##### 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, 2009ORo

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


10Item 1B.


Unresolved Staff Comments


19Item 2.


Properties


19Item 3.


Legal Proceedings


19Item 4.


Submission of Matters to a Vote of Security
    Holders


19PART IIItem 5.


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


19Item 6.


Selected Financial Data


21Item 7.


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


22Item 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


37PART 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-10.22EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1   i




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##### Table of Contents



Item 1.
    Business.  Forward-looking
    Statements
  Form 10-K
  Introduction
  23-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



Peripherals
    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 Gardening Mama
  
    Create
    our own intellectual property.  A Boy and His Blob,
    Our House: Party!, Left Brain Right Brain 2, Go Play
    Lumberjacks, Go Play Circus Star Go Play City
    Sports
  
    Leverage
    our industry relationships and entrepreneurial environment to
    enter new categories and bring innovative products to
    market.   3




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##### Table of Contents



Products
    Cooking
    Mama Cooking Mama Cooking Mama: Cook
    Off Cooking Mama 2: Dinner
    with Friends Cooking Mama: World Kitchen Gardening
    Mama Cooking
    Mama 3: Shop and Chop
  Games
    Titles
  Age of
    Empires Cake Mania Jillian Michaels Nancy Drew Another Night at the Museum: Battle of the
    Smithsonian Alvin and the Chipmunks: The
    Squeakquel
 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 2007Holly Hobbie & Friends

DS

October 2007Zoo Hospital

DS

October 2007Kengo: Legend of the 9

Xbox 360

September 2007Cooking Mama 2: Dinner with Friends

DS

November 2007Nanostray 2

DS

March 2008Eco-Creatures: Save the Forest

DS

March 2008Wild Earth: African Safari

Wii

April 2008BlastWorks: Build, Trade, Destroy

Wii

June 2008Wonder World Amusement Park

Wii

July 2008Zoo Hospital

Wii

September 2008Jillian Michaels Fitness Ultimatum 2009

Wii

October 2008Away: Shuffle Dungeon

DS

October 2008Cooking Mama: World Kitchen

Wii

November 2008Cake Mania: In the Mix!

Wii

November 2008Gardening Mama

DS

March 2009Major Minors Majestic March

Wii

April 2009Night at the Museum: Battle of the Smithsonian

Xbox 360, Wii, DS

May 2009Go Play Lumberjacks

Wii

June 2009Go Play Circus Star

Wii

June 2009Go Play City Sports

Wii

September 2009Our House: Party!

Wii

October 2009Jillian Michaels Fitness Ultimatum 2010

Wii, DS

October 2009A Boy and His Blob

Wii

October 2009Cooking Mama 3: Shop and Chop

DS

October 2009   Peripheral
    Products
  plug-and-play
 5




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##### Table of Contents




    Reached 6 million units sold domestically of the Cooking
    Mamafranchise;
    Gardening Mamawon a 2009 Honors Award from the National
    Parenting Publications Award (NAPPA)
    A Boy and His Blobwon the 2009 Best Puzzle Game of the
    Year from IGN.com and was included in CNET.coms Best Games
    of the Year (2009) collection. In addition, the game was
    also awarded an Editors Choice Award from Childrens
    Technology Review as was Alvin and the Chipmunks: The
    Squeakquel.
    Published 16 titles for the Nintendo DS, 11 titles for Wii, two
    for PC, one for Facebook, one for iPhone and one for Xbox 360.
    Launched Jillian Michaels Fitness Ultimatum 2010on
    Wii, the sequel to the best-selling 2009 fitness game, featuring
    expert advice from Michaels, the strength trainer and life coach
    on the popular television series The Biggest Loser.
    Launched our new Go Playline of affordable motion based
    games with Wii Balance Board support for the whole family.  Product
    Development
      
    Wayforward
    Pipeworks Software
    Panic Button
    Super X Studios
    Backbone Entertainment
    Legacy Interactive     6




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Intellectual
    Property
  Platform
    Licenses
  per-unit and/or title-by-title
  Licenses
    From Third Parties
    Licenses
    To Third Parties
    Manufacturing
       7




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Sales and
    Marketing
  North
    America
  point-of-purchase
    face-to-face
    International
       8




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##### Table of Contents



Customers
    Competition
        
    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
   9




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##### Table of Contents



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.
    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 Securities and Exchange
    Commission filings.  and/or
    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
 10




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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 may
    not be able to maintain our listing on the NASDAQ Capital
    Market.
    Over-The-Counter
  A
    significant portion of our revenue in 2009 was generated from
    games based on one licensed franchise.
   11




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Customer
    accommodations could materially and adversely affect our
    business, results of operations, financial condition and
    liquidity.
    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.
   12




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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;
    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.
   13




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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.  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.      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 new generation
    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 new generation 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 of these games.
    Increasing development costs.  The
    introduction of the new generation platforms has required the
    development of new software to play on such consoles and new
    technologies to create such software. Because the new generation
    consoles have greater complexity and capabilities than the
    predecessor platforms, costs are higher to develop games for new
    generation 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 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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##### Table of Contents



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.
    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.
   17




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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.
   18




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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.
    Item 1B.
    Unresolved
    Staff
    Comments.    Item 2.
    Properties.        Item 3.
    Legal
    Proceedings.    Item 4.
    Submission
    of Matters to a Vote of Security
    Holders.   PART II Item 5.  Market
    For Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.   19




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High


LowFiscal Year 2008First Quarter

$
1.64


$
0.86Second Quarter

$
1.50


$
0.95Third Quarter

$
1.40


$
0.80Fourth Quarter

$
1.25


$
0.36Fiscal Year 2009First Quarter

$
0.92


$
0.40Second Quarter

$
1.70


$
0.53Third Quarter

$
2.39


$
1.26Fourth Quarter

$
2.27


$
0.96   Holders of Common Stock.
  Dividends and dividend policy.
  Securities authorized for issuance under equity compensation
    plans.
  Recent Sales of Unregistered Securities. Form 8-K.
 20




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##### Table of Contents



Item 6.
    Selected
    Financial Data.  1-for-7
  Year Ended October 31,2009


2008


2007


2006


2005(in thousands, except share data)Consolidated Statement of Operations Data:Net revenues

$
94,452


$
63,887


$
50,967


$
66,683


$
59,716Cost of sales(1)


71,543



40,798



33,682



46,858



61,101Gross profit (loss)


22,909



23,089



17,285



19,825



(1,385
)Operating expenses(2)


29,480



20,312



21,114



22,820



68,805Operating (loss) income


(6,571
)


2,777



(3,829
)


(2,995
)


(70,190
)Interest and financing costs, net


1,318



649



1,552



2,371



1,869Other non-operating expense (income)(3)


415



(1,250
)


(611
)






48(Loss) income before income taxes


(8,304
)


3,378



(4,770
)


(5,366
)


(72,107
)(Benefit) provision for income taxes


(1,115
)


26











(1,207
)Net (loss) income

$
(7,189
)

$
3,352


$
(4,770
)

$
(5,366
)

$
(70,900
)Net (loss) income attributable to common stockholders(4)

$
(7,189
)

$
3,352


$
(4,770
)

$
(5,366
)

$
(72,000
)Net (loss) income attributable to common stockholders per share:Basic and Diluted

$
(0.24
)

$
0.12


$
(0.20
)

$
(0.24
)

$
(3.48
)Weighted average shares outstanding:Basic and Diluted


29,770,382



27,547,211



23,891,860



22,616,419



20,686,863   October 312009


2008


2007


2006


2005(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents

$
11,839


$
5,505


$
7,277


$
3,794


$
2,407Working capital


11,815



6,702



2,834



977



3,757Total assets


28,527



23,570



16,313



15,011



30,703Non-current liabilities


626



211



1,460







Stockholders equity


11,719



7,137



2,591



1,749



4,761     (1)
    
    Cost of Sales in 2009 includes $2.5 million to recognize
    impairments to the carrying value of products to be released in
    2010. Cost of sales in 2005 includes: (i) charges of
    $10.5 million to recognize impairments to the carrying
    value of products released in 2005; and
    (ii) $5.1 million for reserves for slow moving
    inventory. 21




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(2)
    
    Operating expenses include: (i) for 2009, a settlement of
    litigation and related charges, net, of $0.4 million, and
    impairment of capitalized software development costs and license
    fees  cancelled games of $1.0 million;
    (ii) 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; (iii) 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;
    (iv) 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; and (v) for 2005, a charge for an
    accounts receivable write-off of $0.3 million,
    $26.3 million to write-off capitalized costs related to
    video games for which development was stopped or impaired, a
    provision for severance of $1.4 million, and a loss of
    $1.4 million related to a legal settlement.(3)
    
    Other non-operating expense includes: (i) for 2009, a
    charge from a change in fair value of warrants of
    $0.4 million; (ii) for 2008, a gain from a change in
    fair value of warrants of $1.3 million; (iii) for
    2007, a gain from a change in fair value of warrants of
    $0.6 million; and (iv) for 2005, a realized loss on
    foreign exchange contract of $48,000.(4)
    
    Net (loss) income attributable to common stockholders includes,
    for 2005, a $1.1 million non-cash charge related to
    warrants exercised at a discount.  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
  23-year
       22




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Net Revenues.
  Cost of Sales.
  Gross Profit.
  Product Research and Development
    Expenses.
  Selling and Marketing Expenses.
  General and Administrative Expenses.
  Loss on Impairments of Software Development Costs and License
    Fees- Cancelled Games.
 23




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Interest and Financing Costs.
  Income Taxes.
  Seasonality
    and Variations in Interim Quarterly Results
    Critical
    Accounting Estimates
         24




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##### Table of Contents



Revenue Recognition.
  Reserves for Price Protection and Other
    Allowances.
  and/or
  Capitalized Software Development Costs and License
    Fees. product-by-product
   25




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Inventory. first-in, title-by-title
  Accounting for Stock-Based
    Compensation.
  Commitments and Contingencies.
 26




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Results
    of Operations
    Year Ended October 31,2009


2008


2007Net revenues


100.0
%


100.0
%


100.0
%Cost of salesProduct costs


42.0



45.2



50.9Software development costs and license fees


31.0



18.7



15.2Loss on impairment of software development costs and license
    fees  future releases


2.7







Gross profit


24.3



36.1



33.9Operating expensesProduct research and development


5.0



5.1



4.5Selling and marketing


15.5



13.5



14.6General and administrative


9.1



15.0



16.4Depreciation and amortization


0.3



0.5



0.6Settlements, loss on impairments and other expenses (income)


1.4



(2.3
)


5.3Operating (loss) income


(7.0
)


4.3



(7.5
)Interest and financing costs and other non-operating expenses
    (income)


1.8



(1.0
)


1.9(Loss) income before income taxes


(8.8
)


5.3



(9.4
)Benefit from income taxes


1.2







Net (loss) income


(7.6
)%


5.3
%


(9.4
)%     Year Ended October 31,2009


2008


2007(in thousands)(Gain) on settlements

$



$



$
(266
)Settlement of litigation and related charges, net


404



(1,572
)


2,822Loss on impairment of software development costs and license
    fees  cancelled games


966



101



154Balance  end of year

$
1,370


$
(1,471
)

$
2,710  27




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Year Ended October 31,2009


2008


2007% of





% of





% ofNet


Total Net


Net


Total Net


Net


Total NetRevenues


Revenues


Revenues


Revenues


Revenues


RevenuesConsole:Wii

$
50.1



53.0
%

$
21.8



34.0
%

$
10.0



19.6
%PS2


0.0



0.0



0.6



1.0



3.5



6.9Xbox


1.1



1.1



0.1



0.2



1.6



3.251.2



54.1



22.5



35.2



15.1



29.7Handheld:DS


40.5



42.8



39.4



61.7



28.3



55.5GBA


0.0



0.0



0.1



0.1



2.8



5.6PSP


0.0



0.1



0.7



1.1



1.5



3.040.5



42.9



40.2



62.9



32.6



64.1Other(1)


2.8



3.0



1.2



1.9



3.3



6.2Total

$
94.5



100.0
%

$
63.9



100.0
%

$
51.0



100.0
%     (1)
    
    Consists primarily of net revenues for downloadable PC games,
    distribution fees, licensing fees and peripheral products and
    accessories.  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
    Michaels Resolution
  Gross Profit. Our House: Party! Major Minors Majestic March
  Product Research and Development
    Expenses.
 28




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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.
  Interest and Financing Costs, Net.
  Change in Fair Value of Warrants. Distinguishing Liabilities from Equity.
   29




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Income Taxes.
    Net (Loss) Income.
  Year
    ended October 31, 2008 versus year ended October 31,
    2007
  Net Revenues. Cooking Mama 2 Cooking Mama Cooking Mama; Cook-Off
  Gross Profit. Dance Dance Revolution, DDR,
  Product Research and Development
    Expenses.
  Selling and Marketing Expenses.
  General and Administrative Expenses.
 30




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##### Table of Contents



Settlement of Litigation and Related Charges,
    Net.
              Operating Income (Loss
  Interest and Financing Costs, Net.
 31




---



##### Table of Contents



Change in Fair Value of Warrants.
    Income Taxes.
  Net Income (Loss
  Liquidity
    and Capital Resources
            Factoring and Purchase Order Financing.
 32




---



##### Table of Contents



30-day
    and/or
  Advances from Customers.
         33




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Cash
    Flows
    Operating Cash Flows.
   34




---



##### Table of Contents



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




---



##### 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.     36




---



##### Table of Contents



Item 9B.
    Other
    Information.   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). 37




---



##### Table of Contents



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).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 (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
.16

Employment Agreement, dated June 27, 2005, by and between
    Majesco Entertainment Company and John Gross (incorporated by
    reference to Exhibit 10.1 to our Quarterly Report on
    Form 10-Q
    filed on September 14, 2005).#10
.17

Employment Agreement, dated January 31, 2007, between Gui
    Karyo and Majesco Entertainment Company (incorporated by
    reference to Exhibit 99.1 to our Current Report on
    Form 8-K
    filed on February 6, 2007).10
.18

License and Distribution Agreement dated as of April 13,
    2007 by and between Majesco Europe Limited and Eidos Interactive
    Limited (incorporated by reference to Exhibit 10.1 to our
    Current Report on
    Form 8-K
    filed on December 7, 2007). 38




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##### Table of Contents



#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
.22

Amendment to Employment Agreement, dated December 21, 2009,
    between Gui Karyo and Majesco Entertainment Company.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).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).*21
.1

Subsidiaries*23
.1

Consent of Amper Politziner Mattia, LLP*23
.2

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




---



##### 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 29, 2010/s/  John
    GrossJohn
    Gross

Chief Financial Officer (Principal Financial and Accounting
    Officer)

January 29, 2010/s/  Allan
    I. GrafmanAllan
    I. Grafman

Chairman of the Board

January 29, 2010/s/  Laurence
    AronsonLaurence
    Aronson

Director

January 29, 2010/s/  Louis
    LipschitzLouis
    Lipschitz

Director

January 29, 2010/s/  Keith
    McCurdyKeith
    McCurdy

Director

January 29, 2010/s/  Stephen
    WilsonStephen
    Wilson

Director

January 29, 2010  40




---



##### 



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

F-2,  F-3Consolidated balance sheets 
    October 31, 2009 and 2008

F-4Consolidated statements of operations 
    Years ended October 31, 2009, 2008 and 2007

F-5Consolidated statements of stockholders
    equity and comprehensive income (loss)  Years ended
    October 31, 2009, 2008 and 2007

F-6Consolidated statements of cash flows 
    Years ended October 31, 2009, 2008 and 2007

F-7Notes to consolidated financial statements

F-8  F-26   F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           /S/  AMPER, POLITZINER & MATTIA, LLP
    F-2




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  Report of
    Independent Registered Public Accounting Firm
             MCGLADREY &
    PULLEN, LLP
    F-3




---



##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARYCONSOLIDATED BALANCE SHEETS(in thousands, except share data)
  October 31,2009


2008ASSETSCurrent assets:Cash and cash equivalents

$
11,839


$
5,505Due from factor


1,172



Accounts and other receivables, net


1,145



3,032Inventory, net


6,190



5,619Advance payments for inventory


3,126



242Capitalized software development costs and license fees


3,678



6,812Prepaid expenses


847



1,714Total current assets


27,997



22,924Property and equipment  net


447



563Other assets


83



83Total assets

$
28,527


$
23,570LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses

$
9,356


$
10,697Share-based litigation settlement






1,250Due to factor






983Customer billings due to distribution partner


230



1,487Inventory financing payables


6,053



1,540Advances from customers


543



265Total current liabilities


16,182



16,222Warrant liability


626



211Commitments and contingenciesStockholders equity:Common stock  $.001 par value;
    250,000,000 share authorized; 38,553,740 and 30,127,950
    issued and outstanding at October 31, 2009 and
    October 31, 2008, respectively


38



30Additional paid-in capital


113,484



101,722Accumulated deficit


(101,361
)


(94,172
)Accumulated other comprehensive loss


(442
)


(443
)Net stockholders equity


11,719



7,137Total liabilities and stockholders equity

$
28,527


$
23,570    F-4




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARYCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except share data)
  Year Ended October 31,2009


2008


2007Net revenues

$
94,452


$
63,887


$
50,967Cost of salesProduct costs


39,699



28,881



25,936Software development costs and license fees


29,329



11,917



7,746Loss on impairment of software development costs and license
    fees  future releases


2,515







71,543



40,798



33,682Gross profit


22,909



23,089



17,285Operating costs and expensesProduct research and development


4,672



3,306



2,311Selling and marketing


14,618



8,628



7,421General and administrative


8,557



9,549



8,376Depreciation and amortization


263



300



296Gain on settlements










(266
)Settlement of litigation and related charges, net


404



(1,572
)


2,822Loss on impairment of software development costs and license
    fees  cancelled games


966



101



15429,480



20,312



21,114Operating (loss) income


(6,571
)


2,777



(3,829
)Other expenses (income)Interest and financing costs, net


1,318



649



1,552Change in fair value of warrant liability


415



(1,250
)


(611
)(Loss) income before income taxes


(8,304
)


3,378



(4,770
)Income taxes


(1,115
)


26



Net (loss) income

$
(7,189
)

$
3,352


$
(4,770
)Net (loss) income per share:Basic and diluted

$
(0.24
)

$
0.12


$
(0.20
)Weighted average shares outstanding:Basic and diluted


29,770,382



27,547,211



23,891,860    F-5




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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, 2006


23,427,462


$
23


$
94,529


$
(92,754
)

$
(49
)

$
1,749Issuance of common stock in connection with:Settlement of accounts payable


238,562







365











365Restricted stock grants  employees and directors


727,438



1



732











733Exercise of stock options


33,334







49











49Non-cash compensation charges  stock options










773











773Private placement of securities


4,244,335



4



3,743











3,747Issuance of common stock for assets


4,831



1



10











11Net loss














(4,770
)






(4,770
)Foreign currency translation adjustment


















(66
)


(66
)Total comprehensive loss






















(4,836
)Balance  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
)

$
11,719    F-6




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)
  Year Ended October 31,2009


2008


2007CASH FLOWS FROM OPERATING ACTIVITIESNet (loss) income

$
(7,189
)

$
3,352


$
(4,770
)Adjustments to reconcile net (loss) income to net cash used in
    operating activities:Change in fair value of warrant liability


415



(1,250
)


(611
)Depreciation and amortization


263



315



296Provision for price protection


5,363



2,556



1,953Amortization of capitalized software development costs and
    prepaid license fees


13,418



6,122



3,116Non-cash compensation expense


1,730



1,558



1,505Warrant issued for services






77



Write-off of accounts receivable






255



Share-based litigation settlement


404



(1,572
)


2,822Gain on settlements










(266
)Loss on impairment of software development costs and license fees


3,481



101



154Changes in operating assets and liabilitiesDue to/from factor  net


(7,186
)


(3,100
)


763Accounts and other receivables


1,368



(2,806
)


2,433Inventory


(412
)


(1,769
)


(1,412
)Capitalized software development costs and prepaid license fees


(13,741
)


(10,362
)


(4,501
)Prepaid expenses


(2,001
)


(833
)


1,097Other assets






(17
)


(18
)Accounts payable and accrued expenses


(779
)


3,314



(2,791
)Litigation settlement


(700
)






Customer billings due to distribution partner


(1,257
)


1,487



Advances from customers


245



(126
)


(536
)Net cash used in operating activities


(6,578
)


(2,698
)


(766
)CASH FLOWS FROM INVESTING ACTIVITIESPurchases of property and equipment


(146
)


(314
)


(163
)Net cash used in investing activities


(146
)


(314
)


(163
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from exercise of stock options










49Sale of common stock, net of expenses


8,628







Treasury stock  retired






(72
)


Inventory financing


4,513



1,540



(1,390
)Proceeds from private placement, net of expenses






(40
)


5,819Net cash provided by financing activities


13,141



1,428



4,478Effect of exchange rates on cash and cash equivalents


(83
)


(188
)


(66
)Net increase (decrease) in cash and cash equivalents


6,334



(1,772
)


3,483Cash and cash equivalents  beginning of year


5,505



7,277



3,794Cash and cash equivalents  end of year

$
11,839


$
5,505


$
7,277SUPPLEMENTAL CASH FLOW INFORMATIONCash paid during the year for interest

$
1,322


$
676


$
1,638Cash 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


$



$
365Issuance of common stock for assets

$



$



$
11Change in fair value of warrant liability

$
415


$
(1,250
)

$
2,071    F-7




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARYNOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  1.
    BASIS OF
    PRESENTATION    2.
    PRINCIPAL
    BUSINESS ACTIVITY    23-year
      Years Ended October 31,2009


%


2008


%


2007


%(in thousands)United States

$
90,428



95.7
%

$
57,932



90.7
%

$
43,564



85.5
%Europe


4,024



4.3
%


5,955



9.3
%


7,403



14.5
%Total

$
94,452



100.0
%

$
63,887



100.0
%

$
50,967



100.0
%   3.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    Principles of Consolidation.
  Revenue Recognition.
 F-8




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    , Revenue
    Recognition Principal Agent
    Considerations
          Capitalized Software Development Costs and License
    Fees. product-by-product
   F-9




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          Advertising Expenses.
  Income taxes.
  Stock
    Based Compensation
   F-10




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##### Table of Contents



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

October 31,

October 31,2009

2008

2007Risk free annual interest rate

2.2%

3.3%

4.6%Expected volatility

76%

65%

107%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.
  Exit or disposal cost obligations.
 F-11




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Estimates.
  Foreign Currency Translation.
  Earnings (loss) per share.
  October 31,2009


2008


2007Warrants(1)


1,812,735



1,922,735



1,854,877Stock options


1,483,929



1,352,610



1,167,191Unit purchase option (see Note 14)


388,734



388,734



388,734     (1)
    
    During the twelve months ended October 31, 2007, warrants
    to purchase 2,063,545 shares of common stock expired and
    warrants to purchase 1,697,735 shares of common stock
    related to an equity financing were issued (see Note 13).  Recent
    Accounting Pronouncements.
  Fair Value Measurements
  Business Combinations
 F-12




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Intangibles  Goodwill and Other
  Debt
  Earnings Per Share
  Subsequent Events Form 10-K
  Amendments to Variable Interest Entity
    Guidance
 F-13




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Measuring Liabilities at Fair Value
  Multiple-Deliverable Revenue Arrangements
  Certain Revenue Arrangements That Include Software
    Elements
  Reclassifications.
  Commitments and Contingencies.
  Fair Value.
 F-14




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   4.
    FACTORED
    RECEIVABLES        30-day
          October 31,(in thousands)2009


2008Accounts receivable assigned to factor

$
19,307


$
12,004Less: allowances


(4,380
)


(3,359
)advances from factor


(13,755
)


(9,628
)$
1,172


$
(983
)  F-15




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Year Ended October 31,(in thousands)2009


2008


2007Balance  beginning of year

$
(3,359
)

$
(3,105
)

$
(4,047
)Add: provisions


(5,031
)


(2,556
)


(1,953
)Less: amounts charged against allowance


4,010



2,302



2,895Balance  end of year

$
(4,380
)

$
(3,359
)

$
(3,105
)   5.
    ACCOUNTS
    RECEIVABLE    October 31,(in thousands)2009


2008Trade receivables

$
1,388


$
2,927Allowances


(295
)


Other


52



105$
1,145


$
3,032   6.
    PREPAID
    EXPENSES    October 31,(in thousands)2009


2008Prepaid media advertising

$
627


$
1,598Other (less than 5% of total assets)


220



116$
847


$
1,714   7.
    ACCOUNTS
    PAYABLE AND ACCRUED EXPENSES    October 31,(in thousands)2009


2008Accounts payable-trade


3,990



5,264Royalties


3,680



2,268Sales commissions


197



203Salaries and other compensation


648



1,987Other accruals


841



975$
9,356


$
10,697  F-16




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   8.
    CUSTOMER
    BILLINGS DUE TO DISTRIBUTION PARTNER  Revenue Recognition Principal Agent
    Considerations
  9.
    INVENTORY
    FINANCING PAYABLE    10.
    ADVANCES
    FROM CUSTOMERS    11.
    SETTLEMENTS
    AND OTHER    12.
    COMMON
    STOCK OFFERING    13.
    PRIVATE
    PLACEMENT   F-17




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      , Distinguishing Liabilities from Equity.
   F-18




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   14.
    COMMON
    STOCK PURCHASE WARRANTS    Issued in





Exercise


October 31,


October 31,connection with

Issue date

Expiration date

Price


2009


2008Equity 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



150,000Consulting services

November 1, 2007

July 31, 2010

$
2.07



75,000



75,0001,812,735



1,922,735     15.
    INCOME
    TAXES    October 31,(000s omitted)2009


2008


2007Current:Federal

$



$
26


$
State


(1,115
)






Deferred:Federal


(2,273
)


953



(1,610
)State


(484
)


186



(311
)Impact of change in effective tax rates on deferred taxes


(1,760
)






Less: valuation allowance


4,517



(1,139
)


1,921$
(1,115
)

$
26


$
  F-19




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    2009


2008


2007(000s omitted)


Percent of


(000s omitted)


Percent of


(000s omitted)


Percent ofAmount


Pretax income


Amount


Pretax income


Amount


Pretax incomeTax (benefit) at federal statutory rate

$
(2,823
)


(34
)%

$
1,149



34
%

$
(1,622
)


(34
)%State income taxes, net of federal income taxes


(515
)


(6
)%


223



7
%


(311
)


(6
)%Impact of change in effective tax rates on deferred taxes


(1,760
)


(21
)%














Sale of state net operating losses


(1,115
)


(13
)%














Change in valuation allowance


4,517



54
%


(1,139
)


(34
)%


1,921



40
%Other


581



7
%


(207
)


(6
)%


12




%$
(1,115
)


(13
)%

$
26



1
%

$





%     October 31,(000s omitted)2009


2008Impairment of capitalized software development costs and prepaid
    license fees not currently deductible

$
1,004


$
36Litigation settlement






611Impairment of inventory


103



50Compensation expense not deductible until options are exercised


1,669



1,632All other temporary differences


852



341Net operating loss carry forward


30,003



26,444Less valuation allowance


(33,631
)


(29,114
)Deferred tax asset

$



$
        F-20




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      16.
    STOCK-BASED
    COMPENSATION ARRANGEMENTS     F-21




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    2009


2008


2007Weighted





Weighted





WeightedAverage





Average





AverageNumber Of


Exercise


Number Of


Exercise


Number Of


ExerciseShares


Price


Shares


Price


Shares


PriceOutstanding at beginning of year


1,352,610


$
5.61



1,167,191


$
6.78



1,527,494


$
6.19Granted


144,079


$
1.88



239,133


$
0.89



46,818


$
2.35Cancelled


(12,760
)

$
6.14



(53,714
)

$
9.92



(373,787
)

$
4.38Exercised


















(33,334
)

$
1.46Outstanding at end of year


1,483,929


$
5.24



1,352,610


$
5.61



1,167,191


$
6.78Options exercisable at year-end


1,252,103


$
5.94



1,051,736


$
6.91



823,108


$
8.24Weighted-average fair value of options granted during the year





$
1.12






$
0.58






$
1.78         Options Outstanding


Options ExercisableWeighted-Average


Weighted-





Weighted-Remaining


Average





AverageRange of

Number


Contractual


Exercise


Number


ExerciseExercise Prices

Outstanding


Life (Years)


Price


Exercisable


Price$0.89


239,133



5.8


$
0.89



119,568


$
0.89$1.17 and $2.80


423,328



4.7


$
1.79



311,067


$
1.69$3.20


372,685



2.8


$
3.20



372,685


$
3.20$7.23 to $8.00


114,300



2.7


$
7.33



114,300


$
7.33$13.30


284,486



1.5


$
13.30



284,486


$
13.30$14.00 to $28.00


49,997



1.9


$
19.96



49,997


$
19.96$0.89 to $28.00


1,483,929



3.6


$
5.24



1,252,103


$
5.95     Weighted-AverageRemainingWeighted-Average


ContractualNumber


Fair Value at


LifeOutstanding


Grant Date


(Years)Non-Vested shares at October 31, 2008


300,874


$
0.71



6.4Options Granted


144,079


$
1.12



6.4Options Vested


(213,127
)

$
0.82



6.0Non-vested options forfeited or expired


Non-Vested shares at October 31, 2009


231,826


$
0.88



6.2  F-22




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##### Table of Contents



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


October 31,


October 31,2009


2008


2007Balance at beginning of period


2,218,373



1,411,470



1,022,033Granted


955,183



1,546,397



937,299Vested


(1,187,740
)


(711,661
)


(336,627
)Cancelled


(90,636
)


(27,833
)


(211,235
)Outstanding at end of period


1,895,180



2,218,373



1,411,470           17.
    EMPLOYEE
    RETIREMENT PLAN        18.
    MAJOR
    CUSTOMERS   F-23




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   19.
    CONTINGENCIES
    AND COMMITMENTS  Commitments
      Year ending October 31,

(in thousands)2010

$
3402011


2762012


2762013


2602014


267Thereafter


74$
1,493       Contingencies
       F-24




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              20.
    RELATED
    PARTY TRANSACTIONS     F-25




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##### Table of Contents



MAJESCO
    ENTERTAINMENT COMPANY AND SUBSIDIARY
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Year EndedOctober 31,2009


2008


2007Consulting

$
213


$
350


$
292Commissions


189



111



42Business expenses


6



49



70Total

$
408


$
510


$
404     21.
    SUBSEQUENT
    EVENTS       F-26