Atari 2010 Annual Report Download - page 63

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1. GENERAL PRINCIPLES
The consolidated financial statements of Atari SA for the year ended March 31, 2010 have been prepared in accordance
with IFRS standards as adopted by the European Union and whose application was mandatory at April 1, 2007.
The accounting policies and measurement methods used are the same as those applied for the year ended March 31,
2009.
These financial statements and the related notes are presented in euros. They were approved by the Board of Directors
on May 20, 2010.
Application of the going concern principle
During and prior to fiscal year 2009-2010 the Group made significant losses that have eroded its equity and cash
position. At March 31, 2010 shareholders’ equity amounted to a positive €1.9 million, taking into account the €19.4 million
loss recorded for 2009-2010. On that same date, the Group’s net debt was €9.2 million euros and the Group had unused
drawdown capacity of approximately 44.0 million euros under its credit facility with BlueBay.
In view of this situation the Group has undertaken (and reached over the second semester of 2009-2010) measures to
refocus its business on online activities and reduce operating costs in order to return to operating profit, generate positive
cash flows and improve working capital. Those measures had their first positive effects in the second half of FY
2009/2010 when the Group published positive net income over that period.
These measures included, among other:
• Sale of all of the Group’s Distribution operations in Europe and Asia to Namco Bandai, carried out in two phases:
34% in February 2009 and the remaining 66% in July 2009.
• Rollout as from June 2009 of an additional worldwide restructuring plan, in order to limit the impact of falling demand
from end-consumers and facilitate the Group’s transition to Online focused business.
In order to ensure that it has the requisite funds to finance its operations in 2010-2011 (and beyond) and to strengthen its
equity, the Company also:
• Launched a financial transaction, which was finalized in January 2010 and enabled to raise €43 million (or €30.4
million paid in cash and €12.6 million paid up by offsetting a portion of the debt held against the Group), resulting
from the free allocation, in December 2009, of warrants (the “Warrants”) to its shareholders entitling them to
subscribe, at the option of Warrant holders, to new shares (the “New Shares”) and/or to bonds redeemable into new
or existing shares (the “ORANEs”), under the conditions set out in the prospectus which received the AMF visa
number 09-367 on December 10th, 2009.
• Implemented new processes and controls to improve efficiency within the Group and improve profitability of its
operations, including strict process to review the development and the profitability of each game, review and control
of all litigations, etc.
• Strict cost control on day-to-day operations.
Based on the above-described measures and assumptions, as well as the forecast for fiscal year 2010-2011 as
approved by the Board of Directors, management believes that the Group’s financial resources – including the transfer
and extension of the Banc of America credit facility to BlueBay – will be sufficient to cover the Group’s operating
expenses and capital expenditure for the year ending March 31, 2011, assuming that the current €49 million credit facility
with BlueBay would be renewed at the end of its maturity date i.e. after December 31, 2010.
On this basis, the Group has applied the going concern principle in preparing the consolidated financial statements.
Management believes that the assumptions it has used are reasonable. However, in view of the uncertainties inherent in
negotiating credit facilities and carrying out a strategic refocusing within a difficult economic environment, actual results
may differ from management’s forecasts. Such a situation could limit the Group’s ability to finance its recurring
operations and lead to adjustments in the value of its assets and liabilities, notably goodwill and intangible assets whose
total value in the consolidated balance sheet at March 31, 2010 amounted to €24.5 million and €31.3 million respectively.