<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



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




For the quarterly period ended September 30, 2001    Commission File No. 0-27338


                                INFOGRAMES, INC.
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                  <C>
            DELAWARE                                     13-3689915
(State or Other Jurisdiction of                       (I.R.S. Employer
 Incorporation or Organization)                      Identification No.)
</TABLE>



                      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 November 8, 2001, there were 69,788,115 shares of the
registrant's Common Stock outstanding.
<PAGE>
                                INFOGRAMES, INC.
               SEPTEMBER 30, 2001 QUARTERLY REPORT ON FORM 10-Q/A
                                TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

INTRODUCTORY NOTE

     This Amendment to the Registrant's Quarterly Report on Form 10-Q, as filed
by the Registrant on November 13, 2001, is being filed to (i) amend the
Management's Discussion and Analysis of Financial Condition and Results of
Operations section to include additional information and disclosures, (ii)
amend Item 3 Quantitative and Qualitative Disclosures about Market Risk to
include additional disclosure and (iii) provide further segment information in
Note 7 of the financial statements.

<TABLE>
<CAPTION>
                                                                                                                    PAGE
                                                                                                                    ----
<S>             <C>                                                                                                 <C>
   Item 1.      Financial Statements:

                Consolidated Balance Sheets as of June 30, 2001 and September 30, 2001                               3

                Consolidated Statements of Operations and Comprehensive Income (Loss) for the
                Three Months Ended September 30, 2000 and 2001                                                       4

                Consolidated Statements of Cash Flows for the Three Months Ended September 30,
                2000 and 2001                                                                                        5

                Notes to the Consolidated Financial Statements                                                       6

   Item 2.      Management's Discussion and Analysis of Financial Condition and Results
                of Operations                                                                                        13

   Item 3.      Quantitative and Qualitative Disclosures about Market Risk                                           18




PART II - OTHER INFORMATION

   Item 1.      Legal Proceedings                                                                                   19

   Item 6.      Exhibits and Reports on Form 8-K                                                                    22

  Signatures                                                                                                        23
</TABLE>
<PAGE>
PART I.     FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

                                INFOGRAMES, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                        JUNE 30,        SEPTEMBER 30,
                                                                                          2001              2001
                                                                                          ----              ----
                                                                                                        (UNAUDITED)
<S>                                                                                    <C>               <C>
ASSETS
Current assets:
   Cash and cash equivalents ..................................................        $   5,378         $  11,441
   Marketable securities ......................................................              554               337
   Receivables, net of allowances for bad debts, returns, price protection
   and other customer promotional programs of $56,554 and $46,682, respectively           37,240            56,890
   Inventories, net of reserves of $20,360 and $13,801, respectively ..........           29,182            34,957
   Income taxes receivable ....................................................            2,273             2,279
   Due from related parties ...................................................            4,388             1,480
   Prepaid expenses and other current assets ..................................            6,743            11,551
                                                                                       ---------         ---------
     Total current assets .....................................................           85,758           118,935
Property, plant and equipment, net ............................................           12,996            13,715
Investments ...................................................................            7,122             7,122
Goodwill, net of accumulated amortization of $26,116 in both periods ..........           29,211            29,211
Other assets ..................................................................            9,997            10,905
                                                                                       ---------         ---------
     Total assets .............................................................        $ 145,084         $ 179,888
                                                                                       =========         =========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
   Accounts payable ...........................................................        $  37,777         $  41,376
   Accrued liabilities ........................................................           31,491            28,534
   Revolving credit facility ..................................................           34,888            34,731
   Related party credit facility ..............................................            9,316            47,111
   Royalties payable ..........................................................           12,842             9,547
   Deferred revenue ...........................................................            1,753             1,753
   Due to related parties .....................................................           15,036            13,245
                                                                                       ---------         ---------
     Total current liabilities ................................................          143,103           176,297
Long-term debt ................................................................           39,954            40,672
Related party debt ............................................................           65,408            66,232
Deferred revenue ..............................................................            1,750             1,750
Other long-term liabilities ...................................................            1,405             1,313
                                                                                       ---------         ---------
     Total liabilities                                                                   251,620           286,264
                                                                                       =========         =========
Commitments and contingencies

Stockholders' deficiency:
   Preferred stock, $0.01 par value, 5,000 shares authorized, none issued
   or outstanding .............................................................             --                --
   Common stock, $0.01 par value, 300,000 shares authorized, 69,759 shares
   issued and 69,524  shares outstanding in both periods ......................              698               698
   Additional paid-in capital .................................................          486,306           486,309
   Accumulated deficit ........................................................         (593,991)         (593,439)
   Accumulated other comprehensive income .....................................            2,803             2,408
   Treasury stock, at cost, 235 shares in both periods ........................           (2,352)           (2,352)
                                                                                       ---------         ---------
         Total stockholders' deficiency .......................................         (106,536)         (106,376)
                                                                                       ---------         ---------
         Total liabilities and stockholders' deficiency .......................        $ 145,084         $ 179,888
                                                                                       =========         =========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                     Page 3
<PAGE>
                                INFOGRAMES, INC.
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          THREE MONTHS      THREE MONTHS
                                                             ENDED             ENDED
                                                          SEPTEMBER 30,     SEPTEMBER 30,
                                                              2000              2001
                                                              ----              ----
<S>                                                       <C>               <C>
     Net revenues ..................................        $ 39,567         $ 81,668
     Cost of goods sold ............................          14,812           37,733
                                                            --------         --------
        Gross profit ...............................          24,755           43,935
     Selling and distribution expenses .............          18,703           16,198
     General and administrative expenses ...........          13,952            8,557
     Research and development ......................          12,978           14,695
     Merger costs ..................................           1,700               --
     Depreciation and amortization .................           4,342            1,091
                                                            --------         --------
          Operating (loss) profit ..................         (26,920)           3,394
     Interest expense ..............................           6,114            2,887
     Other income ..................................             326               49
                                                            --------         --------

     (Loss) profit before provision for income taxes         (32,708)             556
     Provision for income taxes ....................               6                4
                                                            --------         --------

           Net (loss) profit .......................        $(32,714)        $    552
                                                            ========         ========

     Basic and diluted net (loss)  profit  per share        $  (1.58)        $   0.01
                                                            ========         ========

     Basic weighted average shares outstanding .....          20,686           69,524
                                                            ========         ========

     Diluted weighted average shares outstanding ...          20,686           70,008
                                                            ========         ========


     Net (loss) profit .............................        $(32,714)        $    552
     Other comprehensive (loss) income:
        Foreign currency translation adjustments ...          (1,145)            (178)
        Unrealized gain (loss) on securities .......              45             (217)
                                                            --------         --------
               Comprehensive (loss) income .........        $(33,814)        $    157
                                                            ========         ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                     Page 4
<PAGE>
                                INFOGRAMES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS     THREE MONTHS
                                                                    ENDED            ENDED
                                                                 SEPTEMBER 30,    SEPTEMBER 30,
                                                                     2000             2001
                                                                     ----             ----
<S>                                                              <C>              <C>
     CASH FLOWS FROM OPERATING ACTIVITIES:
     Net (loss) profit ...................................        $(32,714)        $    552
     Adjustments to reconcile net (loss) profit  to
        net cash used in operating activities:
        Depreciation and amortization ....................           4,342            1,091
        Amortization of discount on long-term debt .......             718              718
        Accrued interest .................................           3,730            2,042
        Amortization of deferred financing fees ..........             239              239
     Changes in operating assets and liabilities:

           Receivables, net ..............................           4,763          (19,672)
           Inventories, net ..............................           4,190           (5,758)
           Due to / from related parties, net ............           1,838            1,067
           Prepaid expenses and other current  assets ....              --           (4,782)
           Accounts payable ..............................         (14,470)           3,564
           Accrued liabilities ...........................          (3,188)          (3,807)
           Bank overdraft ................................          (3,091)              --
           Royalties payable .............................            (193)          (3,306)
           Income taxes payable ..........................             384               --
           Income taxes receivable .......................             275                2
           Long-term liabilities .........................              19              (89)
           Other assets ..................................           2,514           (1,141)
                                                                  --------         --------
             Net cash used in operating activities .......         (30,644)         (29,280)
                                                                  --------         --------

     CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment .................             (12)          (1,790)
                                                                  --------         --------
             Net cash used in investing activities .......             (12)          (1,790)

     CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowings under revolving credit  facilities .......          30,880           37,000
     Proceeds from exercise of stock options .............               2                2
                                                                  --------         --------
             Net cash provided by financing activities ...          30,882           37,002
     Effect of exchange rates on cash and cash equivalents             147              131
                                                                  --------         --------
     Net increase in cash and cash equivalents ...........             373            6,063
     Cash and cash equivalents--beginning of period ......          12,302            5,378
                                                                  --------         --------
     Cash and cash equivalents--end of period ............        $ 12,675         $ 11,441
                                                                  ========         ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                     Page 5
<PAGE>
                                INFOGRAMES, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Nature of Business

         Infogrames, Inc., a Delaware corporation (the "Company"), is a leading
worldwide developer, publisher and distributor of interactive entertainment
software for use on various platforms, including PCs, Sony PlayStation and
Playstation2, SEGA's Dreamcast and Nintendo's Game Boy. The Company derives its
revenues primarily from the sale of its created, published, licensed and
purchased products to mass merchants, specialty software stores, computer
superstores and distributors located throughout North America. Infogrames
Entertainment S.A. ("Infogrames SA") owns approximately 89% of the Company.

   Basis of Presentation

         On September 6, 2000, the Company entered into a merger agreement with
Infogrames North America, Inc. ("INA"), a wholly-owned subsidiary of Infogrames
SA. The Company acquired INA through the creation of a wholly-owned subsidiary
that merged with and into INA. Upon completion of the merger, INA became a
wholly owned subsidiary of the Company. The accompanying consolidated financial
statements of the Company have been combined as of December 16, 1999, with those
of 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 SA.

         The accompanying interim consolidated financial statements of the
Company are unaudited, but in the opinion of management, reflect all adjustments
consisting of normal recurring accruals necessary for a fair presentation of the
results for the interim period in accordance with instructions for Form 10-Q.
Accordingly, they do not include all information and notes required by generally
accepted accounting principles for complete financial statements. These interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended June 30, 2001. The information for
June 30, 2001 was derived from audited financial statements.

   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.

   Revenue Recognition

         Revenue is recognized upon shipment of merchandise to customers. At the
time the revenue is recognized, a reserve is provided for expected future
returns net of the related cost of such items.

         The Company is not contractually obligated to accept returns, except
for defective product. However, the Company may permit its customers to return
or exchange product and may provide pricing allowances for estimated returns,
price concessions and other allowances. Such allowances are provided for at the
time of sale.


                                     Page 6
<PAGE>
   Net Profit (Loss) Per Share

         Basic profit (loss) per share ("EPS") is computed by dividing net
profit (loss) by the weighted average number of shares of common stock
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur from the conversion of convertible debt and shares of common stock
issuable through stock-based compensation plans including stock options,
restricted stock awards and warrants using the treasury stock method. The impact
on profit (loss) per share of the assumed exercise of options and warrants and
the assumed conversion of convertible debt is not included in the computation of
Dilluted EPS if their inclusion is anti-dilutive.

   Royalty Advances

         Rapid technological innovation, shelf-space competition, shorter
product life cycles and buyer selectivity have made it extremely difficult to
determine the likelihood of individual product acceptance and success. As a
result, the Company follows the policy of expensing royalty advances as
incurred, treating such costs as research and development expenses.

   License Advances

         Payments made to license intellectual property from third parties are
capitalized and amortized over the license term. Management evaluates the
carrying value of these capitalized licenses quarterly and records any
impairment in value through R&D expense.

   Recent Accounting Pronouncements

         Issue No. 00-25, "Vendor Income Statement Characterization of
Consideration from a Vendor to a Retailer" ("EITF Issue No. 00-25"), outlines
required accounting treatment of certain sales incentives, including slotting or
placement fees, cooperative advertising arrangements, buydowns, price protection
and other allowances. EITF Issue No. 00-25 requires the Company to report the
paid consideration expense as a reduction of sales. The Company is required to
implement EITF Issue No. 00-25 for the quarter beginning January 1, 2002.
Management believes that the effect of implementing the guidelines of EITF Issue
No. 00-25, will not materially impact the Company's current reporting practices.

         In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations". SFAS No. 143 addresses financial accounting and
reporting for obligations and costs associated with the retirement of tangible
long-lived assets. The Company is required to implement SFAS No.143 on January
1, 2003. Management believes that the effect of implementing this pronouncement
will not have a material impact on financial condition or results of operations.

         In October 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 replaces SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" and establishes accounting and reporting standards for
long-lived assets to be disposed of by sale. This standard applies to all
long-lived assets, including discontinued operations. SFAS No. 144 requires that
those assets be measured at the lower of carrying amount or fair value less cost
to sell. SFAS No. 144 also broadens the reporting of discontinued operations to
include all components of an entity with operations that can be distinguished
from the rest of the entity that will be eliminated from the ongoing operations
of the entity in a disposal transaction. The Company is required to implement
SFAS No. 144 on January 1, 2002. Management believes that the effect of
implementing this pronouncement will not have a material impact on the financial
condition or results of operations.


                                     Page 7
<PAGE>
NOTE 2 - INVENTORIES, NET

         Inventories consist of the following:

<TABLE>
<CAPTION>
                                           JUNE 30,         SEPTEMBER 30,
                                             2001               2001
                                             ----               ----
<S>                                       <C>                <C>
     Finished goods ............          $ 45,260           $ 44,405
     Return inventory ..........             3,449              3,450
     Raw materials .............               833                903
                                          --------           --------
                                            49,542             48,758

     Less:  Obsolescence reserve           (20,360)           (13,801)
                                          --------           --------

                                          $ 29,182           $ 34,957
                                          ========           ========
</TABLE>

NOTE 3 - COMMITMENTS AND CONTINGENCIES

LITIGATION

         During the three months ended September 30, 2001, no significant claims
were asserted against or by the Company the resolution of which would have a
material adverse affect on the Company's liquidity, financial condition or
results of operations, although the Company is involved in various claims and
legal actions arising in the ordinary course of business. The following
litigation matters are still pending, however, and the Company continues to
believe that the underlying complaints are without merit and intends to defend
itself vigorously against these actions.

         The Company's management believes that the ultimate resolution of any
of the complaints summarized below and/or any other claims which are not stated
herein will not have a material adverse effect on the Company's liquidity,
financial condition or results of operations.

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).


                                     Page 8
<PAGE>
         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.

         On April 24, 2001, Scavenger brought a motion for reargument and
renewal of the January 8, 2001 Order dismissing the second cause of action. By
order entered July 5, 2001, the Commercial Division denied this motion. On or
about July 17, 2001, Scavenger noticed an appeal from the July 5, 2001 Order.
All of the pending appeals have been consolidated for oral argument in the
November 2001 Term of the Appellate Division, First Department.

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


                                     Page 9
<PAGE>
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, oral
argument is scheduled for November 28, 2001.

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. On June 6, 2001 the Company waived service of a summons, and on July
9, 2001 the Company filed a motion to dismiss. Plaintiffs filed papers opposing
the Company's motion to dismiss and on September 14, 2001 the Company filed its
reply brief.

NOTE 4 - DEBT

         The Company has a $50.0 million Credit Agreement with Infogrames SA
which bears interest at LIBOR plus 2.5%. On June 7, 2001, the maturity date was
extended from June 15, 2001 to December 31, 2001. The outstanding borrowings, as
of September 30, 2001, under the Credit Agreement were approximately $47.1
million, of which $1.1 million is related to accrued interest and fees. As of
September 30, 2001, there are $1.3 million of letters of credit outstanding.

         In connection with the INA Merger, the Company assumed a $35.0 million
revolving credit facility with BNP, which was to mature on September 17, 2001.
On September 14, 2001, the facility was extended to November 30, 2001. The
amended facility bears interest at a rate equal to the lender's cost of funds
plus 1.5% on domestic term loans and at LIBOR plus 1.5% on Eurodollar term
loans, payable at maturity. Any demand loans bear interest at the prime rate.
The facility fee of $5,000 was paid on September 14, 2001, and a commitment fee
of 75 basis points, which is payable on the unutilized portion of the facility
is due at the end


                                    Page 10
<PAGE>
of each quarter. The Company had approximately $34.7 million of borrowings
outstanding under the BNP credit facility as of September 30, 2001.

Long-term debt consists of the following at September 30, 2001:

<TABLE>
<S>                                                              <C>
GAP 0% subordinated convertible notes (a)......................   $40,672
5% subordinated convertible note with a subsidiary
of Infogrames SA, due December 16, 2004.......................     66,232
                                                                 --------
                                                                 $106,904
                                                                 ========
</TABLE>

(a) The GAP 0% subordinated convertible note is due on December 16, 2004.
Interest for this note is being accreted at the rate of 7.0% and will have a
redemption value of $50.0 million at maturity.

NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED
                                                                               SEPTEMBER 30,
                                                                             2000         2001
                                                                             ----         ----
<S>                                                                       <C>             <C>
     Conversion of INA related party payables with Infogrames SA          $64,907         $ --
     Cash paid for interest ....................................               --          580
</TABLE>

NOTE 6 - RESTRUCTURING RESERVES

         During the year ended June 30, 2001, the Company implemented a
restructuring plan to improve efficiencies in its publishing and internal
development operations. This plan included the shutdown and move of the
Company's San Jose facility to Santa Monica, California, and the shutdown of the
Humongous publishing group. This resulted in charges of approximately $3.5
million of which $1.9 million related to the termination of 119 employees. The
remaining $1.6 million related to the disposal of fixed assets and other charges
related to the shutdown of these operations.

         The following table sets forth activity for the restructuring reserve,
which is included in accrued liabilities, during the three months ended
September 30, 2001: (IN THOUSANDS)

<TABLE>
<CAPTION>
                        BALANCE                            BALANCE
                        JUNE 30,           CASH          SEPTEMBER 30,
                          2001           PAYMENTS            2001
                          ----           --------            ----
<S>                     <C>              <C>             <C>
     Severance ....     $ 2,647           $(1,216)          $1,431
                        -------           -------           ------
                        $ 2,647           $(1,216)          $1,431
                        =======           =======           ======
</TABLE>

NOTE 7 - OPERATIONS BY REPORTABLE SEGMENTS

         The Company has three reportable segments: publishing, distribution and
corporate. Publishing is comprised of three studios located in Santa Monica,
California; Beverly, Massachusetts; and Minneapolis, Minnesota. Distribution
constitutes the sale of other publishers' titles to various mass merchants and
other retailers. Corporate includes the costs of senior executive management,
legal, finance, administration, and amortization of goodwill of the Company.
The majority of depreciation expense for fixed assets is charged to the
corporate segment and a portion is recorded in the publishing segment. This
amount consists of depreciation on computers and office furniture in the
publishing unit. Historically, the Company does not separately track or
maintain records, other than fixed asset records, which identify assets by
segment and, accordingly, such information is not available.


                                    Page 11
<PAGE>
         The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on operating results of these segments.

         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 and operating profit (loss) by reportable segment for the three months
ended September 30, 2000 and 2001: (in thousands)

<TABLE>
<CAPTION>
                                               PUBLISHING       DISTRIBUTION       CORPORATE             TOTAL
                                               ----------       ------------       ---------             -----
<S>                                            <C>              <C>                <C>                 <C>
Three months ended September 30, 2000:
      Net revenues ...................          $ 27,408           $12,159          $     --           $ 39,567
      Operating profit (loss) ........           (12,160)            3,821           (18,581)           (26,920)

Three months ended September 30, 2001:
      Net revenues ...................            61,655            20,013                --             81,668
      Operating profit (loss) ........            12,007             4,752           (13,365)             3,394
</TABLE>

NOTE 8 - GOODWILL

          The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets, effective July 1, 2001.
Under SFAS No. 142, goodwill is no longer amortized but reviewed for impairment
annually, or more frequently if certain indicators arise. The Company is
required to complete the initial step of a transitional impairment test within
six months of adoption of SFAS No. 142 and to complete the final step of the
transitional impairment test by the end of the fiscal year. Had the Company been
accounting for its goodwill under SFAS No. 142 for all periods presented, the
Company's net (loss) profit and (loss) profit per share would have been as
follows:

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED
                                                                           SEPTEMBER 30,
                                                                           -------------
                                                                     2000                2001
                                                                     ----                ----
<S>                                                              <C>                  <C>
Net (loss) profit .....................................          $  (32,714)          $      552
Add: Goodwill amortization, net of tax ................               2,911                   --
                                                                 ----------           ----------
Pro-forma (loss) profit ...............................          $  (29,803)          $      552
                                                                 ==========           ==========

Basic and diluted net (loss) profit per share .........          $    (1.58)          $     0.01
Basic and diluted goodwill amortization, net of tax ...                 .14                   --
                                                                 ----------           ----------
Pro-forma basic and diluted net (loss) profit per share          $    (1.44)          $     0.01
                                                                 ==========           ==========
</TABLE>


                                    Page 12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         The Company develops, publishes, and distributes interactive games for
leisure entertainment, gaming enthusiasts 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 conducted through the
Company's three main studios: Santa Monica, California (sports/racing and
action/adventure games); Beverly, Massachusetts (kids/family games, racing, and
strategy); and Minneapolis, Minnesota (action/adventure games). 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 games produced
by software publishers which are unrelated to the Company. 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 personal computers (PCs) and dedicated game consoles,
and the Company develops and publishes games for all of these platforms. During
the quarter ended September 30, 2001, the Company's product mix consisted of 73%
PC games, 13% Sony PlayStation games, 12% Sony PlayStation2 games, 1% SEGA
Dreamcast games, and 1% Nintendo Game Boy games. The Company believes that
maintaining a healthy mix of platform distribution in its product line-up is
vital for its continued growth. According to International Development Group
("IDG"), legacy platforms such as the multimedia home PC had an installed base
of more than 68 million in North America in 2001; that base is projected to
increase to more than 102 million by 2004. IDG also reports that PlayStation,
currently the most widely distributed game console, had an installed base of
nearly 30 million in North America in 2001; that base is projected to increase
incrementally to approximately 32 million in 2004. While PlayStation's growth
may slow, growth of the installed base for PlayStation2, introduced in North
America in 2000, is projected to grow from 7.2 million in 2001 to nearly 34
million in 2004. In addition, as of November 2001, the console market will also
include new platforms being introduced by Microsoft and Nintendo, the Xbox and
Game Cube, respectively. IDG projects that the Xbox will have a North American
installed base of approximately 20 million by 2004, while the Game Cube is
projected to have a North American installed base of 18 million in the same time
period. The expansion of the gaming market, both organic and through the
addition of new consoles, opens additional opportunities for the Company's
product while increasing the competition for market share and shelf space.

         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
interactive games 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
balances between internal/external development, and licensed product/owned
franchises.

         The distribution channels for interactive software have changed
significantly in recent years. Traditionally, consumer software was sold through
specialty stores. Today, consumer software is 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
new distribution channels.


                                    Page 13
<PAGE>
         Sales are recorded net of expected future returns and other allowances.
Management continually assesses and re-evaluates the rate of returns and price
protection based on business conditions and market factors.


                                    Page 14
<PAGE>
RESULTS OF OPERATIONS

         The consolidated financial information set forth have been combined as
of December 16, 1999, with those of Infogrames North America Inc. ("INA"), as a
result of a 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 SA ("Infogrames SA").

         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      THREE MONTHS
                                                          ENDED             ENDED
                                                       SEPTEMBER 30,     SEPTEMBER 30,
                                                           2000              2001
                                                           ----              ----
<S>                                                    <C>               <C>
Net revenues ..................................           100.0%            100.0%
Cost of goods sold ............................            37.4              46.2
                                                         ------            ------
   Gross profit ...............................            62.6              53.8
Selling and distribution expenses .............            47.3              19.8
General and administrative expenses ...........            35.3              10.5
Research and development ......................            32.8              18.0
Merger costs ..................................             4.3                --
Depreciation and amortization .................            10.9               1.3
                                                         ------            ------
     Operating (loss) profit ..................           (68.0)              4.2
Interest expense ..............................            15.5               3.6
Other income ..................................             0.8               0.1
                                                         ------            ------

(Loss) profit before provision for income taxes           (82.7)              0.7
Provision for income taxes ....................             0.0               0.0
                                                         ------            ------

      Net (loss) profit .......................           (82.7)              0.7
                                                         ======            ======
</TABLE>

                  THREE MONTHS ENDED SEPTEMBER 30, 2001 VERSUS
                    THE THREE MONTHS ENDED SEPTEMBER 30, 2000

         Net revenues for the three months ended September 30, 2001 increased
approximately $42.1 million, or 106.3%, to $81.7 million from $39.6 million, as
compared to the 2000 period. This increase is attributable to sales of the
former Hasbro Interactive, Inc. ("Hasbro Interactive") titles which are now
published by the Company in conjunction with Infogrames SA's acquisition of
Hasbro Interactive in January 2001. Additionally, the increase is attributable
to the continued success of products such as Driver 2 Greatest Hits for
Playstation, Deer Hunter 5 and new products such as Test Drive Off Road: Wide
Open for Playstation 2.

         Total publishing revenue increased 125.2% to $61.7 million for the
three months ended September 30, 2001 from $27.4 million in the comparable 2000
period. Approximately $32.4 million of this increase is from the sale of former
Hasbro Interactive product as mentioned above. Additionally, the Company's
continued success of console products such as Driver 2 Greatest Hits for
Playstation and Test Drive Off Road: Wide Open for Playstation 2 has helped grow
both its publishing and console businesses from a year ago. Those products
amounted to $7.4 million in net revenue for the three months ended September 30,
2001. Finally, total distribution net revenues increased 63.9% to $20.0 million
for the three months ended September 30, 2001 from $12.2 million in the
comparable period as the Company expanded its relationships with third party
vendors.

         Cost of goods sold for the three months ended September 30, 2001
increased approximately $22.9 million, or 154.7%, to $37.7 million from $14.8
million in the comparable 2000 period. Cost of goods sold as a percentage of net
revenues increased to 46.2% for the three months ended September 30, 2001 as
compared to 37.4% in the comparable 2000 period. The increase in cost of goods
sold as a percentage of net revenues is


                                    Page 15
<PAGE>
primarily attributable to the Company's product revenue mix. Console game
products generally carry a higher cost of goods as compared to PC products and
in the 2001 period recognized 27% of its revenue from console products while the
2000 period recognized 24% of its revenue from console products. Also the
additional revenue earned in 2001 from distribution revenues carry a higher cost
of goods than our standard product sales; thus, increasing overall cost of goods
sold as a percentage of total net revenues.

         Gross profit increased to $43.9 million for the three months ended
September 30, 2001 from $24.8 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 also impacted by the percentage of
sales of PC product as compared to the percentage of sales of console product
and by the percentage of foreign sales. The Company's margins on sales of PC
product are higher than those on console software (currently, Playstation2,
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 decreased to 53.8% during the three months ended September 30, 2001
from 62.6% in the comparable 2000 period. This decrease is due to the Company's
change in product mix and increase in its distribution sales as compared to the
prior period as described above.

         Selling and distribution expenses primarily include shipping expenses,
personnel expenses, advertising and promotion expenses and distribution costs.
During the three months ended September 30, 2001, these expenses decreased
approximately $2.5 million, or 13.4%, to $16.2 million from $18.7 million in the
comparable 2000 period. Selling and distribution expenses as a percentage of net
revenues for the three months ended September 30, 2001 decreased to 19.8% as
compared to 47.3% in the comparable 2000 period. This decrease in selling and
distribution expenses as a percentage of net revenues resulted primarily from
decreased advertising and outbound freight. Advertising expenditures decreased
34.2% to approximately $2.3 million during the three months ended September 30,
2001 as compared to approximately $3.5 million in the comparable 2000 period
through deployment of a more selective marketing strategy. Distribution
expenses decreased 13.8% to $3.1 million during the three months ended
September 30, 2001 as compared to $3.6 million in the comparable 2000 period
due to a reduction in expedited shipments.

         General and administrative expenses primarily include personnel
expenses, facilities costs, professional expenses and other overhead charges.
These expenses in the three months ended September 30, 2001 decreased
approximately $5.4 million, or 38.7%, to $8.6 million from $14.0 million in the
comparable 2000 period. General and administrative expenses as a percentage of
net revenues decreased to 10.5% for the three months ended September 30, 2001
from 35.3% in the comparable 2000 period. This decrease is primarily due to
decreased professional fees (legal, management fees and other outside
consultants) and decreased salaries from the integration of INA and the Company
during the 2001 period. Professional fees decreased 71.0% to approximately $1.4
million for the three months ended September 30, 2001 as compared to $3.8
million in the comparable 2000 period. This decrease is due to nonrecurring
transitional costs incurred in the 2000 period and cost savings realized from
reduced legal and outside consultants fees due to the merger with INA.
Furthermore, effective February 2001, the Company receives monthly management
fee revenue charged to Hasbro Interactive for management and professional
services performed. Salaries decreased 51.7% to approximately $2.8 million
during the three months ended September 30, 2001 as compared to $5.8 million in
the comparable 2000 period. This decrease is attributable to reduced head count
throughout various functions such as senior management, accounting and finance,
information and technology and human resources resulting from the integration
of INA.

         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 September 30, 2001 increased
approximately $1.7 million, or 13.1%, to $14.7 million from $13.0 million in the
comparable 2000 period. Research and development expenses, as a percentage of
net revenues, decreased to 18.0% for the three months ended September 30, 2001
from 32.8% in the comparable 2000 period. The increase in research and
development expenses for the three months ended September 30, 2001 is primarily
due to the Company signing more arrangements with external developers. Research
and development expenses incurred by the Company's internal development studios,
which primarily include Humongous, Legend and Reflections, were approximately
56.0% of total research and development costs for the three months ended
September 30, 2001 as compared to 54.0% in the comparable 2000 period.

         The $1.7 million in merger costs incurred in the three months ended
September 30, 2000 relate to the merger between the Company and INA. There were
no such costs incurred during the three months ended September 30, 2001.

         Depreciation and amortization for the three months ended September 30,
2001 decreased approximately $3.2 million, or 74.4%, to $1.1 million from $4.3
million in the comparable 2000 period. This decrease is primarily attributable
to the cessation of goodwill amortization under Statement of Financial
Accounting Standards (SFAS) 142, Goodwill and Other Intangible Assets. The
Company amortized approximately $2.9 million in goodwill during the three months
ended September 30, 2000. Depreciation and amortization was further reduced by
the write-off of assets due to the consolidation of functions from the merger of
INA and the Company.


                                    Page 16
<PAGE>
         Interest expense, net decreased approximately $3.2 million for the
three months ended September 30, 2001 to $2.9 million from $6.1 million in the
comparable 2000 period. The decrease in the three months ended September 30,
2001 was attributable to lower borrowings in 2001 as compared to the 2000
period.

LIQUIDITY AND CAPITAL RESOURCES

         Cash and cash equivalents were $11.4 million at September 30, 2001
compared to $5.4 million at June 30, 2001. As of September 30, 2001, the Company
had a working capital deficit of $57.4 million compared to $57.3 million in
working capital deficit at June 30, 2001.

         During the three months ended September 30, 2001, $37.0 million was
provided by financing activities. The Company utilized its borrowings from its
credit facilities to fund $29.3 million net cash used in operating activities to
finance receivables and build inventory as the Company enters its peak season.

         The Company's outstanding accounts receivable balance varies
significantly on a quarterly basis due to the seasonality of its business and
the timing of new product releases. Several new products were launched late in
September, increasing the number of days sales outstanding in the receivable
balance above the level of the previous quarter ended June 30, 2001. There were
no significant changes in the credit terms with customers during the three
month period.


DEBT

         The Company has a $50.0 million Credit Agreement with Infogrames SA
which bears interest at LIBOR plus 2.5%. On June 7, 2001, the maturity date was
extended from June 15, 2001 to December 31, 2001. The outstanding borrowings, as
of September 30, 2001, under the Credit Agreement were approximately $47.1
million, of which $1.1 million is related to accrued interest and fees. As of
September 30, 2001, there are $1.3 million of letters of credit outstanding.

         In connection with the INA Merger, the Company assumed a $35.0 million
revolving credit facility with BNP, which was to mature on September 17, 2001.
On September 14, 2001, the facility was extended to November 30, 2001. The
amended facility bears interest at a rate equal to the lender's cost of funds
plus 1.5% on domestic term loans and at LIBOR plus 1.5% on Eurodollar term
loans, payable at maturity. Any demand loans bear interest at the prime rate.
The facility fee of $5,000 was paid on September 14, 2001, and a commitment fee
of 75 basis points, which is payable on the unutilized portion of the facility
is due at the end of each quarter. The Company had approximately $34.7 million
of borrowings outstanding under the BNP credit facility as of September 30,
2001.

Long-term debt consists of the following at September 30, 2001:

<TABLE>
<S>                                                         <C>
GAP 0% subordinated convertible notes (a) ........          $ 40,672
5% subordinated convertible note with a subsidiary
of Infogrames SA, due December 16, 2004 ..........          $ 66,232
                                                            --------
                                                            $106,904
                                                            ========
</TABLE>

         (a) The GAP 0% subordinated convertible note is due on December 16,
         2004. Interest for this note is being accreted at the rate of 7.0% and
         will have a redemption value of $50.0 million at maturity.

         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 of Infogrames SA as deemed
necessary will be sufficient to fund the Company's operations and cash flows.

RECENT ACCOUNTING PRONOUNCEMENTS

         Issue No. 00-25, "Vendor Income Statement Characterization of
Consideration from a Vendor to a Retailer" ("EITF Issue No. 00-25"), outlines
required accounting treatment of certain sales incentives, including slotting or
placement fees, cooperative advertising arrangements, buydowns, price protection
and other allowances. EITF Issue No. 00-25 requires the Company to report the
paid consideration expense as a reduction of sales. The Company is required to
implement EITF Issue No. 00-25 for the quarter beginning


                                    Page 17
<PAGE>
January 1, 2002. Management believes that the effect of implementing the
guidelines of EITF Issue No. 00-25 will not materially impact the Company's
current reporting practices.

         In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations". SFAS No. 143 addresses financial accounting and
reporting for obligations and costs associated with the retirement of tangible
long-lived assets. The Company is required to implement SFAS No.143 on January
1, 2003. Management believes that the effect of implementing this pronouncement
will not have a material impact on financial condition or results of operations.

         In October 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 replaces SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" and establishes accounting and reporting standards for
long-lived assets to be disposed of by sale. This standard applies to all
long-lived assets, including discontinued operations. SFAS No. 144 requires that
those assets be measured at the lower of carrying amount or fair value less cost
to sell. SFAS No. 144 also broadens the reporting of discontinued operations to
include all components of an entity with operations that can be distinguished
from the rest of the entity that will be eliminated from the ongoing operations
of the entity in a disposal transaction. The Company is required to implement
SFAS No. 144 on January 1, 2002. Management believes that the effect of
implementing this pronouncement will not have a material impact on the financial
condition or results of operations.

IMPACT OF INFLATION

         General inflation in the economy has driven the operating expenses of
many businesses higher, and, accordingly, the Company has experienced increased
salaries and higher prices for supplies, goods and services. The Company
continuously seeks methods of reducing costs and streamlining operations while
maximizing efficiency through improved internal operating procedures and
controls. While the Company is subject to inflation as described above,
management believes that inflation currently does not have a material effect on
operating results, but there can be no assurance that this will continue to be
so in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company's carrying value of cash, marketable securities, trade
accounts receivable, accounts payable, accrued liabilities, royalties payable
and its existing lines of credit are a reasonable approximation of their fair
value.

FOREIGN CURRENCY EXCHANGE RATES

         In recent years, the Company has restructured its foreign operations.
For the twelve months ended June 30, 2001, foreign operations represented 2%,
8.5% and 5.3% of consolidated net revenues, operating loss and total assets,
respectively. Currently, substantially all of the Company's business is
conducted in the United States where its revenues and expenses are transacted in
U.S. dollars. As a result, the majority of the Company's results of operations
are not subject to foreign exchange rate fluctuations. The Company does not
hedge against foreign exchange rate fluctuations due to the limited financial
exposure it faces with respect to such risk. The Company purchases certain of
its inventories from foreign developers. The Company's business in this regard
is subject to certain risks, including, but not limited to, differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions and foreign exchange rate volatility. The Company's
future results could be materially and adversely impacted by changes in these or
other factors.

INTEREST RATES

         The Company is exposed to market risk from changes in interest rates on
its revolving credit facility and its related party credit facility. Outstanding
balances under these two facilities (which aggregated $81.8 million at September
30, 2001) bear interest at variable rates based on a margin over LIBOR. Based on
the amount outstanding as of September 30, 2001, a 100 basis point change in
interest rates would result in an approximate $0.8 million change to the
Company's annual interest expense. For fixed rate debt including the GAP 0%
subordinated convertible notes and the 5% subordinated convertible note with a
subsidiary of Infogrames SA aggregating $106.9 million at September 30, 2001,
interest rate changes effect the fair market value of such debt, but do not
impact the Company's earnings or cash flows. The Company does not currently
anticipate entering into interest rate swaps and/or similar instruments.


                                    Page 18
<PAGE>
PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

LITIGATION

         During the three months ended September 30, 2001, no significant claims
were asserted against or by the Company the resolution of which would have a
material adverse affect on the Company's liquidity, financial condition or
results of operations, although the Company is involved in various claims and
legal actions arising in the ordinary course of business. The following
litigation matters are still pending, however, and the Company continues to
believe that the underlying complaints are without merit and intends to defend
itself vigorously against these actions.

         The Company's management believes that the ultimate resolution of any
of the complaints summarized below and/or any other claims which are not stated
herein will not have a material adverse effect on the Company's liquidity,
financial condition or results of operations.

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


                                    Page 19
<PAGE>
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.

         The three pending appeals have been consolidated for oral argument in
the September 2001 Term of the Appellate Division, First Department. On April
24, 2001, Scavenger brought a motion for reargument and renewal of the January
8, 2001 Order dismissing the second cause of action. By order entered July 5,
2001, the Commercial Division denied this motion. On or about July 17, 2001,
Scavenger noticed an appeal from the July 5, 2001 Order, and all of the appeals
have been consolidated for the November Term.

         On April 24, 2001, Scavenger brought a motion for reargument and
renewal of the January 8, 2001 Order dismissing the second cause of action. By
order entered July 5, 2001, the Commercial Division denied this motion. On or
about July 17, 2001, Scavenger noticed an appeal from the July 5, 2001 Order.
All of the pending appeals have been consolidated for oral argument in the
November 2001 Term of the Appellate Division, First Department.

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.


                                    Page 20
<PAGE>
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, oral
argument is scheduled for November 28, 2001.

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. On June 6, 2001 the Company waived service of a summons, and on July
9, 2001 the Company filed a motion to dismiss. Plaintiffs filed papers opposing
the Company's motion to dismiss and on September 14, 2001 the Company filed its
reply brief.


                                    Page 21
<PAGE>
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 22
<PAGE>
                                   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:  February 28, 2002


                                    Page 23