ATARI REPORTS FIRST-QUARTER RESULTS

SUNNYVALE, Calif. May 20, 1996 Atari Corporation today reported its financial results for the first quarter ended March 31, 1996.

Net sales for the first quarter of 1996 were $1.3 million as compared to $4.9 million for the first quarter of 1995. As previously reported, the Company sold the remaining balance of its holdings in a publicly traded security during the first quarter of 1996 and realized a gain of $6.3 million.

Sales of the Jaguar continue to be disappointing and the Company made substantial writedowns of inventory in the first quarter of 1996. The Net Loss for the first quarter of 1996 was $.8 million compared to a net loss of $4.4 million for the first quarter of 1995. The Company is pursuing sales of its inventory of Jaguar product in Europe and North America.

ATARI CORPORATION AND JTS CORPORATION TO MERGE

On February 13, 1996, Atari Corporation and JTS Corporation announced plans to merge the two companies. JTS is a manufacturer of personal computer hard disk drives. Under the terms of the agreement, the new corporation will operate under the name of JTS Corporation and the officers of JTS will become the officers of the merged company. The Atari entertainment business and the JTS disk drive business will operate as separate divisions of the new merged company.

In connection with the merger Atari has extended a bridge loan to JTS in the amount of $25 million. In the event that the merger is not consummated, the bridge loan may be convertible into shares of JTS Series A Preferred Stock at the option of Atari or JTS and subject to certain conditions.

As a result of the transaction, Atari stockholders will hold approximately 60% of the outstanding shares of the new company following the merger. The transaction is structured to qualify as a tax-free reorganization and will be accounted for as a purchase.

The boards of directors of Atari and JTS have approved the definitive merger agreement. The merger is subject to certain shareholder and regulatory approvals and other conditions to closing. It is anticipated that the transaction will close toward the end of the second calendar quarter of 1996.

Atari has been in the video game business for over twenty years. Today, Atari markets Jaguar, the only American made, advanced 64-bit entertainment system and licenses its intellectual property to third parties. Atari is headquartered in Sunnyvale, California.

ATARI CORPORATION

Condensed Consolidated Statements of Operations
(in thousands, except per share)

  Quarter Ended
 
Mar. 31,
1996
Mar. 31,
1995
Net Sales
$1,272
$4,874
Operating Income (loss)
$(7,149)
$(5,158)
Exchange Gain (loss)
(60)
5
Other Income (Expense) Net
6,640
355
Interest Income Net of Interest (Expense)
237
372
Income (loss) Before Income Taxes
$(806)
$(4,426)
Net Income (loss)
$(806)
$(4,426)
Earnings Per Common and Equivalent Share:
  Net Income (loss)
$(0.01)
$(0.07)
  Weighted Average number of shares
  used in computation