##### 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, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from  to
 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
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



MAD CATZ INTERACTIVE, INC.
FORM 10-Q
FOR THE PERIOD ENDED DECEMBER 31, 2010
 TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets as of December 31, 2010 and March 31, 2010
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended December 31,
2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 4. Controls and Procedures
    
    
    16PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    17Item 1a. Risk Factors
    
    
    17Item 6. Exhibits
    
    
    18SIGNATURES
    
    
    19EX-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 31,2010
    
    
    2010AssetsCurrent assets:Cash
    
    $
    9,921
    
    
    $
    2,245Accounts receivable, net
    
    
    51,239
    
    
    
    14,620Other receivables
    
    
    290
    
    
    
    123Income tax receivable
    
    
    21
    
    
    
    21Inventories
    
    
    32,511
    
    
    
    16,975Deferred tax assets
    
    
    17
    
    
    
    17Prepaid expenses and other current assets
    
    
    1,559
    
    
    
    1,410Total current assets
    
    
    95,558
    
    
    
    35,411Deferred tax assets
    
    
    739
    
    
    
    766Other assets
    
    
    784
    
    
    
    626Property and equipment, net
    
    
    3,684
    
    
    
    3,452Intangible assets, net
    
    
    5,805
    
    
    
    2,828Goodwill
    
    
    11,387
    
    
    
    8,466Total assets
    
    $
    117,957
    
    
    $
    51,549Liabilities and Shareholders EquityCurrent liabilities:Bank loan
    
    $
    25,813
    
    
    $
    3,829Accounts payable
    
    
    29,488
    
    
    
    11,871Accrued liabilities
    
    
    15,978
    
    
    
    7,988Note payable, current
    
    
    333
    
    
    
    Contingent consideration, current
    
    
    1,035
    
    
    
    Income taxes payable
    
    
    4,265
    
    
    
    1,670Total current liabilities
    
    
    76,912
    
    
    
    25,358Convertible notes payable
    
    
    14,500
    
    
    
    14,500Contingent consideration
    
    
    3,297
    
    
    
    Other long-term liabilities
    
    
    1,690
    
    
    
    357Total liabilities
    
    
    96,399
    
    
    
    40,215Shareholders equity:Common stock, no par value, unlimited shares
authorized; 55,716,892 and 55,098,549 shares
issued and outstanding at December 31, 2010 and
March 31, 2010, respectively
    
    
    49,681
    
    
    
    48,865Accumulated other comprehensive loss
    
    
    (95
    )
    
    
    (55
    )Accumulated deficit
    
    
    (28,028
    )
    
    
    (37,476
    )Total shareholders equity
    
    
    21,558
    
    
    
    11,334Total liabilities and shareholders equity
    
    $
    117,957
    
    
    $
    51,549
  3




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##### Table of Contents



MAD CATZ INTERACTIVE, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months Ended
    
    
    Nine months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    92,957
    
    
    $
    48,763
    
    
    $
    150,276
    
    
    $
    92,745Cost of sales
    
    
    66,556
    
    
    
    32,822
    
    
    
    107,429
    
    
    
    63,424Gross profit
    
    
    26,401
    
    
    
    15,941
    
    
    
    42,847
    
    
    
    29,321Operating expenses:Sales and marketing
    
    
    4,935
    
    
    
    3,696
    
    
    
    10,982
    
    
    
    8,747General and administrative
    
    
    4,047
    
    
    
    3,465
    
    
    
    10,565
    
    
    
    9,533Research and development
    
    
    1,089
    
    
    
    741
    
    
    
    2,780
    
    
    
    2,033Acquisition related items
    
    
    102
    
    
    
    
    
    
    
    708
    
    
    
    Amortization of intangible assets
    
    
    244
    
    
    
    395
    
    
    
    708
    
    
    
    1,567Total operating expenses
    
    
    10,417
    
    
    
    8,297
    
    
    
    25,743
    
    
    
    21,880Operating income
    
    
    15,984
    
    
    
    7,644
    
    
    
    17,104
    
    
    
    7,441Interest expense, net
    
    
    (1,046
    )
    
    
    (645
    )
    
    
    (2,284
    )
    
    
    (1,637
    )Foreign exchange gain (loss), net
    
    
    (736
    )
    
    
    109
    
    
    
    (41
    )
    
    
    (310
    )Other income
    
    
    46
    
    
    
    42
    
    
    
    223
    
    
    
    138Income before income taxes
    
    
    14,248
    
    
    
    7,150
    
    
    
    15,002
    
    
    
    5,632Income tax expense
    
    
    4,552
    
    
    
    1,558
    
    
    
    5,554
    
    
    
    2,007Net income
    
    $
    9,696
    
    
    $
    5,592
    
    
    $
    9,448
    
    
    $
    3,625Basic net income per share
    
    $
    0.18
    
    
    $
    0.10
    
    
    $
    0.17
    
    
    $
    0.07Diluted net income per share
    
    $
    0.15
    
    
    $
    0.09
    
    
    $
    0.16
    
    
    $
    0.07Weighted average shares  basic
    
    
    55,278,606
    
    
    
    55,098,549
    
    
    
    55,158,786
    
    
    
    55,098,549Weighted average shares  diluted
    
    
    66,684,037
    
    
    
    65,316,293
    
    
    
    65,819,064
    
    
    
    55,098,549
  4




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##### Table of Contents



MAD CATZ INTERACTIVE, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Nine months EndedDecember 31,2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    9,448
    
    
    $
    3,625Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    2,036
    
    
    
    3,003Amortization of deferred financing fees
    
    
    212
    
    
    
    114Provision for deferred income taxes
    
    
    27
    
    
    
    118Loss on disposal or sale of assets
    
    
    2
    
    
    
    81Stock-based compensation
    
    
    458
    
    
    
    458Changes in operating assets and liabilities, net of effects from acquisition:Accounts receivable
    
    
    (36,151
    )
    
    
    (12,593
    )Other receivables
    
    
    (167
    )
    
    
    296Inventories
    
    
    (12,924
    )
    
    
    (7,133
    )Prepaid expenses and other current assets
    
    
    (65
    )
    
    
    220Other assets
    
    
    (343
    )
    
    
    2Accounts payable
    
    
    15,026
    
    
    
    2,479Accrued liabilities
    
    
    8,373
    
    
    
    3,429Income taxes receivable/payable
    
    
    2,593
    
    
    
    1,398Net cash used in operating activities
    
    
    (11,475
    )
    
    
    (4,503
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (1,473
    )
    
    
    (2,412
    )Cash paid for acquisition, net of cash received
    
    
    (1,189
    )
    
    
    Net cash used in investing activities
    
    
    (2,662
    )
    
    
    (2,412
    )Cash flows from financing activities:Payment of financing fees
    
    
    (100
    )
    
    
    (458
    )Repayments on notes payable
    
    
    (470
    )
    
    
    Repayments on bank loan
    
    
    (99,875
    )
    
    
    (68,291
    )Borrowings on bank loan
    
    
    121,859
    
    
    
    78,275Proceeds from exercise of stock options
    
    
    358
    
    
    
    Net cash provided by financing activities
    
    
    21,772
    
    
    
    9,526Effects of foreign exchange on cash
    
    
    41
    
    
    
    324Net increase in cash
    
    
    7,676
    
    
    
    2,935Cash, beginning of period
    
    
    2,245
    
    
    
    2,890Cash, end of period
    
    $
    9,921
    
    
    $
    5,825Supplemental cash flow information:Income taxes paid
    
    $
    2,959
    
    
    $
    655Interest paid
    
    $
    970
    
    
    $
    1,248Supplemental disclosure of non-cash investing and financing activities:Fair value of assets acquired in acquisition, net of cash received
    
    
    3,306
    
    
    
    Goodwill
    
    
    2,928
    
    
    
    Intangible assets
    
    
    3,700
    
    
    
    Liabilities assumed in acquisition
    
    
    (4,155
    )
    
    
    Notes payable assumed in acquisition
    
    
    (803
    )
    
    
    Contingent consideration liability, net of $413 working capital adjustment
    
    
    (3,787
    )
    
    
    Net cash paid for acquisition
    
    $
    1,189
    
    
    $
    
  5




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##### Table of Contents



MAD CATZ INTERACTIVE, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)
 (1) Basis of Presentation
    (2) Acquisition
  6




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##### Table of Contents



Consideration:Cash paid
    
    
    1,350Preliminary working capital adjustment, net of holdback
    
    
    (413
    )Fair value of contingent consideration
    
    
    4,200Total purchase price
    
    
    5,137
  Recognized amounts of identifiable assets acquired and liabilities assumedNet working capital
    
    
    (197
    )Property, plant and equipment and other assets
    
    
    120Deferred tax liability
    
    
    (1,413
    )Goodwill
    
    
    2,927Other intangible assets
    
    
    3,700Total purchase price
    
    
    5,137
  Customer relationships
    
    
    900Trademark and trade names
    
    
    2,800
      7




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##### Table of Contents



Changes in goodwill
  Goodwill balance as of March 31, 2010
    
    
    8,466Changes due to foreign currency translation
    
    
    (6
    )Increase due to Tritton acquisition
    
    
    2,927Goodwill balance as of December 31, 2010
    
    
    11,387
  (3) Notes Payable
  (4) Bank Loan
  (5) Inventories
  December 31,
    
    
    March 31,2010
    
    
    2010Raw materials
    
    $
    1,054
    
    
    $
    1,546Finished goods
    
    
    31,457
    
    
    
    15,429Inventories
    
    $
    32,511
    
    
    $
    16,975
 (6) Comprehensive Income
  Three Months Ended
    
    
    Nine months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    9,696
    
    
    $
    5,592
    
    
    $
    9,448
    
    
    $
    3,625Foreign currency translation adjustment
    
    
    (484
    )
    
    
    (590
    )
    
    
    (40
    )
    
    
    822Comprehensive income
    
    $
    9,212
    
    
    $
    5,002
    
    
    $
    9,408
    
    
    $
    4,447
  (7) Basic and Diluted Net Earnings per Share
  Three Months Ended
    
    
    Nine months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income
    
    $
    9,696
    
    
    $
    5,592
    
    
    $
    9,448
    
    
    $
    3,625Effect of convertible notes payable
    
    
    310
    
    
    
    304
    
    
    
    917
    
    
    
    Numerator for diluted net earnings per share
    
    
    10,006
    
    
    
    5,896
    
    
    
    10,365
    
    
    
    3,625Denominator:Weighted average shares used to compute basis EPS
    
    
    55,278,606
    
    
    
    55,098,549
    
    
    
    55,158,786
    
    
    
    55,098,549Effect of convertible debt
    
    
    10,217,744
    
    
    
    10,217,744
    
    
    
    10,217,744
    
    
    
    Effect of dilutive share share-based awards
    
    
    1,187,687
    
    
    
    
    
    
    
    442,534
    
    
    
    Denominator for diluted net earnings per share
    
    
    66,684,037
    
    
    
    65,316,293
    
    
    
    65,819,064
    
    
    
    55,098,549Basic earnings per share
    
    $
    0.18
    
    
    $
    0.10
    
    
    $
    0.17
    
    
    $
    0.07Diluted earnings per share
    
    $
    0.15
    
    
    $
    0.09
    
    
    $
    0.16
    
    
    $
    0.07
  8




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##### Table of Contents



(8) Geographic Data
  Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales:United States
    
    $
    52,908
    
    
    $
    23,375
    
    
    $
    87,311
    
    
    $
    48,520Europe
    
    
    35,141
    
    
    
    22,982
    
    
    
    55,720
    
    
    
    38,811Canada
    
    
    3,530
    
    
    
    1,201
    
    
    
    4,332
    
    
    
    2,555Other countries
    
    
    1,378
    
    
    
    1,205
    
    
    
    2,913
    
    
    
    2,859$
    92,957
    
    
    $
    48,763
    
    
    $
    150,276
    
    
    $
    92,745
  
 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, 2010 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
Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended March
31, 2010.
 Overview
 Our Business
  Seasonality and Fluctuation of Sales
  Potential Fluctuations in Foreign Currency
  Critical Accounting Policies
  9




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##### Table of Contents



RESULTS OF OPERATIONS
 Net Sales
  Three months ended December 31,
    
    
    $
    
    
    %2010
    
    

%of total
    
    
    2009
    
    

%of total
    
    
    Change
    
    
    ChangeUnited States
    
    $
    52,908
    
    
    
    57
    %
    
    $
    23,375
    
    
    
    48
    %
    
    $
    29,533
    
    
    
    126
    %Europe
    
    
    35,141
    
    
    
    38
    %
    
    
    22,982
    
    
    
    48
    %
    
    
    12,159
    
    
    
    53
    %Canada
    
    
    3,530
    
    
    
    4
    %
    
    
    1,201
    
    
    
    2
    %
    
    
    2,329
    
    
    
    194
    %Other countries
    
    
    1,378
    
    
    
    1
    %
    
    
    1,205
    
    
    
    2
    %
    
    
    173
    
    
    
    14
    %Consolidated net sales
    
    $
    92,957
    
    
    
    100
    %
    
    $
    48,763
    
    
    
    100
    %
    
    $
    44,194
    
    
    
    91
    %
 Nine months ended December 31,
    
    
    $
    
    
    %2010
    
    

%of total
    
    
    2009
    
    

%of total
    
    
    Change
    
    
    ChangeUnited States
    
    $
    87,311
    
    
    
    58
    %
    
    $
    48,520
    
    
    
    52
    %
    
    $
    38,791
    
    
    
    80
    %Europe
    
    
    55,720
    
    
    
    37
    %
    
    
    38,811
    
    
    
    42
    %
    
    
    16,909
    
    
    
    44
    %Canada
    
    
    4,332
    
    
    
    3
    %
    
    
    2,555
    
    
    
    3
    %
    
    
    1,777
    
    
    
    70
    %Other countries
    
    
    2,913
    
    
    
    2
    %
    
    
    2,859
    
    
    
    3
    %
    
    
    54
    
    
    
    2
    %Consolidated net sales
    
    $
    150,276
    
    
    
    100
    %
    
    $
    92,745
    
    
    
    100
    %
    
    $
    57,531
    
    
    
    62
    %
 Rock Band 3 Rock Band 3 Rock Band 3
 Street
Fighter IV
  Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Xbox 360
    
    
    31
    %
    
    
    31
    %
    
    
    33
    %
    
    
    30
    %PlayStation 3
    
    
    19
    %
    
    
    17
    %
    
    
    18
    %
    
    
    16
    %Wii
    
    
    19
    %
    
    
    14
    %
    
    
    16
    %
    
    
    12
    %PC
    
    
    12
    %
    
    
    23
    %
    
    
    14
    %
    
    
    25
    %Handheld Consoles(a)
    
    
    2
    %
    
    
    3
    %
    
    
    2
    %
    
    
    4
    %PlayStation 2
    
    
    
    %
    
    
    1
    %
    
    
    
    %
    
    
    2
    %GameCube
    
    
    
    %
    
    
    2
    %
    
    
    1
    %
    
    
    2
    %All others
    
    
    17
    %
    
    
    9
    %
    
    
    16
    %
    
    
    9
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 (a)
    
    Handheld consoles include Sony PSP and Nintendo DS, DS Lite, DSi and DSXL. 10




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##### Table of Contents



Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Specialty controllers
    
    
    29
    %
    
    
    21
    %
    
    
    27
    %
    
    
    28
    %Audio
    
    
    24
    %
    
    
    10
    %
    
    
    26
    %
    
    
    10
    %Controllers
    
    
    16
    %
    
    
    26
    %
    
    
    16
    %
    
    
    24
    %Games
    
    
    16
    %
    
    
    2
    %
    
    
    14
    %
    
    
    2
    %Accessories
    
    
    9
    %
    
    
    30
    %
    
    
    11
    %
    
    
    26
    %Personal computer products
    
    
    6
    %
    
    
    8
    %
    
    
    6
    %
    
    
    8
    %All others
    
    
    
    %
    
    
    3
    %
    
    
    
    %
    
    
    2
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Gross Profit
   Three months ended December 31,% of Net
    
    
    
    
    
    
    % of Net
    
    
    $
    
    
    %2010
    
    
    Sales
    
    
    2009
    
    
    Sales
    
    
    Change
    
    
    ChangeNet sales
    
    $
    92,957
    
    
    
    100.0
    %
    
    $
    48,763
    
    
    
    100.0
    %
    
    $
    44,194
    
    
    
    90.6
    %Cost of sales
    
    
    66,556
    
    
    
    71.6
    %
    
    
    32,822
    
    
    
    67.3
    %
    
    
    33,734
    
    
    
    102.8
    %Gross profit
    
    $
    26,401
    
    
    
    28.4
    %
    
    $
    15,941
    
    
    
    32.7
    %
    
    $
    10,460
    
    
    
    65.6
    %
 Nine months ended December 31,% of Net
    
    
    
    
    
    
    % of Net
    
    
    $
    
    
    %2010
    
    
    Sales
    
    
    2009
    
    
    Sales
    
    
    Change
    
    
    ChangeNet sales
    
    $
    150,276
    
    
    
    100.0
    %
    
    $
    92,745
    
    
    
    100.0
    %
    
    $
    57,531
    
    
    
    62.0
    %Cost of sales
    
    
    107,429
    
    
    
    71.5
    %
    
    
    63,424
    
    
    
    68.4
    %
    
    
    44,005
    
    
    
    69.4
    %Gross profit
    
    $
    42,847
    
    
    
    28.5
    %
    
    $
    29,321
    
    
    
    31.6
    %
    
    $
    13,526
    
    
    
    46.1
    %
 Rock Band 3
 Operating Expenses
  Three months ended December 31,% of Net
    
    
    
    
    
    
    % of Net
    
    
    $
    
    
    %2010
    
    
    Sales
    
    
    2009
    
    
    Sales
    
    
    Change
    
    
    ChangeSales and marketing
    
    $
    4,935
    
    
    
    5.3
    %
    
    $
    3,696
    
    
    
    7.6
    %
    
    $
    1,239
    
    
    
    33.5
    %General and administrative
    
    
    4,047
    
    
    
    4.4
    %
    
    
    3,465
    
    
    
    7.1
    %
    
    
    582
    
    
    
    16.8
    %Research and development
    
    
    1,089
    
    
    
    1.2
    %
    
    
    741
    
    
    
    1.5
    %
    
    
    348
    
    
    
    47.0
    %Acquisition related items
    
    
    102
    
    
    
    0.1
    %
    
    
    
    
    
    
    
    %
    
    
    102
    
    
    
    100.0
    %Amortization
    
    
    244
    
    
    
    0.2
    %
    
    
    395
    
    
    
    0.8
    %
    
    
    (151
    )
    
    
    (38.2
    )%Total operating expenses
    
    $
    10,417
    
    
    
    11.2
    %
    
    $
    8,297
    
    
    
    17.0
    %
    
    $
    2,120
    
    
    
    25.6
    %
 Nine months ended December 31,% of Net
    
    
    
    
    
    
    % of Net
    
    
    $
    
    
    %2010
    
    
    Sales
    
    
    2009
    
    
    Sales
    
    
    Change
    
    
    ChangeSales and marketing
    
    $
    10,982
    
    
    
    7.3
    %
    
    $
    8,747
    
    
    
    9.4
    %
    
    $
    2,235
    
    
    
    25.6
    %General and administrative
    
    
    10,565
    
    
    
    7.0
    %
    
    
    9,533
    
    
    
    10.3
    %
    
    
    1,032
    
    
    
    10.8
    %Research and development
    
    
    2,780
    
    
    
    1.8
    %
    
    
    2,033
    
    
    
    2.2
    %
    
    
    747
    
    
    
    36.7
    %Acquisition related items
    
    
    708
    
    
    
    0.5
    %
    
    
    
    
    
    
    
    %
    
    
    708
    
    
    
    100.0
    %Amortization
    
    
    708
    
    
    
    0.5
    %
    
    
    1,567
    
    
    
    1.7
    %
    
    
    (859
    )
    
    
    (54.8
    )%Total operating expenses
    
    $
    25,743
    
    
    
    17.1
    %
    
    $
    21,880
    
    
    
    23.6
    %
    
    $
    3,863
    
    
    
    17.7
    %
 11




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##### Table of Contents



Sales and Marketing.
 General and Administrative.
 Research and Development.
 Amortization.
 Interest Expense, Foreign Exchange Gain(Loss) and Other Income
  Three months ended December 31,% of Net
    
    
    
    
    
    % of Net
    
    $
    
    %2010
    
    Sales
    
    2009
    
    Sales
    
    Change
    
    ChangeInterest expense
    
    $
    (1,046
    )
    
    
    1.1
    %
    
    $
    (645
    )
    
    
    1.3
    %
    
    $
    (401
    )
    
    
    62.2
    %Foreign exchange gain (loss)
    
    $
    (736
    )
    
    
    0.8
    %
    
    $
    109
    
    
    
    0.2
    %
    
    $
    (845
    )
    
    
    (775.2
    )%Other income
    
    $
    46
    
    
    
    0.0
    %
    
    $
    42
    
    
    
    0.1
    %
    
    $
    4
    
    
    
    9.5
    %
 Nine months ended December 31,% of Net
    
    
    
    
    
    % of Net
    
    $
    
    %2010
    
    Sales
    
    2009
    
    Sales
    
    Change
    
    ChangeInterest expense
    
    $
    (2,284
    )
    
    
    1.5
    %
    
    $
    (1,637
    )
    
    
    1.8
    %
    
    $
    (647
    )
    
    
    39.5
    %Foreign exchange gain (loss)
    
    $
    (41
    )
    
    
    0.0
    %
    
    $
    (310
    )
    
    
    0.3
    %
    
    $
    269
    
    
    
    86.8
    %Other income
    
    $
    223
    
    
    
    0.1
    %
    
    $
    138
    
    
    
    0.1
    %
    
    $
    85
    
    
    
    61.6
    %
   12




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##### Table of Contents



Income Tax Expense
  Three months ended December 31,Effective
    
    
    
    
    
    Effective
    
    $
    
    %2010
    
    Tax Rate
    
    2009
    
    Tax Rate
    
    Change
    
    ChangeIncome tax expense
    
    $
    4,552
    
    
    
    31.9
    %
    
    $
    1,558
    
    
    
    21.8
    %
    
    $
    2,994
    
    
    
    192.2
    %
 Nine months ended December 31,Effective
    
    
    
    
    
    Effective
    
    $
    
    %2010
    
    Tax Rate
    
    2009
    
    Tax Rate
    
    Change
    
    ChangeIncome tax expense
    
    $
    5,554
    
    
    
    37.0
    %
    
    $
    2,007
    
    
    
    35.6
    %
    
    $
    3,547
    
    
    
    176.7
    %
   Liquidity and Capital Resources
 Sources of Liquidity
 As of and for thenine months endedDecember 31,(in thousands)
    
    2010
    
    
    2009
    
    
    ChangeCash
    
    $
    9,921
    
    
    $
    5,825
    
    
    $
    4,096Percentage of total assets
    
    
    8.4
    %
    
    
    7.5
    %Cash used in operating activities
    
    $
    (11,475
    )
    
    $
    (4,503
    )
    
    $
    (6,972
    )Cash used in investing activities
    
    
    (2,662
    )
    
    
    (2,412
    )
    
    
    (250
    )Cash provided by financing activities
    
    
    21,772
    
    
    
    9,526
    
    
    
    12,246Effects of foreign exchange on cash
    
    
    41
    
    
    
    324
    
    
    
    (283
    )Net increase in cash
    
    $
    7,676
    
    
    $
    2,935
    
    
    
    4,741
  Cash Flows from Operating Activities
  13




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##### Table of Contents



Cash Flows from Investing Activities
  Cash Flows from Financing Activities
     Contractual Obligations and Commitments
   14




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##### Table of Contents



EBITDA
  Three months ended
    
    
    Nine months endedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    9,696
    
    
    $
    5,592
    
    
    $
    9,448
    
    
    $
    3,625Adjustments:Interest expense
    
    
    1,046
    
    
    
    645
    
    
    
    2,284
    
    
    
    1,637Income tax expense
    
    
    4,552
    
    
    
    1,558
    
    
    
    5,554
    
    
    
    2,007Depreciation and amortization
    
    
    690
    
    
    
    920
    
    
    
    2,036
    
    
    
    3,003EBITDA
    
    $
    15,984
    
    
    $
    8,715
    
    
    $
    19,322
    
    
    $
    10,272
 Forward-Looking Statements
    15




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##### Table of Contents



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
  Circuit City Stores, Inc., et al., Debtors, Alfred H. Siegel, as Trustee for Circuit City, Inc.,
Liquidating Trust v. Mad Catz, Inc. and Saitek Industries Limited, Mad Catz, Inc., dba Saitek
Industries Limited
  
 Item 1A. Risk Factors
  17




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##### Table of Contents



Item 6. Exhibits
 31.1
    
    Certification of Registrants Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Registrants Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    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.
 18




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##### Table of Contents



MAD CATZ INTERACTIVE, INC.February 9, 2011
    /s/  Darren RichardsonDarren RichardsonPresident and Chief Executive OfficerFebruary 9, 2011
    /s/  Allyson VanderfordAllyson VanderfordInterim Chief Financial Officer 19