##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 WASHINGTON, D.C.
    20549
 FORM 10-K
  (Mark One)þ

Annual Report Pursuant to Section 13 or 15(d) of The
    Securities Exchange Act of 1934For the fiscal year ended October 31, 2010ORo

Transition Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934For the Transition Period
    from          to   No. 000-51128
 MAJESCO ENTERTAINMENT
    COMPANY
   DELAWARE

06-1529524(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)    Edison, New Jersey 08837
   732) 225-8910
      Common Stock, Par Value $0.001
   o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
   Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company þ   Rule 12b-2 o þ
      Form 10-K.




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##### 





TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


1Item 1A.


Risk Factors


9Item 1B.


Unresolved Staff Comments


20Item 2.


Properties


20Item 3.


Legal Proceedings


20Item 4.


(Removed and Reserved)


20PART IIItem 5.


Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


20Item 6.


Selected Financial Data


22Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


23Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


35Item 8.


Financial Statements and Supplementary Data


35Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


35Item 9A.


Controls and Procedures


35Item 9B.


Other Information


36PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


37Item 11.


Executive Compensation


37Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


37Item 13.


Certain Relationships and Related Transactions,
    Director Independence


37Item 14.


Principal Accountant Fees and Services


37PART IVItem 15.


Exhibits, Financial Statement Schedules


37EX-21.1EX-23.1EX-23.2EX-23.3EX-31.1EX-31.2EX-32.1   i




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##### Table of Contents



Item 1.
    Business.  Forward-looking
    Statements
  Form 10-K
  Introduction
  24-year
  ®
      Corporate
    Background
  (732) 225-8910.
 1




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##### Table of Contents



Industry
    Overview
    Video
    Game Hardware Platforms
        Video
    Game Software
   2




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##### Table of Contents



free-to-play
  Strategy
    Develop
    franchise titles with capability to sell multiple
    sequels.
    Focus
    product development efforts on quality games that are easy to
    pick-up-and-play,
    priced affordably and targeted for the mass market.
    Grow
    Cooking Mama franchise
  Cooking
    Mama Mama Gardening Mama Crafting Mama Babysitting
    Mama
  Leverage
    our industry relationships and entrepreneurial environment to
    enter new categories and bring innovative products to
    market.
    Products
   3




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##### Table of Contents



Cooking Mama Cooking Mama Cooking Mama 2:
    Dinner with Friends Gardening
    Mama Cooking Mama 3: Shop and
    Chop Crafting Mama
  Cooking Mama: Cooking Mama: World Kitchen Babysitting Mama
  Games
  Age of
    Empires Cake Mania Jillian Michaels Nancy Drew Tetris, Night at the Museum Alvin
    and the Chipmunks: The Squeakquel, Zumba Fitness
 4




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##### Table of Contents



Selected Titles

Platform

Launch DateCooking Mama: Cook Off

Wii

March 2007Bust-A-Move
    Bash!

Wii

April 2007The New York Times Crosswords

DS

May 2007Nancy Drew: Deadly Secret of Olde World Park

DS

September 2007Cooking Mama 2: Dinner with Friends

DS

November 2007Nanostray 2

DS

March 2008BlastWorks: Build, Trade, Destroy

Wii

June 2008Wonder World Amusement Park

Wii

July 2008Zoo Hospital

Wii

September 2008Jillian Michaels Fitness Ultimatum 2009

Wii

October 2008Cooking Mama: World Kitchen

Wii

November 2008Gardening Mama

DS

March 2009Night at the Museum: Battle of the Smithsonian

Xbox 360, Wii, DS

May 2009Jillian Michaels Fitness Ultimatum 2010

Wii, DS

October 2009A Boy and His Blob

Wii

October 2009Cooking Mama 3: Shop and Chop

DS

October 2009Hello Kitty Party

DS

November 2009Alvin and the Chipmunks: The Squeakquel

Wii, DS

December 2009Serious Sam HD: The First Encounter

XBLA

January 2010Attack of the Movies
    3-D

Wii, Xbox 360

May 2010Tetris Party Deluxe

Wii, DS

June 2010Swords

Wii

September 2010Serious Sam HD: The Second Encounter

XBLA

September 2010Greg Hastings Paintball 2

Xbox 360, Wii

September 2010Gardening Mama

iPhone, iPad

October 2010My Baby 3 & Friends

DS

October 2010Crafting Mama

DS

October 2010   Peripheral
    Products
  plug-and-play
 5




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##### Table of Contents



Product
    Development
      
    Wayforward
    Panic Button
    First Playable
    DreamRift
    Arkadium
    Foundation 9      Intellectual
    Property
  Platform
    Licenses
  per-unit and/or title-by-title
 6




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Licenses
    from Third Parties
    Licenses
    to Third Parties
    Manufacturing
        Sales and
    Marketing
  North
    America
  point-of-purchase
   7




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face-to-face
    International
          Customers
    Competition
   8




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
    respond more quickly to new or emerging technologies or changes
    in customer preferences;
    carry larger inventories;
    gain access to wider distribution channels;
    undertake more extensive marketing campaigns;
    adopt more aggressive pricing policies;
    devote greater resources to securing the rights to valuable
    licenses and relationships with leading software developers;
    maintain better relationships with licensors and secure more
    valuable licenses;
    make higher royalty payments; and
    secure more and better shelf space.    Seasonality
    Employees
    Item 1A.
    Risk
    Factors.  Our business and operations are subject to a number of risks
    and uncertainties as described below. However, the risks and
    uncertainties described below are not the only ones we face.
    Additional risks and uncertainties that we are unaware of, or
    that we may currently deem immaterial, may become important
    factors that could harm our business, financial condition or
    results of operations. If any of the following risks actually
    occur, our business, financial condition or results of
    operations could suffer.
  We have
    experienced recent net losses and we may incur future net
    losses, which may cause a decrease in our stock price.
   9




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Our
    business activities may require additional financing that might
    not be obtainable on acceptable terms, if at all, which could
    have a material adverse effect on our financial condition,
    liquidity and our ability to operate going forward.
  and/or
    We are
    heavily reliant on our factoring arrangement.
    We have
    experienced volatility in the price of our stock.
    
    price and volume fluctuations in the overall stock market from
    time to time;
    actual or anticipated changes in our earnings or fluctuations in
    our operating results or changes in the expectations of
    securities analysts;
    our, or a competitors, announcement of new products,
    services or technological innovations;
    departures of key personnel;
    general economic, political and market conditions and
    trends; or
    other risks and uncertainties as may be detailed from time to
    time in our public announcements and filings with the Securities
    and Exchange Commission, referred to herein as the SEC.  and/or
   10




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We may
    not be able to maintain our listing on the Nasdaq Capital
    Market.
        Over-The-Counter
  A
    significant portion of our revenue in 2010 was generated from
    games based on one licensed franchise.
    Customer
    accommodations could materially and adversely affect our
    business, results of operations, financial condition and
    liquidity.
   11




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If we do
    not consistently meet our product development schedules, our
    operating results will be adversely affected.
  and/or
  Video
    games that are not high quality may not sell according to our
    forecast, which could materially impact our profitability in any
    given quarter.
    Increased
    competition for limited shelf space and promotional support from
    retailers could affect the success of our business and require
    us to incur greater expenses to market our products.
      Fluctuations
    in our quarterly operating results due to seasonality in the
    interactive entertainment industry and other factors related to
    our business operations could result in substantial losses to
    investors.
    
    the timing of our release of new titles as well as the release
    of our competitors products;
    the popularity of both new titles and titles released in prior
    periods;
    the profit margins for titles we sell; 12




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
    the competition in the industry for retail shelf space;
    fluctuations in the size and rate of growth of consumer demand
    for titles for different platforms; and
    the timing of the introduction of new platforms and the accuracy
    of retailers forecasts of consumer demand.  quarter-to-quarter
  A weak
    global economic environment could result in a reduced demand for
    our products and increased volatility in our stock
    price.
    Our
    business may be affected by issues in the economy that affect
    consumer spending.
    The loss
    of any of our key customers could adversely affect our
    sales.
    
    we lose any of our significant customers;
    any of these customers purchase fewer of our offerings;
    any of these customers encounter financial difficulties,
    resulting in the inability to pay vendors, store closures or
    liquidation; or
    we experience any other adverse change in our relationship with
    any of these customers. 13




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Increased
    sales of used video game products could lower our
    sales.
    Significant
    competition in our industry could continue to adversely affect
    our business.
    
    respond more quickly to new or emerging technologies or changes
    in customer preferences;
    undertake more extensive marketing campaigns;
    devote greater resources to secure rights to valuable licenses
    and relationships with leading software developers;
    gain access to wider distribution channels; and
    have better access to prime shelf space.      If our
    marketing and advertising efforts fail to resonate with our
    customers, our business and operating results could be adversely
    affected.
    Increasing
    development costs for games which may not perform as anticipated
    can decrease our profitability and could result in potential
    impairments of capitalized software development costs.
   14




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Our
    business is dependent on the viability of console
    hardware.
    
    Hardware shortages.  The current console
    hardware systems have experienced hardware shortages, including
    Nintendos Wii console. Hardware shortages generally
    negatively affect the sales of video games since consumers do
    not have consoles on which to play the games.
    Software pricing.  Software prices for
    the current console games are higher than prices for games for
    the predecessor platforms. There is no assurance that consumers
    will continue to pay the higher prices on these games.
    Additionally, as it gets later in the console cycle, consumers
    may be unwilling to continue to pay the higher prices that they
    paid closer to the launch of the consoles.
    Significant development costs.  The
    complexity and capabilities of the current consoles lead to
    higher development costs for games to make use of the consoles.
    Greater costs can lead to lower operating margins, negatively
    affecting our profitability.  Our
    business is highly dependent on the continued growth of current
    generation video game platforms and our ability to develop
    commercially successful products for these platforms.
    Termination
    or modification of our agreements with platform hardware
    manufacturers, who are also competitors and frequently control
    the manufacturing of our titles, may adversely affect our
    business.
      
    do not approve a project for which we have expended significant
    resources;
    refuse or are unable to manufacture or ship our products;
    increase manufacturing lead times or delay the manufacturing of
    our products; or
    require us to take significant risks in prepaying and holding an
    inventory of products. 15




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The video
    game hardware manufacturers set the royalty rates and other fees
    that we must pay to publish games for their platforms, and
    therefore have significant influence on our costs. If one or
    more of these manufacturers change their fee structure, our
    profitability will be materially impacted.
    We may be
    unable to develop and publish new products if we are unable to
    secure or maintain relationships with third party video game
    software developers.
        If we are
    unable to maintain or acquire licenses to intellectual property,
    we may publish fewer titles and our revenue may
    decline.
  and/or
  If we are
    unable to successfully introduce new products on a timely basis,
    or anticipate and adapt to rapidly changing technology,
    including new hardware platform technology, our business may
    suffer.
   16




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Technology
    changes rapidly in our business and if we fail to anticipate new
    technologies or the manner in which people play our games, the
    quality, timeliness and competitiveness of our products and
    services will suffer.
    We have
    invested in products for systems utilizing new motion-based game
    technology, and if these new systems prove to be commercially
    unsuccessful, then sales of our products will suffer,
  and/or
  
    being accustomed to and satisfied with non-motion-based gaming
    systems;
    being accustomed to and satisfied with the Nintendo Wii, which
    has been the sole player in the motion-based game system genre
    for the past four years;
    with particular respect to exercise games, failing to appreciate
    the convergence of technology and exercise, choosing
    traditional, non-simulated modes of exercise instead;
    lacking the additional physical space required to play
    motion-based games.    We have
    invested in products for the Nintendo 3DS, and if this system
    proves to be commercially unsuccessful, then sales of our
    products will suffer.
   17




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and/or
  Competition
    with emerging forms of home-based entertainment may reduce sales
    of our products.
    Our
    adoption of new business models could fail to produce positive
    results.
    Our
    business is hit driven. If we do not deliver
    hit titles, or if consumers prefer competing
    products, our sales could suffer.
    Intellectual
    property claims may increase our product costs or require us to
    cease selling affected products, which could adversely affect
    our earnings and sales.
   18




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Our
    intellectual property is vulnerable to misappropriation and
    infringement which could adversely affect our business
    prospects.
    If our
    products contain defects, our business could be harmed
    significantly.
    Rating
    systems for digital entertainment software, potential
    legislation and consumer opposition could inhibit sales of our
    products.
    Our
    business is subject to risks generally associated with the
    entertainment industry, and we may fail to properly assess
    consumer tastes and preferences, causing product sales to fall
    short of expectations.
   19




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We seek
    to manage our business with a view to achieving long-term
    results, and this could have a negative effect on short-term
    trading.
    If we do
    not continue to attract and retain key personnel, we will be
    unable to effectively conduct our business.
    If we
    fail to maintain an effective system of internal controls, we
    may not be able to accurately report our financial results. As a
    result, current and potential stockholders could lose confidence
    in our financial reporting, which could have a negative impact
    on our stock price.
  Form 10-K and/or
  Item 1B.
    Unresolved
    Staff
    Comments.    Item 2.
    Properties.    Item 3.
    Legal
    Proceedings.    Item 4.
    (Removed
    and Reserved). PART II Item 5.  Market
    For Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.   20




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High


LowFiscal Year 2009First Quarter

$
0.92


$
0.40Second Quarter

$
1.70


$
0.53Third Quarter

$
2.39


$
1.26Fourth Quarter

$
2.27


$
0.96Fiscal Year 2010First Quarter

$
1.28


$
0.75Second Quarter

$
1.08


$
0.77Third Quarter

$
0.88


$
0.64Fourth Quarter

$
0.71


$
0.49   Holders of Common Stock.
  Dividends and dividend policy.
  Securities authorized for issuance under equity compensation
    plans.
  Recent Sales of Unregistered Securities. Form 8-K.
 21




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##### Table of Contents



Item 6.
    Selected
    Financial Data.    Year Ended October 31,2010


2009


2008


2007


2006(in thousands, except share data)Consolidated Statement of Operations Data:Net revenues

$
75,648


$
94,452


$
63,887


$
50,967


$
66,683Cost of sales(1)


57,263



71,543



40,798



33,682



46,858Gross profit (loss)


18,385



22,909



23,089



17,285



19,825Operating expenses(2)


20,496



29,480



20,312



21,114



22,820Operating (loss) income


(2,111
)


(6,571
)


2,777



(3,829
)


(2,995
)Interest and financing costs, net


999



1,318



649



1,552



2,371Other non-operating expense (income)(3)


(482
)


415



(1,250
)


(611
)


(Loss) income before income taxes


(2,628
)


(8,304
)


3,378



(4,770
)


(5,366
)(Benefit) provision for income taxes


(1,656
)


(1,115
)


26







Net (loss) income

$
(972
)

$
(7,189
)

$
3,352


$
(4,770
)

$
(5,366
)Net (loss) income attributable to common stockholders

$
(972
)

$
(7,189
)

$
3,352


$
(4,770
)

$
(5,366
)Net (loss) income attributable to common stockholders per share:Basic and Diluted

$
(0.03
)

$
(0.24
)

$
0.12


$
(0.20
)

$
(0.24
)Weighted average shares outstanding:Basic and Diluted


37,019,750



29,770,382



27,547,211



23,891,860



22,616,419   October 312010


2009


2008


2007


2006(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents

$
8,004


$
11,839


$
5,505


$
7,277


$
3,794Working capital


11,563



11,815



6,702



2,834



977Total assets


30,029



28,527



23,570



16,313



15,011Non-current liabilities


144



626



211



1,460



Stockholders equity


12,008



11,719



7,137



2,591



1,749     (1)
    
    Cost of sales includes $1.0 million and $2.5 million
    in 2010 and 2009, respectively, to recognize impairments to the
    carrying value of products for future release.(2)
    
    Operating expenses include: (i) for 2010, an impairment of
    capitalized software development costs and license
    fees  cancelled games of $0.4 million;
    (ii) for 2009, a settlement of litigation and related
    charges, net, of $0.4 million, and impairment of
    capitalized software development costs and 22




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license fees  cancelled games of $1.0 million;
    (iii) for 2008, a settlement of litigation and related
    charges, net, of $1.6 million, and impairment of software
    development costs and license fees  cancelled games
    of $0.1 million; (iv) for 2007, a settlement of
    litigation and related charges, net, of $2.8 million, a
    gain from settlement of liabilities of $0.3 million and
    impairment of software development costs and license
    fees  cancelled games of $0.2 million; and
    (v) for 2006, a gain from settlement of liabilities and
    other of $4.8 million, and impairment of software
    development costs and license fees  cancelled games
    of $2.4 million.(3)
    
    Other non-operating expense includes: (i) for 2010, a gain
    from a change in fair value of warrants of $0.5 million
    (ii) for 2009, a charge from a change in fair value of
    warrants of $0.4 million; (iii) for 2008, a gain from
    a change in fair value of warrants of $1.3 million; and
    (iv) for 2007, a gain from a change in fair value of
    warrants of $0.6 million.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  You should read the following discussion and analysis of our
    financial condition and results of operations together with
    Selected Financial Data and our consolidated
    financial statements and related notes appearing elsewhere in
    this annual report on
    Form 10-K.
    This discussion and analysis contains forward-looking statements
    that involve risks, uncertainties and assumptions. The actual
    results may differ materially from those anticipated in these
    forward-looking statements as a result of certain factors,
    including, but not limited to, those set forth under Risk
    Factors and elsewhere in this annual report on
    Form 10-K.
  Overview
  ®
      Net Revenues.
  Cost of Sales.
 23




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Gross Profit.
  Product Research and Development
    Expenses.
  Selling and Marketing Expenses.
  General and Administrative Expenses.
  Loss on Impairment of Software Development Costs and License
    Fees- Cancelled Games.
  Interest and Financing Costs.
  Income Taxes.
 24




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Seasonality
    and Variations in Interim Quarterly Results
    Critical
    Accounting Estimates
        Revenue Recognition.
  Price Protection and Other Allowances.
 25




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and/or 12-month
  Capitalized Software Development Costs and License
    Fees. product-by-product
         26




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Inventory. first-in, title-by-title
  Accounting for Stock-Based
    Compensation.
  Commitments and Contingencies.
 27




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Results
    of Operations
    Year Ended October 31,2010


2009


2008Net revenues


100.0
%


100.0
%


100.0
%Cost of salesProduct costs


51.2



42.0



45.2Software development costs and license fees


23.2



31.0



18.7Loss on impairment of software development costs and license
    fees  future releases


1.3



2.7



Gross profit


24.3



24.3



36.1Operating expensesProduct research and development


4.4



5.0



5.1Selling and marketing


11.2



15.5



13.5General and administrative


10.8



9.1



15.0Depreciation and amortization


0.2



0.3



0.5Settlements, loss on impairments and other expenses (income)


0.5



1.4



(2.3
)Operating (loss) income


(2.8
)


(7.0
)


4.3Interest and financing costs and other non-operating expenses
    (income)


0.7



1.8



(1.0
)(Loss) income before income taxes


(3.5
)


(8.8
)


5.3Benefit from income taxes


2.2



1.2



Net (loss) income


(1.3
)%


(7.6
)%


5.3
%     Year Ended October 31,2010


2009


2008(in thousands)Settlement of litigation and related charges, net

$



$
404


$
(1,572
)Loss on impairment of software development costs and license
    fees  cancelled games


407



966



101Balance  end of year

$
407


$
1,370


$
(1,471
)     Year Ended October 31,2010


2009


2008% of





% of





% ofNet


Total Net


Net


Total Net


Net


Total NetRevenues


Revenues


Revenues


Revenues


Revenues


RevenuesNintendo Wii

$
23.6



31.2
%

$
50.1



53.0
%

$
21.8



34.0
%Nintendo DS


48.9



64.6



40.5



42.8



39.4



61.7Other(1)


3.1



4.2



3.9



4.2



2.7



4.3Total

$
75.6



100.0
%

$
94.5



100.0
%

$
63.9



100.0
%  28




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##### Table of Contents



(1)
    
    Consists primarily of net revenues for other console and
    handheld games, such as PlayStation, Xbox and Game Boy Advance,
    as well as downloadable PC games, distribution fees, licensing
    fees and peripheral products and accessories.  Year
    ended October 31, 2010 versus year ended October 31,
    2009
  Net Revenues.
  Gross Profit.
    Product Research and Development
    Expenses.
  Selling and Marketing Expenses.
 29




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General and Administrative Expenses.
  Settlement of Litigation Charges.
  Operating Loss.
  Interest and Financing Costs, Net.
  Change in Fair Value of Warrants. Distinguishing Liabilities from Equity
    Income Taxes.
  Net Loss.
  Year
    ended October 31, 2009 versus year ended October 31,
    2008
  Net Revenues. Cooking Mama: World Kitchen Gardening Mama Jillian Michaels Fitness Ultimatum 2009 Another
    Night at the Museum: Battle of the Smithsonian. Cooking Mama Cooking
    Mama 3: Shop and Chop Jillian
 30




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Michaels Resolution
  Gross Profit. Our House: Party! Major Minors Majestic March
  Product Research and Development
    Expenses.
  Selling and Marketing Expenses. GoPlay
  General and Administrative Expenses.
  Settlement of Litigation and Related
    Charges.
  Loss on impairment of software development costs and license
    fees  cancelled games.
  Operating (Loss) Income.
 31




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Interest and Financing Costs, Net.
  Change in Fair Value of Warrants. Distinguishing Liabilities from Equity.
    Income Taxes.
    Net (Loss) Income.
  Liquidity
    and Capital Resources
       32




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Factoring and Purchase Order Financing.
    30-day
    and/or
  Advances from Customers.
 33




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Contingencies and Commitments.
  Off-Balance
    Sheet Arrangements
    Cash
    Flows
    Operating Cash Flows.
     34




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Investing Cash Flows.
  Financing Cash Flows.
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market
    Risk.  Regulation S-K
  Item 8.
    Financial
    Statements and Supplementary
    Data.  Page F-1,
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial
    Disclosure.    Item 9A.
    Controls
    and
    Procedures.  Evaluation of Disclosure Controls and
    Procedures. Rules 13a-15(e) 15d-15(e),
         35




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##### Table of Contents



Rules 13a-15(e) 15d-15(e))
    Managements Annual Report on Internal Control Over
    Financial Reporting. Rules 13a-15(f) 15d-15(f)
  
    pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect transactions involving our assets;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with GAAP, and that our receipts and expenditures are
    being made only in accordance with the authorization of our
    management; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.        Item 9B.
    Other
    Information.   36




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##### Table of Contents



PART III  Form 10-K
  Item 10 
    Directors,
    Executive Officers and Corporate
    Governance.  Item 11 
    Executive
    Compensation.  Item 12 
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder
    Matters.  Item 13 
    Certain
    Relationships and Related Transactions and Director
    Independence.  Item 14 
    Principal
    Accountant Fees and
    Services. PART IV  Item 15.
    Exhibits,
    Financial Statement
    Schedules.  Financial Statements.
  Page F-1,
  Financial Statement Schedules.
    Exhibits.
    3
.1

Restated Certificate of Incorporation (incorporated by reference
    to Exhibit 3.1 to our Quarterly Report on Form 10-Q filed on
    June 14, 2005).3
.2

Restated Bylaws (incorporated by reference to Exhibit 3.1 to our
    Current Report on
    Form 8-K
    filed on June 17, 2005).4
.1

Securities Purchase and Registration Rights Agreement dated as
    of August 29, 2007 by and among Majesco Entertainment Company
    and the Investors named therein (incorporated by reference to
    Exhibit 4.1 to our Current Report on Form 8-K filed on September
    5, 2007).4
.2

Form of Common Stock Purchase Warrant issued to investors
    (incorporated by reference to Exhibit 4.2 to our Current Report
    on Form 8-K filed on September 5, 2007).4
.3

Restricted Stock Agreement dated June 7, 2010 between Majesco
    Entertainment Company and Chris Gray (incorporated by reference
    to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on
    September 14, 2010).4
.4

Warrant Purchase Agreement dated March 29, 2010 between Majesco
    Entertainment Company and Gerald A. Amato (incorporated by
    reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q
    filed on September 14, 2010).10
.1

Lease Agreement, dated as of February 2, 1999, by and between
    160 Raritan Center Parkway, L.L.C. and Majesco Sales Inc.
    (incorporated by reference to Exhibit 10.1 to our Current Report
    on Form 8-K filed on August 11, 2004).10
.2

Factoring Agreement, dated April 24, 1989, between Majesco Sales
    Inc. and Rosenthal & Rosenthal, Inc. (incorporated by
    reference to Exhibit 10.1 to our Current Report on
    Form 8-K
    filed on October 22, 2004).10
.3

Amendment, dated March 18, 1999, to Factoring Agreement, dated
    April 24, 1989, between Majesco Sales Inc. and Rosenthal &
    Rosenthal, Inc. (incorporated by reference to Exhibit 10.2
    to our Current Report on Form 8-K filed on October 22, 2004).10
.4

Amendment, dated September 30, 2004, to Factoring Agreement,
    dated April 24, 1989, between Majesco Sales Inc. and Rosenthal
    & Rosenthal, Inc. (incorporated by reference to Exhibit
    10.3 to our Current Report on Form 8-K filed on October 22,
    2004). 37




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##### Table of Contents



10
.5

Assignment of Monies Due Under Factoring Agreement, dated July
    21, 2000, by and among Majesco Sales Inc., Rosenthal &
    Rosenthal, Inc. and Transcap Trade Finance (incorporated by
    reference to Exhibit 10.4 to our Current Report on Form 8-K
    filed on October 22, 2004).10
.6

Master Purchase Order Assignment Agreement, dated July 21, 2000,
    between Majesco Sales Inc. and Transcap Trade Finance
    (incorporated by reference to Exhibit 10.5 to our Current Report
    on Form 8-K filed on October 22, 2004).10
.7

Sixth Amendment to Master Purchase Order Assignment Agreement,
    dated September 12, 2003, by and between Transcap Trade Finance
    and Majesco Sales Inc. (incorporated by reference to Exhibit
    10.6 to our Current Report on Form 8-K filed on October 22,
    2004).10
.8

Seventh Amendment to Master Purchase Order Assignment Agreement,
    dated October 16, 2003, by and between Transcap Trade Finance
    and Majesco Sales Inc. (incorporated by reference to Exhibit
    10.7 to our Current Report on Form 8-K filed on October 22,
    2004).10
.9

Eighth Amendment to Master Purchase Order Assignment Agreement,
    dated April 14, 2004, by and between Transcap Trade Finance and
    Majesco Sales Inc. (incorporated by reference to Exhibit 10.8 to
    our Current Report on Form 8-K filed on October 22, 2004).10
.10

Guaranty and Pledge Agreement, dated July 21, 2000, by and among
    Jesse Sutton, Joseph Sutton, Morris Sutton, Adam Sutton and
    Transcap Trade Finance (incorporated by reference to Exhibit
    10.9 to our Current Report on Form 8-K filed on October 22,
    2004).10
.11

Amendment, dated October 18, 2005, to Factoring Agreement, dated
    April 24, 1989, between Majesco Sales, Inc. and Rosenthal &
    Rosenthal, Inc. (incorporated by reference to Exhibit 10.46 to
    our Annual Report on Form 10-K filed on February 1, 2006).10
.12

Amendment, dated October 1, 2008, to Factoring Agreement, dated
    April 24, 1989, between Majesco Sales Inc. and Rosenthal &
    Rosenthal, Inc. (incorporated by reference to Exhibit 10.23 to
    our Annual Report on Form 10-K filed on January 29, 2009)#10
.13

Amended and Restated 2004 Employee, Director and Consultant
    Incentive Plan (incorporated by reference to Exhibit 10.1 to our
    Quarterly Report on Form 10-Q filed on June 15, 2009).#10
.14

Form of Non-Qualified Stock Option Agreement (incorporated by
    reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q
    filed on June 14, 2005).#10
.15

Form of Incentive Stock Option Agreement (incorporated by
    reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q
    filed on June 14, 2005).#10
.19

2008 Executive Officer Incentive Bonus Program (incorporated by
    reference to Exhibit 10.1 to our Current Report on Form 8-K
    filed on February 15, 2008).#10
.20

Amended and Restated Non-Employee Director Compensation Policy
    (incorporated by reference to Exhibit 10.1 to our Quarterly
    Report on Form 10-Q filed on September 15, 2008).#10
.21

Employment Agreement, dated January 8, 2008, between Jesse
    Sutton and Majesco Entertainment Company (incorporated by
    reference to Exhibit 10.1 to our Current Report on Form 8-K
    filed on January 13, 2008).10
.23

2009 Executive Officer Incentive Bonus Plan (incorporated by
    reference to Exhibit 10.1 to our Current Report on Form 8-K
    filed on April 21, 2009).10
.24

First Amendment to Lease by and between the Company and the
    Landlord dated May 1, 2009 (incorporated by reference to Exhibit
    10.1 to our Current Report on Form 8-K filed on May 6, 2009).10
.25

Form of Personal Indemnification Agreement (incorporated by
    reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q
    filed on June 15, 2009).10
.26

Placement Agency Agreement dated September 17, 2009, by and
    between the Company and Roth Capital Partners, LLC (incorporated
    by reference to Exhibit 10.1 to our Current Report on Form 8-K
    filed on September 18, 2009).10
.27

Form of Subscription Agreement between the Company and each of
    the investors signatory thereto (incorporated by reference to
    Exhibit 10.2 to our Current Report on Form 8-K filed on
    September 18, 2009).10
.28

Confidential License Agreement for the Wii Console (Western
    Hemisphere), effective February 21, 2007, by and between
    Nintendo of America Inc. and Majesco Entertainment Company
    (incorporated by reference to Exhibit 10.1 to our Quarterly
    Report on Form 10-Q filed on June 14, 2010). 38




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##### Table of Contents



10
.29

First Amendment to the Confidential License Agreement for the
    Wii Console (Western Hemisphere), effective January 4, 2010, by
    and between Nintendo of America Inc. and Majesco Entertainment
    Company (incorporated by reference to Exhibit 10.2 to our
    Quarterly Report on Form 10-Q filed on June 14, 2010).10
.30

Add On Content Addendum to the Confidential License Agreement
    for the Wii Console, effective November 2, 2009, by and between
    Nintendo of America Inc. and Majesco Entertainment Company
    (incorporated by reference to Exhibit 10.3 to our Quarterly
    Report on Form 10-Q filed on June 14, 2010).10
.31

Confidential License Agreement for Nintendo DS (Western
    Hemisphere), effective May 1, 2005, by and between Nintendo of
    America Inc. and Majesco Entertainment Company (incorporated by
    reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q
    filed on June 14, 2010).10
.32

First Amendment to the Confidential License Agreement for
    Nintendo DS (Western Hemisphere), effective April 30, 2008, by
    and between Nintendo of America Inc. and Majesco Entertainment
    Company (incorporated by reference to Exhibit 10.5 to our
    Quarterly Report on Form 10-Q filed on June 14, 2010).10
.33

Letter Agreement re: Game Publishing for Nintendo DSI, dated
    February 25, 2009, by and between Nintendo of America Inc. and
    Majesco Entertainment Company (incorporated by reference to
    Exhibit 10.6 to our Quarterly Report on Form 10-Q filed on June
    14, 2010).# 10
.34

2010 Executive Officer Incentive Bonus Plan (incorporated by
    reference to Exhibit 10.1 to our Current Report on Form 8-K
    filed on April 16, 2010).# 10
.35

2011 Executive Officer Incentive Bonus Plan (incorporated by
    reference to Exhibit 10.1 to our Current Report on Form 8-K
    filed on January 20, 2011).16
.1

Letter from Goldstein Golub Kessler LLP (GGK) to the Company,
    notifying the Company that the partners of GGK became partners
    of McGladrey & Pullen, LLP in a limited asset purchase
    agreement and that GGK resigned as independent registered public
    accounting firm for the Company, dated October 26, 2007
    (incorporated by reference to Exhibit 16.1 to our Current Report
    on Form 8-K filed on November 1, 2007).16
.2

Letter furnished by Goldstein Golub Kessler LLP in response to
    the Companys request, addressed to the Securities and
    Exchange Commission, dated November 1, 2007, indicating their
    agreement with the statements contained in the Current Report on
    Form 8-K filing dated November 1, 2007 (incorporated by
    reference to Exhibit 16.2 to our Current Report on Form 8-K
    filed on November 1, 2007).16
.3

Letter from McGladrey & Pullen, LLP regarding change in
    certifying accountant, dated May 4, 2009 (incorporated by
    reference to Exhibit 16.1 to our Current Report on Form 8-K
    filed on May 6, 2009).16
.4

Letter from Amper, Politziner & Mattia, LLP regarding
    change in certifying accountant, dated August 17, 2010
    (incorporated by reference to Exhibit 16.1 to our Current Report
    on Form 8-K filed on August 20, 2010)*21
.1

Subsidiaries*23
.1

Consent of EisnerAmper LLP*23
.2

Consent of Amper, Politziner & Mattia, LLP*23
.3

Consent of McGladrey & Pullen, LLP*31
.1

Certification of Principal Executive Officer*31
.2

Certification of Principal Financial Officer*32
.1

Section 1350 Certificate of President and Chief Financial
    Officer     #
    
    Constitutes a management contract, compensatory plan or
    arrangement.*
    
    Filed herewith.  (b) Exhibits.See (a)(3) above.(c) Financial Statement Schedules.See (a)(2) above. 39




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##### Table of Contents



SIGNATURES
    MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
  By:
    /s/  Jesse
    Sutton,        Signature

Title

Date/s/  Jesse
    SuttonJesse
    Sutton

Chief Executive Officer and Director 
    (Principal Executive Officer)

January 31, 2011/s/  Michael
    VeseyMichael
    Vesey

Interim Chief Financial Officer (Principal Financial and
    Accounting Officer)

January 31, 2011/s/  Allan
    I. GrafmanAllan
    I. Grafman

Chairman of the Board

January 31, 2011/s/  Laurence
    AronsonLaurence
    Aronson

Director

January 31, 2011/s/  Louis
    LipschitzLouis
    Lipschitz

Director

January 31, 2011/s/  Keith
    McCurdyKeith
    McCurdy

Director

January 31, 2011/s/  Stephen
    WilsonStephen
    Wilson

Director

January 31, 2011  40




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##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReports of Independent Registered Public
    Accounting Firms

F-2  F-4Consolidated balance sheets 
    October 31, 2010 and 2009

F-5Consolidated statements of operations 
    Years ended October 31, 2010, 2009 and 2008

F-6Consolidated statements of stockholders
    equity and comprehensive income (loss)  Years ended
    October 31, 2010, 2009 and 2008

F-7Consolidated statements of cash flows 
    Years ended October 31, 2010, 2009 and 2008

F-8Notes to consolidated financial statements

F-9  F-27  F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           /S/  EISNERAMPER LLP
    F-2




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           /S/  AMPER, POLITZINER & MATTIA, LLP
    F-3




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           /s/  MCGLADREY &
    PULLEN, LLP
     F-4




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARYCONSOLIDATED BALANCE SHEETS(in thousands, except share data)
  October 31,2010


2009ASSETSCurrent assets:Cash and cash equivalents

$
8,004


$
11,839Due from factor


1,015



1,172Accounts and other receivables, net


725



1,145Inventory, net


8,418



6,190Advance payments for inventory


5,454



3,126Capitalized software development costs and license fees


4,903



3,678Prepaid expenses


921



847Total current assets


29,440



27,997Property and equipment, net


520



447Other assets


69



83Total assets

$
30,029


$
28,527LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses

$
11,375


$
9,356Customer billings due to distribution partner






230Inventory financing payables


5,557



6,053Advances from customers and deferred revenue


945



543Total current liabilities


17,877



16,182Warrant liability


144



626Commitments and contingenciesStockholders equity:Common stock  $.001 par value;
    250,000,000 shares authorized; 39,326,376 and
    38,553,740 shares issued and outstanding at
    October 31, 2010 and 2009, respectively


39



38Additional paid-in capital


114,824



113,484Accumulated deficit


(102,333
)


(101,361
)Accumulated other comprehensive loss


(522
)


(442
)Net stockholders equity


12,008



11,719Total liabilities and stockholders equity

$
30,029


$
28,527    F-5




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
  CONSOLIDATED STATEMENTS OF OPERATIONS
 (in
    thousands, except share data)
  Year Ended October 31,2010


2009


2008Net revenues

$
75,648


$
94,452


$
63,887Cost of salesProduct costs


38,718



39,699



28,881Software development costs and license fees


17,524



29,329



11,917Loss on impairment of software development costs and license
    fees  future releases


1,021



2,515



57,263



71,543



40,798Gross profit


18,385



22,909



23,089Operating costs and expensesProduct research and development


3,347



4,672



3,306Selling and marketing


8,432



14,618



8,628General and administrative


8,127



8,557



9,549Depreciation and amortization


183



263



300Settlement of litigation and related charges, net






404



(1,572
)Loss on impairment of software development costs and license
    fees  cancelled games


407



966



10120,496



29,480



20,312Operating (loss) income


(2,111
)


(6,571
)


2,777Other expenses (income)Interest and financing costs, net


999



1,318



649Change in fair value of warrant liability


(482
)


415



(1,250
)(Loss) income before income taxes


(2,628
)


(8,304
)


3,378Income taxes


(1,656
)


(1,115
)


26Net (loss) income

$
(972
)

$
(7,189
)

$
3,352Net (loss) income per share:Basic and diluted

$
(0.03
)

$
(0.24
)

$
0.12Weighted average shares outstanding:Basic and diluted


37,019,750



29,770,382



27,547,211    F-6




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARYCONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY AND COMPREHENSIVE INCOME (LOSS)(in thousands, except share data)
  AccumulatedCommon Stock


Additional





Other


Net$.001 par value


Paid-In


Accumulated


Comprehensive


StockholdersNumber


Amount


Capital


Deficit


Loss


EquityBalance  October 31, 2007


28,675,962


$
29


$
100,201


$
(97,524
)

$
(115
)

$
2,591Issuance of common stock in connection with:Cost of private placement of securities










(40
)










(40
)Restricted stock grants  directors


181,397







191











191Restricted stock grants, net  employees


1,354,731



1



1,132











1,133Non-cash compensation charges  stock options










233











233Issuance of warrants for services










77











77Treasury stock  retired


(84,140
)






(72
)










(72
)Net income














3,352







3,352Foreign currency translation adjustment


















(328
)


(328
)Total comprehensive income






















3,024Balance  October 31, 2008


30,127,950


$
30


$
101,722


$
(94,172
)

$
(443
)

$
7,137Issuance of common stock in connection with:Sale of common stock


6,420,000



6



8,622











8,628Settlement of litigation


1,130,000



1



1,411











1,412Exercise of warrants


28,807



















Restricted stock grants  directors


234,183







229











229Restricted stock grants, net  employees


612,800



1



1,384











1,385Non-cash compensation charges  stock options










116











116Net loss














(7,189
)






(7,189
)Foreign currency translation adjustment


















1



1Total comprehensive loss






















(7,188
)Balance  October 31, 2009


38,553,740


$
38


$
113,484


$
(101,361
)

$
(442
)

$
11,719Issuance of common stock in connection with:Restricted stock grants  directors


261,706







218











218Restricted stock grants, net  employees


510,930



1



962











963Non-cash compensation charges  stock options










121











121Warrants issued for services










39











39Net loss














(972
)






(972
)Foreign currency translation adjustment


















(80
)


(80
)Total comprehensive loss






















(1,052
)Balance  October 31, 2010


39,326,376


$
39


$
114,824


$
(102,333
)

$
(522
)

$
12,008    F-7




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)
  Year Ended October 31,2010


2009


2008CASH FLOWS FROM OPERATING ACTIVITIESNet (loss) income

$
(972
)

$
(7,189
)

$
3,352Adjustments to reconcile net (loss) income to net cash used in
    operating activities:Change in fair value of warrant liability


(482
)


415



(1,250
)Depreciation and amortization


183



263



315Provision for price protection


3,226



5,363



2,556Amortization of capitalized software development costs and
    prepaid license fees


6,543



13,418



6,122Non-cash compensation expense


1,301



1,730



1,558Warrant issued for services


39







77Write-off of accounts receivable










255Share-based litigation settlement






404



(1,572
)Loss on asset disposals


27







Loss on impairment of software development costs and license fees


1,428



3,481



101Changes in operating assets and liabilitiesDue to/from factor  net


(3,325
)


(7,186
)


(3,100
)Accounts and other receivables


618



1,368



(2,806
)Inventory


(2,243
)


(412
)


(1,769
)Capitalized software development costs and prepaid license fees


(9,197
)


(13,741
)


(10,362
)Advance payments for inventory


(2,328
)


(2,875
)


662Prepaid expenses and other assets


(66
)


874



(1,512
)Accounts payable and accrued expenses


2,041



(779
)


3,314Litigation settlement






(700
)


Customer billings due to distribution partner


(230
)


(1,257
)


1,487Advances from customers


402



245



(126
)Net cash used in operating activities


(3,035
)


(6,578
)


(2,698
)CASH FLOWS FROM INVESTING ACTIVITIESPurchases of property and equipment


(283
)


(146
)


(314
)Net cash used in investing activities


(283
)


(146
)


(314
)CASH FLOWS FROM FINANCING ACTIVITIESSale of common stock, net of expenses






8,628



Treasury stock  retired










(72
)Inventory financing


(496
)


4,513



1,540Proceeds from private placement, net of expenses










(40
)Net cash (used in) provided by financing activities


(496
)


13,141



1,428Effect of exchange rates on cash and cash equivalents


(21
)


(83
)


(188
)Net (decrease) increase in cash and cash equivalents


(3,835
)


6,334



(1,772
)Cash and cash equivalents  beginning of year


11,839



5,505



7,277Cash and cash equivalents  end of year

$
8,004


$
11,839


$
5,505SUPPLEMENTAL CASH FLOW INFORMATIONCash paid during the year for interest

$
1,006


$
1,322


$
676Cash paid during the year for income taxes

$



$
1


$
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND
    FINANCING ACTIVITIESIssuance of common stock in payment of accounts payable

$



$
459


$
    F-8




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  1.
    BASIS OF
    PRESENTATION    2.
    PRINCIPAL
    BUSINESS ACTIVITY  ®
        Years Ended October 31,2010


%


2009


%


2008


%(in thousands)United States

$
73,817



97.6
%

$
90,428



95.7
%

$
57,932



90.7
%Europe


1,831



2.4
%


4,024



4.3
%


5,955



9.3
%Total

$
75,648



100.0
%

$
94,452



100.0
%

$
63,887



100.0
%   3.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    Principles of Consolidation.
 F-9




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Revenue Recognition.
  , Revenue
    Recognition Principal Agent
    Considerations
      605-50, Customer Payments and Incentives
      Capitalized Software Development Costs and License
    Fees.
 F-10




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  product-by-product
        Advertising Expenses.
  Income taxes.
  Stock Based Compensation.
 F-11




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        October 31,

October 31,

October 31,2010

2009

2008Risk free annual interest rate

1.3%

2.2%

3.3%Expected volatility

74%

76%

65%Expected life

4.25 years

4.25 years

4.25 yearsAssumed dividends

None

None

None         Cash and cash equivalents.
  Inventory. first-in, title-by-title
  Property and equipment.
  Estimates.
 F-12




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Foreign Currency Translation.
  Earnings (loss) per share.
  October 31,2010


2009


2008Warrants


2,226,469



2,201,469



2,311,469Stock options


1,699,216



1,483,929



1,352,610Restricted stock


1,749,535



1,895,180



2,218,373   Reclassifications.
  Commitments and Contingencies.
  Concentrations.
  Fair Value.
  Recent
    Accounting Pronouncements.
  Amendments to Variable Interest Entity
    Guidance 860-10-65, Accounting for Transfers of Financial Assets Transfers and Servicing
 F-13




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Multiple-Deliverable Revenue Arrangements
  Certain Revenue Arrangements That Include Software
    Elements
  Fair Value ASC 820-10, Measuring Liabilities at Fair Values ASC 820-10 ASC 820-10 ASC 820-10,
  4.
    FAIR
    VALUE    
    Level 1  Quoted prices in active markets for
    identical assets or liabilities.
    Level 2  Observable inputs other than quoted
    prices included in Level 1, such as quoted prices for
    markets that are not active or other inputs that are observable
    or can be corroborated by observable market data.
    Level 3  Unobservable inputs that are supported
    by little or no market activity and that are significant to the
    fair value of the assets or liabilities. This includes certain
    pricing models, discounted cash flow methodologies and similar
    techniques that use significant unobservable inputs. F-14




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     Quoted Prices





Significantin Active Markets


Significant Other


UnobservableOctober 31,


for Identical Assets


Observable Inputs


Inputs2010


(Level 1)


(Level 2)


(Level 3)(in thousands)Assets:Money market funds

$
1,045


$
1,045


$



$
Bank- deposit

$
6,959


$
6,959


$



$
Total financial assets

$
8,004


$
8,004


$



$
Liabilities:Warrant liability

$
144


$



$



$
144Total financial liabilities

$
144


$



$



$
144   , Distinguishing
    Liabilities from Equity.
      Year


YearEnded


EndedOctober 31,


October 31,Description

2010


2009(in thousands)Beginning balance

$
626


$
211Total loss (gain) included in net loss


(482
)


415Ending balance

$
144


$
626     5.
    FACTORED
    RECEIVABLES   F-15




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      30-day
          October 31,(in thousands)2010


2009Accounts receivable sold to factor

$
13,754


$
19,307Less: allowances


(3,298
)


(4,380
)advances from factor


(9,441
)


(13,755
)$
1,015


$
1,172  F-16




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Year Ended October 31,(in thousands)2010


2009


2008Balance  beginning of year

$
(4,380
)

$
(3,359
)

$
(3,105
)Add: provisions


(3,482
)


(5,031
)


(2,556
)Less: amounts charged against allowance


4,564



4,010



2,302Balance  end of year

$
(3,298
)

$
(4,380
)

$
(3,359
)   6.
    ACCOUNTS
    RECEIVABLE    October 31,(in thousands)2010


2009Trade receivables

$
726


$
1,388Allowances


(25
)


(295
)Other


24



52$
725


$
1,145   7.
    PREPAID
    EXPENSES    October 31,(in thousands)2010


2009Prepaid media advertising

$
746


$
627Other


175



220$
921


$
847   8.
    PROPERTY
    AND EQUIPMENT, NET    October 31,(in thousands)2010


2009Computers and software

$
2,699


$
2,695Furniture and equipment


739



520Leasehold improvements


150



1503,588



3,365Accumulated depreciation


(3,068
)


(2,918
)$
520


$
447  F-17




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  9.
    ACCOUNTS
    PAYABLE AND ACCRUED EXPENSES    October 31,(in thousands)2010


2009Accounts payable-trade

$
4,856


$
4,029Royalty and software development


5,517



4,152Sales commissions


120



197Salaries and other compensation


592



648Other accruals


290



330$
11,375


$
9,356   10.
    INVENTORY
    FINANCING PAYABLE    11.
    COMMON
    STOCK OFFERING    12.
    WARRANT
    LIABILITY     F-18




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  , Distinguishing
    Liabilities from Equity.
    13.
    COMMON
    STOCK PURCHASE WARRANTS    Issued in





Exercise


October 31,


October 31,connection with

Issue date

Expiration date

Price


2010


2009Equity financing

September 5, 2007

March 5, 2013

$
2.04



1,697,735



1,697,735Consulting services

June 14, 2006

May 31, 2013

$
1.55



40,000



40,000Consulting services

November 1, 2007

July 31, 2010

$
2.07







75,000Consulting services

March 29, 2010

March 28,2015

$
1.06



100,000



1,837,735



1,812,735    F-19




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  14.
    INCOME
    TAXES    October 31,(in thousands)2010


2009


2008Current:Federal

$



$



$
26State


(1,656
)


(1,115
)


Deferred:Federal


(403
)


(2,273
)


953State


(84
)


(484
)


186Impact of change in effective tax rates on deferred taxes


1,312



(1,760
)


Less: valuation allowance


(825
)


4,517



(1,139
)$
(1,656
)

$
(1,115
)

$
26     2010


2009


2008(in thousands)


Percent of


(in thousands)


Percent of


(in thousands)


Percent ofAmount


Pretax income


Amount


Pretax income


Amount


Pretax incomeTax (benefit) at federal statutory rate

$
(894
)


(34
)%

$
(2,823
)


(34
)%

$
1,149



34
%State income taxes, net of federal income taxes


(84
)


(3
)%


(515
)


(6
)%


223



7
%Effect of permanent items


433



17
%


581



7
%


(207
)


(6
)%Sale of state net operating losses


(1,656
)


(63
)%


(1,115
)


(13
)%






Change in valuation allowance


(825
)


(32
)%


4,517



54
%


(1,139
)


(34
)%Reduction of deferred benefit of state net operating losses


1,312



50
%


1,608



19
%






Impact of change in effective tax rate on deferred taxes and
    other


58



2
%


(3,368
)


(40
)%






$
(1,656
)


(63
)%

$
(1,115
)


(13
)%

$
26



1
%  F-20




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    October 31,(in thousands)2010


2009Impairment of capitalized software development costs and prepaid
    license fees not currently deductible

$
209


$
1,004Depreciation and amortization


17



Impairment of inventory


80



103Compensation expense not deductible until options are exercised


1,715



1,669All other temporary differences


471



852Net operating loss carry forward


30,314



30,003Less valuation allowance


(32,806
)


(33,631
)Deferred tax asset

$



$
           15.
    STOCK-BASED
    COMPENSATION ARRANGEMENTS   F-21




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        2010


2009


2008Weighted





Weighted





WeightedAverage





Average





AverageNumber Of


Exercise


Number Of


Exercise


Number Of


ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding at beginning of year


1,483,929


$
5.24



1,352,610


$
5.61



1,167,191


$
6.78Granted


289,475


$
0.68



144,079


$
1.88



239,133


$
0.89Cancelled


(74,188
)

$
3.23



(12,760
)

$
6.14



(53,714
)

$
9.92Exercised






















Outstanding at end of year


1,699,216


$
4.55



1,483,929


$
5.24



1,352,610


$
5.61Options exercisable at year-end


1,362,440


$
5.46



1,252,103


$
5.94



1,051,736


$
6.91Weighted-average fair value of options granted during the year





$
0.38






$
1.12






$
0.58      F-22




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Options Outstanding


Options ExercisableWeighted-Average


Weighted-





Weighted-Remaining


Average





AverageRange of

Number


Contractual


Exercise


Number


ExerciseExercise Prices

Outstanding


Life (Years)


Price


Exercisable


Price$0.68


289,475



6.8


$
0.68






$
$0.89


210,147



4.8


$
0.89



210,147


$
0.89$1.17 and $2.80


403,496



3.4


$
1.77



356,193


$
1.69$3.20


363,685



1.8


$
3.20



363,685


$
3.20$7.23 to $8.00


100,000



1.7


$
7.23



100,000


$
7.33$13.30


282,416



0.4


$
13.30



282,416


$
13.30$14.00 to $28.00


49,997



0.9


$
19.96



49,997


$
19.96$0.68 to $28.00


1,699,216



3.1


$
4.55



1,362,438


$
5.46     Weighted-AverageRemainingWeighted-Average


ContractualNumber


Fair Value at


LifeOutstanding


Grant Date


(Years)Non-Vested shares at October 31, 2009


231,826


$
0.88



6.4Options Granted


289,475


$
0.38



6.8Options Vested


(161,919
)

$
0.70



5.0Non-vested options forfeited or expired


(22,606
)

$
0.80



5.2Non-Vested shares at October 31, 2010


336,776


$
0.50



6.6       October 31,


October 31,


October 31,2010


2009


2008Balance at beginning of period


1,895,180



2,218,373



1,411,470Granted


1,243,467



955,183



1,546,397Vested


(1,040,566
)


(1,187,740
)


(711,661
)Cancelled


(348,546
)


(90,636
)


(27,833
)Outstanding at end of period


1,749,535



1,895,180



2,218,373    F-23




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        16.
    EMPLOYEE
    RETIREMENT PLAN        17.
    MAJOR
    CUSTOMERS    18.
    CONTINGENCIES
    AND COMMITMENTS  Commitments
      Year ending October 31,

(in thousands)2011

$
2762012


2762013


2602014


2672015


74$
1,153  F-24




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Contingencies
                 F-25




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      19.
    EXIT
    COSTS AND WORKFORCE REDUCTION      Year EndedOctober 31, 2010(in thousands)Product research and development

$
90Selling and Marketing


243General and Administrative


70Total

$
403     20.
    RELATED
    PARTY TRANSACTIONS   F-26




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Year EndedOctober 31,(in thousands)2010


2009


2008Consulting

$
150


$
213


$
350Commissions


131



189



111Business expenses


11



6



49Total

$
292


$
408


$
510     month-to-month
 F-27