Annual Financial Report
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ANNUAL FINANCIAL REPORT ANNUAL FINANCIAL REPORT ANNUAL FINANCIAL REPORT Note: In accordance with Article 28 of the European Commission Regulation (EC) No. 809/2004, the following information is included by reference in this Reference Document: - The consolidated financial statements and the Statutory Auditors’ report relating thereto for the year ended March 31, 2018, as presented in the Reference Document filed on September 7, 2018 under number D.18-803 on pages 46 to 80. - The consolidated financial statements and the Statutory Auditors’ report relating thereto for the year ended March 31, 2017, as presented in the Reference Document filed on August 3, 2017 under number D.17-823 on pages 41 to 76. CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2019 Note to the reader: The English version of this report is a free translation from the original, which was prepared in French and is available on the company’s corporate French website. In the event of any inconsistencies between the original language version of the document in French and this English translation, the French version will take precedence. Page 2 of 131 ANNUAL FINANCIAL REPORT SUMMARY GENERAL OVERVIEW --------------------------------------------------------------------------------------------------------------------- 5 PROFILE ------------------------------------------------------------------------------------------------------------------------------------- 5 KEY FIGURES ------------------------------------------------------------------------------------------------------------------------------ 5 STRATEGY ---------------------------------------------------------------------------------------------------------------------------------- 6 HISTORY ------------------------------------------------------------------------------------------------------------------------------------- 6 THE INTERACTIVE ENTERTAINEMENT MARKET ------------------------------------------------------------------------------ 7 BUSINESS ----------------------------------------------------------------------------------------------------------------------------------- 7 FRANCHISING / LICENSING ----------------------------------------------------------------------------------------------------------- 8 MATERIAL CONTRACTS OF THE GROUP ---------------------------------------------------------------------------------------- 8 INVESTMENT POLICY ------------------------------------------------------------------------------------------------------------------- 9 FUTURE PROSPECTS ------------------------------------------------------------------------------------------------------------------- 9 RISK FACTORS ---------------------------------------------------------------------------------------------------------------------------- 9 MEASURES IMPLEMENTED TO SECURE THE BUSINESS ------------------------------------------------------------------ 9 NON-RECURRING EVENTS AND LITIGATION --------------------------------------------------------------------------------- 10 HUMAN RESOURCES AND PERSONNEL --------------------------------------------------------------------------------------- 10 GROUP PREMISES --------------------------------------------------------------------------------------------------------------------- 10 SIMPLIFIED ORGANIZATIONAL CHART OF THE GROUP AS OF MARCH 31, 2019--------------------------------- 11 MANAGEMENT REPORT ---------------------------------------------------------------------------------------------------------------- 12 1. ENVIRONMENT AND HIGHLIGHTS OF THE PERIOD --------------------------------------------------------------------- 12 2. ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------------------------ 14 3. PARENT COMPANY BUSINESS AND FINANCIAL RESULTS (ATARI S.A.) ----------------------------------------- 20 4. ACTIVITIES AND INCOME OF SUBSIDIARIES ------------------------------------------------------------------------------ 21 5. MAJOR SHAREHOLDER ----------------------------------------------------------------------------------------------------------- 22 6. APPROPRIATION OF THE NET RESULT ------------------------------------------------------------------------------------- 23 7. STOCK OPTION PLANS / STOCK OPTIONS --------------------------------------------------------------------------------- 23 8. RISKS RELATED TO THE ACTIVITY -------------------------------------------------------------------------------------------- 28 9. INFORMATION CONCERNING THE WORKFORCE ----------------------------------------------------------------------- 35 10. INTERNAL CONTROL ------------------------------------------------------------------------------------------------------------- 35 11. INVESTMENT POLICY - RESEARCH & DEVELOPMENT --------------------------------------------------------------- 36 12. SUBSEQUENT EVENTS ---------------------------------------------------------------------------------------------------------- 36 13. COMPANY PROSPECTS ------------------------------------------------------------------------------------------------------------ 36 14. RESULTS AND OTHER CHARACTERISTIC ELEMENTS OF ATARI SA IN THE LAST FIVE FINANCIAL YEARS -------------------------------------------------------------------------------------------------------------------------------------- 37 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS ----------------------------------------------------------------------- 38 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS ----------------------- 77 Page 3 of 131 ANNUAL FINANCIAL REPORT ATARI SA ANNUAL FINANCIAL STATEMENTS --------------------------------------------------------------------------------- 84 ANNUAL FINANCIAL STATEMENTS ----------------------------------------------------------------------------------------------- 85 NOTES TO THE FINANCIAL STATEMENTS ------------------------------------------------------------------------------------- 86 STATUTORY AUDITORS’ REPORT ON THE ANNUAL FINANCIAL STATEMENTS -------------------------------- 100 GENERAL INFORMATION ABOUT THE COMPANY -------------------------------------------------------------------------- 105 GENERAL INFORMATION CONCERNING THE COMPANY’S SHARE CAPITAL ----------------------------------- 109 MARKET FOR THE COMPANY’S SECURITIES ------------------------------------------------------------------------------- 114 DIVIDENDS ------------------------------------------------------------------------------------------------------------------------------ 115 CORPORATE GOVERNANCE REPORT ------------------------------------------------------------------------------------------ 116 CORPORATE GOVERNANCE CODE -------------------------------------------------------------------------------------------- 116 ADMINISTRATIVE, MANAGEMENT AND CONTROL BODIES ----------------------------------------------------------- 116 COMPENSATION OF DIRECTORS AND CORPORATE OFFICERS ---------------------------------------------------- 121 REGULATED AGREEMENTS ------------------------------------------------------------------------------------------------------ 123 SUMMARY TABLE OF THE DELEGATIONS CURRENTLY VALID GRANTED BY THE SHAREHOLDER’S GENERAL MEETING WITH REGARD TO AN INCREASE IN CAPITAL AND THEIR UTILIZATION ------------- 124 OWNERSHIP STRUCTURE -------------------------------------------------------------------------------------------------------- 125 STATUTORY AUDITORS’ SPECIAL REPORT ON REGULATED AGREEMENTS AND COMMITMENTS – FINANCIAL YEAR ENDED MARCH 31, 2019 ------------------------------------------------------------------------------------ 127 PERSON RESPONSIBLE FOR THE ANNUAL FINANCIAL REPORT ---------------------------------------------------- 129 Page 4 of 131 ANNUAL FINANCIAL REPORT GENERAL OVERVIEW PROFILE Atari (the “Company” or the “Group”) is a French company whose securities are listed on the Euronext Paris market, compartment C (ISIN code: FR0010478248, ticker: ATA). Atari (www.atari.com) is an interactive entertainment production company that manages an intellectual property portfolio focused on the Atari brand, Atari Classics games and intellectual property assets and licenses such as RollerCoaster Tycoon. The company has 4 main business lines: (i) video games (“Atari Games”), the Group’s DNA, which includes, by extension, the monetization of such games via multiple channels, multimedia production, and licensing activities; (ii) the regulated online casino games within the dedicated company “Atari Casino”; (iii) the “Atari VCS”, the Group’s new console; and (iv) “Atari Partners” which covers investments in technology companies, primarily by licensing the Atari brand. The Company’s business model is based on directly or indirectly monetizing its rights, in the broadest possible sense. Direct monetization includes revenue earned from games played on mobile, PC, online, console, or multimedia platforms. Such direct monetization also includes the final sale of rights under an ongoing arbitrage policy concerning the Company’s intellectual property portfolio. Indirect monetization covers licensing agreements granted to third parties, who are then responsible for manufacturing and producing products or applications in exchange for royalties paid to Atari, under multi-year contracts. In general, any transaction concerning such rights, whatever their legal nature, is considered part of the Company’s current business activity and contributes to its revenue and/or current operating income. KEY FIGURES Sales amounted to €20.6 million for the year ended March