##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period fromto
 Commission File No. 001-14944
 
 MAD CATZ INTERACTIVE, INC.
 (Exact name of
Registrant as specified in its charter)
 
 Canada
(State or other jurisdiction of 
incorporation or organization)
    
    Not Applicable
(I.R.S. Employer
Identification No.)7480 Mission Valley Road, Suite 101
San Diego, California
(Address of principal executive offices)
    
    92108
(Zip Code)
 (619) 683-9830
(Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




---



##### 



MAD CATZ INTERACTIVE, INC.
FORM 10-Q
FOR THE PERIOD ENDED DECEMBER 31, 2009
 TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)Condensed Consolidated Balance Sheets as of December 31, 2009 and March 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months
ended December 31, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended
December 31, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 4. Controls and Procedures
    
    
    16PART II  OTHER INFORMATION
    
    
    17Item 1. Legal Proceedings
    
    
    17Item 1a. Risk Factors
    
    
    17Item 6. Exhibits
    
    
    17SIGNATURES
    
    
    18EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 MAD
CATZ INTERACTIVE, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    March 31,2009
    
    
    2009AssetsCurrent assets:Cash
    
    $
    5,825
    
    
    $
    2,890Accounts receivable, net of allowances of $7,222
and $5,926 at December 31, 2009 and March 31,
2009, respectively
    
    
    28,374
    
    
    
    15,524Other receivables
    
    
    176
    
    
    
    471Income tax receivable
    
    
    760
    
    
    
    759Inventories
    
    
    24,978
    
    
    
    17,774Deferred tax assets
    
    
    19
    
    
    
    19Prepaid expenses and other current assets
    
    
    1,273
    
    
    
    1,491Total current assets
    
    
    61,405
    
    
    
    38,928Deferred tax assets
    
    
    367
    
    
    
    484Other assets
    
    
    704
    
    
    
    362Property and equipment, net
    
    
    3,568
    
    
    
    2,242Intangible assets, net
    
    
    3,231
    
    
    
    5,118Goodwill
    
    
    8,453
    
    
    
    8,467Total assets
    
    $
    77,728
    
    
    $
    55,601Liabilities and Shareholders EquityCurrent liabilities:Bank loan
    
    $
    23,256
    
    
    $
    13,272Accounts payable
    
    
    15,983
    
    
    
    13,528Accrued liabilities
    
    
    8,294
    
    
    
    5,929Note payable
    
    
    847
    
    
    
    847Income taxes payable
    
    
    2,040
    
    
    
    655Total current liabilities
    
    
    50,420
    
    
    
    34,231Convertible notes payable
    
    
    14,500
    
    
    
    14,500Other long-term liabilities
    
    
    1,484
    
    
    
    453Total liabilities
    
    
    66,404
    
    
    
    49,184Shareholders equity:Common stock, no par value, unlimited shares
authorized; 55,098,549 shares issued and
outstanding at December 31, 2009 and March 31,
2009
    
    
    48,715
    
    
    
    48,255Accumulated other comprehensive income
    
    
    923
    
    
    
    101Accumulated deficit
    
    
    (38,314
    )
    
    
    (41,939
    )Total shareholders equity
    
    
    11,324
    
    
    
    6,417Total liabilities and shareholders equity
    
    $
    77,728
    
    
    $
    55,601
  3




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MAD
CATZ INTERACTIVE, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    48,763
    
    
    $
    40,817
    
    
    $
    92,745
    
    
    $
    89,872Cost of sales
    
    
    32,822
    
    
    
    30,269
    
    
    
    63,424
    
    
    
    63,307Gross profit
    
    
    15,941
    
    
    
    10,548
    
    
    
    29,321
    
    
    
    26,565Operating expenses:Sales and marketing
    
    
    3,696
    
    
    
    3,851
    
    
    
    8,747
    
    
    
    10,816General and administrative
    
    
    3,465
    
    
    
    3,783
    
    
    
    9,533
    
    
    
    12,307Research and development
    
    
    741
    
    
    
    223
    
    
    
    2,033
    
    
    
    1,161Goodwill impairment
    
    
    
    
    
    
    28,513
    
    
    
    
    
    
    
    28,513Amortization of intangible assets
    
    
    395
    
    
    
    597
    
    
    
    1,567
    
    
    
    1,811Total operating expenses
    
    
    8,297
    
    
    
    36,967
    
    
    
    21,880
    
    
    
    54,608Operating income (loss)
    
    
    7,644
    
    
    
    (26,419
    )
    
    
    7,441
    
    
    
    (28,043
    )Interest expense, net
    
    
    (645
    )
    
    
    (521
    )
    
    
    (1,637
    )
    
    
    (1,512
    )Foreign exchange gain (loss), net
    
    
    109
    
    
    
    1,032
    
    
    
    (310
    )
    
    
    859Other income
    
    
    42
    
    
    
    112
    
    
    
    138
    
    
    
    251Income (loss) before income taxes
    
    
    7,150
    
    
    
    (25,796
    )
    
    
    5,632
    
    
    
    (28,445
    )Income tax expense
    
    
    1,558
    
    
    
    1,113
    
    
    
    2,007
    
    
    
    480Net income (loss)
    
    $
    5,592
    
    
    $
    (26,909
    )
    
    $
    3,625
    
    
    $
    (28,925
    )Basic net income (loss) per share
    
    $
    0.10
    
    
    $
    (0.49
    )
    
    $
    0.07
    
    
    $
    (0.53
    )Diluted net income (loss) per share
    
    $
    0.09
    
    
    $
    (0.49
    )
    
    $
    0.07
    
    
    $
    (0.53
    )Weighted average shares  basic
    
    
    55,098,549
    
    
    
    55,098,549
    
    
    
    55,098,549
    
    
    
    55,085,822Weighted average shares  diluted
    
    
    65,316,293
    
    
    
    55,098,549
    
    
    
    55,098,549
    
    
    
    55,085,822
  4




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##### Table of Contents



MAD
CATZ INTERACTIVE, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months EndedDecember 31,2009
    
    
    2008Cash flows from operating activities:Net income (loss)
    
    $
    3,625
    
    
    $
    (28,925
    )Adjustments to reconcile net income (loss) to net cash used in operating activities:Depreciation and amortization
    
    
    3,003
    
    
    
    3,138Amortization of deferred financing fees
    
    
    114
    
    
    
    56Goodwill impairment
    
    
    
    
    
    
    28,513Increase in sales reserves
    
    
    6,589
    
    
    
    7,663Provision (benefit) for deferred income taxes
    
    
    118
    
    
    
    (298
    )Loss on disposal or sale of assets
    
    
    81
    
    
    
    Stock-based compensation
    
    
    458
    
    
    
    339Changes in operating assets and liabilities:Accounts receivable
    
    
    (19,182
    )
    
    
    (26,687
    )Other receivables
    
    
    296
    
    
    
    (386
    )Inventories
    
    
    (7,133
    )
    
    
    (1,024
    )Prepaid expenses and other current assets
    
    
    220
    
    
    
    184Other assets
    
    
    2
    
    
    
    (36
    )Accounts payable
    
    
    2,479
    
    
    
    4,469Accrued liabilities
    
    
    3,429
    
    
    
    1,334Income taxes receivable/payable
    
    
    1,398
    
    
    
    (35
    )Net cash used in operating activities
    
    
    (4,503
    )
    
    
    (11,695
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (2,412
    )
    
    
    (1,127
    )Net cash used in investing activities
    
    
    (2,412
    )
    
    
    (1,127
    )Cash flows from financing activities:Proceeds from stock option exercises
    
    
    
    
    
    
    56Payment of financing fees
    
    
    (458
    )
    
    
    Repayments on bank loan
    
    
    (68,291
    )
    
    
    (61,900
    )Borrowings on bank loan
    
    
    78,275
    
    
    
    72,930Net cash provided by financing activities
    
    
    9,526
    
    
    
    11,086Effects of foreign exchange on cash
    
    
    324
    
    
    
    (533
    )Net increase (decrease) in cash
    
    
    2,935
    
    
    
    (2,269
    )Cash, beginning of period
    
    
    2,890
    
    
    
    5,230Cash, end of period
    
    $
    5,825
    
    
    $
    2,961Supplemental cash flow information:Income taxes paid
    
    $
    655
    
    
    $
    569Interest paid
    
    $
    1,248
    
    
    $
    589Supplemental disclosure of non-cash investing and financing activities:Lease incentives recorded as deferred rent
    
    $
    
    
    
    $
    109Note payable issued for final Saitek acquisition working capital purchase
price adjustment
    
    $
    
    
    
    $
    847
  5




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##### Table of Contents



MAD
CATZ INTERACTIVE, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (1) Basis of Presentation
     Recently Adopted Accounting Pronouncements
      6




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(2) Stock-Based Compensation
  7




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##### Table of Contents



3) Inventories
  December 31,
    
    
    March 31,2009
    
    
    2009Raw materials
    
    $
    1,977
    
    
    $
    949Finished goods
    
    
    23,001
    
    
    
    16,825Inventories
    
    $
    24,978
    
    
    $
    17,774
 (4) Bank Loan
  (5) Convertible Notes Payable
  (6) Completion Note
  (7) Comprehensive Income (Loss)
  Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    5,592
    
    
    $
    (26,909
    )
    
    $
    3,625
    
    
    $
    (28,925
    )Foreign currency translation adjustment
    
    
    (590
    )
    
    
    (2,700
    )
    
    
    822
    
    
    
    (4,190
    )Comprehensive income (loss)
    
    $
    5,002
    
    
    $
    (29,609
    )
    
    $
    4,447
    
    
    $
    (33,115
    )
  8




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##### Table of Contents



(8) Basic and Diluted Net Income (Loss) per Share
   Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Net income (loss) for basic income (loss) per share
    
    $
    5,592
    
    
    $
    (26,909
    )
    
    $
    3,625
    
    
    $
    (28,925
    )Effect of dilutive securities:Convertible notes payable  interest expense, net
of tax
    
    
    304
    
    
    
    
    
    
    
    
    
    
    
    Numerator for diluted income (loss) per share
    
    
    5,896
    
    
    
    (26,909
    )
    
    
    3,625
    
    
    
    (28,925
    )Denominator:Denominator for basic income (loss) per share 
weighted average shares
    
    
    55,098,549
    
    
    
    55,098,549
    
    
    
    55,098,549
    
    
    
    55,085,822Effect of dilutive securities:Convertible notes payable
    
    
    10,217,744
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted income (loss) per share
    
    
    65,316,293
    
    
    
    55,098,549
    
    
    
    55,098,549
    
    
    
    55,085,822Income (loss) per share basic and diluted:Basic income (loss) per common share
    
    $
    0.10
    
    
    $
    (0.49
    )
    
    $
    0.07
    
    
    $
    (0.53
    )Diluted income (loss) per common share
    
    $
    0.09
    
    
    $
    (0.49
    )
    
    $
    0.07
    
    
    $
    (0.53
    )
  (9) Geographic Data
  Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales:United States
    
    $
    23,375
    
    
    $
    23,956
    
    
    $
    48,520
    
    
    $
    51,069Europe
    
    
    22,982
    
    
    
    14,548
    
    
    
    38,811
    
    
    
    34,050Canada
    
    
    1,201
    
    
    
    787
    
    
    
    2,555
    
    
    
    1,349Other countries
    
    
    1,205
    
    
    
    1,526
    
    
    
    2,859
    
    
    
    3,404$
    48,763
    
    
    $
    40,817
    
    
    $
    92,745
    
    
    $
    89,872
  (10) Subsequent Events
  9




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Unless the context otherwise requires, all references in this section to the Company, we,
us or our refer, collectively, to Mad Catz Interactive Inc. and all of its subsidiaries, and
all references in this section to Mad Catz refer to Mad Catz Interactive Inc.
 This section contains forward-looking statements and forward looking information
(collectively forward-looking statements) as defined in applicable securities legislation
involving risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors including those set
out under Forward-looking Statements herein and in Item 1A. Risk Factors in our Annual Report
on Form 10-K for the fiscal year ended March 31, 2009 and in Part II Other Information  Item 1A.
Risk Factors in this Quarterly Report on Form 10-Q . The following discussion should be read in
conjunction with our condensed consolidated financial statements and related notes included in this
Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009.
 Overview
 Our Business
  Seasonality and Fluctuation of Sales
  Potential Fluctuations in Foreign Currency
  Critical Accounting Policies
  RESULTS OF OPERATIONS
 Net Sales
  Three months ended December 31,
    
    
    $
    
    
    %2009
    
    
    %of total
    
    
    2008
    
    
    %of total
    
    
    Change
    
    
    ChangeUnited States
    
    $
    23,375
    
    
    
    48
    %
    
    $
    23,956
    
    
    
    59
    %
    
    $
    (581
    )
    
    
    (2
    )%Europe
    
    
    22,982
    
    
    
    48
    %
    
    
    14,548
    
    
    
    35
    %
    
    
    8,434
    
    
    
    58
    %Canada
    
    
    1,201
    
    
    
    2
    %
    
    
    787
    
    
    
    2
    %
    
    
    414
    
    
    
    53
    %Other countries
    
    
    1,205
    
    
    
    2
    %
    
    
    1,526
    
    
    
    4
    %
    
    
    (321
    )
    
    
    (21
    )%Consolidated net sales
    
    $
    48,763
    
    
    
    100
    %
    
    $
    40,817
    
    
    
    100
    %
    
    $
    7,946
    
    
    
    19
    %
 Nine months ended December 31,
    
    
    $
    
    
    %2009
    
    
    %of total
    
    
    2008
    
    
    %of total
    
    
    Change
    
    
    ChangeUnited States
    
    $
    48,520
    
    
    
    52
    %
    
    $
    51,069
    
    
    
    57
    %
    
    $
    (2,549
    )
    
    
    (5
    )%Europe
    
    
    38,811
    
    
    
    42
    %
    
    
    34,050
    
    
    
    38
    %
    
    
    4,761
    
    
    
    14
    %Canada
    
    
    2,555
    
    
    
    3
    %
    
    
    1,349
    
    
    
    1
    %
    
    
    1,206
    
    
    
    89
    %Other countries
    
    
    2,859
    
    
    
    3
    %
    
    
    3,404
    
    
    
    4
    %
    
    
    (545
    )
    
    
    (16
    )%Consolidated net sales
    
    $
    92,745
    
    
    
    100
    %
    
    $
    89,872
    
    
    
    100
    %
    
    $
    2,873
    
    
    
    3
    %
 10




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##### Table of Contents



Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008PC
    
    
    23
    %
    
    
    27
    %
    
    
    25
    %
    
    
    30
    %Xbox 360
    
    
    31
    %
    
    
    21
    %
    
    
    30
    %
    
    
    17
    %PlayStation 3
    
    
    17
    %
    
    
    5
    %
    
    
    16
    %
    
    
    7
    %Wii
    
    
    14
    %
    
    
    17
    %
    
    
    12
    %
    
    
    17
    %Handheld Consoles(a)
    
    
    3
    %
    
    
    9
    %
    
    
    4
    %
    
    
    10
    %PlayStation 2
    
    
    1
    %
    
    
    3
    %
    
    
    2
    %
    
    
    4
    %GameCube
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %
    
    
    3
    %Xbox
    
    
    0
    %
    
    
    1
    %
    
    
    0
    %
    
    
    0
    %All others
    
    
    9
    %
    
    
    15
    %
    
    
    9
    %
    
    
    12
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
   Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Specialty controllers
    
    
    21
    %
    
    
    11
    %
    
    
    28
    %
    
    
    15
    %Accessories
    
    
    30
    %
    
    
    45
    %
    
    
    26
    %
    
    
    44
    %Controllers
    
    
    26
    %
    
    
    26
    %
    
    
    24
    %
    
    
    22
    %Personal computer input devices
    
    
    8
    %
    
    
    11
    %
    
    
    8
    %
    
    
    10
    %Audio
    
    
    10
    %
    
    
    5
    %
    
    
    10
    %
    
    
    6
    %Games(a)
    
    
    2
    %
    
    
    2
    %
    
    
    2
    %
    
    
    3
    %All others
    
    
    3
    %
    
    
    0
    %
    
    
    2
    %
    
    
    0
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
  Gross Profit
  11




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Three months ended December 31,% of Net
    
    
    
    
    
    
    % of Net
    
    
    $
    
    
    %2009
    
    
    Sales
    
    
    2008
    
    
    Sales
    
    
    Change
    
    
    ChangeNet sales
    
    $
    48,763
    
    
    
    100.0
    %
    
    $
    40,817
    
    
    
    100.0
    %
    
    $
    7,946
    
    
    
    19.5
    %Cost of sales
    
    
    32,822
    
    
    
    67.3
    %
    
    
    30,269
    
    
    
    74.2
    %
    
    
    2,553
    
    
    
    8.4
    %Gross profit
    
    $
    15,941
    
    
    
    32.7
    %
    
    $
    10,548
    
    
    
    25.8
    %
    
    $
    5,393
    
    
    
    51.1
    %
 Nine months ended December 31,% of Net
    
    
    
    
    
    
    % of Net
    
    
    $
    
    
    %2009
    
    
    Sales
    
    
    2008
    
    
    Sales
    
    
    Change
    
    
    ChangeNet sales
    
    $
    92,745
    
    
    
    100.0
    %
    
    $
    89,872
    
    
    
    100.0
    %
    
    $
    2,873
    
    
    
    3.2
    %Cost of sales
    
    
    63,424
    
    
    
    68.4
    %
    
    
    63,307
    
    
    
    70.4
    %
    
    
    117
    
    
    
    0.2
    %Gross profit
    
    $
    29,321
    
    
    
    31.6
    %
    
    $
    26,565
    
    
    
    29.6
    %
    
    $
    2,756
    
    
    
    10.4
    %
  Operating Expenses
  Three months ended December 31,% of Net
    
    
    
    
    
    
    % of Net
    
    
    $
    
    
    %2009
    
    
    Sales
    
    
    2008
    
    
    Sales
    
    
    Change
    
    

ChangeSales and marketing
    
    $
    3,696
    
    
    
    7.6
    %
    
    $
    3,851
    
    
    
    9.4
    %
    
    $
    (155
    )
    
    
    (4.0
    )%General and administrative
    
    
    3,465
    
    
    
    7.1
    %
    
    
    3,783
    
    
    
    9.3
    %
    
    
    (318
    )
    
    
    (8.4
    )%Research and development
    
    
    741
    
    
    
    1.5
    %
    
    
    223
    
    
    
    0.5
    %
    
    
    518
    
    
    
    232.3
    %Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    28,513
    
    
    
    69.9
    %
    
    
    (28,513
    )
    
    
    (100
    )%Amortization
    
    
    395
    
    
    
    0.8
    %
    
    
    597
    
    
    
    1.5
    %
    
    
    (202
    )
    
    
    (33.8
    )%Total operating expenses
    
    $
    8,297
    
    
    
    17.0
    %
    
    $
    36,967
    
    
    
    90.6
    %
    
    $
    (28,670
    )
    
    
    (77.6
    )%Nine months ended December 30,% of Net
    
    
    
    
    
    
    % of Net
    
    
    $
    
    
    %2009
    
    
    Sales
    
    
    2008
    
    
    Sales
    
    
    Change
    
    

ChangeSales and marketing
    
    $
    8,747
    
    
    
    9.4
    %
    
    $
    10,816
    
    
    
    12.0
    %
    
    $
    (2,069
    )
    
    
    (19.1
    )%General and administrative
    
    
    9,533
    
    
    
    10.3
    %
    
    
    12,307
    
    
    
    13.7
    %
    
    
    (2,774
    )
    
    
    (22.5
    )%Research and development
    
    
    2,033
    
    
    
    2.2
    %
    
    
    1,161
    
    
    
    1.3
    %
    
    
    872
    
    
    
    75.1
    %Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    28,513
    
    
    
    31.7
    %
    
    
    (28,513
    )
    
    
    (100
    )%Amortization
    
    
    1,567
    
    
    
    1.7
    %
    
    
    1,811
    
    
    
    2.0
    %
    
    
    (244
    )
    
    
    (13.5
    )%Total operating expenses
    
    $
    21,880
    
    
    
    23.6
    %
    
    $
    54,608
    
    
    
    60.7
    %
    
    $
    (32,728
    )
    
    
    (60.0
    )%
 Sales and Marketing.
 General and Administrative.
 12




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##### Table of Contents



Research and Development.
 Amortization.
 Interest Expense, Foreign Exchange Gain (Loss) and Other Income
  Three months ended December 31,% of Net
    
    
    
    
    
    % of Net
    
    $
    
    %2009
    
    Sales
    
    2008
    
    Sales
    
    Change
    
    ChangeInterest expense, net
    
    $
    (645
    )
    
    
    1.3
    %
    
    $
    (521
    )
    
    
    1.3
    %
    
    $
    (124
    )
    
    
    23.8
    %Foreign exchange gain, net
    
    $
    109
    
    
    
    0.2
    %
    
    $
    1,032
    
    
    
    2.5
    %
    
    $
    (923
    )
    
    
    (89.4
    )%Other income
    
    $
    42
    
    
    
    0.1
    %
    
    $
    112
    
    
    
    0.3
    %
    
    $
    (70
    )
    
    
    (62.5
    )%
 Nine months ended December 31,% of Net
    
    
    
    
    
    % of Net
    
    $
    
    %2009
    
    Sales
    
    2008
    
    Sales
    
    Change
    
    ChangeInterest expense, net
    
    $
    (1,637
    )
    
    
    1.8
    %
    
    $
    (1,512
    )
    
    
    1.7
    %
    
    $
    (125
    )
    
    
    8.3
    %Foreign exchange (loss),
gain net
    
    $
    (310
    )
    
    
    0.3
    %
    
    $
    859
    
    
    
    1.0
    %
    
    $
    (1,169
    )
    
    
    (136.1
    )%Other income
    
    $
    138
    
    
    
    0.1
    %
    
    $
    251
    
    
    
    0.3
    %
    
    $
    (113
    )
    
    
    (45.0
    )%
    Income Tax Expense
  Three months ended December 31,Effective
    
    
    
    
    
    Effective
    
    $
    
    %2009
    
    Tax Rate
    
    2008
    
    Tax Rate
    
    Change
    
    ChangeIncome tax expense
    
    $
    1,558
    
    
    
    21.8
    %
    
    $
    1,113
    
    
    
    (4.3
    )%
    
    $
    445
    
    
    
    40.0
    %
 Nine months ended December 31,Effective
    
    
    
    
    
    Effective
    
    $
    
    %2009
    
    Tax Rate
    
    2008
    
    Tax Rate
    
    Change
    
    ChangeIncome tax expense
    
    $
    2,007
    
    
    
    35.6
    %
    
    $
    480
    
    
    
    (1.7
    )%
    
    $
    1,527
    
    
    
    318.1
    %
  13




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##### Table of Contents



Liquidity and Capital Resources
 Sources of Liquidity
 As of and for thenine months endedDecember 31,(in thousands)
    
    2009
    
    
    2008
    
    
    ChangeCash
    
    $
    5,825
    
    
    $
    2,961
    
    
    $
    2,864Percentage of total assets
    
    
    7.5
    %
    
    
    3.8
    %Cash used in operating activities
    
    $
    (4,503
    )
    
    $
    (11,695
    )
    
    $
    7,192Cash used in investing activities
    
    
    (2,412
    )
    
    
    (1,127
    )
    
    
    (1,285
    )Cash provided by financing activities
    
    
    9,526
    
    
    
    11,086
    
    
    
    (1,560
    )Effects of foreign exchange on cash
    
    
    324
    
    
    
    (533
    )
    
    
    857Net increase (decrease) in cash
    
    $
    2,935
    
    
    $
    (2,269
    )
    
    
    5,204
  Cash Flows from Operating Activities
   Cash Flows from Investing Activities
  Cash Flows from Financing Activities
    14




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##### Table of Contents



Contractual Obligations and Commitments
   EBITDA, and Adjusted EBITDA
  Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    5,592
    
    
    $
    (26,909
    )
    
    $
    3,625
    
    
    $
    (28,925
    )Adjustments:Interest expense
    
    
    645
    
    
    
    521
    
    
    
    1,637
    
    
    
    1,512Income tax expense
    
    
    1,558
    
    
    
    1,113
    
    
    
    2,007
    
    
    
    480Depreciation and amortization
    
    
    920
    
    
    
    973
    
    
    
    3,003
    
    
    
    3,138EBITDA
    
    $
    8,715
    
    
    $
    (24,302
    )
    
    $
    10,272
    
    
    $
    (23,795
    )Goodwill impairment
    
    
    
    
    
    
    28,513
    
    
    
    
    
    
    
    28,513Adjusted EBITDA
    
    $
    8,715
    
    
    $
    4,211
    
    
    $
    10,272
    
    
    $
    4,718
 15




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##### Table of Contents



Forward-Looking Statements
    
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  16




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 6. Exhibits
 31.1
    
    Certification of Registrants Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Registrants Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Registrants Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as created by Section
906 of the Sarbanes-Oxley Act of 2002. This certification is being furnished solely to accompany this Quarterly
Report on Form 10-Q and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, and is not to be incorporated by reference into any filing of the Company.32.2
    
    Certification of Registrants Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as created by Section
906 of the Sarbanes-Oxley Act of 2002. This certification is being furnished solely to accompany this Quarterly
Report on Form 10-Q and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934,
as amended, and is not to be incorporated by reference into any filing of the Company.
 17




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##### Table of Contents



MAD CATZ INTERACTIVE, INC.February 9, 2010
    /s/ Darren RichardsonDarren RichardsonPresident and Chief Executive OfficerFebruary 9, 2010
    /s/ Stewart A. HalpernStewart A. HalpernChief Financial Officer 18