Form 8-K MAD CATZ INTERACTIVE For: Nov 06

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November 6, 2014 4:18 PM EST

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�

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

�

FORM 8-K

�

CURRENT REPORT

Pursuant to Section�13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November�6, 2014

�

MAD CATZ INTERACTIVE, INC.

(Exact Name of Registrant as Specified in Charter)

�

Canada

�

001-14944

�

N/A

(State or Other Jurisdiction

of Incorporation)

�

(Commission

File Number)

�

(I.R.S. Employer

Identification No.)

10680 Treena Street, Suite 500

San Diego, California 92131

(Address of Principal Executive Offices)

�

(858) 790-5008

(Registrant�s telephone number, including area code)

�

7480 Mission Valley Road, Suite 101, San Diego, California 92108

(Former name or former address, if changed since last report)

�

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

�

�	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

�

�	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14.a-12)

�

�	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

�

�	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

�

Item�2.02.

Results of Operations and Financial Condition

The following information is furnished pursuant to Item�2.02, �Results of Operations and Financial Condition,� and shall not be deemed �filed� for purposes of Section�18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

On November�6, 2014, the Company issued a press release announcing its financial results for its fiscal second quarter ended September�30, 2014. A copy of the press release is attached hereto as Exhibit 99.1.

The information contained in this Current Report, including the exhibit, shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

�

Item�9.01.

Financial Statements and Exhibits

(d) Exhibits.

�


99.1	��	Press Release, dated November�6, 2014, issued by Mad Catz Interactive, Inc., furnished pursuant to Item�2.02 of Form 8-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

�


Date: November�6, 2014	�	MAD CATZ INTERACTIVE, INC.

	�	By:	�	/s/ KAREN MCGINNIS
	�	Name:	�	Karen McGinnis
	�	Its:	�	Chief Financial Officer

Exhibit 99.1

�

LOGO

MAD CATZ^� REPORTS FISCAL 2015 SECOND QUARTER FINANCIAL RESULTS

San Diego, CA � November�6, 2014 � Mad Catz Interactive, Inc. (�Mad Catz� or the �Company�) (NYSE MKT/TSX: MCZ), today announced financial results for the fiscal 2015 second quarter ended September�30, 2014.

Key Highlights of Fiscal 2015 Second Quarter and Subsequent:

�

Fiscal 2015 second quarter net sales increased 26% to $22.5 million, driven by a 162% increase in net sales across APAC, a 15% increase in EMEA and an 8% increase in the Americas;

�

Gross margin improved to 30.0%, compared to 26.7% in the prior year quarter;

�

Total operating expenses decreased 15% from the prior year period to $7.2 million;

�

Diluted loss per share was ($0.01) for the fiscal 2015 second quarter, compared to a diluted loss per share of ($0.07) last year;

�

Net position of bank loan, less cash, of $8.9 million at September�30, 2014, compared to $11.4 million at September�30, 2013;

�

Shipped new range of Tritton^� Xbox One� licensed headsets;

�

Shipped Pro Racing� Force Feedback Wheel and Pedals for Xbox One;

�

Announced M.M.O.^TE� (Tournament Edition) Gaming Mouse for Windows PC and Mac;

�

Announced S.T.R.I.K.E.^TE� (Tournament Edition) Gaming Keyboard for Windows PC and Mac; and,

�

Filed a $30 million universal shelf registration statement.

Summary of Financials

(in thousands, except margins and per share data)

�

��

Three Months

�

Six Months

�

��

Ended September�30,

�

Ended September�30,

�

��

2014

�

2013

�

Change

�

2014

�

2013

�

Change

�

Net sales

��

22,467

��

�

17,839

��

�

%�

�

39,214

��

�

36,523

��

�

%�

Gross profit

��

�

6,731

��

�

4,770

��

�

%�

�

11,794

��

�

10,135

��

�

%�

Total operating expenses

��

�

7,155

��

�

8,387

��

�

(15

%)�

�

13,349

��

�

15,870

��

�

(16

%)�

��

�

Operating loss

��

�

(424

)�

�

(3,617

)�

�

(88

%)�

�

(1,555

)�

�

(5,735

)�

�

(73

%)�

��

�

Net loss

��

�

(922

)�

�

(4,545

)�

�

(80

%)�

�

(2,167

)�

�

(6,610

)�

�

(67

%)�

��

�

Net loss per share, basic and diluted

��

0.01

)�

�

0.07

)�

�

(33

%)�

�

0.03

)�

�

0.10

)�

�

(33

%)�

��

�

Gross margin

��

�

30.0

%�

�

26.7

%�

�

320

�bps�

�

30.1

%�

�

27.7

%�

�

230

�bps�

Adjusted EBITDA (loss) ⁽¹⁾

��

111

)�

�

3,005

)�

�

(96

%)�

�

557

)�

�

4,130

)�

�

(87

%)�

�

(1)

Definitions, disclosures and reconciliations regarding non-GAAP financial information are included on page 7.

�

Commenting on the Company�s fiscal 2015 second quarter results, Darren Richardson, President and Chief Executive Officer of Mad Catz, said, �Our results for the quarter were in-line with our previously expressed expectations of year-over-year net sales growth. Sales of our console products are rebounding on the back of the hugely successful next gen console launches, providing us with great optimism for future performance. We also have exciting new products for the PC and Mac that will be launching shortly and, while the smart device opportunity is still in the early stages, there are some clear signs that it�s gaining traction. We are on track with our goal of returning to sales growth and profitability in fiscal 2015.�

Summary of Key Sales Metrics

�

��

Three Months

�

Six Months

�

��

Ended September�30,

�

Ended September�30,

�

��

2014

�

2013

�

Change

�

2014

�

2013

�

Change

�

Net Sales by Geography (in thousands)

��

�

EMEA

��

10,904

��

�

9,477

��

�

%�

�

19,278

��

�

19,592

��

�

%)�

Americas

��

�

7,260

��

�

6,718

��

�

%�

�

12,709

��

�

13,318

��

�

%)�

APAC

��

�

4,303

��

�

1,644

��

�

162

%�

�

7,227

��

�

3,613

��

�

100

%�

��

�

��

22,467

��

�

17,839

��

�

%�

�

39,214

��

�

36,523

��

�

%�

��

�

Sales by Platform as a % of Gross Sales

��

�

PC and Mac

��

�

%�

�

%�

�

%�

�

%�

�

Next gen consoles (a)

��

�

%�

�

%�

�

%�

�

��

%�

�

Universal

��

�

%�

�

%�

�

%�

�

%�

�

Smart devices

��

�

%�

�

%�

�

%�

�

%�

�

Legacy consoles (b)

��

�

%�

�

%�

�

%�

�

%�

�

All others

��

�

��

%�

�

%�

�

��

%�

�

%�

�

��

�

��

�

100

%�

�

100

%�

�

100

%�

�

100

%�

�

��

�

Sales by Category as a % of Gross Sales

��

�

Audio

��

�

%�

�

%�

�

%�

�

%�

�

Specialty controllers

��

�

%�

�

%�

�

%�

�

%�

�

Mice and keyboards

��

�

%�

�

%�

�

%�

�

%�

�

Controllers

��

�

%�

�

%�

�

%�

�

%�

�

Accessories

��

�

%�

�

%�

�

%�

�

%�

�

Games and Other

��

�

%�

�

%�

�

%�

�

%�

�

��

�

��

�

100

%�

�

100

%�

�

100

%�

�

100

%�

�

��

�

Sales by Brand as a % of Gross Sales

��

�

Tritton

��

�

%�

�

%�

�

%�

�

%�

�

Mad Catz

��

�

%�

�

%�

�

%�

�

%�

�

Saitek

��

�

%�

�

%�

�

%�

�

%�

�

Other

��

�

%�

�

%�

�

%�

�

%�

�

��

�

��

�

100

%�

�

100

%�

�

100

%�

�

100

%�

�

��

�

(a)

Includes products developed for Xbox One, PlayStation 4 and Wii U.

(b)

Includes products developed for Xbox 360, PlayStation 3 and Wii.

�

Karen McGinnis, Chief Financial Officer of Mad Catz, commented, �We are pleased with our to return to top-line growth for the quarter and year-to-date and remain confident that our business strategy, product offerings and financial position will help us return to sales growth and profitability in fiscal 2015. We remain focused on effectively managing our inventory, expenses and accounts receivable while positioning the Company in the best way possible to fully benefit from the upcoming holiday season.�

The Company will host a conference call and simultaneous webcast on November�6, 2014, at 5:00 p.m. ET, which can be accessed by dialing (212)�231-2930. Following its completion, a replay of the call can be accessed for 30 days at the Company�s Web site (www.madcatz.com, select �About Us/Investor Relations�) or for seven days via telephone at (800)�633-8284 (reservation #21738355) or, for International callers, at (402)�977-9140.

About Mad Catz

Mad Catz Interactive, Inc. (�Mad Catz�) (NYSE MKT/TSX: MCZ) is a global provider of innovative interactive entertainment products marketed under its Mad Catz^� (gaming), Tritton^� (audio), and Saitek^� (simulation) brands. Mad Catz products cater to passionate gamers across multiple platforms including in-home gaming consoles, handheld gaming consoles, Windows^� PC and Mac^� computers, smart phones, tablets and other mobile devices. Mad Catz distributes its products through its online store as well as distribution via many leading retailers around the globe. Headquartered in San Diego, California, Mad Catz maintains offices in Europe and Asia. For additional information about Mad Catz and its products, please visit the Company�s website at www.madcatz.com.

Social Media

�

LOGO

Safe Harbor

Information in this press release that involves the Company�s expectations business prospects, plans, intentions or strategies regarding its future are forward-looking statements that are not facts and that involve substantial risks and uncertainties. You can identify these statements by the use of words such as �anticipate,� �estimate,� �expect,� �project,� �intend,� �should,� �plan,� �goal,� �believe,� and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause the Company�s actual future results to differ materially from those expressed in the forward-looking statements set forth in this release are the following: the ability to maintain or renew the Company�s licenses; competitive developments affecting the Company�s current products; first-party price reductions; availability of capital under our credit facility; commercial acceptance of new in-home gaming consoles; the ability to successfully market both new and existing products domestically and internationally; difficulties or delays in manufacturing; unanticipated product delays; or a downturn in the market or industry. A further list and description of these and other factors, risks, uncertainties and other matters can be found in the Company�s most recent annual report, and any subsequent quarterly reports, filed with the U.S. Securities and Exchange Commission and the Canadian Securities Administrators. The forward-looking statements in this release are based upon information available to the Company as of the date of this release, and the Company assumes no obligation to update any such forward-looking statements as a result of new information or future events or developments, except as may be require by applicable law. Forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of the future performance of the Company and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.

�


Contact:	��	��	Joseph Jaffoni, Norberto Aja, Jim Leahy
Karen McGinnis.	��	��	JCIR
Chief Financial Officer	��	��	[email protected] or (212)�835-8500
Mad Catz Interactive, Inc.	��	��
[email protected] or (858)�790-5040	��	��

- TABLES FOLLOW -

�

Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

�

��

Three Months

�

Six Months

�

��

Ended September�30,

�

Ended September�30,

�

��

2014

�

2013

�

2014

�

2013

�

Net sales

��

22,467

��

�

17,839

��

�

39,214

��

�

36,523

��

Cost of sales

��

�

15,736

��

�

13,069

��

�

27,420

��

�

26,388

��

�

Gross profit

��

�

6,731

��

�

4,770

��

�

11,794

��

�

10,135

��

�

Operating expenses:

��

�

Sales and marketing

��

�

3,477

��

�

3,923

��

�

5,889

��

�

6,829

��

General and administrative

��

�

2,722

��

�

3,015

��

�

5,873

��

�

6,248

��

Research and development

��

�

846

��

�

1,167

��

�

1,368

��

�

2,178

��

Acquisition related items

��

�

��

�

��

�

��

�

152

��

Amortization of intangible assets

��

�

110

��

�

229

��

�

219

��

�

463

��

�

Total operating expenses

��

�

7,155

��

�

8,387

��

�

13,349

��

�

15,870

��

�

Operating loss

��

�

(424

)�

�

(3,617

)�

�

(1,555

)�

�

(5,735

)�

Other (expense) income:

��

�

Interest expense, net

��

�

(167

)�

�

(135

)�

�

(325

)�

�

(253

)�

Foreign currency exchange loss, net

��

�

(382

)�

�

(392

)�

�

(417

)�

�

(416

)�

Change in fair value of warrant liability

��

�

��

�

(317

)�

�

��

�

(334

)�

Other (expense) income

��

�

)�

�

��

�

��

�

��

�

Total other expense

��

�

(477

)�

�

(818

)�

�

(608

)�

�

(906

)�

��

�

Loss before income taxes

��

�

(901

)�

�

(4,435

)�

�

(2,163

)�

�

(6,641

)�

Income tax (expense) benefit

��

�

(21

)�

�

(110

)�

�

)�

�

��

�

Net loss

��

922

)�

�

4,545

)�

�

2,167

)�

�

6,610

)�

��

�

Net loss per share:

��

�

��

�

Basic

��

0.01

)�

�

0.07

)�

�

0.03

)�

�

0.10

)�

��

�

Diluted

��

0.01

)�

�

0.07

)�

�

0.03

)�

�

0.10

)�

��

�

Shares used in per share computations:

��

�

��

�

Basic

��

�

64,149,124

��

�

63,689,909

��

�

64,115,591

��

�

63,584,235

��

�

Diluted

��

�

64,149,124

��

�

63,689,909

��

�

64,115,591

��

�

63,584,235

��

�

Consolidated Balance Sheets

(in thousands)

(Unaudited)

�


�	��	September�30,		�	�	March�31,		�
�	��	2014		�	�	2014		�
ASSETS	��				�
Current assets:	��				�
Cash	��	$	1,666	��	�	$	1,496	��
Accounts receivable, net	��	�	12,024	��	�	�	8,059	��
Other receivables	��	�	1,313	��	�	�	1,531	��
Inventories	��	�	20,097	��	�	�	17,189	��
Deferred tax assets	��	�	918	��	�	�	926	��
Income tax receivable	��	�	895	��	�	�	895	��
Prepaid expenses and other current assets	��	�	1,906	��	�	�	1,605	��
	��	�	�	�	�	�	�	�
Total current assets	��	�	38,819	��	�	�	31,701	��
Deferred tax assets	��	�	1,293	��	�	�	1,334	��
Other assets	��	�	366	��	�	�	499	��
Property and equipment, net	��	�	2,544	��	�	�	2,737	��
Intangible assets, net	��	�	2,803	��	�	�	3,022	��
	��	�	�	�	�	�	�	�
Total assets	��	$	45,825	��	�	$	39,293	��
	��	�	�	�	�	�	�	�
LIABILITIES AND STOCKHOLDERS� EQUITY	��				�
Current liabilities:	��				�
Bank loan	��	$	10,535	��	�	$	5,612	��
Accounts payable	��	�	18,187	��	�	�	13,661	��
Accrued liabilities	��	�	5,177	��	�	�	4,874	��
Note payable	��	�	1,045	��	�	�	1,336	��
Income taxes payable	��	�	18	��	�	�	330	��
	��	�	�	�	�	�	�	�
Total current liabilities	��	�	34,962	��	�	�	25,813	��
Note payable, less current portion	��	�	900	��	�	�	1,023	��
Warrant liability	��	�	20	��	�	�	75	��
Deferred tax liabilities	��	�	173	��	�	�	178	��
Other long-term liabilities	��	�	130	��	�	�	78	��
	��	�	�	�	�	�	�	�
Total liabilities	��	�	36,185	��	�	�	27,167	��
Shareholders� equity:	��				�
Common stock	��	�	61,323	��	�	�	60,847	��
Accumulated other comprehensive loss	��	�	(2,552	)�	�	�	(1,757	)�
Accumulated deficit	��	�	(49,131	)�	�	�	(46,964	)�
	��	�	�	�	�	�	�	�
Total shareholders� equity	��	�	9,640	��	�	�	12,126	��
	��	�	�	�	�	�	�	�
Total liabilities and shareholders� equity	��	$	45,825	��	�	$	39,293	��
	��	�	�	�	�	�	�	�

�

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

�


�	��	Six Months						�
�	��	Ended September�30,						�
�	��	2014		�	�	2013		�
Cash flows from operating activities:	��				�
Net loss	��	($	2,167	)�	�	�	(6,610	)�
Adjustments to reconcile net loss to net cash used in operating activities:	��				�
Depreciation and amortization	��	�	1,060	��	�	�	1,409	��
Accrued and unpaid interest expense on note payable	��	�	10	��	�	�	��	��
Amortization of deferred financing fees	��	�	36	��	�	�	16	��
Loss on disposal of assets	��	�	6	��	�	�	��	��
Stock-based compensation	��	�	240	��	�	�	347	��
Change in fair value of contingent consideration	��	�	��	��	�	�	(711	)�
Change in fair value of warrant liability	��	�	(55	)�	�	�	334	��
Provision for deferred income taxes	��	�	44	��	�	�	(2	)�
Changes in operating assets and liabilities:	��				�
Accounts receivable	��	�	(4,195	)�	�	�	4,105	��
Other receivables	��	�	205	��	�	�	(940	)�
Inventories	��	�	(3,077	)�	�	�	(3,697	)�
Prepaid expenses and other current assets	��	�	(319	)�	�	�	(992	)�
Other assets	��	�	187	��	�	�	(65	)�
Accounts payable	��	�	4,332	��	�	�	3,332	��
Accrued liabilities	��	�	285	��	�	�	(280	)�
Income taxes receivable/payable	��	�	(330	)�	�	�	(262	)�
	��	�	�	�	�	�	�	�
Net cash used in operating activities	��	�	(3,738	)�	�	�	(4,016	)�
	��	�	�	�	�	�	�	�
Cash flows from Investing activities:	��				�
Purchases of property and equipment	��	�	(686	)�	�	�	(690	)�
	��	�	�	�	�	�	�	�
Net cash used in investing activities	��	�	(686	)�	�	�	(690	)�
	��	�	�	�	�	�	�	�
Cash flows from financing activities:	��				�
Borrowings on bank loan	��	�	29,220	��	�	�	34,417	��
Repayments on bank loan	��	�	(24,297	)�	�	�	(30,035	)�
Payment of financing fees	��	�	(50	)�	�	�	(15	)�
Repayments on note payable	��	�	(469	)�	�	�	��	��
Proceeds from exercise of stock options	��	�	236	��	�	�	188	��
Payment of contingent consideration	��	�	��	��	�	�	(787	)�
	��	�	�	�	�	�	�	�
Net cash provided by financing activities	��	�	4,640	��	�	�	3,768	��
	��	�	�	�	�	�	�	�
Effects of foreign currency exchange rate changes on cash	��	�	(46	)�	�	�	72	��
	��	�	�	�	�	�	�	�
Net increase (decrease) in cash	��	�	170	��	�	�	(866	)�
Cash, beginning of period	��	�	1,496	��	�	�	2,773	��
	��	�	�	�	�	�	�	�
Cash, end of period	��	$	1,666	��	�	$	1,907	��
	��	�	�	�	�	�	�	�

�

Supplementary Data

Adjusted EBITDA (Loss) Reconciliation (non-GAAP)

(in thousands)

(Unaudited)

�

��

Three Months

�

Six Months

�

��

Ended�September�30,

�

Ended�September�30,

�

��

2014

�

2013

�

2014

�

2013

�

Net loss

��

922

)�

�

4,545

)�

�

2,167

)�

�

6,610

)�

Adjustments:

��

�

Depreciation and amortization

��

�

580

��

�

731

��

�

1,096

��

�

1,425

��

Stock-based compensation

��

�

117

��

�

194

��

�

240

��

�

347

��

Change in fair value of warrant liability

��

�

(74

)�

�

317

��

�

(55

)�

�

334

��

Acquisition related items

��

�

��

�

��

�

��

�

152

��

Interest expense, net

��

�

167

��

�

135

��

�

325

��

�

253

��

Income tax expense (benefit)

��

�

��

�

110

��

�

��

�

(31

)�

��

�

Adjusted EBITDA (loss)

��

111

)�

�

3,005

)�

�

557

)�

�

4,130

)�

��

�

Adjusted EBITDA (loss), a non-GAAP financial measure, represents net loss before interest, taxes, depreciation and amortization, stock-based compensation, the gain/loss on the change in the fair value of the related warrant liability, goodwill impairment, if any, and acquisition related items. Adjusted EBITDA is not intended to represent cash flows for the period, nor is it being presented as an alternative to operating or net income as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles in the United States. As defined, Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. We believe, however, that in addition to the performance measures found in our financial statements, Adjusted EBITDA is a useful financial performance measurement for assessing our Company�s operating performance. We use Adjusted EBITDA as a measurement of operating performance in comparing our performance on a consistent basis over prior periods, as it removes from operating results the impact of our capital structure, including the interest expense resulting from our outstanding debt, and our asset base, including depreciation and amortization of our capital and intangible assets. In addition, Adjusted EBITDA is an important measure for our lender.

�

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