Atari Corporation was incorporated under the laws of Nevada in May 1984. From 1984 to 1992, Atari designed, manufactured and marketed proprietary personal computers, video games and related software. Over the past several years, Atari has undergone significant change. In 1992 and 1993, Atari significantly downsized operations, decided to exit the computer business and focused on its video game business. These actions resulted in significant restructuring charges for closed operations and write-downs of computer and certain video game inventories in those years.

While restructuring, Atari developed its 64-bit Jaguar interactive multimedia entertainment system, which was introduced in selected markets in the fourth quarter of 1993. For 1995 and 1994, total sales of Jaguar and related products were 9.9 million and 19.3 million, respectively, and represented 68% and 76% of Atari’s net revenues, respectively. These sales were substantially below Atari’s expectations, and Atari’s business and financial results were materially adversely affected in 1995 as Atari continued to invest heavily in Jaguar game development, entered into arrangements to publish certain licensed titles and reduced the retail price for its Jaguar console unit. Atari attributes the poor performance of Jaguar to a number of factors including (I) extensive delays in development of software for the Jaguar, which reduced orders due to consumer concern as to when titles for the platform would be released and how many titles would ultimately be available, and (II) the introduction of competing products by Sega and Sony in May 1995 and September 1995, respectively.

By the second half of 1995, Atari Corporation and it’s Board of Directors recognized that despite the significant financial resources that had been devoted to the Jaguar product, it was unlikely that Jaguar would ever become a broadly accepted video game console, or that Jaguar technology would be broadly adopted by software title developers. As a result, at its meeting in October 1995, the Atari Board of Directors determined to substantially reduce the resources devoted to the Jaguar and related products and to change Atari’s strategic focus by devoting its resources PC software publishing and strategic opportunities. In particular, the Atari Board of Directors directed management to focus on evaluating strategic opportunities for Atari, including potential investments and acquisitions.

JTS Corporation was founded as a Delaware corporation in February 1994 to design, manufacture and market hard disk drives for use in notebook computers and desktop personal computers. JTS has developed two product families of hard disk drives: the Nordic product family for notebook computers, which includes desk dives with 3-inch form factors and two or three recording disks; and the Palladium product family for desktop personal computers, which includes disk drives with 3.5-inch form factors and two or three recording disks. JTS is also developing a family of 5.25-inch form factor disk drives for the desktop computer market. JTS markets and sells its products to original equipment manufacturers ("OEMs") for incorporation into their notebook and rights to certain key technology utilized in JTS’ subsidiary, JTS Technology Limited, formerly Modular Electronics (India) Pvt., located in Madras, India.

Since its inception, JTS Corporation has continually sought to identify new sources of financing to support the expansion of its manufacturing facilities, capital expenditures and research and development activities. In late 1995, JTS recognized the need for a significant infusion of capital within the next three to four months to fund the growth of JTS’ operations. Accordingly, at a meeting in October 1995, the JTS Board of Directors instructed members of management to explore various financing sources.

In early November 1995, Sam Tramiel, Chief Executive Officer of Atari, contacted JTS to set up a meeting with Sirjang L. "Jugi" Tandon, the Chairman of JTS, and David T. Mitchell, JTS’ President and Chief Executive Officer, to discuss possible strategic opportunities between the companies. After several meetings between executives of the two companies, the Board of Directors of both companies decided to proceed with a merger of the two companies by mid-February, 1996.