<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                                       OR

[ ]  TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                          COMMON STOCK, $0.01 PAR VALUE

         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 [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant, based on the $4.25 closing sale price of the
Common Stock on September 19, 2001 as reported on the Nasdaq National Market,
was approximately $33.4 million. As of September 19, 2001, there were 69,524,671
shares of the registrant's Common Stock outstanding.
<PAGE>   2
                                INFOGRAMES, INC.
                    JUNE 30, 2001 ANNUAL REPORT ON FORM 10-K
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
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<S>                                                                                       <C>
FORWARD LOOKING INFORMATION ..........................................................     ii
PART I ...............................................................................      1
   ITEM 1.  Business .................................................................      1
   ITEM 2.  Properties ...............................................................     13
   ITEM 3.  Legal Proceedings ........................................................     14
   ITEM 4.  Submission of Matters to Vote of Security Holders ........................     16
PART II ..............................................................................     17
   ITEM 5.  Market for Registrant's Common Equity and Related Stockholder Matters ....     17
   ITEM 6.  Selected Financial Data ..................................................     18
   ITEM 7.  Management's Discussion and Analysis of Financial Condition and Results of
            Operations ...............................................................     19
   ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk ...............     30
   ITEM 8.  Index to the Financial Statements and Supplementary Data .................     30
   ITEM 9.  Changes in and Disagreements with Accountants on Accounting and Financial
            Disclosure ...............................................................     30
PART III .............................................................................     32
   ITEM 10. Directors and Executive Officers .........................................     32
   ITEM 11. Executive Compensation ...................................................     34
   ITEM 12. Security Ownership of Certain Beneficial Owners and Management ...........     38
   ITEM 13. Certain Relationships and Related Transactions ...........................     40
PART IV ..............................................................................     43
   ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .........     43
SIGNATURES ...........................................................................     51
CONSOLIDATED FINANCIAL STATEMENTS ....................................................    F-1
</TABLE>
<PAGE>   3
                           FORWARD-LOOKING INFORMATION

         When used in this Annual Report, the words "intends," "expects,"
"plans," "estimates," "projects," "believes," "anticipates" and similar
expressions are intended to identify forward-looking statements. Except for
historical information contained herein, the matters discussed and the
statements made herein concerning the Company's future prospects are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Although the Company believes that its plans, intentions and
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such plans, intentions or expectations will be achieved.
There can be no assurance that future results will be achieved, and actual
results could differ materially from the forecast and estimates. Important
factors that could cause actual results to differ materially include, but are
not limited to, worldwide business and industry conditions (including consumer
buying and retailer ordering patterns), adoption of new hardware systems,
product delays, changes in research and development spending, software
development requirements and their impact on product launches, Company customer
relations, retail acceptance of the Company's published and third-party titles,
competitive conditions and other risk factors, including, but not limited to,
those discussed in "Risk Factors" below at pages 8 to 13.
<PAGE>   4
                                     PART I

ITEM 1.  BUSINESS

                                    OVERVIEW

         Infogrames, Inc. (formerly GT Interactive Software Corp.), a Delaware
corporation (the "Company"), develops, publishes, and distributes interactive
entertainment 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.

         Following the acquisitions of GT Interactive Software Corp., a Delaware
corporation, in 1999 and Hasbro Interactive, Inc., a Delaware corporation
("Hasbro Interactive"), in 2001 by its parent company, Infogrames Entertainment
S.A., a French corporation ("Infogrames SA"), the Company embarked upon an
extensive restructuring and streamlining of its operations in fiscal 2001. These
efforts resulted in a reduction of overhead and the establishment of a revised
organizational structure, which the Company believes will enhance productivity
and generate greater cost efficiencies. Among the most significant changes made
during this period was the centralization of the Company's publishing and
marketing activities in three locations across the country, each focused on
specific gaming genres. The Company believes that its new structure and emphasis
on key gaming genres will enable the Company to (i) compete more effectively in
the increasingly crowded and challenging interactive gaming industry, and (ii)
capitalize on new opportunities arising from the arrival of new console gaming
platforms.

         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 ("Third-Party
Products"). 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
fiscal 2001, the Company's product mix consisted of 65% PC games, 23% Sony
PlayStation games, 6% Sony PlayStation2 games, 3% SEGA Dreamcast games, and 3%
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 install 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
gaming console, had an install 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 install 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 install base of approximately 20 million by
2004, while the Game Cube is projected to have a North American install 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

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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 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/third-party 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.

         Sales are recorded net of expected future returns and other allowances.
Management continually assesses and reevaluates the rate of returns and price
protection based on business conditions and market factors.

                            MERGERS AND ACQUISITIONS

INFOGRAMES NORTH AMERICA MERGER

         On October 2, 2000, the Company completed a merger (the "INA Merger")
with Infogrames North America, Inc., a California corporation ("INA"). INA was a
wholly-owned subsidiary of Infogrames SA, the Company's majority shareholder.
This transaction was treated as a common control business combination accounted
for on an "as-if pooled" basis. The following outlines the INA Merger:

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

      (b)   The outstanding debt under the Company's revolving credit agreement
            (the "Credit Agreement") and certain intercompany payables between
            the Company and Infogrames SA were converted into the Company's
            common stock at $6.40 per share. The balance of the Credit Agreement
            and certain intercompany payables owed to Infogrames SA prior to the
            INA 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 Infogrames SA to provide
            for an aggregate commitment of $50 million with primarily the same
            terms as the previous facility. The latest amendment of the Credit
            Agreement is dated June 7, 2001, which extends the facility to
            December 31, 2001.

      (c)   All warrants held by Infogrames SA and California U.S. Holdings,
            Inc., a California corporation and a wholly-owned subsidiary of
            Infogrames SA ("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 was to mature
            on September 17, 2001. On September 14, 2001, the facility was
            extended to November 30, 2001.

      (e)   The Company issued 28,000,000 shares of its common stock to CUSH in
            exchange for all the outstanding shares of INA held by CUSH. The
            net assets of INA were valued at approximately $5.1 million as of
            October 2, 2000.

         For the period from December 16, 1999 through June 30, 2000, the
Company was granted the non-exclusive right in the U.S. and Canada to act as the
sales agent for INA, for INA's products, pursuant to which the Company received
3% of net receipts for such products. The parties entered into a subsequent
agreement for the period from July 1, 2000 to October 2, 2000, pursuant to which
the Company received 15% of net receipts for such products. These agreements
were terminated upon consummation of the INA Merger.


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                                   PUBLISHING

         The Company is currently ranked as the second largest third-party
publisher of interactive entertainment in the United States, according to NPD
TRSTS Video Games Service. Third-party publishers are companies whose sole
business is the development, publishing and distribution of interactive
entertainment software. Third-party publishers are distinguishable from
first-party publishers (e.g., Sony Computer Entertainment of America, Microsoft
Corporation and Nintendo of America) in that the latter produce computer gaming
consoles or hardware, as well as entertainment software. The Company's
publishing business primarily consists of three publishing studios (Santa
Monica, California; Beverly, Massachusetts; and Minneapolis, Minnesota), which
focus on the Company's core strengths: kids/family games, action/adventure
games, and sports/racing games. The Company publishes games for all platforms,
including the Sony PlayStation(R) and PlayStation2(R); Nintendo(R) Game Boy(R),
Game Boy(R) Advance and Game Cube(R); the Microsoft(R) Xbox(TM); and personal
and Macintosh(R) computers. With its emphasis on producing interactive
entertainment for a mass entertainment audience, the Company publishes games at
various price points, ranging from value-priced titles to premium priced
products. Pricing is determined by a variety of factors, including but not
limited to: license or franchise property, internal or external development;
single or multiple platform development; production values; target audience; and
distribution territory.

         The Company defines licensed properties as those titles that it has
licensed, for a fee and a finite period of time, from the property owner for the
purposes of developing an interactive game (see examples below). Franchises, in
the form of characters or games, constitute intellectual property owned and
controlled exclusively by the Company (see examples below). Games published by
the Company with either licensed or franchise property, are developed either
internally or externally. Internal development is conducted at development
studios owned and/or managed by the Company for the sole purpose of game
development. External development studios are independent studios with which the
Company has contracts for the development of specific titles. (See below for
more detailed discussion of Internal and External Development Studios.)

SANTA MONICA, CALIFORNIA

         In August 2001, the Company combined and relocated its two offices in
California (previously located in San Jose and Woodland Hills) to a new
state-of-the-art studio in Santa Monica, California. The centralization of these
operations is expected to result in a reduction of costs and expenses associated
with research and development, among other variables.

         With an emphasis on action/adventure and racing/sports games, the Santa
Monica Studio publishes both internally and externally developed titles. Its
proximity to the Hollywood community also gives the Studio an advantageous
position in acquiring and overseeing key titles licensed from the Hollywood film
and television studios. To date, the Company has licensed film and television
properties from: Viacom/Paramount Pictures/CBS/Nickelodeon (Mission: Impossible,
Mission: Impossible 2 and Survivor); Sony Pictures (Men In Black, Godzilla);
Canal + (Terminator, Terminator 2); and Warner Bros. (Looney Tunes).

         The line-up of titles published through the Santa Monica Studio also
includes titles developed in partnership with leading game developers, including
DarkWorks (Alone in the Dark), Epic Games (Unreal Tournament), and Pitbull
Syndicate (Test Drive), among others.

         The former Woodland Hills and San Jose operations published a combined
56 new titles in fiscal 2001, representing approximately 41.7% of the Company's
publishing revenue for the year. These titles include games for the personal
computer, Sony PlayStation and PlayStation2, and SEGA(R) Dreamcast.
Additionally, the Studio is currently preparing several titles that will be
published on the Microsoft Xbox platform due to debut in November 2001.

BEVERLY, MASSACHUSETTS

         The Company's Beverly Studio focuses on developing and publishing a
range of products, from kids' and family-oriented interactive entertainment to
racing and strategy games for the more seasoned gamer. The Studio's publishing
line-up encompasses those titles previously published under the Hasbro
Interactive label, which was acquired in 2000 by the Company's parent company,
Infogrames SA. Those titles include an array of valuable assets, including
Roller Coaster Tycoon(R) (more than 3 million units sold to date), Monopoly(R)
(more than 4 million units sold to date), and Civilization(TM) (more than 2
million units sold to date), among many others.


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         In addition, the Beverly Studio publishes the award-winning and
critically acclaimed children's edutainment titles developed by the Company's
Humongous Entertainment division. These titles include internally developed
properties such as Freddi Fish(TM), Pajama Sam(R), Putt Putt(R), and the
Backyard Sports(TM) series of games, as well as licensed products such as
Nickelodeon's Blue's Clues(TM).

         Completing the Beverly Studio's publishing line-up are titles developed
in partnership with leading game developers, including Firaxis (Civilization),
Stunt Puppy Entertainment (*NSYNC Hotline Fantasy Phone & CD-ROM Game), and
Quicksilver (Master of Orion III), among others.

         The Beverly Studio published 67 titles in fiscal 2001, representing
approximately 20.5% of the Company's publishing revenue for the year. While the
Studio publishes games for all platforms, the majority of its games are for the
personal computer, which is the platform best suited to games for younger
players. Given the broad household penetration of the personal computer (see
discussion above), the Company believes this legacy platform remains a viable
and healthy business.

         Among the key franchises published by the Beverly Studio are the
Backyard Sports series, Freddi Fish, Pajama Sam, Putt Putt, and Spy Fox. Key
licenses published by this Studio include Monopoly, Tonka, Blue's Clues,
Scrabble, Jeopardy and Wheel of Fortune, among others.

MINNEAPOLIS, MINNESOTA

         The Company's Studio in Minneapolis, Minnesota, publishes games
focusing primarily on action/adventure games for the casual gamer. Given the
nature of these games and their broad audience appeal, the majority of the
Studio's line-up is published for the personal computer and the Macintosh
computer. Some exceptions include the licensed title Dragon Ball Z: Legacy of
Goku, which is scheduled to be published in 2002 on the Game Boy Advance and the
PlayStation2, and World of Outlaws: Sprint Cars 2002 for PlayStation2, among
others. These titles mark the Studio's first steps toward extending its reach to
include the console market.

         Titles published by the Minneapolis Studio include hunting and outdoor
adventure games, such as the Deer Hunter(R) franchise, which has sold more than
2 million units to date, racing titles such as the Harley-Davidson(R) license,
and strategy/adventure games such as the upcoming Survivor(TM) licensed game. In
addition, the Studio's MacSoft is the industry's leading publisher of
entertainment software for the Macintosh computer, focusing primarily on
strategy and adventure games. The Minneapolis Studio also publishes titles
developed by external development studios.

         The Minneapolis Studio published 34 titles in fiscal 2001, representing
10.5% of the Company's publishing revenue for the year. Among the key franchises
published by the Minneapolis Studio are Deer Hunter and Beach Head. Key licenses
published by this Studio include Harley-Davidson, Survivor, and World of
Outlaws, among others.

INTERNAL DEVELOPMENT STUDIOS

         In addition to its three central Studios, which publish, market and
distribute the Company's games, the Company owns and manages several studios
that focus solely on game development. Titles from these locations range in
genre and are published for various audiences playing on the full array of
gaming platforms.

         Humongous Entertainment. Seattle-based Humongous Entertainment
("Humongous") develops some of the most successful children's franchises in the
industry. To date, its Freddi Fish and Putt Putt franchises have sold more than
3 million units each, and its Backyard Sports series has sold in excess of 2
million units. In June 2001, the Company restructured Humongous to focus
primarily on the development of new installments for the Backyard Sports series.
In addition, Humongous will adapt its character franchises to be published for
next-generation consoles.

         Reflections. Reflections Interactive Limited ("Reflections"), based in
Newcastle, England, was the developer of the Company's hit Driver franchise
which has sold more than 5 million units to date. Reflections is developing the
Company's upcoming Stuntman, which is slated to be published in 2002 for the
PlayStation2.


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         Legend Entertainment. Based in Chantilly, Virginia, Legend
Entertainment Company ("Legend"), is the Studio behind Unreal and Unreal 2.

RELATED PARTY

         Paradigm. On behalf of Infogrames SA, the Company manages Dallas-based
Paradigm Entertainment, Inc., a Texas corporation ("Paradigm"), which Infogrames
SA acquired in 2000. The Studio behind the successful Pilot Wings game, Paradigm
is currently developing three upcoming titles for the Company: Mission:
Impossible II, Terminator and MX Rider, all of which are scheduled to be
published in fiscal 2002.

EXTERNAL DEVELOPMENT STUDIOS

         Since its inception, the Company has established publishing
relationships with various independent developers. These developers include:
Angel Studios (TransWorld Surf); Deep Red (Monopoly Tycoon); Epic (Unreal
Tournament); Firaxis (Civilization); Oddworld Inhabitants, Inc. (Abe's Oddysee
and Abe's Exoddus); and Rainbow Studios (Splashdown), among others.

         Acquired titles are marketed under the Company's name, as well as the
name of the original developer. The agreements with third-party developers
provide the Company with exclusive publishing and distribution rights for a
specific period of time for specified platforms and territories. Those
agreements may grant the Company the right to publish sequels, enhancements and
add-ons to the product originally being developed and produced by the developer.
In consideration for its services, the developer receives a royalty based on
sales of the product that it has developed. A portion of this royalty may be
prepaid, with payments tied to the completion of detailed performance
milestones.

         The Company manages the production of external development projects by
appointing a producer to oversee the product's development and to work with the
third-party developer to design, develop and test the software. This producer
also helps ensure that performance milestones are met in a timely manner. The
Company generally has the right to cease making payments to an independent
developer if such developer fails to complete its performance milestones in a
timely fashion.

                                  DISTRIBUTION

         The Company's strength in distribution in North America, as well as its
distribution presence in Europe through Infogrames SA, ensures access to
valuable shelf space for its published products. The Company believes that it is
one of the few software publishers that sells directly to substantially all of
the major retailers of computer software in the U.S. and that it is the largest
distributor of computer software to mass merchants in the U.S. The Company
supplies consumer software (including its own and Third-Party Products) to
approximately 2,600 Wal-Mart stores, approximately 2,100 Kmart stores and
approximately 1,000 Target stores.

         The Company also distributes Third-Party Products to other major
retailers in the U.S. (including Office Depot, Best Buy, CompUSA, Sam's Club,
Babbage's/Gamestop, Electronics Boutique, Costco, Toys R Us, Staples,
Blockbuster, and many other retailers and resellers of computer software and
video games) and in Canada. The Company values its distribution relationships
with these major retailers because they also allow the Company to more readily
sell its own, higher margin software to them.

         Technology. Utilizing its point-of-sale replenishment systems and
electronic data interchange links with its largest mass merchant accounts, the
Company is able to handle high sales volumes to those customers efficiently,
manage and replenish inventory on a store-by-store basis and assemble for its
customers regional and store-by-store data based on product sell-through. The
Company utilizes proprietary technology systems for order processing, inventory
management, purchasing and tracking of shipments, thereby increasing the
efficiency and accuracy of order processing and payments and shortening order
turnaround time. These systems automatically track software orders from order
processing to point-of-sale, thereby enhancing customer satisfaction through
prompt delivery of the desired software titles.

         Fulfillment. Historically, the Company's warehouse operations provided
fulfillment services within North America to the Company and third-party
developers. Such services included physical receipt and storage of inventory and
its distribution


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to the mass market and other retailers. After evaluating the costs associated
with the fulfillment function, including, among other things, the costs of
projected future investments in plants and technology, the Company decided to
outsource its warehouse and manufacturing operations in July 1999.

         Distribution of Third-Party Products. Based on the strength of its
current consumer software distribution operation, the Company has successfully
attracted other publishers to utilize its mass merchant distribution
capabilities for their products. Such products are generally acquired by the
Company and distributed under the name of the publisher who is, in turn,
responsible for the publishing, packaging, marketing and customer support of
such products. The Company's agreements with other publishers typically provide
for certain retail distribution rights in designated territories for a specific
period of time, after which those rights are subject to negotiated renewal.

         Value/Close-out. The value/close-out business purchases older titles
from other publishers and sells them as "value" titles to retailers. This helps
the publisher extend the life cycle of its products. The products are intended
for retail price points of $4.98 to $19.99 and may include boxed products as
well as products in jewel cases. The value/close-out business may purchase
finished goods or may license the rights to produce finished goods from the
publisher. The Company sells value programs to some retailers in which the
Company is responsible for stocking a four-foot or eight-foot section in the
retailers' stores.

GEOGRAPHY

         In connection with its restructuring and reorganization, the Company
has decided to concentrate its efforts in North America. Because of Infogrames
SA's strong European presence, the Company has entered into an agreement with
Infogrames SA to provide distribution of the Company's products in Europe
pursuant to which the Company is entitled to receive 30% of the gross profit on
such products. Furthermore, because of Infogrames SA's strong European presence,
effective December 1, 1999, the Company began the process of closing its
European Operations, which was completed in July 2000. The Company believes that
Infogrames SA's strong presence in Europe will provide effective distribution in
Europe of the Company's titles while allowing the Company to focus its efforts
in North America. The Company continues to maintain an office in Australia, the
results of operations of which are consolidated in the results of operations of
the Company. For additional information regarding the Company's international
business, see Consolidated Financial Statements.

SALES AND MARKETING

         The Company utilizes a wide range of sales and marketing techniques to
promote sales of its products including (i) in-store promotions utilizing
display towers and endcaps, (ii) advertising in computer and general consumer
publications, (iii) on-line marketing, (iv) direct mailings, (v) television
advertising, (vi) radio advertising, (vii) guerilla or underground marketing
techniques (i.e., the Company places marketing materials in locations that are
relevant to targeted groups of consumers), (viii) viral marketing techniques
(i.e., marketing techniques which use consumers to "pass along" the Company's
messages to other targeted groups of consumers), and (ix) cross promotions with
third parties. The Company monitors and measures the effectiveness of its
marketing strategies throughout the product life cycle. Historically, the
Company has devoted a substantial amount of its marketing resources to its core
gaming published products and intends to do so in the future. The Company
believes that such marketing is essential for cultivating product successes and
brand-name loyalty.

         The Company's marketing programs have expanded along with the Company's
publishing business, with an emphasis in three areas: (i) launching new
products, (ii) raising the public's awareness of new brands and franchises, and
(iii) extending the life of existing products and properties to the greatest
degree possible. The Company may begin to develop an integrated marketing
program for a product more than a year in advance of its release. This
integrated marketing approach may include extensive press contacts, development
of point-of-purchase displays, print and television advertising, Internet
promotion, press events and a global synchronized launch.

         The Internet is an integral element of the Company's marketing efforts
used, in part, to generate awareness for titles months prior to their market
debut. The Company incorporates the Internet into its marketing programs through
the creation of product-dedicated mini-sites and on-line promotions. In
addition, the Company provides editorial material to on-line publications that
reach the core gaming audience.


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         To capitalize on the innovative nature of its products, the Company has
developed a public relations program that has resulted in coverage for the
Company by trade journals and also by well-recognized publications such as The
New York Times, Entertainment Weekly, Newsweek and USA Today. Among the
marketing strategies the Company utilizes is the creation of special press
events to coincide with the launch of a new product. The Company also uses
independent field sales representative organizations to assist in servicing its
mass merchant accounts.

         In fiscal year 1999, the Company consolidated its three North American
sales organizations into a single sales organization in order to improve the
efficiency of its sales effort. Currently, the Company has 14 customer sales
representatives who serve as the primary contacts with the Company's largest 25
customers. In addition, the Company has five product line specific divisional
sales representatives who work with the Company's customer sales representatives
and their customers to help provide leadership and direction to the Company's
selling efforts on each of the product lines.

         In connection with the Company's restructuring and reorganization, for
the period from December 16, 1999 through June 30, 2000, the Company was granted
the non-exclusive right in the U.S. and Canada to act as the sales agent for
INA, for INA's products, pursuant to which the Company received 3% of net
receipts for such products. The parties entered into a subsequent agreement for
the period from July 1, 2000 to October 2, 2000, pursuant to which the Company
received 15% of net receipts for such products. These agreements were terminated
upon consummation of the INA Merger.

         In February 2001, through Infogrames SA's acquisition of Hasbro
Interactive, Inc., Atari Interactive, Inc. and Games.com, Inc., each a Delaware
corporation (collectively, "Hasbro"), and all theirs assets, properties and
licenses, the Company acquired the licenses and distribution rights for all
video games developed by Hasbro and began actively selling, distributing and
managing Hasbro's video games in the North American marketplace.

HARDWARE LICENSES

         The Company currently develops software for use with Sony PlayStation
and PlayStation2, Nintendo N64, Game Cube, Gameboy and Gameboy Advance,
Microsoft Xbox and Sega Dreamcast and other video game consoles pursuant to
licensing agreements with each of the respective hardware developers. Each
license allows the Company to create one or more products for the applicable
system, subject to certain approval rights as to quality which are reserved by
each hardware licensor. Each license also requires that the Company pay the
hardware licensor a per-unit license fee from product produced.

         The Company currently is not required to obtain any license for the
development and distribution of PC CD-ROMs. Accordingly, the Company's per-unit
manufacturing cost for PC-CD products is less than the per-unit manufacturing
cost for console products.

OPERATIONS

         Since July 1999, the Company has been outsourcing its warehouse
operations in the U.S. to Arnold Logistics. The warehouse operations include the
receipt and storage of inventory as well as the distribution of inventory to
mass market and other retailing customers. In connection with the outsourcing
agreement, the Company discontinued the use of its Edison, New Jersey,
facilities for warehouse operations and terminated the employment of
approximately 525 employees who performed related services for the Company.

         The Company's CD-ROM disk duplication and the printing of user manuals
and packaging materials are performed to the Company's specifications by outside
sources. To date, the Company has not experienced any material difficulties or
delays in the manufacture and assembly of its products, or material returns due
to product defects. There is some concentration for the supply of the Company's
publishing needs, but a number of other outside vendors are also available as
sources for these manufacturing and replication services.

         Sony and Nintendo manufacture the Company's products that are
compatible with their respective video game consoles, as well as the manuals and
packaging for such products, and ship finished products to the Company for
distribution. Sony PlayStation products consist of proprietary format CD-ROMs
and are typically delivered to the Company by Sony within a relatively short
lead time. Manufacturers of Nintendo and other video game cartridges typically
deliver software to the Company within 45 to 60 days after receipt of a purchase
order. To date, the Company has not experienced any material difficulties or
delays in the manufacture and assembly of its products. However, a shortage of
components or other factors


                                       7
<PAGE>   11
beyond the Company's control could impair the ability of the Company to bring
its products to market in a timely manner and, accordingly, could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors -- Because Some Hardware Licensors Have
Significant Control Over the Company's Products, There May Be Material Delays or
Increases in the Cost of Manufacturing Those Products."

EMPLOYEES

         As of end of fiscal year 2001, the Company has 583 employees
domestically, with 168 in administration and finance, 75 in sales, 92 in
marketing and 248 in product development. The Company has operations in New
York, New York; Beverly, Massachusetts; Minneapolis, Minnesota; Seattle,
Washington; Sunnyvale, California; and Santa Monica, California. Except for
Reflections studio located in United Kingdom, which has 87 employees, the
Company ceased all other European operations in July 2000 and, consequently, the
Company no longer has any other employees internationally.

         In July of 1999, the Company began outsourcing all of its distribution
and manufacturing operations and, by early 2000, the Company closed its
distribution and manufacturing facilities in Edison, New Jersey. As a result of
such functions being outsourced, the Company no longer has a relationship with
Local 734 of the Laborers International Union of North America of the AFL-CIO
nor does it have a relationship with any other labor unions in the U.S.

COMPETITION

         The interactive entertainment software publishing industry is intensely
competitive, and relatively few products achieve market acceptance. The
availability of significant financial resources has become a major competitive
factor in the industry primarily as a result of the increasing development,
acquisition, production and marketing budgets required to publish quality
titles. The Company competes with other third-party publishers of interactive
entertainment software, including Electronic Arts Inc., THQ, Inc., Activision,
Inc., Take Two Interactive, Inc., and SEGA Corporation, among others. In
addition, the Company competes with first-party publishers such as SONY Computer
Entertainment, Nintendo of America, and Microsoft Corporation. Furthermore, some
large media companies and film studios are increasing their focus on the
interactive entertainment software market and may become significant competitors
of the Company. See "Risk Factors -- Significant Competition In Our Industry
Could Adversely Affect Our Business."

         Infogrames SA has granted the Company a non-exclusive, royalty-free
license to use the name "Infogrames", which license may not be canceled on less
than one-year's notice unless the Company breaches its obligations under the
license. Management believes that a number of factors provide the Company with
competitive opportunities in the industry, including its extensive catalogue of
multi-platform products, strength in the mass-market, and strong sales forces in
North America and, through Infogrames SA, in Europe and Australia. The Company
believes that solid franchises such as Driver and Civilization, and attractive
licenses such as Survivor, Harley Davidson, Mission: Impossible and Looney
Tunes, as well as its base of productive publishing assets, provide the Company
with a competitive angle to market its products.

                                  RISK FACTORS

         This Risk Factors section is written to be responsive to the Securities
and Exchange Commission's (the "SEC") "Plain English" guidelines. In this
section, the words "we," "our," "ours" and "us" refer only to the Company and
its subsidiaries and not any other person.

         Set forth below and elsewhere in this Form 10-K and in other documents
we file with the SEC are important risks and uncertainties that could cause our
actual results of operations, business and financial condition to differ
materially from the results contemplated by the forward-looking statements
contained in this Form 10-K. See "Forward-Looking Information" above.

         INFOGRAMES SA CONTROLS THE COMPANY AND COULD PREVENT AN ACQUISITION
FAVORABLE TO OUR OTHER STOCKHOLDERS. Infogrames SA beneficially owns
approximately 89% of our common stock, which gives it sufficient voting power to
prevent any unsolicited acquisition of the Company, including an acquisition
favorable to our other stockholders. Infogrames SA and its affiliates have
sufficient voting power to control any merger, consolidation or


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<PAGE>   12
sale of all or substantially all of our assets and to elect members of the Board
of Directors. Two of the eight members of the Board are employees of Infogrames
SA or its affiliates, not including the Company.

         OUR SUCCESS DEPENDS ON INFOGRAMES SA'S SUCCESS AND WILLINGNESS TO
CONTINUE TO SUPPORT THE COMPANY. The Company depends upon Infogrames SA for its
senior executives, financial funding and distribution of its products in Europe.
The success of the Company is dependent upon Infogrames SA's success and its
willingness to continue to support the Company. Management believes that the
Company's ability to operate on a stand-alone basis may be limited. Although the
Company is exploring various strategic alternatives, there can be no assurance
that any such transactions will be consummated, or that if consummated any such
transactions will improve the Company's business, operating results or financial
condition.

         WE WILL NEED ADDITIONAL FINANCING. Since its acquisition of a majority
stake in the Company, Infogrames SA has to date provided financing to the
Company, although there can be no assurance that it will continue to do so.
Management believes that existing cash, cash equivalents and short-term
investments, together with cash expected to be generated from operations, cash
available under the Credit Agreement (which expires on December 31, 2001) and
continued financial support from Infogrames SA, will be sufficient to fund the
Company's operations and cash flows throughout fiscal year 2002. While
management believes that replacement funding will be available from Infogrames
SA or other sources, there can be no assurance that future financing will be
available on favorable terms, if at all.

         THE LOSS OF WAL-MART, TARGET OR KMART AS KEY CUSTOMERS COULD NEGATIVELY
AFFECT OUR BUSINESS. Our sales to Wal-Mart, Kmart and Target accounted for
approximately 22%, 9% and 7%, respectively, of net revenues for the fiscal year
ended June 30, 2001. Our gross accounts receivable from Wal-Mart, Target and
Kmart were approximately $19.9 million, $16.4 million and $6.5 million,
respectively, as of June 30, 2001. Our business, operating results and financial
condition would be adversely affected if: (i) we lost Wal-Mart, Target or Kmart
as a customer, (ii) we began shipping fewer products to Wal-Mart, Target or
Kmart, (iii) we were unable to collect receivables from Wal-Mart, Target or
Kmart, or (iv) we experienced any other adverse change in our relationship with
Wal-Mart, Target or Kmart. We do not have any written agreements or
understandings with Wal-Mart, Target or Kmart. Consequently, our relationship
with Wal-Mart, Target or Kmart could end at any time. We cannot assure that
Wal-Mart, Target and Kmart will continue to use us as a major supplier of
consumer software, or at all. During 1999, 2000 and 2001, Wal-Mart has
continued, and can be expected to continue, to buy software directly from other
publishers, rather than purchasing software through the Company. These direct
purchases could significantly reduce our sales to Wal-Mart.

         OUR REVENUES WILL DECLINE AND OUR COMPETITIVE POSITION WILL BE
ADVERSELY AFFECTED IF WE ARE UNABLE TO INTRODUCE NEW PRODUCTS ON A TIMELY BASIS.
Our continued success in the publishing business depends on the timely
introduction of successful new products, sequels or enhancements of existing
products to replace declining revenues from older products. A significant delay
in introducing new products, sequels or enhancements could materially and
adversely affect the ultimate success of our products and, in turn, our
business, operating results and financial condition, particularly in view of the
seasonality of our business. The process of introducing new products, sequels or
product enhancements is extremely difficult and will only become more difficult
as new platforms and technologies emerge. Competitive factors in our industry
demand that we create increasingly sophisticated products, which in turn makes
it difficult to produce and release these products on a predictable schedule.

         WE MAY BE UNABLE TO DEVELOP, MARKET AND PUBLISH NEW PRODUCTS IF WE ARE
UNABLE TO SECURE OR MAINTAIN RELATIONSHIPS WITH INDEPENDENT SOFTWARE DEVELOPERS.
Although we have substantially increased our internal software capabilities over
the last five years, we are still dependent, to a meaningful degree, upon
independent software developers. Consequently, our success depends in part on
our continued ability to obtain or renew product development agreements with
independent software developers. However, we cannot assure that we will be able
to obtain or renew these product development agreements on favorable terms, or
at all, nor can we assure that we will be able to obtain the rights to sequels
of successful products which were originally developed by independent software
developers for the Company. In addition, many of our competitors have greater
access to capital than we do, which puts us at a competitive disadvantage when
bidding to attract independent software developers to enter into publishing
agreements with us. Our agreements with independent software developers are
easily terminable, often without notice, if either party declares bankruptcy,
becomes insolvent, ceases operations or materially breaches its agreement and
fails to cure that breach within a designated time frame. In addition, many
independent software developers have limited financial resources. Many are small
companies with a few key individuals without whom a project may be difficult or
impossible to complete. Consequently, we


                                       9
<PAGE>   13
are exposed to the risk that these developers will go out of business before
completing a project, or simply cease work on a project, for which we have hired
them.

         COMPETITION FOR INDEPENDENT SOFTWARE DEVELOPERS IS INTENSE AND MAY
PREVENT US FROM SECURING OR MAINTAINING RELATIONSHIPS WITH INDEPENDENT SOFTWARE
DEVELOPERS. We may be unable to secure or maintain relationships with
independent software developers if our competitors can offer them better shelf
access, better marketing support, more development funding, higher royalty
rates, or other selling advantages. Even if these independent software
developers have developed products for us in the past, we cannot assure that
they will continue to develop products for us in the future. In fact, we have in
the past worked with independent software developers who later entered into
agreements with our competitors because of our competitors' ability or
willingness to pay higher royalty rates or advances.

         FLUCTUATIONS IN OUR QUARTERLY NET REVENUES AND OPERATING RESULTS MAY
RESULT IN REDUCED PROFITABILITY AND LEAD TO REDUCED PRICES FOR OUR STOCK. Our
quarterly net revenues and operating results have varied in the past and can be
expected to vary in the future. As a result, we cannot assure that we will be
consistently profitable on a quarterly or annual basis. If our operating results
in any future quarter fall below the expectations of market analysts or
investors, the price of our Common Stock will likely decrease. Our business has
experienced, and is expected to continue to experience, significant seasonality.
Typically, our net sales are significantly higher during the fourth calendar
quarter because of increased consumer demand during the year-end holiday season.
In other calendar quarters, our net revenues may be lower and vary
significantly.

         OUR REVENUE GROWTH AND COMPETITIVE POSITION MAY BE ADVERSELY AFFECTED
IF WE ARE UNABLE TO ANTICIPATE AND ADAPT TO RAPIDLY CHANGING TECHNOLOGY. The
consumer software industry is characterized by rapidly changing technology. The
introduction of new technologies, including new technologies that support
multi-player games and new media formats such as on-line delivery and digital
video disks (DVDs), could render our previously released products obsolete or
unmarketable. We must continually anticipate the emergence of, and adapt our
products to, new technologies and systems. In addition, the development cycle
for products designed to operate on new systems can be significantly longer than
our current development cycles. When we choose to publish or develop a product
for a new system, we may need to make a substantial development investment one
or two years in advance of when we actually ship products for that system. If we
develop products for a new system that is ultimately unpopular, our revenues
from that product may be less than expected and we may not be able to recoup our
investment. Conversely, if we choose not to publish products for a new system
that is ultimately popular, our revenue growth and competitive position may be
adversely affected. While 32- and 64-bit game systems, such as Sony PlayStation
1 and Nintendo 64, continue to be popular and their installed base has reached
significant levels in the U.S. and worldwide, new systems such as Microsoft's
Xbox are being developed. For example, Sony introduced the PlayStation 2, a
128-bit system that incorporates DVD technology, in Japan in March 2000 and
introduced it to overseas markets in fall of 2000. If successfully developed,
these new systems would require us to reassess our commitment to 32- and 64-bit
game systems or any new systems which are introduced.

         BECAUSE SOME HARDWARE LICENSORS HAVE SIGNIFICANT CONTROL OVER THE
COMPANY'S PRODUCTS, THERE MAY BE MATERIAL DELAYS OR INCREASES IN THE COST OF
MANUFACTURING THOSE PRODUCTS. We are required to obtain a license to develop and
distribute software for each of the video game systems for which we develop
products. We currently have licenses from Sony to develop products for the Sony
PlayStation 1 and PlayStation 2, from Nintendo to develop products for Nintendo
64 and Gamecube, and from Sega to develop products for Dreamcast. We recently
obtained licenses from Microsoft Corporation to develop products for the Xbox.
Our contracts with these manufacturers often grant them significant control over
the manufacturing of the Company products. For example, we are obligated to
submit new games to Sony, Nintendo or Microsoft for approval prior to
development and/or manufacture. In some circumstances, this could adversely
affect the Company by: (i) leaving the Company unable to have its products
manufactured and shipped to customers, (ii) increasing manufacturing lead times
and expense to us over the lead times and costs we could achieve independently,
(iii) delaying the manufacture and, in turn, the shipment of products, and (iv)
requiring the Company to take significant risks in prepaying for and holding its
inventory of products. These factors could materially and adversely affect our
business, operating results and financial condition.

         THE LOSS OF OUR SENIOR MANAGEMENT AND SKILLED PERSONNEL COULD
NEGATIVELY AFFECT OUR BUSINESS. Our success will depend to a significant degree
upon the performance and contribution of our senior management team and upon our
ability to attract, motivate and retain highly qualified employees with
technical,


                                       10
<PAGE>   14
management, marketing, sales, product development and other creative skills. In
the computer software industry, competition for highly skilled and creative
employees is intense and costly. We expect this competition to continue for the
foreseeable future, and we may experience increased costs in order to attract
and retain skilled employees. We cannot assure that we will be successful in
attracting and retaining skilled personnel. Our business, operating results and
financial condition could be materially and adversely affected if we lost the
services of senior employees or if we failed to replace other employees who
leave or to attract additional qualified employees.

         SIGNIFICANT COMPETITION IN OUR INDUSTRY COULD ADVERSELY AFFECT OUR
BUSINESS. The market for our products is highly competitive and relatively few
products achieve significant market acceptance. Currently, we compete primarily
with other publishers of interactive entertainment software for both personal
computers and video game consoles. Our competitors include Electronic Arts Inc.,
THQ, Inc., Activision, Inc., Take Two Interactive, Inc., and SEGA Corporation,
among others. In addition, some large software companies (including SONY
Computer Entertainment, Nintendo of America, and Microsoft Corporation), media
companies and film studios, such as Walt Disney Company, are increasing their
focus on the interactive entertainment and "edutainment" software market and may
become significant competitors of the Company. As compared to the Company, many
of our current and future competitors may have significantly greater financial,
technical and marketing resources than we do. As a result, these current and
future competitors may be able to: (i) respond more quickly to new or emerging
technologies or changes in customer preferences, (ii) carry larger inventories,
(iii) undertake more extensive marketing campaigns, (iv) adopt more aggressive
pricing policies, and (v) make higher offers or guarantees to software
developers and licensors than the Company. We may not have the resources
required for us to respond effectively to market or technological changes or to
compete successfully with current and future competitors. Increased competition
may result in price reductions, reduced gross margins and loss of market share,
any of which could have a material adverse effect on our business, operating
results or financial condition. We cannot assure that we will be able to
successfully compete against our current or future competitors or that
competitive pressures will not have a material adverse effect on our business,
operating results and financial condition.

         REVENUES FROM OUR DISTRIBUTION BUSINESS MAY DECLINE AS COMPETITION
INCREASES AND INTERNET TECHNOLOGY IMPROVES. During the fiscal year ended June
30, 2001, revenues from our distribution business were approximately 25% of net
revenues. Recently, several of our customers have begun to purchase directly
from software publishers rather than purchasing software through the Company.
New video game systems and electronic delivery systems may be introduced into
the software market and potential new competitors may enter the software
development and distribution market, resulting in greater competition. In
addition, revenues from our distribution business may be adversely affected as
Internet technology is improved to enable consumers to purchase and download
full-version software products or order products directly from publishers or
from unauthorized or illegal sources over the Internet.

         REVENUES FROM OUR DISTRIBUTION BUSINESS MAY DECLINE IF THE THIRD-PARTY
PRODUCTS WHICH WE DISTRIBUTE FOR OTHER COMPANIES BECOME UNAVAILABLE TO US. As
part of our distribution program, we provide our mass merchant customers with a
wide variety of titles. To achieve this product mix, we must supplement the
distribution of our own published products with Third-Party Products, including
products published by our competitors. We cannot assure that these competitors
will continue to provide us with their products for distribution to our mass
merchant customers. Our inability to obtain software titles developed or
published by our competitors, coupled with our inability to obtain these titles
from other distributors, could have a material adverse effect on our
relationships with our mass merchant customers and our ability to obtain shelf
space for our own products. This, in turn, could have a material adverse effect
on our business, operating results and financial condition.

         WE MAY FACE INCREASED COMPETITION AND DOWNWARD PRICE PRESSURE IF WE ARE
UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS. Our success is heavily
dependent upon our confidential and proprietary intellectual property. We sell a
significant portion of our published software under licenses from independent
software developers and, in these cases, we do not acquire the copyrights for
the underlying work. We rely primarily on a combination of confidentiality and
non-disclosure agreements, patent, copyright, trademark and trade secret laws,
as well as other proprietary rights laws and legal methods, to protect our
proprietary rights and the rights of our developers. However, current U.S. and
international laws afford us only limited protection. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy our
products or obtain and use information that we regard as proprietary. Software
piracy is a persistent problem in the computer software industry. Policing
unauthorized use of our products is extremely difficult because consumer
software can be easily duplicated and disseminated. Furthermore, the laws of
some foreign countries may not protect our proprietary rights to as great an
extent as U.S. law. Software piracy is a particularly acute


                                       11
<PAGE>   15
problem in some international markets such as South America, the Middle East,
the Pacific Rim and the Far East. Our business, operating results and financial
condition could be materially and adversely affected if a significant amount of
unauthorized copying of our products were to occur. We cannot assure that our
attempts to protect our proprietary rights will be adequate or that our
competitors will not independently develop similar or competitive products.

         WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS WHICH WOULD BE
COSTLY TO RESOLVE. As the number of available software products increases, and
their functionality overlaps, software developers and publishers may
increasingly become subject to infringement claims. We are not aware that any of
our products infringe on the proprietary rights of third parties. However, we
cannot assure that third parties will not assert infringement claims against the
Company in the future with respect to current or future products. There has been
substantial litigation in the industry regarding copyright, trademark and other
intellectual property rights. We have also initiated litigation to assert our
intellectual property rights. Whether brought by or against the Company, these
claims can be time consuming, result in costly litigation and divert
management's attention from the day-to-day operations of the Company, which can
have a material adverse effect on our business, operating results and financial
condition.

         WE MAY BE AT A COMPETITIVE DISADVANTAGE IF WE ARE UNABLE TO
SUCCESSFULLY IMPLEMENT OUR INTERNET STRATEGY. To take advantage of Internet
opportunities, we have, and will continue to: (i) expand our World Wide Web
sites and the development of our Internet infrastructure and capabilities, (ii)
expand our electronic distribution capabilities, (iii) incorporate on-line
functionality into existing products, and (iv) develop and invest in new
Internet-based businesses and products, including multi-player entertainment
products. Implementing our Internet strategy has been costly. We have incurred,
and expect to incur, significant additional costs in connection with these
efforts. These costs include those associated with the acquisition and
maintenance of hardware and software necessary to permit on-line commerce and
multi-player games, as well as the related maintenance of our website and
personnel. Although we believe these platforms and technologies are an integral
part of our business, we cannot assure that our Internet strategy will be
successful or that we will be able to recoup the cost of our investment.

         WE ARE CURRENTLY IN LITIGATION WHICH COULD BE COSTLY IF WE LOSE. As
described under Item 3, "Legal Proceedings," the Company is currently a
defendant, or subject to counterclaims, in a number of lawsuits. In all of these
lawsuits, we believe that the plaintiffs' complaints are without merit. Although
we intend to defend ourselves vigorously against these actions, doing so is
costly and time consuming and may divert management's attention from our
day-to-day operations. In addition, we cannot assure that these actions will be
ultimately resolved in our favor or that an adverse outcome will not have a
material adverse effect on our business, operating results and financial
condition.

         IF ACTUAL RETURNS EXCEED OUR RETURN RESERVE, OUR BUSINESS MAY BE
NEGATIVELY AFFECTED. To cover returns, we establish a return reserve at the time
we ship our products. We estimate the potential for future returns based on
historical return rates, seasonality of sales, retailer inventories of our
products, and other factors. While we are able to recover the majority of our
costs when Third-Party Products are returned, we bear the full financial risk
when our own products are returned. In addition, the license fees we pay Sony
and Nintendo are non-refundable and we cannot recover these fees when our
console products are returned. Although we believe we maintain adequate reserves
with respect to product returns, we cannot assure that actual returns will not
exceed reserves, which could adversely affect our business, operating results
and financial condition.

         WE CANNOT PREDICT THE IMPACT OF RECENT AMENDMENT TO THE NASDAQ STOCK
MARKET MARKETPLACE RULES. Effective June 29, 2001, the SEC approved certain
amendments to Nasdaq Stock Market's ("Nasdaq") Marketplace Rules pertaining to
Nasdaq's continued listing quantitative standards. Among other things, the
amendments replace the minimum net tangible asset standard with a minimum equity
standard and provide that the Company can continue to qualify for continued
listing under either standard until November 1, 2002, when it must achieve
compliance with the new applicable equity standard. In the event that the
Company fails to comply with the minimum equity standard by the November 1, 2002
deadline, the Company may be listed under Nasdaq's SmallCap Market. We cannot
predict whether the Company will satisfy the minimum equity standard by this
deadline.


                                       12
<PAGE>   16
ITEM 2.  PROPERTIES

         New York. The Company's principal administrative, sales and development
facilities are located in approximately 90,000 square feet of space at 417 Fifth
Avenue in New York City under a lease expiring in December 2006, which commenced
in December 1996. The Company subleased 30,000 square feet of this space
beginning on April 1, 2000.

         California. As a result of the INA Merger, the Company assumed
responsibility for a lease for approximately 44,400 square feet of office space
in San Jose, California, which was terminated in July 2001. The Company also
assumed two leases totaling approximately 11,500 square feet of office space in
Woodland Hills, California, both which expire in October 2003. The Company has a
lease for approximately 15,000 square feet of office space in Sunnyvale,
California, which expires in June 2004. The Company has a lease for
approximately 17,400 square feet of office space in Santa Monica, California,
which expires in May 2006. The Company maintained an office in San Francisco,
California, under a lease which expired in December 2000.

         Washington. The Company leases approximately 65,500 square feet of
office space in Bothell, Washington, under a lease which expires in May 2008.
This office space is occupied by Humongous Entertainment, a division of the
Company (formerly known as Humongous Entertainment, Inc., a wholly-owned
subsidiary of the Company). In November 2000, the Company terminated a second
lease in Bothell, Washington, for 17,800 square feet which held the Company's
technical support operation.

         Minnesota. The Company leases 23,400 square feet of office space in
Plymouth, Minnesota, under a lease which expires in February 2003. This office
space is occupied by WizardWorks Group, a division of the Company (formerly
known as WizardWorks Group, Inc., a wholly-owned subsidiary of the Company).

         Other States in the U.S. In Scottsdale, Arizona, the Company leases a
25,000 square feet of office space under a lease which expires in March 2006.
This lease has been sublet for the remaining term thereof.

         The Company maintained three leases in Salt Lake City, Utah, for sites
totaling approximately 27,100 square feet. These leases expired in June 2000,
January 2001 and March 2001.

         The Company maintains a development studio in Chantilly, Virginia, for
approximately 10,500 square feet pursuant to a lease which terminates in January
2002. This space is occupied by Legend Entertainment, a division of the Company
(formerly known as Legend Entertainment, LLC., a wholly-owned subsidiary of the
Company).

         Europe. In connection with certain acquisitions which the Company
entered into, the Company assumed leases for certain of its internal development
studios totaling approximately 76,000 square feet with lease expiration dates
from June 2000 through September 2010. These properties are located in England,
the Netherlands, Germany and France. The Netherlands lease was transferred to
Cryo Interactive Entertainment when it purchased Home Software Benelux B.V from
the Company in May 2000. Further, during the fiscal year ended June 30, 2001,
the lease for the premises in France was transferred to Infogrames SA, and the
leases for two sites in Germany have been terminated. The Company still
maintains a lease, which expires in September 2010, for one of its internal
studios, Reflections, in Gateshead Tyne and Wear, United Kingdom.

         The Company had maintained, under two leases, two facilities in London,
England totaling approximately 19,200 square feet, from which it conducted a
substantial portion of its European operations. One lease expired in December
2000 and the other lease will expire in March 2012, which was eventually
assigned to Infogrames United Kingdom Limited as a result of the Company's
decision to cease its European operations. The Company also maintained a lease
for office space in Kingston Upon Thames, in Surrey, United Kingdom, which was
surrendered in December 2000.

ITEM 3.  LEGAL PROCEEDINGS

Scavenger

         On September 18, 1997, Scavenger, Inc. ("Scavenger"), a software
developer, filed a lawsuit against the Company in


                                       13
<PAGE>   17
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 judgement) satisfying the partial summary judgement.

         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.

         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,


                                       14
<PAGE>   18
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.

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 has not yet been scheduled.

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. The Court granted Plaintiffs' an
extension until Sunday, August 19, 2001 to oppose the Company's motion to
dismiss and the Company's reply brief is due in September 2001.


                                       15
<PAGE>   19
         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 other claims and legal actions arising in the
ordinary course of business.

         The Company's management believes that the ultimate resolution of any
of the aforementioned complaints 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.

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None.


                                       16
<PAGE>   20
                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock is quoted on the Nasdaq National Market. The
high and low sale prices for the Common Stock as reported by the Nasdaq National
Market for the fiscal years ended March 31, 1999 and 2000, the three month
transition period ended June 30, 2000 and the year ended June 30, 2001 are
summarized below. These over-the-counter market quotations reflect inter-dealer
prices, without retail mark-ups, mark-downs, or commissions and may not
necessarily represent actual transactions. On June 26, 2000, the Company
effected a one-for-five reverse stock split of the Common Stock to meet certain
requirements of the Nasdaq National Market. Except as otherwise noted,
references to share prices and the number of shares of Common Stock in this
Annual Report reflect the reverse stock split.

<TABLE>
<CAPTION>
                                                               HIGH        LOW
                                                               ----        ---
<S>                                                           <C>         <C>
     Fiscal 1999
        First Quarter ..................................      $55.62      $35.00
        Second Quarter .................................      $45.00      $22.50
        Third Quarter ..................................      $37.19      $18.75
        Fourth Quarter .................................      $29.06      $19.38
     Fiscal 2000
        First Quarter ..................................      $22.50      $13.75
        Second Quarter .................................      $18.44      $12.81
        Third Quarter ..................................      $15.94      $ 8.28
        Fourth Quarter .................................      $21.25      $ 9.38
     Three Month Period Ended June 30, 2000 ............      $18.75      $ 5.13
     Fiscal 2001
        First Quarter ..................................      $ 8.50      $ 5.00
        Second Quarter .................................      $11.00      $ 5.56
        Third Quarter ..................................      $10.13      $ 5.06
        Fourth Quarter .................................      $ 8.20      $ 4.93
</TABLE>


         On September 19, 2001, the last reported sale price of the Common Stock
on the Nasdaq National Market was $4.25. As of September 19, 2001, there were
approximately 6,200 beneficial owners of the Common Stock.

         The Company currently anticipates that it will retain all of its future
earnings for use in the expansion and operation of its business. The Company has
not paid any cash dividends nor does it anticipate paying any cash dividends on
its Common Stock in the foreseeable future. In addition, the payment of cash
dividends may be limited by financing agreements entered into by the Company in
the future.

RECENT SALES OF UNREGISTERED SECURITIES

There were no sales of unregistered securities for the year ended June 30, 2001.


                                       17
<PAGE>   21

ITEM 6. SELECTED FINANCIAL DATA

      The following tables set forth selected consolidated financial information
of the Company which, for the year ended December 31, 1997, the three months
ended March 31, 1998, the twelve months ended March 31, 1999 and 2000, the three
months ended June 30, 2000 and the year ended June 30, 2001, is derived from the
audited consolidated financial statements of the Company. The consolidated
financial information for the twelve months ended March 31, 1998, three months
ended June 30, 1999 and year ended June 30, 2000 is derived from the unaudited
financial statements of the Company. The consolidated financial information set
forth have been combined as of December 16, 1999, with those of 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
SA.


      These tables should be read in conjunction with the Company's Consolidated
Financial Statements, including the notes thereto, appearing elsewhere in this
Form 10-K. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                YEAR           THREE                         YEARS
                                                ENDED       MONTHS ENDED                     ENDED
                                             DECEMBER 31,     MARCH 31,                     MARCH 31,
                                             -----------    ------------    --------------------------------------
                                                1997            1998            1998          1999          2000
                                             -----------    ------------    ----------     ---------     ---------
                                                                            (UNAUDITED)
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                          <C>            <C>             <C>            <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net revenues ..............................    $ 530,677       $ 105,767     $ 543,063     $ 572,342     $ 386,062
Cost of Goods Sold ........................      315,134          57,092       314,343       329,959       307,292
                                               ---------       ---------     ---------     ---------     ---------
Gross Profit ..............................      215,543          48,675       228,720       242,383        78,770
Selling and distribution expenses .........       97,656          23,754       105,682       145,548       152,641
General and administrative expenses .......       43,400           9,686        45,366        58,938        79,335
Research and development ..................       11,929          10,673        21,825        75,242        71,184
Royalty advance write-off .................       73,821              --        73,821            --            --
Restructuring and other charges ...........           --              --            --        17,479        37,948
INA merger costs ..........................           --              --            --            --            --
Gain on sale of line of business ..........           --              --            --            --            --
Purchased research and development ........       11,008              --        11,008         5,000            --
SingleTrac retention bonus ................        2,400              --         2,400         1,680            --
Depreciation and amortization .............        7,434           2,511         6,265        14,606        25,654
                                               ---------       ---------     ---------     ---------     ---------
Operating  (loss) income ..................      (32,105)          2,051       (37,647)      (76,110)     (287,992)
Interest expense ..........................       (1,010)           (557)       (1,567)       (5,108)      (18,123)
Other (expense) income ....................       (1,065)           (832)       (2,144)         (207)         (418)
                                               ---------       ---------     ---------     ---------     ---------
(Loss) income before provision for (benefit
  from) income taxes ......................      (34,180)            662       (41,358)      (81,425)     (306,533)
Total (benefit from)  provision for
  income taxes ............................       (9,157)            304       (12,239)      (29,628)       40,891
                                               ---------       ---------     ---------     ---------     ---------
(Loss) income from continuing
  operations ..............................      (25,023)            358       (29,119)      (51,797)     (347,424)
Discontinued operations:
  Loss from operations of OZM .............           --              --            --        (3,531)           --
  Loss on disposal of OZM .................           --              --            --       (15,510)         (477)
                                               ---------       ---------     ---------     ---------     ---------
  Loss from discontinued operations .......           --              --            --       (19,041)         (477)
                                               ---------       ---------     ---------     ---------     ---------
(Loss) income before extraordinary
   item ...................................      (25,023)            358       (29,119)      (70,838)     (347,901)
Extraordinary item:
  Gain on early extinguishment of debt
   (net of tax of $1,312) .................           --              --            --            --         1,888
                                               ---------       ---------     ---------     ---------     ---------
Net (loss) income before dividends on
   preferred stock ........................      (25,023)            358       (29,119)      (70,838)     (346,013)
Less dividends on preferred stock .........           --              --            --           226            --
                                               ---------       ---------     ---------     ---------     ---------
Net (loss) income attributable to common
  stockholders ............................    $ (25,023)      $     358     $ (29,119)    $ (71,064)    $(346,013)
                                               =========       =========     =========     =========     =========
</TABLE>

<TABLE>
<CAPTION>
                                                       THREE MONTHS                       YEARS
                                                           ENDED                          ENDED
                                                          JUNE 30,                       JUNE 30,
                                                -------------------------      -------------------------
                                                   1999            2000            2000           2001
                                                -----------     ---------      -----------     ---------
                                                (UNAUDITED)                    (UNAUDITED)
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>             <C>            <C>             <C>
STATEMENT OF OPERATIONS DATA:
Net revenues ..............................       $ 121,325     $  48,469        $ 313,206     $ 310,479
Cost of Goods Sold ........................          62,143        25,283          270,432       125,940
                                                  ---------     ---------        ---------     ---------
Gross Profit ..............................          59,182        23,186           42,774       184,539
Selling and distribution expenses .........          33,328        20,764          140,077        91,541
General and administrative expenses .......           9,312        17,602           87,625        67,341
Research and development ..................          16,366        17,275           72,093        56,617
Royalty advance write-off .................              --            --               --            --
Restructuring and other charges ...........              --        11,081           49,029         3,539
INA merger costs ..........................              --            --               --         1,700
Gain on sale of line of business ..........              --            --               --        (5,501)
Purchased research and development ........              --            --               --            --
SingleTrac retention bonus ................              --            --               --            --
Depreciation and amortization .............           3,885         5,788           27,557        20,297
                                                  ---------     ---------        ---------     ---------
Operating  (loss) income ..................          (3,709)      (49,324)        (333,607)      (50,995)
Interest expense ..........................          (1,959)       (4,328)         (20,492)      (13,399)
Other (expense) income ....................            (293)         (497)            (622)        1,358
                                                  ---------     ---------        ---------     ---------
(Loss) income before provision for (benefit
  from) income taxes ......................          (5,961)      (54,149)        (354,721)      (63,036)
Total (benefit from)  provision for
  income taxes ............................          (2,109)        1,251           44,251        (2,368)
                                                  ---------     ---------        ---------     ---------
(Loss) income from continuing
  operations ..............................          (3,852)      (55,400)        (398,972)      (60,668)
Discontinued operations:
  Loss from operations of OZM .............              --            --               --            --
  Loss on disposal of OZM .................              --            --             (477)           --
                                                  ---------     ---------        ---------     ---------
  Loss from discontinued operations .......              --            --             (477)           --
                                                  ---------     ---------        ---------     ---------
(Loss) income before extraordinary
   item ...................................          (3,852)      (55,400)        (399,449)      (60,668)
Extraordinary item:
  Gain on early extinguishment of debt
   (net of tax of $1,312) .................              --            --            1,888            --
                                                  ---------     ---------        ---------     ---------
Net (loss) income before dividends on
   preferred stock ........................          (3,852)      (55,400)        (397,561)      (60,668)
Less dividends on preferred stock .........             600            --               --            --
                                                  ---------     ---------        ---------     ---------
Net (loss) income attributable to common
  stockholders ............................       $  (4,452)    $ (55,400)       $(397,561)    $ (60,668)
                                                  =========     =========        =========     =========
</TABLE>

                                       18
<PAGE>   22
<TABLE>
<CAPTION>
                                                         THREE
                                          YEAR           MONTHS                        YEARS
                                          ENDED          ENDED,                        ENDED,
                                       DECEMBER 31,     MARCH 31,                     MARCH 31
                                       -----------     ----------    ----------------------------------------
                                          1997            1998          1998           1999          2000
                                       -----------     ----------    ----------     ----------     ----------
                                                                     (UNAUDITED)
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                    <C>             <C>           <C>            <C>            <C>
Basic (loss) income per share from
  continuing operations ............    $    (1.87)    $     0.03    $    (2.16)    $    (3.73)    $   (21.12)
Basic loss per share from
  discontinued operations ..........            --             --            --     $    (1.37)    $    (0.03)
Basic income per share from
  extraordinary item ...............            --             --            --             --           0.11
                                        ----------     ----------    ----------     ----------     ----------
Basic net (loss) income  per share .    $    (1.87)    $     0.03    $    (2.16)    $    (5.10)    $   (21.03)
                                        ==========     ==========    ==========     ==========     ==========
Weighted average shares
  outstanding(1) ...................        13,396         13,588        13,473         13,931         16,451
                                        ==========     ==========    ==========     ==========     ==========

Diluted (loss) income per share from
  continuing operations ............    $    (1.87)    $     0.03    $    (2.16)    $    (3.73)    $   (21.12)
Diluted loss per share from
  discontinued operations ..........            --             --            --     $    (1.37)    $    (0.03)
Diluted income per share from
  extraordinary item ...............            --             --            --             --           0.11
                                        ----------     ----------    ----------     ----------     ----------
Diluted net (loss) income per share.    $    (1.87)    $     0.03    $    (2.16)    $    (5.10)    $   (21.03)
                                        ==========     ==========    ==========     ==========     ==========
Weighted average shares
  outstanding(1) ...................        13,396         13,677        13,473         13,931         16,451
                                        ==========     ==========    ==========     ==========     ==========
</TABLE>

<TABLE>
<CAPTION>
                                                  THREE
                                                  MONTHS                       YEARS
                                                  ENDED,                       ENDED
                                                 JUNE 30                      JUNE 30
                                       --------------------------    -------------------------
                                           1999           2000           2000          2001
                                       -----------     ----------    ----------     ----------
                                       (UNAUDITED)                   (UNAUDITED)
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                    <C>             <C>           <C>            <C>
Basic (loss) income per share from
  continuing operations ............    $    (0.26)    $    (2.68)    $   (22.21)    $    (1.07)
Basic loss per share from
  discontinued operations ..........            --             --          (0.03)            --
Basic income per share from
  extraordinary item ...............            --             --           0.11             --
                                        ----------     ----------     ----------     ----------
Basic net (loss) income  per share..    $    (0.26)    $    (2.68)    $   (22.13)    $    (1.07)
                                        ==========     ==========     ==========     ==========
Weighted average shares
  outstanding(1) ...................        14,574         20,646         17,963         56,839
                                        ==========     ==========     ==========     ==========

Diluted (loss) income per share from
  continuing operations ............    $    (0.26)    $    (2.68)    $   (22.21)    $    (1.07)
Diluted loss per share from
  discontinued operations ..........            --             --          (0.03)            --
Diluted income per share from
  extraordinary item ...............            --             --           0.11             --
                                        ----------     ----------     ----------     ----------
Diluted net (loss) income per share.    $    (0.26)    $    (2.68)    $   (22.13)    $    (1.07)
                                        ==========     ==========     ==========     ==========
Weighted average shares
  outstanding(1) ...................        14,574         20,646         17,963         56,839
                                        ==========     ==========     ==========     ==========
</TABLE>

(1)      Reflects the one-for-five reverse stock split approved by the Company's
         Board of Director which was effected on June 26, 2000. All periods have
         been restated to reflect the reverse stock split.


<TABLE>
<CAPTION>
                                          DECEMBER 31,                 MARCH 31,                  JUNE 30,      JUNE 30,
                                          -----------    -----------------------------------     ---------     ---------
                                              1997         1998          1999         2000          2000          2001
                                          -----------    ---------    ---------    ---------     ---------     ---------
<S>                                       <C>            <C>          <C>          <C>           <C>           <C>
BALANCE SHEET DATA:
Cash and cash equivalents ..............    $  39,713    $  17,329    $  13,512    $  25,857     $  13,463     $   5,378
Working capital (deficit) ..............       77,965       69,994      131,770     (146,088)     (191,469)      (57,345)
Total assets ...........................      370,165      295,862      438,911      222,514       170,475       145,084
Total debt .............................       54,619       28,017       98,750      217,476       257,357       149,566
Stockholders' equity (deficit) .........      134,241      138,889      127,133     (182,777)     (242,220)     (106,536)
</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

      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 the Company's
games (both internally and externally developed products) and games produced by
the Company's affiliates. 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
fiscal


                                       19
<PAGE>   23
2001, the Company's product mix consisted of 65% PC games, 23% Sony PlayStation
games, 6% Sony PlayStation2 games, 3% SEGA Dreamcast games, and 3% 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 install 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 gaming
console, had an install 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 install 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 install base of approximately 20 million by 2004,
while the Game Cube is projected to have a North American install 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/third-party 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.

      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.

      In November 1998, the Company acquired One Zero Media, Inc. ("OZM"), an
Internet entertainment content company, in exchange for 458,000 newly issued
shares of the Company's common stock and approximately 117,000 stock options to
purchase the Company's common stock. Total consideration, 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, because
it was the Company's intention to sell an ownership interest in OZM. At 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. This resulted in a loss from discontinued operations of $19.5 million,
$0.5 million of which recognized in the year ended March 31, 2000.

      Effective January 1, 1998, the Company changed its fiscal year from
December 31 to March 31. Effective April 1, 2000, the Company changed its fiscal
year from March 31 to June 30. Accordingly, the discussion of financial results
set forth below compares the year ended June 30, 2001 to the year ended June 30,
2000, three month period ended June 30, 2000 to the three month period ended
June 30, 1999 and the twelve months ended March 31, 2000 to the twelve months
ended March 31, 1999.

RESULTS OF OPERATIONS

      The following table sets forth certain consolidated statements of
operations data as a percentage of net revenues for each of the years in the
year ended December 31, 1997, the three months ended March 31, 1998, the twelve
months ended March 31, 1999 and 2000, the three months ended June 30, 2000 and
the year ended June 30, 2001, which is derived from the audited consolidated
financial statements of the Company. The consolidated financial information for
the twelve months


                                       20
<PAGE>   24
ended March 31, 1998, three months ended June 30, 1999 and year ended June 30,
2000 is derived from the unaudited financial statements of the Company. The
consolidated financial information set forth have been combined as of December
16, 1999, with those of 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 SA.


<TABLE>
<CAPTION>
                                                         THREE
                                             YEAR        MONTHS                    YEARS
                                             ENDED       ENDED                     ENDED
                                          DECEMBER 31    MARCH 31,                MARCH 31,
                                          -----------  -----------  -----------------------------------
                                             1997         1998          1998        1999         2000
                                          -----------  -----------  -----------  ---------    ---------
                                                                    (unaudited)
<S>                                       <C>          <C>          <C>          <C>          <C>
Net revenues ...........................      100.0%       100.0%       100.0%       100.0%       100.0%
Cost of Goods Sold .....................       59.4         54.0         57.9         57.7         79.6
                                              -----        -----        -----        -----        -----
Gross Profit ...........................       40.6         46.0         42.1         42.3         20.4
Selling and distribution expenses ......       18.4         22.5         19.5         25.4         39.5
General and administrative expenses ....        8.2          9.2          8.4         10.3         20.5
Research and development ...............        2.2         10.1          4.0         13.1         18.4
Royalty advance write-off ..............       13.9           --         13.6           --           --
Restructuring and other charges ........         --           --           --          3.1          9.8
INA merger costs .......................         --           --           --           --           --
Gain on sale of line of business .......         --           --           --           --           --
Purchased research and development .....        2.1           --          2.0          0.9           --
SingleTrac retention bonus .............        0.5           --          0.4          0.3           --
Depreciation and amortization ..........        1.4          2.4          1.2          2.6          6.6
                                              -----        -----        -----        -----        -----
Operating  (loss) income ...............       (6.0)         1.9         (6.9)       (13.3)       (74.6)
Interest expense .......................       (0.2)        (0.5)        (0.3)        (0.9)        (4.7)
Other (expense) income .................       (0.2)        (0.8)        (0.4)          --         (0.1)
                                              -----        -----        -----        -----        -----
(Loss) income before provision for
  (benefit from) income taxes ..........       (6.4)         0.6         (7.6)       (14.2)       (79.4)
Total (benefit from)  provision for
  income taxes .........................       (1.7)         0.3         (2.3)        (5.2)        10.6
                                              -----        -----        -----        -----        -----
(Loss) income from continuing
  operations ...........................       (4.7)         0.3         (5.4)        (9.1)       (90.0)
Discontinued operations:
  Loss from operations of OZM ..........         --           --           --         (0.6)          --
  Loss on disposal of OZM ..............         --           --           --         (2.7)        (0.1)
                                              -----        -----        -----        -----        -----
  Loss from discontinued operations ....         --           --           --         (3.3)        (0.1)
                                              -----        -----        -----        -----        -----
 (Loss) income before extraordinary
  item .................................       (4.7)         0.3         (5.4)       (12.4)       (90.1)
Extraordinary item:
  Gain on early extinguishment of debt
   (net of tax) ........................         --           --           --           --          0.5
                                              -----        -----        -----        -----        -----
Net (loss) income before dividends on
  preferred stock ......................       (4.7)         0.3         (5.4)       (12.4)       (89.6)
Less dividends on preferred stock ......         --           --           --           --           --
                                              -----        -----        -----        -----        -----
Net (loss) income attributable to
  common stockholders ..................       (4.7)%        0.3%        (5.4)%      (12.4)%      (89.6)%
                                              =====        =====        =====        =====        =====
</TABLE>

<TABLE>
<CAPTION>
                                                     THREE
                                                     MONTHS                       YEARS
                                                     ENDED,                       ENDED
                                                    JUNE 30,                     JUNE 30,
                                          --------------------------    -------------------------
                                              1999           2000           2000          2001
                                          -----------     ----------    ----------     ----------
                                          (unaudited)                   (unaudited)
<S>                                       <C>             <C>           <C>            <C>
Net revenues ...........................      100.0%         100.0%       100.0%          100.0%
Cost of Goods Sold .....................       51.2           52.2         86.3            40.6
                                              -----          -----        -----           -----
Gross Profit ...........................       48.8           47.8         13.7            59.4
Selling and distribution expenses ......       27.5           42.8         44.7            29.5
General and administrative expenses ....        7.7           36.3         28.0            21.7
Research and development ...............       13.5           35.6         23.0            18.2
Royalty advance write-off ..............         --             --           --              --
Restructuring and other charges ........         --           22.9         15.7             1.1
INA merger costs .......................         --             --           --             0.5
Gain on sale of line of business .......         --             --           --            (1.8)
Purchased research and development .....         --             --           --              --
SingleTrac retention bonus .............         --             --           --              --
Depreciation and amortization ..........        3.2           11.9          8.8             6.5
                                              -----          -----        -----           -----
Operating  (loss) income ...............       (3.1)        (101.8)      (106.5)          (16.4)
Interest expense .......................       (1.6)          (8.9)        (6.5)           (4.3)
Other (expense) income .................       (0.2)          (1.0)        (0.2)            0.4
                                              -----          -----        -----           -----
(Loss) income before provision for
  (benefit from) income taxes ..........       (4.9)        (111.7)      (113.3)         (20.3)
Total (benefit from)  provision for
  income taxes .........................       (1.7)           2.6         14.1            (0.8)
                                              -----          -----        -----           -----
(Loss) income from continuing
  operations ...........................       (3.2)        (114.3)      (127.4)          (19.5)
Discontinued operations:
  Loss from operations of OZM ..........         --             --           --              --
  Loss on disposal of OZM ..............         --             --         (0.2)             --
                                              -----          -----        -----           -----
  Loss from discontinued operations ....         --             --         (0.2)             --
                                              -----          -----        -----           -----
(Loss) income before extraordinary
  item .................................       (3.2)        (114.3)      (127.5)          (19.5)
Extraordinary item:
  Gain on early extinguishment of debt
   (net of tax) ........................         --             --          0.6              --
                                              -----          -----        -----           -----
Net (loss) income before dividends on
  preferred stock ......................       (3.2)        (114.3)      (126.9)          (19.5)
Less dividends on preferred stock ......        0.5             --           --              --
                                              -----          -----        -----           -----
Net (loss) income attributable to
  common stockholders ..................       (3.7)%       (114.3)%     (126.9)%         (19.5)%
                                              =====          =====        =====           =====
</TABLE>


TWELVE MONTHS ENDED JUNE 30, 2001 COMPARED TO TWELVE MONTHS ENDED JUNE 30, 2000

      Net revenues for the twelve months ended June 30, 2001 decreased $2.7
million or 0.9% from $313.2 million to $310.5 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 of
the Company by Infogrames SA. The decrease in distribution revenue was partially
offset by an increase in revenue attributable to the addition of sales of the
former Hasbro Interactive product which are now published through the Company in
conjunction with Infogrames SA'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.


                                       21
<PAGE>   25
      Total publishing revenue for the twelve months ended June 30, 2001
increased 23.2% to $232.1 million from $188.4 million in the comparable 2000
period. Approximately 65.0% of such revenues related to PC product revenues and
35.0% of such revenues related to console games for the twelve months ended June
30, 2001, as compared to 70.9% and 29.1%, respectively, in the comparable 2000
period. Both the increase in publishing revenue and the increase in console
product during the twelve months ended June 30, 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 $56.8
million of net revenues for the twelve months ended June 30, 2001. Additionally,
publishing revenue increased due to sales of the former Hasbro Interactive
products such as Roller Coaster Tycoon and NASCAR Heat for Playstation 2 which
contributed approximately $38.9 million in net revenues for the twelve months
ended June 30, 2001.

      Cost of goods sold for the twelve months ended June 30, 2001 decreased
approximately $144.5 million or 53.4% to $125.9 million from $270.4 million from
the comparable 2000 period. Cost of goods sold as a percentage of net revenues
decreased to 40.6% for twelve months ended June 30, 2001, as compared to 86.3%
in the comparable 2000 period. The 2000 period included special charges. These
special charges of approximately $51.6 million 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 twelve months ended June 30, 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 $184.5 million for the twelve months ended June
30, 2001 from $42.8 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, 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 59.4% for the twelve months ended June 30, 2001 from 13.7% 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 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 twelve months ended June 30, 2001,
selling and distribution expenses decreased approximately $48.5 million, or
34.7%, to $91.5 million from $140.0 million in the comparable 2000 period.
Selling and distribution expenses as a percentage of net revenues for the twelve
months ended June 30, 2001 decreased to 29.5% as compared to 44.7% in the
comparable 2000 period. The 2000 period included special charges of
approximately $12.7 million related to additional reserves for co-op
advertising. For the twelve months ended June 30, 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 twelve months ended June 30, 2001 decreased approximately $20.3
million, or 23.2%, to $67.3 million from $87.6 million in the comparable 2000
period. General and administrative expenses as a percentage of net revenues
decreased to 21.7% for the twelve months ended June 30, 2001 from 28.0% 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 Infogrames SA acquisition of a controlling interest in the
Company. Additionally, the Company has further reduced costs in the 2001 period
due to internal consolidation and reorganization efforts. The decrease was
offset by approximately $20.7 million of additional provisions for receivables
during the current twelve month period.


                                       22
<PAGE>   26
      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 twelve months ended June 30, 2001 decreased
approximately $15.5 million, or 21.5%, to $56.6 million from $72.1 million in
the comparable 2000 period. Research and development expenses, as a percentage
of net revenues, decreased to 18.2% for the twelve months ended June 30, 2001
from 23.0% 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 from both Europe and Singletrac as
compared to the twelve months ended June 30, 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, for the twelve months ended June 30, 2001,
decreased $19.9 million or 44.5% to $24.8 million from $44.7 million in the
comparable 2000 period.

      The Company incurred restructuring charges of $49.0 million and $3.5
million for the twelve months ended June 30, 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 employee severance packages and the disposal of assets that will no longer be
used. In the fourth quarter of fiscal 2001, the Company initiated a
restructuring of its Humongous Entertainment Business to refocus the operations
primarily on internal development and incurred a $1.1 million charge. The
Company incurred an additional $0.3 million charge to centralize its technical
support operations in Seattle.

      The Company incurred expenses of $1.7 million or 0.5% of net revenue
related to the INA merger during the twelve months ended June 30, 2001. The
costs include various consulting, legal, and accounting fees.

      The Company recorded a gain on sale of line of business for the twelve
months ended June 30, 2001 of approximately $5.5 million. This is related to the
sale of the Duke Nukem franchise as the Company refocused it's 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 twelve months ended June 30, 2001
decreased approximately $7.3 million, or 26.4%, to $20.3 million from $27.6
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. This decrease was offset by amortization
expense resulting from the INA Merger.

      Interest expense, net, decreased approximately $7.1 million to $13.4
million from $20.5 million in the comparable 2000 period. The decrease in the
twelve months ended June 30, 2001 was attributable to lower borrowings in 2001
as compared to 2000.

      For the twelve months ended June 30, 2001, the Company recorded a tax
benefit of $2.4 million compared to a tax provision of $44.3 million in the
comparable 2000 period. The Company recognized a tax benefit in the current
period related to foreign current taxes and in the prior year provided a full
valuation allowance for deferred tax assets.

THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999

      Net revenues for the three months ended June 30, 2000 decreased
approximately $72.9 million, or 60.1%, to $48.5 million from $121.3 million in
the comparable 1999 period. This decrease is attributable to the restructuring
of the Company's publishing business, the acquisition by Infogrames SA of a
controlling interest in the Company and the subsequent decision to downsize its
distribution business. Additionally, some of the Company's larger retail
customers are purchasing consumer software directly from several large
publishers, which was previously sold through the Company.


                                       23
<PAGE>   27
      Total publishing revenue decreased 16.5% to $42.5 million in 2000 from
$50.9 million in the comparable 1999 period. Approximately 89.6% of such
revenues related to PC product revenues and 10.4% of such revenues related to
console games in 2000, as compared to 34.0% and 66.0%, respectively, in the
comparable 1999 period.

      While the consumer software business is typically seasonal, the granting
of price protection and returns of products in 2000 were greater than
anticipated. As consumer pricing has become more competitive, the Company is
finding more frequently that it is necessary to offer mark-downs for products
which have not yet sold through to the consumer, or to accept a higher level of
returns of product that are not selling at retail, or both.

      A significant portion of the Company's revenues in any quarter are
generally derived from software first released in that quarter or in the
immediately preceding quarter. See "Risk Factors -- Our Revenues Will Decline
and Our Competitive Position Will Be Adversely Affected If We Are Unable to
Introduce New Products on a Timely Basis."

      Cost of goods sold for 2000 decreased approximately $36.9 million, or
59.3%, to $25.3 million from $62.1 million in the comparable 1999 period. Cost
of goods sold as a percentage of net revenues increased to 52.2% in 2000 as
compared to 51.2% in the comparable 1999 period.

      Gross profit decreased from $59.2 million (48.8% of net revenues) in the
comparable 1999 period to $23.2 million (47.8% of net revenues) for the three
months ended June 30, 2000. Gross profit decreased primarily due to decreased
sales volume. Gross profit is primarily impacted by the percentage of sales of
CD software as compared to the percentage of sales of cartridge software. 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 CD software
(currently, PlayStation, PCs and Dreamcast) are higher than those on cartridge
software (currently, Nintendo 64 and Game Boy Color) as a result of
significantly lower CD software product costs.

      Selling and distribution expenses primarily include shipping expenses,
sales and distribution labor expenses, advertising and promotion expenses and
distribution facilities costs. During 2000, these expenses decreased
approximately $12.6 million, or 37.7%, to $20.8 million from $33.3 million in
the comparable 1999 period. Selling and distribution expenses as a percentage of
net revenues for 2000 increased to 42.8% as compared to 27.5% in the comparable
1999 period. The increase, as a percentage of net revenues, was due to lower
overall sales volume, and the increase in co-op advertising costs incurred
during the current period. This was partially offset by the reduction of freight
costs due to decreased sales volume in the current period.

      General and administrative expenses primarily include personnel expenses,
facilities costs, professional expenses and other overhead charges. These
expenses in 2000 increased approximately $8.3 million, or 89.0%, to $17.6
million from $9.3 million in the comparable 1999 period. General and
administrative expenses as a percentage of net revenues increased to 36.3% in
2000 from 7.7% in the comparable 1999 period. This increase was due primarily to
additional costs associated with management's reorganization of operations as a
result of the acquisition of controlling interest in the Company by Infogrames
SA.

      Research and development expenses primarily include 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, such as
salaries and other related costs. These expenses in 2000 increased approximately
$0.9 million, or 5.6%, to $17.3 million from $16.4 million in the comparable
1999 period. Research and development expenses, as a percentage of net revenues,
increased to 35.6% in 2000 from 13.5% in the comparable 1999 period. The
increase in research and development expenses as a percentage of net revenues is
primarily due to the decrease in overall sales volume and the Company entering
into similar contracts with external developers as compared to the 1999 period.
Research and development expenses of the Company's internal development studios,
which primarily include Humongous, Legend and Reflections, decreased to $9.6
million in 2000 from $10.7 million in the comparable 1999 period.

      Restructuring and other charges of approximately $11.1 million, recorded
in 2000, relates to a reorganization and refocus by the Company as a result of
Infogrames SA's acquisition of a controlling interest in the Company, as well as
the Company's reorganization of its Frontline publishing business. Approximately
$0.4 million relates to the write-off of goodwill, $9.4 million of impaired
assets and transition rent, and $1.3 million related to the planned severance of
49


                                       24
<PAGE>   28
employees, primarily those employees performing administrative and product
development functions. The remaining employees to be terminated received
notification prior to the fiscal year ended June 30, 2000, with terminations
scheduled to be effective over the subsequent three months. Management completed
the Company's reorganization by September 30, 2000. During the three months
ended June 30, 2000, 62 employees were terminated under the restructuring plan.

      Depreciation and amortization expense for 2000 decreased approximately
$7.3 million, or 26.3%, to $20.3 million from $27.6 million in the comparable
1999 period. This decrease is attributable to the lower amortization expense as
a result of the write-off of all goodwill, other than the INA, Legend and
Reflections studios, in connection with the Company's reorganization plans.

      Interest expense increased approximately $2.4 million during 2000 to $4.3
million from $2.0 million in the comparable 1999 period. The increase was
attributable to the increase in interest costs associated with increased
borrowings under the Credit Agreement and amortization of deferred financing
costs relating to the Credit Agreement and the subordinated notes held by
Infogrames SA.

      For the three months ended June 30, 2000, the Company recorded a tax
provision of $1.3 million compared to a tax benefit of $2.1 million in the
comparable 1999 period. The Company provided a full valuation allowance for
deferred tax assets and foreign deferred liability in the current period and a
benefit from state and local taxes in the 1999 period.

TWELVE MONTHS ENDED MARCH 31, 2000 COMPARED TO TWELVE MONTHS ENDED MARCH 31,
1999

      Net revenues for fiscal 2000 decreased approximately $186.3 million, or
32.6%, to $386.1 million from $572.3 million in fiscal 1999. This decrease is
attributable to the restructuring of the Company's publishing business, the
acquisition by Infogrames SA of a controlling interest in the Company and the
Company's decision to downsize its distribution business, whereby substantially
less product was shipped in the last four months of the fiscal year.
Additionally, some of the Company's larger retail customers continue to purchase
consumer software directly from several large publishers whose software was
previously sold through the Company.

      Total publishing revenue decreased 12.2% to $262.8 million in fiscal 2000
from $299.4 million in fiscal 1999. Approximately 55% of such revenues related
to PC product revenues and 45% of such revenues related to console game revenues
in fiscal 2000, as compared to 58% and 42%, respectively, in fiscal 1999.

      While the consumer software business is typically seasonal, the granting
of price protection and returns of products in fiscal 2000 exceeded
expectations. As consumer pricing has become more competitive, the Company is
finding more frequently that it is necessary to offer mark-downs for products
which have not yet sold through to the consumer, or to accept a higher level of
returns of product that are not selling at retail, or both. A large portion of
aging customer chargebacks relating to price protection, co-op advertising and
uncollectible accounts were reserved for in the current fiscal quarter.

      A significant portion of the Company's revenues in any quarter are
generally derived from software first released in that quarter or in the
immediately preceding quarter. See "Risk Factors--Our Revenues Will Decline and
Our Competitive Position Will Be Adversely Affected If We Are Unable to
Introduce New Products on a Timely Basis."

      Cost of goods sold for fiscal 2000 decreased approximately $22.7 million,
or 6.9%, to $307.3 million from $330.0 million in fiscal 1999. Cost of goods
sold as a percentage of net revenues increased to 79.6% in fiscal 2000 as
compared to 57.7% in fiscal 1999. The increase, as a percentage of net revenues,
was due to lower overall sales volume, coupled with substantial reserves for
unsellable product, particularly Third-Party Product, which bears a higher cost
than published product, both domestically and internationally.

      Gross profit decreased from $242.4 million (42.3% of net revenues) for the
year ended March 31, 1999 to $78.8 million (20.4% of net revenues) for the year
ended March 31, 2000. This decrease primarily is due to reduced sales volume and
higher cost of goods sold as described above. Gross profit is primarily impacted
by the percentage of sales of CD software as compared to the percentage of sales
of cartridge software. 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.


                                       25
<PAGE>   29
The Company's margins on sales of CD software (currently, PlayStation, PCs and
Dreamcast) are higher than those on cartridge software (currently, Nintendo 64
and Game Boy Color) as a result of significantly lower CD software product
costs.

      Selling and distribution expenses primarily include shipping expenses,
sales and distribution labor expenses, advertising and promotion expenses and
distribution facilities costs. During fiscal 2000, these expenses increased
approximately $7.1 million, or 4.9%, to $152.6 million from $145.5 million in
fiscal 1999. Selling and distribution expenses as a percentage of net revenues
for fiscal 2000 increased to 39.5% as compared to 25.4% in fiscal 1999. The
increase, as a percentage of net revenues, was due to lower overall sales
volume, and the increase in co-op advertising costs due to the write-down of
receivables. This was partially offset by the reduction of freight costs due to
decreased sales volume.

      General and administrative expenses primarily include personnel expenses,
facilities costs, professional expenses and other overhead charges. These
expenses in fiscal 2000 increased approximately $20.4 million, or 34.6%, to
$79.3 million from $58.9 million in fiscal 1999. General and administrative
expenses as a percentage of net revenues increased to 20.5% in fiscal 2000 from
10.3% in fiscal 1999. This increase was due primarily to an increase in salary
expense relating to the severance packages of several senior officers during the
fiscal year, the write-off of uncollectible account receivables, and additional
costs incurred associated with management's reorganization of operations as a
result of the acquisition of a controlling interest in the Company by Infogrames
SA.

      Research and development expenses primarily include 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 such as salaries
and other related costs. These expenses in fiscal 2000 decreased approximately
$4.1 million, or 5.4%, to $71.2 million from 75.2 million in fiscal 1999.
Research and development expenses, as a percentage of net revenues, increased to
18.4% in fiscal 2000 from 13.1% in fiscal 1999. The decrease in research and
development expenses is primarily due to the Company entering into fewer new
contracts with external developers, partially offset by a $7.8 million
earned-out royalty payment to Reflections for the title Driver during the three
months ended September 30, 1999, which was paid in cash and common stock of the
Company. Research and development expenses of the Company's internal development
studios, which primarily include Humongous, Legend and Reflections, increased to
$45.7 million in fiscal 2000 from $34.9 million in fiscal 1999.

      Restructuring and other charges of approximately $37.9 million, recorded
in the third and fourth quarters of fiscal 2000, relate to a reorganization of
the Company's Frontline publishing business, the shutdown of a substantial
portion of European publishing operations and outsourcing and down-sizing of the
Company's distribution and assembly functions. Approximately $17.6 million
relates to the write-off of goodwill as a result of the consolidation of the
value distribution division with the Company's publishing division, $12.1
million relates to the shutdown of European operations, including the write-off
of all goodwill other than that relating to the Reflections studio, $6.1 million
relates to impaired assets and $2.1 million relates to the planned severance of
221 employees, those employees primarily performing administrative functions.
The remaining employees to be terminated received notification prior to the
fiscal year ended March 31, 2000, with terminations scheduled to be effective
over the subsequent three months. Management completed the Company's
reorganization by June 30, 2000. As of March 31, 2000, 88 employees were
terminated under the restructuring plan.

      Depreciation and amortization expense for fiscal 2000 increased
approximately $11.0 million, or 75.6%, to $25.7 million from $14.6 million in
fiscal 1999. This increase is attributable to the higher depreciation and
amortization expense as a result of the Company's merger with INA.

      Interest expense increased approximately $13.0 million during fiscal 2000
to $18.1 million from $5.1 million in fiscal 1999. The increase was partially
attributable to the increase in interest costs associated with increased
borrowings under the Old Credit Agreement (as defined below) and the Credit
Agreement. The amortization of deferred financing costs relating to the Credit
Agreement and the subordinated notes held by General Atlantic Partners, LLC
(together with its affiliates, "GAP") and members of the Cayre family also
contributed to the increase in interest and other income (expense), net.

      For the twelve months ended March 31, 2000 the Company recorded a
provision of $40.9 million as compared to a benefit of $29.6 million in fiscal
1999. The valuation allowance increased by $134.6 million in fiscal 2000,
consisting of a valuation allowance of $48.8 million for the beginning deferred
tax asset balance and a valuation allowance of $85.8 million for the net change
in the deferred tax asset during the year. The valuation allowance was necessary
due to the current year operating results and the terminated plans to sell
certain of the Company's businesses which would have resulted in the utilization
of the deferred tax asset. A full valuation allowance has been recorded against
the net deferred tax asset since it is more likely than not that such assets
will not be realized in the foreseeable future.


                                       26
<PAGE>   30
businesses which would have resulted in the utilization of the deferred tax
asset. A full valuation allowance has been recorded against the net deferred tax
asset since it is more likely than not that such assets will not be realized in
the foreseeable future.

      Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the
Results of Operations--Reporting Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
("APB 30"), as of March 31, 2000, the Consolidated Financial Statements of the
Company reflect the planned disposal of OZM as a discontinued operation.
Accordingly, the revenues, costs and expenses, assets and liabilities, and cash
flows of this business have been excluded from the respective captions in the
Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated
Statements of Comprehensive Income and Consolidated Statements of Cash Flows,
and have been reported through its planned date of disposition as "Loss from
discontinued operations." As of March 31, 1999, OZM was accounted for as a
discontinued operation and was sold in July 1999. This resulted in a loss from
discontinued operations of $19.5 million, $0.5 million of which is recognized in
the fiscal year 2000.

      The gain on early extinguishment of debt of $3.2 million ($1.8 million net
of tax) relates to the net gain recognized on the issuance of subordinated
convertible notes in exchange for shares of Series A Convertible Preferred Stock
("Preferred Stock") and subordinated notes of the Company held by GAP and the
write-off of deferred financing costs associated with warrants issued in
connection with the assumption of the Credit Agreement and warrants issued to
GAP and subsequently acquired by Infogrames SA concurrent with Infogrames SA's
acquisition of a controlling interest in the Company on December 16, 1999.


LIQUIDITY AND CAPITAL RESOURCES

      As of June 30, 2001, the Company's working capital deficit was $57.3
million compared to $191.5 million at June 30, 2000. Cash and cash equivalents
were $5.4 million at June 30, 2001 compared to $13.4 million at June 30, 2000.

      During the year ended June 30, 2001, $43.2 million was provided by
financing activities, primarily from borrowings from the Infogrames SA facility.
The cash was used primarily to fund $44.8 million in operating activities which
resulted from operating losses and a reduction in the accounts payable balance
for past due accounts. Approximately $6.1 million in cash was used in investing
activities to purchase property and equipment, primarily additional computer
hardware and software for the development of internal systems.

      The Company does not currently have any material commitments with respect
to any capital expenditures.

      The Company has committed to pay advance payments under certain license
agreements. These obligations are guaranteed and are not dependent on the
delivery of the contracted services by the developers. Future advances due under
these license agreements are $4.3 million, $1.0 million, $1.0 million, $1.0
million and $1.0 million for the fiscal years then ended 2002, 2003, 2004, 2005
and 2006, respectively. Currently, the Company has no obligations to pay license
advances beyond the 2006 fiscal year.

      On January 21, 1997, the Company entered into a revolving credit agreement
(as amended, the "Old Credit Agreement") with certain banks expiring on December
31, 1998. On September 11, 1998, the borrowings under the Old Credit Agreement
were repaid and the Old Credit Agreement was terminated.

      On September 11, 1998, the Company entered a Credit Agreement as
subsequently amended, with First Union National Bank as agent for a syndicate of
banks (the "Banks"), which expired 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, Infogrames SA entered into an agreement with the
Banks, pursuant to which Infogrames SA assumed the Banks' interest in the Credit
Agreement. In connection with the assumption by Infogrames SA 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


                                       27
<PAGE>   31
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 Infogrames SA, (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 Infogrames SA.

      On June 30, 2000, the Company had outstanding borrowing under the Credit
Agreement of approximately $96.0 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.

      The Credit Agreement has been modified from time to time. On June 29,
2000, Infogrames SA and the Company amended the Credit Agreement to increase the
aggregate commitment available under the facility to $125 million and waived
compliance with all of the required financial covenants contained in the
agreement extending the maturity date to September 30, 2000.

      On March 1, 2000, INA issued a promissory note to Infogrames SA for $25.0
million at interest rates of 6.8% per annum. Prior to the INA Merger, this
amount was forgiven by Infogrames SA and converted into equity of INA.

      In conjunction with the INA Merger, which closed on October 2, 2000, all
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 Infogrames SA (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 Infogrames SA
amended the New Credit Agreement to extend the maturity date to June 15, 2001,
as amended, and on June 7, 2001 extended the facility to December 31, 2001. As
of June 30, 2001, the outstanding borrowings under the Credit Agreement were
approximately $9.3 million, of which $0.3 million is related to accrued
interest. As of June 30, 2001, there are $0.9 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 $34.9 million
of borrowings outstanding under the BNP Credit Facility as of June 30, 2001.

      The Company expects continued volatility in the use of cash due to varying
seasonal, receivable payment cycles and quarterly working capital needs to
finance its publishing businesses and corporate plan of reorganization.

      The Company believes that existing cash, cash equivalents and short-term
investments, together with cash expected to be generated from operations, cash
available under the Credit Agreement and continued financial support from
Infogrames SA will be sufficient to fund the Company's operations and cash flows
throughout fiscal 2002.

      The Company is also party to various litigations arising in the course of
its business, the resolution of none of which, management believes, will have a
material adverse effect on the Company's liquidity, financial condition or
results of operations.

RECENT 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. It requires companies to recognize all derivatives as either assets
or liabilities in the statement of financial position


                                       28
<PAGE>   32
and measure those instruments at fair value. The Company adopted SFAS No. 133,
amended by SFAS No. 138, in the first quarter of fiscal 2001. The adoption of
SFAS No. 133 did not have a material effect on the Company's consolidated
results of operations or financial position.

      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 and the adoption
of SAB 101 did not have a material effect on the Company's consolidated results
of operations or financial position.

      In March 2000, the FASB issued Interpretation No. 44 (FIN No. 44),
Accounting for Certain Transactions involving Stock Compensation - an
Interpretation of APB 25. FIN No. 44 clarifies (i) the definition of employee
for purposes of applying APB Opinion No. 25, (ii) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (iii) the accounting
consequences of various modifications to the terms of a previously fixed stock
option or award, and (iv) the accounting for an exchange of stock compensation
awards in a business combination. FIN No. 44 is effective July 1, 2000 but
certain conclusions in this interpretation cover specific events that occur
after either December 15, 1998 or January 12, 2000. The adoption of certain of
the conclusions of FIN No. 44 covering events occurring during the period after
December 15, 1998 or January 12, 2000 did not have a material effect on the
Company's financial position or results of operations. Adoption of the remaining
conclusions has not had a material effect on the financial position or results
of operations.

      On June 29, 2001, the Financial Accounting Standards Board (FASB) approved
for issuance Statement of Financial Accounting Standards (SFAS) 141, Business
Combinations, and SFAS 142, Goodwill and Intangible Assets. Major provisions of
these Statements are as follows: all business combinations initiated after June
30, 2001 must use the purchase method of accounting; the pooling of interest
method of accounting is prohibited except for transactions initiated before July
1, 2001; intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal rights or
are separable from the acquired entity and can be sold, transferred, licensed,
rented or exchanged, either individually or as part of a related contract, asset
or liability; goodwill and intangible assets with indefinite lives are not
amortized but are tested for impairment annually, except in certain
circumstances, and whenever there is an impairment annually, except in certain
circumstances, and whenever there is an impairment indicator; all acquired
goodwill must be assigned to reporting units for purposes of impairment testing
and effective January 1, 2002, goodwill will no longer be subject to
amortization. The Company is permitted to early adopt effective July 1, 2001 and
management has elected to do so. Management believes that these Statements will
not have a material impact on the Company's financial position or results or
operations other than from the cessation of goodwill amortization. For the
fiscal year ended June 30, 2001, amortization of goodwill amounted to
approximately $11.6 million.

      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.

EURO CONVERSION

      As part of the European Economic and Monetary Union (EMU), a single
currency (the "Euro") will replace the national currencies of most of the
European countries in which the Company conducts business. The conversion rates
between the Euro and the participating nations' currencies have been fixed
irrevocably as of January 1, 1999, with the participating national currencies
being removed from circulation between January 1, and June 30, 2002 and replaced
by Euro notes and coinage. During the "transition period" from January 1, 1999
through December 31, 2001, public and private entities as well as individuals
may pay for goods and services using either checks, drafts, or wire transfers
denominated in Euros or the participating country's national currency.

      Under the regulations governing the transition to a single currency, there
is a "no compulsion, no prohibition" rule which states that no one is obliged to
utilize the Euro until the notes and coinage have been introduced on January 1,
2002. In keeping with this rule, the Company is Euro "compliant" (able to
receive Euro denominated payments and able to invoice in


                                       29
<PAGE>   33
Euros as requested by vendors and suppliers, respectively) as of January 1, 1999
in the affected countries. Full conversion of all affected country operations to
the Euro is expected to be completed by the time national currencies are removed
from circulation. Phased conversion to the Euro is currently underway and the
effects on revenues costs and various business strategies are being assessed.
The cost of software and business process conversion is not expected to be
material.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      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 at fixed rates.

ITEM 8. INDEX TO THE FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The Consolidated Financial Statements, and notes thereto, and the
Financial Statement Schedule of the Company, are presented on pages F-1 through
F-32 hereof as set forth below:

<TABLE>
<CAPTION>
                                                                                                   PAGE
                                                                                                   ----

<S>                                                                                         <C>
INFOGRAMES, INC. AND SUBSIDIARIES
    Independent Auditors' Reports ......................................................     F-1 to F-2
    Consolidated Balance Sheets as of June 30, 2000 and June 30, 2001 ..................            F-3
    Consolidated Statements of Operations and Comprehensive Loss for the Years
         Ended March 31, 1999 and 2000, the Three Months Ended June 30, 2000 and
         The Year Ended June 30, 2001 ..................................................            F-4
    Consolidated Statements of Cash Flows for the Years Ended March 31, 1999
         and 2000, the Three Months Ended June 30, 2000 and the Year Ended June 30, 2001            F-5
    Consolidated Statements of Stockholders' Equity (Deficiency) for the Years
         Ended March 31, 1999 and 2000, the Three Months Ended June 30, 2000 and the
         Year Ended June 30, 2001 ......................................................            F-7
    Notes to the Consolidated Financial Statements .....................................    F-9 to F-35
FINANCIAL STATEMENT SCHEDULE
    For the Years Ended March 31, 1999 and 2000, the Three Months
    Ended June 30, 2000 and the Year Ended June 30, 2001
    Schedule II--Valuation and Qualifying Accounts .....................................           F-36
</TABLE>

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

      On March 20, 2000, the Company's Board of Directors appointed Deloitte &
Touche LLP as its independent accountants, replacing Arthur Andersen LLP (the
"Former Accountants").

      During the Company's two most recent fiscal years, there were no
disagreements with the Former Accountants on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of the Former
Accountants, would have caused them to make reference to the subject matter of
the disagreement in their report. None of the Former Accountants' reports on the
Company's financial statements for either of the past two years contained an
adverse opinion or disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope, or accounting principles.

      In addition, there were no reportable events in accordance with Item
304(a)(1)(v)(A)-(D) of Regulation S-K.

      A letter from the Former Accountants addressed to the Securities and
Exchange Commission in accordance with Item 304(a)(3) of Regulation S-K, stating
that they agree with the Registrant's response to Item 4 of the Registrant's
Current Report on Form 8-K, dated March 20, 2000, was filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000,
which is herein incorporated by reference.


                                       30
<PAGE>   34
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
NAME                           AGE   POSITION                                      SINCE    TERM OF OFFICE
----                           ---   --------                                      -----    --------------

<S>                            <C>   <C>                                           <C>      <C>
Bruno Bonnell                  43    Chairman of the Board of Directors and        1999        2001(3)
                                     Chief Executive Officer
Denis Guyennot(2)              38    Director, President, Chief Operating          2000         2002
                                     Officer and Secretary
Steven A. Denning(1)(2)        53    Director                                      1995         2003
Thomas A. Heymann(2)           43    Director                                      1999         2001(3)
Ann E. Kronen(2)               43    Director                                      2000         2002
Thomas Schmider                39    Director                                      1999         2003
Thomas Mitchell(1)             62    Director                                      2001         2001(3)
James Ackerly(1)               52    Director                                      2001         2001(3)
Harry M. Rubin                 48    Senior Executive Vice President               1998           -
David J. Fremed                41    Senior Vice President and Chief Financial     2000           -
                                     Officer
Lisa S. Rothblum               49    Senior Vice President, General Counsel and    2000           -
                                     Assistant Secretary
</TABLE>

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

(1)  Member of the Audit Committee.

(2)  Member of the Compensation Committee.

(3)  Represents term of office which will be renewed at the Company's next
     shareholder's meeting.

         BRUNO BONNELL has served as a director since December 16, 1999 and has
been Chairman of the Board and Chief Executive Officer of the Company since
February 11, 2000. Since June 1983, Mr. Bonnell has also been the Chairman of
the Board of Directors and Chief Executive Officer of Infogrames SA, the
Company's parent corporation.

         DENIS GUYENNOT has served as a director of the Company since February
10, 2000. Since February 19, 2000, he has also served as President, Chief
Operating Officer and Secretary of the Company. From January 1999 to January
2000, Mr. Guyennot served as President of Distribution for Infogrames
Entertainment Europe. From July 1998 to January 1999, Mr. Guyennot served as
President of Infogrames Europe's Southern Region. In 1988, Mr. Guyennot founded
Ecudis, a distributor of interactive software in Europe, which was acquired by
Infogrames in July 1998.

         STEVEN A. DENNING has served as a director of the Company since
February 1995. Mr. Denning is the Managing Partner of General Atlantic Partners,
LLC, a private equity investment firm focused exclusively on information
technology and telecommunications business globally. Mr. Denning is also the
President of General Atlantic Service Corporation. Mr. Denning also serves on
the board of directors of iFormation Group, Eclipsys Corporation, EXE
Technologies, Exult, Inc., Manugistics and The Thomson Corporation.

         THOMAS A. HEYMANN has served as a director since February 8, 1999. From
February 8, 1999 until February 10, 2000, he was Chairman of the Board and Chief
Executive Officer of the Company. From November 1994 to February 1999, Mr.
Heymann was President of The Disney Store, Inc. Since May 2000, Mr. Heymann has
been the Managing Director of Digital Coast Ventures. Mr. Heymann also serves on
the board of directors of mp3.com as well as the boards of several private
companies.

         ANN E. KRONEN has served as a director of the Company since February
10, 2000. Since 1996, Ms. Kronen has been an independent consultant specializing
in strategic planning and management development issues. Previously, she was
Vice President of Product Development for Disney Educational Publishing.


                                       31
<PAGE>   35
         THOMAS SCHMIDER has served as a director of the Company since December
16, 1999. Since June 1983, Mr. Schmider has been the Managing Director of
Infogrames SA. Mr. Schmider also serves on the board of directors of several
private companies that are affiliates of Infogrames SA.

         THOMAS MITCHELL has served as a director of the Company since January
3, 2001. Until his retirement in 1999, Mr. Mitchell served as a Senior Audit
Partner at Ernst & Young and also served as the Co-Chairman of Ernst & Young
Multinational Partner Group. Mr. Mitchell also serves on the audit and
compliance committees of several not-for-profit organizations.

         JAMES ACKERLY has served as a director of the Company since June 14,
2001. He is currently president of Splinternet Communications, Inc., an operator
of offshore internet service providers and provider of telecom services, and the
president of Solid Contract Baseball, Inc., a recently formed manufacturer of a
proprietary baseball hitting instruction device.

         HARRY M. RUBIN has served as Senior Executive Vice President of the
Company since January 1, 2001. From April 1998 until September 2000, Mr. Rubin
was the President of the International Division of the Company. Prior to that,
Mr. Rubin was Executive Vice President and General Manager, International
Division and Business Affairs of the Company.

         DAVID J. FREMED has served as Senior Vice President and Chief Financial
Officer of the Company since May 8, 2000. From 1996 until May 2000, Mr. Fremed
served in various financial capacities, including Chief Financial Officer and
Treasurer of Marvel Enterprises, Inc. (formerly Toy Biz, Inc.). Prior to that,
Mr. Fremed was Vice President and Controller of Toy Biz, Inc.

         LISA S. ROTHBLUM has served as Senior Vice President, Legal and
Business Affairs, and General Counsel of the Company since September 18, 2000.
On February 1, 2001, Ms. Rothblum was appointed by the Board of Directors to
serve as the Company's Assistant Secretary. From 1982 to 1999, Ms. Rothblum was
Senior Vice President of Legal Affairs and General Counsel of PolyGram Holdings,
Inc. (now known as Universal Vivendi), and served as that company's Corporate
Secretary. Prior to that, Ms. Rothblum was a litigation associate at Greenbaum
Wolff & Ernst and a Staff Attorney at the New York Office of the Securities and
Exchange Committee.

BOARD COMPOSITION

         The Board of Directors of the Company directs the management of the
business and affairs of the Company, as provided by Delaware law, and conducts
its business through meetings of the Board of Directors, an Audit Committee and
a Compensation Committee. In addition, from time to time, special committees may
be established under the direction of the Board of Directors when necessary to
address specific issues.

         The Board of Directors held seven meetings during the fiscal year ended
June 30, 2001. During the period in which he or she served as a director, each
director attended at least 75% of the aggregate of the total number of meetings
of the Board of Directors plus the total number of meetings of the committees of
the Board of Directors on which he or she served.

         The Audit Committee currently is composed of Mr. Ackerly, Mr. Denning
and Mr. Mitchell to comply with Nasdaq's amended Nasdaq Marketplace Rules (the
"Rules"). Prior to June 14, 2001, the Audit Committee was composed of Mr.
Denning, Mr. Heymann and Ms. Kronen. The Audit Committee reviews the adequacy of
internal controls, the scope and results of annual audits and other services
provided by the Company's independent public accountants. The Audit Committee
met three times during the fiscal year ended June 30, 2001.

         The Compensation Committee was established by the Board of Directors on
February 1, 2001. The Compensation Committee is composed of Mr. Denning, Mr.
Guyennot, Mr. Heymann and Ms. Kronen. Following the acquisition by Infogrames SA
of its interest in the Company and until the creation of the Compensation
Committee, the Board of Directors acted in the interim as a whole with respect
to the Company's compensation plans, programs and policies for executive
officers, monitoring the performance and compensation of executive officers and
other key employees, and related decisions concerning matters of executive
compensation.


                                       32
<PAGE>   36
         The Company does not have a nominating committee. The functions
customarily performed by a nominating committee are performed by the Board of
Directors as a whole. Any stockholder who wishes to make a nomination at an
annual or special meeting for the election of directors must do so in compliance
with the applicable procedures set forth in the Company's By-laws.

DIRECTOR COMPENSATION

         Directors who also serve as employees of the Company do not receive any
compensation for their service on the Board of Directors. Effective February 1,
2001, each non-employee director serving on the Board of Directors is given (i)
an annual retainer of $15,000, (ii) an annual stock option grant for 5,000
shares of the Company's common stock and (iii) a one-time stock option grant for
15,000 shares of the Company's common stock.

         From December 16, 1999 through January 31, 2001, the Company did not
have any standard arrangements with respect to the compensation of non-employee
directors, except that each of Mr. Denning, Mr. Heymann and Ms. Kronen received
a one-time stock option grant for 6,000 shares of the Company's common stock for
serving on the Board of Directors in 2000. Prior to December 16, 1999, each
non-employee director of the Company was paid an annual retainer of $15,000 and
a fee of $1,000 for each meeting of the Board of Directors or any committee
thereof he or she attended.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Exchange Act requires the directors and executive
officers of the Company and persons who beneficially own more than ten percent
of the Company's common stock (collectively, the "Reporting Persons") to report
their ownership of and transactions in the Company's common stock to the SEC.
Copies of these reports are also required to be supplied to the Company. The
Company believes, upon a review of the copies of such reports received by the
Company and written representations furnished by the Reporting Persons to the
Company, that during the fiscal year ended June 30, 2001 the Reporting Persons
complied with all applicable Section 16(a) reporting requirements except that
Mr. Ackerly failed to timely file Form 3 and such Form 3 was subsequently filed
on July 11, 2001.

ITEM 11.  EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

         The following table sets forth information concerning compensation
earned by the Company's Chief Executive Officer and its four most highly
compensated executive officers for the fiscal years ended June 30, 2001
(collectively, the "Named Executive Officers") for the last three fiscal years,
if applicable.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                         ANNUAL COMPENSATION                          LONG-TERM COMPENSATION
                                         ---------------------------------------------------  --------------------------------------
                                                                               OTHER ANNUAL        SECURITIES         ALL OTHER
NAME AND PRINCIPAL POSITION              YEAR     SALARY($)      BONUS($)    COMPENSATION($)  UNDERLYING OPTIONS(#)  COMPENSATION($)
---------------------------              ----     ---------      --------    ---------------  ---------------------  ---------------

<S>                                      <C>      <C>          <C>           <C>              <C>                    <C>
Bruno Bonnell.......................     2001         --            --           60,000(1)         1,000,000                  --
   Chief Executive Officer               2000         --            --               --              200,000                  --


Denis Guyennot......................     2001    300,000       162,000(2)       258,832(3)           500,000               4,200(4)
   President, Chief Operating Officer    2000     75,000(5)    100,000(6)        71,329(7)           100,000                  --
     and Secretary


Harry M. Rubin......................     2001    360,000(8)    170,000(2)       $27,000(9)           150,000           1,602,475(10)
   Senior Executive Vice President       2000    420,385        58,000(11)      $24,000(9)            50,000                  --
                                         1999    381,769            --               --                  --                   --


David J. Fremed....................      2001    275,000        94,000(2)            --               50,000               5,499(4)
Senior Vice President and Chief          2000     45,833(12)    20,000(6)            --               30,000                  --
   Financial Officer


Lisa S. Rothblum .................       2001    211,979(13)    82,000(2)            --               60,000(14)           4,313(4)
Senior Vice President, General
   Counsel and Assistant Secretary
</TABLE>


                                       33
<PAGE>   37
-------------------------------------------

(1)  Represents housing allowance from January 2001 through May 2001.

(2)  50% of this bonus amount was paid on July 20, 2001 and the remaining 50% of
     this amount will be paid on October 5, 2001.

(3)  (i) $171,008 of this amount represents housing allowance, (ii) $41,139 of
     this amount represents car allowance and (iii) $46,685 of this amount
     represents relocation allowance.

(4)  Represents Company contributions on behalf of the Named Executive Officers
     to the Company's 401(k) Profit Sharing Plan.

(5)  Mr. Guyennot became President, Chief Operating Officer and Secretary of the
     Company on February 19, 2000 and joined the Company's payroll on April 3,
     2000. This amount represents payment of salary from April 3, 2000 through
     June 30, 2000 based on his annual salary of $300,000.

(6)  Represents sign-on bonus.

(7)  (i) $65,000 of this amount represents housing allowance and (ii) $6,329 of
     this amount represents car allowance.

(8)  Mr. Rubin entered into a new employment agreement with the Company
     effective January 1, 2001. See "Employment Contracts, Termination of
     Employment and Change-in-Control Arrangements - Employment Agreement with
     Harry M. Rubin". Represents payment of salary from (i) July 2000 through
     December 2000 based on his annual salary of $420,385 and (ii) from January
     2001 through June 2001 based on his annual salary of $300,000.

(9)  Represents car allowance.

(10) Represents (i) $1,600,000 of payment made upon entering into the New Rubin
     Employment Agreement (See "Employment Contracts, Termination of Employment
     and Change-in-Control Arrangements - Employment Agreement with Harry M.
     Rubin") and (ii) $2,475 of the Company's contribution on behalf of Mr.
     Rubin to the Company's 401(k) Profit Sharing Program.

(11) Represents bonus earned during the fiscal year ended March 31, 1999.

(12) Mr. Fremed became Senior Vice President and Chief Financial Officer of the
     Company on May 8, 2000. This amount represents payment of salary from May
     8, 2000 through June 30, 2000 based on his annual salary of $275,000.

(13) Ms. Rothblum became Senior Vice President and General Counsel of the
     Company on September 18, 2000. This amount represents payment of salary
     from September 18, 2000 through June 30, 2001, based on her annual salary
     of $275,000.

(14) 10,000 of these common stock options represent sign-on bonus.

         For use by the Company's executive officers, directors, consultants and
relocating executives, the Company leases four corporate apartments in New York
City, which leases expire in July 2001, August 2001, December 2001 and January
2002.

         Through the INA Merger, the Company has acquired a month-to-month lease
for a residence in Santa Clara, California, for use by the Company's directors
and executive officers.

         Option Grants. Shown below is information regarding stock options
granted under the Company's stock incentive plans to the Named Executive
Officers during the fiscal year ended June 30, 2001. The following table also
shows the hypothetical value of the options granted at the end of the option
terms (ten years) if the stock price were to appreciate


                                       34
<PAGE>   38
annually by 5% and 10%, respectively. These assumed rates of growth are required
by the SEC for illustration purposes only and are not intended to forecast
possible future stock prices.

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                             NUMBER OF         PERCENT OF
                             SECURITIES      TOTAL OPTIONS                                       POTENTIAL REALIZABLE VALUE
                             UNDERLYING        GRANTED TO                                         AT ASSUMED ANNUAL RATES OF
                              OPTIONS         EMPLOYEES IN     EXERCISE PRICE                      STOCK PRICE APPRECIATION
                             GRANTED(#)      FISCAL YEAR(1)     PER SHARE(2)    EXPIRATION DATE       FOR OPTION TERM(3)
                             ----------      --------------     ------------    ---------------       ------------------
                                                                                                      5%             10%
                                                                                                      --             ---

<S>                          <C>             <C>               <C>              <C>              <C>              <C>
Bruno Bonnell                 100,000(4)           2.4221%        $5.1875          09/22/10           $326,240       $826,750
                              900,000(5)          21.7985%        $6.2500          12/21/10         $3,537,540     $8,964,810


Denis Guyennot                200,000(4)           4.8441%        $5.1875          09/22/10           $652,480     $1,653,500
                              300,000(5)           7.2662%        $6.2500          12/21/10         $1,179,180     $2,988,270


Harry M. Rubin                 50,000(4)           1.2110%        $5.1875          09/22/10           $163,120       $413,375
                              100,000(6)           2.4221%        $5.0625          04/06/11           $318,380       $806,830


David J. Fremed                50,000(4)           1.2110%        $5.1875          09/22/10           $163,120       $413,375


Lisa S. Rothblum               60,000(4)           1.4532%        $5.1875          09/22/10           $195,744       $496,050
</TABLE>

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

(1)  The Company granted 4,128,722 Common Stock options to employees during
     fiscal year ended June 30, 2001.

(2)  The exercise price is equal to the fair market value of the Company's
     common stock on the close of the last business day prior to the date of
     grant.

(3)  Represents the product of (i) the difference between (A) the product of the
     per-share fair market value at the time of the grant compounded annually at
     the assumed rate of appreciation over the term of the option, and (B) the
     per-share exercise price of the option, and (ii) the number of shares
     underlying the grant at the fiscal year end.

(4)  25% of the options will become exercisable on September 22, 2001 and 6.25%
     of the options will become exercisable each calendar quarter thereafter.

(5)  25% of the options will become exercisable on December 21, 2001 and 6.25%
     of the options will become exercisable each calendar quarter thereafter.

(6)  25% of the options will become exercisable on April 6, 2002 and 6.25% of
     the options will become exercisable each calendar quarter thereafter.

         Aggregated Option Exercises and Year-End Option Values. Shown below is
information relating to the exercise of stock options during the fiscal year
ended June 30, 2001 for each of the Company's Named Executive Officers and the
year-end value of unexercised options held by the Named Executive Officers.


                                       35
<PAGE>   39
             AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                                                     NUMBER OF          VALUE OF UNEXERCISED
                                                                               SECURITIES UNDERLYING        IN-THE-MONEY
                                                                                UNEXERCISED OPTIONS          OPTIONS AT
                                              SHARES                           AT JUNE 30, 2001 (#)     JUNE 30, 2001 ($)(1)
                                            ACQUIRED ON         VALUE              (EXERCISABLE/            (EXERCISABLE/
NAME                                        EXERCISE(#)      REALIZED($)          UNEXERCISABLE)           UNEXERCISABLE)
----                                        -----------      -----------          --------------           --------------


<S>                                         <C>              <C>               <C>                     <C>
Bruno Bonnell...........................          0              $0.00            50,000/1,150,000          0/1,456,250
Denis Guyennot..........................          0               0.00              25,000/575,000            0/887,500
Harry M. Rubin..........................          0               0.00             115,546/150,000       28,481/374,375
David J. Fremed.........................          0               0.00                7,500/72,500            0/120,625
Lisa S. Rothblum........................          0               0.00                    0/60,000            0/144,750
</TABLE>

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

(1)  Market value of underlying shares of Common Stock on June 29, 2001 ($7.60),
     minus the aggregate exercise price.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

   Employment Agreement with Harry M. Rubin

         The Company and Harry M. Rubin entered into an agreement and release
dated April 7, 2000 and a letter agreement dated June 15, 2000. These agreements
will terminate certain provisions of the employment agreement, dated as of April
28, 1998 between the Company and Mr. Rubin, in the event that Mr. Rubin elects
to resign from the Company on or prior to September 30, 2000. Mr. Rubin elected
not to resign from the Company and entered into a letter agreement with the
Company dated December 21, 2000 (the "New Rubin Employment Agreement"). In
consideration of entering into the New Rubin Employment Agreement and as a
result of the Company's change-in-control (i.e., acquisition of the Company by
Infogrames SA), the Company made a payment of $1,600,000 to Mr. Rubin. Under the
New Rubin Employment Agreement, the Company appointed Mr. Rubin as Senior
Executive Vice President beginning January 1, 2001. Mr. Rubin receives an annual
salary of $300,000 and is eligible to participate in the Company's Corporate
Executive Incentive Program, pursuant to which he may receive a bonus of up to
50% of his base salary. In addition, Mr. Rubin receives a car allowance of
$2,500 per month. If Mr. Rubin's employment is terminated without cause within
two years of his employment with the Company pursuant to the New Rubin
Employment Agreement, he will receive a severance payment equal to six months of
his base salary.

   Employment Agreement with Lisa S. Rothblum

         On September 6, 2000, the Company entered into an employment agreement
with Lisa S. Rothblum, appointing her as Senior Vice President and General
Counsel of the Company beginning September 18, 2000. Ms. Rothblum received
60,000 Common Stock options (10,000 of these options represent sign-on bonus)
and receives an annual salary of $275,000. Ms. Rothblum is eligible to
participate in the Company's Corporate Executive Incentive Program, pursuant to
which she may receive a bonus of up to 40% of her base salary. If Ms. Rothblum's
employment is terminated without cause within two years of her employment with
the Company, she will receive a severance payment equal to six months of her
base salary.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         The Compensation Committee of the Board of Directors is composed of Mr.
Denning, the Executive Managing Member of General Atlantic Partners, LLC, a
shareholder of the Company, Mr. Guyennot, the President, Chief Operating Officer
and Secretary of the Company, Mr. Heymann, a former Chief Executive Officer of
the Company, and Ms. Kronen.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information, as of August 15, 2001,
concerning the Common Stock of the Company beneficially owned by (i) each
director and nominee of the Company, (ii) the Named Executive Officers and all
executive


                                       36
<PAGE>   40
officers and directors as a group and (iii) each stockholder known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock. Unless otherwise indicated in the footnotes to the table, the beneficial
owners named have, to the knowledge of the Company, sole voting and dispositive
power with respect to the shares beneficially owned, subject to community
property laws where applicable.

<TABLE>
<CAPTION>
                                                                                         AMOUNT AND NATURE
                                                                                           OF BENEFICIAL
                                                                                        OWNERSHIP OF SHARES
NAME OF BENEFICIAL OWNER                                                                OF COMMON STOCK(1)     PERCENTAGE**
------------------------                                                                ------------------     ------------

<S>                                                                                     <C>                    <C>
General Atlantic Partners, LLC.................................................            3,985,705(2)           5.57%
    3 Pickwick Plaza, Greenwich, CT 06830
Steven A. Denning..............................................................            3,987,205(3)           5.57%
California U.S. Holdings, Inc..................................................           69,076,760(4)           89.8%
    1, Place Verrazzano, 69252 Lyon Cedex 09, France
Infogrames Entertainment S.A...................................................           69,076,760(4)           89.8%
    1, Place Verrazzano, 69252 Lyon Cedex 09, France
Bruno Bonnell..................................................................           69,151,760(5)           89.8%
Thomas Schmider................................................................           69,089,260(6)           89.8%
Thomas Heymann.................................................................              113,900(7)               *
Ann E. Kronen..................................................................                1,500(8)               *
Denis Guyennot.................................................................               75,000(9)               *
Thomas Mitchell................................................................                3,000(10)              *
James Ackerly..................................................................                    0(11)              *
Harry M. Rubin.................................................................              128,466(12)              *
David J. Fremed................................................................               20,340(13)              *
Lisa S. Rothblum...............................................................               15,000(14)              *
All named executive officers and directors as a group (10 persons).............           73,507,911(15)          92.0%
</TABLE>


*    Less than 1%.

**   As of September 10, 2001, 69,524,688 shares of Common Stock were
     outstanding, excluding shares issuable upon exercise or conversion of
     outstanding options, warrants, convertible notes and other convertible
     securities.


(1)  For purposes of this table, beneficial ownership of securities is defined
     in accordance with the rules of the SEC and means generally the power to
     vote or exercise investment discretion with respect to securities,
     regardless of any economic interests therein. Except as otherwise
     indicated, the beneficial owners of shares of Common Stock listed above
     have sole investment and voting power with respect to such shares, subject
     to community property laws where applicable. In addition, for purposes of
     this table, a person or group is deemed to have "beneficial ownership" of
     any shares that such person has the right to acquire by October 14, 2001.
     For purposes of calculating the percentage of outstanding shares held by
     each person listed above, any shares which such person has the right to
     acquire by October 14, 2001 are deemed to be outstanding, but not for the
     purpose of calculating the percentage ownership of any other person.

(2)  Includes (i) 836,909 shares held by General Atlantic Partners 16, L.P.
     ("GAP 16"), 418,455 shares held by General Atlantic Partners 19, L.P. ("GAP
     19"), 129,541 shares held by GAP Coinvestment Partners, L.P. ("GAP
     Coinvestment") and 100,800 shares held by General Atlantic Partners II,
     L.P. ("GAP II"), and (ii) 2,040,600 shares of Common Stock issuable upon
     conversion of a convertible note held by General Atlantic Partners 54, L.P.
     ("GAP 54") and 459,400 shares of Common Stock issuable upon conversion of a
     convertible note held by GAP Coinvestment Partners II, L.P. ("GAP
     Coinvestment II"). The general partner of GAP 16, GAP 19, GAP II and GAP 54
     is General Atlantic Partners, LLC, a Delaware limited liability company.
     The managing members of General Atlantic Partners, LLC are also the general
     partners of GAP Coinvestment and GAP Coinvestment II. Mr. Denning, a
     Director of the Company and a member of the Audit Committee and the
     Compensation Committee of the Company's Board of Directors, is the
     Executive Managing Member of General Atlantic Partners, LLC and a general
     partner of GAP Coinvestment and GAP Coinvestment II. Mr. Denning disclaims
     beneficial ownership of shares owned by GAP 16,


                                       37
<PAGE>   41
     GAP 19, GAP 54 and GAP Coinvestment, GAP Coinvestment II and GAP II, except
     to the extent of his pecuniary interest therein.

(3)  See footnote 2. Includes 1,500 shares that can be acquired through stock
     option exercises within 60 days.

(4)  Includes (i) a proxy for the vote of 260,000 shares of Common Stock held by
     the Cayre family; and (ii) 7,146,544 shares of Common Stock issuable upon
     conversion of a convertible note. Infogrames SA may be deemed to
     beneficially own all of the shares held by CUSH because CUSH is a
     wholly-owned subsidiary of Infogrames SA. Mr. Bruno Bonnell may be deemed
     to beneficially own all of the shares held by CUSH because he is the
     Chairman of the Board of Directors, President and Chief Executive Officer
     of Infogrames SA. Mr. Thomas Schmider may be deemed to beneficially own all
     of the shares held by CUSH because he is the Managing Director of
     Infogrames SA. Each of Mr. Bonnell and Mr. Schmider disclaims beneficial
     ownership of such shares.

(5)  See footnote 4. Mr. Bonnell is a Director, Chairman of the Board and Chief
     Executive Officer of the Company. Mr. Bonnell is the beneficial owner of
     approximately 9% of Infogrames SA. Includes 75,000 shares that can be
     acquired through stock option exercises within 60 days.

(6)  See footnote 4. Mr. Schmider is a Director of the Company. Mr. Schmider is
     the beneficial owner of approximately 8% of Infogrames SA. Includes 12,500
     shares that can be acquired through stock option exercises within 60 days.

(7)  Mr. Heymann is a Director of the Company. Represents 113,900 shares that
     can be acquired through stock option exercises within 60 days.

(8)  Ms. Kronen is a Director of the Company. Represents 1,500 shares that can
     be acquired through stock option exercises within 60 days.

(9)  Mr. Guyennot is a Director, President, Chief Operating Officer and
     Secretary of the Company. Represents 75,000 shares that can be acquired
     through stock option exercises within 60 days.

(10) Mr. Mitchell is a Director of the Company and owns 3,000 shares.

(11) Mr. Ackerly is a Director of the Company.

(12) Mr. Rubin is Senior Executive Vice President of the Company. Represents 420
     shares owned by Mr. Rubin and 128,046 shares that can be acquired through
     stock option exercises within 60 days.

(13) Mr. Fremed is Senior Vice President, Finance and Chief Financial Officer of
     the Company. Represents 340 shares owned by Mr. Fremed and 20,000 shares
     that can be acquired through stock option exercises within 60 days.

(14) Ms. Rothblum is Senior Vice President, General Counsel and Assistant
     Secretary of the Company. Represents 15,000 shares that can be acquired
     through stock option exercises within 60 days.

(15) See footnote 1. Includes (i) a proxy for the vote of 260,000 shares of
     Common Stock held by the Cayre family; (ii) 7,146,544 shares issuable upon
     conversion of the note held by CUSH; (iii) 2,500,000 shares issuable upon
     conversion of the notes held by GAP Coinvestment II and GAP 54; and (iv)
     442,446 shares subject to options exercisable within 60 days.

CHANGE OF CONTROL OF THE COMPANY

         During the fiscal year ended June 30, 2001, no event has occurred which
resulted in a change of control of the Company.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATED PARTY TRANSACTIONS

Infogrames SA

         On January 26, 2001, Infogrames SA and the Company entered into a
letter agreement whereby Infogrames SA has agreed to pay the Company a total
one-time fee of $1.0 million in consideration for the Company's services
rendered to


                                       38
<PAGE>   42
Infogrames SA in connection with the purchase of Hasbro Interactive, Inc.,
Games.com, Inc., Atari Interactive, Inc. and certain other companies, which was
consummated on January 26, 2001.

         On October 2, 2000, the Company completed a merger with INA, a
wholly-owned subsidiary of its majority shareholder, Infogrames SA (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 consumated by the Company as of October 2, 2000:

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

(b)  The outstanding debt under the Credit Agreement and certain intercompany
     payables between the Company and Infogrames SA were converted into the
     Company's common stock at $6.40 per share. The balance of the Credit
     Agreement and certain intercompany payables owed to Infogrames SA prior to
     the INA 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 Infogrames SA to provide for an aggregate
     commitment of $50 million with primarily the same terms as the previous
     facility. The latest amendment of the Credit Agreement is dated June 7,
     2001, which extends the facility to December 31, 2001.

(c)  All warrants held by Infogrames SA 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 was to mature on September
     17, 2001. On September 14, 2001, the facility was extended to November 30,
     2001.

(e)  The Company issued 28,000,000 shares of its common stock to CUSH in
     exchange for all the outstanding shares of INA held by CUSH. The net
     assets of INA were valued at approximately $5.1 million as of October 2,
     2000.

         For the period from December 16, 1999 through June 30, 2000, the
Company was granted the non-exclusive right in the U.S. and Canada to act as the
sales agent for INA, for INA's products, pursuant to which the Company received
3% of net receipts for such products. The parties entered into a subsequent
agreement for the period from July 1, 2000 to October 2, 2000, pursuant to which
the Company received 15% of net receipts for such products. These agreements
were terminated upon consummation of the INA Merger.

Purchases of product by and  from Infogrames SA

         During the three months ended June 30, 2000 and the year ended June 30,
2001, the Company purchased $0.7 million, and $0.4 million of product from
Infogrames SA, respectively. No purchases were made for the years ended March
31, 1999 and 2000. As of June 30, 2001, the Company has approximately $0.4
million outstanding payables related to purchase of product from Infogrames SA.
Additionally, Infogrames SA has purchased product from the Company representing
$0.3 million for the year ended June 30, 2001. No purchases were made by
Infogrames SA from the Company for the year ended March 31, 1999, 2000, and the
three months ended June 30, 2000. As of June 30, 2001, the Company has
approximately $0.3 million of outstanding receivables related to the selling of
such product.

Management fees charged to the Company by Infogrames SA

         Infogrames SA charges the Company monthly management fees for various
global management and system support. For the year ended March 31, 2000, the
three months ended June 30, 2000 and the year ended June 30, 2001 management
fees charged to the company from Infogrames SA totaled $0.6 million, $0.2
million and $2.8 million, respectively. As of June 30, 2001, $0.8 million
remains outstanding. No such fees were charged for the year ended March 31,
1999.

Interest expense and facility fees charged to the Company by Infogrames SA


                                       39
<PAGE>   43
         Infogrames SA charges the Company monthly interest and fees for the
amount outstanding on the related party credit facility and its usage. The
interest rate is approximately prime plus 2.5%. For the year ended March 31,
2000, the three months ended June 30, 2000 and the year ended June 30, 2001, the
Company incurred interest and fees of approximately $1.1 million, $2.1 million
and $3.8 million, respectively. No interest or fees was incurred from Infogrames
SA for the year ended March 31, 1999. As of June 30, 2001, approximately $0.3
million remained unpaid.

Interest expense on notes payable charged to the Company by Infogrames SA

         Infogrames SA charges the Company monthly interest for the amount
outstanding on the long term related party 5% notes payable. The interest rate
is approximately 5%. For the year ended March 31, 2000, three months ended June
30, 2000 and year ended June 30, 2001, the Company incurred interest of
approximately $0.9 million, $0.8 million and $3.2 million, respectively (Note
16).

Royalty agreement between the Company and Infogrames SA

         The Company and Infogrames SA entered into a distribution agreement,
which provides for the distribution by the company of Infogrames SA's products
in the United States, Canada and their territories and possessions, pursuant to
which the Company will pay Infogrames SA 30% of the gross profit on such
products, while retaining 70% of the gross profit for the Company. The Company
records this charge as royalty expense. For the year ended June 30, 2001, the
Company recorded $4.9 million of royalty expense, which has been paid as of year
end. The agreement also includes distribution by Infogrames SA of the Company's
products across Europe, pursuant to which Infogrames SA will pay the Company 30%
of the gross profit on such products, which the Company recognizes as royalty
income. For the year ended June 30, 2001, royalty income for the Company based
on the agreement amounted to $13.7 million of which $2.7 million remains
outstanding at June 30, 2001. For the years ended March 31, 1999 and 2000 and
the three months ended June 30, 2000, no royalty income or expense was
recognized by the Company relating to Infogrames SA.

Transactions with Infogrames Melbourne House, Australia

         Infogrames Melbourne House, Australia, a wholly-owned subsidiary of
Infogrames, SA, is an external product developer for the Company. They performed
such services as product development, designing, and testing for the Company
during the year ended June 30, 2001. No such services were performed in any
prior period. For the year ended June 30, 2001, services provided and charged to
the Company amounted to approximately $0.7 million. The Company has no amount
outstanding to Infogrames Melbourne House as of June 30, 2001.

Transactions with OziSoft Entertainment

         Ozisoft Entertainment is a wholly-owned subsidiary of Infogrames SA
("Ozisoft"). Effective, July 1, 2000, the Company charges Ozisoft management
fees of $0.4 million per annum primarily for the management and maintenance of
information systems. For the year ended June 30, 2001, the Company recognized
$0.4 million as management fee revenue which remains outstanding at June 30,
2001.

   Transactions with Paradigm Entertainment, Inc.

         Paradigm Entertainment Inc., a wholly owned subsidiary of Infogrames SA
as of July 2000, is an external product developer for the Company. They perform
such services as program development, designing and testing. For the year ended
June 30, 2001, services provided and charged to the Company amounted to $3.9
million, of which $1.9 million remains outstanding at June 30, 2001.

Purchases of product from Infogrames Interactive Inc.

         During the year ended June 30, 2001, the Company purchased $9.5 million
of product from Infogrames Interactive Inc. ("Infogrames Interactive"),
representing approximately 9.2% of total purchases by the Company for the year.
As of June 30, 2001, the Company has approximately $9.5 million outstanding
related to purchase of product from Infogrames Interactive which remains
outstanding at June 30, 2001.


                                       40
<PAGE>   44
Royalty Agreement between the Company and Infogrames Interactive

         As part of the acquisition and change of Infogrames Interactive any
distribution of Infogrames Interactive products by the Company will result in
the Company paying Infogrames Interactive 30% of the gross profit of such
products as royalty expense, while retaining 70% of the gross profit for the
Company. For the year ended June 30, 2001, the Company incurred royalty expense
of $9.9 million related to the distribution of Infogrames Interactive products,
which remains outstanding at June 30, 2001.

Management fees charged to Infogrames Interactive by the Company

         The Company charges management fees to Infogrames Interactive primarily
for the legal, financial, information systems and human resource management. For
the year ended June 30, 2001, management fee revenue of $1.3 million was
recorded for these services, of which $1.3 million remains outstanding at June
30, 2001. Additionally, the Company has incurred cost and spent cash on behalf
of Infogrames Interactive in efforts to help in the transition. The Company has
approximately $8.5 million outstanding as of June 30, 2001.

Employment Agreement with Harry M. Rubin

         The Company and Harry M. Rubin entered into an agreement and release
dated April 7, 2000 and a letter agreement dated June 15, 2000. These agreements
will terminate certain provisions of the employment agreement, dated April 28,
1998 between the Company and Mr. Rubin, in the event that Mr. Rubin elects to
resign from the Company on or prior to September 30, 2000. Mr. Rubin elected not
to resign from the Company and entered into a letter agreement with the Company
dated December 21, 2000 (the "New Rubin Employment Agreement"). In consideration
of entering into the New Rubin Employment Agreement and as a result of the
Company's change in control (i.e., acquisition of the Company by Infogrames SA),
the Company made a payment of approximately $1.6 million to Mr. Rubin. Under the
New Rubin Employment Agreement, the Company appointed Mr. Rubin as Senior
Executive Vice President beginning January 1, 2001. Mr. Rubin receives an annual
salary of $0.3 million and is eligible to participate in the Company's Corporate
Executive Incentive Program, pursuant to which he may receive a bonus up to 50%
of his base salary. In addition, Mr. Rubin receives a car allowance of $2,500
per month. If Mr. Rubin's employment is terminated without cause within two
years of his employment with the Company pursuant to the New Rubin Employment
Agreement, he will receive a severance payment equal to six months of his base
salary.


                                       41
<PAGE>   45
                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a)(1) and (2) Financial Statements and Financial Statement Schedules

         See Item 8 hereof.

         (a)(3) Exhibits

2.1         Agreement and Plan of Reorganization by and among the Company, GT
            Acquisition Sub, Inc., WizardWorks Group, Inc. and the Stockholders
            of WizardWorks Group, Inc., dated June 24, 1996 is incorporated
            herein by reference to Exhibit 2.1 to the Company's Current Report
            on Form 8-K filed on July 9, 1996.

2.2         Escrow Agreement by and among the Company, Paul D. Rinde, as the
            Stockholder Representative of WizardWorks Group, Inc., and Republic
            National Bank of New York, as Escrow Agent, dated June 24, 1996 is
            incorporated herein by reference to Exhibit 2.2 to the Company's
            Current Report on Form 8-K filed on July 9, 1996.

3.1         Amended and Restated Certificate of Incorporation is incorporated
            herein by reference to Exhibit 3.1 to the Company's Annual Report on
            Form 10-K for the fiscal year ended March 31, 2000.

3.2         Amended and Restated By-laws are incorporated herein by reference to
            Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
            quarter ended June 30, 1998.

4.1         Specimen form of stock certificate for Common Stock is incorporated
            herein by reference to Exhibit 4.1 to the Company's Annual Report on
            Form 10-K for the fiscal year ended March 31, 2000.

4.2         Certificate of the Powers, Designations, Preferences and Rights of
            the Series A Convertible Preferred Stock is incorporated herein by
            reference to Exhibit 3.1 to Company's Current Report on Form 8-K
            filed on March 2, 1999.

4.3         Stockholders' Agreement by and among Joseph J. Cayre, Kenneth Cayre,
            Stanley Cayre, Jack J. Cayre, the Trusts listed on Schedule I
            attached thereto and the Company is incorporated herein by reference
            to an exhibit filed as a part of the Company's Registration
            Statement on Form S-1 filed October 20, 1995.

4.3a        Amendment to Stockholders Agreement, dated as of December 18, 1995,
            by and among Joseph J. Cayre, Kenneth Cayre, Stanley Cayre, Jack J.
            Cayre, the Trusts parties thereto and the Company is incorporated
            herein by reference to Exhibit 10.30 to the Company's Annual Report
            on Form 10-K for the year ended December 31, 1996.

4.4         Registration Rights Agreement by and among Joseph J. Cayre, Kenneth
            Cayre, Stanley Cayre, Jack J. Cayre, the Trusts listed on Schedule I
            attached thereto and the Company is incorporated herein by reference
            to an exhibit filed as a part of the Company's Registration
            Statement on Form S-1 filed October 20, 1995.

4.5         Amended and Restated Registration Rights Agreement, dated as of
            February 15, 2000, between California U.S. Holdings, Inc. and the
            Company is incorporated herein by reference to Exhibit 4.5 to the
            Company's Annual Report on Form 10-K for the fiscal year ended March
            31, 2000.

10.1        The 1995 Stock Incentive Plan (as amended on October 31, 1996) is
            incorporated herein by reference to Exhibit 10.1 to Amendment No. 2
            to the Company's Registration Statement on Form S-1, filed December
            6, 1996.*

10.2        The 1997 Stock Incentive Plan is incorporated herein by reference to
            Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
            quarter ended June 30, 1997.*


                                       42
<PAGE>   46
10.3        The 1997 Stock Incentive Plan (as amended on June 17, 1998) is
            incorporated herein by reference to Exhibit 10.5 to the Company's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.*

10.4        The 2000 Stock Incentive Plain is incorporated herein by reference
            to Appendix B to the Company's proxy statement dated June 29, 2000.*

10.5        The 1998 Employee Stock Purchase Plan is incorporated herein by
            reference to Exhibit 10.6 to the Company's Quarterly Report on Form
            10-Q for the quarter ended June 30, 1998.*

10.6        Employment Agreement, dated April 28, 1998, between the Company and
            Harry M. Rubin is incorporated herein by reference to Exhibit 10.3
            to the Company's Quarterly Report on Form 10-Q for the quarter ended
            June 30, 1998.*

10.6a       Agreement and Release, dated April 7, 2000, by and between Harry M.
            Rubin and the Company is incorporated herein by reference to Exhibit
            10.10a to the Company's Annual Report on Form 10-K for the fiscal
            year ended March 31, 2000.*

10.6b       Letter Agreement, dated June 15, 2000, by and between Harry M. Rubin
            and the Company is incorporated herein by reference to Exhibit
            10.10b to the Company's Annual Report on Form 10-K for the fiscal
            year ended March 31, 2000.*

10.6c       Letter Agreement, dated December 21, 2000, by and between Harry
            Rubin and the Company.*

10.7        Letter Agreement, dated April 20, 2000, by and between David Fremed
            and the Company is incorporated herein by reference to Exhibit 10.15
            to the Company's Annual Report on Form 10-K for the fiscal year
            ended March 31, 2000.*

10.8        Letter Agreement, dated September 7, 2000, by and between Lisa
            Rothblum and the Company.*

10.9        Lease Agreement between the Company and Plymouth 2200, LLP, dated
            September 6, 1996 is incorporated herein by reference to Exhibit
            10.1 to the Company's Quarterly Report on Form 10-Q for the quarter
            ended September 30, 1996.

10.10       Agreement of Lease, dated as of December 12, 1996, by and between
            the Company and F.S. Realty Corp is incorporated herein by reference
            to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the
            year ended December 31, 1996.

10.11       Lease Agreement between the Company and Netbreeders Realty LLC,
            dated November 1, 1999.

10.12       Lease Agreement between the Company and CarrAmerica Realty
            Corporation, dated February 17, 2000.

10.13       Sublease Agreement between the Company and North American Mortgage
            Company, dated February 17, 2000.

10.14       Sublease Agreement between the Company and SAVI Technology, Inc.,
            dated May 30, 2001.

10.15       Lease Agreement between the Company and Edward Silver, Co-Trustee of
            the Silver Trust and Paul Weinstein, Co-Trustee of the Weinstein
            Trust (dba PTL Realty), dated May 7, 2001.

10.16       Lease Agreement between the Company and MV 1997, L.L.C., dated
            November 24, 1997.

10.17       Lease Agreement between the Company and Northwest Properties Realty
            Corp., dated February 22, 1999.

10.18       Lease Agreement between the Company and Cimarron Airpark L.L.C.
            VIII, dated June 1, 1995.


                                       43
<PAGE>   47
10.19       Sublease Agreement between the Company and XPIDATA, Inc., dated
            December 6, 1996.

10.20       Lease Agreement between the Company and Brookfield J, LLC, dated
            December 23, 1998.

10.21       Services Agreement between the Company and GoodTimes Home Video
            Corp., dated as of January 1, 1995, is incorporated herein by
            reference to Exhibit 10.2 to the Company's Registration Statement on
            Form S-1 filed October 20, 1995.

10.22       GTIS Master Option and License Agreement between the Company and the
            Williams Entertainment Group, dated December 28, 1994, and the
            Amendment to such agreement, dated March 31, 1995, are incorporated
            herein by reference to Exhibit 10.10 to the Company's Registration
            Statement on Form S-1 filed October 20, 1995.

10.23       GTIS Master Option and License Agreement (Home Video Games) between
            the Company and the Williams Entertainment Group, dated March 31,
            1995 is incorporated herein by reference to Exhibit 10.11 to the
            Company's Registration Statement on Form S-1 filed October 20, 1995.

10.24       Agreement by and between the Company and REPS is incorporated herein
            by reference to an exhibit filed as a part of the Company's
            Registration Statement on Form S-1 filed October 20, 1995.

10.25       Warehouse Services Contract, dated March 2, 1999, by and between the
            Company and Arnold Transportation Services, Inc. t/d/b/a Arnold
            Logistics is incorporated herein by reference to Exhibit 10.50 to
            the Company's Annual Report on Form 10-K for the fiscal year ended
            March 31, 1999.

10.26       Distribution Agreement between Infogrames Entertainment SA and the
            Company, dated as of December 16, 1999, is incorporated herein by
            reference to Exhibit 7 to the Schedule 13D filed by Infogrames
            Entertainment SA and California U.S. Holdings, Inc. on January 10,
            2000.

10.26a      Amendment to Distribution Agreement between Infogrames Entertainment
            SA and the Company dated as of July 1, 2000.

10.27       Trademark Agreement, dated as of May 10, 2000, by and between
            Infogrames Entertainment SA and the Company is incorporated herein
            by reference to Exhibit 10.25 to the Company's Annual Report on Form
            10-K for the fiscal year ended March 31, 2000.

10.28       Credit Agreement, dated as of September 11, 1998, by and among the
            Company, the Lenders thereto, NationsBanc Montgomery Securities,
            LLC, as Syndication Agent, Fleet Bank, N.A., as Documentation Agent,
            and First Union National Bank, as Administrative Agent, is
            incorporated herein by reference to Exhibit 10.3 to the Company's
            Quarterly Report on Form 10-Q for the quarter ended September 30,
            1998.

10.28a      Second Amendment, Waiver and Agreement, dated as of June 29, 1999,
            by and among the Company, the Lenders thereto and First Union
            National Bank, as Administrative Agent, is incorporated herein by
            reference to Exhibit 10.1 to the Company's Current Report on 8-K
            filed on August 5, 1999.

10.28b      Third Amendment, Consent, Waiver and Agreement, dated as of November
            15, 1999, by and among the Company, the Lenders thereto and First
            Union National Bank, as Administrative Agent is incorporated herein
            by reference to Exhibit 10.3 to the Company's Current Report on Form
            8-K filed on November 19, 1999.

10.28c      Right of First Refusal Offer Agreement, dated November 15, 1999, by
            and among California U.S. Holdings, Inc. and the Lenders named
            therein is incorporated herein by reference to Exhibit 13 to the
            Schedule 13D filed by Infogrames Entertainment SA and California
            U.S. Holdings, Inc. on December 14, 1999.

10.28d      Amended and Restated Unconditional Subsidiary Guaranty Agreement,
            dated as of November 15, 1999, among certain subsidiaries of the
            Company, California U.S. Holdings, Inc. and First Union National
            Bank, as


                                       44
<PAGE>   48
            administrative agent, for the benefit of the Lenders is incorporated
            herein by reference to Exhibit 15 to the Schedule 13D filed by
            Infogrames Entertainment SA and California U.S. Holdings, Inc. on
            December 14, 1999.

10.28e      Second Amended and Restated Security Agreement, dated as of November
            15, 1999, by and among the Registrant, certain of its subsidiaries,
            First Union National Bank, as Administrative Agent, and California
            U.S. Holdings, Inc. is incorporated herein by reference to Exhibit
            10.4 to the Company's Current Report on Form 8-K filed on November
            19, 1999.

10.28f      Second Amended and Restated Pledge Agreement, dated as of November
            15, 1999, by the Company and certain of its subsidiaries in favor of
            First Union National Bank, as Administrative Agent, and California
            U.S. Holdings, Inc. is incorporated herein by reference to Exhibit
            10.5 to the Company's Current Report on Form 8-K filed on November
            19, 1999.

10.28g      Master Assignment and Acceptance, dated as of February 15, 2000, by
            and among the Company, the Assignors and Infogrames Entertainment SA
            is incorporated herein by reference to Exhibit 10.26g to the
            Company's Annual Report on Form 10-K for the fiscal year ended March
            31, 2000.

10.28h      Warrant Agreement, dated as of February 15, 2000, by and among the
            Company and Infogrames Entertainment SA is incorporated herein by
            reference to Exhibit 10.26h to the Company's Annual Report on Form
            10-K for the fiscal year ended March 31, 2000.

10.28i      Warrant Certificate, dated as of February 15, 2000, issued to
            California U.S. Holdings, Inc. is incorporated herein by reference
            to Exhibit 10.26i to the Company's Annual Report on Form 10-K for
            the fiscal year ended March 31, 2000.

10.28j      Fourth Amendment to the Credit Agreement, dated as of February 15,
            2000, by and between the Company and Infogrames Entertainment SA is
            incorporated herein by reference to Exhibit 10.26j to the Company's
            Annual Report on Form 10-K for the fiscal year ended March 31, 2000.

10.28k      Reimbursement and Cash Collateral Agreement, dated as of February
            15, 2000, by and between the Company and First Union National Bank
            is incorporated herein by reference to Exhibit 10.26k to the
            Company's Annual Report on Form 10-K for the fiscal year ended March
            31, 2000.

10.28l      Collateral Assignment Agreement, dated as of February 15, 2000, by
            and among First Union National Bank, Infogrames SA, the Company and
            the Guarantors is incorporated herein by reference to Exhibit 10.26l
            to the Company's Annual Report on Form 10-K for the fiscal year
            ended March 31, 2000.

10.28m      Fifth Amendment to the Credit Agreement, dated as of March 31, 2000,
            by and between the Company and Infogrames Entertainment SA is
            incorporated herein by reference to Exhibit 10.26m to the Company's
            Annual Report on Form 10-K for the fiscal year ended March 31, 2000.

10.28n      Sixth Amendment to the Credit Agreement, dated as of June 29, 2000,
            by and between the Company and Infogrames Entertainment SA is
            incorporated herein by reference to Exhibit 10.26n to the Company's
            Annual Report on Form 10-K for the fiscal year ended March 31, 2000.

10.28o      Ninth Amendment to the Credit Agreement, dated as of June 7, 2001,
            to the Credit Agreement by and between the Company and Infogrames
            Entertainment SA.

10.29       Stock Purchase Agreement, dated February 8, 1999, among the Company,
            General Atlantic Partners 54, L.P. and GAP Coinvestment Partners II,
            L.P. is incorporated herein by reference to Exhibit 10.1 to the
            Company's Current Report on 8-K filed on March 2, 1999.


                                       45
<PAGE>   49
10.30       Warrant Agreement, dated as of June 29, 1999, among the Company, GAP
            54, GAPCO II and the other parties named therein is incorporated
            herein by reference to Exhibit 1 to the Schedule 13D filed by
            General Atlantic Partners, LLC and certain of its affiliates on
            August 10, 1999.

10.31       Letter Agreement, dated June 29, 1999, among GAP 54, GAPCO II,
            Joseph J. Cayre, Kenneth Cayre and Stanley Cayre is incorporated
            herein by reference to Exhibit 2 to the Schedule 13D filed by
            General Atlantic Partners, LLC and certain of its affiliates on
            August 10, 1999.

10.32       Form of Option Agreement, dated as of July 30, 1999, among GAP 54,
            GAPCO II and the other parties named therein is incorporated herein
            by reference to Exhibit 3 to the Schedule 13D filed by General
            Atlantic Partners, LLC and certain of its affiliates on August 10,
            1999.

10.33       Securities Purchase Agreement, dated as of November 15, 1999, by and
            among Infogrames Entertainment S.A., California U.S. Holdings, Inc.
            and the Company is incorporated herein by reference to Exhibit 10.1
            to the Company's Current Report on 8-K filed on November 19, 1999.

10.34       Securities Exchange Agreement, dated as of November 15, 1999, by and
            among the Company, General Atlantic Partners 54, L.P., and GAP
            Coinvestment Partners II, L.P. is incorporated herein by reference
            to Exhibit 10.2 to the Company's Current Report on 8-K filed on
            November 19, 1999.

10.35       Promissory Note of the Company in the aggregate principal amount of
            $25,000,000 payable to California U.S. Holdings, Inc. is
            incorporated herein by reference to Exhibit 10.6 to the Company's
            Current Report on 8-K filed on November 19, 1999.

10.36       Warrant to Purchase 50,000 shares of Common Stock, issued to
            California U.S. Holdings, Inc. is incorporated herein by reference
            to Exhibit 5 to the Schedule 13D filed by Infogrames Entertainment
            S.A. and California U.S. Holdings, Inc. on December 14, 1999.

10.37       Form of GAP Warrant is incorporated herein by reference to Exhibit 9
            to the Schedule 13D filed by Infogrames Entertainment S.A. and
            California U.S. Holdings, Inc. on December 14, 1999.

10.38       Note Purchase Agreement, dated as of November 15, 1999, between
            certain members of the Cayre Group and California U.S. Holdings,
            Inc. is incorporated herein by reference to Exhibit 11B to the
            Schedule 13D filed by Infogrames Entertainment S.A. and California
            U.S. Holdings, Inc. on December 14, 1999.

10.39       Equity Purchase and Voting Agreement, dated as of November 15, 1999,
            among Infogrames Entertainment S.A., California U.S. Holdings, Inc.,
            GAP 16, GAP 19, GAP II, GAP 54, GAPCO and GAPCO II is incorporated
            herein by reference to Exhibit 3 to the Schedule 13D filed by
            General Atlantic Partners, LLC and certain of its affiliates on
            December 23, 1999.

10.40       Form of GAP 54 Note is incorporated herein by reference to Exhibit 4
            to the Schedule 13D filed by General Atlantic Partners, LLC and
            certain of its affiliates on December 23, 1999.

10.41       Form of GAPCO II Note is incorporated herein by reference to Exhibit
            5 to the Schedule 13D filed by General Atlantic Partners, LLC and
            certain of its affiliates on December 23, 1999.

10.42       5% Subordinated Convertible Note of the Company is incorporated
            herein by reference to Exhibit 6 to the Schedule 13D filed by
            Infogrames Entertainment S.A. and California U.S. Holdings, Inc. on
            January 10, 2000.

10.43       Services Agreement, dated as of January 1, 2000, between Infogrames
            Entertainment SA and the Company is incorporated herein by reference
            to Exhibit 10.41 to the Company's Annual Report on Form 10-K for the
            fiscal year ended March 31, 2000.


                                       46
<PAGE>   50
10.44       Sales Agency Agreement dated as of December 16, 1999 between
            Infogrames North America, Inc. and the Company is incorporated
            herein by reference to Exhibit 10.42 to the Company's Annual Report
            on Form 10-K for the fiscal year ended March 31, 2000

10.45       Affiliated Label Agreement dated as of July 1, 2000 between
            Infogrames North America, Inc. and the Company is incorporated
            herein by reference to Exhibit 10.43 to the Company's Annual Report
            on Form 10-K for the fiscal year ended March 31, 2000.

10.46       Services Agreement, dated as of January 26, 2001, between the
            Company and Infogrames Interactive, Inc.

10.47       Letter Agreement, dated as of January 26, 2001, between the Company
            and Infogrames Entertainment SA.

16.1        Letter from Arthur Andersen LLP, dated March 20, 2000, addressed to
            the Securities and Exchange Commission in accordance with Item
            304(a)(3) is incorporated herein by reference to Exhibit 16.1 to the
            Company's Current Report on Form 8-K dated March 20, 2000.

21.1        The Company's Subsidiaries is incorporated herein by reference to
            Exhibit 16.1 to the Company's Annual Report on Form 10-K for the
            fiscal year ended March 31, 1999.

22.1        Information Statement on Schedule 14C filed on January 25, 2000 is
            incorporated herein by reference.

22.2        Information Statement on Schedule 14C filed on May 12, 2000 is
            incorporated herein by reference.

22.3        Information Statement on Schedule 14C filed on June 5, 2000 is
            incorporated herein by reference.

22.4        Information Statement on Schedule 14C filed on September 12, 2000 is
            incorporated herein by reference.

23.1        Consent of Arthur Andersen LLP is incorporated herein by reference
            to Exhibit 23.1 to the Company's Registration Statement on Form S-8
            filed on February 2, 2001.

23.2        Consent of Deloitte & Touche LLP.

24.1        Power of Attorney.

99.1        Amended and Restated Audit Committee Charter is incorporated herein
            by reference to Appendix A to the Company's proxy statement dated
            June 29, 2000.

Exhibit indicated with an * symbol is a management contract or compensatory plan
or arrangement filed pursuant to Item 14 of Form 10-K.

         A copy of any of the exhibits included in this Annual Report on Form
10-K may be obtained by written request to the Company, upon payment of a fee of
$0.10 per page to cover costs. Requests should be sent to the Company at the
address set forth on the front cover, attention Director, Investor Relations.

         (c)  Reports on Form 8-K

         The Company filed the following Current Reports on Form 8-K during the
fiscal year ended June 30, 2001:

<TABLE>
<CAPTION>
          DATE OF REPORT                      ITEMS REPORTED               FINANCIAL STATEMENTS FILED
          --------------                      --------------               --------------------------

<S>                                           <C>                          <C>
           July 6, 2000                              8                                None
           October 6, 2000                          2,7                               None
</TABLE>


                                       47
<PAGE>   51
                                   SIGNATURES

         Pursuant to the requirements of the Section 13 or 15(d) 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
                                              ----------------------------------
                                              Name:  David J. Fremed
                                              Title:  Chief Financial Officer
                                              Date:  September 26, 2001

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
             SIGNATURE                           TITLE(S)                                                  DATE
             ---------                           --------                                                  ----

<S>                                     <C>                                                              <C>
        /s/  BRUNO BONNELL              Chairman of the Board of Directors and Chief                     September 26, 2001
-----------------------------------         Executive Officer (principal executive
           Bruno Bonnell                    officer) and Director

      /s/  STEVEN A. DENNING            Director                                                         September 26, 2001
-----------------------------------
         Steven A. Denning

        /s/  DENIS GUYENNOT             Director and President, Chief Operating                          September 26, 2001
-----------------------------------         Officer and Secretary
          Denis Guyennot


      /s/  THOMAS A. HEYMANN            Director                                                         September 26, 2001
-----------------------------------
         Thomas A. Heymann

        /s/  ANN E. KRONEN              Director                                                         September 26, 2001
-----------------------------------
           Ann E. Kronen

       /s/  THOMAS SCHMIDER             Director                                                         September 26, 2001
-----------------------------------
          Thomas Schmider

       /s/  THOMAS MITCHELL             Director                                                         September 26, 2001
-----------------------------------
          Thomas Mitchell

         /s/ JAMES ACKERLY              Director                                                         September 26, 2001
-----------------------------------
           James Ackerly

       /s/  DAVID J. FREMED             Chief Financial Officer (principal financial                     September 26, 2001
-----------------------------------         officer and principal accounting officer)
          David J. Fremed

* By:  /s/  DAVID J. FREMED                                                                              September 26, 2001
-----------------------------------
(David J. Fremed, Attorney-in-Fact)
</TABLE>


                                       48

<PAGE>   52
                        INFOGRAMES, INC. AND SUBSIDIARIES

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Infogrames, Inc.
New York, New York

         We have audited the accompanying consolidated balance sheets of
Infogrames Inc. and subsidiaries (the "Company") as of June 30, 2001, June 30,
2000 and the related consolidated statements of operations and comprehensive
loss, stockholders' equity (deficiency) and cash flows for years ended June 30,
2001, March 31, 2000 and the three months ended June 30, 2000. Our audits also
included the consolidated financial statement schedule listed at Item 14. These
financial statements and the consolidated financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Infogrames, Inc. and
its subsidiaries as of June 30, 2001 and June 30, 2000 and the consolidated
results of their operations and their cash flows for the years ended June 30,
2001, March 31, 2000 and the three months ended June 30, 2000 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.


/s/  Deloitte & Touche LLP



New York, New York
August 24, 2001 (September 14, 2001 as to Note 3 (d))


                                       F-1
<PAGE>   53
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders of
Infogrames, Inc. and subsidiaries:

         We have audited the accompanying consolidated balance sheet of
Infogrames Inc., formerly GT Interactive Software Corp. (a Delaware corporation)
and subsidiaries as of March 31, 1999 and the related consolidated statements of
operations and comprehensive loss, stockholders' equity (deficiency) and cash
flows for the year ended March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

         We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Infogrames, Inc. and
subsidiaries as of March 31, 1999 and the results of their operations and cash
flows for the year ended March 31, 1999, in conformity with accounting
principles generally accepted in the United States.

         Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to the
financial statements and supplementary data is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.


                                                      ARTHUR ANDERSEN LLP



New York, New York
June 29, 1999
(except with respect to the reverse stock split discussed in Note 1, as to which
the date is June 29, 2000)


                                       F-2
<PAGE>   54
                        INFOGRAMES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                   JUNE 30,        JUNE 30,
                                                                                     2000            2001
                                                                                  ---------       ---------
<S>                                                                               <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents ...............................................      $  13,463       $   5,378
   Marketable securities ...................................................          3,223             554
   Receivables, net of allowances for bad debts, returns, price protection
   and other customer  promotional programs of $80,838 and $56,554,
   respectively ............................................................         36,458          37,240
   Inventories, net of reserves of $48,101 and $20,360, respectively .......         32,575          29,182
   Income taxes receivable .................................................          1,357           2,273
   Due from related parties ................................................             --           4,388
   Prepaid expenses and other current assets ...............................          7,591           6,743
                                                                                  ---------       ---------
     Total current assets ..................................................         94,667          85,758
Property and equipment, net ................................................         17,412          12,996
Investments ................................................................          7,421           7,122
Goodwill, net of accumulated amortization of $14,470 and $26,116,
   respectively ............................................................         40,857          29,211
Other assets ...............................................................         10,118           9,997
                                                                                  ---------       ---------
     Total assets ..........................................................      $ 170,475       $ 145,084
                                                                                  =========       =========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:

   Accounts payable ........................................................      $  69,472       $  37,777
   Accrued liabilities .....................................................         38,546          31,491
   Bank Overdraft ..........................................................          3,355              --
   Revolving credit facility ...............................................         31,139          34,888
   Related party credit facility ...........................................         98,543           9,316
   Royalties payable .......................................................         18,678          12,842
   Deferred revenue ........................................................             58           1,753
   Due to related parties ..................................................         26,345          15,036
                                                                                  ---------       ---------
     Total current liabilities .............................................        286,136         143,103
Long-term debt .............................................................         37,084          39,954
Related party debt .........................................................         87,236          65,408
Deferred revenue ...........................................................             --           1,750
Other long-term liabilities ................................................          2,239           1,405
                                                                                  ---------       ---------
     Total liabilities .....................................................        412,695         251,620
                                                                                  ---------       ---------
Commitments and contingencies

Stockholders' deficiency:
   Preferred stock, $0.01 par value, 5,000 shares authorized, none issued
   or outstanding ..........................................................             --              --
   Common stock, $0.01 par, 300,000 shares authorized, 20,685 and
   69,759 shares issued and 20,353 and 69,524  shares outstanding,
   respectively ............................................................            208             698
   Additional paid-in capital ..............................................        293,284         486,306
   Accumulated deficit .....................................................       (533,323)       (593,991)
   Accumulated other comprehensive income ..................................            933           2,803
Treasury shares, at cost, 332 and 235 shares, respectively .................         (3,322)         (2,352)
                                                                                  ---------       ---------
         Total stockholders' deficiency ....................................       (242,220)       (106,536)
                                                                                  ---------       ---------
         Total liabilities and stockholders' deficiency ....................      $ 170,475       $ 145,084
                                                                                  =========       =========
</TABLE>

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


                                      F-3
<PAGE>   55
                        INFOGRAMES, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                    THREE MONTHS
                                                            YEARS ENDED                ENDED         YEAR ENDED
                                                             MARCH 31,                JUNE 30,        JUNE 30,
                                                     -------------------------      ------------     ----------
                                                        1999            2000            2000            2001
                                                     ---------       ---------      ------------     ----------
<S>                                                  <C>             <C>            <C>              <C>
Net revenues ..................................      $ 572,342       $ 386,062       $  48,469       $ 310,479
Cost of goods sold ............................        329,959         307,292          25,283         125,940
                                                     ---------       ---------       ---------       ---------
   Gross profit ...............................        242,383          78,770          23,186         184,539
Selling and distribution expenses .............        145,548         152,641          20,764          91,541
General and administrative expenses ...........         58,938          79,335          17,602          67,341
Research and development ......................         75,242          71,184          17,275          56,617
Restructuring and other charges ...............         17,479          37,948          11,081           3,539
Purchased research and development ............          5,000              --              --              --
INA merger costs ..............................             --              --              --           1,700
Gain on sale of line of business ..............             --              --              --          (5,501)
SingleTrac retention bonus ....................          1,680              --              --              --
Depreciation and amortization .................         14,606          25,654           5,788          20,297
                                                     ---------       ---------       ---------       ---------
   Operating loss .............................        (76,110)       (287,992)        (49,324)        (50,995)
Interest expense ..............................         (5,108)        (18,123)         (4,328)        (13,399)
Other (expense) income ........................           (207)           (418)           (497)          1,358
                                                     ---------       ---------       ---------       ---------
   Loss before (benefit from) provision for
      income taxes ............................        (81,425)       (306,533)        (54,149)        (63,036)
Total (benefit from) provision for income taxes        (29,628)         40,891           1,251          (2,368)
                                                     ---------       ---------       ---------       ---------
   Loss from continuing operations ............        (51,797)       (347,424)        (55,400)        (60,668)
Discontinued operations:
   Loss from operations of OZM ................         (3,531)             --              --              --
   Loss on disposal of OZM ....................        (15,510)           (477)             --              --
                                                     ---------       ---------       ---------       ---------
   Loss from discontinued operations ..........        (19,041)           (477)             --              --
                                                     ---------       ---------       ---------       ---------
   Loss before extraordinary item .............        (70,838)       (347,901)        (55,400)        (60,668)
Extraordinary item:
   Gain on early extinguishment of debt,
      net of tax of $1,312 ....................             --           1,888              --              --
                                                     ---------       ---------       ---------       ---------
      Net loss before dividends on
        Preferred stock .......................        (70,838)       (346,013)        (55,400)        (60,668)
Less dividends on preferred stock .............            226              --              --              --
                                                     ---------       ---------       ---------       ---------
      Net loss attributable to common
        stockholders ..........................      $ (71,064)      $(346,013)      $ (55,400)      $ (60,668)
                                                     =========       =========       =========       =========
Basic and diluted loss per share from
   Continuing operations ......................      $   (3.73)      $  (21.12)      $   (2.68)      $   (1.07)
Basic and diluted loss per share from
   Discontinued operations ....................          (1.37)          (0.03)             --              --
Basic and diluted income per share from
   Extraordinary item .........................             --            0.11              --              --
                                                     ---------       ---------       ---------       ---------
Basic and diluted net loss per share ..........      $   (5.10)      $  (21.03)      $   (2.68)      $   (1.07)
                                                     =========       =========       =========       =========
Basic and diluted weighted average shares
outstanding(1) ................................         13,931          16,451          20,646          56,839
                                                     =========       =========       =========       =========

Net loss before dividends on
   Preferred stock ............................      $ (70,838)      $(346,013)      $ (55,400)      $ (60,668)
Other comprehensive loss:
   Foreign currency translation adjustments ...           (667)          1,683             571           1,382
   Unrealized holding gain (loss) on securities             11           1,768          (1,298)            488
                                                     ---------       ---------       ---------       ---------
          Comprehensive loss ..................      $ (71,494)      $(342,562)      $ (56,127)      $ (58,798)
                                                     =========       =========       =========       =========
</TABLE>

(1)      Reflects the one-for-five reverse stock split approved by the Company's
         Board of Directors which was effected on June 26, 2000. All periods
         have been restated to reflect the reverse stock split.

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


                                      F-4
<PAGE>   56
                        INFOGRAMES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                YEARS ENDED           THREE MONTHS
                                                                                 MARCH 31,               ENDED        YEAR ENDED
                                                                         ------------------------       JUNE 30,       JUNE 30,
                                                                            1999           2000           2000           2001
                                                                         ---------      ---------     ------------    ----------
<S>                                                                      <C>            <C>           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss before dividends on preferred
   stock ...........................................................     $ (70,838)     $(346,013)     $ (55,400)     $ (60,668)
Adjustments to reconcile net loss to
   net cash used in operating activities:
   Depreciation and amortization ...................................        14,606         25,654          5,788         20,297
   Write-off of investments ........................................         2,676             --             --            299
   Purchased research and development ..............................         5,000             --             --             --
   Deferred income taxes ...........................................       (32,666)        48,806            876             --
   Deferred income .................................................            21           (118)             3             --
   Purchase of barter credits ......................................            --             --         (1,188)            --
   Write-off of assets in connection with  restructuring charges ...         7,362         30,391          9,592          1,560
   Sales and distribution fees .....................................            --             --           (440)            --
   Loss from discontinued operations ...............................        19,041            477             --             --
   Extraordinary gain on General Atlantic Partners,
     LLC (GAP) 0% subordinated convertible note ....................            --         15,649             --             --
   Amortization of discount on long-term debt ......................            --            718            956          2,870
   Accrued interest ................................................            --          1,461          2,542          3,476
   Amortization of deferred financing fees .........................            --             --             --            956
   Write-off of deferred financing costs in
     connection with the GAP securities exchange ...................            --          8,985             --             --
   Write-off of deferred financing costs in connection with
     the early extinguishment of Credit Agreement ..................            --          3,188             --             --
   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 .............................................       (57,490)        98,604          7,146           (133)
      Marketable securities ........................................            --             --             --          3,152
      Inventories, net .............................................       (10,498)       100,885         11,468          3,749
      Royalty advances .............................................           814          9,195             --             --
      Due from related party .......................................            --             --             --         (4,444)
      Due to related party .........................................           (17)         3,023          1,651         28,599
      Prepaid expenses and other current assets ....................        (5,884)         1,301          2,129            949
      Accounts payable .............................................        47,956        (44,538)       (27,065)       (31,329)
      Accrued liabilities ..........................................        14,169         (5,976)        (4,922)        (6,762)
      Bank overdraft ...............................................            --            168          2,135         (3,355)
      Royalties payable ............................................       (21,907)        (5,940)           322         (5,218)
      Income taxes payable .........................................        (1,133)        (2,746)            --             --
      Deferred income ..............................................            --             --             --          3,445
      Income taxes receivable ......................................         8,711           (577)         1,346           (916)
      Long-term liabilities ........................................         1,220            552         (1,223)          (814)
      Other assets .................................................        (2,226)        (2,549)        (1,429)          (480)
                                                                         ---------      ---------      ---------      ---------
            Net cash  used in operating activities .................       (81,083)       (54,611)       (45,713)       (44,767)
                                                                         ---------      ---------      ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................................       (22,607)        (9,437)        (2,005)        (6,084)
Acquisitions, net of cash acquired of approximately
$1,678, $0, $0 and $0, respectively ................................        (2,701)            --             --             --
                                                                         ---------      ---------      ---------      ---------
        Net cash used in investing activities ......................       (25,308)        (9,437)        (2,005)        (6,084)
</TABLE>




                                      F-5
<PAGE>   57
<TABLE>
<CAPTION>

                                                                                 YEARS ENDED           THREE MONTHS
                                                                                  MARCH 31,               ENDED        YEAR ENDED
                                                                          ------------------------       JUNE 30,       JUNE 30,
                                                                             1999           2000           2000           2001
                                                                          ---------      ---------     ------------    ----------
<S>                                                                       <C>            <C>            <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) under revolving credit  facility, net .......        70,750        (24,364)        34,486         43,068
Cash received in connection with Infogrames North America Merger ....            --          1,307             --             --
Issuance of  5% subordinated convertible note .......................            --         50,000             --             --
Issuance of General Atlantic Partners, LLC  subordinated note ("GAP")            --         20,000             --             --
Issuance of subordinated Cayre Notes ................................            --         10,000             --             --
Issuance of common stock net  of expenses ...........................            --         48,677             --             --
Proceeds from exercise of warrants in connection with Infogrames
North America Merger.................................................            --             --             --             48
Proceeds from exercise of stock options .............................           376            146              5              6
Proceeds from employee stock purchase plan ..........................            --             --             --             71
Purchase of treasury shares .........................................            --             --         (2,322)            --
Issuance (redemption) of preferred stock ............................        30,000        (30,000)            --             --
                                                                          ---------      ---------      ---------      ---------
        Net cash provided by financing activities ...................       101,126         75,766         32,169         43,193
Effect of exchange rates on cash and cash equivalents ...............         1,448            732          3,155           (427)
                                                                          ---------      ---------      ---------      ---------
Net (decrease) increase in cash and cash equivalents ................        (3,817)        12,450        (12,394)        (8,085)
Cash and cash equivalents--beginning of fiscal year .................        17,224         13,407         25,857         13,463
                                                                          ---------      ---------      ---------      ---------
Cash and cash equivalents--end of fiscal year .......................     $  13,407      $  25,857      $  13,463      $   5,378
                                                                          =========      =========      =========      =========
</TABLE>


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


                                      F-6
<PAGE>   58
                        INFOGRAMES, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                SERIES A         SERIES A
                                               CONVERTIBLE      CONVERTIBLE     COMMON
                                                PREFERRED        PREFERRED      STOCK        COMMON
                                               STOCK SHARES        STOCK        SHARES       STOCK
                                               ------------        -----        ------       -----
<S>                                            <C>            <C>            <C>       <C>
BALANCE, MARCH 31, 1998 ...................          --          $     --       13,600     $    136
Issuance of preferred stock ...............        120,000         30,000           --          --
Issuance of stock options in connection
  with acquisitions .......................             --             --           --          --
Issuance of stock in connection with
  acquisitions ............................             --             --          920           8
Exercise of stock options .................             --             --           35           1
Net loss ..................................             --             --           --          --
Currency translation adjustment ...........             --             --           --          --
Unrealized gain on securities .............             --             --           --          --
                                                  --------       --------      -------       -----

BALANCE, MARCH 31, 1999 ...................        120,000         30,000       14,555         145
Exchange of preferred stock for
long-term debt.............................       (120,000)       (30,000)          --          --
Issuance of warrants to Infogrames ........             --             --           --          --
Issuance of warrants in connection with
  revolving credit facility ...............             --             --           --          --
Issuance of common stock in lieu of partial
  royalty payment .........................             --             --          300           3
Issuance of common stock pursuant
to employee stock purchase plan ...........             --             --           40           1
Issuance of common stock to
Infogrames, net............................             --             --        5,740          57
Exercise of stock options .................             --             --           40           1
Merger INA ................................             --             --           --           1
Net loss ..................................             --             --           --          --
Currency translation adjustment ...........             --             --           --          --
Unrealized gain on securities .............             --             --           --          --
                                                  --------       --------      -------       -----
BALANCE, MARCH 31, 2000 ...................             --             --       20,675         208
Exercise of stock options .................             --             --           10          --
Net loss ..................................             --             --           --          --
Treasury shares ...........................             --             --           --          --
Currency translation adjustment ...........             --             --           --          --
Unrealized gain on securities .............             --             --           --          --
                                                  --------       --------      -------       -----
BALANCE, JUNE 30, 2000 ....................             --             --       20,685         208
Issuance of shares for INA merger .........             --             --       28,000         280
Conversion of warrants at $0.05 a share....             --             --          955           9
Conversion of related party credit facility
at $6.40 a share ..........................             --             --       20,089         200
</TABLE>



<TABLE>
<CAPTION>
                                                                                   ACCUMULATED
                                                        ADDITIONAL     RETAINED      OTHER                    TREASURY
                                                         PAID-IN       EARNINGS    COMPREHENSIVE   TREASURY    SHARES
                                                         CAPITAL       (DEFICIT)  (LOSS) INCOME     SHARES     AT COST       TOTAL
                                                         -------       ---------  -------------     ------     -------       -----
<S>                                                     <C>           <C>         <C>             <C>        <C>          <C>
BALANCE, MARCH 31, 1998 ............................    $ 131,926     $   7,962     $  (1,135)         --      $    --    $ 138,889
Issuance of preferred stock ........................           --            --            --          --           --       30,000
Issuance of stock options in connection
  with acquisitions ................................        1,356            --            --          --           --        1,356
Issuance of stock in connection
  with acquisitions ................................       27,999            --            --          --           --       28,007
Exercise of stock options ..........................          374            --            --          --           --          375
Net loss ...........................................           --       (70,838)           --          --           --      (70,838)
Currency translation adjustment ....................           --            --          (667)         --           --         (667)
Unrealized gain on securities ......................           --            --            11          --           --           11
                                                         --------       --------      -------       -----      -------   ----------
BALANCE, MARCH 31, 1999 ............................      161,655       (62,876)       (1,791)         --           --      127,133
Exchange of preferred stock for long-term debt .....           --            --            --          --           --      (30,000)
Issuance of warrants to Infogrames .................        8,983            --            --          --           --        8,983
Issuance of warrants in connection with
  revolving credit facility ........................        3,188            --            --          --           --        3,188
Issuance of common stock in lieu of partial
  royalty payment ..................................        4,205            --            --          --           --        4,208
Issuance of common stock pursuant
to employee stock purchase plan ....................          582            --            --          --           --          583
Issuance of common stock to Infogrames, net.........       48,620            --            --          --           --       48,677
Exercise of stock options ..........................          145            --            --          --           --          146
Merger INA .........................................       65,900       (69,034)           --          --           --       (3,133)
Net loss ...........................................           --      (346,013)           --          --           --     (346,013)
Currency translation adjustment ....................           --            --         1,683          --           --        1,683
Unrealized gain on securities ......................           --            --         1,768          --           --        1,768
                                                         --------       --------      -------       -----      -------   ----------
BALANCE, MARCH 31, 2000 ............................      293,278      (477,923)        1,660          --           --     (182,777)
Exercise of stock options ..........................            6            --            --          --           --            6
Net loss ...........................................           --       (55,400)           --          --           --      (55,400)
Treasury shares ....................................           --            --            --         332       (3,322)      (3,322)
Currency translation adjustment ....................           --            --           571          --           --          571
Unrealized gain on securities ......................           --            --        (1,298)         --           --       (1,298)
                                                         --------       --------      -------       -----      -------   ----------
BALANCE, JUNE 30, 2000 .............................      293,284      (533,323)          933         332       (3,322)    (242,220)
Issuance of shares for INA merger ..................           --            --            --          --           --          280
Conversion of warrants at $0.05 a share ............           39            --            --          --           --           48
Conversion of related party credit facility at $6.40
a share ............................................      128,370            --            --          --           --      128,570
</TABLE>

                                      F-7

<PAGE>   59
<TABLE>
<S>                                               <C>          <C>         <C>          <C>
Conversion of INA related party payables...          --           --           --          --
Issuance of common stock pursuant to employee
stock purchase plan .......................          --           --           13          --
Sales of treasury shares ..................          --           --           --          --
Exercise of stock options .................          --           --           17           1
Net loss ..................................          --           --           --          --
Currency translation adjustment ...........          --           --           --          --
Unrealized gain on securities .............          --           --           --          --
                                                   ----        -----       ------       -----
BALANCE, JUNE 30, 2001.........                      --          $--       69,759        $698
                                                   ====        =====       ======       =====
</TABLE>

<TABLE>
<S>                                                     <C>          <C>            <C>             <C>       <C>          <C>
Conversion of INA related party payables............       64,907            --            --        --             --       64,907
Issuance of common stock pursuant
to employee stock purchase plan ....................           71            --            --        --             --           71
Sales of treasury shares ...........................         (370)           --            --       (97)           970          600
Exercise of stock options ..........................            5            --            --        --             --            6
Net loss ...........................................           --       (60,668)           --        --             --      (60,668)
Currency translation adjustment ....................           --            --         1,382        --             --        1,382
Unrealized gain on securities ......................           --            --           488        --             --          488
                                                        ---------     ---------     ---------       ---      ---------    ---------
Balance, June 30, 2001 .............................    $ 486,306     $(593,991     $   2,803       235      $  (2,352)   $(106,536)
                                                        =========     =========     =========       ===      =========    =========

</TABLE>

(1)      Reflects the one-for-five reverse stock split approved by the Company's
         Board of Directors which became effective on June 26, 2000. All periods
         have been restated to reflect the reverse stock split.



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

                                      F-8

<PAGE>   60
                        INFOGRAMES, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1--OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Nature of Business

        Infogrames, Inc., formerly GT Interactive Software Corp., 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 Playstation 2, 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 and also in various international locations. Infogrames
Entertainment SA ("Infogrames SA") owns 89% of the Company (Note 2). The Company
has relied on support from its parent in the recent past. The Company believes
that it is Infogrames SA's present intention to continue such support as
Infogrames SA deems necessary to fund operations and cash flows for the next
twelve months.

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, a Company under common control. 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.


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.

  Cash and Cash Equivalents

        Cash and cash equivalents consist of cash in banks and highly liquid,
short-term investments with original maturities of three months or less at the
date acquired.

  Inventories

        Inventories are stated at the lower of cost (based upon the first-in,
first-out method) or market. Allowances are established (and reassessed
quarterly) to reduce the recorded cost of obsolete inventory and slow moving
inventory to its net realizable value.


                                       F-9
<PAGE>   61
  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.

   Goodwill

        Goodwill is currently amortized using the straight-line method over
periods not exceeding five 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.

  Property and Equipment

        Property and equipment is recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
which range from three to seven years. Leasehold improvements are amortized
using the straight-line method over the shorter of the lease term or the
estimated useful lives of the related assets.

  Income Taxes

        The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires the
use of the liability method of accounting for deferred income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates in effect for the years in which the
differences are expected to reverse.

  Fair Values of Financial Instruments

        Statement of Financial Accounting Standards No. 107 "Disclosure About
Fair Value of Financial Instruments" requires certain disclosures regarding the
fair value of financial instruments. Cash and cash equivalents, accounts
receivable, accounts payable, accrued liabilities, royalties payable, revolving
credit facility and amounts due to and from related parties are reflected in the
consolidated financial statements at fair value because of the short-term
maturity of these instruments. The fair value of long-term debt closely
approximates its carrying value. The Company uses quoted market prices to
calculate these fair values, when available.

  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.
The cost of investments sold is determined on the first-in, first-out method.

  Impairment of Long-Lived Assets

        The Company reviews long-lived assets, such as fixed assets and certain
identifiable intangibles to be held, for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be


                                      F-10
<PAGE>   62
recoverable. If the sum of the expected cash flows, undiscounted and without
interest, is less than the carrying amount of the asset, an impairment loss is
recognized as the amount by which the carrying amount of the asset exceeds its
fair value, as defined in Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of."

  Research and Development Costs

        Research and development costs related to the design, development and
testing of new software products are charged to expense as incurred. Research
and development costs also include payments for royalty advances to third-party
developers on products that are currently in development.

  Advertising Expenses

        Advertising costs are expensed as incurred. Advertising expense for the
years ended March 31, 1999 and 2000, the three months ended June 30, 2000 and
the year ended June 30, 2001 amounted to approximately $49.1 million, $67.6
million, $8.1 million and $21.2 million, respectively.

  Foreign Currency

        Assets and liabilities of foreign subsidiaries have been translated at
year-end exchange rates, while revenues and expenses have been translated at
average exchange rates in effect during the year. Resulting cumulative
translation adjustments have been recorded as accumulated comprehensive loss.

  New 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. It requires companies to recognize all derivatives 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 2001. The adoption of SFAS No. 133 did not
have a material effect on the Company's consolidated results of operations or
financial position.

         In December 1999, the Securities and Exchange Commission (the "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 and
the adoption of SAB 101 did not have a material effect on the Company's
consolidated results of operations or financial position.

        In March 2000, the FASB issued Interpretation No. 44 (FIN No. 44),
Accounting for Certain Transactions involving Stock Compensation - an
Interpretation of APB 25. FIN No. 44 clarifies (i) the definition of employee
for purposes of applying APB Opinion No. 25, (ii) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (iii) the accounting
consequences of various modifications to the terms of a previously fixed stock
option or award, and (iv) the accounting for an exchange of stock compensation
awards in a business combination. FIN No. 44 is effective July 1, 2000 but
certain conclusions in this interpretation cover specific events that occur
after either December 15, 1998 or January 12, 2000. The adoption of certain of
the conclusions of FIN No. 44 covering events occurring during the period after
December 15, 1998 or January 12, 2000 did not have a material effect on the
Company's financial position or results of operations. Adoption of the remaining
conclusions has not had a material effect on the financial position or results
of operations.

        On June 29, 2001, the Financial Accounting Standards Board (FASB)
approved for issuance Statement of Financial Accounting Standards (SFAS) 141,
Business Combinations, and SFAS 142, Goodwill and Intangible Assets. Major
provisions of these Statements are as follows: all business combinations
initiated after June 30, 2001 must use the purchase method of accounting; the
pooling of interest method of accounting is prohibited except for transactions
initiated before July 1, 2001; intangible assets acquired in a business
combination must be recorded separately from goodwill if they arise from
contractual or other legal rights or are separable from the acquired entity and
can be sold, transferred, licensed, rented or exchanged, either


                                      F-11
<PAGE>   63
individually or as part of a related contract, asset or liability; goodwill and
intangible assets with indefinite lives are not amortized but are tested for
impairment annually, except in certain circumstances, and whenever there is an
impairment indicator; all acquired goodwill must be assigned to reporting units
for purposes of impairment testing and effective January 1, 2002, goodwill will
no longer be subject to amortization. The Company is permitted to early adopt
effective July 1, 2001 and management has elected to do so. Management believes
that these Statements will not have a material impact on the Company's financial
position or results or operations other than from the cessation of goodwill
amortization. For fiscal year ended June 30, 2001, amortization of goodwill
amounted to approximately $11.6 million.

         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.

  Reclassifications

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

  Net Loss Per Share

        Basic loss per share ("EPS") is computed by dividing net 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 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 years
ended March 31, 1999 and 2000, the three months ended June 30, 2000 and the year
ended June 30, 2001, respectively.

  Discontinued Operations

        Pursuant to Accounting Principles Board Opinion No. 30 "Reporting the
Results of Operations--Reporting Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
("APB 30"), the consolidated financial statements of the Company reflect the
disposal of OZM as a discontinued operation. Accordingly, the revenues, costs
and expenses, assets and liabilities, and cash flows of this business have been
excluded from the respective captions in the Consolidated Balance Sheets,
Consolidated Statements of Operations, Consolidated Statements of Comprehensive
Income and Consolidated Statements of Cash Flows, and have been reported through
its date of disposition as "Loss from discontinued operations."

     Shipping and Handling Costs

        Shipping and handling costs incurred to move product to the customer are
charged to selling and distribution expense. For the years ended March 31, 1999
and 2000, the three months ended June 30, 2000 and the year ended June 30, 2001,
these charges were approximately $33.0 million, $18.6 million, $1.6 million, and
$14.4 million, respectively.

  Use of Estimates

        The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.


                                      F-12
<PAGE>   64
  Fiscal Period

        Effective April 1, 2000, the Company changed its fiscal year end from
March 31 to June 30. Accordingly, the fiscal period ended June 30, 2000,
represents three months of operations.

  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--PURCHASE OF MAJORITY INTEREST BY INFOGRAMES SA

        As of June 30, 2001, Infogrames SA and subsidiaries acquired
approximately 89% of the voting stock of the Company through the following
transactions:



-        On February 23, 1999 General Atlantic Partners, LLC ("GAP") purchased
         an aggregate of 600,000 shares of Series A Convertible Preferred Stock
         ("Preferred Stock") for an aggregate purchase price of $30,000,000.
         Each share of Preferred Stock was convertible into 10 shares of Common
         Stock.

-        On June 29, 1999, GAP entered into a Subordinated Loan Commitment
         Letter (the "Commitment Letter") pursuant to which GAP agreed to loan
         the Company on July 30, 1999 an aggregate of $20,000,000 if the Company
         had not paid in full on July 20, 1999 certain amounts owed under the
         existing credit agreement.

-        On June 29, 1999, pursuant to a Warrant Agreement, dated June 29, 1999
         (the "Warrant Agreement"), among the Company, GAP, Joseph J. Cayre,
         Kenneth Cayre and Stanley Cayre, the Company issued to GAP warrants to
         purchase, at an exercise price equal to $0.05 per share, 100,000 shares
         of Common Stock, in consideration of the execution by GAP of the
         Commitment Letter. Pursuant to the Warrant Agreement, the aggregate
         number of warrants was subject to automatic increase by the following
         number of warrants (the "Additional Warrants") on the following dates
         upon the occurrence of the following events (the "Triggering Events"):
         (i) 300,000 on July 30, 1999, if the parties to the Warrant Agreement
         made the subordinated loans under the Commitment Letter, (ii) 500,000
         on November 1, 1999 if the Company had not executed on or prior to
         October 31, 1999, an agreement (a "Sale Agreement") relating to a
         recapitalization, reorganization, merger, sale or other business
         combination transaction after the consummation of which the
         stockholders of the Company did not hold at least a majority of the
         voting power of the surviving person, (iii) 500,000 on the date of
         termination of such Sale Agreement if the Company entered into such an
         agreement on or prior to October 31, 1999, but such Sale Agreement
         thereafter terminated for any reason, (iv) 600,000 on February 29, 2000
         if the Company had not closed the transactions contemplated by the Sale
         Agreement on or prior to February 28, 2000 and repaid in full the
         subordinated loans made pursuant to the Commitment Letter and (v)
         600,000 on June 30, 2000, and the last day of each fiscal quarter
         thereafter if the Company had not repaid in full during such quarter
         the subordinated loans made pursuant to the commitment Letter. The
         Additional Warrants have an exercise price of $0.05 per share.

-        On July 29, 1999, in accordance with the Commitment Letter, GAP made a
         $20,000,000 unsecured subordinated loan to the Company. Concurrently,
         in accordance with the Warrant Agreement, the Company issued to GAP
         1,500,000 Additional Warrants to purchase shares of Common Stock. On
         October 31, 1999, in accordance with the Warrant Agreement, the Company
         issued to GAP 500,000 Additional Warrants to purchase shares of Common
         Stock.


                                      F-13
<PAGE>   65
-        On November 15, 1999, Infogrames SA purchased from the Company a $25
         million principal amount Short-Term Senior Secured Note ("Short-Term
         Note"). In connection with this transaction, the Company issued to
         Infogrames SA warrants to purchase 10,000 shares of common stock at an
         exercise price of $0.05 per share.

-        On December 16, 1999, the Company consummated the following of
         transactions with Infogrames SA and certain partnerships affiliated
         with GAP. Infogrames SA, the founding Cayre family, and GAP entered
         into following transactions as well:

         a)       Infogrames SA purchased 6,711,701 shares of the Company's
                  common stock from the Cayre family, founders of GT Interactive
                  Software Corp., for $25.0 million and also purchased from the
                  Cayre family $10 million of subordinated notes ("Cayre Notes")
                  of the Company.

         b)       Infogrames SA purchased 5,714,286 shares of Common Stock from
                  the Company for $50 million ($8.75 per share) and $60.6
                  million principal amount of a new 5% subordinated convertible
                  note of the Company in exchange for $25 million in cash, the
                  Cayre Notes, the Short-Term Note and $0.6 million accrued
                  interest. The new 5% subordinated convertible note is
                  convertible into common stock at $9.25 per share (Note 16).

         c)       The Company issued to GAP $50 million principal amount of
                  non-interest bearing subordinated convertible notes in
                  exchange for 600,000 shares of Series A Preferred Stock and
                  $20 million of subordinated notes of the Company, and accrued
                  interest thereon, held by GAP. These notes are convertible
                  into common stock at $20.00 per share (Note 16).

         d)       Infogrames SA acquired from GAP warrants to purchase 900,000
                  shares of common stock of the Company at an exercise price of
                  $0.05 per share, for nominal consideration.

         As a result of these transactions and the Company's merger with INA
(Note 3), as of June 30, 2001, Infogrames SA owns approximately 61,670,217
shares of the Company's common stock.

NOTE 3 - INFOGRAMES NORTH AMERICA MERGER


        On October 2, 2000 the Company completed a merger with INA, a
wholly-owned subsidiary of its majority shareholder Infogrames SA, (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 Infogrames SA entered into a distribution agreement,
         which provides for the distribution by the Company of Infogrames SA's
         products in the United States, Canada and their territories and
         possessions, pursuant to which the Company will pay Infogrames SA 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 Infogrames SA 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
         Infogrames SA to provide for an aggregate commitment of $50 million
         with primarily the same terms as the previous facility. The last
         amendment of the credit agreement is dated June 7, 2001, which extends
         the facility to December 31, 2001.

c)       All warrants held by Infogrames SA 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.


                                      F-14
<PAGE>   66
d)     The Company assumed a $35.0 million revolving credit facility (the "BNP
       Credit Facility") with BNP Paribas ("BNP") which was to mature on
       September 17, 2001. On September 14, 2001, the facility was extended to
       November 30, 2001.

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

       For the period from December 16, 1999 through June 30, 2000, the Company
was granted the non-exclusive right in the U.S. and Canada to act as the sales
agent for INA's products, pursuant to which the Company received 3% of net
receipts for such products. The parties entered into a subsequent agreement for
the period from July 1, 2000 to October 2, 2000, pursuant to which the Company
received 15% of net receipts for such products. These agreements were terminated
upon consummation of the INA Merger.

NOTE 4--ACQUISITIONS

       In November 1998, the Company acquired One Zero Media, Inc. ("OZM"), an
Internet entertainment content company, in exchange for 458,000 newly issued
shares of the Company's common stock and approximately 117,000 stock options to
purchase the Company's common stock. Total consideration, 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, because
it was the Company's intention to sell an ownership interest in OZM. At 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. This resulted in a loss from discontinued operations of $19.5 million,
$0.5 million of which recognized in the fiscal year ended March 31, 2000.

       In December 1998, the Company acquired Reflections Interactive Limited
("Reflections"), a developer of interactive entertainment software for computer
games, in exchange for approximately 457,000 newly issued shares of the
Company's common stock. Total consideration, including acquisition costs, was
approximately $13.5 million. The acquisition was accounted for as a purchase.
The purchase price was allocated to net assets acquired, purchased in-process
R&D and goodwill. Accordingly, $5.0 million of acquisition cost was expensed in
the quarter ended December 31, 1998. Additionally, the Company acquired Prism
Leisure Tontragervertriebs GmbH, a distributor of value-priced software based in
Germany, for nominal consideration. The acquisition was accounted for as a
purchase. The purchase price was allocated to net assets acquired and goodwill.
Goodwill arising from this acquisition approximated $8.0 million.

       In December 1998, the Company formed GT Interactive European Holdings
B.V., a European holding company, which acquired all of the outstanding capital
stock of Home Software Benelux B.V., a distributor of entertainment software,
for approximately $1.0 million in cash. The acquisition was accounted for as a
purchase.

       In December 1998, the Company purchased the assets of Legend
Entertainment, L.L.C. ("Legend"), a developer of entertainment software. Total
consideration, including acquisition costs, was approximately $2.0 million. The
purchase price was allocated to goodwill. In connection with the asset purchase
of Legend on December 22, 1998, the Company issued approximately 9,000 shares of
its common stock.

NOTE 5 - GAIN ON 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 during the year
ended June 30, 2001. The Company sold the stock in January 2001 for
approximately $6.2 million. The note is payable upon completion of certain
requirements by an independent developer and will be recognized as

                                      F-15
<PAGE>   67
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 6--RECEIVABLES, NET

       Receivables consist of the following:


<TABLE>
<CAPTION>
                                                                               JUNE 30,
                                                                               --------
                                                                          2000           2001
                                                                          ----           ----
<S>                                                                     <C>            <C>
Trade accounts receivable .........................................     $ 117,296      $  93,794
Less: Allowances for bad debts, returns, price protection and other
          customer promotional programs ...........................       (80,838)       (56,554)
                                                                        ---------      ---------
                                                                        $  36,458      $  37,240
                                                                        =========      =========
</TABLE>

NOTE 7--INVENTORIES, NET

         Inventories consist of the following:


<TABLE>
<CAPTION>
                                                                    JUNE 30,
                                                                    --------
                                                               2000          2001
                                                               ----          ----
<S>                                                          <C>           <C>
Finished goods ........................................      $ 75,247      $ 45,260
Return inventory ......................................         3,249         3,449
Raw materials .........................................         2,180           833
                                                               ------        ------
                                                               80,676        49,542

Less:  Obsolescence reserve                                   (48,101)      (20,360)
                                                               ------        ------

                                                             $ 32,575      $ 29,182
                                                               ======        ======
</TABLE>


         During the year ended June 30, 2000, an aggregate charge of
approximately $56.0 million was recorded relating to management's decision to
focus on certain product lines and exit others. This charge was made to cost of
sales and is part of the restructuring and reorganization of the Company (Note
23).

NOTE 8 -- MARKETABLE SECURITIES AND INVESTMENTS

         In 1995, the Company invested $63,000 in Zomax Incorporated ("Zomax"),
an outsource provider of process management services to software publishers,
computer manufacturers and other producers of multimedia products. As of June
30, 2001 the Company held approximately 62,140 shares of Zomax at a market price
of $8.91 per share.

         In 1996, the Company invested approximately $7.1 million in convertible
preferred stock of OddWorld Inhabitants, Inc., a privately-held developer of
entertainment software, which is convertible into 50% of the common equity.

                                      F-16
<PAGE>   68
NOTE 9--PROPERTY AND EQUIPMENT, NET

         Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                           JUNE 30,
                                           --------
                                       2000         2001
                                       ----         ----

<S>                                  <C>            <C>
Computer equipment ............      $ 14,491       $13,252
Machinery and Equipment .......         1,794         1,838
Capitalized computer software .         8,718         9,679
Furniture and fixtures ........         5,405         5,456
Leasehold improvements ........         3,510         4,784
                                     --------       -------
                                       33,918        35,009
Less:  accumulated depreciation       (16,506)      (22,013)
                                     --------       -------
                                     $ 17,412       $12,996
                                     ========       =======
</TABLE>



         Depreciation expense for the years ended March 31, 1999 and 2000, the
three months ended June 30, 2000 and year ended June 30, 2001 amounted to
approximately $11.3 million, $13.2 million, $2.7 million and $8.7 million,
respectively.

         During the three months ended June 30, 2000 and the year ended June 30,
2001 the Company wrote off total net fixed assets of $9.2 million and $1.7
million, respectively. These decisions were made in connection with the
Company's strategic plan to reorganize and re-focus its business and its desire
to exit certain product lines (Note 23).

NOTE 10--ACCRUED LIABILITIES

         Accrued liabilities consist of the following:


<TABLE>
<CAPTION>
                                                                    JUNE 30,
                                                                    --------
                                                               2000           2001
                                                               ----           ----

<S>                                                           <C>          <C>
Restructuring reserve (Note  23) .......................      $ 9,836      $ 2,647
Accrued advertising ....................................          307        3,897
Accrued professional fees and other services ...........        2,700        3,277
Accrued salary and related costs .......................        6,118        8,275
Taxes payable ..........................................           --          450
Litigation reserve .....................................        2,750           --
Accrued freight, distribution and other related services        4,094        5,599
Other ..................................................       12,741        7,346
                                                              -------      -------
                                                              $38,546      $31,491
                                                              =======      =======
</TABLE>

                                      F-17
<PAGE>   69
NOTE 11--INCOME TAXES

         The components of the (benefit from) provision for income taxes are as
follows:

<TABLE>
<CAPTION>
                                                              THREE MONTHS
                                          YEARS ENDED             ENDED     YEAR ENDED
                                           MARCH 31,              JUNE        JUNE 30,
                                    1999            2000          2000         2001
                                    ----            ----          ----         ----
Federal:
<S>                               <C>            <C>            <C>          <C>
   Current .................      $     --       $ (6,603)      $  375       $    (9)
   Deferred ................       (23,563)        38,499          287            --
                                  --------       --------       ------       -------
          ..................       (23,563)        31,896          662            (9)
                                  --------       --------       ------       -------
State and local:
   Current .................            --             --           --            --
   Deferred ................        (4,202)         4,424           --            --
                                  --------       --------       ------       -------
          ..................        (4,202)         4,424           --            --
                                  --------       --------       ------       -------
Foreign:
   Current .................         1,186             33           --        (2,359)
   Deferred ................        (3,049)         4,538          589            --
                                  --------       --------       ------       -------
          ..................        (1,863)         4,571          589        (2,359)
                                  --------       --------       ------       -------
Provision for (benefit from)
     income taxes ..........      $(29,628)      $ 40,891       $1,251       $(2,368)
                                  ========       ========       ======       =======
</TABLE>

The reconciliation of the income tax provision (benefit) computed at the Federal
statutory rate to the reported provision for (benefit from) income taxes is as
follows:

<TABLE>
<CAPTION>
                                                                                   THREE MONTHS
                                                         YEARS ENDED                   ENDED       YEAR ENDED
                                                   MARCH 31,       MARCH 31,          JUNE 30,       JUNE 30,
                                                     1999            2000              2000           2001
                                                     ----           ----               ----           ----

<S>                                                <C>             <C>            <C>             <C>
Benefit from income taxes computed
   at Federal  statutory rate ...............      $(28,499)       $(107,287)     $  (18,952)     $ (22,063)
Increase (decrease) in (benefit from)
   provision for income taxes resulting from:
State and local taxes, net of
   Federal tax benefit ......................        (3,324)         (10,969)         (1,603)        (2,458)
Foreign taxes (less than) in excess of Federal
   statutory rate ...........................          (512)          17,598           3,042         (1,830)
Goodwill ....................................            --               --              --          4,530
Other, net ..................................         2,707           (1,891)            687            855
Increase to deferred tax asset
   valuation allowance ......................            --          143,440          18,077         18,598
                                                   --------        ---------        --------        -------
(Benefit from) provision for income taxes ...      $(29,628)       $  40,891        $  1,251         (2,368)
                                                   ========        =========        ========        =======
</TABLE>


Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of the
Company's deferred tax assets and liabilities are as follows:

                                      F-18
<PAGE>   70
<TABLE>
<CAPTION>
                                                                   THREE MONTHS
                                                                       ENDED         YEAR ENDED
                                                                     JUNE 30,         JUNE 30,
                                                                       2000             2001
                                                                       ----             ----
DEFERRED TAX ASSETS:
<S>                                                                   <C>            <C>
Inventory valuation ...............................                   $   19,296     $   9,086
Deferred income ...................................                          197           772
Tax loss carryforwards ............................                      142,826       171,940
Restructuring reserve .............................                        3,186         1,787
Allowances for bad debts, returns, price protection
and other customer promotional programs ...........                       12,588        15,461
Depreciation ......................................                          912           517
Other .............................................                        5,272         3,311
                                                                        --------       -------
                                                                         184,277       202,874

Less valuation allowance ..........................                     (184,277)     (202,874)
                                                                        --------       -------
Net deferred tax asset ............................                   $      -       $       -
                                                                        ========       =======
</TABLE>


       As of June 30, 2001 the Company has combined net operating loss
carryforwards of approximately $481.1 million for tax purposes. These loss
carryforwards are available to offset future taxable income and will expire
beginning in the years 2011 through 2021. The Company experienced an ownership
change in 1999 as a result of its acquisition by Infogrames SA. Under Section
382 of the Internal Revenue Code, when there is an ownership change, the
pre-ownership-change loss carryforwards are subject to an annual limitation
which could reduce or defer the utilization of these losses. Pre-acquisition
change losses of approximately $203.3 million are subject to an annual
limitation.

       A full valuation allowance has been recorded against the net deferred tax
asset because management believes it is more likely than not that such asset
will not be realized.

       As of June 30, 2001, there were no undistributed earnings for the
Company's 100% owned foreign subsidiaries.

NOTE 12--STOCKHOLDERS' DEFICIT (NOTE 2)

       On November 12, 1999, the Company's Board of Directors approved an
amendment to the Company's Amended and Restated Certificate of Incorporation
(the "Charter Amendment"), which increases the total number of shares of
authorized capital stock of the Company from 155 million shares to 305 million
shares. The Charter Amendment became effective on February 14, 2000. There is
currently authorized 300 million shares of the Company's common stock and five
million shares of the Company's Series A Convertible Preferred Stock.

       As of March 31, 1999 and 2000, June 30, 2000 and 2001, the Company had
warrants outstanding to purchase an aggregate of approximately 246,000, 246,000,
251,182 and 251,182 shares, respectively, of Common Stock to content-providers
at exercise prices (ranging from $42.50 to $70.00) not less than the fair market
value at the date of issue.

       On June 26, 2000, the Company repurchased approximately 332,000 shares of
its common stock in connection with severance agreements with certain of its
employees. The repurchased shares of common stock are held as treasury stock.

       On November 6, 2000, approximately 97,000 shares of treasury stock were
issued to a developer in lieu of cash payment for royalties due.

                                      F-19
<PAGE>   71
NOTE 13--STOCK OPTIONS

       The Company has three stock option plans which began in 1995, 1997 and
2000, (the "Plans"). The Company accounts for these Plans under Accounting
Principles Board Opinion No. 25, under which no compensation cost has been
recognized.

       Generally, under the Plans, options are granted to employees to purchase
shares of the Company's common stock at no less than the fair market value at
the date of the grant, vest over a period of four or five years and are
exercisable for a period of ten years from the grant date.

       A summary of the status of the Company's Plans at March 31, 1999 and
2000, June 30, 2000 and 2001 and changes during the years ended March 31, 1999
and 2000, the three months ended June 30, 2000 and the year ended June 30, 2001
are as follows:


<TABLE>
<CAPTION>
                                                      MARCH 31, 1999
                                                         PRICE PER         WEIGHTED AVERAGE
                                       SHARES             SHARE            EXERCISE PRICE
                                   (in thousands)
<S>                                <C>                <C>                 <C>
Outstanding at beginning of
  Fiscal year ...................       1,958         $ 0.20-72.50        $     43.95
Granted .........................       1,139           0.01-100.00             32.85
Exercised .......................         (40)          0.01-39.70               7.40
Forfeited .......................         (99)          0.90-70.00              46.20
Expired .........................         (47)          1.75-70.00              46.05
                                       ---------      --------------        ------------

Outstanding at end of fiscal year       2,911         $ 0.01-100.00       $     40.10
                                       =========      ==============        ============
</TABLE>


<TABLE>
<CAPTION>
                                                     MARCH 31, 2000
                                                        PRICE PER          WEIGHTED AVERAGE
                                        SHARES           SHARE             EXERCISE PRICE
                                   (in thousands)

<S>                                    <C>           <C>                   <C>
Outstanding at beginning of
  Fiscal year ...................       2,911         $ 0.01-100.00         $   40.10
Granted .........................         415           9.40-19.70              14.75
Exercised .......................         (61)          0.01-10.40               2.35
Forfeited .......................      (1,049)          1.75-100.00             33.25
Expired .........................        (321)          0.90-100.00             52.95
                                       ------           -----------             -----
Outstanding at end of fiscal year       1,895         $ 0.01-72.50          $   37.63
                                       ======           ===========             =====
</TABLE>


<TABLE>
<CAPTION>
                                                         JUNE 30, 2000
                                                            PRICE PER         WEIGHTED AVERAGE
                                         SHARES              SHARE            EXERCISE PRICE
                                     (in thousands)
<S>                                  <C>                <C>                   <C>
Outstanding at beginning of
  period ..........................       1,895         $ 0.01-72.50          $   37.63
Granted ...........................         526           9.38-13.75              13.37
Exercised .........................         (10)          0.01-10.38               0.50
Forfeited .........................         (85)         14.69-70.00              32.31
Expired ...........................        (115)          0.88-72.50              46.14
                                          ------         -----------              -----
Outstanding at end of fiscal period       2,211         $ 0.22-70.00          $   31.78
                                          ======         ===========              =====
</TABLE>

                                      F-20
<PAGE>   72
<TABLE>
<CAPTION>
                                                          JUNE 30, 2001
                                                            PRICE PER            WEIGHTED AVERAGE
                                          SHARES              SHARE               EXERCISE PRICE
                                      (in thousands)
<S>                                         <C>           <C>                    <C>
Outstanding at beginning of
  fiscal year ...................           2,211         $ 0.22-70.00              $   31.78
Granted .........................           4,128           4.93-13.75                   5.63
Exercised .......................              (5)          0.22- 3.53                   1.45
Forfeited .......................            (573)          5.19-70.00                  11.16
Expired .........................            (280)          0.88-70.00                  53.73
                                            ------         -----------                  -----
Outstanding at end of fiscal year           5,481         $ 0.23-70.00              $   13.14
                                            ======         ===========                  =====
</TABLE>


The following table summarizes information concerning currently outstanding and
exercisable options (in thousands):


<TABLE>
<CAPTION>
                                                                          Weighted                                   Weighted
        Range of              Number              Remaining               Average                Number              Average
     Exercise Price         Outstanding              Life              Exercise Price          Exercisable        Exercise Price
     --------------         -----------           ----------          --------------          -----------        --------------


<S>                         <C>                   <C>                 <C>                     <C>                <C>
  $      0.23-13.75            4,266                    9.5              $  6.62                  163               $ 12.12
  $     14.69-70.00            1,215                    7.0              $ 36.05                1,086               $ 37.56
                               -----                                                            -----
                               5,481                                                            1,249
                               =====                                                            =====
</TABLE>


       As of June 30, 2001, there were approximately 5,481 options outstanding
at prices ranging from $0.232 to $70.00, of which 1,249 options were exercisable
at prices ranging from $0.23 to $70.00.

       If compensation cost for these plans were determined consistent with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," the Company's net loss before dividends on preferred stock and
loss per share would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                    THREE MONTHS
                                            YEARS ENDED                 ENDED        YEAR ENDED
                                             MARCH 31,                 JUNE 30,       JUNE 30,
                                       1999            2000             2000            2001
                                       ----            ----             ----            ----

<S>                                <C>             <C>              <C>             <C>
Net loss attributable to
   common stockholders
   As reported ...........         $ (71,064)      $ (346,013)      $ (55,400)      $ (60,668)
   Pro forma .............           (77,792)        (346,228)        (55,488)        (65,293)
Basic net loss per share
   As reported ...........         $   (5.10)      $   (21.03)      $   (2.68)      $   (1.07)
   Pro forma .............         $   (5.58)      $   (21.05)      $   (2.69)      $   (1.15)
Diluted net loss per share
   As reported ...........         $   (5.10)      $   (21.03)      $   (2.68)      $   (1.07)
   Pro forma .............         $   (5.58)      $   (21.05)      $   (2.69)      $   (1.15)
</TABLE>


       The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in the years ended March 31, 1999 and 2000, the
three months ended June 30, 2000 and the year ended June 30, 2001. No dividends
will be paid for the entire term of the option, expected volatility of 67.5% for
the year ended March 31, 1999, 81.0% for the year ended March 31, 2000 and the
three months ended June 30, 2000 and 89.0% for the year ended June 30, 2001,
risk-free interest rates averaging 4.74% for the year ended March 31, 1999 and
5.82% for the year ended March 31, 2000, 6.31% for the three months ended June
30, 2000 and 5.63% for the year ended June 30, 2001, and expected lives of four
years in the years ended March 31, 1999 and 2000, the three months ended June
30, 2000 and the year ended June 30, 2001.

                                      F-21
<PAGE>   73
NOTE 14--RELATED PARTY TRANSACTIONS

Infogrames SA

       On January 26, 2001, Infogrames SA and the Company entered into a letter
agreement whereby Infogrames SA has agreed to pay the Company a total one-time
fee of $1.0 million in consideration for the Company's services rendered to
Infogrames SA in connection with the purchase of Hasbro Interactive, Inc.,
Games.com, Inc., Atari Interactive, Inc. and certain other companies, which was
consummated on January 26, 2001.

Purchases of product by and  from Infogrames SA

       During the three months ended June 30, 2000 and the year ended June 30,
2001, the Company purchased $0.7 million, and $0.4 million of product from
Infogrames SA, respectively. No purchases were made for the years ended March
31, 1999 and 2000. As of June 30, 2001, the Company has approximately $0.4
million outstanding payables related to purchase of product from Infogrames SA.
Additionally, Infogrames SA has purchased product from the Company representing
$0.1 million for the year ended June 30, 2001. No purchases were made by
Infogrames SA from the Company for the year ended March 31, 1999, 2000, and the
three months ended June 30, 2000. As of June 30, 2001, the Company has
approximately $0.1 million of outstanding receivables related to the selling of
such product.

Management fees charged to the Company by Infogrames SA

       Infogrames SA charges the Company monthly management fees for various
global management and system support. For the year ended March 31, 2000, the
three months ended June 30, 2000 and the year ended June 30, 2001 management
fees charged to the company from Infogrames SA totaled $0.6 million, $0.2
million and $2.8 million, respectively. As of June 30, 2001, $0.8 million
remains outstanding. No such fees were charged for the year ended March 31,
1999.

Interest expense and facility fees charged to the Company by Infogrames SA

       Infogrames SA charges the Company monthly interest and fees for the
amount outstanding on the related party credit facility and its usage. The
interest rate is approximately prime plus 2.5%. For the year ended March 31,
2000, the three months ended June 30, 2000 and the year ended June 30, 2001, the
Company incurred interest and fees of approximately $1.1 million, $2.1 million
and $3.8 million, respectively. No interest or fees was incurred from Infogrames
SA for the year ended March 31, 1999. As of June 30, 2001, approximately $0.3
million remained unpaid (Note 17).

Interest expense on notes payable charged to the Company by Infogrames SA

       Infogrames SA charges the Company monthly interest for the amount
outstanding on the long term related party 5% notes payable. The interest rate
is approximately 5%. For the year ended March 31, 2000, three months ended June
30, 2000 and year ended June 30, 2001, the Company incurred interest of
approximately $0.9 million, $0.8 million and $3.2 million, respectively (Note
16).

Royalty agreement between the Company and Infogrames SA

       The Company and Infogrames SA entered into a distribution agreement,
which provides for the distribution by the company of Infogrames SA's products
in the United States, Canada and their territories and possessions, pursuant to
which the Company will pay Infogrames SA 30% of the gross profit on such
products, while retaining 70% of the gross profit for the Company. The Company
records this charge as royalty expense. For the year ended June 30, 2001, the
Company recorded $4.9 million of royalty expense, which has been paid as of
year-end. The agreement also includes distribution by Infogrames SA of the
Company's products across Europe, pursuant to which Infogrames SA will pay the
Company 30% of the gross profit on such products, which the Company recognizes
as royalty income. For the year ended June 30, 2001, royalty income for the
Company based on the agreement amounted to $13.7 million of which $2.7 million
remains outstanding at June 30, 2001. For the years ended March 31, 1999 and
2000 and the three months ended June 30, 2000, no royalty income or expense was
recognized by the Company relating to Infogrames SA.

                                      F-22
<PAGE>   74
Transactions with Infogrames Melbourne House, Australia

       Infogrames Melbourne House, Australia, a wholly-owned subsidiary of
Infogrames, SA, is an external product developer for the Company. They performed
such services as product development, designing, and testing for the Company
during the year ended June 30, 2001. No such services were performed in any
prior period. For the year ended June 30, 2001, services provided and charged to
the Company amounted to approximately $0.7 million. The Company has no amount
outstanding to Infogrames Melbourne House as of June 30, 2001.

Transactions with OziSoft Entertainment

       Ozisoft Entertainment is a wholly-owned subsidiary of Infogrames SA
("Ozisoft"). Effective, July 1, 2000, the Company charges Ozisoft management
fees of $0.4 million per annum primarily for the management and maintenance of
information systems. For the year ended June 30, 2001, the Company recognized
$0.4 million as management fee revenue which remains outstanding at June 30,
2001.

Transactions with Paradigm Entertainment, Inc.

       Paradigm Entertainment Inc., a wholly owned subsidiary of Infogrames, SA
as of July 2000, is an external product developer for the Company. They perform
such services as program development, designing and testing. For the year ended
June 30, 2001 services provided and charged to the Company amounted to $3.9
million, of which $1.9 million remains outstanding at June 30, 2001.

Purchases of product from Infogrames Interactive, Inc.

       During the year ended June 30, 2001, the Company purchased $ 9.5 million
of product from Infogrames Interactive, Inc. ("Infogrames Interactive"),
representing approximately 9.2% of total purchases by the Company for the year.
As of June 30, 2001, the Company has approximately $9.5 million outstanding
related to purchase of product from Infogrames Interactive which remains
outstanding at June 30, 2001.

Royalty Agreement between the Company and Infogrames Interactive

       As part of the acquisition and change of Infogrames Interactive, any
distribution of Infogrames Interactive products by the Company will result in
the Company paying Infogrames Interactive 30% of the gross profit of such
products as royalty expense, while retaining 70% of the gross profit for the
Company. For the year ended June 30, 2001, the Company incurred royalty expense
of $9.9 million related to the distribution of Infogrames Interactive products,
which remains outstanding at June 30, 2001.

Management fees charged to Infogrames Interactive by the Company

       The Company charges management fees to Infogrames Interactive primarily
for the legal, financial, information systems and human resource management. For
the year ended June 30, 2001, management fee revenue of $1.3 million was
recorded for these services, of which $1.3 million remains outstanding at June
30, 2001. Additionally, the Company has incurred cost and spent cash on behalf
of Infogrames Interactive in efforts to help in the transition. The Company has
approximately $8.5 million outstanding as of June 30, 2001.

Employment Agreement with Harry M. Rubin

       The Company and Harry M. Rubin entered into an agreement and release
dated April 7, 2000 and a letter agreement dated June 15, 2000. These agreements
will terminate certain provisions of the employment agreement, dated April 28,
1998 between the Company and Mr. Rubin, in the event that Mr. Rubin elects to
resign from the Company on or prior to September 30, 2000. Mr. Rubin elected not
to resign from the Company and entered into a letter agreement with the Company
dated December 21, 2000 (the "New Rubin Employment Agreement"). In consideration
of entering into the New Rubin Employment Agreement and as a result of the
Company's change in control (i.e., acquisition of the Company by Infogrames SA),
the Company made a payment of approximately $1.6 million to Mr. Rubin. Under the
New Rubin Employment

                                      F-23
<PAGE>   75
Agreement, the Company appointed Mr. Rubin as Senior Executive Vice President
beginning January 1, 2001. Mr. Rubin receives an annual salary of $0.3 million
and is eligible to participate in the Company's Corporate Executive Incentive
Program, pursuant to which he may receive a bonus up to 50% of his base salary.
In addition, Mr. Rubin receives a car allowance of $2,500 per month. If Mr.
Rubin's employment is terminated without cause within two years of his
employment with the Company pursuant to the New Rubin Employment Agreement, he
will receive a severance payment equal to six months of his base salary.

TRANSACTIONS WITH FORMER SHAREHOLDERS AND DIRECTORS

       The following transactions occurred between the Company and the former
directors through their date of resignation, and accordingly, the information
presented is from April 1, 1999 through December 16, 1999, the date that
Infogrames SA purchased a majority interest in the Company.

Leases

       In May 1995, G.T. Interactive Software (Europe) Limited, the Company's
European subsidiary, entered into a lease with respect to its then principal
executive offices with Marylebone 248 Realty LLC ("Marylebone 248"), an entity
controlled by Joseph J. Cayre, former Chairman Emeritus of the Board of
Directors, and Jack J. Cayre, former Executive Vice president and a director of
the Company. This lease was terminated in August 1999. From April 1, 1999
through August 15, 1999, the Company paid approximately $119,000 in rent to
Marylebone 248. There were no payments made during any subsequent periods to
Excel.

Transactions with GoodTimes Home Video Corp. ("GTHV")

       GTHV, a majority of which stock was formerly owned by Joseph J. Cayre,
Stanley Cayre and Kenneth Cayre, performed certain assembly and packaging
services for the Company. The Company enters into arms length manufacturing
transactions with GTHV on an as needed basis. The Company made cash payments
totaling approximately $1.1 million to GTHV during the year ended March 31,
1999. GTHV performed certain assembly and packaging services for the Company.
From April 1, 1999 through December 16, 1999, the Company paid approximately
$260,000 in fees for such services. As of June 30, 2001, the Company had no
outstanding liabilities to GHTV.

REPS Agreement

       In servicing its mass merchant accounts, the Company uses field
representatives supplied by REPS, a company owned by Joseph J. Cayre, Stanley
Cayre and Kenneth Cayre. REPS provides such services to the Company as well as
to third parties not affiliated with the Cayre family. The Company had an
agreement with REPS pursuant to which REPS supplied such services through May 1,
2000. The Company is currently operating on a month-to-month basis under the
terms of the expired agreement. The total amount charged to operations for these
services amounted to approximately $4.1 million for the year ended March 31,
1999. From April 1, 1999 through December 16, 1999, the Company paid
approximately $2.7 million in fees to REPS.

Travel Services

       The Company occasionally hired Excel Aire Service, Inc. ("Excel") to
provide business travel services for its officers and employees. Excel leases
its planes from JT Aviation Corp., a company owned by Joseph J. Cayre. Excel is
not owned in whole or in part by any member of the Cayre family. Excel provided
air travel to the Company at an hourly rate and on an as needed as available
basis. During the year ended March 31, 1999, the Company paid approximately $311
to Excel. From April 1, 1999 through December 16, 1999, the Company paid
approximately $69,000 to Excel. There were no payments made during any
subsequent periods to Excel.

       The Company occasionally hired JC Aviation Corp. ("JCAC"), a company
owned by Jack J. Cayre, Executive Vice President and Director of the Company, to
provide business transportation services for its officers. During the year ended
December 31, 1997, the Company paid approximately $26,000 to JCAC. There were no
payments made during any subsequent periods to JCAC.

                                      F-24
<PAGE>   76
ClientLogic Corporation

       The Company has entered into agreements with ClientLogic Corporation
("Clientlogic") (formerly doing business as SOFTBANK Services Group) pursuant to
which ClientLogic (i) provides toll-free customer support for some of the
Company's published products and (ii) takes direct customer orders and provides
fulfillment services for the Company, in each case on a per service basis. Both
agreements provide for automatic renewal on a month-to-month basis upon
expiration unless terminated by either party. During the year ended March 31,
1999, the Company had charged to operations approximately $251,000 in fees to
ClientLogic. Jordan A. Levy, a former director of the Company, is Vice-Chairman
of ClientLogic. There were no payments made during any subsequent periods to
ClientLogic.

RCS Computer Experience

       From time to time, the Company purchases computer equipment from and
sells computer software to RCS Computer Experience, LLC ("RCS"). In June 1998,
Rockwell Computer Services, LLC, a company controlled by Joseph J. Cayre,
purchased approximately a 70% interest in RCS. During the year ended March 31,
1999, the Company paid approximately $24,000 to RCS and generated approximately
$54,000 in net revenues from RCS.

The Company has entered into agreements with an unaffiliated leasing company for
computer equipment. This leasing company purchases computer equipment from
various vendors including RCS. During the year ended March 31, 1999, the leasing
company paid approximately $231,000 to RCS for equipment leased by the Company.
There were no payments made during any subsequent periods to RCS.

       The Company believes that the terms of the foregoing transactions are no
less favorable to the Company than could be obtained by the Company from
unrelated parties on an arm's-length basis.

Gregor Loan

       On August 31, 1996, the Company extended a loan to Andrew Gregor, a
former Chief Financial Officer of the Company, in the principal amount of
$250,000. The loan, including interest, amounted to $290,000 and was forgiven as
part of Mr. Gregor's severance package and charged to restructuring charges in
the fourth quarter of fiscal 1999. See Note 23 for information concerning other
restructuring charges.

Humongous Loan

       The Company extended a demand promissory note to the former President of
Humongous, a wholly-owned subsidiary of the Company. The note bears interest at
a rate of 8.75% per annum and secured by security interest in all shares of
common stock of the Company owned beneficially by such individual. The balance
outstanding, including interest, at March 31, 2000 was approximately $2.5
million. During June 2000, the Company exchanged the shares owned by the former
President and reduced the amount outstanding to approximately $1.5 million. As
part of the exchange, the Company negotiated a repayment schedule for this
outstanding loan which provided for a first installment of approximately $37,000
to be paid on July 1, 2001. Such payment was not received and the Company is
pursuing collection of the note by exploring various legal remedies which it has
available.

 SingleTrac Loans

       The Company has extended non-interest bearing loans to three former
employees of the Company who were former stockholders of SingleTrac. The
principal amount of each such loan is $100,000. Such loans become due and
payable at the earliest of the sale of their stock of the Company, in November
1999 or six months following termination of the borrowers' respective employment
with the Company. Each of the borrowers has pledged 4,000 shares of the
Company's common stock, as collateral security for the loans. Two loans were
forgiven on July 9, 1999 pursuant to amended employment agreements, which
provided for the loan forgiveness pursuant to termination of employment. $20,000
of the third loan has been partially earned by the former employee, and the
$80,000 balance repaid to the Company in May 2000.

                                      F-25
<PAGE>   77
NOTE 15--LEASES

       The Company accounts for its leases as operating leases, with expiration
dates ranging from 2001 through 2012. Future minimum annual rental payments
under the leases approximate as follows for the fiscal years then ended:


<TABLE>
<CAPTION>
<S>                                                          <C>
                 2002......................................  $         4,700
                 2003......................................            4,300
                 2004......................................            3,900
                 2005......................................            3,400
                 2006......................................            2,500
                 Thereafter................................            3,200
                                                             ---------------
                                                             $        22,000
                                                             ===============
</TABLE>



       Total rent expense charged to operations for the years ended March 31,
1999 and 2000, the three months ended June 30, 2000 and the year ended June 30,
2001 amounted to approximately $7.3 million, $9.4 million, $1.3 million, and
$5.7 million respectively.

NOTE 16 -- DEBT

       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"), which expired 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, Infogrames SA entered into an agreement with the
Banks, pursuant to which Infogrames SA assumed the Banks' interest in the Credit
Agreement. In connection with the assumption by Infogrames SA 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 Infogrames SA, (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 Infogrames
SA.

       On June 30, 2000, the Company had outstanding borrowing under the Credit
Agreement of approximately $96.0 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.

       The Credit Agreement has been modified from time to time. On June 29,
2000, Infogrames SA and the Company amended the Credit Agreement to increase the
aggregate commitment available under the facility to $125 million and waived
compliance with all of the required financial covenants contained in the
agreement extending the maturity date to September 30, 2000.

                                      F-26
<PAGE>   78
       On March 1, 2000, INA issued a promissory note to Infogrames SA for $25.0
million at interest rates of 6.8% per annum. Prior to the merger with the
Company this amount was forgiven by Infogrames SA and converted into equity of
INA (Note 3).

       In conjunction with the INA Merger (Note 3) which closed on October 2,
2000, all 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 Infogrames SA (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
Infogrames SA amended the New Credit Agreement to extend the maturity date to
June 15, 2001 and on June 7, 2001, the credit agreement was further extended to
December 31, 2001. As of June 30, 2001, the outstanding borrowings under the
Credit Agreement were approximately $9.3 million, of which $0.3 million is
related to accrued interest. As of June 30, 2001, there are $0.9 million of
letters of credit outstanding.

       In connection with the INA Merger (Note 3), 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 $34.9 million
of borrowings outstanding under the BNP Credit Facility as of June 30, 2001.

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

<TABLE>
<CAPTION>
<S> <C>                                                                                                   <C>
GAP 0% subordinated convertible note (a)..............................................................    $        39,954

5% subordinated convertible note with a subsidiary of Infogrames SA, due December 16, 2004............              65,408
                                                                                                          ----------------

                                                                                                          $       105,362
                                                                                                          ================
</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 17--LEGAL PROCEEDINGS

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

                                      F-27
<PAGE>   79
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 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

                                      F-28
<PAGE>   80
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, oral
argument has not yet been scheduled.

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. The Court granted Plaintiffs' an
extension until Sunday, August 19, 2001 to oppose the Company's motion to
dismiss and the Company's reply brief is due in September 2001.

       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 other claims and legal actions arising in the ordinary
course of business.

       The Company's management believes that the ultimate resolution of any of
the aforementioned complaints 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.

                                      F-29
<PAGE>   81
NOTE 18--EMPLOYEE SAVINGS PLAN

       The Company maintains an Employee Savings Plan (the "Plan") which
qualifies as a deferred salary arrangement under Section 401(k) of the Internal
Revenue Code. The Plan is available to all U.S. employees who meet the
eligibility requirements. Under the Plan, participating employees may elect to
defer a portion of their pretax earnings, up to the maximum allowed by the
Internal Revenue Service with matching of 50% of the employee's contribution up
to 6 percent provided by the Company. Generally, the Plan's assets in a
participant's account will be distributed to a participant or his or her
beneficiaries upon termination of employment, retirement, disability or death.
All Plan administrative fees are paid by the Company. Generally, the Company
does not provide its employees any other post-retirement or post-employment
benefits, except discretionary severance payments upon termination of
employment. Plan expense approximated $739,000, $530,000, $200,000 and $811,000
for the years ended March 31, 1999 and 2000, the three months ended June 30,
2000 and the year ended June 30, 2001, respectively.

NOTE 19--ROYALTY ADVANCES

       The Company has committed to pay advance payments under certain license
agreements. These obligations are guaranteed and are not dependent on the
delivery of the contracted services by the developers. Future advances due under
these license agreements are as follows for the fiscal years then ended:


<TABLE>
<CAPTION>
<S>                                                       <C>
           2002......................................     $     4,282
           2003......................................           1,000
           2004......................................           1,000
           2005......................................           1,000
           2006......................................           1,000
           Thereafter................................               -
                                                          -----------
                                                          $     8,282
                                                          ===========
</TABLE>


NOTE 20--CONCENTRATION OF CREDIT RISK

       The Company extends credit to various companies in the retail and mass
merchandising industry for the purchase of its merchandise which results in a
concentration of credit risk. This concentration of credit risk may be affected
by changes in economic or other industry conditions and may, accordingly, impact
the Company's overall credit risk. Although the Company generally does not
require collateral, the Company performs ongoing credit evaluations of its
customers and reserves for potential losses are maintained.

       The Company had sales constituting 40%, 35%, 52% and 31% of net revenue
to two customers in the years ended March 31, 1999 and 2000, the three months
ended June 30, 2000 and the year ended June 30, 2001, respectively. Sales to one
customer constituted 30%, 24%, 37% and 22% of net revenue during the years ended
March 31, 1999 and 2000, the three months ended June 30, 2000 and the year ended
June 30, 2001, respectively, while sales to a second customer constituted 10%,
11%, 15% and 9% of the net revenue for the same periods, respectively.

       Accounts receivable due from three significant customers aggregated 48%
and 50% of accounts receivable at June 30, 2000 and June 30, 2001, respectively.

                                      F-30
<PAGE>   82
NOTE 21--OPERATIONS BY REPORTABLE SEGMENTS AND GEOGRAPHIC AREAS

       The Company has three reportable segments: publishing, distribution and
corporate. Publishing is comprised of frontline, leisure and children's
publishing. Distribution constitutes the sale of other publishers' titles 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 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 income (loss) by reportable segment for the year ended March 31,
1999 and 2000, the three months ended June 30, 2000 and the year ended June 30,
2001:


<TABLE>
<CAPTION>
                                        PUBLISHING       DISTRIBUTION        CORPORATE           TOTAL
                                        ----------       ------------        ---------           -----


<S>                                     <C>              <C>                 <C>               <C>
Year ended March 31, 1999:
       Net revenues .............        $ 299,400         $ 272,942         $      --         $ 572,342
       Operating income (loss) ..           24,447            30,520          (131,077)          (76,110)
Year ended March 31, 2000:
       Net revenues .............          262,794           123,268                --           386,062
       Operating income (loss) ..           (5,545)           11,526          (293,973)         (287,992)
Three months ended June 30, 2000:
       Net revenues .............           42,527             5,942                --            48,469
       Operating loss ...........          (17,948)           (3,460)          (27,916)          (49,324)
Year ended June 30, 2001:
       Net revenues .............          232,101            78,378                --           310,479
       Operating income (loss) ..              785            12,963           (64,743)          (50,995)
</TABLE>



       Information about the Company's operations in the U.S. and other
geographic locations for the year ended March 31, 1999 and 2000, the three
months ended June 30, 2000 and the year ended June 30, 2001 are presented below.

<TABLE>
<CAPTION>
                                                                          OTHER
                                        UNITED          UNITED          GEOGRAPHIC
                                        STATES          KINGDOM          LOCATIONS           TOTAL
                                        ------          -------          ---------           -----

<S>                                   <C>               <C>              <C>              <C>
Year ended March 31, 1999:
       Net revenues ..........        $ 469,670         $ 76,132         $ 26,540         $ 572,342
       Operating (loss) income          (68,947)         (13,666)           6,503           (76,110)
       Capital expenditures ..            2,196           20,121              290            22,607
       Total assets ..........          374,084           49,296           15,531           438,911
Year ended March 31, 2000:
       Net revenues ..........        $ 297,666         $ 70,748         $ 17,648         $ 386,062
       Operating loss ........         (246,823)         (37,793)          (3,376)         (287,992)
       Capital expenditures ..            2,140            6,115            1,182             9,437
       Total assets ..........          201,090           10,749            9,675           221,514
Year ended June 30, 2000:
       Net revenues ..........        $  45,891         $    415         $  2,163         $  48,469
       Operating loss ........          (46,247)          (1,200)          (1,877)          (49,324)
       Capital expenditures ..            1,875              130               --             2,005
</TABLE>

                                      F-31
<PAGE>   83
<TABLE>
<S>                                                                 <C>          <C>        <C>         <C>
       Total assets.............................................       158,275      7,060       5,140     170,475
Year ended June 30, 2001:
       Net revenues.............................................    $  304,116   $  1,495   $   4,868   $ 310,479
       Operating loss...........................................       (46,639)      (777)     (3,579)    (50,995)
       Capital expenditures.....................................         6,084         --          --       6,084
       Total assets.............................................       137,415      1,959       5,710     145,084
</TABLE>

NOTE 22--SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                                        THREE MONTHS
                                                                                    YEARS ENDED             ENDED      YEAR ENDED
                                                                                      MARCH 31,            JUNE 30,     JUNE 30,
                                                                                 1999           2000         2000         2001
                                                                                 ----           ----         ----         ----
<S>                                                                            <C>            <C>       <C>            <C>
Issuance of common stock in connection with the acquisition of OZM...........  $ 15,473       $     --      $    --     $     --
Issuance of stock options in connection with the acquisition of OZM..........     1,347             --           --           --
Issuance of common stock in connection with the acquisition of Reflections...    12,279             --           --           --
Issuance of common stock in connection with the acquisition of Legend........       255             --           --           --
Issuance of stock options in connection with the acquisition of Legend.......         9             --           --           --
Conversion of revolving credit facility into  shares of the Company's
     common stock by Infogrames SA at $6.40 per share........................        --             --           --      128,570
Issuance of stock in exchange for the assets of Infogrames North America.....        --             --           --          280
Conversion of Infogrames North America related party balances with
     Infogrames SA...........................................................        --             --           --       64,907
Sale of treasury stock in lieu of partial royalty payment....................        --             --           --          600
Warrants issued in connection with New Credit Agreement......................        --          3,188           --           --
Warrants issued to GAP and acquired by Infogrames SA.........................        --          8,833           --           --
Warrants issued in connection with Short-Term Note...........................        --            150           --           --
Discount on GAP 0% Subordinated Convertible Note.............................        --         14,351           --           --
Deferred financing costs in connection with Long-Term debt...................        --          4,776           --           --
Common stock issued in lieu of partial royalty payment.......................        --          4,208           --           --
Cash paid for income taxes...................................................    11,118          2,713           --           --
Cash paid for interest.......................................................     5,826          8,492        1,010        3,145
</TABLE>

NOTE 23--RESTRUCTURING AND OTHER CHARGES

           During December 1999, the Company's management approved and adopted a
formal plan (the "Restructuring Plan") relating to a reorganization of the
Company's action and adventure publishing business, the shutdown of a
substantial portion of European publishing operations and outsourcing and
downsizing of the Company's distribution and assembly function. As a result of
the implementation of the Restructuring Plan, the Company has incurred
restructuring and other charges of


                                      F-32
<PAGE>   84
approximately $37.9 million in fiscal 2000, mostly recorded in the three months
ended December 31, 1999. As a result of the implementation of the Restructuring
Plan, the Company has incurred approximately $17.6 million relating to the
write-off of goodwill due to the consolidation of the value distribution
division with the Company's publishing division, $12.1 million relates the
shutdown of European operations, including the write-off of all goodwill other
than the Reflections studio, $6.1 million relates to impaired assets and $2.1
million relates to the planned severance of certain employees. 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
activities. Thus, $2.4 million of such reserves were reversed in the second
quarter of fiscal 2001.

           During the three months ended June 30, 2000, the Company recorded
additional restructuring charges of approximately $11.1 million. These charges
relate to $0.4 million of goodwill write-off, $9.4 million related to impaired
assets and transition rent and $1.3 million of severance for 30 employees,
mostly in administration and product development.

           During the year ended June 30, 2001, the Company implemented a
restructuring plan to further strategically operate and make more efficient its
current 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 adjustments to the restructuring
reserve: (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                    ADDITIONAL
                                       BALANCE     RESTRUCTURING                                  BALANCE
                                       MARCH 31,     AND OTHER                       CASH         MARCH 31,
                                         1999         CHARGES       WRITE-OFFS     PAYMENTS        2000
                                         ----         -------       ----------     --------        ----
<S>                                    <C>         <C>              <C>           <C>            <C>
Severance.........................     $  8,357      $   4,720      $      --     $   (5,144)    $   7,933
Shutdown of European Operations...           --          3,128             --         (1,236)        1,892
Impairment charges................           --         29,783        (29,783)            --            --
Transition rent...................          635            317             --           (568)          384
                                       --------      ---------      ---------     ----------     ---------
                                       $  8,992      $  37,948      $ (29,783)    $   (6,948)    $  10,209
                                       ========      =========      =========     ==========     =========
</TABLE>

<TABLE>
<CAPTION>
                                                    ADDITIONAL
                                       BALANCE     RESTRUCTURING                                 BALANCE
                                       MARCH 31,     AND OTHER                       CASH        JUNE 30,
                                         2000         CHARGES       WRITE-OFFS     PAYMENTS        2000
                                         ----         -------       ----------     --------        ----
<S>                                    <C>         <C>              <C>           <C>            <C>
Severance.........................     $   7,933     $   1,284      $      --     $  (1,800)     $   7,417
Shutdown of European operations...         1,892            --             --            --          1,892
Impairment charges................            --         9,592         (9,592)           --             --
Transition rent...................           384           205             --           (62)           527
                                       ---------     ---------      ---------     ---------      ---------
                                       $  10,209     $  11,081      $  (9,592)    $  (1,862)     $   9,836
                                       =========     =========      =========     =========      =========
</TABLE>

<TABLE>
<CAPTION>
                                                    ADDITIONAL
                                       BALANCE     RESTRUCTURING                                          BALANCE
                                       JUNE 30       AND OTHER                     CASH                   JUNE 30,
                                         2000         CHARGES      WRITE-OFFS    PAYMENTS      OTHER        2001
                                         ----         -------      ----------    --------      -----        ----
<S>                                    <C>         <C>             <C>          <C>          <C>          <C>
Severance..........................    $   7,417     $   1,857     $      --    $  (6,627)   $      --    $  2,647
Shutdown of European operations....        1,892            --            --           --       (1,892)         --
Shutdown of San Jose facilities....           --         1,294        (1,294)          --           --          --
Shutdown of Humongous publishing...           --           388          (388)          --           --          --
</TABLE>


                                      F-33
<PAGE>   85
<TABLE>
<S>                                    <C>           <C>           <C>          <C>          <C>          <C>
Transition rent....................          527            --            --           --         (527)         --
                                       ---------     ---------     ---------    ---------    ---------    --------
                                       $   9,836     $   3,539     $  (1,682)   $  (6,627)   $  (2,419)   $  2,647
                                       =========     =========     =========    =========    =========    ========
</TABLE>

NOTE 24--QUARTERLY FINANCIAL DATA (UNAUDITED)

           Summarized quarterly financial data for the fiscal year ended March
31, 1999 are as follows:

<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED
                                                                      JUNE 30,    SEPTEMBER 30,   DECEMBER 31,     MARCH 31,
                                                                      --------    -------------   ------------     ---------
<S>                                                                 <C>           <C>             <C>             <C>
Net revenues.....................................................   $   116,391    $   116,151    $    246,303    $    93,497
Gross profit.....................................................        60,493         60,193         126,691         (4,990)
Operating income (loss)..........................................         4,112          3,034          33,706       (116,962)
Income (loss) from continuing operations.........................         1,803          1,369          17,332        (72,301)
Loss from discontinued operations................................            --             --            (560)       (18,481)
Net income (loss) before dividends on preferred stock............         1,803          1,369          16,772        (90,782)
Net income (loss)................................................         1,803          1,369          16,772        (91,008)
Basic income (loss) per share from continuing operations.........   $      0.13    $      0.10    $       1.24    $     (4.97)
Basic loss per share from discontinued operations................   $        --    $        --    $      (0.04)   $     (1.27)
Basic net income (loss) per share................................   $      0.13    $      0.10    $       1.20    $     (6.24)
Weighted average shares outstanding- basic.......................        13,612         13,618          13,949         14,555
Diluted income (loss) per share from continuing operations.......   $      0.13    $      0.10    $       1.24    $     (4.97)
Diluted (loss) per share from discontinued operations............   $        --    $        --    $      (0.04)   $     (1.27)
Diluted net income (loss) per share..............................   $      0.13    $      0.10    $       1.20    $     (6.24)
Weighted average shares outstanding-diluted......................        13,798         13,713          14,019         14,555
</TABLE>

           Summarized quarterly financial data for the fiscal year ended March
31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                                                       THREE MONTHS ENDED
                                                                       JUNE 30,    SEPTEMBER 30,   DECEMBER 31,     MARCH 31,
                                                                       --------    -------------   ------------     ---------
<S>                                                                  <C>           <C>             <C>             <C>
Net revenues.......................................................  $   121,325    $    91,426    $    109,703    $    63,608
Gross profit.......................................................       59,182         26,806          20,567        (27,785)
Operating loss.....................................................       (3,709)       (52,112)        (93,359)      (138,812)
Loss from continuing operations....................................       (3,852)       (56,060)       (118,777)      (168,735)
Loss from discontinued operations..................................           --           (477)             --             --
Loss before extraordinary items....................................       (3,852)       (56,537)       (118,777)      (168,735)
Gain from extraordinary item, net of tax of $1,312.................           --             --           1,888             --
Net loss...........................................................       (3,852)       (56,537)       (116,889)      (168,735)
Basic and diluted loss per share from continuing operations........  $     (0.26)   $     (3.80)   $      (7.51)   $     (8.16)
Basic and diluted loss per share from discontinued operations......  $        --    $     (0.03)   $         --    $        --
Basic and diluted income per share from extraordinary items........  $        --    $        --    $       0.12    $        --
Basic and diluted net loss per share...............................  $     (0.26)   $     (3.83)   $      (7.39)   $     (8.16)
Weighted average shares outstanding................................       14,574         14,772          15,816         20,668
</TABLE>


                                      F-34
<PAGE>   86
Summarized quarterly financial data for the three months ended June 30, 2000 is
as follows:

<TABLE>
<CAPTION>
                                                                    THREE MONTHS
                                                                        ENDED
                                                                      JUNE 30,
                                                                      --------
<S>                                                                 <C>
Net revenues.....................................................    $   48,469
Gross profit.....................................................        25,283
Operating loss...................................................       (49,324)
Net loss.........................................................       (55,400)
Basic and diluted loss per share from continuing operations......    $    (2.68)
Basic and diluted net loss per share.............................    $    (2.68)
Weighted average shares outstanding..............................        20,646
</TABLE>

Summarized quarterly financial data for the fiscal year ended June 30, 2001 is
as follows:

<TABLE>
<CAPTION>
                                                                    SEPTEMBER 30,    DECEMBER 31,     MARCH 31,        JUNE 30,
                                                                    -------------    ------------     ---------        --------
<S>                                                                 <C>              <C>             <C>             <C>
Net revenues.....................................................    $    39,567     $    127,484    $    70,768     $    72,660
Gross profit.....................................................         24,755           81,491         33,808          44,485
Operating loss...................................................        (26,920)          17,832        (18,832)        (23,075)
Loss from continuing operations..................................        (32,714)          16,475        (21,430)        (22,999)
Net loss.........................................................        (32,714)          16,475        (21,430)        (22,999)
Basic and diluted loss per share from continuing operations......    $     (1.58)    $       0.24    $     (0.31)    $     (0.33)
Basic and diluted net loss per share.............................    $     (1.58)    $       0.24    $     (0.31)    $     (0.33)
Weighted average shares outstanding- basic.......................         20,686           68,135         69,734          69,524
Weighted average shares outstanding- diluted.....................         20,686           68,691         69,734          69,524
</TABLE>

         The sum of per share amounts may differ from the total for the year due
to the significant increase in the number of common shares outstanding relating
to the INA merger, the conversion of related party debt and the fact that the
per share information is computed separately for each period (Note 3).


                                      F-35
<PAGE>   87
                        INFOGRAMES, INC. AND SUBSIDIARIES

              SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (OPEN)
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                           ADDITIONS
                                                              BALANCE      CHARGED TO                    BALANCE
                                                             BEGINNING     COSTS AND                       END
DESCRIPTION                                                  OF PERIOD      EXPENSES     DEDUCTIONS     OF PERIOD
-----------                                                  ---------      --------     ----------     ---------
<S>                                                          <C>           <C>           <C>            <C>
ALLOWANCE FOR BAD DEBTS, RETURNS, PRICE PROTECTION
AND OTHER CUSTOMER PROMOTIONAL PROGRAMS:

Year ended June 30, 2001..................................   $   80,838    $   93,691    $ (117,975)    $   56,554
                                                             ==========    ==========    ==========     ==========
Three months ended June 30, 2000..........................   $   72,323    $   36,990    $  (28,475)    $   80,838
                                                             ==========    ==========    ==========     ==========
Year ended March 31, 2000.................................   $   69,821    $  159,297    $ (156,795)    $   72,323
                                                             ==========    ==========    ==========     ==========
Year ended March 31, 1999.................................   $   36,041    $  244,333    $ (210,553)    $   69,821
                                                             ==========    ==========    ==========     ==========

RESERVE FOR OBSOLESCENCE:

Year ended June 30, 2001..................................   $   48,101    $      838    $  (28,579)    $   20,360
                                                             ==========    ==========    ==========     ==========
Three months ended June 30, 2000..........................   $   48,087    $    6,925    $   (6,911)    $   48,101
                                                             ==========    ==========    ==========     ==========
Year ended March 31, 2000.................................   $   18,617    $   38,953    $   (9,483)    $   48,087
                                                             ==========    ==========    ==========     ==========
Year ended March 31, 1999.................................   $   15,574    $   16,634    $  (13,591)    $   18,617
                                                             ==========    ==========    ==========     ==========
</TABLE>


                                      F-36
<PAGE>   88

                                EXHIBIT INDEX
                                -------------

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

2.1         Agreement and Plan of Reorganization by and among the Company, GT
            Acquisition Sub, Inc., WizardWorks Group, Inc. and the Stockholders
            of WizardWorks Group, Inc., dated June 24, 1996 is incorporated
            herein by reference to Exhibit 2.1 to the Company's Current Report
            on Form 8-K filed on July 9, 1996.

2.2         Escrow Agreement by and among the Company, Paul D. Rinde, as the
            Stockholder Representative of WizardWorks Group, Inc., and Republic
            National Bank of New York, as Escrow Agent, dated June 24, 1996 is
            incorporated herein by reference to Exhibit 2.2 to the Company's
            Current Report on Form 8-K filed on July 9, 1996.

3.1         Amended and Restated Certificate of Incorporation is incorporated
            herein by reference to Exhibit 3.1 to the Company's Annual Report on
            Form 10-K for the fiscal year ended March 31, 2000.

3.2         Amended and Restated By-laws are incorporated herein by reference to
            Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
            quarter ended June 30, 1998.

4.1         Specimen form of stock certificate for Common Stock is incorporated
            herein by reference to Exhibit 4.1 to the Company's Annual Report on
            Form 10-K for the fiscal year ended March 31, 2000.

4.2         Certificate of the Powers, Designations, Preferences and Rights of
            the Series A Convertible Preferred Stock is incorporated herein by
            reference to Exhibit 3.1 to Company's Current Report on Form 8-K
            filed on March 2, 1999.

4.3         Stockholders' Agreement by and among Joseph J. Cayre, Kenneth Cayre,
            Stanley Cayre, Jack J. Cayre, the Trusts listed on Schedule I
            attached thereto and the Company is incorporated herein by reference
            to an exhibit filed as a part of the Company's Registration
            Statement on Form S-1 filed October 20, 1995.

4.3a        Amendment to Stockholders Agreement, dated as of December 18, 1995,
            by and among Joseph J. Cayre, Kenneth Cayre, Stanley Cayre, Jack J.
            Cayre, the Trusts parties thereto and the Company is incorporated
            herein by reference to Exhibit 10.30 to the Company's Annual Report
            on Form 10-K for the year ended December 31, 1996.

4.4         Registration Rights Agreement by and among Joseph J. Cayre, Kenneth
            Cayre, Stanley Cayre, Jack J. Cayre, the Trusts listed on Schedule I
            attached thereto and the Company is incorporated herein by reference
            to an exhibit filed as a part of the Company's Registration
            Statement on Form S-1 filed October 20, 1995.

4.5         Amended and Restated Registration Rights Agreement, dated as of
            February 15, 2000, between California U.S. Holdings, Inc. and the
            Company is incorporated herein by reference to Exhibit 4.5 to the
            Company's Annual Report on Form 10-K for the fiscal year ended March
            31, 2000.

10.1        The 1995 Stock Incentive Plan (as amended on October 31, 1996) is
            incorporated herein by reference to Exhibit 10.1 to Amendment No. 2
            to the Company's Registration Statement on Form S-1, filed December
            6, 1996.*

10.2        The 1997 Stock Incentive Plan is incorporated herein by reference to
            Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
            quarter ended June 30, 1997.*



<PAGE>   89
10.3        The 1997 Stock Incentive Plan (as amended on June 17, 1998) is
            incorporated herein by reference to Exhibit 10.5 to the Company's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.*

10.4        The 2000 Stock Incentive Plain is incorporated herein by reference
            to Appendix B to the Company's proxy statement dated June 29, 2000.*

10.5        The 1998 Employee Stock Purchase Plan is incorporated herein by
            reference to Exhibit 10.6 to the Company's Quarterly Report on Form
            10-Q for the quarter ended June 30, 1998.*

10.6        Employment Agreement, dated April 28, 1998, between the Company and
            Harry M. Rubin is incorporated herein by reference to Exhibit 10.3
            to the Company's Quarterly Report on Form 10-Q for the quarter ended
            June 30, 1998.*

10.6a       Agreement and Release, dated April 7, 2000, by and between Harry M.
            Rubin and the Company is incorporated herein by reference to Exhibit
            10.10a to the Company's Annual Report on Form 10-K for the fiscal
            year ended March 31, 2000.*

10.6b       Letter Agreement, dated June 15, 2000, by and between Harry M. Rubin
            and the Company is incorporated herein by reference to Exhibit
            10.10b to the Company's Annual Report on Form 10-K for the fiscal
            year ended March 31, 2000.*

10.6c       Letter Agreement, dated December 21, 2000, by and between Harry
            Rubin and the Company.*

10.7        Letter Agreement, dated April 20, 2000, by and between David Fremed
            and the Company is incorporated herein by reference to Exhibit 10.15
            to the Company's Annual Report on Form 10-K for the fiscal year
            ended March 31, 2000.*

10.8        Letter Agreement, dated September 7, 2000, by and between Lisa
            Rothblum and the Company.*

10.9        Lease Agreement between the Company and Plymouth 2200, LLP, dated
            September 6, 1996 is incorporated herein by reference to Exhibit
            10.1 to the Company's Quarterly Report on Form 10-Q for the quarter
            ended September 30, 1996.

10.10       Agreement of Lease, dated as of December 12, 1996, by and between
            the Company and F.S. Realty Corp is incorporated herein by reference
            to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the
            year ended December 31, 1996.

10.11       Lease Agreement between the Company and Netbreeders Realty LLC,
            dated November 1, 1999.

10.12       Lease Agreement between the Company and CarrAmerica Realty
            Corporation, dated February 17, 2000.

10.13       Sublease Agreement between the Company and North American Mortgage
            Company, dated February 17, 2000.

10.14       Sublease Agreement between the Company and SAVI Technology, Inc.,
            dated May 30, 2001.

10.15       Lease Agreement between the Company and Edward Silver, Co-Trustee of
            the Silver Trust and Paul Weinstein, Co-Trustee of the Weinstein
            Trust (dba PTL Realty), dated May 7, 2001.

10.16       Lease Agreement between the Company and MV 1997, L.L.C., dated
            November 24, 1997.

10.17       Lease Agreement between the Company and Northwest Properties Realty
            Corp., dated February 22, 1999.

10.18       Lease Agreement between the Company and Cimarron Airpark L.L.C.
            VIII, dated June 1, 1995.



<PAGE>   90
10.19       Sublease Agreement between the Company and XPIDATA, Inc., dated
            December 6, 1996.

10.20       Lease Agreement between the Company and Brookfield J, LLC, dated
            December 23, 1998.

10.21       Services Agreement between the Company and GoodTimes Home Video
            Corp., dated as of January 1, 1995, is incorporated herein by
            reference to Exhibit 10.2 to the Company's Registration Statement on
            Form S-1 filed October 20, 1995.

10.22       GTIS Master Option and License Agreement between the Company and the
            Williams Entertainment Group, dated December 28, 1994, and the
            Amendment to such agreement, dated March 31, 1995, are incorporated
            herein by reference to Exhibit 10.10 to the Company's Registration
            Statement on Form S-1 filed October 20, 1995.

10.23       GTIS Master Option and License Agreement (Home Video Games) between
            the Company and the Williams Entertainment Group, dated March 31,
            1995 is incorporated herein by reference to Exhibit 10.11 to the
            Company's Registration Statement on Form S-1 filed October 20, 1995.

10.24       Agreement by and between the Company and REPS is incorporated herein
            by reference to an exhibit filed as a part of the Company's
            Registration Statement on Form S-1 filed October 20, 1995.

10.25       Warehouse Services Contract, dated March 2, 1999, by and between the
            Company and Arnold Transportation Services, Inc. t/d/b/a Arnold
            Logistics is incorporated herein by reference to Exhibit 10.50 to
            the Company's Annual Report on Form 10-K for the fiscal year ended
            March 31, 1999.

10.26       Distribution Agreement between Infogrames Entertainment SA and the
            Company, dated as of December 16, 1999, is incorporated herein by
            reference to Exhibit 7 to the Schedule 13D filed by Infogrames
            Entertainment SA and California U.S. Holdings, Inc. on January 10,
            2000.

10.26a      Amendment to Distribution Agreement between Infogrames Entertainment
            SA and the Company dated as of July 1, 2000.

10.27       Trademark Agreement, dated as of May 10, 2000, by and between
            Infogrames Entertainment SA and the Company is incorporated herein
            by reference to Exhibit 10.25 to the Company's Annual Report on Form
            10-K for the fiscal year ended March 31, 2000.

10.28       Credit Agreement, dated as of September 11, 1998, by and among the
            Company, the Lenders thereto, NationsBanc Montgomery Securities,
            LLC, as Syndication Agent, Fleet Bank, N.A., as Documentation Agent,
            and First Union National Bank, as Administrative Agent, is
            incorporated herein by reference to Exhibit 10.3 to the Company's
            Quarterly Report on Form 10-Q for the quarter ended September 30,
            1998.

10.28a      Second Amendment, Waiver and Agreement, dated as of June 29, 1999,
            by and among the Company, the Lenders thereto and First Union
            National Bank, as Administrative Agent, is incorporated herein by
            reference to Exhibit 10.1 to the Company's Current Report on 8-K
            filed on August 5, 1999.

10.28b      Third Amendment, Consent, Waiver and Agreement, dated as of November
            15, 1999, by and among the Company, the Lenders thereto and First
            Union National Bank, as Administrative Agent is incorporated herein
            by reference to Exhibit 10.3 to the Company's Current Report on Form
            8-K filed on November 19, 1999.

10.28c      Right of First Refusal Offer Agreement, dated November 15, 1999, by
            and among California U.S. Holdings, Inc. and the Lenders named
            therein is incorporated herein by reference to Exhibit 13 to the
            Schedule 13D filed by Infogrames Entertainment SA and California
            U.S. Holdings, Inc. on December 14, 1999.

10.28d      Amended and Restated Unconditional Subsidiary Guaranty Agreement,
            dated as of November 15, 1999, among certain subsidiaries of the
            Company, California U.S. Holdings, Inc. and First Union National
            Bank, as



<PAGE>   91
            administrative agent, for the benefit of the Lenders is incorporated
            herein by reference to Exhibit 15 to the Schedule 13D filed by
            Infogrames Entertainment SA and California U.S. Holdings, Inc. on
            December 14, 1999.

10.28e      Second Amended and Restated Security Agreement, dated as of November
            15, 1999, by and among the Registrant, certain of its subsidiaries,
            First Union National Bank, as Administrative Agent, and California
            U.S. Holdings, Inc. is incorporated herein by reference to Exhibit
            10.4 to the Company's Current Report on Form 8-K filed on November
            19, 1999.

10.28f      Second Amended and Restated Pledge Agreement, dated as of November
            15, 1999, by the Company and certain of its subsidiaries in favor of
            First Union National Bank, as Administrative Agent, and California
            U.S. Holdings, Inc. is incorporated herein by reference to Exhibit
            10.5 to the Company's Current Report on Form 8-K filed on November
            19, 1999.

10.28g      Master Assignment and Acceptance, dated as of February 15, 2000, by
            and among the Company, the Assignors and Infogrames Entertainment SA
            is incorporated herein by reference to Exhibit 10.26g to the
            Company's Annual Report on Form 10-K for the fiscal year ended March
            31, 2000.

10.28h      Warrant Agreement, dated as of February 15, 2000, by and among the
            Company and Infogrames Entertainment SA is incorporated herein by
            reference to Exhibit 10.26h to the Company's Annual Report on Form
            10-K for the fiscal year ended March 31, 2000.

10.28i      Warrant Certificate, dated as of February 15, 2000, issued to
            California U.S. Holdings, Inc. is incorporated herein by reference
            to Exhibit 10.26i to the Company's Annual Report on Form 10-K for
            the fiscal year ended March 31, 2000.

10.28j      Fourth Amendment to the Credit Agreement, dated as of February 15,
            2000, by and between the Company and Infogrames Entertainment SA is
            incorporated herein by reference to Exhibit 10.26j to the Company's
            Annual Report on Form 10-K for the fiscal year ended March 31, 2000.

10.28k      Reimbursement and Cash Collateral Agreement, dated as of February
            15, 2000, by and between the Company and First Union National Bank
            is incorporated herein by reference to Exhibit 10.26k to the
            Company's Annual Report on Form 10-K for the fiscal year ended March
            31, 2000.

10.28l      Collateral Assignment Agreement, dated as of February 15, 2000, by
            and among First Union National Bank, Infogrames SA, the Company and
            the Guarantors is incorporated herein by reference to Exhibit 10.26l
            to the Company's Annual Report on Form 10-K for the fiscal year
            ended March 31, 2000.

10.28m      Fifth Amendment to the Credit Agreement, dated as of March 31, 2000,
            by and between the Company and Infogrames Entertainment SA is
            incorporated herein by reference to Exhibit 10.26m to the Company's
            Annual Report on Form 10-K for the fiscal year ended March 31, 2000.

10.28n      Sixth Amendment to the Credit Agreement, dated as of June 29, 2000,
            by and between the Company and Infogrames Entertainment SA is
            incorporated herein by reference to Exhibit 10.26n to the Company's
            Annual Report on Form 10-K for the fiscal year ended March 31, 2000.

10.28o      Ninth Amendment to the Credit Agreement, dated as of June 7, 2001,
            to the Credit Agreement by and between the Company and Infogrames
            Entertainment SA.

10.29       Stock Purchase Agreement, dated February 8, 1999, among the Company,
            General Atlantic Partners 54, L.P. and GAP Coinvestment Partners II,
            L.P. is incorporated herein by reference to Exhibit 10.1 to the
            Company's Current Report on 8-K filed on March 2, 1999.



<PAGE>   92
10.30       Warrant Agreement, dated as of June 29, 1999, among the Company, GAP
            54, GAPCO II and the other parties named therein is incorporated
            herein by reference to Exhibit 1 to the Schedule 13D filed by
            General Atlantic Partners, LLC and certain of its affiliates on
            August 10, 1999.

10.31       Letter Agreement, dated June 29, 1999, among GAP 54, GAPCO II,
            Joseph J. Cayre, Kenneth Cayre and Stanley Cayre is incorporated
            herein by reference to Exhibit 2 to the Schedule 13D filed by
            General Atlantic Partners, LLC and certain of its affiliates on
            August 10, 1999.

10.32       Form of Option Agreement, dated as of July 30, 1999, among GAP 54,
            GAPCO II and the other parties named therein is incorporated herein
            by reference to Exhibit 3 to the Schedule 13D filed by General
            Atlantic Partners, LLC and certain of its affiliates on August 10,
            1999.

10.33       Securities Purchase Agreement, dated as of November 15, 1999, by and
            among Infogrames Entertainment S.A., California U.S. Holdings, Inc.
            and the Company is incorporated herein by reference to Exhibit 10.1
            to the Company's Current Report on 8-K filed on November 19, 1999.

10.34       Securities Exchange Agreement, dated as of November 15, 1999, by and
            among the Company, General Atlantic Partners 54, L.P., and GAP
            Coinvestment Partners II, L.P. is incorporated herein by reference
            to Exhibit 10.2 to the Company's Current Report on 8-K filed on
            November 19, 1999.

10.35       Promissory Note of the Company in the aggregate principal amount of
            $25,000,000 payable to California U.S. Holdings, Inc. is
            incorporated herein by reference to Exhibit 10.6 to the Company's
            Current Report on 8-K filed on November 19, 1999.

10.36       Warrant to Purchase 50,000 shares of Common Stock, issued to
            California U.S. Holdings, Inc. is incorporated herein by reference
            to Exhibit 5 to the Schedule 13D filed by Infogrames Entertainment
            S.A. and California U.S. Holdings, Inc. on December 14, 1999.

10.37       Form of GAP Warrant is incorporated herein by reference to Exhibit 9
            to the Schedule 13D filed by Infogrames Entertainment S.A. and
            California U.S. Holdings, Inc. on December 14, 1999.

10.38       Note Purchase Agreement, dated as of November 15, 1999, between
            certain members of the Cayre Group and California U.S. Holdings,
            Inc. is incorporated herein by reference to Exhibit 11B to the
            Schedule 13D filed by Infogrames Entertainment S.A. and California
            U.S. Holdings, Inc. on December 14, 1999.

10.39       Equity Purchase and Voting Agreement, dated as of November 15, 1999,
            among Infogrames Entertainment S.A., California U.S. Holdings, Inc.,
            GAP 16, GAP 19, GAP II, GAP 54, GAPCO and GAPCO II is incorporated
            herein by reference to Exhibit 3 to the Schedule 13D filed by
            General Atlantic Partners, LLC and certain of its affiliates on
            December 23, 1999.

10.40       Form of GAP 54 Note is incorporated herein by reference to Exhibit 4
            to the Schedule 13D filed by General Atlantic Partners, LLC and
            certain of its affiliates on December 23, 1999.

10.41       Form of GAPCO II Note is incorporated herein by reference to Exhibit
            5 to the Schedule 13D filed by General Atlantic Partners, LLC and
            certain of its affiliates on December 23, 1999.

10.42       5% Subordinated Convertible Note of the Company is incorporated
            herein by reference to Exhibit 6 to the Schedule 13D filed by
            Infogrames Entertainment S.A. and California U.S. Holdings, Inc. on
            January 10, 2000.

10.43       Services Agreement, dated as of January 1, 2000, between Infogrames
            Entertainment SA and the Company is incorporated herein by reference
            to Exhibit 10.41 to the Company's Annual Report on Form 10-K for the
            fiscal year ended March 31, 2000.



<PAGE>   93
10.44       Sales Agency Agreement dated as of December 16, 1999 between
            Infogrames North America, Inc. and the Company is incorporated
            herein by reference to Exhibit 10.42 to the Company's Annual Report
            on Form 10-K for the fiscal year ended March 31, 2000

10.45       Affiliated Label Agreement dated as of July 1, 2000 between
            Infogrames North America, Inc. and the Company is incorporated
            herein by reference to Exhibit 10.43 to the Company's Annual Report
            on Form 10-K for the fiscal year ended March 31, 2000.

10.46       Services Agreement, dated as of January 26, 2001, between the
            Company and Infogrames Interactive, Inc.

10.47       Letter Agreement, dated as of January 26, 2001, between the Company
            and Infogrames Entertainment SA.

16.1        Letter from Arthur Andersen LLP, dated March 20, 2000, addressed to
            the Securities and Exchange Commission in accordance with Item
            304(a)(3) is incorporated herein by reference to Exhibit 16.1 to the
            Company's Current Report on Form 8-K dated March 20, 2000.

21.1        The Company's Subsidiaries is incorporated herein by reference to
            Exhibit 16.1 to the Company's Annual Report on Form 10-K for the
            fiscal year ended March 31, 1999.

22.1        Information Statement on Schedule 14C filed on January 25, 2000 is
            incorporated herein by reference.

22.2        Information Statement on Schedule 14C filed on May 12, 2000 is
            incorporated herein by reference.

22.3        Information Statement on Schedule 14C filed on June 5, 2000 is
            incorporated herein by reference.

22.4        Information Statement on Schedule 14C filed on September 12, 2000 is
            incorporated herein by reference.

23.1        Consent of Arthur Andersen LLP is incorporated herein by reference
            to Exhibit 23.1 to the Company's Registration Statement on Form S-8
            filed on February 2, 2001.

23.2        Consent of Deloitte & Touche.

24.1        Power of Attorney.

99.1        Amended and Restated Audit Committee Charter is incorporated herein
            by reference to Appendix A to the Company's proxy statement dated
            June 29, 2000.

Exhibit indicated with an * symbol is a management contract or compensatory plan
or arrangement filed pursuant to Item 14 of Form 10-K.