---




SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





---




FORM 20-F





| ̈ |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
|- |  | ----------------------------------------------------------

| |  | THE SECURITIES EXCHANGE ACT OF 1934
| |  | -----------------------------------




OR





|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
|- |  | ------------------------------------------------

| |  | THE SECURITIES EXCHANGE ACT OF 1934.
| |  | ------------------------------------




| |  | For the fiscal year ended: March 31, 2002
| |  | -----------------------------------------




OR





| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
|- |  | ----------------------------------------------------

| |  | THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
| |  | ------------------------------------------------------




| |  | From the transition period
from    to  .
| |  | ----------------------------------------




Commission file number 001-14944





---




MAD CATZ INTERACTIVE, INC.


(Exact name of Registrant as specified in its charter)





MAD CATZ INTERACTIVE, INC.


(Translation of Registrants name into English)





Canada


(Jurisdiction of incorporation
or organization)





141 Adelaide St. West


Suite 400


Toronto, Ontario M5H 3L5


(Address of principal executive offices)





---




Securities registered or to be registered pursuant to Section 12(g) of the Act:





Common
Shares, without par value


(Title of Class)





Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:





None


(Title of Class)





---




Indicate the number of outstanding shares of each of the issuers classes of capital or common shares as of the close of the period
covered by the annual report.





52,909,548





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  ̈





Indicate by check mark which financial statement item the Registrant has elected to follow. Item 17 x. Item 18  ̈ .





---



---




PART I





Item 1.Identity of Directors, Senior Management and Advisers





Not applicable.





Item 2.Offer Statistics and
Expected Timetable.





Not applicable.





Item 3.Key Information





A.    Selected Financial Data





The summary of financial information set
forth below is derived from and should be read in conjunction with the more detailed financial statements and notes thereto appearing elsewhere in this Annual Report on Form 20-F (the Form 20-F). See Report of Independent
Auditors and Financial Statements. The Companys fiscal year is from April 1 to March 31.





Mad Catz Interactive, Inc., (the Company), maintains its books and records in US dollars, and has prepared its financial statements contained in this Form 20-F in accordance with generally accepted accounting principles
(GAAP) in Canada, which vary in certain significant respects from GAAP in the United States. See Note 14 to the consolidated financial statements included in Item 17. Financial Statements elsewhere in this Form 20-F for a
reconciliation of the fiscal year 2002 net income determined in accordance with GAAP in Canada to the net income determined in accordance with GAAP in the United States.





During fiscal year 2002, the Company changed its reporting currency from Canadian dollars to US dollars. The comparative historical figures for the 2001, 2000, and 1999
fiscal years in this Form 20-F have been translated into US dollars, in accordance with US GAAP, which requires the use of an average exchange rate for each year in the translation from Canadian dollars to US dollars for the historical periods.
Shareholders should be aware that the comparative figures found in the Companys Annual Report to Shareholders are different from those listed below and elsewhere in this Form 20-F because the figures in the Companys Annual Report to
Shareholders were translated from Canadian dollars to US dollars using Canadian GAAP, which requires translation into US dollars at the exchange rate in effect on March 31, 2001 rather than an average exchange rate for the entire year.





SELECTED CONSOLIDATED


STATEMENT OF
OPERATIONS INFORMATION


Audited





Year Ended March 31,
2002

Year ended March 31, 2001


Year Ended March
31, 2000


Year Ended March 31, 1999Net sales

$
83,337,134

$
58,472,096


$
47,821,587


$
Cost of sales


64,927,895


45,458,773



34,184,138



Gross profit


18,409,239


13,013,323



13,637,449



Expenses


14,392,354


13,675,583



8,710,118



54,791Income (loss) before the under noted


4,016,885


(662,260
)


4,927,331



(54,791
)Gain on sale of subsidiary













(1,571,583
)Gain on net accounts payable adjustment









(362,582
)


(337,668
)Income (loss) before income taxes & goodwill charges1

$
4,016,885

$
(662,260
)

$
5,289,913


$
1,854,460Income taxes


1,855,544


3,217,371



3,170,219



(187,489
)Income (loss) before goodwill charges and discontinued operations


2,161,341


(3,879,631
)


2,119,694



2,041,949Goodwill charges


976,665


996,549



572,154



Net income (loss) from continuing operations


1,184,676


(4,876,180
)


1,547,540



2,041,949Net income (loss) from discontinued operations


302,095


(19,136,936
)


2,238,503



806,644Net income (loss)


1,486,771


(24,013,116
)


3,786,043



2,848,593Net Income (loss) per share

$
0.03

$
(0.53
)

$
0.11


$
0.17





---

|1 |  | As at March 31, 2000, the Company adopted provisions of the Canadian Institute of Chartered Accountants (CICA) Handbook Section on business
combinations. This section permits, but does not require, entities to present goodwill amortization expenses and goodwill charges on a net of tax basis as a separate line item in the income statement after income taxes.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2




---




SELECTED CONSOLIDATED


BALANCE SHEET INFORMATION


Audited





As at March 31, 2002


As at March 31, 2001Cash

$
1,902,966


$
1,455,480Accounts receivable


10,276,547



6,810,779Inventories


15,918,898



13,493,306Future income tax assets


2,070,835



2,484,398Capital assets


1,919,749



1,733,516Goodwill


16,362,175



17,529,191Total assets


50,195,368



45,668,270Bank loan


4,335,084



8,670,796Accounts payable and accrued liabilities


16,106,044



8,562,687Subordinated debt


136,886



407,182Future tax liability






3,338,719Shareholders equity


29,617,354



24,688,886Retained deficit


(17,114,271
)


(18,601,042
)





B.    Capitalization and indebtedness





Not applicable.





C.    Reasons for the offer and use of proceeds





Not applicable.





D.    Risk Factors





The Companys future financial results depend upon numerous factors and are subject to many risks and uncertainties. The risks and uncertainties described below are
not the only ones facing the Company. Additional risks and uncertainties not presently known to the Company orthat may be immaterial at this time may also impair the Companys business operations and future financial condition, results of
operations or liquidity.





A Significant Portion of the Companys Revenue is Derived from a Few Large
Customers.





The Company is dependent on a very small number of large customers. The Companys top two
customers, Wal-Mart and Target, accounted for approximately 48% of the Companys revenues for fiscal year 2002. The Company does not have long-term agreements with these or other significant customers. As a result, agreements with respect to
pricing, shelf space, cooperative advertising or special promotions, among other things, are subject to periodic negotiation with each customer. No assurance can be given that these or other customers will continue to do business with the Company or
that they will maintain their historical levels of business. The loss of either of these customers could have a material adverse effect on the Companys business, results of operations, financial condition and liquidity.





Some of the Companys License Agreements with Video Game Console Developers Have Expired or Are About to Expire, Which
Could Limit the Companys Product Offerings and Significantly Reduce its Revenues.





Historically, a
majority of the Companys revenues has come from video game accessories that work with video game consoles sold by Sony Corporation (Sony), Nintendo Company, Ltd. (Nintendo) and Microsoft Corporation
(Microsoft). Some, but not




3




---

all, of the Companys products compatible with these video game consoles have been produced under license agreements pursuant to which the Company received proprietary and other useful
information, including use of the first party logos. Some of these license agreements have expired and others are about to expire, which could limit the Companys product offerings and significantly reduce its revenues.





In particular, the Companys domestic license for the Sony PlayStation 2 Memory Card expired on December 31, 2001, and its
international license for the Sony PlayStation 2 Memory Card will expire on November 27, 2002. Approximately 22% and 8% of the Companys revenues in fiscal year 2002 were attributable to sales of the PlayStation 2 Memory Card under these
domestic and international licenses, respectively. Based on discussions with Sony, the Company does not expect to be able to renew or replace these licenses. Without these licenses, the Company is unable to produce or sell the Sony PlayStation 2
Memory Card. As a result, the Company has discontinued domestic sales, and expects to discontinue international sales after the 6 month sell-off period which ends in May 2003, of the PlayStation 2 Memory Card, causing a significant decline in its
revenues. If the Company is unable to generate sufficient revenue from sales of other products to replace this revenue, its financial condition and results of operations could be materially and adversely affected.





In addition, the Companys license with Sony covering the MC2 Racing Wheel expired on June 15, 2002, and its license with Microsoft
covering products relating to Microsofts Xbox video game console will expire on February 28, 2003. Based on discussions with Sony, the Company will not renew or replace the Sony license. The Company is uncertain whether it will be able to
renew or replace the Microsoft license. Nonetheless, these licenses only relate to the use of Sonys and Microsofts logos on the Companys products, so even without the licenses, the Company would be able to, and intends to, continue
producing and selling similar products which do not contain the logos. There can be no assurance, however, that sales of unlicensed products will be equivalent to sales of the licensed products. Any decline in the sale of such products could
significantly reduce the Companys revenues and have a material adverse effect on its financial condition and results of operations.





Furthermore, the Company does not have any license agreements with Nintendo. The absence of license agreements with Nintendo, Sony or Microsoft could result in the Company being unable to efficiently and cost effectively
design future generations of compatible accessories. In the event Nintendo, Sony or Microsoft enters into license agreements with other companies and not with the Company, the Company would be placed at a substantial competitive disadvantage, which
could materially and adversely affect its business and financial condition.





The Company Must Stay at the
Forefront of Technology, and any Inability to do so Would Have a Material Adverse Effect on the Companys Results of Operations, Financial Condition or Liquidity.





The high-tech industry is characterized by rapid technological advances, evolving industry standards, frequent new product introductions and enhancements and changing
customer requirements. The introduction of products embodying or based upon new technologies and the emergence of new industry standards could render the Companys existing inventory of products obsolete and unmarketable. The Companys
future success will depend upon its ability to enhance its current inventory of products and to introduce new products that keep pace with technological developments, respond to evolving end-users requirements and achieve market acceptance. If the
Company fails to develop and introduce these enhancements or new products, or if these products are not accepted by its intended customers, the Companys business could be harmed.





The Companys Financial Results Are Dependent on Timely Introduction of New Products





The timely shipment of new products depends on various factors, including the development process, debugging, approval by hardware licensors, and approval by third-party
licensors. Due to these factors, and others, some of the Companys products may not be released in accordance with its operating plans. A significant delay in the introduction of one or more new products would negatively affect the
Companys revenues and have a negative impact on the Companys results of operations, financial condition or liquidity. No assurance can be given that the Companys new products will be released in a timely fashion in accordance with
its business plan.





The average life cycle of video game accessories is similar to the life of video game consoles
which generally ranges from 2 to 5 years. Factors such as competition for access to retail shelf space, consumer preferences and seasonality could result in the shortening




4




---

of the life cycle for older products and increase the importance of the Companys ability to release new products on a timely basis. The Company must introduce new products in order to
generate new revenues and/or to replace declining revenues from older products. The complexity of new video game systems has resulted in higher development expenses, longer development cycles, and the need to carefully monitor and plan the product
development process. If the Companydoes not introduce new products in accordance with its operating plans for a period, its results of operations, liquidity and profitability in that period could be negatively affected.





New Video Game Platforms and Development for Multiple Consoles Create Additional Technical and Business Model Uncertainties





Large portions of the Companys revenues are derived from the sale of video game accessories for use
with proprietary video game platforms (such as the Microsoft Xbox  ; the Nintendo
GameCube  , Game Boy Advance  , Gamegear  , Super Nintendo  , and Nintendo 64  ; and the Sony PlayStation  and PlayStation 2  ). The success of the
Companys products is significantly affected by commercial acceptance of the new video game consoles and the life span of older platforms. In addition, the Company anticipates that its profitability will continue to be impacted by the levels of
research and development expenses incurred relative to revenues, and by fluctuations relating to the timing of development in anticipation of the future platforms.





From time to time, the Company will expend development and marketing resources on products designed for new video game systems that have not yet achieved a large installed
base or will continue product development for older hardware platforms that may have shorter life cycles than the Company expected. Conversely, if the Company does not develop products for use on a platform that achieves significant market
acceptance, or if the Company discontinues development for a platform that has a longer life cycle than expected, the Companys revenue growth may be adversely affected.





The Manufacture and Supply of the Companys Products is Dependant upon a Limited Number of Third Parties.





The Company relies on a limited number of manufacturers and suppliers for its products. There can be no assurance that these manufacturers and suppliers will be able
to manufacture/supply the Company with sufficient quantities of its products to ensure consumer availability. Moreover, there can be no assurance that such manufacturers and suppliers will not refuse to supply the Company with product, and
independently market their own competing products in the future or will not otherwise discontinue their relationships with or support of the Company. The failure of the Company to maintain its existing manufacturing and supplier relationships, or to
establish new relationships in the future, could have a material adverse effect on the Companys business, its results of operations, financial condition and liquidity.





The Companys Business is Seasonal and Its Financial Results Vary from Period to Period.





The video game and video game accessory industry is highly seasonal and the Companys operating results vary substantially from period to period. The Company generates
a substantial portion of its sales during the Christmas season. If expenses remain relatively fixed, but the Companys revenues are less than anticipated in any quarter, the Companys operating results would be adversely affected for that
quarter. In addition, incurring unplanned expenses could adversely affect operating results for the period in which such expenses are incurred. Failure to achieve periodic revenue, earnings and other operating and financial results as anticipated by
brokerage firms or industry analysts could result in an immediate and adverse effect on the market price of the Companys shares of its Common Stock (Shares). The Company may not discover, or be able to confirm, revenue or earnings
shortfalls until the end of a quarter, which could result in a greater immediate and adverse effect on the Share price.





There are Risks Associated with the Companys Product Returns, Price Protection Policies and Other Promotional Activities.





Competitors promotional or other activities could result in the need for the Company to price protect its customers inventory. Furthermore, the Company expects that the rate of product
returns could increase above historical levels to the extent that the Company introduces new versions of products or to the extent that the product sales mix changes. It is also likely that the Company will experience additional price competition as
it continues to introduce new and enhanced products. Although the Company establishes allowances for anticipated product returns, and believes its existing policies have resulted in allowances that are adequate,




5




---

there can be no assurance that such product returns and price protection obligations will not exceed such allowances in the future, which would have a material adverse effect on future operating
results.





The Company May Need to Obtain Additional Financing to Maintain its Business, Which May Not be
Available on Favorable Terms, or at All.





The Companys management believes that the Company currently
has sufficient credit facilities and access to other sources of capital to fund existing operations. Additional funds may be required to finance an increased level of sales and operations, and possible acquisitions. There can be no assurance that
the Companys currently available funds will be adequate to fund its future operations or, if additional capital is needed, that adequate funds will be available on acceptable terms, or at all. The inability to have or obtain adequate funds
could limit the Companys ability to implement its business plan and have a material adverse effect upon the Companys business, results of operations, financial condition and liquidity.





The Company Depends Upon the Availability of Capital Under its Credit Facility.





In addition to revenue generated from sales of its products, the Company finances its operations with a $35,000,000 Credit Facility (the
Credit Facility) provided by Congress Financial Corporation and affiliates (Congress), an unrelated party. In the event that this Credit Facility is terminated or if the Company fails to meet the tangible net worth loan
covenant, the Company will need to obtain alternative financing. There can be no assurance that alternative financing can be obtained on substantially similar or acceptable terms, or at all. The failure of the Company to promptly obtain alternate
financing would have an immediate, severe and adverse impact on the Companys operations and business. In the event that no alternative financing is available, the Company would be forced to drastically curtail operations, or dispose of assets,
or cease operations altogether.





If the Company violates any of the financial or other covenants contained in the
Credit Facility, the Company will be in default under the Credit Facility. If a default occurs and is not timely cured or waived by Congress, Congress could seek remedies against the Company, including: (1) penalty rates of interest, (2) immediate
repayment of the debt or (3) the foreclosure on assets securing the debt. Although the Company was in compliance with its covenants contained in the Credit Facility as of the end of fiscal year 2002, no assurance can begiven that the Company will
continue to maintain compliance with these covenants or that Congress will waive compliance with any of these covenants in the future.





Claims that the Companys Products Infringe Third Parties Intellectual Property Rights Could Be Costly to Resolve.





Although the Company does not believe that its products infringe upon the proprietary rights of any third parties, there can be no assurance that infringement or invalidity claims will not be asserted
against the Company or that any such claims will not materially adversely affect the business, financial condition, or results of operations. Regardless of their validity or success, such claims may result in costly litigation, cause diversion of
the Companys managements time and attention, cause product shipment delays or require the Company to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable
to the Company, or at all. Any of these costs or outcomes could adversely affect the Companys business, results of operations, financial condition and liquidity.





The Companys Intellectual Property Rights May Not Prevent Its Competitors From Using Its Technologies or Similar Technologies to Develop Competing Products, Which
Could Weaken the Companys Competitive Position and Harm Its Financial Results.





The Companys
success depends in part on the use of proprietary technologies. The Company relies, and plans to continue to rely, on a combination of patents, copyrights, trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish
and protect its proprietary rights. The Company has entered into confidentiality and invention assignment agreements with its employees and contractors, and nondisclosure agreements with selected parties with whom the Company conducts business to
limit access to and disclosure of its proprietary information. These contractual arrangements and the other steps the Company has taken to protect its intellectual property may not prevent misappropriation of that intellectual property or deter
independent third-party development of similar technologies. Monitoring the unauthorized use of proprietary technology and trademarks is costly, and any dispute or other litigation, regardless of outcome, may be costly and time-consuming and may
divert the Companys management and




6




---

key personnel from its business operations. The steps taken by the Company may not prevent unauthorized use of its proprietary technology or trademarks. Many features of the Company products are
not protected by patents, and, as a consequence, the Company may not have the legal right to prevent others from reverse engineering or otherwise copying and using these features in competitive products. If the Company fails to protect or to enforce
its intellectual property rights successfully, its competitive position could suffer, which could adversely affect its financial results.





The Company May Pursue Acquisitions, Which Would Subject its Business to New Risks.





The Company may expand its operations or product offerings through the acquisition of additional businesses, products or technologies. There can be no assurance that the Company will be able to identify, acquire or profitably manage
additional businesses or successfully integrate any acquired businesses, products or technologies into the Company without substantial expenses, delays or other operational or financial problems. Acquisitions involve a number of risks, including:





| |  |  | diversion of managements attention,
| | - |  | ------------------------------------




| |  |  | failure to retain key acquired personnel,
| | - |  | -----------------------------------------




| |  |  | difficulty in integrating and absorbing the acquired business, its employees, corporate culture, managerial systems and services,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------




| |  |  | customer dissatisfaction or performance problems with an acquired business,
| | - |  | ---------------------------------------------------------------------------




| |  |  | lawsuits and legal liabilities, and
| | - |  | -----------------------------------




| |  |  | other unanticipated events or circumstances.
| | - |  | --------------------------------------------




Some or all of these risks could have a material adverse effect on the Companys acquired businesses, products or technologies. Furthermore, there can be no assurance that any acquired business,
product, or technology will be profitable or achieve anticipated revenues and income. The failure of the Company to manage its acquisition strategy successfully could have a material adverse effect on the Companys business, results of
operations and financial condition.





There are Numerous Risks Associated With the Companys International
Operations, Any Number of Which Could Harm the Companys Business.





The Companys operations are
currently headquartered in Canada, the majority of its sales revenue is generated in the United States, and a substantial majority of its products are manufactured by third parties in foreign locales, most notably China and Hong Kong. There are
certain risks inherent in international operations, which could result in disruption or termination of supply of the Companys products available for sale. These risks include, but are not limited to:





| |  |  | unexpected changes in regulatory requirements, taxes, trade laws and tariffs,
| | - |  | -----------------------------------------------------------------------------




| |  |  | political instability,
| | - |  | ----------------------




| |  |  | fluctuations in currency exchange rates, and potential adverse tax consequences,
| | - |  | --------------------------------------------------------------------------------




| |  |  | differing intellectual property rights and protections, and
| | - |  | -----------------------------------------------------------




| |  |  | differing labor relations.
| | - |  | --------------------------




These factors could materially and adversely affect the Companys business, operating results, and financial condition.





Since the Companys financial results are reported in US dollars, fluctuations in the value of the US dollar relative to the Canadian dollar, British pound and other currencies could materially
affect the Companys results. Historically, the Company has not engaged in hedging transactions to reduce the risk of currency fluctuation. However, upon opening a sales office in the United Kingdom in fiscal fourth quarter 2002, the Company
now denominates sales invoices in British pounds and anticipates future international business denominated in Euros and other currencies. Accordingly, the Company plans to engage in hedging transactions in the future in an attempt to partially
mitigate the effect of foreign currency variations on the financial results.




7




---




Failure to Attract, Retain and Motivate Skilled Personnel Would Have a
Material Adverse Effect on the Companys Results of Operations, Financial Condition or Liquidity.





The
Companys ability to achieve its revenue and operating performance objectives will depend in large part on its ability to attract and retain qualified and highly skilled sales, consulting, marketing, management, engineering and finance
personnel. The Company competes for its personnel with other companies, and competition for such personnel is intense and is expected to remain so for the foreseeable future. Competition for qualified personnel in the video and computer game and
gaming accessories industry is intense, particularly for those with relevant technical expertise. Failure to retain and expand its key employee population could adversely affect the Companys business and operating results.





The Company is heavily dependent upon its senior management team. The continued availability of this team will be a major
contributing factor to the Companys future growth. In the event that any member of senior management becomes unavailable for any reason, the Company could be materially and adversely affected. The Company does not maintain key-man life
insurance on any of its senior management.





Competition for Market Acceptance and Retail Shelf Space and
Pricing Competition Affect the Companys Revenue and Profitability





The video game accessory market is
highly competitive. Only a small percentage of products introduced in the market achieve any degree of sustained market acceptance. If the Companys products are not successful, its operations and profitability will be negatively impacted.
Competition in the video game accessory industry is based primarily upon:





| |  |  | the availability of significant financial resources;
| | - |  | ----------------------------------------------------




| |  |  | the quality of products;
| | - |  | ------------------------




| |  |  | reviews received for an accessory from independent reviewers;
| | - |  | -------------------------------------------------------------




| |  |  | access to retail shelf space;
| | - |  | -----------------------------




| |  |  | the success of the game console for which the products was developed;
| | - |  | ---------------------------------------------------------------------




| |  |  | the price at which the products are sold; and
| | - |  | ---------------------------------------------




| |  |  | the number of other products for the system for which the products was developed.
| | - |  | ---------------------------------------------------------------------------------




Some of the Companys competitors or potential competitors enjoy competitive advantages, such as longer operating histories, larger technical staffs, more established
and larger sales and marketing organizations, significantly greater financial and other resources, ability to respond more quickly to new or emerging technologies and changes in customer requirements or ability to establish or strengthen cooperative
relationships with retailers, distributors and other marketers.





Increased competition from these and other
sources could require the Company to respond to competitive pressures by establishing pricing, marketing and other programs or seeking out additional acquisitions that may be less favorable than what the Company could otherwise establish or obtain,
and thus could have a material adverse effect on the Companys business, financial condition and results of operations. No assurance can be given that the Company will be able us to compete effectively in its markets.





The Company has Implemented a Rights Plan that Could Prevent or Delay an Acquisition of the Company that May Be Beneficial to its
Stockholders and could result in Additional Dilution to the Stockholders.





The Company has adopted a
shareholder rights plan in an attempt to ensure that shareholders receive a fair price in the event that a person seeks to acquire the Company. Under the rights plan shareholders hold certain rights, which entitle them to purchase additional Shares
in response to a take-over bid, at a substantial discount from the prevailing market price of the Shares, and vote the additional Shares. The existence of the rights plan could result in a decrease in investor interest, and an accompanying downward
pressure on the market price of the Shares, or could discourage, delay or prevent an acquisition of the Company under certain circumstances because of the increased difficulty faced by persons making a take-over bid for the Company. In addition,
there could be substantial dilution of the Shares in the event that the permitted shareholders purchase additional Shares pursuant to the rights plan.




8




---




Any Future Terrorist Attacks, Such as the Attacks That Occurred on September
11, 2001, and Other Acts of Violence or War May Affect the Demand for Video Game Accessories, Which May Negatively Affect the Companys Operations and Financial Results.





There can be no assurance that there will not be further terrorist attacks against the United States or United States businesses. These attacks or armed conflicts may
directly impact the Companys physical facilities, those of its customers or potential customers or those of its manufacturers or suppliers. Also, these attacks may cause a reduction in the demand for video game accessories. Any additional
actions by the United States against the people and organizations the United States believes to coordinate and facilitate terrorist activities could have a further impact on demand for consumer products in general and video game accessories in
particular. Political and economic instability in some regions of the world may also result and could negatively impact the Companys international operations. The consequences of any of these armed conflicts are unpredictable, and the Company
may not be able to foresee events that could have an adverse effect on its business. The continued threat of terrorism within the United States, Europe and the Middle East and the military action and heightened security measures in response to such
threat may cause significant disruption to commerce throughout the world. To the extent that such disruptions result in delays or cancellations of customer orders, a general decrease in the demand for video game accessories, or the Companys
inability to effectively market its products, the Company business and results of operations could be materially and adversely affected. The Company is unable to predict whether the threat of terrorism or the responses thereto will result in any
long term commercial disruptions or if such activities or responses will have a long term material adverse effect on the Companys business, results of operations or financial condition.





Control by Existing Shareholders; Anti-Takeover Effects.





The Companys officers and directors, in the aggregate, beneficially own approximately 17.1% of the Companys outstanding Shares as of March 31, 2002. As a result, these shareholders, if
acting together, are able to exert substantial influence over the Company and many matters requiring shareholder approval, including, without limitation, the election of directors, modification of the Companys capital structure, adoption of
stock option plans and award of grants thereunder, terms and conditions of a merger or consolidation of the Company with another company, and negotiation of the terms and conditions of a tender offer for the Shares made by another company. These
shareholders may exercise this ability in a manner that advances their best interests and not necessarily those of the Companys other stockholders. This ownership concentration could also have the effect of delaying or preventing any
acquisition of the Company, which could adversely affect the market price of the Shares and, in certain circumstances, prevent shareholders from receiving a premium over the then current market value for their Shares.





Penny Stock Rules May Negatively Impact the Liquidity of the Shares.





The Shares are subject to rules promulgated by the Securities and Exchange Commission (the SEC) relating to penny stocks which apply to certain
companies whose shares trade at less than $5.00 per share and which do not meet certain other financial requirements specified by the SEC. These rules require brokers who sell penny stocks to persons other than established customers and
accredited investors to complete certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning the risks of trading in such penny stocks. These rules may discourage or restrict
the ability of brokers to sell the Shares and may affect the secondary market for the Shares. These rules could also have a detrimental effect upon the Companys ability to raise funds in the primary market for Shares.





Volatility of Stock Price and Absence of Dividends.





The market price of the Shares has been and is likely to be highly volatile. Many factors could have a significant adverse impact on the market price of the Shares,
including:





| |  |  | the Companys or its competitors announcements of technological innovations or new products by the Company or its competitors,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------




| |  |  | governmental regulatory actions,
| | - |  | --------------------------------




| |  |  | developments with the Companys strategic alliances and collaborators,
| | - |  | ----------------------------------------------------------------------




| |  |  | developments concerning proprietary rights of the Company or its competitors (including litigation),
| | - |  | ----------------------------------------------------------------------------------------------------



9




---




| |  |  | period-to-period fluctuations in the Companys operating results,
| | - |  | -----------------------------------------------------------------




| |  |  | changes in estimates of the Companys performance by securities analysts,
| | - |  | -------------------------------------------------------------------------




| |  |  | market conditions for consumer technology stocks in general, and
| | - |  | ----------------------------------------------------------------




| |  |  | other factors not within the control of the Company.
| | - |  | ----------------------------------------------------




The Company has never paid cash dividends on its Shares and does not anticipate paying any cash dividends in the foreseeable future.





Item 4.Information on the Company.





A.    History and Development of the Company





The name of the Company
is Mad Catz Interactive, Inc. The Shares trade on the Toronto Stock Exchange (TSE) and the American Stock Exchange (AMEX) under the symbol MCZ. The Companys corporate headquarters are located at 141 Adelaide
Street West, Suite 400, Toronto, Ontario, M5H3L5. The Companys registered office is located at BCE Place, 181 Bay Street, Suite 2500, Toronto, Ontario, M5J2T7. The Companys primary subsidiaryMad Catz, Inc. (MCI), is
located at 7480 Mission Valley Road, Suite 101, San Diego, California, 92108. The Company is in the business of designing, manufacturing and distributing video game accessories which are compatible with Sega, Sony, Nintendo, and Microsoft game
systems. The Companys video game accessories are marketed under the Mad Catz brand.





The Company was
incorporated under the Canada Business Corporations Act on August 25, 1993 under the name Patch Ventures Inc. (Patch). In 1994, Patch acquired all of the issued and outstanding shares of Legacy Manufacturing Corporation and changed its
name to Legacy Storage Systems International Inc. In 1996, the Company changed its name to Tecmar Technologies International Inc. At that time, the Company conducted its principal business of designing and developing data storage systems for
networks and workstations and marketing such systems to computer original equipment manufacturers and distributors through several operating subsidiaries.





In 1998, the Company sold the last of its operating businesses, Tecmar Technologies, Inc. and changed its name to Xencet Investments Inc. (Xencet). To meet the original listing requirements
of the TSE, the Company then acquired all of the outstanding securities of Games Trader Inc., a private corporation incorporated pursuant to the laws of the Province of Ontario (Games Trader) that sold previously played video games.
Following the acquisition, the Company changed its name to Games Trader Inc. The Company later changed its name to GTR Group Inc. in 1999.





Effective August 31, 1999, the Company completed the acquisition of MCI, a private company incorporated under the laws of Utah that designs, manufactures and distributes video game accessories. In September 2001, the Company
changed its name to Mad Catz Interactive, Inc.





General Organization of the Company





The Company is a corporation incorporated under the Canada Business Corporations Act. In fiscal year 2002, the Company had two
primary operating subsidiaries, one of which is MCI and the other of which is 1328158 Ontario Inc., which sells the Companys Mad Catz line of video game accessories in Canada under the name Mad Catz Canada (MCC). MCI owns all of
the issued and outstanding shares of FX Unlimited, Inc., a corporation incorporated under the laws of Delaware (FX), which is currently inactive, but holds certain intangible assets related to the MCI business. MCI and FX each own 50% of
the issued and outstanding shares of Mad Catz (Asia) Limited, a corporation incorporated under the laws Hong Kong (MCA) that provides China factory quality assurance services for MCI. The Company owns all the issued and outstanding
shares of Mad Catz Europe, Limited., a corporation incorporated under the laws of England and Wales (MCE) that sells the Companys Mad Catz line of video game accessories in Europe. The Company also beneficially owns all the issued
and outstanding shares of Mad Catz Interactive Asia Limited, a corporation incorporated under the laws of Hong Kong (MCIA) that provides procurement services related to the manufacture of Mad Catz products.




10




---




B.    Business Overview





Video Game Controllers and Accessories





The Companys products include video game controllers and accessories of all types, such as steering wheels, joysticks, memory cards, video cables and accessories, standard controllers and advanced controllers. The Company
produces a variety of interactive video game control devices, each used in conjunction with interactive entertainment software and console based video game platforms. The Companys principal products include automotive racing simulation
controllers, a family of sports and action/adventure game controllers and advanced controllers, including joysticks, gamepads, light guns, and arcade-style in-home dual video game controllers. The Company also offers a comprehensive suite of
complementary accessory products.





The Company manufactures (through third parties) all of its products in Asia.
The Company products have been designed, developed, manufactured (through third parties) and marketed for all major console based video game systems (such as Microsoft Xbox; Nintendo GameCube, Game Boy Advance, Gamegear, Super Nintendo, and Nintendo
64; Sony PlayStation and PlayStation 2; and Sega Corporation (Sega) Dreamcast  ,
Genesis  and Saturn  ) across all 16-, 32-, 64-, and 128-bit technology platforms.





Product Lifecycle





The
Companys product lifecycles are reasonably stable and predictable due to the continued success of the major console based video game systems. The installed base of video game consoles, the Companys relationships with major retailers, and
the conversion and compatibility of major the Company products drive product sales across the major platforms.





Sales Analysis





The Companys products are sold by 9 of the largest 10 retailers in
the United States. The Company sells its products in approximately 12,000 storefronts, and it supplies a large network of independent retailers through a series of distributors. The Company also sells its products internationally to Europe (direct
in the United Kingdom through MCE), South America, Canada, Australia, New Zealand and Japan.





Sales outside of the
United States represented 12% of the Companys total sales in fiscal year 2002 and 17% for fiscal year 2001.





Sales by Customer





The largest of the Companys customers represented 31% of
MCIs total sales in fiscal year 2002, the second largest customer represented 17%. No other customer represented more than 10% of MCIs total sales in 2002.





Seasonality and the Volatility of Quarterly Results





The Company generates a substantial percentage of its sales in the last three months of every calendar year. In addition, the Companys quarterly results of operations can be expected to fluctuate significantly in the
future, as a result of many factors, including: seasonal influences on its sales; unpredictable consumer preferences and spending trends; the introduction of new video game platforms; the need to increase inventories in advance of the Companys
primary selling season; and timing of introductions of new products. For a discussion of these and other factors affecting seasonality, see Risk FactorsThe Companys Business is Seasonal and Financial Result Vary from Period to
Period elsewhere in this Form 20-F.





Strategy





The Companys strategy following its acquisition of Games Trader, which occurred in 1998, was to create a diversified interactive entertainment business. At the
start of fiscal year 2000, the Company was comprised of the Games Trader business (value-priced video game distribution). In fiscal year 2000, the Games Trader business expanded its position as North Americas largest independent supplier of
previously played video games, and began to establish a position as a supplier of value-priced republished video games. Later in fiscal year 2002, the Company completed its acquisition of MCI, which expanded the Companys operations into the
video game accessory design and manufacturing industry. The Games Trader and MCI subsidiaries provided a presence in




11




---

both software and hardware segments of the video game market. Following the acquisition of MCI, the Company formed an online unit, ZapYou.com, to enable it to sell video games and accessories
over the Internet.





In fiscal year 2001, the Companys management determined that the opportunity in the
video game accessories business significantly outweighed the benefits of pursuing a diversification strategy. As such, a decision was made by the Companys board of directors to set forth a plan in the fourth quarter of fiscal year 2001 to sell
or discontinue the Games Trader and ZapYou.com businesses and to focus on the MCI business. In June of 2001, the remaining inventory of Games Trader was sold to Game Stop Inc. By October 1, 2001, all assets of the Games Trader and ZapYou.com
businesses had been disposed of leaving only the MCI business.





The Companys key focus for the MCI business
in fiscal year 2002 was preparing new products to support the North American launch of the Microsoft Xbox and the Nintendo GameCube video game consoles, which occurred in November 2001. MCI has developed and shipped a complete line-up of accessories
for the Sony PlayStation 2, Nintendo GameCube and Microsoft Xbox video game consoles. In total, MCI released 65 new products in fiscal year 2002. Although the Company focused during fiscal year 2002 on the United States retail market, to prepare for
the launch of the new Microsoft and Nintendo video game consoles in Europe in the spring of 2002, MCI organized a business entity in the United Kingdom (Mad Catz Europe Ltd.) and began operations in the United Kingdom in fiscal fourth quarter 2002.
This marked the next step in the Companys strategy, which is penetrating the European market. Overall, the key initiatives for growth include:





| |  |  | Increasing the Companys overall market share in the accessories industry through increased penetration of retail stores worldwide;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------




| |  |  | Extending the Companys product line by introducing innovative peripherals;
| | - |  | ---------------------------------------------------------------------------




| |  |  | Improving the Companys gross margins by reducing manufacturing and component costs; and
| | - |  | ----------------------------------------------------------------------------------------




| |  |  | Generating greater institutional investor awareness.
| | - |  | ----------------------------------------------------




Industry analysts predict robust growth for the video game accessory business over the next few years fueled by the introduction of new game consoles such as the recent launch of Nintendo GameCube and
Microsofts Xbox. These new game consoles join the popular Sony PlayStation 2 console launched in the fall of 2000 to create significant opportunity for new product development at MCI.





Intellectual Property Needed to Produce the Companys Products





Historically, a majority of the Companys revenues has come from video game accessories that work with video game consoles sold by Sony, Nintendo, Microsoft and Sega. Some, but not all, of the
Companys products compatible with these video game consoles have been produced under license agreements pursuant to which the Company received proprietary and other useful information, including use of the first party logos. Some of these
license agreements have expired and others are about to expire.





In particular, the Companys domestic
license for the Sony PlayStation 2 Memory Card expired on December 31, 2001, and its international license for the Sony PlayStation 2 Memory Card will expire on November 27, 2002. Approximately 22% and 8% of the Companys revenues in fiscal
year 2002 were attributable to sales of the PlayStation 2 Memory Card under these domestic and international licenses, respectively. Based on discussions with Sony, the Company does not expect to be able to renew or replace these licenses. Without
these licenses, the Company is unable to produce or sell the Sony PlayStation 2 Memory Card. As a result, the Company has discontinued domestic sales, and expects to discontinue international sales in November 2002, of the PlayStation 2 Memory Card,
causing a significant decline in its revenue. If the Company is unable to generate sufficient revenues from sales of other products to replace this revenue, its financial condition and results of operations could be materially and adversely
affected. The Companys pays royalties to Sony equal to 5% on sales of the Sony PlayStation 2 Memory Card in Europe.





The Companys license with Sony covering the MC2 Racing Wheel expired on June 15, 2002, and its license with Microsoft covering products relating to Microsofts Xbox video game console will expire on February 28, 2003.
Based on discussions with Sony, the Company will not replace the Sony license. The Company is uncertain whether it will be able to renew or replace the




12




---

Microsoft license. Nonetheless, these licenses only relate to the use of Sonys and Microsofts logos on the Companys products, so even without the licenses, the Company would be
able to, and intends to, continue producing and selling similar products which do not contain the logos. There can be no assurance, however, that sales of unlicensed products will be equivalent to sales of the licensed products. Any decline in the
sale of such products could significantly reduce the Companys revenues and have a material adverse effect on its financial condition and results of operations. The Company pays royalties to Microsoft equal to 5% on sales of licensed products.





The Company does not have any license agreements with, and does not pay royalties to, Nintendo. The absence of
license agreements with Nintendo, Sony or Microsoft could result in the Company being unable to efficiently and cost effectively design future generations of compatible accessories. In the event Nintendo, Sony or Microsoft enters into license
agreements with other companies and not with the Company, the Company would be placed at a substantial competitive disadvantage, which could materially and adversely affect its business and financial condition.





The Company introduces new products every year to replace revenue lost by discontinued products or products for which licenses have
expired. In this manner, the Company believes that it can replace revenues lost by discontinued products and continue to grow at a similar pace as the third party peripherals market.





Competitive Environment





The
markets in which the Company competes are highly competitive, and the Company expects that it may face increased competition as additional companies enter these markets. Historically, price has been a significant competitive factor across the market
for interactive video game control devices under the Mad Catz name brand as well as in the original equipment manufacturer line of business.





Management believes that the other principal competitive factors that historically have affected retailer and consumer choice include value, product features, ease of use and installation, realism in
simulation, name brand recognition (including reputation and historical compatibility), style (including colors) and whether the product is licensed. Additional competitive factors from the perspective of the major retailers include margins,
service, support, merchandising and promotional support, reliable and timely delivery, track record and electronic data interchange capability.





The Companys principal competitors in the United States include InterAct Accessories Inc., a Recoton company, Sony, Nintendo, Microsoft and to a lesser extent, Nuby Interactive, LLC, Nyko
Technologies, Inc., Pelican Accessories, and Thrustmaster, Inc.





Management believes that the Companys
products cover each market demographic group, and are complementary with consumers of Sony and Microsoft video game consoles (somewhat older consumers), and consumers of Nintendo video game consoles (younger consumers). The Companys management
believes that the two major factors that will provide for the continued viability and competitive edge of the Mad Catz branded products are: (i) increasing the Companys market share; and (ii) the Companys relationship with first party
manufacturers of major video game platforms, namely Sony, Nintendo and Microsoft. One of the Companys licenses with Sony has recently expired and will not be renewed, and another will expire in November 2002. The Companys license with
Microsoft expires in February 2003. No assurance can be made that the Company will be able to maintain or obtain beneficial licenses with these manufacturers.





The Companys products incorporate a number of commercially available electronic components. The Company currently obtains substantially all of these components from suppliers located in Mainland
China, Hong Kong, Taiwan and the United States.





C.    Organizational Structure





The Company is incorporated under the Canada Business Corporations Act. In fiscal year 2002, the Company had two primary operating
subsidiaries: MCI and MCC. MCI owns all of the issued and outstanding shares of FX, and MCI and FX each own 50% of the issued and outstanding shares of MCA. The Company also owns all the issued and outstanding shares of MCE and MCIA. At August 31,
2002, the Company had 90 full-time employees. The Company has one class of capital stock outstanding, the Shares.




13




---




D.    Property, plants and equipment





The head office of the Companys primary subsidiary, MCI, which is leased, is located at 7480 Mission Valley Road, Ste. 101, San
Diego, California, USA 92108. The lease covers approximately 14,000 square feet and the annual rent is approximately $244,000. The lease commenced on August 1, 2001 and expires on August 31, 2006.





The Companys 95,000 square foot warehouse, which is also leased, is located 12160 Philadelphia Street, Mira Loma, California, USA
91752-1188. The lease commenced on May 1, 2000 and expires on April 30, 2006; the annual rent is $384,000.





The
office of Mad Catz Canada consists of 350 square feet of office space leased by the Company at 5560 Explorer Drive, Mississauga, Ontario, Canada L4W 5M3. The Company leases this space on a month to month basis at a cost of Cdn. $2,231 per month.





The office of Mad Catz Europe, Ltd. is located at 18 Soho Square, London, England W1D 3QL and comprises
approximately 350 square feet. The office space is leased on a month-to-month basis with a monthly lease cost of £3,650.





The office of Mad Catz Asia, Ltd. is located at 138 Shatin Rural Committee Road, Unit 1717-19, 17th Floor, Grand Central Plaza, Tower 2, Shatin, N.T. Hong Kong. The office space comprises 5,000 square feet at a monthly lease cost of
$10,620 per month. The lease expires June 30, 2003.





The Company also leases 23,000 square feet at 8 Kenview
Blvd., Brampton, Ontario L6T 5E4, Canada that was previously used by the Companys Games Trader business. The lease relating to this office space expires on March 30, 2006, and the annual rent, including taxes and maintenance, is approximately
Cdn. $180,000. Since March, 2002, the facility has been sub-leased to an independent third party at approximately the same lease rate.





Management believes that its facilities currently leased are adequate for the foreseeable future.





|Item |  | 5.Operating and Financial Review and Prospects.
|---- |  | -----------------------------------------------




|Overview |  | 
|-------- |  | 




The
Company is a holding company which owns all of the outstanding shares of MCI, 1328158 Ontario Inc. and MCE. MCI, headquartered in San Diego, California, is a supplier of video game accessories for Nintendo, Sega, Sony, and Microsoft game systems.
MCI products are sold in over 12,000 retail stores in North America. MCI products are also well represented internationally with sales to Europe, South America, Canada, Australia, and New Zealand. 1328158 Ontario Inc. operates the video game
accessories business in Canada under the name Mad Catz Canada and MCE which operates the video game accessories business in the United Kingdom and Europe. The Company s stock is traded on the TSE and AMEX (ticker symbol MCZ).





The following discussion of the financial condition, changes in financial condition and results of operations of
the Company should be read in conjunction with the consolidated financial statements of the Company and related notes contained elsewhere in this Form 20-F. See Item 17 Financial Statements. The consolidated financial statements are
expressed in US dollars and have been prepared in accordance with GAAP in Canada. Reference is made to Note 14 of the consolidated financial statements for the years ended March 31, 2002 and 2001 for a discussion of the material measurement
differences between GAAP in Canada and the United States, and their effect on the Companys financial statements.





In addition to historical information, the following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. In some
cases, you can identify forward-looking statements by terminology such as could, may, will, should, expect, plan, anticipate, believe,
intend, estimate, predict, potential or continue, the negative of such terms or other comparable terminology. The Companys actual results could differ significantly from those
anticipated in these forward-looking statements as a result of these risks and uncertainties and certain other factors, including those discussed in Risk Factors elsewhere in this form 20-F. Historical results of operations, percentage
relationships and any trends that may be inferred therefrom are not necessarily indicative of the operating results of any future period.




14




---




Critical Accounting Policies





Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada, which
conform to accounting principles generally accepted in the United States, except as discussed in detail in Note 14 to the consolidated financial statements. The preparation of these financial statements requires MCI to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, MCI evaluates its estimates, including those related to the allowance for doubtful
accounts, inventory reserve, and allowances for sales returns and price protection. MCI bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.





Management believes that there are several accounting policies that are critical to understanding our historical and future
performance, as these policies affect the reported amounts of revenue and other significant areas that involve management judgments and estimates. These significant accounting policies are:





| |  |  | Allowance for doubtful accounts
| | - |  | -------------------------------




| |  |  | Allowances for sales returns and price protection
| | - |  | -------------------------------------------------




| |  |  | Inventory reserve
| | - |  | -----------------




These policies, and our procedures related to these policies, are described in detail below and under specific areas within the discussion and analysis of our financial condition and results of operations.





Allowance for doubtful accounts.





The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were
to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.





Allowance for sales returns and price protection





The Company maintains allowances
for marketing coop, volume rebate, and defective product as negotiated with specific customers. In additition, the Company maintains an allowance for the return of defective product based on the historical return rate of products by customers and
end consumers. If the actual defective product return rate exceeds the historical average, additional write-downs may be required.





The Company does business in a highly competitive industry. Pricing strategies by competitors could require the Company to price protect existing customers inventories. The Company does not maintain speculative allowances to
take into account the pricing strategies of competitors. Should market conditions exist that would require the Company to price protect customers inventories, write-downs would be required that would reduce net sales.





Inventory reserve





We assess our inventory for estimated obsolescence or unmarketable inventory and write down the difference between the cost of inventory and the estimated market value based upon assumptions about
future sales and supply on-hand. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.





New Accounting Standards, the Impact of recent United States accounting pronouncements:





In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 was effective as of July 1, 2001 and SFAS No. 142 was effective




15




---

April 1, 2002 for the Company. SFAS No.141 requires that the purchase method of accounting be used for all business combinations. SFAS No.141 specifies criteria that intangible assets
acquired in a business combination must meet to be recognized and reported separately from goodwill. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment
at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121 and, subsequently, SFAS No. 144 after its adoption. The CICA has adopted similar standards and, accordingly, there will be no United StatesCanadian GAAP differences arising from the
addition of these standards. The Company has no intangible assets other than goodwill. Goodwill at March 31, 2002 was $16,362,175. Amortization of goodwill for fiscal 2002 was $976,665. As a result of SFAS No. 142, the Company will not recognize
goodwill of approximately $975,000 in fiscal 2003.





In August 2001, the FASB issued SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. SFAS No. 144 also
broadens the definition of discontinued operations to include all distinguishable components of an entity that will be eliminated from ongoing operations. The Company is required to adopt SFAS No. 144 on April 1, 2002 on a prospective basis.





New Accounting Standards, the Impact of recent Canadian accounting pronouncements:





In July 2001, the CICA issued Handbook Section 3062, Goodwill and Other Intangible Assets(Section 3062). Section 3062
requires that intangible assets with indefinite useful lives acquired prior to July 1, 2001 no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of Section 3062. Furthermore, intangible
assets with indefinite useful lives acquired subsequent to June 30, 2001 are not amortized, but are reviewed at least annually for impairment. Section 3062 also requires that intangible assets with estimable useful lives be amortized over their
respective estimated useful lives. Upon adoption of Section 3062 on April 1, 2002, we will perform an evaluation of our identifiable intangible assets as of April 1, 2002 to determine whether any of our intangible assets are impaired, and we will
cease amortizing indefinite-lived intangibles acquired prior to July 2001.





Significant Developments During
Fiscal Year 2002





A decision was made by the Companys board of directors to set forth a plan in the
fourth quarter of fiscal 2001 to sell or discontinue the Games Trader (previously played video game) and ZapYou (internet distribution) businesses in order to focus the Companys efforts on the MCI business. By October 1, 2001, Company had
disposed of all of the assets of the Games Trader and ZapYou businesses. Financial results for fiscal years 2001 and 2002 recognize the Games Trader and ZapYou businesses as discontinued operations.





In July 2001, subordinated debt of the Company in the amount of $3.4 million was converted into 4,247,478 Shares.





In fiscal first quarter 2002, the Company launched a full line of accessories to support the new Nintendo Game Boy Advance product. In
fiscal third quarter 2002, the Company launched a full line of accessories to support the Microsoft Xbox and Nintendo GameCube consoles.





On December 31, 2001, the Companys license with Sony North American license for the PlayStation 2 Memory Card expired, has not been, and is not expected to be, renewed. The Sony European license for the PlayStation 2
Memory Card expires in November 2002.





In fiscal fourth quarter 2002, MCI organized an entity and opened a
business office in the United Kingdom (Mad Catz Europe Ltd.) to support the European launch of Microsoft Xbox and Nintendo GameCube.




16




---




A.  Operating Results





Fiscal Year ended March 31, 2002 compared to March 31, 2001





During fiscal year 2002, the Company changed its reporting currency from Canadian dollars to US dollars. The comparative historical figures for the 2001, 2000, and 1999 fiscal years in this Form 20-F
have been translated into US dollars, in accordance with US GAAP, which requires the use of an average exchange rate for each year in the translation from Canadian dollars to US dollars for the historical periods. Shareholders should be aware that
the comparative figures found in the Companys Annual Report to Shareholders are different from those listed in this Form 20-F because the figures in the Companys Annual Report to Shareholders were translated from Canadian dollars to US
dollars using Canadian GAAP, which requires translation into US dollars at the exchange rate in effect on March 31, 2001 rather than an average exchange rate for the entire year).





Sales





Net sales from
continuing operations increased to $83.3 million as compared with $58.5 million (Cdn.$87.9 million) for the same period last year. The Companys North American sales, which accounted for 88% of total sales, increased 58%, as a result of
increased market penetration of PlayStation 2 products and the launch of the Xbox, GameCube and Game Boy Advance product lines. International sales were $10.1 million for fiscal 2002 as compared to $9.5 million in fiscal 2001. The seasonality of the
sales cycle was as expected with 45% of sales occurring in third quarter. The top selling product group for fiscal 2002 was PlayStation 2 representing 43% of total sales as compared to 31% in fiscal 2001, benefiting from the significant increase in
the embedded base of Sony PlayStation 2 consoles. The top selling product for fiscal 2002 was the PlayStation 2 Memory Card representing 30% of total sales as compared to 20% of sales in fiscal 2001. On December 31, 2001, the Sony North American
license for the PlayStation 2 Memory Card expired. The Sony European license for the PlayStation 2 Memory Card, which represented 8% of total sales in 2002 and 6% of sales in 2001, remains in effect and expires in November of 2002.





Gross Profit





Gross profit is defined as net sales less factory product costs, cost of royalties, cost of freight-in and freight out and distribution center costs.





Gross profit from continuing operations was $18.4 million as compared to $13.0 million (Cdn.$19.6 million) last year. Gross
profit as a percentage of net sales was 22.1% for fiscal 2002 as compared to 22.3% in fiscal 2001. Gross profit for fiscal 2002 was negatively affected by the Xbox product launch due to higher new product development costs and expediting costs.
Gross profit derived from the PlayStation 2 and Game Boy products helped offset the lower Xbox product margins.





Operating Expenses





Operating expenses include selling, marketing, engineering and
administrative expenses of the MCI, MCC and MCE businesses, as well as the corporate operating expense associated with the Company.





Total operating expenses were $12.2 million in fiscal 2002 as compared to $11.4 million (Cdn.$17.2 million) in fiscal 2001. The primary driver for the increased operating expenses are selling costs attributable to the 43%
increase in sales. Selling expenses increased to $7.3 million as compared to $5.2 million (Cdn.$7.8 million) in fiscal 2001. Variable selling expenses including marketing co-op and commissions to outside sales representatives increased in line with
sales. Selling expenses as a percentage of sales decreased to 8.7% in fiscal 2002 from 8.9% in fiscal 2001. Total administrative expenses decreased to $4.9 million in fiscal 2002 from $6.2 million (Cdn.$9.4 million) in fiscal 2001. The decrease in
administrative expenses is due to reductions in corporate overhead.





Corporate operating expense for the Company
was $0.8 million in fiscal 2002 compared with $2.3 million (Cdn.$3.4 million) in fiscal 2001. A reduction in professional and legal fees, salaries, and severance costs was responsible for the favorable variance.




17




---




Earnings Before Interest, Taxes, Amortization and Other
Items





Earnings before interest, taxes, depreciation and amortization (EBITDA) for the
Companys continuing operations was $6.2 million in fiscal 2002 compared to $1.5 million (Cdn.$2.3 million) for the previous year. The increase in EBITDA is attributed to the gross profit generated by the 43% increase in sales and the reduction
in administrative expenses.





Interest Expense





Interest expense from continuing operations was $1.2 million in fiscal 2002 as compared to $1.3 million (Cdn.$1.9 million) for the
previous year. Interest applicable to the asset-based operating line of credit was $1.0 million for fiscal 2002 compared with $0.9 million (Cdn.$1.3 million) in fiscal 2001. Interest applicable to the subordinated debt was $0.2 million in fiscal
2002 compared with $0.4 million (Cdn.$0.6 million) in fiscal 2001. Fiscal 2002 and 2001 included 6 months of interest attributed to the subordinated debt. During fiscal 2001, a portion of the subordinated debt was repaid resulting in lower monthly
interest payments in fiscal 2002. The subordinated debt was converted to equity in July of fiscal 2002.





Amortization





Amortization of capital assets and goodwill charges associated with
the purchase of MCI was $2.0 million in fiscal 2002 as compared to $1.7 million (Cdn.$2.6 million) for fiscal 2001. Depreciation attributed to fixed assets was $1.0 million for fiscal 2002 compared to $0.8 million (Cdn.$1.1 million) in fiscal 2001.
Primary asset acquisitions in fiscal 2002 were primarily moulds used in production of accessories associated with the Nintendo Game Boy Advance, Microsoft Xbox and the Nintendo GameCube product launches.





Income Tax Expense





Income tax expense was $1.9 million for the year as compared to $3.2 million (Cdn.$4.8 million) for fiscal 2001. Fiscal year 2001 income tax expense included a $1.7 million (Cdn.$2.6 million) one-time
write-off of a future tax asset related to the parent company.





Net Income (Loss) and Income
(Loss) Per Share





Net income from continuing operations was $1.2 million as compared to a net loss of $4.9
million (Cdn.$7.3 million) in fiscal 2001. Net income per share in fiscal 2002 was $0.03 as compared to a net loss per share of $0.53 (Cdn.$0.80) in fiscal 2001. Income (loss) per share is calculated on the basis of the weighted average number of
basic shares outstanding during the year of 51,188,889 compared to 45,297,305 in the previous year.





Net Gain (Loss) From Discontinued Operations





In March 2001, the Companys
Board of Directors adopted a formal plan to dispose of the assets and business operations of its Games Trader and ZapYou business units.





By October 2001, the Company had disposed of all of the assets of the Games Trader and ZapYou businesses. Provisions for outstanding liabilities related to the discontinued operations were updated to provide for the expected
future liabilities of the Games Trader and ZapYou businesses. The net result of the disposal of assets and revaluation of liabilities resulted in a gain on discontinued operations of $0.3 million for the year. The loss from discontinued operations
for fiscal 2001 was $19.1 million (Cdn.$28.8 million). The 2001 loss from discontinued operations includes charges of $1.0 million (Cdn.$1.6 million) for costs to exit the Games Trader and ZapYou businesses. The fiscal 2001 loss also included $13.0
million (Cdn.$20.4 million) in write-downs of the following assets to their net realizable value as related to the disposition of the business units: inventories, $2.7 million (Cdn.$4.2 million) write-down; capital assets $2.1 million (Cdn.$3.3
million) write-down; goodwill and intangibles $2.2 million (Cdn.$3.5 million) write-down; future tax asset $4.0 million (Cdn.$6.2 million) write-down; and accounts receivable $2.0 million (Cdn.$3.2 million) write-down. The balance of the $19.1
million (Cdn.$28.8 million) fiscal year 2001 loss was attributed to operating losses associated with the Games Trader and ZapYou fiscal 2001 operations.




18




---




Income per share for discontinued operations in fiscal 2002 was $0.01 as compared
to a loss of $0.42 (Cdn.$(0.64)) in the prior year.





Fiscal Year ended March 31, 2001 compared to March 31,
2000





The Games Trader and ZapYou businesses were discontinued at the close of the 2001 fiscal year.
Accordingly, previously published financial results for fiscal 2000 have been restated to reflect discontinued operations accounting. In the accompanying analysis, the Companys consolidated fiscal 2000 results included 7 months of MCI
operations as MCI was acquired on August 31, 1999. In order to make a more meaningful comparison of results, the analysis of operations also includes a comparison of MCIs financial results for fiscal 2001 and for the unaudited 12-month period
ending March 31, 2000.





In fiscal 2002, the Company changed its reporting currency from Canadian dollars to US
dollars. The comparative figures in the following analysis for fiscal 2001 and 2000 have been translated into US dollars at the average rate of exchange for the year, in accordance with US GAAP.





Sales





Sales from
continuing operations increased to $58.5 million (Cdn.$87.9 million) for fiscal 2001 as compared with $47.8 million (Cdn.$70.4 million) for fiscal 2000. The primary reason for the increase is the inclusion of 12 months of MCI sales in fiscal 2001
versus 7 months in fiscal 2000. MCI sales increased 4% year-on-year for comparative 12 month periods. However, MCIs North American sales, which accounted for 83% of total sales, were up 22%, while the industry as a whole declined. MCIs
European sales decreased 39% which is consistent with the general decline in the European market and was within managements expectations. The typical seasonality of the sales cycle was as expected with 57% of sales occurring in the fiscal
third quarter.





Gross Profit





Gross profit from continuing operations was $13.0 million (Cdn.$19.6 million) for fiscal 2001 as compared to $13.6 million (Cdn.$20.1 million) for fiscal 2000. Gross profit
as a percentage of net sales was 22.3% for fiscal 2001 as compared to 28.5% in fiscal 2000. The MCI gross profit was 22.3% for 2001 versus 24.2% had MCI been included in the Companys operating results for the entire 12 months ending March 31,
2000. Fiscal 2001 represented a transition year for the console industry as the new 128 bit platforms started replacing the 32/64 bit products. As expected, margins were lower in fiscal 2001 as accessories for the older platforms were discounted and
the delivery of the new PlayStation 2 consoles did not meet market expectation due to supply issues.





Operating Expenses





Operating expenses include selling, marketing and administrative
expenses of the MCI business and corporate overhead associated with the Company. Operating expenses were $11.4 million (Cdn.$17.2 million) in fiscal 2001 as compared to $7.7 million (Cdn.$11.3 million) in fiscal 2000. The primary reason for the
variance is the inclusion of only 7 months of MCI expenses in fiscal 2000. Taking a full 12 months of fiscal 2000 into account, MCI operating expenses decreased to $9.1 million (Cdn.$13.7 million) from $11.2 million (Cdn.$16.5 million) the prior
year. The improvement in MCI operating expense was attributable to a streamlined selling process. MCI previously relied heavily on external sales support and now combines both internal and external sales-forces. Corporate operating expense for the
Company was $2.3 million (Cdn.$3.4 million) in fiscal 2001 compared with $0.8 million (Cdn.$1.2 million) in fiscal 2000. Professional and legal fees, salaries, and severance costs were the primary costs.





Earnings Before Interest, Taxes, Amortization and Other Items





EBITDA from continuing operations was $1.6 million (Cdn.$2.3 million) in fiscal 2001 as compared to $5.9 million (Cdn.$8.7 million) for fiscal 2000. The variance is due to
the cyclical nature of the business and partial inclusion of the MCI 2000 results. Consolidated Company fiscal 2000 EBITDA includes the majority of MCI sales and a lesser proportion of operating expenses. From a 12 month year on year perspective,
MCI EBITDA increased to $3.5 million (Cdn.$5.2 million) in 2001 from $2.6 million (Cdn.$3.8 million) in 2000 due to the improvement in operating expenses.




19




---




Interest Expense





Interest expense from continuing operations was $1.3 million (Cdn.$1.9 million) in fiscal 2001 as compared to $0.6 million (Cdn.$0.8
million) for fiscal 2000. Using a comparative 12 month unaudited period, MCI interest expense was $0.8 million (Cdn.$1.2 million) for 2001 as compared to $0.7 million (Cdn.$1.1 million) the previous year. Interest expense for MCI is driven by the
asset-based line of credit. The Companys interest expense is primarily a shareholder loan.





Amortization





Amortization of capital assets and goodwill charges associated with
the purchase of MCI was $1.7 million (Cdn.$2.6 million) in fiscal 2001 as compared to $0.9 million (Cdn.$1.3 million) for fiscal 2000. Fiscal 2000 includes only 7 months of amortization of the MCI goodwill. From a 12 month unaudited perspective, MCI
amortization of capital assets was $0.7 million (Cdn.$1.1 million) for 2001 as compared to $0.3 million (Cdn.$0.5 million) in 2000. Primary asset acquisitions are moulds used in production of accessories.





Gains





A portion of the liabilities acquired from Xencet were accounts payable recorded to cover potential amounts owing to creditors in a subsidiary company. Management was of the view that these amounts were no longer payable,
and therefore certain accounts payable were reversed to income in fiscal year 2000. The amount attributed to fiscal 2000 was $0.4 million (Cdn.$0.5 million).





Income Tax Expense





Income tax expense was $3.2
million (Cdn.$4.8 million) for the 2001 fiscal year as compared to $3.2 million (Cdn.$4.7 million) for fiscal 2000. MCI income taxes were $1.5 million (Cdn.$2.2 million) payable on the profitability of the MCI business despite losses reported at the
Company level. A 1999 Internal Revenue Service (IRS) offer-in-compromise related to the MCI business limits the deductions taken on the MCI profits in fiscal 2001. Certain deductions have been deferred to later years and are reflected as
current tax assets on the Companys balance sheet. At the Company level, income tax expense was $1.7 million (Cdn.$2.6 million) which was a one-time write-off of a future tax asset.





Net income (loss) and income (loss) per share





Net loss from continuing operations was $4.9 million (Cdn.$7.3 million) in fiscal 2001 as compared to net income of $1.5 million (Cdn.$2.3 million) in fiscal 2000. Net income from the MCI operation was
$0.4 million (Cdn.$0.6 million) for 2001 as compared to a net loss of $0.1 million (Cdn.$0.1 million) for the 12 months in 2000. Loss per share for the Companys continuing operations in fiscal 2001 was $(0.11) (Cdn.$(0.16)) as compared to
income of $0.05 (Cdn.$0.07) in fiscal 2000. Income (loss) per share is calculated on the basis of the weighted average number of basic shares outstanding during the year of 45,297,305 compared to 34,746,433 in the previous year.





Net income (loss) and income (loss) per share from discontinued operations





In March 2001, the Companys Board of Directors adopted a formal plan to dispose of the assets and business operations of
its Games Trader and ZapYou business units. The significant assets of the Games Trader and ZapYou business units were disposed of by August 31, 2001. During the year, the Company recorded a net loss of $19.1 million (Cdn.$28.8 million)
(2000net income of $2.2 million (Cdn.$3.3 million)) on these discontinued operations. The fiscal 2001 loss from discontinued operations includes charges of $1.1 million (Cdn.$1.6 million) for costs to exit the Games Trader and ZapYou business
units. The fiscal 2001 loss also included $13.6 million (Cdn.$20.4 million) in write downs of the following assets to their net realizable value as related to the disposition of the business units: inventories $2.8 million (Cdn.$4.2 million)
write-down; capital assets $2.2 million (Cdn.$3.3 million) write-down; goodwill and intangibles $2.3 million (Cdn.$3.5 million) write-down; future tax asset $4.1 million (Cdn.$6.2 million) write-down; and accounts receivable $2.1 million (Cdn.$3.2
million) write-down. The balance of the $19.1 million (Cdn.$28.8 million) fiscal year 2001 loss is attributed to operating losses associated with the Games Trader and ZapYou fiscal 2001 operations. Loss per share for discontinued operations in
fiscal 2001 was $(0.42) (Cdn.$(0.64)) as compared to income of $0.06 (Cdn.$0.09) the prior year.




20




---




B.    Liquidity and Capital Resources





Congress Credit Facility





On September 25, 2000, the Company entered into a Loan Agreement with Congress, pursuant to which Congress agreed to provide the Company with lines of credit totaling approximately $35,000,000 for MCI,
and Cdn. $15,000,000 for the Games Trader business (the Credit Facility). On September 5, 2001, the Credit Facility was amended to remove all references and obligations related to the Games Trader business. The Credit Facility was also
amended on June 18, 2002 and August 1, 2002 to allow MCE and MCIA to borrow under the facility. The Credit Facility replaced lines of credit from other lenders which were established by MCI and Games Trader independently prior to the Companys
acquisition of MCI. The Loan Agreement requires the Company to adhere to financial operating guidelines. See Note 6 to the consolidated financial statements included in Item 17. Financial Statements and Exhibits elsewhere in this Form
20-F.





The Credit Facility is being utilized to finance ongoing operations. The Company also established a
separate credit line of $10,000,000 which may be utilized, at Congress discretion, for acquisitions. The Credit Facility is secured by the Companys assets, including a pledge in favor of Congress of all of the stock of the Companys
subsidiaries. The interest rate payable on outstanding balances is the U.S. prime rate plus 0.75%. In addition, the Company is obligated to pay Congress (i) a monthly service fee of $2,000, (ii) an unused Line Fee equal to 0.25%, and (iii) an early
termination fee which ranges from .50% and 1.5% of the Credit Facility. The term of the Credit Facility is three (3) years, with a one (1) year renewal at Congress option, and automatic one year renewals, unless either party gives notice of
termination.





At August 31, 2002, the outstanding balance of the Credit Facility was $15,370,222





Contractual Obligations





The following summarizes the Companys contractual obligations at March 31, 2002 (in thousands).





Contractual Obligations:

Total

Less than One Year

1-3 years

4-5 years

After 5 yearsNon-cancelable operating lease obligations

$
3,499

877

2,451

171







Year ended March 31, 2002 compared to March 31, 2001





At March 31, 2002, available cash was approximately $1.9 million. As set forth in the Summary Consolidated
Statements of Cash Flow, below, this cash total reflects an increase of approximately $0.5 million from March 31, 2001, as a result of net cash provided by continuing operations of approximately $5.3 million and cash provided by discontinued
operations of $0.3 million offset by cash used in investing activities of $1.1 million (principally purchases of capital assets) and cash used in financing activities of approximately $4.0 million (principally repayment of bank loan).





In fiscal 2002, the Company changed its reporting currency from Canadian dollars to US dollars. The comparative figures in the
following analysis for fiscal 2001 and 2000 have been translated into US dollars at the average rate of exchange for the year, in accordance with US GAAP.





Summary Consolidated Statements of Cash Flow





2002


2001


2000In Millions of US DollarsCash provided by (used in) continuing operating activities

$
5.3


$
10.0


$
(5.1
)Cash provided by (used in) discontinued operations


0.3



(8.9
)


(0.3
)Cash provided by (used in) financing activities


(4.0
)


1.6



16.5Cash used in investing activities


(1.1
)


(1.2
)


(14.3
)Net increase (decrease) in cash

$
0.5


$
1.5


$
(3.2
)





The Companys continuing operations generated $5.3 million in
cash in fiscal 2002 from continuing operating activities compared to cash generated of $10.0 million (Cdn.$15.1 million) in fiscal 2001. During fiscal 2002, the Company invested in




21




---

inventories for the new Game Boy Advance, Xbox and GameCube product lines. The offset to the inventory investment was an increase in accounts payable. In addition, accounts receivable increased
in line with the approximate 43% increase in sales.





Cash used in financing activities was $4.0 million in fiscal
2002 compared to cash generated of $1.6 million (Cdn.$2.4 million) in fiscal 2001. Cash used in financing activities in fiscal 2002 was to repay the bank loan.





Total cash used in fiscal 2002 investing activities of $1.1 million and cash used in fiscal 2001 investing activities of $1.2 million (Cdn.$1.9 million) was for the acquisition of capital assets,
primarily moulds used in production of the Companys products.





The net cash generated for fiscal 2002 was
$0.5 million as compared to cash generated of $1.5 million (Cdn.$2.3 million) in fiscal 2001.





The Companys
working capital needs are provided by internally generated cash flow and an operating credit facility with an asset-based lender. The current operating credit facility has a maximum availability of $35 million, however access to this line of credit
is based on eligible collateral (accounts receivable and inventory) which changes throughout the year. During fiscal 2002 the maximum amount borrowed against the line of credit was $16.0 million. At March 31, 2002 the outstanding balance was $4.3
million with additional excess loan availability of $3.3 million. In addition, the Company must meet a tangible net worth covenant to access the line of credit. As at March 31, 2002, the Company was in compliance with this loan covenant.





Fiscal Year ended March 31, 2001 compared to March 31, 2000





In fiscal 2002, the Company changed its reporting currency from Canadian dollars to US dollars. The comparative figures for cash movements
in the attached analysis for fiscal 2001 and 2000 have been translated into US dollars at the average rate of exchange for the year, and the balance sheet amounts at the historical rate at the balance sheet date, in accordance with US GAAP.





The increase in cash is largely a result of changes in accounts receivable and inventories. Accounts receivable
at March 31, 2001 totaled $6.8 million (Cdn.$10.7 million), a decrease of $8.5 million (Cdn.$11.6 million) from the March 31, 2000 balance of $15.3 million (Cdn.$22.3 million). This decrease principally reflects write-offs associated with the
discontinuing of the Games Trader business. Inventories at March 31, 2001, totaled $13.5 million (Cdn.$21.3 million), a decrease of approximately $5.2 million (Cdn.$5.9 million) from the March 31, 2000 balance of $18.7 million (Cdn.$27.2 million).
This decrease also reflects the discontinuance of the Games Trader business.





On September 25, 2000, the Company
secured an operating line credit facility for MCI with Congress of approximately $35.0 million. Although $10.0 million of the Credit Facility may be used for acquisitions, the Company has no present plan to make any acquisitions. The Credit Facility
replaces and consolidates MCIs pre-existing lines of credit, and is secured by MCIs assets. See Congress Credit Facility.





The net cash generated for fiscal 2001 was $1.5 million (Cdn.$2.3 million) as compared to a net use of cash of $3.2 million (Cdn.$4.8 million) in fiscal 2000.





Balance Sheet





In fiscal 2002, Mad Catz changed its reporting currency from Canadian dollars to US dollars. The comparative figures in the attached analysis for fiscal 2001 and 2000 have been translated into US dollars at the historic rate
at the balance sheet date, in accordance with US GAAP.





As of March 31, 2002, the Companys consolidated
balance sheet had assets of $50.2 million as compared with $45.7 million (Cdn.$72.0 million) the previous year. Shareholders equity was $29.6 million in fiscal 2002 as compared with $24.7 million (Cdn.$38.9 million) the previous year. The increase
in assets in fiscal 2002 was due to the increased working capital needs to support the new Game Boy Advance, Xbox and GameCube product lines as well as the overall increase in sales. The fiscal year 2002 increase in shareholders equity is primarily
due to the conversion of subordinated debt to equity which did not provide additional cash to the Company.




22




---




C.    Research and Development, Patents and Licenses, etc.





The Company is party to various license agreements with various manufacturers of video game consoles. Currently, the Company is
party to license agreements with Sony and Microsoft. See Item 4 Information on the CompanyB. Business OverviewIntellectual Property Needed to Produce the Companys Products.





D.    Trend Information





Trends in the Companys financial performance are discussed above in Section A, Operating Results.





Item 6.Directors, Senior Management and Employees





A.    Directors and Senior Management





Directors





The directors of the Company are as follows:





Name

Position

Director SincePatrick S. Brigham

Chairman and Director

September 1998J. Brendan Ryan

Director

September 2001Donald Lenz

Director

March 2000Cary L. McWhinnie

Director

October 1998Morris Perlis

Director

March 2000





Patrick S. Brigham, Chairman and Director





Mr. Brigham has been the Chairman of the Company since September 30, 1998. He is the President of Hartay
Enterprises Inc. He was the founder and past Chairman of Sunquest Vacations Limited. In March 1997, he was appointed to the Board of Directors of Radium Energy Corporation.





J. Brendan Ryan, Director





Mr. Brendan Ryan is CEO of Foote, Cone & Belding Worldwide, Inc., a leading Advertising firm based in New York City. Mr. Ryan has held this position for the past five years.





Donald Lenz, Director





Mr. Lenz is the Managing Director of Brompton Securities Ltd. (Investment bankingToronto, Ontario). Mr. Lenz was previously the President of Seldm Limited, a private investment company based in Toronto, Canada. Prior to
starting Seldm Limited in 1999, Mr. Lenz spent over 30 years in the investment banking industry. Joining Dominion Securities Inc. in 1986, Mr. Lenz most recently served as a senior partner with its Investment Banking Division, and prior to this
fulfilled the role of Vice-President of Corporate Finance for Goldman Sachs & Co. in New York. Mr. Lenz began his investment banking career with A.E. Ames & Co. Incorporated where he served as Vice-President before leaving in 1976. Mr. Lenz
has experience in all facets of investment, restructuring and general advisory services. He led the first initial public offering for a technology based company at RBC Dominion Securities Inc.





Cary L. McWhinnie, Director





Mr. McWhinnie is the Secretary of Hartay Enterprises Inc. with responsibility for developing new investment opportunities. Previously, he was a Director and Executive Vice-President, Strategic Planning of Sunquest Vacations Limited.




23




---




Morris Perlis, Director





Mr. Perlis is currently the President and Chief Executive Officer of the Company. Previously, he was President of Counsel Corporation, a
public investment company. Prior to his involvement with Counsel Corporation, from 1979 to 1982, Mr. Perlis was with American Express in Canada and at its U.S. headquarters in New York. Mr. Perlis served American Express in a variety of capacities
over 13 years, including as President and Chief Executive Officer of Amex Bank of Canada, President and General Manager of American Express Canada, and Executive Vice President and General Manager of American Express Personal Card Division.





Senior Management





The Companys executive officers are as follows:





Name

Position

Executive Officer SinceMorris Perlis

President and Chief Executive Officer

May 30, 2000Darren Richardson

Executive Vice President of the     Company, President and

October 1, 1997Chief Operating Officer of MCIAndrew Schmidt

Chief Financial Officer of the     Company and MCI

December 1, 2000Tom Roberts

Senior Vice President of MCI

June 12, 1997Warren Cook

Vice President Sales of MCI

May 1, 2000Whitney Peterson

Vice President Corporate Development and Corporate
    Counsel of MCI

July 1, 1998





Darren Richardson





Mr. Richardson was appointed President and COO of MCI following GTRs acquisition of MCI on August 31, 1999, and has been an
Executive Vice President of the Company since October of 1997. Prior to joining MCI, Mr. Richardson served in several senior management capacities with Games Trader, including Chief Operating Officer, and Vice-President of Business Development,
responsible for sales and marketing with a focus on new account development. He has a Master of Business Administration degree from Trinity College Dublin (1993) and a Bachelor of Commerce degree from the University of Wollongong, Australia (1984).





Andrew C. Schmidt





Mr. Schmidt has been Chief Financial Officer of the Company and MCI since December 2000. Previously, he was the Director of Finance for MCI. Prior to his term with the
Company, Mr. Schmidt held senior finance positions with Cox Communications, Lucas Electronics, National Steel and Shipbuilding and Texas Instruments. He has a Masters degree in Accountancy from San Diego State University and a Bachelor or Business
Adminstration/Finance degree from the University of Texas at Austin.





Tom Roberts





Mr. Roberts joined the company in 1993 and has served as General Manager of the company and is principally responsible for
Product Development and Manufacturing. Mr. Roberts has lived and traveled throughout Asia where the companys manufacturing operations are performed. Mr. Roberts has held executive positions in Engineering and Design with General Dynamics
Corporation and Hughes Aircraft. Mr. Roberts holds an Undergraduate Degree in Engineering from Brigham Young University and attended MBA studies at the University of Laverne.





Warren Cook





Mr.
Cook has been Vice-President for GTI since February 1997. His emphasis is on servicing and developing GTIs existing customers as well as the development of new accounts. With the acquisition of MCI, Mr. Cook is charged with the integration of
both




24




---

sales organizations and the execution of a customer-focused strategy that will leverage the strengths of both product lines. Previously, during the period between August 1991 and February 1997,
Mr. Cook fulfilled the role of Manager, Accounts Sales at Marks Work Warehouse, with a focus on the development of corporate business. Prior to this, Mr. Cook worked for Grants between 1998 and 1991, a small privately held textile company, as
National Sales Manager. Mr. Cook graduated from Ryerson Polytechnic University with a Bachelor of Business Administration in 1986.





Whitney Peterson





Mr. Peterson has been Vice President Corporate
Development and General Counsel for MCI since July 1998. Prior to joining MCI, Mr. Peterson spent the past seven years working at the International law firm of Latham & Watkins, where he represented and consulted with numerous Fortune 500
companies. Mr. Peterson is also the co-founder and co-owner of Cornerstone Films of America, a production company that produces and markets full-length motion pictures worldwide. Mr. Peterson received his law degree from the J. Rueben Clark School
of Law at Brigham Young University, where he graduated Magna Cum Laude. Mr. Peterson also served as an Articles Editor on the BYU Law Review in which he was published. Following law school, Mr. Peterson clerked for the Honorable Bruce S. Jenkins,
Chief Judge of the Federal District Court in Utah.





B.    Compensation





The following table sets forth all compensation for all periods indicated in respect of the individual who was, as of March 31, 2002, the
chief executive officer of the Company, and all other persons who were executive officers of the Company or its subsidiaries who received compensation in excess of $100,000 for the year ended March 31, 2002.





Summary Compensation Table





Information provided in the table below is in Canadian dollars unless noted otherwise.





Annual Compensation


Long-Term Compensation

All other Compen- sation (Cdn$)Awards

PayoutsName and Principal Position

Year

Salary (Cdn$)


Bonus (Cdn$)

Other Annual Compensation
(Cdn$)(4)


Securities Under Options Granted (6)

Restricted Shares or Restricted Share Units

LTIP Payouts (Cdn$)Peter M. Kozicz President and Chief Executive Officer(1)

2002 2001 2000

$  25,000 $273,077
$200,000


  

$  251,000  
(2)

 75,000 

  

  

275,000 

(7)Louis Nagy, Chief Financial Officer(3)

2002 2001 2000

 $  76,346 $  95,068


  $  30,000

  


  

  

  

 34,615 
(3)Darren Richardson, Executive Vice-President

2002 2001 2000

US$181,500 US$150,000 $127,506


  $  20,000

  


150,000 50,000 30,000

  

  

  Andrew C. Schmidt, Chief Financial Officer

2002 2001

US$152,500 US$  45,000
(5)

 

 


165,000 

 

 

 Warren Cook Vice President, MCI

2002 2001

US$161,550 US$130,000


 

 


100,000 40,000

 

 

 Tom Roberts, Senior Vice President, MCI

2002 2001 2000

US$170,000 US$170,000 US$170,000


  

  


100,000 30,000 125,000

  

  

  Whitney Peterson, Vice President, MCI

2002 2001 2000

US$150,000 US$150,000 US$150,000


  

  


50,000 20,000 75,000

  

  

  Morris Perlis President and Chief Executive Officer(8)

2002

$635,156




$    13,300
(9)

710,000










25




---




Notes:





|(1) |  | Peter M. Kozicz ceased to be President and Chief Executive Officer effective May 1, 2001.
|--- |  | -----------------------------------------------------------------------------------------

|(2) |  | Represents the difference between the market value of common shares issued on exercise of stock options on the date of exercise and the date of grant.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Louis Nagy ceased to be Chief Financial Officer effective November 20, 2000. His remuneration after November 20, 2000, is reported under the heading All
Other Compensation.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | For each of the Named Executive Officers, personal benefits were not greater than the lesser of $50,000 and 10% of the total annual salary and bonus of such
named Executive Officers for fiscal year 2002.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Andrew Schmidt became Chief Financial Officer effective December 1, 2000. Represents remuneration for the period December 1, 2000, to March 31, 2001. On an
annualized basis, Mr. Schmidts salary for the fiscal year ended March 31, 2001, is equal to US $114,870.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Options granted have a 5 year term.
|--- |  | -----------------------------------

|(7) |  | Represents severance payment equal to one years salary. Cdn. $275,000 was paid out in fiscal 2002 with Cdn. $25,000 remaining to be paid in fiscal 2003.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Morris Perlis became President and Chief Executive Officer of the Corporation on May 1, 2001. In April 2001, Morris Perlis was a consultant to the Corporation
and was paid consulting fees of Cdn. $29,600 during this period.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | Represents payments of Directors fees.
|--- |  | ---------------------------------------




Compensation of Directors





For the fiscal year ended March
31, 2002, the directors of the Company, who were not salaried employees of the Company, were each paid or accrued (Canadian directors Perlis, Lenz, McWhinnie, and Brigham are paid the amounts below in Canadian dollars, Ryan, a United States based
director is paid the amounts below in US dollars):





(a)  an annual retainer of
$5,000;





(b)  a fee of $1,500 for each regularly scheduled quarterly Board of Directors
meeting attended;





(c)  a fee of $300 for each Board of Directors meeting held by
teleconference;





(d)  a fee of $2,500 for acting as the Chairman of a committee;





(e)  a fee of $500 for attendance as a committee member of a regularly scheduled
committee meeting; and





(f)  a fee of $300 for each committee meeting held by
teleconference.





Matters relating to compensation are the responsibility of the Companys Compensation
Committee. This committee of the Board of Directors presently consists of Cary McWhinnie, and Brendan Ryan and Patrick Brigham.





No amount has been set aside or accrued by the Company and its subsidiaries during the last fiscal year of the Company to provide pension, retirement or similar benefits for directors and officers of the Company, pursuant to any
existing plan provided or contributed to by the Company and its subsidiaries.





C.    Board Practices





Directors were elected at the Annual General Meeting of Shareholders held on August 7, 2002, and each will
serve until the next Annual General Meeting of Shareholders or until his or her successor is duly elected unless prior thereto he or she resigns or his or her office becomes vacant by reason of death or other cause.





Compensation Committee





Matters relating to compensation are the responsibility of the Companys Compensation Committee. This committee of the Board of Directors of the Company presently consists of Cary McWhinnie (Chairman), Patrick Brigham, and
Brendan Ryan.




26




---




The Compensation Committee sets the salary of the President and Chief Executive
Officer, subject to the terms of any employment agreement. The Chief Executive Officer recommends the salaries of other senior executive officers for approval by the Compensation Committee. The Compensation Committee establishes incentive policies
for the Company and oversees the Option Plan. The Compensation Committee is charged with monitoring and recommending new employment agreements for officers and with the appointment and dismissal of officers. The Compensation Committee bases its
recommendations on current markets and the desire to attract and retain high quality executive officers. Compensation, including bonuses and stock options, is awarded for significant contributions to increased shareholder value. In setting policy,
the Compensation Committee relies upon the recommendations of relevant officers of the Company but may from time to time make reference to other comparable corporate situations and the advice of independent consultants. The Compensation Committee
from time to time reviews the Companys compensation policies to ensure that these policies remain appropriate.





Audit Committee





The Audit Committee reviews the audited annual financial statements of the Company and certain other public
disclosure documents required by regulatory authorities and makes recommendations to the Board with respect to such statements and documents. The Audit Committee also makes recommendations to the Board regarding the appointment of independent
auditors, reviews the nature and scope of the annual audit as proposed by the Companys auditors and management, and reviews with management the risks inherent in the Companys business and related risk management programs. The Audit
Committee also reviews with the Companys auditors and management the adequacy of the internal accounting control procedures and systems. The Audit Committee members have direct access to the independent auditors. The Company does not have an
internal audit department nor does it feel that one is currently required. The Audit Committee consists of Donald Lenz (Chairman), Cary McWhinnie and Patrick Brigham.





D.    Employees





Location

2002

2001

2000San Diego, CA-USA

40

40

45Mira Loma, CA-USA

15

15

15Toronto, Canada

3

3

65Hong Kong, PRC

20

20

18Shenzhen, PRC

12

12

10





Temporary employees are used in the Mira Loma, CA-USA distribution center during the peak
shipping months of October through December. Temporary employees during this period averaged 15 hourly employees.




27




---




E.    Share Ownership





The following table shows the number of our Shares beneficially owned by each director and the named executive officer in subsection 6.B. as of August 30, 2002.
Amounts shown are in Canadian dollars.





Name and Principal Position

Shares held directly and beneficially

$ of Outstanding Shares as of Aug. 31, 2002

Options Outstanding

Exercise Price

Expiration DatePatrick S. Brigham, Chairman and Director

8,595,205

$
12,033,287

27,600 10,000

$ $
1.80 1.40

6/30/05 8/30/07Brendan Ryan Director

*




25,000 10,000

$ $
2.29 1.40

9/10/06 8/30/07Donald Lenz, Director

*




25,000 17,700 10,000

$ $ $
3.30 1.80 1.40

1/18/05 6/30/05 8/30/07Cary L. McWhinnie, Director

*




42,150 10,000

$ $
1.80 1.40

6/30/05 8/30/07Morris Perlis, Director,
CEO

*




13,200 200,000 500,000 10,000

$ $ $
$
1.80 0.70 1.37 1.40

6/30/05 4/30/06 1/24/07 8/30/07Andrew C. Schmidt, Chief
Financial Officer

*




100,000 50,000

$ $
0.91 1.35

6/30/06 2/22/07Darren Richardson, EVP,
COO MCI

*




150,000 50,000 30,000 75,000

$ $ $
$
0.91 0.91 0.91 0.91

6/30/06 6/30/05 3/23/04 10/27/03Tom Roberts,

*




100,000

$
0.84

6/30/06Senior Vice President, MCI






30,000 125,000

$ $
0.84 0.84

6/30/05 8/19/04Whitney Peterson, Vice
President, MCI

*




33,333 20,000 75,000

$ $ $
0.84 0.84 0.84

6/30/06 6/30/05 8/19/04Warren Cook, Vice
President

*




100,000 40,000 20,000 66,667

$ $ $
$
0.84 0.84 0.84 0.84

6/30/06 6/30/05 3/23/04 10/27/03


---

|* |  | Indicates beneficial ownership of less than 1% of the Shares
|- |  | ------------------------------------------------------------



28




---




Item 7.Major Shareholders and Related Party Transactions





A.    Major Shareholders





Shareholder

Year

Shares owned

% outstanding sharesPatrick Brigham

August 31, 2002 Sept. 21, 2001 March 31, 2001 March 31, 2000

8,595,205 8,267,475 4,019,997 4,019,997

16 16 8 10
% % % %





Patrick Brigham does not have any special voting rights that would
differentiate his shares from other shareholders.





As at August 31, 2002, there are no arrangements which could
result in a change of control at a subsequent date.





B.    Related Party Transactions





In July of 2001, Patrick Brigham, Chairman of the Board, agreed to convert certain subordinated debt owed by the Company to Mr. Brigham of
$5,173,428 into 4,247,478 Shares, converted at a price of $1.218. The conversion price was arrived at by calculating the weighted average closing price of the stock (TSE) for the five days prior to conversion.





During the period April 1, 2001 to August 31, 2002, the Company is not aware of any other transactions or loans in which directors,
executive officers, holders of ten percent of the Companys outstanding Shares, or any associate or affiliate of such person, has or had a material interest, direct or indirect.





Item 8.Financial Information





A.    Consolidated Statements and Other Financial Information





See Item
17.





B.    Significant Changes





There were no significant changes since the issuance of the March 31, 2002 financial statements.





Item 9.The Offer and Listing.





A.    Offer and Listing Details





See Item 9.C.





B.    Plan of Distribution





Not applicable.




29




---




C.    Markets





The Shares commenced trading on the TSE in December, 1995 under the symbol GTR. The TSE is the primary trading market for the Shares. The Shares began trading
on AMEX in the United States on September 14, 1999 under the symbol GIG. On September 11, 2001, the Shares began trading on both the AMEX and the TSE under the symbol MCZ to reflect the Companys name change to Mad Catz Interactive,
Inc. The following is a summary of trading, on a quarterly basis, in the Shares on the TSE and AMEX for the fiscal years ended March 31, 2000, 2001, and 2002 and the first two quarters of the fiscal year 2003 along with a monthly presentation for
the first six months of fiscal year 2003:





THE TORONTO STOCK EXCHANGE





Fiscal Years ended March 31





High

Low2002

$
3.04

$
0.502001


3.15


0.662000


6.15


2.401999


2.80


0.561998


3.45


0.30





Fiscal Year Ended March 31, 2001





High

Low1st Quarter

$
3.15

$
1.402nd Quarter


1.90


0.943rd Quarter


1.50


0.904th Quarter


1.50


0.66





Fiscal Year Ended March 31, 2002





High

Low1st Quarter

$
1.29

$
0.502nd Quarter


3.04


1.003rd Quarter


2.85


1.584th Quarter


2.00


1.22





Fiscal Year 2003





High

LowMarch 2002

$
1.76

$
1.55April 2002


1.80


1.41May 2002


1.69


1.41June 2002


1.65


1.40July 2002


1.60


1.05August 2002


1.46


1.17





AMERICAN STOCK EXCHANGE (in US$)





Fiscal Years Ended March 31





High

Low2002

$
1.94

$
0.342001


2.19


0.402000


3.75


1.93




30




---




Fiscal Year Ended March 31, 2001





High

Low1st Quarter

$
2.19

$
0.932nd Quarter


1.25


0.633rd Quarter


1.13


0.564th Quarter


1.06


0.40





Fiscal Year Ended March 31, 2002





High

Low1st Quarter

$
0.87

$
0.342nd Quarter


1.94


0.753rd Quarter


1.68


1.074th Quarter


1.14


0.80





Fiscal Year 2003





High

LowMarch 2002

$
1.14

$
0.98April 2002


1.15


0.88May 2002


1.11


0.90June 2002


1.10


0.94July 2002


1.07


0.66August 2002


0.95


0.72





D.    Selling Shareholders





Not applicable.





E.    Dilution





Not applicable.





F.    Expenses of the Issue





Not applicable.





Item 10.Additional
Information.





A.    Share Capital





Not applicable.





B.    Incorporation





The Company is incorporated pursuant to the Canada Business Corporations Act (the Act) under
Corporation Number 294869-9. The Companys articles of incorporation do not contain any limitations on the objects or purposes of the Company.




31




---




The following is a summary of certain provisions of the Companys bylaws and
articles of incorporation:





Directors Responsibilities in Matters in Which the Director is Materially Interested





The Companys articles of incorporation require any of the Companys directors who has a material
interest in any person who is a party to a material contract or proposed material contract with the Company to disclose the nature and extent of their interest. Pursuant to the Act, in the case of a proposed contract, the declaration must be made at
the meeting of the Companys Board of Directors at which the question of entering into the contract is first taken into consideration, or if the interested directors are not present at that meeting the Companys directors are required to
declare their interest at the next meeting. In the case where any of the Companys directors becomes interested in a contract after it is made, the declaration must be made at the first meeting of directors held after the applicable director
has become interested. In the case where a proposed contract is dealt with by resolution instead of at a meeting, the disclosure that would otherwise be required to be made at a meeting must be made forthwith on receipt of the resolution, or if the
director was not interested in the proposed contract at the time of receipt of the resolution, at the first meeting after he becomes so interested.





Directors Power to Vote on Compensation to Themselves





Subject to the Act, the
Companys articles of association provide that the directors may determine to be paid out of the Companys funds as remuneration for their service.





Directors Borrowing Powers





Under the Companys Articles and the Act,
the Companys directors may, without authorization of the shareholders, take various actions, including, but not limited to the following: (i) borrow money upon the credit of the Company; (ii) issue, reissue, sell or pledge debt obligations of
the Company, whether secured or unsecured; (iii) give directly or indirectly financial assistance to any person by means of a loan, guarantee or otherwise on behalf of the Company to secure any loan or obligation of any person, and (iv) mortgage,
hypothecate, pledge or otherwise create a security interest in all or any property of the Company, owned or subsequently acquired, to secure any obligation of the Company.





Retirement of Directors Under an Age Limit Requirement





The
Companys articles of association do not require directors to retire pursuant to an age limit.





Number of Shares Required for a
Directors Qualification





The Companys articles of association do not provide for a requirement of
shares for a directors qualification.





Rights and Preferences of Shares





The Companys articles of association permit but do not require the Board of Directors to declare and pay dividends with respect to
the Shares. Each holder of Shares is entitled to one vote per share on all matters coming for a vote before the shareholders. There is no cumulative voting. Directors stand for one-year terms and are elected at each annual meeting of shareholders.
All holders of Shares are entitled to share equally in any surplus in the event of a liquidation of the Company after the Companys obligations are repaid. There are no provisions calling for redemption of securities, establishing any sinking
fund, or establishing any obligation to participate in further capital calls by the Company. There is no provision discriminating against existing or prospective holders of Shares as a result of such shareholder owning a substantial number of
Shares.





Creation of New Securities





The Act provides a holder of shares of any class or series of shares the right to vote on any proposal to create a new class or series upon amendments to the Companys bylaws or articles of
incorporation.





Shareholder Meetings





The Company must hold an annual meeting of its shareholders every calendar year at a time and place determined by the Companys Directors. The Companys Board of Directors, the Chairman of
the Board, the Chief Executive Officer or the President may at any time convene a special meeting of the shareholders.




32




---




At least 21 days notice and not more than 50 days notice of every
general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, must be given to the Companys shareholders entitled to be present at the meeting by notice
given as permitted by the Companys bylaws.





No business will be transacted at any shareholder meeting unless
the requisite quorum is present at the commencement of the business. Subject to the Act, if we have two or more shareholders, a quorum for the transaction of business at a shareholder meeting shall be two persons present in person or by proxy and
holding or representing by proxy, not less than five percent (5%) of the shares entitled to vote at the shareholder meeting.





Limitations on the Rights to Own Securities





The Companys articles of incorporation
and bylaws do not provide for any limitations on the rights to own securities.





Change in Control Provisions





The Companys articles of incorporation and bylaws do not contain any change in control limitations with respect to a
merger, acquisition, or corporate restructuring.





Shareholder Ownership Disclosure





The Companys articles of incorporation and bylaws do not contain any provision governing the ownership threshold above which
shareholder ownership must be disclosed.





Changes in Capital





Subject to the Act, the Company may, by resolution of its shareholders, increase the Companys share capital by the creation of new shares. Subject to the Act, the new
shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached to them as the resolution of the shareholders determines.





Except as otherwise provided by the conditions of issue or by the Companys articles of incorporation. The Company may, by special resolution of the shareholders
where required, reduce its share capital in any way subject to any incident authorized and consent required by law.





C.    Material Contracts





The Company entered into the following
material contracts during the previous two years, other than contracts entered into in the ordinary course of business.





On July 9, 2001, the Company entered into a lease with H. G. Fenton Company for approximately 14,022 square feet of office space located at 7480 Mission Valley Road, San Diego, California 92108. This office space is occupied by MCI,
the Companys principal subsidiary. The lease commenced on September 1, 2001 and continues in effect until August 31, 2006. The base rent in year one is $20,331.90 per month and increases 4% per year thereafter.





On September 25, 2001. the Company entered into amended loan and security document related to its Credit Facility with Congress Financial
Corporation (Central). These amendments were effected to remove any references or obligations related to the Companys Games Trader business following the discontinuance of that business.





On March 2, 2001, the Company entered into an a licensing agreement with Microsoft to produce and market certain accessories for the X-box console. The license fee is
5% of net sales for licensed products. The license expires on February 28, 2003 and automatically renews for consecutive 12 month periods unless notice is served by either party to terminate the agreement.





On September 28, 2001, the Company entered into a licensing agreement with Immersion for the sale of spinning mass tactile feedback
devices (products that rumble). The license fee is approximately 2.5% of net sales of licensed product. The agreement is in effect during the life of the relevant Immersion patents.




33




---




On July 18, 2002 and August First 2002, the Company entered into additional loan
documents to allow its recently formed subsidiaries in the United Kingdom, MCE, and Asia, MCIA, to borrow under the Congress Loan Agreement.





D.    Exchange Controls





(a)  There are no laws or
governmental decrees or regulations in Canada that restrict the export or import of capital, or affects the remittance of dividends, interest or other payments to holders of the Companys securities who are not residents of Canada, other than
withholding tax requirements.





(b)  There are no limitations imposed by the laws of Canada, the laws of
Ontario or by the charter or other governing documents of the Company on the right of a non-resident to hold or vote Shares of the Company, other than as provided in the Investment Canada Act (Canada) (the Investment Act). The following
summarizes the principal features of the Investment Act for a non-resident who proposes to acquire Shares. The summary does not anticipate statutory or regulatory amendments.





The Investment Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint
venture that is not a Canadian as defined in the Investment Act (a non-Canadian), unless after review, the minister responsible for the Investment Act (the Minister) is satisfied that the investment is likely to
be of net benefit to Canada. Under the Investment Act, a United States citizen qualifies as a World Trade Organization Investor. Subject to the restrictions noted below, an investment in a Canadian business by a World Trade Organization
Investor, would be reviewable under the Investment Act only if it is an investment to acquire control of such Canadian business and the value of the assets of the Canadian business as shown on its financial statements is not less than a specified
amount, which for 2002 is Cdn. $218 million. An investment in the shares of a Canadian business by a non-Canadian other than a World Trade Organization Investor when the Company is not controlled by a World Trade Organization Investor,
would be reviewable under the Investment Act if it is an investment to acquire control of the Canadian business and the value of the assets of the Canadian business as shown on its financial statements is $5 million or more, or if an order for
review is made by the federal cabinet on the grounds that the investment relates to Canadas cultural heritage or national identity.





The acquisition by a World Trade Organization Investor of control of a Canadian business in any of the following sectors is also subject to review if the value of the assets of the Canadian business exceeds Cdn. $5 million,
as shown on its financial statements: uranium, financial services (except insurance), transportation services and cultural businesses, which include broadcast media (publication, distribution or sale of books, magazines, periodicals, newspapers,
music, film and video products and the exhibition of film and video products), television and radio services. Given the nature of the Companys business, it is possible, but not certain, that the Minister might conclude that the Company is
engaged in a cultural business. Advice is available from the Department of Heritage in respect of a proposed transaction.





A non-Canadian would acquire control of the Company for purposes of the Investment Act if the non-Canadian acquired a majority of the Shares. The acquisition of less than a majority but one-third or more of the Shares would be
presumed to be an acquisition of control of the Company unless it could be established that, on acquisition, the Company was not controlled in fact by the acquired through the ownership of Shares.





Certain transactions relating to Shares are exempt from the Investment Act, and include:





(a)  an acquisition of Shares by a person in the ordinary course of that persons business as a trader or
dealer in securities;





(b)  an acquisition of control of the Company in connection with
the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Act; and





(c)  an acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the
ultimate direct or indirect control in fact of the Company, through the ownership of Shares.





Competition Act
Review





Investments giving rise to the acquisition or establishment, directly or indirectly, by one of more
persons of control over, or a significant interest in the whole or part of a business of a competitor, supplier, customer or other person are subject to substantive




34




---

review by Canadas Competition Law Authority, and the Commissioner of Competition (the Commissioner). If or when the Commissioner concludes that a merger (Merger),
whether by purchase or lease of shares or assets, by amalgamation or by combination, or otherwise, prevents or lessens, or is likely to prevent or lessen competition substantially, he may apply to the Competition Tribunal for an order that the
merger not proceed or, in the case of a completed merger, for an order that the merger be dissolved on that the acquirer dispose of shares or assets, as may be necessary to eliminate the substantial lessening or prevention of competition. Such
substantive Merger review power applies to all Mergers, whether or not they meet limits for pre-notification under the Competition Act.





In addition to substantive Merger review, the Competition Act provides for a notification regime respecting Mergers of certain size. The regime applies in respect of share acquisitions, asset acquisitions, acquisition of
interests in a combination, amalgamations and the creation of certain combinations. For ease of reference, this filing refers specifically to share acquisition, although the pre-notification regime applies, with the appropriate modification, to
other types of acquisition of control as well.





In order for a share acquisition transaction to be pre-notifiable,
the parties to the transaction (being the person or persons who propose to acquire shares, and the corporation the shares of which are to be acquired), together with their affiliates (being all firms with a 50% or more voting shares linkage up and
down the chain) must have:





(i)  aggregate gross assets in Canada that exceed Cdn.
$400,000,000.00 in value, as shown on their audited financial statements for the most recently completed fiscal year (which must be within the last fifteen (15) months); or





(ii)  aggregate gross revenue from sales in, from or into Canada that exceed Cdn. $400,000,000.00 for the most recently completed fiscal year
shown on the said financial statements; and





(iii)  the party being acquired must have
gross assets in Canada, or gross revenues from sales in or from Canada, exceeding Cdn. $35,000,000 as shown on the said financial statements. Acquisition of shares carrying up to but not exceeding 20% of the votes of a publicly traded corporation,
or 35% of the votes in a private corporation will not be subject to pre-notification, regardless of the above thresholds. However, exceeding the 20% or the 35% threshold, and again exceeding the 50% threshold, gives rise to an obligation of
notification if the size threshold is net.





If a transaction is pre-notifiable, a filing must be made with the
Commissioner containing the prescribed information with respect to the parties, and a waiting period, (either fourteen or forty-two days, depending on whether a long or short form filing is chosen) must expire prior to closing.





As an alternative to pre-notification, the Commissioner may grant an Advance Ruling Certificate which exempts the transaction
from pre-notification. Advance Ruling Certificates are granted where the Commissioner concludes, based on the information provided to him, that he would not have sufficient grounds on which to apply to the Competition Tribunal to challenge the
Merger.





E.    Taxation





The following summary describes the principal Canadian federal income tax considerations generally applicable to a holder of the Companys Shares who, for purposes of
the Income Tax Act (Canada) (the Canadian Tax Act) and the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital (the Convention) and at all relevant times, is resident in
the United States and not resident in Canada, deals at arms length with the Company, holds the Companys Shares as capital property and does not use or hold and is not deemed to use or hold the Companys Shares in or in the course of
carrying on business in Canada (a United States Holder).





This following summary is based upon the
current provisions of the Canadian Tax Act, the regulations thereunder, all specific proposals to amend the Canadian Tax Act and the regulations announced by the Minister of Finance (Canada) prior to the date hereof and the Companys
understanding of the published administrative practices of the Canada Customs and Revenue Agency. This summary does not take into account or anticipate any other changes in the governing law, whether by judicial, governmental or legislative decision
or action, nor does it take into account the tax legislation or considerations of any province, territory or non-Canadian (including U.S.) jurisdiction, which legislation or considerations may differ significantly from those described herein.




35




---




Dividends on the Companys Shares





Generally, dividends paid by Canadian corporations to non-resident shareholders are subject to a withholding tax of 25% of the gross
amount of such dividends. However, pursuant to the Convention, the withholding tax rate on the gross amount of dividends paid to residents of the United States is reduced to 15% or, in the case of a U.S. corporation which owns at least 10% of the
voting stock of the Canadian corporation paying the dividends, to 5% of the gross amount of such dividends.





Pursuant to the Convention, certain tax-exempt entities resident in the United States may be exempt from Canadian withholding taxes, including any withholding tax levied in respect of dividends received on the Companys Shares.





Disposition of the Companys Shares





In general, a United States Holder will not be subject to Canadian income tax on capital gains arising on the disposition of the Companys Shares, unless (i) such
shares are taxable Canadian property within the meaning of the Canadian Tax Act and no relief is afforded under the Convention. The shares of the Company will be taxable Canadian property of a non-resident if at any time during the sixty
(60) month period immediately preceding a disposition by the non-resident of such shares, not less than 25% of the issued shares of any class or series of a class of shares of the Company belonged to the non-resident, to persons with whom the
non-resident did not deal at arms length, or to the non-resident and persons with whom the non-resident did not deal at arms length for purposes of the Canadian Act. For this purpose, issued shares include options to acquire such shares
(including conversion rights) held by such persons. Under the Convention, a capital gain realized by a resident of the United States will not be subject to Canadian tax unless the value of the shares of the Company is derived principally from real
property (as defined in the Convention) situated in Canada.





F.    Dividends and Paying Agents





Not applicable.





G.    Statement by Experts





Not applicable.





H.    Documents on Display





The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and files reports and other information with the Securities and Exchange Commission (the
SEC). You may read and copy any of our reports and other information at, and obtain copies upon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. In addition, the SEC maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov. The Company does not file
electronically with the SEC. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.





The Company is required to file reports and other information with the securities commission in all provinces of Canada. You are invited to read and copy any reports, statements or other information,
other than confidential filings, that the Company files with the provincial securities commissions. These filings are also electronically available from the Canadian System for Electronic Document Analysis and Retrieval (SEDAR)
(http://www.sedar.com), the Canadian equivalent of the SECs electronic document gathering and retrieval system.





As a foreign private issuer, the Company is exempt from the rules under the Securities Exchange act of 1934, as amended, prescribing the furnishing and content of proxy statements to shareholders. The Company has included in this
report certain information disclosed in the Companys Proxy Statement prepared under Canadian securities rules.





The Company will provide without charge to each person, including any beneficial owner, on the written or oral request of such person, a copy of any or all documents referred to above which have been or may be incorporated by
reference in this report (not




36




---

including exhibits to such incorporated information that are not specifically incorporated by reference into such information). Requests for such copies should be directed to the Company at the
following address: Mad Catz Interactive, Inc., 7480 Mission Valley Road, Ste. 101, San Diego, California 92108, Attention: Investor Relations, telephone number: 619-683-9830.





Item 12.Quantitative and Qualitative Disclosures About Market Risk.





Quantitative Information About Market Risk





Congress Credit Facility





On September 25, 2000, the Company entered into Loan Agreements
with Congress for Congress to provide the Company with lines of credit totaling approximately $35,000,000 for the MCI business; Cdn. $15,000,000 for the Games Trader business. The Credit Facility was amended in September 2001 to remove references
and obligations of the Games Trader Business and again in June and August 2002 to allow MCE and MCIA to borrow under the facility. This Credit Facility replaced lines of credit from other lenders which were established by MCI and Games Trader prior
to the Companys acquisition of MCI. Subsequent to March 31, 2001, the Games Trader facility was repaid and closed.





The Credit Facility is being utilized to finance ongoing operations; in addition, a maximum of $10,000,000 may be utilized, at Congress discretion, for acquisitions. The Credit Facility is secured by the Companys assets,
including a pledge in favor of Congress of the stock of the Companys subsidiaries. The interest rate payable on outstanding balances is the U.S. prime rate plus 0.75% for MCI related borrowings. In addition, the Company is obligated to pay
Congress (i) a monthly Service Fee of $2,000, (ii) an unused Line Fee equal to 0.25%, and (iii) an Early Termination Fee which ranges from .50% and 1.5% of the Credit Facility. The term of the Credit Facility is three (3) years, with a one (1) year
renewal at Congress option, and automatic one year renewals, unless either party gives notice of termination.





At August 31, 2002, the outstanding balance of the Credit Facility was approximately $15,370,222.





The Companys primary market risk exposures are foreign exchange risk and interest rate risk.





Foreign Exchange Risk





The Companys reporting currency is the US dollar. The Company
is exposed to foreign exchange risk associated with its sales to Canadian customers and to United Kingdom customers through its subsidiary Mad Catz Europe, Ltd. Any increase in the value of the US dollar compared with the Canadian dollar or British
pound will reduce the Companys sales revenue expressed in US dollars. The Company historically has not hedged its exposure to foreign exchange risk. The Company plans to hedge its sales to the United Kingdom subsidiary Mad Catz Europe,
Ltd. in fiscal year 2003. Gains and losses resulting from the effects of changes in the U.S. dollar to Canadian dollar or British pound exchange rate are recorded in income.





Interest Rate Risk





The
Company is exposed to interest rate risk on its Credit Facility. Funds advanced to the Company pursuant to the Credit Facility bear interest at the prime rate in Canada and the U.S. (depending on which country funds are advanced from) plus 0.75%.
The Company does not hedge its exposures to interest rate risk.




37




---




The following table sets out the weighted average interest rates and maturities
of the Companys long-term debt at August 31, 2002.





Expected to Mature in fiscal year ended March 31,2003


2004

2005(in millions of dollars, except percentages)Credit facilityCanadian Dollars

$
0.0


n/a

n/aAverage interest rateUS Dollars

$
15.4


n/a

n/aEffective interest rate at March 31, 2002


5.50
%Bank Term LoanCanadian Dollars

$
0.0


n/a

n/aAverage interest rate





Limitations





The discussion above includes only those exposures that existed at August 31, 2002. As a result, the discussion above does not consider
exposures or positions that could arise after August 31, 2002. The Companys ultimate realized gain or loss with respect to foreign exchange and interest rate fluctuations will depend on the exposures that arise during the period, the
Companys hedging strategies, if any, at the time, and the foreign exchange and interest rates.





Qualitative Information About Market Risk





See Quantitative Information About Market
Risk. elsewhere in this Form 20-F.





Interim Periods





|Item |  | 12.    Description of Securities Other Than Equity Securities.
|---- |  | --------------------------------------------------------------




Not applicable.




38




---

PART II





Item 13.Defaults, Dividend Arrearages and Delinquencies.





As of August 31, 2002, the Company did not have any defaults, dividend arrearages or delinquencies.





Item
14.Material Modifications to the Rights of Security Holders and Use of Proceeds.





As of August 31, 2002, there have been no material modifications to the rights of security holders and use of proceeds.




39




---

PART III





Item 17.Financial Statements.





(a)  Report and Consolidated Balance Sheets as at March 31, 2002 and 2001 and Statement of Operations and Deficit and Cash flows for the years ended March 31, 2002, 2001 and 2000 reported on by KPMG LLP, Certified Public
Accountants. These statements are expressed in US dollars and were prepared in accordance with GAAP in Canada, which vary in certain significant respects from GAAP in the United States. See Note 14 to the financial statements.




40




---

INDEPENDENT AUDITORS REPORT





The Board of Directors and Shareholders


Mad Catz Interactive, Inc.:





We have audited the consolidated balance sheets of Mad Catz
Interactive, Inc. (formerly GTR Group Inc.) as at March 31, 2002, and 2001 and the consolidated statements of operations and deficit and cash flows for each of the years in the three-year period ended March 31, 2002. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.





We conducted our audits in accordance with auditing standards generally accepted in Canada and the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.





In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the
Company as at March 31, 2002, and 2001 and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2002, in accordance with accounting principles generally accepted in Canada.





Accounting principles generally accepted in Canada vary in certain significant respects from accounting principles generally
accepted in the United States of America. Application of accounting principles generally accepted in the United States of America would have affected results of operations for each of the years in the three-year period ended March 31, 2002 and
shareholders equity as of March 31, 2002 and 2001, to the extent summarized in note 14 to the consolidated financial statements.





KPMG LLP





San Diego, California


May 29, 2002




41




---

MAD CATZ INTERACTIVE, INC.





CONSOLIDATED BALANCE SHEETS


(Expressed in U.S. dollars)


March 31, 2002 and 2001





2002


2001ASSETSCurrent assets:Cash

$
1,902,966


$
1,455,480Accounts receivable


10,276,547



6,810,779Inventories (note 3)


15,918,898



13,493,306Prepaid expenses and deposits


634,886



658,373Future tax assets (note 9)


2,070,835



2,484,398Income taxes receivable


267,495



178,23531,071,627



25,080,571Deferred financing fees


841,817



1,324,992Capital assets (note 4)


1,919,749



1,733,516Goodwill (note 5)


16,362,175



17,529,191$
50,195,368


$
45,668,270LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Bank loans (note 6)

$
4,335,084


$
8,670,796Accounts payable and accrued liabilities


16,106,044



8,562,687Subordinated debt (note 7)






3,338,71920,441,128



20,572,202Future tax liabilities (note 9)


136,886



407,182Shareholders equity:Capital stock (note 8)


45,554,910



41,823,042Accumulated other comprehensive income


1,176,715



1,466,886Deficit


(17,114,271
)


(18,601,042
)29,617,354



24,688,886Commitments and contingencies (note 12)$
50,195,368


$
45,668,270




42




---




MAD CATZ INTERACTIVE, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000





2002


2001


2000Net sales

$
83,337,134


$
58,472,096


$
47,821,587Cost of sales


64,927,895



45,458,773



34,184,138Gross profit


18,409,239



13,013,323



13,637,449Expenses (income):Selling


7,276,113



5,194,493



2,466,815Administrative


4,934,693



6,249,853



5,233,586Interest


985,342



863,947



560,582Interest on bank term loan






4,246



Interest on subordinated debt


246,781



409,619



Amortization


1,009,936



752,514



332,888Other (income) expenses










(110,589
)Foreign exchange loss (gain)


(60,511
)


200,911



226,83614,392,354



13,675,583



8,710,118Income (loss) before the undernoted


4,016,885



(662,260
)


4,927,331Gain on accounts payable adjustments










362,582Income (loss) before income taxes and goodwill charges


4,016,885



(662,260
)


5,289,913Income taxes (note 9)


1,855,544



3,217,371



3,170,219Income (loss) before goodwill charges and discontinued operations


2,161,341



(3,879,631
)


2,119,694Goodwill charges


976,665



996,549



572,154Income (loss) from continuing operations


1,184,676



(4,876,180
)


1,547,540Income (loss) from discontinued operations (note 2)


302,095



(19,136,936
)


2,238,503Net income (loss)


1,486,771



(24,013,116
)


3,786,043Retained earnings (deficit), beginning of year


(18,601,042
)


5,412,074



1,626,031Retained earnings (deficit), end of year

$
(17,114,271
)

$
(18,601,042
)

$
5,412,074Income (loss) per share before goodwill charges and discontinued operations

$
0.04


$
(0.09
)

$
0.06Income (loss) per share on discontinued operations


0.01



(0.42
)


0.06Loss per share on goodwill charges


(0.02
)


(0.02
)


(0.01
)Net income (loss) per share (note 11)

$
0.03


$
(0.53
)

$
0.11Diluted net income (loss) per share (note 11)

$
0.03


$
(0.53
)

$
0.10





See accompanying notes to consolidated financial statements.




43




---




MAD CATZ INTERACTIVE, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000





2002


2001


2000Cash provided by (used in):Operating activities:Net income (loss)

$
1,486,771


$
(24,013,116
)

$
3,786,043Adjusted for loss (income) from discontinued operations


(302,095
)


19,136,936



(2,238,503
)Items not involving cash:Write-off of investment






271,202



Deferred financing fees


603,465



740,715



Foreign exchange


(60,511
)


208,023



(18,120
)Amortization


1,986,601



1,749,063



905,043Future income taxes


143,267



414,440



433,691Director compensation










102,276Change in non-cash operating working capital:Decrease (increase) in accounts receivable


(3,462,953
)


8,242,002



(7,808,779
)Decrease (increase) in prepaid expenses and deposits


(96,663
)


193,160



121,010Decrease (increase) in inventories


(2,411,279
)


4,588,381



(4,078,876
)Increase (decrease) in accounts payable and accrued liabilities


7,377,328



(2,938,989
)


1,301,531Decrease in income taxes receivable


12,027



1,457,472



2,359,188Cash provided by continuing operations


5,275,958



10,049,289



(5,135,496
)Cash provided by (used in) discontinued operations


302,095



(8,938,505
)


(286,032
)Financing activities:Deferred financing fees






(2,071,834
)


Shareholder advances






3,849



15,108Preacquisition Mad Catz Inc. loan










(5,038,607
)Bank indebtedness






(4,120,129
)


4,225,635Bank loans


(4,349,018
)


4,322,709



(3,357,935
)Bank term loan






(163,044
)


(308,710
)Subordinated debt






4,987,465



Repayment of subordinated debt






(1,692,136
)


Mad Catz obligation






(3,832,631
)


Secured debenture










(453,139
)Proceeds from issue of share capital


367,100



4,252,933



25,503,629Share issue costs






(89,199
)


(4,070,325
)(3,981,918
)


1,597,983



16,515,655Investing activities:Acquisition of assets, net of cash acquired










(10,558,689
)Purchase of capital assets


(1,103,614
)


(1,237,725
)


(3,754,602
)(1,103,614
)


(1,237,725
)


(14,313,292
)Effects of exchange rate changes on cash


(45,035
)


(15,562
)


(15,171
)Increase (decrease) in cash


447,486



1,455,480



(3,234,335
)Cash, beginning of year


1,455,480







3,234,335Cash, end of year

$
1,902,966


$
1,455,480



Supplemental cash flow information:Income taxes paid

$
1,800,000


$
1,110,096



558,023Interest paid


665,862



1,277,812



874,714





See accompanying notes to consolidated financial statements.




44




---




MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Expressed in U.S. dollars)


Years Ended March 31, 2002, 2001 and 2000





Mad Catz Interactive, Inc. (formerly GTR Group Inc.) (the Company) was incorporated on February 3, 1997 under the Ontario Business Corporations Act and commenced operations on April 7,
1997.





1.    Significant accounting policies:





The consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada and, except as described in note 14, conform in all
material respects with accounting principles generally accepted in the United States of America. The principal accounting policies followed by the Company, which have been consistently applied, are summarized as follows:





(a)  Principles of consolidation:





The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, 1328158 Ontario Inc. (Mad Catz
Canada), Xencet Massachusetts Inc., Xencet U.S. Inc., Singapore Holdings Inc., Spoxt Pte Ltd., Mad Catz, Inc. (MCI), Mad Catz (Asia) Ltd., Mad Catz Europe Ltd., FX Unlimited Inc. and Mad Catz Ltd. All significant intercompany
transactions and balances have been eliminated on consolidation.





(b)  Revenue
recognition:





Revenue from product sales is recognized upon shipment and when title passes to the
customer, after making appropriate provision for sales returns and credit memos issued.





(c)  Inventories:





Raw materials, packaging materials and accessories
are valued at the lower of cost and replacement cost.





Finished goods are valued at the lower of
cost and net realizable value with cost being determined on an average cost basis using the first-in first-out method.





(d)  Capital assets:





Capital assets are stated at cost less
accumulated amortization. Amortization is provided over the estimated useful lives of the assets on a straight-line basis at the following annual rates:


Manufacturing and office equipment

20%-33
%Computer hardware

33
%Computer software

33
%Computer system development

33
%Furniture and fixtures

20
%Leasehold improvements

10
%Moulds

33
%





The Company assesses the value of its capital
assets annually by ensuring the net recoverable amount of its assets exceeds the net carrying amount. In the year of a write-down, capital assets will be reduced by a charge to income.





(e)  Goodwill:





Goodwill, representing the excess of the purchase price over the fair value of identifiable net assets acquired, is amortized on a straight-line basis over 20 years.




45




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000







1.    Significant accounting policies (continued):








The Company assesses the continuing value of goodwill each year by
reviewing the undiscounted cash flows of the related business, taking into account the risk associated with the investment. In the year of an impairment in value, the goodwill will be reduced by a charge to income.





(f)  Deferred financing fees:





Deferred financing fees include costs related to obtaining debt financing and are amortized on a straight-line basis over the term of the debt.





(g)  Employee stock option plan:





The Company has an employee stock-based option plan, which is described in note 8. No compensation expense is recorded on granting of stock options.
Any consideration paid by the employees on the exercise of the stock options or purchase of stock is credited to share capital.





(h)  Income taxes:





Income taxes are
accounted for using the liability method. Under the liability method of accounting for income taxes, future tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying
value and tax basis of assets and liabilities and for tax loss carryforwards.





Future tax assets
and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on future tax assets and
liabilities of a change in tax rates is recognized in income in the year that includes the enactment or substantive enactment date. To the extent that it is not more likely than not that a future tax asset will be realized, a valuation
allowance is provided.





(i)  Foreign currency translation:





The Company has adopted the United States dollar as its reporting currency for its financial statements, commencing April
1, 2001. Gains and losses resulting from foreign currency translation are accumulated as a separate component of consolidated shareholders equity (deficit) as accumulated other comprehensive income.





The United States dollar is the functional currency of the Companys United States operations. The Canadian dollar is
the functional currency of the Companys Canadian operations, which are translated to United States dollars using the current rate method. The British pound is the functional currency of the Companys United Kingdom operations, which are
translated to United States dollars using the current rate method.





Foreign currency transactions
and account balances have been translated where applicable into United States dollars as follows: monetary assets and monetary liabilities are translated into United States dollars at the rate of exchange in effect at the balance sheet date; revenue
and expenses are translated into United States dollars at the average rates of exchange prevailing during the year. Exchange gains and losses resulting from the translation of these amounts are included in the consolidated statements of operations
and deficit.





The assets and liabilities of the Company and of Mad Catz Canada, which have the
Canadian dollar as the functional currency, and of Mad Catz Europe Ltd., which has the British pound as its functional currency are considered financially and operationally independent, and are translated into United States dollars at the rate of
exchange in effect at year end. The revenue and expenses of these self-sustaining operations are translated at the average rate of exchange in effect during the year. The foreign currency translation adjustment is deferred and included as a separate
component of shareholders equity.




46




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000




1.    Significant accounting policies (continued):





(j)  Use of estimates:





The preparation of financial statements in conformity with accounting principles generally accepted in Canada requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Actual results could differ from those estimates.





(k)  Credit risk:





The Company extends credit on an uncollateralized basis to certain of its customers and monitors this on a continuing basis.





(l)  Net income (loss) per share:





Effective April 1, 2001, the Company changed its method of calculating net income (loss) per share, on a retroactive basis, in accordance with Section 3500
of The Canadian Institute of Chartered Accountants (CICA) Handbook. Under the new recommendations, the treasury stock method is used to calculate diluted net income (loss) per share, consistent with United States accounting
principles. The treasury stock method assumes any option proceeds would be used to purchase common shares at the average market price during the period. This change has no impact on the reported net income (loss) per share for the prior year
presented.





2.    Discontinued operations:





In March 2001, the Companys Board of Directors adopted a formal plan to dispose of the assets and business operations of its GTI (previously played video game
business) and ZapYou.com (internet distribution) business units. These units are accounted for as discontinued operations and, accordingly, amounts in the financial statements and related notes for all periods shown have been restated to reflect
discontinued operations accounting. As at March 31, 2002, all of the assets of GTI and ZapYou.com have been disposed of. The Company will maintain a provision for accounts payable and accrued liabilities until such time that all recognized
obligations of the previous GTI and ZapYou.com businesses are settled.





During 2002, the Company recorded a net
gain of $302,095 (2001net loss of $19,136,936, 2000net gain of $2,238,503), net of income taxes of nil (2001net of income tax recovery of $4,168,262, 2000net of income tax recovery of $3,844,910) in respect of GTI and
ZapYou.com business units. Net revenue applicable to GTI and ZapYou.com during the years presented was nil (2001$16,767,565, 2000$23,597,251). The 2002 gain from discontinued operations is a result of revaluing the fiscal 2001 provisions
to provide for the expected future liabilities associated with the GTI and ZapYou.com businesses. The 2001 loss from discontinued operations includes accrued charges of $1,018,754 for estimated costs to exit the GTI and ZapYou.com business units.
The loss also includes the following writedowns of assets to their net realizable value related to the dispositions of the business units:


Inventories

$
2,657,944Capital assets


2,093,929Goodwill


2,215,866Future tax asset


3,947,411Accounts receivable


2,011,766$
12,926,916




47




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000







2.    Discontinued operations (continued):





The assets of the GTI and ZapYou.com business units in the consolidated balance sheets include the following:





2002

2001Cash

$
520,836

$
802,360Inventories





2,140,805Accounts receivable





1,634,818Capital assets





69,784$
520,836

$
4,647,767





The liabilities of the GTI and ZapYou.com business units, which are
included in the consolidated balance sheets are as follows:





2002

2001Bank loan

$


$
1,928,913Accounts payable and accrued liabilities

$
424,305

$
2,627,291$
424,305


4,556,204





The Company anticipates additional expenses relating to legal
expenses, salaries and severance expenses of $424,305 to be incurred relating to the disposition of its GTI and ZapYou.com business units. These expenses have been accrued in the current years financial statements and are reflected in the
above accrued liabilities amounts.





During 2002, GTI paid $25,369 (2001-$722,744, 2000-$254,747) in interest
expense in respect of the discontinued operations.





3.    Inventories:


2002

2001Raw materials

$
4,516,360

$
4,007,946Finished goods


11,163,351


9,071,391Packaging materials and accessories


239,187


413,969$
15,918,898

$
13,493,306





Raw materials in 2001 represent unprocessed and unpackaged game
cartridges and computer chips. In 2002, raw materials represent computer chips only.





During 2001, inventories of
$2,657,944 were written down in respect of liquidating GTI inventories (note 2).




48




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000







4.    Capital assets:





2002

2001Cost

Accumulated amortization

Net book value

Net book valueManufacturing and office equipment

$
156,108

$
75,220

$
80,888

$
158,945Computer hardware


869,895


453,816


416,079


192,389Computer software


222,354


105,319


117,035


108,845Computer system development


3,200


711


2,489


11,473Furniture and fixtures


147,898


51,112


96,786


28,547Leasehold improvements


415,830


137,911


277,919


198,413Moulds


2,303,829


1,375,276


928,553


1,034,904$
4,119,114

$
2,199,365

$
1,919,749

$
1,733,516





During 2001, $994,070 and $1,099,859 of capital assets were written
down to their estimated net recoverable amount of $69,784 in respect of GTI and ZapYou.com, respectively (note 2). Capital assets written down included furniture and fixtures, computer hardware and software, computer system development costs,
leasehold improvements and racks and kiosks.





5.    Goodwill:





2002

2001Cost

Accumulated amortization

Net book value

Net book valueGoodwill

$
18,787,443

$
2,425,268

$
16,362,175

$
17,529,191





During 2001, $2,215,866 of goodwill was written off as part of
discontinued operations in respect of the original purchase of GTI (note 2).





6.    Bank loans:





On September 25, 2000, MCI signed a loan agreement with Congress Financial Corporation (Central) (Congress) to
borrow up to $35,000,000 under a revolving line of credit. The line of credit accrues interest on the daily outstanding balance at U.S. prime rate plus 0.75% per annum, expires in 2003 and must be repaid in United States dollars. The line of credit
is secured by a first priority interest in MCIs inventories, equipment, accounts receivable and investment properties. The line of credit is guaranteed by the Company.





On September 25, 2000, GTI signed a loan agreement with Congress to borrow up to Cdn. $15,000,000 under a revolving line of credit. The line of credit accrues interest on
the daily outstanding United States dollar balance at U.S. prime rate plus 0.75% per annum and on the Canadian dollar balance at Canadian prime rate plus 0.75%. The line expires in 2003. The line of credit is secured by a first priority interest in
GTIs inventories, equipment, accounts receivable and investment properties. The line of credit is guaranteed by the Company and MCI. In fiscal year 2002, the GTI portion of the bank loan was repaid in full, and the line of credit was closed.





The Company has also been granted $10,000,000 line of credit from Congress to be used for acquisition purposes
under the same conditions and terms as the lines of credit described above.







49




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000




6.    Bank loans (continued):





The Congress loan agreements also require the borrowers to meet a monthly consolidated tangible net worth covenant. As at March 31, 2002, the Company was in compliance with
this covenant.





7.    Subordinated debt:





On September 18, 2000, the Company signed a loan agreement with a shareholder and director to borrow $5,000,000. The loan accrued interest on the daily outstanding balance
at 14% per annum. As at July 17, 2001, an agreement was reached to convert the outstanding loan to equity. The balance of the loan at that date was $3,361,770, which included $23,051 of unpaid interest due. The loan was converted at a share price of
Cdn. $1.218 which was the five day average share price for the period from June 12 to June 18, 2001. A total of 4,247,478 shares were issued.





Additional conditions of the loan required the Company to issue 200,000 warrants to purchase the Companys common stock. Each warrant entitles the holder to acquire one common share of the Company
at a price of $0.91. The warrants expire on September 18, 2002.





8.    Capital stock:





(a)  Authorized:





Unlimited Class A preferred shares


Unlimited Class B preferred shares


Unlimited common shares





(b)  Issued:





Common shares

Number of shares

AmountBalance, March 31, 1999

29,174,088

$
10,835,506Exercise of options under stock option plan

254,008


293,954Shares issued for cash

9,118


24,605Shares issued on exercise of warrants

1,519,192


970,231Shares issued for April financing

4,500,000


9,742,938Exercise of other stock options

482,100


298,227Shares issued for September financing

4,675,000


14,459,756Share issue costs, net of tax effect




(2,140,409
)Balance, March 31, 2000

40,613,506

$
34,484,808Exercise of options under stock option plan

225,999


177,634Shares issued on exercise of warrants

5,303,791


4,071,801Shares issued for Mad Catz purchase

2,059,739


3,266,731Warrants purchased




(96,733
)Share issue costs, net of tax effect




(81,199
)Balance, March 31, 2001

48,203,035


41,823,042Exercise of options under stock option plan

459,035


370,098Shares issued on conversion of subordinated debt (note 7)

4,247,478


3,361,770Balance, March 31, 2002

52,909,548

$
45,554,910




50




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000







8.    Capital stock (continued):





(c)  Share purchase warrants:





At March 31, 2002, the following share purchase warrants are outstanding:





Price

Expiring200,000

$
0.91

September 2002





Each share purchase warrant entitles the holder to
acquire one common share of the Company at the price specified.





(d)  Stock option plan:





Under the Companys share option plan (the Plan), options are granted to purchase common
shares and are exercisable over a period of a maximum of five years. Directors options vest immediately and other option is vest over a period of three years. As part of the Plan the following director, officer and employee stock options have been
granted and are outstanding:





2002

2001Options


Weighted average exercise price

Options


Weighted average exercise priceOutstanding, beginning of year

2,443,410


$
1.51

1,900,659


$
2.00Granted

1,928,833



0.68

977,250



1.15Exercised

(459,035
)


0.84

(225,999
)


0.79Expired/cancelled

(411,741
)


1.27

(208,500
)


1.94Outstanding, end of year

3,501,467



1.16

2,443,410



1.51





The following summarizes information about stock options
outstanding as at March 31, 2002:





Options outstanding

Options exercisableRange of exercise price

Number outstanding

Weighted average remaining contractual life in years

Weighted average exercise price

Number exercisable

Weighted average exercise price$0.45-0.60

1,309,167

4.0

$
0.55

663,176

$
0.53$0.85-1.22

971,300

4.2


0.98

571,510


1.01$1.27-1.90

701,000

2.6


1.63

684,000


1.62$2.06-2.47

520,000

2.3


2.39

520,000


2.393,501,467

3.5


1.16

2,438,686


1.35





9.    Income taxes:





(a)  The income tax provision consists of the following:





2002

2001

2000Current income tax expense

$
1,712,277

$
2,236,258

$
2,711,379Future income tax expense


143,267


981,113


458,840$
1,855,544

$
3,217,371

$
3,170,219




51




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000







9.    Income taxes (continued):





(b)  The difference between the amount of the reported income tax provision and the amount computed by multiplying the income
before income taxes by the Companys applicable statutory tax rate of approximately 39% (2001-42%, 2000-approximately 45%) is reconciled as follows:





2002


2001


2000Income tax expense using the Companys statutory tax rates

$
1,174,133


$
(867,609
)

$
2,314,090Income taxed in foreign jurisdictions


58,430



(42,504
)


(283,322
)Write-off of losses previously tax benefited






1,730,692



Temporary differences not tax-benefited


333,706



1,618,355



781,005Amortization of goodwill


377,188



419,746



255,295Other


(87,913
)


(81,072
)


79,361Large Corporations Tax










23,790Write-off of disputed income tax receivable






439,763



$
1,855,544


$
3,217,371


$
3,170,219





(c)  The tax effect of temporary differences that give
rise to significant portions of the future tax assets and liabilities at March 31, 2002 is as follows:





Future tax assetscurrent:State taxes paid/deductible in future

$
138,117Inventories


763,246Accounts receivable


1,419,5352,320,898Less valuation allowance


(250,063
)Net future tax assetscurrent

$
2,070,835Future tax assetsnon-current:Unclaimed scientific research expenditures

$
149,898Capital assets


218,488Deferred financing fees


661,311Tax loss carryforward


9,710,372Goodwill


712,84711,452,916Less valuation allowance


(11,452,916
)Net future tax assetsnon-current

$
Future tax liabilitiesnon-current:Future inventory deduction

$
136,886




52




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000







9.    Income taxes (continued):





(d)  The Company has non-capital income tax losses of $9,324,000, which may be carried forward to reduce future years
taxable income. These losses expire as follows:





2004

$
646,0002005


654,0002006


500,0002007


1,600,0002008


3,691,0002009


2,233,000$
9,324,000





The Company also has net capital tax losses of approximately
$1,975,000, which are available indefinitely to offset capital gains.





The Companys Canadian subsidiary has
non-capital income tax losses of $21,210,500, which may be carried forward to reduce future years taxable income. These losses expire as follows:


2003

$
2,082,0002004


3,750,0002005


1,873,0002006


4,5002007


638,0002008


7,218,0002009


5,645,000$
21,210,500





(e)  The Company is undergoing tax audits of the 1996 to
1998 taxation years. No reassessments have been received and the outcome of the audits is not determinable at this time.





One of the Companys foreign subsidiaries tax filings for prior taxation years are being reviewed by foreign tax authorities. No reassessments have been received by the Companys foreign subsidiary and the outcome of
this review is not determinable at this time.





(f)  The Company operates one of its foreign subsidiaries
on the basis that its operations in certain jurisdictions are exempted from taxation in these jurisdictions. The Company understands that its tax position with respect to these jurisdictions is subject to challenge and or change by the applicable
foreign tax authority.





10.    Financial instruments:





The carrying values of the Companys financial instruments, including cash, accounts receivable and accounts payable and accrued liabilities approximate their
fair values due to their short-term nature. The carrying values of the bank loan and the subordinated debt approximate their fair values as the interest rates are those which are currently available to the Company.




53




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000







11.    Net income (loss) per share:





(a)  Basic:





Basic net income (loss) per share are based on the weighted average number of common shares issued and outstanding during the year calculated on an annual basis being 51,188,889 (2001-45,297,305,
2000-34,746,433).





(b)  Diluted:





The following table sets forth the computation of diluted income (loss) per share:





2002

2001


2000Numerator:Net income (loss)

$
1,486,771

$
(24,013,116
)

$
3,786,043Net income (loss) available to common shareholders

$
1,486,771

$
(24,013,116
)

$
3,786,043Denominator:Weighted average common shares outstanding


51,188,889


45,297,305



34,746,433Effect of dilutive securities:Employee stock options and warrants


767,806






2,387,580Weighted average sharesdiluted


51,956,695


45,297,305



37,134,013





In 2002, 1,222,100 options were not included as
they were considered anti-dilutive. Stock options and warrants were not included in 2001 as they are considered anti-dilutive.





12.    Commitments and contingencies:





(a)  The following are
the payments required under operating leases for the next five years:





Year ending March 31:2003

$
877,5542004


779,2792005


834,8782006


836,7162007


170,547$
3,498,974





(b)  Royalty and license agreements:





The Company has licensing agreements to utilize existing design and utility technology with its products. The
Company also has royalty agreements for use of licensed trademarks and celebrity endorsements. These agreements have royalty and licensing fees based on different percentages of certain types of sales or a predetermined amount per unit. The minimum
royalty payable under these agreements for fiscal year 2003 is approximately $1,000,000.





(c)  Other:





There are a number of legal actions against the Company, none of which, in the opinion of
management, is expected to have a material adverse impact on the financial position or results of operations of the Company.




54




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000







13.    Segmented data:





The Companys sales and capital assets are attributed to the following countries:





2002

2001

2000Net sales:Canada

$
1,450,556

$
1,779,267

$
141,636United States


71,743,787


46,702,230


34,446,367International


10,142,791


9,990,599


13,233,584$
83,337,134

$
58,472,096

$
47,821,587





Revenue is attributed to countries based on the location of the
customer. During the year, the Company sold a total of 48% of its products to two customers (2001-43% to two customers, 2000-48% to two customers).





2002

2001Capital assets:Canada

$
1,175

$
69,783United States


902,323


557,270International


1,016,251


1,106,463$
1,919,749

$
1,733,516





Goodwill for both years presented is attributed to Canada.





14.    Canadian and United States accounting policy differences:





These consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP)
as applied in Canada. In certain respects, GAAP as applied in the United States differs from that applied in Canada.





Reconciliation of net income (loss) determined in accordance with generally accepted accounting principles in Canada to net income (loss) determined under accounting principles generally accepted in the United States of America is as
follows:





2002Income from continuing operations, as reported

$
1,184,676Compensation expense(a)


(517,270
)Income from continuing operations in accordance with accounting principles generally accepted in the United
States

$
667,406Net income (loss) per share in accordance with United States accounting principles:Basic and diluted

$
0.01




55




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000







14.    Canadian and United States accounting policy differences
(continued):





For the years ended March 31, 2001 and 2000, there were no material differences between Canadian
and United States GAAP. The areas of material difference between Canadian and United States GAAP and their impact on the consolidated financial statements of the Company for the year ended March 31, 2002 are described as follows:





(a)  Stock-based compensation:





For United States GAAP purposes, the Company measures compensation using the intrinsic value method as specified by APB Opinion 25. During the year, 859,501
options with exercise prices ranging from Cdn. $0.94 to Cdn. $2.00 were repriced to Cdn. $0.84 and 100,000 options at Cdn. $2.00 were repriced to Cdn. $0.90. Under United States GAAP, subsequent to the repricing, these options would be considered
variable resulting in compensation expense. Based on the March 31, 2002 share price, compensation expense related to the repricing of the above noted options is calculated to be $517,270. Under Canadian GAAP there would be no compensation expense
recorded for the above noted stock option repricing.





(b)  Income taxes:





Included in the caption Income taxes is the tax effect of various adjustments where appropriate and
the impact of substantively enacted rate changes that would not have been recorded under United States GAAP. Under Canadian GAAP, future income tax assets and liabilities are remeasured for substantively enacted rate changes, whereas under United
States GAAP, future income tax assets and liabilities are only measured for enacted tax rates. There is no impact of applying substantively enacted tax rates in 2002 and 2001.





(c)  Operating income before amortization:





United States GAAP requires that amortization be included in the determination of operating income and does not permit the disclosure of a subtotal of the amount of operating income before this item.
Canadian GAAP permits the disclosure of a subtotal of the amount of operating income before this item.





(d)  Impact of recent United States accounting pronouncements:





In June
2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 was effective as of July 1, 2001 and SFAS No. 142 is effective April
1, 2002. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations. SFAS 141 specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported separately
from goodwill. SFAS No. 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142
also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121 and, subsequently, SFAS No.
144 after its adoption. The CICA has adopted similar standards and, accordingly, there will be no United StatesCanadian GAAP differences arising from the addition of these standards. The Company has no intangible assets.







56




---



MAD CATZ INTERACTIVE, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)


(Expressed in U.S. dollars)


Years ended March 31, 2002, 2001 and 2000




In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. SFAS No. 144 also broadens the definition of
discontinued operations to include all distinguishable components of an entity that will be eliminated from ongoing operations. The Company is required to adopt SFAS No. 144 on April 1, 2002 on a prospective basis.




57




---




Item 18.Financial Statements.





Not applicable.





Item 19.Exhibits.





Number

Description1.1

Articles of Incorporation and Amendments thereto(1)1.2

By-Laws(2)2.1

Shareholder Rights Plan Agreement between GTR Group Inc. and Montreal Trust Company of Canada, dated as May 26,
20004.1

Transfer Agreement dated April 14, 1997 among and between Tecmar Technologies Incorporated, Tecmar Technologies
International Inc. and Storage One, Inc.(3)4.2

Purchase and Sale Agreement dated April 14, 1997 among and between Tecmar Technologies Incorporated, Tecmar
Technologies International Inc. and Storage One, Inc.(3)4.3

Agreement dated March 4, 1999 among and between Movies and Games 4 Sale, L.P., Movies and Games, Inc., Hunt Capital
Partners, L.P., RCD Investments No. 2, Ltd., M4s, Inc., Brad Painter, Games Trader Inc., and 1328158 Ontario Inc.(3)4.4

Share Purchase Agreement dated August 19, 1999, among and between GTR Group Inc., Mad Catz, Inc. and
others(3)4.5

Non-Competition Agreement dated August 31, 1999, among and between Thomas Roberts, GTR Group Inc., Mad Catz, Inc.,
FX Unlimited, Inc., and Mad Catz (Asia) Limited(3)4.6

Loan Agreement between Congress Financial Corporation (Canada) and 1328158 Ontario Inc., dated September 25,
2000(3)4.7

Loan Agreement between Congress Corporation (Central) and Mad Catz, Inc., dated September 25, 2000(3)4.8

Guarantee from GTR Group Inc. to Congress Financial Corporation (Canada), dated September 25, 20004.9

Guarantee from 1328158 Ontario Inc. to Congress Financial Corporation (Canada), dated September 25,
2000(3)4.10

General Security Agreement among and between Mad Catz, Inc., FX Unlimited, Inc., and Congress Financial Corporation
(Central), dated September 25, 2000(3)4.11

Guarantee from Mad Catz, Inc. to Congress Financial Corporation (Central), dated September 25, 2000(3)4.12

Employment Agreement between Mad Catz, Inc. and Darren Richardson, dated May 18, 20004.13

Consulting Agreement by and between GTR Group Inc. and Morris Perlis & Associates Inc. dated as of February 26,
20014.14

Standard Industrial Lease between H. G. Fenton Company and Mad Catz Inc., dated July 9, 20014.15

Employment Agreement between Mad Catz, Inc. and Andrew C. Schmidt, dated July 1, 20014.16

First Amended and Restated Loan Agreement between Congress Financial Corporation (Central) and Mad Catz, Inc., dated
as of September 5, 20014.17

Amended and Restated General Security Agreement by and among Mad Catz Inc., FX Unlimited, Inc. and Congress
Financial Corporation (Central), dated as of November 30, 20014.18

Amending Agreement between Mad Catz, Inc. and Congress Financial Corporation (Central), dated as of June 18,
20024.19

Guarantee and Debenture between Mad Catz Limited, Mad Catz Europe Limited and Congress Financial Corporation
(Central), dated as of June 18, 20024.20

Guarantee from 1328158 Ontario Inc. to Congress Financial Corporation (Central), dated as of August 1,
20024.21

Guarantee and Indemnity provided by Mad Catz (Asia) Limited in favor of Congress Financial Corporation (Central),
dated as of August 1, 2002




58




---

Number

Description4.22

Debenture provided by Mad Catz (Asia) Limited in favor of Congress Financial Corporation (Central), dated as of
August 1, 20024.23

Charge Over Shares made by Mad Catz Interactive, Inc. and 1328158 Ontario Inc. in favor of Congress Financial
Corporation (Central) with respect to the shares of Mad Catz (Asia) Limited, dated as of August 1, 20024.24

Share Pledge Agreement made by Mad Catz Interactive, Inc. in favor of Congress Financial Corporation (Central) with
respect to the shares of Mad Catz (Asia) Limited, dated as of August 1, 20024.25

Share Pledge Agreement made by 1328158 Ontario Inc. in favor of Congress Financial Corporation (Central) with
respect to the shares of Mad Catz (Asia) Limited, dated as of August 1, 20024.26

Amended and Restated Incentive Stock Option Plan of the Company4.27

Form of Incentive Stock Option Plan8.1

Subsidiaries


---

|(1) |  | Previously filed as an exhibit to the Annual Report on Form 20-F filed with the Securities and Exchange Commission (SEC) on October 15, 2001 and
incorporated herein by reference.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Previously filed as an exhibit to the Registration Statement on Form 20-F, dated June 1, 1999, filed with the SEC on June 3, 1999 and incorporated herein by
reference.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Previously filed as an exhibit to the Annual Report on Form 20-F of Games Trader Inc. for the fiscal year ended March 31, 2000 and incorporated herein by
reference.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



59




---




The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.





MAD CATZ INTERACTIVE, INC.By:

/s/    MORRIS A.
PERLISMorris A. Perlis President and
Chief Executive OfficerBy:

/s/    ANDREW C.
SCHMIDTAndrew C. Schmidt Chief
Financial Officer





Date: September 27, 2002







60




---




CHIEF EXECUTIVE OFFICER CERTIFICATION





I, Morris A. Perlis, certify that:





1.  I have reviewed this annual report on Form 20-F of Mad Catz Interactive, Inc.;





2.  Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;





3.  Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;








/s/    MORRIS A.
PERLISMorris A. Perlis President and
Chief Executive Officer





Date: September 27, 2002




61




---




CHIEF FINANCIAL OFFICER CERTIFICATION





I, Andrew C. Schmidt, certify that:





1.  I  have reviewed this annual report on Form 20-F of Mad Catz Interactive, Inc.;





2.  Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;





3.  Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;








/s/    ANDREW C.
SCHMIDTAndrew C. Schmidt Chief Financial
Officer





Date: September 27, 2002




62