UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

OR

FOR THE TRANSITION PERIOD FROM                     TO                     .

COMMISSION FILE NUMBER: 000-32989

BAM! ENTERTAINMENT, INC.

333 WEST SANTA CLARA STREET, SUITE 716
SAN JOSE, CALIFORNIA 95113
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(408) 298-7500
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

     Indicate by check mark whether the registrant (1) is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MAY 21, 2004:
27,834,228

PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

BAM! ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)

See notes to condensed consolidated financial statements

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BAM! ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

See notes to condensed consolidated financial statements

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BAM! ENTERTAINMENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

See notes to condensed consolidated financial statements

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BAM! ENTERTAINMENT, INC. AND SUBSIDIARIES

1. BASIS OF PRESENTATION

The condensed consolidated financial statements are unaudited. However, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the financial position and results of the operations of the interim period, have been included.

These condensed consolidated financial statements include the accounts of Bam! Entertainment, Inc. (“Bam” or “the Company”), located in San Jose, California, and its wholly owned subsidiaries, located in the United Kingdom. All significant intercompany transactions and balances have been eliminated in consolidation. The accompanying interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for annual financial statements.

The results of operations for the three and nine months ended March 31, 2004 are not necessarily indicative of the results to be expected for the entire fiscal year, which ends on June 30, 2004.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended June 30, 2003, together with management’s discussion and analysis of financial condition and results of operations, contained in Bam’s 2003 Annual Report and Form 10-K.

Reclassifications - Certain 2003 amounts have been reclassified to conform with 2004 presentation. Such reclassifications had no effect on net revenues, net loss or shareholders’ equity.

Going Concern and Liquidity Uncertainties - These condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in these condensed consolidated financial statements, during the nine months ended March 31, 2004, Bam used cash in operating activities of $6.1 million and incurred a net loss of $11.2 million. As of March 31, 2004, Bam had cash and cash equivalents of $290,000 and its accumulated deficit was $71.0 million. These factors, among others, raise substantial doubt about Bam’s ability to continue as a going concern for a reasonable period of time. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of recorded liabilities that might be necessary should Bam be unable to continue as a going concern.

In October 2003, Bam completed the sale of 1,850,000 shares of its common stock and warrants to purchase another 1,665,000 shares of its common stock, resulting in gross proceeds (assuming no exercise of the warrants) of $1.8 million, in a private offering to institutional and accredited investors. The warrants have a five-year term and are immediately exercisable, at $1.87 per share. The placement agents were issued warrants (“placement agent warrants”) to purchase 277,500 shares of Bam’s common stock in connection with placement agent fees under the same terms as the warrants issued to the investors, except that the placement agent warrants are subject to a 180 day lock-up provision. Bam also granted the investors additional investment rights to purchase an additional 1,111,625 shares of its common stock and warrants to purchase another 1,000,462 shares of its common stock. The shares of common stock underlying the additional investment rights are purchasable at $0.96 per share and the warrants underlying the additional investment rights have a five-year term and are exercisable at the greater of (i) $1.87 and (ii) the lesser of (x) the closing bid price of Bam’s common stock on the Nasdaq Stock Market on the business day immediately preceding the exercise date of the additional investment right, and (y) the average of the closing bid price of Bam’s common stock on the Nasdaq Stock Market for the five business days immediately preceding the exercise date of the additional investment right. Between January and March 2004, six of the investors exercised their additional investment rights in full and purchased 1,060,858 shares of Bam’s common stock at $0.96 per share, resulting in gross proceeds (assuming no exercise of the warrants) of $1.0 million. These investors were also issued five-year warrants to purchase 954,772 shares of Bam’s common stock, which are exercisable under the terms of additional investment rights issued in the October private offering of Bam’s securities. The remaining additional investment rights to purchase 50,767 shares of Bam’s common stock and warrants to purchase another 45,690 shares of Bam’s common stock lapsed on March 11, 2004.

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In December 2003, Bam sold a convertible term note and 166,667 warrants, raising gross proceeds of $1.5 million (assuming no exercise of the warrants) to an investment group. The note, which bears interest at a rate of 7% per annum, has a maturity date of December 3, 2004. The warrants have a seven-year term and are immediately exercisable at prices ranging between $1.73 and $2.33 per share. Each month, commencing on April 1, 2004, $166,667 of the principal amount of the note plus accrued and unpaid interest and fees can either be repaid in cash, or converted into Bam’s shares at a fixed conversion price, provided that the closing price of Bam’s shares exceeds 115% of the fixed conversion price for a period of 10 consecutive trading days prior to the date of conversion. If, at any other time, the closing price of Bam’s shares exceeds 115% of the fixed conversion price for a period of 5 consecutive trading days, Bam has the option to, 10 trading days later, convert all or part of the remaining outstanding note, interest and fees, subject to conversion volume limitations based on Bam’s share trading volume and share price in the 10 trading days prior to such conversion. The holder of the note has the right to convert all or any of the outstanding portion of the note, interest and fees at any time at the fixed conversion price. Conversion of the note by either party is subject to there being an effective registration statement in effect and Nasdaq’s confirmation that this transaction is not integrated with the private offering that closed in October 2003. An effective registration statement went into effect on April 22, 2004. Nasdaq has advised Bam that the transaction is not integrated with the private offering that closed in October 2003. The fixed conversion price is subject to an anti dilution adjustment should Bam issue stock at a price below the fixed conversion price prior to repayment of the note. The fixed conversion price was originally set at $1.33 per share, but an issuance of shares in January 2004 triggered the anti-dilution provision, and the fixed conversion price was adjusted to $1.28 per share. Further issuances of shares occurred in May 2004 as set out below, and the fixed conversion price was further adjusted to $1.19 per share. The note is secured by Bam’s North American assets. As of May 21, 2004, none of the note had been repaid or converted into common stock, and accordingly Bam is in default of the terms of the note.

In January 2004, Bam completed the sale of 2,532,522 shares of its common stock and warrants to purchase another 1,519,513 shares of its common stock, resulting in gross proceeds (assuming no exercise of the warrants) of $2.3 million, in a private offering to institutional and accredited investors. The warrants have a five-year term and are exercisable at $1.40 per share. Bam also granted the investors additional investment rights to purchase an additional 2,467,478 shares of its common stock and warrants to purchase another 1,480,487 shares of its common stock. The shares of common stock underlying the additional investment rights are purchasable at $0.92 per share and the warrants underlying the additional investment rights have a five-year term and are exercisable at the greater of (i) $1.40 and (ii) the lesser of (x) the closing bid price of Bam’s common stock on the Nasdaq Stock Market on the business day immediately preceding the exercise date of the additional investment right, and (y) the average of the closing bid price of our common stock on the Nasdaq Stock Market for the five business days immediately preceding the exercise date of the additional investment right. The additional investment rights are exercisable until June 25, 2004.

On February 17, 2004, the management of Bam agreed with the management of VIS entertainment plc (“VIS”), a Scottish developer of interactive entertainment software products, on the terms of an offer (the “VIS Offer”) to acquire all of the Ordinary Shares, A Shares and B Shares of VIS in exchange for the issuance of up to 4.5 million unregistered shares (the “VIS Consideration Shares”) of Bam’s common stock. On May 19, 2004, all the terms of the VIS Offer were either satisfied or waived, and accordingly the VIS Offer was declared unconditional in all respects.

On February 17, 2004, Bam’s management entered into an agreement with the shareholders of State of Emergency Development Corporation (“SOED”) to acquire all of the share capital of SOED (the “SOED Acquisition”) in exchange for the issuance of up to 4.5 million unregistered shares of Bam’s common stock (the “SOED Consideration Shares”). The SOED Acquisition was conditional upon the closing of the acquisition by Bam of all of the VIS shares. On May 19, 2004, the SOED Acquisition was declared unconditional in all respects and Bam issued the 4.5 million unregistered shares of its common stock in exchange for the share capital of SOED.

BAM has received irrevocable acceptances to acquire a controlling interest from shareholders in VIS. As of May 23, 2004, BAM had received irrevocable acceptances to acquire 91.9% of the Ordinary Shares, 95.6% of the A Shares and 100.0% of the B Shares of VIS, respectively. Because Bam has received irrevocable acceptances in excess of 90% of each class of shareholder, Bam can compulsorily acquire the remaining shares held by shareholders who have not accepted the VIS Offer within 14 days of the VIS Offer being declared unconditional. Bam intends to

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enforce the compulsory purchase. Accordingly, Bam will issue 4.5 million unregistered shares of its common stock in exchange for the entire share capital of VIS.

The VIS shareholders and the SOED shareholders have each placed a total of 375,000 of the Bam shares issued in connection with the two transactions in an escrow account for the purpose of indemnifying Bam against any breach by VIS and SOED of the representations and warranties in the purchase agreements. In addition, each of the parties placed 225,000 of the Bam shares to be issued in connection with the transactions in an escrow account to provide security for the additional Purchase Price Adjustments set forth in the agreement. Bam also placed a total of 750,000 of its shares into an escrow account for the purposes of indemnifying the shareholders of VIS and SOED against certain warranties made by Bam to VIS and SOED shareholders. The shares placed in escrow by Bam are in addition to the shares issued by Bam under the acquisition of VIS and SOED. All shares placed in escrow shall remain in escrow until the later of 12 months from closing date and the date of the resolution of any claims that may arise. As of May 21, 2004, no claims had been made.

Bam currently estimates that its direct acquisition costs will be approximately $1.6 million. Of these, $0.5 million is payable in either cash or Bam’s common stock at Bam’s discretion.

The two transactions were conditional upon, among other things, (i) the stockholders of Bam approving the issuance of the 9 million Bam shares in connection with the two transactions; (ii) Bam raising not less than $12.35 million (net of expenses) from the sale of equity capital prior to the closing date expected to be on June 2, 2004; and (iii) Bam using its commercially reasonable efforts to maintain its listing on the NASDAQ Stock Market. The condition for Bam to raise not less than $12.35 million (net of expenses) from the sale of equity capital prior to the closing date was waived by the VIS Board prior to the VIS offer being declared unconditional on May 19, 2004.

Bam, the VIS shareholders, and the SOED shareholders have entered into various agreements affecting the transferability of the SOED Consideration Shares and VIS Consideration Shares. The parties have entered into a registration rights agreement which requires Bam to file, no later than the thirtieth day following the closing date, a registration statement with the Securities and Exchange Commission for the registration of the VIS Consideration Shares and the SOED Consideration Shares. Nevertheless, the parties have also entered into a lock-up agreement which requires the VIS and SOED shareholders to only sell their registered Bam shares in accordance with the following schedule: (i) 25% shall be sold no earlier than the 30^th day following the closing date; (ii) an additional 25% shall be sold no earlier than the 180^th day following the closing date; (iii) an additional 25% shall be sold no earlier than the 270^th day following the closing date; and (iv) the remaining 25% shall be sold no earlier than the first anniversary of the closing date. The closing of transaction takes place 14 days after the offer became unconditional.

On May 19, 2004 Bam entered into an agreement with SOED’s Loanholders whereby, upon close of the SOED transaction, GBP 792,000 (equivalent to $1.4 million) of outstanding loan notes shall be repaid, and GBP 1.7 million (equivalent to $3.0 million) of outstanding loan notes, which were repayable upon the close of the SOED acquisition, will no longer be payable upon the close, but will become payable as follows: the sterling equivalent of $1.0 million plus outstanding interest will become payable by Bam on or before September 30, 2004, and the balance, including outstanding interest, will become payable by Bam on or before the one year anniversary of the closing date. In addition to these amounts, and in consideration of this deferral of payment, Bam will issue upon the closing date 5 year warrants to purchase 1,071,000 shares of its common stock to the Loanholders at the lower of $0.70 and the average mid market price of Bam’s common stock for the five business days prior to exercise of the warrant, and 5 year warrants to purchase 428,500 shares of its common stock to the advisors of the Loanholders at the lower of $0.70 and the average mid market price of Bam’s common stock for the five business days prior to exercise of the warrant. Bam is also

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required to make a cash payment of $210,000 to the advisors of the Loanholders when the loan has been repaid in full.

On May 19, 2004, in accordance with an agreement entered into between Bam and Flextech Television Limited, and upon the VIS Offer becoming unconditional, Bam issued 801,529 shares of its common stock to the Telewest Group of Companies to repay a debt, approximating $393,000, owed by VIS itv Limited to the Telewest Group of Companies. VIS itv Limited is a private limited company incorporated in the United Kingdom, owned as to 50% by Flextech Television Limited, a subsidiary of Telewest Communications plc, and 50% by VIS.

On May 21, 2004 Bam issued 771,715 shares of its common stock, and warrants to purchase another 77,172 shares of its common stock, in exchange for the settlement of debts totaling $463,000 owed to four creditors. The warrants have a five-year term and are exercisable at $0.60 per share.

On May 24, 2004 Bam completed the sale of 282 shares of its Series A Cumulative Convertible Preferred Stock (the “Preference shares”) and warrants to purchase another 2,548,192 shares of its common stock, resulting in gross value (assuming no exercise of the warrants) of $2.8 million, in a private offering to institutional, accredited investors, Bam’s Chief Executive Officer and Vice Chairman of the Board of Directors. Of the total sale, 188 Preference shares and warrants to purchase another 1,698,795 shares of its common stock, resulting in gross proceeds (assuming no exercise of the warrants) of $1.9 million, were sold to institutional and accredited investors, 50 Preference shares and warrants to purchase another 451,807 shares of its common stock, resulting in gross value (assuming no exercise of the warrants) of $500,000 were sold to Bam’s Chief Executive Officer, and 44 Preference shares and warrants to purchase another 397,590 shares of its common stock, resulting in gross value (assuming no exercise of the warrants) of $440,000, were sold in exchange for the settlement of a loan and accrued interest totaling $260,000 from Bam’s Vice Chairman of the Board of Directors and deferred salaries totaling $90,000 each from Bam’s Chief Executive Officer and Vice Chairman of the Board of Directors. All of these warrants have a five-year term and are exercisable at $0.594 per share. Each Preference stockholder receives a 10% dividend per annum, payable quarterly in arrears on the last day of each quarter. The initial dividend payment will be pro-rated from the date of issuance to the end of the first quarter after issuance. Each Preference share is convertible into 12,048 shares of Bam’s common stock at the option of the holder. Bam can require the Preference stockholder to convert the Preference shares into common shares upon the expiration of 30 days notice provided that the following three conditions are all met: (i) there is an effective registration statement in effect, (ii) the daily market price of Bam’s common stock is greater than $1.20 for twenty of the thirty trading days prior to the notice being issued, and (iii) Bam’s common stock is listed on either the Nasdaq SmallCap Market, Nasdaq National Market, American Stock Exchange or the New York Stock Exchange. Each Preference share has a liquidation preference of $10,000. A change of control is not deemed to be a liquidation. Preference stockholders have full voting rights and powers, are treated as the same class as common stock holders at stockholder meetings, and are entitled to vote the number of common stock equivalent votes at each meeting. While at least 10% of the original numbers of Preference shares issued are in issue, Bam may not, without the written consent of the majority of Preferred stockholders (i) repeal or alter the terms under which the Preference shares are issued, (ii)amend or repeal its Certificate of Incorporation or Bylaws, (iii) authorize, offer or issue any stock ranking pari passu or senior to them (iv) redeem or repurchase any shares of the Company in issue, and (v) declare or pay a dividend to any other class of share. Bam is required to redeem all Preference shares and pay the liquidated preference in cash plus all accrued and unpaid dividends if (i) it refuses to convert any Preference shares to common stock having received notice from the holder to convert, or (ii) it breaches any warranty or representation given to the Preference stockholders, or (iii) breaches any covenant given to the Preference stockholders.

On May 24, 2004 Bam completed the sale of a $6.75 million 2% Secured Convertible Debenture (the “Debenture”), due November 24, 2006, and warrants to purchase another 6,549,398 shares of its common stock. The warrants have a five-year term and are exercisable at $0.594 per share. The Debenture is convertible, in whole or in part, into Bam’s common stock, at the option of the Debenture holders, at a conversion price of $0.83 per share. The entire $6.75 million received from the issuance of the Debenture is secured by restricted cash held at an account at a third party custodian. Bam has no access to, or use of the cash, until the Debenture is converted into common stock. If the Debenture is partly converted into common stock, Bam will have access to the cash for the part converted and the remainder of the cash will remain restricted. Interest on the Debenture is payable quarterly in arrears on the last day of each quarter. The initial interest payment will be pro-rated from the date of issuance to the end of the first quarter after issuance. Bam can require the Debenture holder to convert the Debenture into common shares upon the

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expiration of no more than 5 days notice provided that the following two conditions are all met: (i) Bam gives notice to the Debenture holders within 3 days of the daily market price of Bam’s common stock exceeding $1.66 for fifteen consecutive trading days, and (ii) Bam’s common stock’s average daily trading volume over the fifteen consecutive trading days exceeds 100,000 shares. In order to issue the Debenture, Bam was required to obtain the consent of the existing convertible term note holders. The convertible term note holders gave their consent on May 21, 2004 and, as consideration, were issued warrants, with a seven-year term, to purchase 166,667 shares of Bam’s common stock at an exercise price of $0.63 per share.

Bam needs to raise additional funds to satisfy its future liquidity requirements. These funds may come from either one or a combination of additional financings, exercise of outstanding warrants and additional investment rights, mergers or acquisitions, or otherwise obtain capital via sale or license of certain of its assets, in order to satisfy its future liquidity requirements. Current market conditions present uncertainty as to Bam’s ability to secure additional financing or effectuate any merger or acquisition, as well as Bam’s ability to reach profitability. There can be no assurances that Bam will be able to secure additional financing or effectuate any such merger or acquisition, or obtain favorable terms on such financing if it is available, or as to Bam’s ability to achieve positive cash flow from operations. Continued negative cash flows create significant uncertainty about Bam’s ability to implement its operating plan and Bam may have to further reduce the scope of its planned operations. If cash and cash equivalents, together with cash generated from operations, are insufficient to satisfy Bam’s liquidity requirements, Bam will not have sufficient resources to continue operations for the next six months.

As of March 31, 2004, Bam had $1.2 million of capitalized development costs and licensed assets, and $291,000 of prepaid royalties. Should Bam be unable to effectuate either a merger or acquisition or to secure sufficient additional financing, part or all of the development projects in progress might have to be abandoned, the related costs might have to be written off, and Bam would be unable to develop or acquire new titles, which would significantly affect its future cash flows from operations.

Stock-Based Compensation - Bam accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and to nonemployees using the fair value method in accordance with Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation and in accordance with Emerging Issues Task Force (EITF) No. 96-18, Accounting for Equity Instruments That Are Issued To Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure requires disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. Bam adopted the disclosure provisions of SFAS No. 148 on January 1, 2003.

Since Bam continues to account for its stock-based awards to employees using the intrinsic value method in accordance with APB No. 25, SFAS No. 123 requires the disclosure of pro forma net income (loss) as if Bam had adopted the fair value method. Under APB No. 25, stock-based compensation is based on the difference, if any, on the date of grant, between the fair value of Bam’s stock and the exercise price. Unearned compensation is amortized using the multiple option award valuation and amortization approach method and expensed over the vesting period of the respective options.

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The following table illustrates the effect on net loss and net loss per share if Bam had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation. For purposes of SFAS No. 123 pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period using the multiple option award valuation and amortization approach method. (in thousands):

Revenue Recognition - Bam recognizes revenue in accordance with Statement of Position 97-2, Software Revenue Recognition, and related interpretations, when persuasive evidence of an arrangement exists, delivery has occurred, the price has been fixed or is determinable and collectibility has been reasonably assured. This occurs when finished goods in the form of software on a cartridge, CD-ROM or similar media are shipped to the customer. Under certain conditions, Bam may allow customers to exchange and return its products and from time to time provide price protection or allow returns on certain unsold merchandise in the form of a credit against amounts due from the customer. On a product by product basis, revenue from product sales is reflected net of the allowance for returns and price protection. Bam estimates the amount of future returns, and price protection based upon current known circumstances and historical results.

Fair Values of Financial Instruments - The estimated fair value of Bam’s financial instruments, which include cash and cash equivalents, accounts receivable, convertible term note, loan from director, capital lease obligations, accounts payable and short-term borrowings, approximate their carrying amount, which is due to their short-term maturities. The recorded amount of Bam’s capital lease obligation approximates the estimated fair value.

2.

RESTRUCTURING COSTS (BENEFIT)

Bam accounts for restructuring costs in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. For restructuring actions initiated prior to January 1, 2003 Bam accounts for restructuring costs in accordance with EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit on Activity (including Certain Costs Incurred in a Restructuring).

In November 2002, Bam initiated a restructuring of its operations, and accounted for it in accordance with EITF 94-3. As part of the restructuring, upon the sale of its London based studio, Bam granted VIS Entertainment plc a sublease to its London premises through June 2007. VIS had an option to terminate the tenancy of the sublease upon the later of November 30, 2003 and the determination of a porting contract between Bam and VIS. In October 2003, VIS notified Bam that they were terminating the sublease effective November 30, 2003. In April 2004, Bam surrendered the lease to the landlord in consideration for a settlement payment of $225,000, covering arrears of rent and a termination fee. Of the settlement payment, $67,000 relates to costs incurred prior to the termination of the tenancy of the sublease. The remaining $158,000 is accounted for as a restructuring cost.

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Restructuring costs for the three and nine months ended March 31, 2004 comprise Bam’s estimate of its future net expense relating to its former London premises. Management reassesses the estimate on a quarterly basis based on known circumstances and anticipated events and adjusts the reserve as appropriate. In September 2003, December 2003, and March 2004 management revised its estimate of its future net expense. At March 31, 2004, management’s estimate of its future net expense comprised rents payable for the period from the termination of the sublease with VIS to the surrender of the lease with the landlord, the termination fee element of the settlement payment to surrender the London lease, and attributable legal fees.

Restructuring costs (benefit) for the three and nine months ended March 31, 2004 are as follows (in thousands):

Restructuring costs for the three and nine months ended March 31, 2003, which included employee severance payments, write down costs on property and equipment, and legal fees associated with the disposal of the London based studio, were as follows (in thousands):

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