in the Supreme Court addressed to the
January 8 Order.

Herzog

         In January, February and March 1998, ten substantially similar
complaints were filed against the Company, its former Chairman and its former
Chief Executive Officer, and in certain actions, its former Chief Financial
Officer, in the U.S. District Court for the Southern District of New York. The
plaintiffs, in general, purport to sue on behalf of a class of persons who
purchased shares (and as to certain complaints, purchased call options or sold
put options) of the Company during the period from December 15, 1995 through
December 12, 1997. In their consolidated and amended complaint, the plaintiffs
allege that the Company violated the federal securities laws by making
misrepresentations and omissions of material facts that allegedly artificially
inflated the market price of the Company's common stock during the class period.
The plaintiffs further allege that the Company failed to expense properly
certain prepaid royalties for software products that had been terminated or had
failed to achieve technological feasibility, or had insufficient sales to recoup
the paid advances, which misstatements purportedly had the effect of overstating
the Company's net income and net assets. By order dated January 23, 1999, the
plaintiffs were granted leave to file a second consolidated and amended
complaint, which added claims under the federal securities laws against the
Company's former independent auditors, Arthur Andersen LLP. The Company and
Arthur Andersen LLP each filed motions to dismiss the second consolidated and
amended complaint. By order and opinion dated November 29, 1999, the District
Court granted the motion to dismiss. Plaintiffs appealed from the dismissal of
the action, and on July 11, 2000, the Court of Appeals for the Second Circuit
issued an opinion and judgment reversing the dismissal of the complaint as to
the Company and individual defendants (but not as to Arthur Andersen LLP) and
remanding the action to the District Court. On July 21, 2000, the Company filed
with the Court of Appeals a petition for rehearing with suggestion for rehearing
en banc. On September 1, 2000, the Court of Appeals denied the petition for
rehearing and suggestion for rehearing en banc. The case was returned to the
District Court, where it is now pending.

James

         On April 12, 1999, an action was commenced by the administrators for
three children who were murdered on December 1, 1997 by Michael Carneal at the
Heath High School in McCracken County, Kentucky. The action was brought against
25 defendants, including the Company and other corporations in the videogame
business, companies that produced or distributed the movie The Basketball
Diaries, and companies that provide allegedly obscene internet content. The
complaint alleges, with respect to the Company and other corporations in the
videogame business, that Carneal was influenced by the allegedly violent content
of certain videogames and that the videogame manufacturers are liable for
Carneal's conduct. The complaint seeks $10 million in compensatory damages and
$100 million in punitive damages. The Company and approximately 10 other
corporations in the videogame business have entered into a joint defense
agreement and have retained counsel. By order entered April 6, 2000, the Court
granted a motion to dismiss the complaint. Plaintiffs have filed a motion to
vacate the dismissal of the action. On June 16, 2000, the Court denied the
motion to vacate. On June 28, 2000, plaintiffs appealed the dismissal of the
action to the Court of Appeals for the Sixth Circuit. Plaintiffs' and
defendants' final appellate briefs were submitted on November 30, 2000.


                                    Page 26
<PAGE>   26
McGovern

         On or about September 11, 2000, Jane Bassler and Paul McGovern, as
shareholders of the Company, commenced a derivative action on behalf of the
Company in Delaware Chancery Court, New Castle County, against IESA, CUSH, and
the individual members of the Company's board of directors since November 1999.
The action alleges that IESA, as controlling shareholder of the Company and
through its nominees on the Company's board, has engaged in certain self-dealing
actions. The first cause of action, asserted against certain defendants, alleges
breach of fiduciary duty. The second cause of action, asserted against CUSH,
alleges aiding and abetting. The third cause of action, asserted against certain
defendants, alleges breach of fiduciary duty in order to divest their own
investment in the Company on terms beneficial to them. The complaint seeks on
behalf of the Company a declaration that the defendants have breached their
fiduciary duties to the Company; the imposition of a constructive trust on all
profits and gains defendants have received as a result of the wrong alleged;
damages in favor of the Company; and attorneys' fees and costs for plaintiffs.
On September 19, 2000, Bassler voluntarily dismissed her claim without
prejudice. On May 7, 2001 plaintiff McGovern voluntarily dismissed this action
without prejudice.

Sanders

         On April 19, 2001, a putative class action was commenced by the family
of William David Sanders, a teacher murdered on April 2, 1999 in a shooting
rampage committed by Eric Harris and Dyland Klebold at the Columbine High School
in Jefferson County, Colorado. The action was brought against 25 defendants,
including the Company and other corporations in the videogame business,
companies that produced or distributed the movie The Basketball Diaries, and
companies that provide allegedly obscene internet content. The complaint
alleges, with respect to the Company and other corporations in the videogame
business, that Harris and Klebold were influenced by the allegedly violent
content of certain videogames and that the videogame manufacturers are liable
for Harris' and Klebold's conduct. The complaint seeks a minimum $15,000 for
each plaintiff and up to $15 million in compensatory damages for certain
plaintiffs and $5 billion in punitive damages, injunctive relief in the form of
a court established "monitoring system" requiring video game companies to comply
with rules and standards set by the court for marketing violent games to
children. The Company has not yet been served but intends to vigorously defend
this action if and when properly served.

         The Company believes that these complaints are without merit and
intends to defend itself vigorously against these actions. Additionally, the
Company is involved in various claims and legal actions arising in the ordinary
course of business, the ultimate resolution of which the management of the
Company believes will not be material to the Company's results of operations or
financial condition.


                                    Page 27
<PAGE>   27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

         No exhibit is filed or incorporated by reference as part of this
report.



         (b) Reports on Form 8-K

         No reports on Form 8-K is filed or incorporated by reference as part of
this report.


                                    Page 28
<PAGE>   28
                                   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.




                                INFOGRAMES, INC.




                                By:      /s/    DAVID J. FREMED
                                         -------------------------
                                         David J. Fremed
                                         Senior Vice President of Finance and
                                         Chief Financial Officer
                                         Date:  May 11, 2001


                                    Page 29