Atari 2012 Annual Report Download

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ANNUAL FINANCIAL REPORT/
REGISTRATION DOCUMENT
FISCAL YEAR 2011/2012
A French S
ociété Anonyme
(joint stock company) with share capital of
€14,741,702
Registered office: 78 rue Taitbout 75009 PARIS – France
Paris Trade and Companies Registry number 341 699 106 RCS Paris
THE ORIGINAL INNOVATOR OF VIDEO GAMING

Table of contents

  • Page 1
    ANNUAL FINANCIAL REPORT/ REGISTRATION DOCUMENT FISCAL YEAR 2011/2012 THE ORIGINAL INNOVATOR OF VIDEO GAMING A French Société Anonyme (joint stock company) with share capital of â,¬14,741,702 Registered office: 78 rue Taitbout 75009 PARIS - France Paris Trade and Companies Registry number 341 699...

  • Page 2
    ..., 2010 under no. D 10-0660. CONSOLIDATED FINANCIAL STATEMENTS FISCAL YEAR ENDED MARCH 31, 2012 Note to the reader: The English language version of this report is a free translation from the original, which was prepared in French and is available on the company's corporate website (http://corporate...

  • Page 3
    ... REPORT - REGISTRATION DOCUMENT CONTENTS ANNUAL FINANCIAL REP ORT 1 REGISTRATION DOCUMEN T 2 GENERAL INFORMATION 4 CORPORATE PROFILE 4 STRATEGY 5 HISTORY 6 THE MARKET FOR INTERACTIVE ENTERTAINMENT SOFTWARE 6 BUSINESS 7 FRANCHISES AND LICENSES 8 MATERIAL CONTRACTS 8 CAPITAL PROJECTS...

  • Page 4
    ...franchises, including world-renowned brands like Asteroids®, Centipede®, Missile Command®, Pong®, Test Drive®, Backyard Sports®, and Rollercoaster Tycoon®. Atari capitalizes on these popular properties by delivering compelling games online (i.e. browser, Facebook®, and digital download), and...

  • Page 5
    ... LICENSING AND STRATEGIC PARTNERSHIPS Atari owns and/or manages a globally recognized corporate brand and portfolio of more than 200 games and franchises, including Asteroids®, Centipede®, Missile Command®, Pong®, Test Drive®, Backyard Sports®, and Rollercoaster Tycoon®. This unique portfolio...

  • Page 6
    ... partner Namco Bandai Games Europe. This strategic decision was followed, in May of the same year, by the Company changing its name from Infogrames Entertainment to Atari while writing down a significant impairment of its remaining legacy activities. In 2010, the Group completed a successful rights...

  • Page 7
    ...mobiles, Android-based, other smartphone, feature phones ** Including Apple iPad and other tablets *** Including PC full game downloads, cloud gaming, MMOs, social games, casual games, online console/HH, rental MOBILE, TABLETS AND SMARTPHONE GAME MARKET Mobile games are video games played on mobile...

  • Page 8
    ... Bandai Partners. FRANCHISES AND LICENSES The Group's operations have enabled it to acquire or manage a full portfolio of exclusive brands and well-known intellectual properties such as Atari Classics (including Asteroids, Pong, Missile Commends, and Centipede), Roller Coaster Tycoon, Test Drive...

  • Page 9
    ...Greatest hits on the App Store and Android platform, Freddi Fish and the stolen shell and Putt-Putt saves the Zoo on App Store and the online games available on Atari.com, including, but not limited to Centipede, Yars' Revenge, Tempest, Millipede, Missile Command, Adventure, Asteroids, Haunted House...

  • Page 10
    ... Group, which also works with leading copyright law firms and intellectual property monitoring services. Where appropriate, the Group registers its product names and copyrights in as many countries as possible, besides Europe and the United States. In addition, all console manufacturers incorporate...

  • Page 11
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT SUPPLY SHORTAGES The Group seeks to reduce the risk of supply shortages by diversifying its manufacturing sources. In the case of products for PC's, the risk is limited due to the large number of manufacturing companies around the world and their ...

  • Page 12
    ...FINANCIAL ST ATEMENTS Year ended March 31, 2012 BOARD OF DIRECTORS' REPORT ON THE GROUP'S MANAGEMENT 1. ECONOMIC ENVIRONM ENT AND HIGHLIGHTS O F THE YEAR 1.1. ECONOMIC ENVIRONMENT Atari ("the Company" or "the Group") is a multi-platform, global interactive entertainment and licensing company. Atari...

  • Page 13
    ... decision maker reviews financial operations. The Group has focused its future operations on building and monetizing Atari's mobile and online games as well as developing the licensing operations, while remaining opportunistic on the retail business. As a result, management decided to report its...

  • Page 14
    ... in relation to the products released and lower investment requirements of the current product pipeline as the Company continues to shift its focus away from retail toward online and mobile games. Marketing and selling expenses Marketing and selling expenses were â,¬6.3 million, compared...

  • Page 15
    ... -10,4% Change 0,3 (0,8) (0,8) 0,6 1,9 2,6 2,6 -41,0% 23,9% 43,3% -114,3% na -30,2% -41,0% Note: The net income of Eden, in the process of being disposed of as of March 31, 2012, is reported on the line "discontinued operations" as of April 1, 2010. 2010/2011 and 2011/2012 Group sales and current...

  • Page 16
    ... 6.5 Corporate and Other (7.8) Corporate and Other (6.4) Total 39.6 30.2 2.1 Total 60.1 34.5 2.3 The net income of Eden, in the process of being disposed of as of March 31, 2012, is reported on the line "discontinued operations" as of April 1, 2010. 2010/2011 and 2011/2012 Group sales and current...

  • Page 17
    ... business in its product line. Current Operating Income ("COI") Operating costs of the retail segment primarily include research and development costs of retail product, marketing, selling and distribution expenses and allocated overhead. Total operating costs for the Fiscal Year 2011/2012...

  • Page 18
    ... disposed of as of March 31, 2012, are reported on the line "assets/liabilities held for sale". In the process of being disposed by the end of April 2012, is also repor ted on the line "discontinued operations" the value of Game One's shares Consolidated shareholders' equity was -â,¬7.5 million as...

  • Page 19
    ... including the Hasbro license. As of March 31, 2011, intangible assets primarily consisted of â,¬4.5 million for games planned for future releases, â,¬4.1 million for games already released and to amortize over the remaining product life-cycle and â,¬4.1 million for trademarks including the Hasbro...

  • Page 20
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT 3. PARENT COMPANY BU SINESS AND FINANCIAL RESULTS (AT ARI S.A.) The Company is the parent entity and head of the Atari Group. It derives most of its revenue (other than investment and interest income) from services (corporate management, financial and...

  • Page 21
    ... the Company's shares outstanding . The Board of Directors did not make use of this authority. The authority expires on March 30, 2013. 5.5. EMPLOYEE SHARE OWNERSHIP As of March 31, 2012, the Company's employees owned less than 0.005% of its shares through the Employee Savings Plan. 6. ALLOCATION...

  • Page 22
    ... orientation, the preparation of the Board's work determined by the Board of Directors during the Chairman's term of office, as well as the change in the Company's relative position in its business sector in terms of market share, financial performance and market capitalization. Equal weight will be...

  • Page 23
    ...will still be within the Company at the vesting date. 250 000 From May 23, 2013 to May 23, 2015 From May 23, 2013 to May 23, 2015 INDEMNITY IN THE EVENT OF TERMINATION In the event Mr. Wilson is removed from office before the end of his appointment, the Board, on December 23, 2010, has also agreed...

  • Page 24
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT Executive corporate officer compensation summary: Indemnities and/or benefits due or likely to be due in the event of termination or a change of position Yes No Employment contract Supplementary pension plan Consideration due under a covenant not ...

  • Page 25
    ... the French Commercial Code. Compensation, stock options and rights to performance shares allocated to each executive corporate officer (â,¬ thousands) FY 2010/2011 FY 2011/2012 Jim Wilson, Chief Executive Officer since Dec. 23, 2010, COO from Oct. 25, 2010 until Dec. 23, 2010 - CEO of Atari Inc...

  • Page 26
    ... the Board of Directors has adopted rules restricting the sale of shares for the CEO and the Chairman. On May 25, 2009, the Board of Directors granted to Mr. Wilson 300,000 stock options with an exercise price of â,¬5.17 euro per stock. Following the financial transaction on January 2010, the number...

  • Page 27
    ...exercisable for shares of Atari have been granted by other Group companies. On-going stock options plans: Date of Shareholders' Meeting Date of Board of Directors' meeting Number of Stock Options granted (1) Of which, to members of the Top Executive Management and Board of directors (2) Plan N°11...

  • Page 28
    ... year 2011/2012 None Stock options exercised during the Fiscal Year by each corporate officer Name of the executive Fiscal year 2010/2011 NONE Fiscal year 2011/2012 NONE N° and date of the plan Number of options exercised during the fiscal year Exercise price PERFORMANCE SHARES ALLOCATED TO ATARI...

  • Page 29
    ... the largest number of options No shares were acquired by Company employees in FY 2011/2012 through the exercise of stock options granted by the Company or its subsidiaries. Paris, May 29, 2012 - The Board of Directors SUMMARY OF THE PRINCIPAL FEATURES OF PERFORMANCE SHARE PLANS As of March...

  • Page 30
    ... of Directors meeting/Initial allocation date Final grant date Total number of rights to performance shares originally allocated Of which to members of the Board and senior management 2011 A 09/30/2011 11/04/2011 11/04/2012 125 000 0 2011 B 09/30/2011 11/04/2011 11/04/2013 125 000 0 Trading price...

  • Page 31
    ...In the case of new shares being issued, a request for listing will be carried out. IISUMMARY OF THE PRINCIPAL FEATURES OF PERFORMANCE SHARE PLANS For the three plans, the Board of Directors has decided to allocate a total number of 1,937,290 rights to performance shares of the Company. For the three...

  • Page 32
    ... 29, 2012 - The Board of Directors 8. RISKS TO WHICH TH E BUSINESS IS EXPOSED FINANCIAL RISKS For further information on financial risks, see Note 24 "Management of market risks" to the consolidated financial statements. Liquidity, going-concern and operating loss risk Information on going-concern...

  • Page 33
    ... for 10,019,963 shares) and 152,636 ORANEs 2010 acquired as part of the financial transaction in January 2010 (exercisable for 4,028,064 shares). During the Fiscal Year 2011/2012, BlueBay Value Recovery (Master) Fund Limited was member of the Company's Board of Directors, represented by Gene Davis...

  • Page 34
    ... under certain circumstances. RISKS RELATED TO THE COMPANY'S FINANCIAL REPORTING Risk management Risk exposure is handled by the Group's parent company based on co nditions in the financial markets and in accordance with procedures set by management. Foreign currency transactions are carried out in...

  • Page 35
    ... the content, marketing and distribution of its products, including infringements of intellectual property rights held by third parties. On the other hand, no licenses are required for products in PC-compatible format. RISKS RELATED TO THE VIDEO GAME BUSINESS Risks of change in Business Model The...

  • Page 36
    ... 2010/2011). For Atari to succeed in 2012/2013 and beyond, Management believes that the Company must publish mobile games that are widely accepted and commercially successful for smartphone and tablets, succeed in the monetization of our games, and significantly increase the number of users of Atari...

  • Page 37
    ... effect on the Group's financial position. Also, to reduce such risks, the Company is working on increasing internal technical expertise by hiring additional key personnel (in technology, art, production, and design) and on starting to build internal development capacity in the mobile area. Risks...

  • Page 38
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT practices concerning the use, transmission and disclosure of the information that it collects regarding our users. Any failure by Atari to comply with its posted privacy policy, terms of service or privacy related laws and regulations could result in ...

  • Page 39
    ...users of those products and services and to gather such information and transmit it to the provider. The video game at issue is Atari's Greatest Hits. Lodsys has not made a specified the amount of money that they are claiming as damages. Atari was one of number of interactive game companies that was...

  • Page 40
    ... of May 15, 2001 on new economic regulations. This report covers the entities belonging to the Atari "Unité Economique et Sociale" (UES), meaning the holding entity, Atari SA and Atari Europe SAS, exclusive of Eden Games SAS and of corporate officers. As of March 31, 2012, the above French entities...

  • Page 41
    ... investment and cost control discipline, Overall the Company expects flat to continued improvement in Current Operating Income for the full year 2012/2013. Atari expects to continue launching new mobile and online games in FY 2012/2013 based upon its highly popular and world renowned game brands...

  • Page 42
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT 13. AT ARI SA FIVE-YEAR FINANCIAL SUMMARY 31/03/2008 (â,¬ thousands) Share capital Number of common shares outstanding Cumulative number of preferred shares (without voting rights) outstanding Maximum number of shares to be issued on conversion of b ...

  • Page 43
    ...in capital) Delegation of authority to the September 30, 2011 board of directors to issue Resolution 15 shares and securities with rights to shares of the Company for offering to members of an employee savings plan 40 (2) (over the term of the authority) Not used 40 (26 months) November 29, 2013...

  • Page 44
    ... Feb. 2010 11 12, 2010 Board) and July 2010 plan to 6 employees (approved by July 22, 2010 Board) 1- The shares have a nominal value of 0.5 euro. As of March 31, 2012 the Company's capital stock amounted to 14,741,702 euros, divided into 29,483,404 shares. 2- The number of shares issued pursuant to...

  • Page 45
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2012 CONTENTS CONSOLIDATED INCOME STATEMENT ...46 CONSOLIDATED BALANCE SHEET ...48 CONSOLIDATED CASH FLOW STATEMENT ...49 CONSOLIDATED STATEME NT OF CHANGES IN EQU ITY ...50 NOTE 1 - ...

  • Page 46
    ...for the year ended March 31, 2011 has been restated to present discontinued operations (Eden Games and Cryptic) on separate lines (see Note 1). (*) Cost of stock options, rights to performance shares and incentive bonuses paid in shares. During Fiscal Year ended March 31, 2012, the Company recorded...

  • Page 47
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT The following notes form an integral part of the consolidated financial statements. (â,¬ million) GROUP CONSOLIDATED NET RESULT Elements directly incurred in net equity: Translation adjustments Total result directly recognised in net equity GLOBAL ...

  • Page 48
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT CONSOLIDATED BALANCE SHEET (â,¬ million) Notes March 31, 2012 March 31, 2011 Goodwill Intangible assets Property, plant and equipment Non-current financial assets Deferred tax assets Non-current assets Inventories Trade receivables Current tax ...

  • Page 49
    ... assets and property, plant and equipment Other Cost of debt Income taxes (deferred and current) Cash flow before net cost of debt and taxes Income taxes paid Changes in working capital Inventories Trade receivables Trade payables Other current assets and liabilities Net cash used in operating...

  • Page 50
    ... and â,¬3.0 million value in share (383 517 shares issues). The earn-out had a positive impact on consolidated equity of â,¬ 3.5 million for the Fiscal Year 2010/2011. (2) In November 2011, as permitted by the September 30, 2011 shareholders meeting, Atari S.A. reduced its capital, not motivated by...

  • Page 51
    ... franchises, including world-renowned brands like Asteroids®, Centipede®, Missile Command®, Pong®, Test Drive®, Backyard Sports®, and Rollercoaster Tycoon®. Atari capitalizes on these powerful properties by delivering compelling games online (i.e. browser, Facebook® and digital download), on...

  • Page 52
    ...still supported by Atari. On the other hand, the selling price of applications is set by the company, not by the agent. Based on these facts, Atari decided to treat income distribution "mobile, social, and digital" in gross basis, with the related costs reflected in the cost of goods sold. The group...

  • Page 53
    ... which provides guidance on accounting for agreements to settle a financial liability fully or partially with shares or other equity instruments; Amendment to IFRS 1 - Limited Exemption from Comparative IFRS7 Disclosure for First-time Adopters; - Annual Improvements to IFRSs (May 2010), which mainly...

  • Page 54
    ... unless the entity concerned is sold. The table below sets out the exchange rates for the main foreign currencies used by the Group: Euros March 31, 2012 Closing Average rate for the year 1.33560 0.83390 1.28360 1.37773 0.86307 1.31863 March 31, 2011 Closing Average rate for the year 1.42070 0.88370...

  • Page 55
    ...estimated sale price less costs to sell. A discontinued operation is a component of an entity that has either been disposed of, or is classified as held for sale, and represents a separate major line of business or geographical area of operations for the Group; is part of a single co-ordinated plan...

  • Page 56
    ... forms part of "Operating income (loss)". 2.9. OTHER INTANGIBL E ASSETS Items recorded under "Intangible assets" in the balance sheet primarily include purchased management software, rights under purchased licenses, trademarks and video game development costs. Atari does not capitalize financial...

  • Page 57
    ... be impaired. These tests are based on the higher of the following values: ï,· ï,· present value of projected operating cash flows over a four-year period, plus a terminal value; the net sale price if there is an active market for the asset. When the sale price less costs to sell cannot be reliably...

  • Page 58
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT in Note 2.2. Treasury shares held by the parent company or fully consolidated subsidiaries are deducted from equity on the basis of their purchase price or initial balance sheet value. Gains or losses on sales of treasury shares are eliminated in the ...

  • Page 59
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT 2.20. PROVISIONS FOR PENSIONS AND OTHE R POST-EMPLOYMENT BENEFITS Defined contribution plans Group subsidiaries are subject to certain obligations under local laws and practices with respect to employee pensions, life and disability insurance plans ...

  • Page 60
    ...still supported by Atari. On the other hand, the selling price of applications is set by the company, not by the agent. Based on these facts, Atari decided to treat income distribution "mobile, social, and digital" in gross basis, with the related costs reflected in the cost of goods sold. The group...

  • Page 61
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT 2.26. FINANCIAL INCO ME AND EXPENSES Cost of debt Net debt is the aggregate of current and non-current borrowings and other financial liabilities, less cash and cash equivalents. The cost of debt is the excess of expenses over income generated by ...

  • Page 62
    ... and a terminal value. The main assumptions used by management to project future cash flows are a discount rate, growth rates, expected trends in sale prices and operating costs. The table below sets out the discount rates and perpetuity growth rates used at March 31, 2012 and March 31, 2011: March...

  • Page 63
    ...driven by online distribution sales and on (ii) a comparable cost structure to the one achieved in 2010/2011. At March 31, 2012, the sensitivity of the recoverable amounts of the Group's CGU to a one-point change in the discount rate or the perpetuity growth rate was as follows: Cash-generating unit...

  • Page 64
    ... tests done by the group on intangible assets did not lead to material depreciation for the Fiscal Year 2011/2012. The table below shows changes in intangible assets during the year ended March 31, 2011: (â,¬ millions) Gross value Gam es Tradem arks Licences Softw are Other Total April 1, 2010...

  • Page 65
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT NOTE 5 - PROPERTY, PLANT AND EQUIPMENT Changes in property, plant and equipment for the year ended March 31, 2011 can be analyzed as follows: Property, plant and equipm ent (â,¬ m illion) Other equipm ent, furniture and fixtures and fittings Total ...

  • Page 66
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT The table below shows changes in property, plant and equipment for the year ended March 31, 2011: Property, plant and equipm ent (â,¬ m illion) Other equipm ent, furniture and fixtures and fittings Total Land Buildings Com puter hardw are Gross ...

  • Page 67
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT NOTE 6 - NON-CURRENT FINANCIAL AS SETS Non-current financial assets can be analyzed as follows (â,¬ million) Deposits Loans Other (1) Total At March 31, 2011 Gross value Impairment Net value at March 31, 2011 Increase Changes in scope of ...

  • Page 68
    ... are subject to an insignificant risk of changes in value. At March 31, 2012 and 2011, there were no cash balances that could not be freely used. NOTE 11 - EQUITY 11.1. CAPIT AL STOCK COMMON STOCK At March 31, 2012, the Company had 29,483,404 common shares outstanding, fully paid up, with a nominal...

  • Page 69
    ... of 7.8% on the Company's capital as of March 31, 2012. 11.4. AT ARI SA STOCK OPTION PLAN The Board of Directors has been authorized, until November 29, 2013, to grant options for new or existing common shares of the Company to officers, directors and certain employees of the Group, subject to the...

  • Page 70
    ... shares, grants of stock options and stock warrants were not taken into account when calculating diluted earnings (loss) per share for Fiscal Years 2010/2011 and 2011/2012, as their impact was anti-dilutive. NOTE 12 - PROVISIONS FOR CURRE NT AND NON-CURRENT CONTINGENCIE S AND LOSSES 12.1. CHANGES...

  • Page 71
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT (â,¬ m illions) Employee-related expenses Rent on unused premises Other Total March 31, 2012 0.6 0.6 March 31, 2011 1.4 0.5 1.9 During Fiscal Year ended March 31, 2009, the Company announced a restructuring plan on June 17, 2008. The provision for ...

  • Page 72
    ... shares in December 2004 to take into account the allocation of free stock warrants on that date. The Company has the option of calling the bonds if, prior to their maturity, the price of Atari common stock rises above a pre-defined level. A prospectus was published in connection with the bond issue...

  • Page 73
    ... interest at an annual rate of 0.5% - representing â,¬0.50 per bond - payable in arrears on April 1 each year. Taking into account the adjustment made to the related exchange parities in January 2010, one ORANE 2009 bond is redeemable for 29.29 new or existing shares. As of March 31, 2012 there were...

  • Page 74
    ... relating to certain video games published by Atari Europe SAS. Pledges of the intragroup receivables of certain Group subsidiaries. BlueBay executed a termination related to the pledge of the Cryptic shares at the time that Atari closed the Cryptic sale to Perfect World. The table below summarizes...

  • Page 75
    ... unchanged and bars Atari from using its real estate properties and rights as collateral, or from pledging its business as security, without the holders of OCEANE 2020 bonds being granted pari passu rights. This obligation only pertains to bond issues and does not restrict Atari's right to grant...

  • Page 76
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT NOTE 14 - OTHER CURRENT AND NO N-CURRENT LIABILITIES Other current and non-current liabilities can be analyzed as follows: (â,¬ m illion) March 31, 2012 March 31, 2011 Hasbro guaranteed minimum Other Other non-current liabilities 0,1 0,1 4,7 0,1 ...

  • Page 77
    ... Held-to-maturity investments Loans, receivables and liabilities at amortized cost Derivatives Total (2,4) (2,4) - - 15.4. RECOGNITION IN THE INCOME STATEMENT FOR YEAR ENDED M ARCH 31, 2011 Total contribution to net Foreign financial exchange and income other gains (expense) for and losses the...

  • Page 78
    ... as of March 31, 2012, is reported on the line "discontinued operations" as of April 1, 2010. 2010/2011 and 2011/2012 Group sales and current operating income exclude Eden business. (2) The Group has realigned its segment reporting by breaking out its licensing business as a stand-alone segment...

  • Page 79
    ...still supported by Atari. On the other hand, the selling price of applications is set by the company, not by the agent. Based on these facts, Atari decided to treat income distribution "mobile, social, and digital" in gross basis, with the related costs reflected in the cost of goods sold. The group...

  • Page 80
    ... of the Company's shares. The options granted have an eight-year life and a vesting period of between zero and three years. The table below summarizes the information concerning the Company's current stock option plans: 2011-2012 Num ber of options (in thousands) Average exercise price 2010-2011 Num...

  • Page 81
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT Principal assum ptions 2011-2012 #1 2010-2011 #1 2010-2011 #2 2010-2011 #3 Valuation model Price of shares on option grant date Exercise price on option grant date (per share) Expected volatility Risk-free interest rate on grant date Expected ...

  • Page 82
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT NOTE 21 - INCOME TAX 21.1. ANALYSIS OF THE TAX CHARGE By destination â,¬ illio Year ended March 31, Year ended March 31, 2012 2011 Current income tax benefit (expense) French enti ti es Forei gn enti ti es Deferred tax benefit (expense) French enti ...

  • Page 83
    ... forwards arising in the United States (Atari Inc.) and in France. Atari SA and its French subsidiaries set up a consolidated tax group on July 1, 1995. The five-year option for tax consolidation was extended on March 31, 2005. For the years ended March 31, 2012 and 2011 group tax relief amounted to...

  • Page 84
    ...equivalents Current assets Assets held for sale Year ended March 31, 2012 0,1 1,9 2,0 1,1 0,1 1,2 3,2 Year ended March 31, 2011 19,7 20,1 0,4 0,6 40,8 0,4 0,4 0,7 1,5 42,3 In March 2012, the company decided to begin the process of divesting itself of Game One. The â,¬1.9 million which was the value...

  • Page 85
    ..., 2012 0.5 0.1 0.5 1.1 1.1 Year ended March 31, 2011 0.1 5.5 5.6 1.3 0.1 4.4 5.8 11.4 22.3. SEGMENT INFORM ATION ON DISCONTINUED OPERATIONS AND ASS ETS AND LIABILITIES HELD FOR SALE March 31, 2012 (â,¬ m illions) Online Retail Corporate & other Total Revenue from discontinued operations Current...

  • Page 86
    ... New borrow ings Net funds disbursed for: Interest and other financial charges, net Debt repayment Net cash provided by (used in) financing activities Impact of changes in exchange rates Net change in cash and cash equivalents CASH AND CASH EQUIVALENTS: At beginning of year At end of year (a) Change...

  • Page 87
    ... the type of financing concerned. At March 31, 2012, the Group had not hedged its overall exchange-rate exposure on these sums as they represent long-term financing for its US operations. The Group has not set up a currency hedging strategy for commercial transactions as there is an overall balance...

  • Page 88
    ...Year 2011/2012 and â,¬1.7 million for the Fiscal Year 2010/2011. 25.1 DISPUTES WITH A FORMER EMPLOYEE AND THE COMPANY A significant case arose in a previous year, in which the Company was sued by a former employee who claimed that he had co-authored one of the Group's former best-selling franchises...

  • Page 89
    ... of those products and services and to gather such information and transmit it to the provider. The video games at issue is Atari's Greatest Hits. Lodsys has not made a specified the amount of money that they are claiming as damages. Atari was one of number of interactive game companies that was...

  • Page 90
    ...Viacom, for a purchase price, in cash, of approximately â,¬5.9 million. This transaction is part of Atari's strategy to focus on core gaming a ssets. The proceeds of the transaction have been used for corporate purposes and reduction of debt. As of March 31, 2012, the Company accounted for its stake...

  • Page 91
    ... the Company's financial resources be insufficient, Senior Management believes that the Blue Bay credit line would be renewed beyond December 31, 2012. ï,· Also, we draw your attention to the change in accounting method in terms of « Digital» revenues and cost of sales presentation. This change is...

  • Page 92
    ... Income tax Employee profit sharing Net income (loss) for the year NOTES TO THE FINANCIAL STATEMENTS These notes form an integral part of the financial statements for the year ended March 31, 2012 of Atari (hereinafter the "Company"), which had total assets of â,¬229 million and reported a loss of...

  • Page 93
    ... restructuring cost for Eden Games in Fiscal Year 2011/2012 amounted to approximately â,¬3.6 million. As of March 31, 2012 the Company has started a formal disposal process of Eden Games whose core business is to develop console games, while Atari is mainly focusing on mobile/online games. Cryptic...

  • Page 94
    ... ending as of March 31, 2013. In the case the financial resources of the Group would not be sufficient, the management believes that the credit facility would be extended beyond December 31, 2012. 2.2. Accounting principles The basic method used to measure accounting items is the historical cost...

  • Page 95
    ..., on the line "Net change in intra -group balances". ï,· Use of estimates The preparation of the annual financial statements in accordance with generally accepted accounting practices requires the use of estimates and assumptions by the Company's management, which affect the value of assets and...

  • Page 96
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT exchange rate between $US and â,¬ concerning the loan to Atari Interactive Inc. The provisions increased by â,¬50 million due to this Fiscal Year impairment. All receivables from subsidiaries are due in more than one year. As of March 31, 2012, the ...

  • Page 97
    ... of 2008, 2009 and 2010 ORANE bonds (2) Equity issue as part of free shares (3) Reduction of shares' nominal value (4) Appropriation of 2011 loss Netting of retained earnings and other reserves Profit (loss) for the year ended March 31, 2012 Shareholders' equity as of March 31, 2012 29 483 404 14...

  • Page 98
    ...9.2. Atari stock option plan The Board of Directors has been authorized, until November 29, 2013, to grant options for new or existing common shares of the Company to officers, directors and certain employees of the Group, subject to the ceiling set in Article L.225-182 of the French Commercial Code...

  • Page 99
    ...Company issued bonds redeemable for new or existing shares with stock warrants attached, maturing April 1, 2014. The nominal value of the bond issue was â,¬40,543,800 represent ing 405,438 bonds with a nominal value of â,¬100 each. The bonds bear annual interest at 0.5%. On January 22, 2010, as part...

  • Page 100
    ... in the issue of 20,916,198 new shares with a dilutive effect on the Company's capital of 70.9% as of March 31, 2012. 12.5. ORANE 2010 bonds (ISIN code: FR0010833053) In December 2009, Atari launched a financial transaction, which was finalized in January 2010, resulting from the free allocation of...

  • Page 101
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT prospectus which received the AMF visa number 09-367 on December 10th, 2009. In January 2010, the Company issued 156,428 bonds redeemable for new or existing shares ("ORANE 2010 bonds", ISIN FR0010833053), maturing on April 1, 2015. The bonds have a ...

  • Page 102
    ... Insurance Fees Advertising, publications, public relations Travel, assignment and entertainment Postage and communications Bank charges (essentially ORANE issue costs) Directors' fees Other expenses Total 03/31/2012 13 33 2 460 73 213 185 1 871 18 22 13 7 167 5 498 10 572 03/31/2011 6 1 160 117 27...

  • Page 103
    ... including reversal of provision on: o Shares in Cryptic for â,¬12.2 million; o Current account in Atari Europe for â,¬79.2 million. Financial expenses for the year ended March 31, 2012 included: ï,· Interest at 0.5% on ORANE bonds for 1 million euro, ï,· Exchange loss for â,¬1.8 million. 103

  • Page 104
    ... of: o â,¬100.6 million for Atari Europe shares, o â,¬27.5 million for Atari Inc shares Financial income for the year ended March 31, 2011 reflected: ï,· Interest income of â,¬3.8 million, corresponding to interest charged on loans to other Group companies, ï,· Reversals of provisions of â,¬22...

  • Page 105
    ... of certain trademarks and rights relating to certain video games published by Atari Europe SAS, pledges of the intra-group receivables of certain Group subsidiaries. 23.1.2. Hasbro commitment In connection with the agreement signed in July 2011, entered into by the Company and Hasbro Inc., the...

  • Page 106
    ... had been terminated, and new offices have been rent. The new lease is for three years, and began in April 2012. The annual rent is â,¬47,000. The Company signed a three-year lease starting on June 15, 2010 for its headquarters office in Paris. The annual rent is â,¬51,000. 23.3. Capital leases As...

  • Page 107
    ... of those products and services and to gather such information and transmit it to the provider. The video games at issue is Atari's Greatest Hits. Lodsys has not made a specified the amount of money that they are claiming as damages. Atari was one of number of interactive game companies that was...

  • Page 108
    ... Viacom, for a purchase price, in cash, of approximately â,¬5.9 million. This transaction is part of Atari's strategy to focus on core gaming assets. The proceeds of the transaction have been used for corporate purposes and reduction of debt. As of March 31, 2012, the Company accounted for its stake...

  • Page 109
    ... ON THE FINANCIAL STATEMENTS Year ended March 31, 2012 This is a free translation into English of the statutory auditors' report issued in French and is provided solely for the con venience of English speaking users. The statutory auditors' report includes information specifically required by French...

  • Page 110
    ...all media and by means of all present and future means of communication; purchasing, selling, supplying and more generally distributing all products and services related to the foregoing; creating, acquiring, using and managing intellectual and industrial property rights or other rights in rem or in...

  • Page 111
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT PLACE WHERE LEGAL DOCUMENTS MAY BE EXAMINED The Company's registered office. FISCAL YEAR (ARTICLE 6 OF THE ARTICLES OF INCORPORATION) The Fiscal Year of the Company commences on April 1 and ends on March 31 of each year. FUNCTIONING OF THE BOARD OF ...

  • Page 112
    ... location set by the Shareholders' Meeting or, failing which, by the Board of directors, no later than nine months after the end of the Fiscal Year. The Board of Directors may distribute one or more interim dividends prior to approving the financial statements for the year. The Annual Shareholders...

  • Page 113
    ... Meetings of September 30, 20 10 and of September 30, 2011 delegated authority to the Board of Directors to increase the capital by issuing shares or other securities carrying rights to Company shares, to be offered to members of company savings plans, over a period of 26 months and for an aggregate...

  • Page 114
    ... result in the issue of 20,916,198 new shares with a dilutive effect on the Company's capital of 70.9% as of March 31, 2012. Bonds redeemable for new or existing shares issued in January 2010 in connection with the issue of free warrants to purchase new shares or ORANE ("ORANE 2010 bonds") - ISIN...

  • Page 115
    ... FINANCIAL REPORT - REGISTRATION DOCUMENT INFORMATION CONCERNING THE POTENTIAL DILUTION OF THE COMPANY'S CAPITAL (As of March 31, 2012) Potentially dilutive securities Stock options Number Exercise outstanding on Issue date price in March 31, euros (1) 2012 (6) Number of Potential dilution shares...

  • Page 116
    ...OWN STOCK TRADING BY CORPORATE OFFICERS IN SHARES AND OTHER SECURITIES (ARTICLE L. 621-18-2 OF THE FRENCH MONETARY AND FINANCIAL CODE) Name and position on the transaction date The BlueBay Value Recovery Fund Limited Member of the Board of Directors The BlueBay Multi-Strategy Fund Limited Member of...

  • Page 117
    ...BlueBay Value Recovery Fund Limited Member of the Board of directors Type of transaction Transaction date Trading volume 125,964 ORANE bonds 171,910 shares Unit price (â,¬) 100 Transaction amount (â,¬) 12,569,400 171,910 shares Subscription 01-22-2010 ORANE exercise 10/08/2010 NA CHANGES IN...

  • Page 118
    ... shown in the parent company financial statements. * As of July 7, 2009, due to the sale of the Company's remaining 66% interest to Namco Bandai Games Europe SAS, these pledges have been lifted. Undertaking to pledge or to keep certain assets free of liens and encumbrances As part of the previously...

  • Page 119
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT 2009 STOCK WARRANTS - ISIN CODE: FR0010690099 Monthly highs and lows High (euros) 2011 January February March April May June July August September October November December 2012 January February March (Source: Nyse Euronext) ORANE 2008 BONDS ...

  • Page 120
    ... 0.0010 0.0095 0.0043 0.0025 0.0017 EXISTING SHARES) - ISIN CODE: Monthly highs and lows High (euros) 2011 January February March April May June July August September October November December 2012 January February March (Source: NYSE Euronext) ORANE 2010 BONDS FR0010833053 (REDEEMABLE FOR 21.02 21...

  • Page 121
    ... of shares traded (â,¬ millions) DIVIDENDS The Company has not paid any dividends for the past five Fiscal Years and the Board does not anticipate that it will propose a dividend for Fiscal Year 2011/2012. CORPORATE GOVERNANCE M ANAGEMENT, SUPERVISORY AND OVERSIGHT BO DIES THE BOARD OF DIRECTORS...

  • Page 122
    ...members of the Board of Directors during the period from April 1, 2010 to the date of the filing of the present document: Name Date of appointment Term ends (at the close of the AGM called to approve the financial statements for the year ending 03/31) 2012 Main function in the Company Main currently...

  • Page 123
    ... FINANCIAL REPORT - REGISTRATION DOCUMENT Name Date of appointment Term ends (at the close of the AGM called to approve the financial statements for the year ending 03/31) 2013 Main function in the Company Main currently outside Company position held the Age nationality and Other offices...

  • Page 124
    ... section 7 "Corporate Officier" of the "Information on management and the financial statements / Board of directors' report on the Group's management" on page 21 to 26 of the present document. THE EXCOM TEAM The management team has continued to evolve, in order to best help the Group negotiate each...

  • Page 125
    ... NG EMPLOYEE PROFIT SHARINGPROFIT -SHARING PLAN This information can be found in section 9 "Information concerning the workforce/information concerning employee profit sharing" of the "Information on management and the financial statements / Board of directors' report on the Group's management" on...

  • Page 126
    ... Bluebay Credit Line to Atari Europe SA and Atari Inc.. As of March 31, 2012, your Board of Directors has authorized the Atari Europe to re-invoice to your Company, and to Atari Inc., the cost of the Bluebay credit line based on a 10% rate, corresponding to the average cost of debt used by Bluebay...

  • Page 127
    ... governance, the orientation of the strategy, and the preparation of Board work determined by the Board during the term of the Chairman, and the evolution the relative position of the Company compared to its industry in terms of market share, financial performance and market valuation, would all be...

  • Page 128
    ...refers to the Board of Directors' Management Report included in the Company's Registration Document for the year ended March 31, 2012 with regard to the publication of the information mentioned in Article L. 225-100-3 of the French Commercial Code concerning the Company's share capital and the items...

  • Page 129
    ... thresholds necessary for the Chief Executive Officer (or the other executive officers) to finalize and effect the main transactions of the Company, and approves the annual Budget and the multiannual game publishing plan. The Board of Directors also approves any material change in the Budget or in...

  • Page 130
    ... of the Company's size and the expert ise of the Committee's members. During Fiscal Year 2011/2012, the Audit Committee met 4 times (average attendance rate was 100%) to address issues such as review of the Company's annual and quarterly financial statements, recommendation of the Group's exte rnal...

  • Page 131
    ANNUAL FINANCIAL REPORT - REGISTRATION DOCUMENT approves any material change in the Budget or in the publishing plan during the year. The Board of Directors approves the financial communication policy of the Company. 3. INTERNAL CONTROL During Fiscal Year 2011/2012, the Group has been working on ...

  • Page 132
    ... Executive Officers of entities. The Group's finance management conducts reviews of each operating entity, including technical performances and risk procedures, action plans decided in connection with financial planning procedures and ad-hoc audits. The independent auditors also report to the Group...

  • Page 133
    .... In addition, officers, executives and selected critical managers have been allocated rights to performance shares and stock options. Compensation paid to members of the Board of Directors is describe d in section 7 of the Board of Directors' Management Report included in the Registration Document...

  • Page 134
    ...reported on the line "discon tinued operations" as of April 1, 2010. 2011/2012 and 2012/2013 Group revenues exclude Eden Games business. The Group has adopted the provisions of IFRS 8 and presents segment information in accordance with how the Group's chief operating decision maker reviews financial...

  • Page 135
    ...the change in accounting method in terms of « Digital » revenues and cost of sales presentation described in notes 2.1.1 and 2.22. The historical financial data for Fiscal Year ended March 31, 2011 and March 2010 are incorporated by reference. The report for Fiscal Year ended March 31, 2011 called...

  • Page 136
    ... 4 26 68 93 59 Information on the Company's business and financial position can be found on its website at www.atari.com TENTATIVE TIMETABLE (FOR INFORMATION) Annual Shareholders' Meeting: September 28, 2012 The dates above are indicative only and may have to be changed. Firm dates can be obtained...

  • Page 137
    ... rights dispute Atari bolsters management team Free share plan First Half of Fiscal Year 2011/2012 Financial results First Half of Fiscal Year 2011/2012 Financial Report Statement on recent share price increase Atari's Breakout: Boostâ„¢ Surpasses One Million Downloads - Atari's Greatest Hits App...

  • Page 138
    ... to corporate officers and executives 15.2 Pensions and other benefits 21-26 ; 89 40-41 137-139 125-127 130 128 128-133 133-134 16 16.1 16.2 16.3 16.4 16.5 Board practices Terms of office of the members of the Board of Directors and senior management Board members' service contracts Information...

  • Page 139
    ...listed by article L.451-1-2 of the French Monetary and Financial PAGES Code (Code monétaire et financier) 2011/2012 Statutory financial statements 2011/2012 Consolidated financial statements Board of Directors' 2011/2012 management report Statement by the person responsible for the 2011/2012 Annual...

  • Page 140
    ATARI 78 rue Taitbout - 75 009 PARIS - FRANCE