8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 3, 2011

MAJESCO ENTERTAINMENT COMPANY

(Exact name of registrant as specified in its charter)

Delaware	001-32404	06-1529524
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation)		Identification No.)

160 Raritan Center Parkway,
Edison, New Jersey 08837
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (732) 225-8910

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 (see General Instruction A.2. below):

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

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

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

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

Item 2.01. Completion of Acquisition or Disposition of Assets.

On June 6, 2011, Majesco Entertainment Company (the “Company”) filed a Current Report on Form 8-K to report that it had concurrently entered into, and completed the transactions contemplated by, an Asset Purchase Agreement (the “Agreement”) with Quick Hit, Inc., a Delaware corporation (“Quick Hit”) as of June 3, 2011. The purchase price was $836,545 in cash, which was paid to Quick Hit’s senior lender (the “Senior Lender”), except for $216,000 that was used to pay off equipment lease obligations of Quick Hit. Of the purchase price, $50,000 was placed into escrow until June 2012 for indemnification obligations of Quick Hit and the Senior Lender. The Company is filing this amendment to the Current Report on Form 8-K filed on June 6, 2011 to include the financial statement and pro forma financial information required by Item 9.01.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

Quick Hit’s audited financial statements as of December 31, 2010 and for the two years in the period ended December 31, 2010 are attached as Exhibit 99.1 and are incorporated herein by reference.

Quick Hit’s unaudited financial statements as of June 3, 2011 and for the period from January 1, 2011 through June 3, 2011 are attached as Exhibit 99.2 and are incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed consolidated balance sheet as of April 30, 2011 and statements of operations for the Company’s year ended October 31, 2010 and six months ended April 30, 2011 are attached as Exhibit 99.3 and are incorporated herein by reference.

Based on the relationship of Quick Hit’s reported net loss for its year ended December 31, 2010 ($7.1 million) to the Company’s reported net loss for the fiscal year ended October 31, 2010, the Company is presenting the pro forma condensed consolidated financial information in accordance with the requirements of Form 8-K, which reflect costs of Quick Hit’s former strategy. The pro forma statements do not purport to represent the actual results of operations that would have occurred if the acquisition had taken place on the dates specified and are not expected to be indicative of the results of operations that may be achieved in the future. Further, the Company intends to reduce subcontracted development and other expenses incurred by it prior to the acquisition of the Quick Hit assets to pursue its social games strategy. No adjustments for cost savings expected to be achieved through the acquisition of the Quick Hit assets are reflected as adjustments to the pro forma results.

Quick Hit was originally formed in 2008 to develop and operate a series of online, head-to-head sports games (e.g. football, baseball, basketball, hockey and soccer) with aspects of massively multiplayer online role-playing games (MMORPG) and 3D technology. Between 2009 and 2011, Quick Hit revised its business plan to focus resources on adding features to its football game launched in 2009 and to delay its schedule of future releases. Accordingly it reduced its workforce during this time from over 30 in 2009 to 12 by June 2011. The Company intends to utilize this workforce to operate its social games strategy and reduce its subcontracted development costs. Accordingly, the historical and pro forma results include significant personnel and licensing costs which will not be incurred by the Company on a going-forward basis. The pro forma financial statements presented do not include adjustments to reflect the expense reductions and synergies the Company expects to realize.

1

(d) Exhibits

Exhibit
Number	Description
23.1	Consent of Independent Accountant
99.1	Audited financial statements of Quick Hit, Inc. as of December 31, 2010 and for the two years in the period ended December 31, 2010.
99.2	Unaudited financial statements of Quick Hit, Inc. as of June 3, 2011 and for the periods from January 1, 2011 through June 3, 2011 and 2010.
99.3	Unaudited pro forma condensed consolidated balance sheet as of April 30, 2011 and statements of operations for the Company’s year ended October 31, 2010 and six months ended April 30, 2011.

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.

	MAJESCO ENTERTAINMENT COMPANY
Dated: July 15, 2011		/s/ Jesse Sutton
		Jesse Sutton
		Chief Executive Officer

2

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

To the Board of Directors
Majesco Entertainment Company

     We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (Nos. 333-136260 and 333-168008) and Forms S-3 (333-122519; 333-115822; 333-121640; 333-120103; 333-135463; 333-146253; 333-159980; and 333-173863) of Majesco Entertainment Company and subsidiary of our report dated June 30, 2011, relating to the financial statements of Quick Hit, Inc. as of December 31, 2010 and for the two years in the period ended December 31, 2010, which appear in this Form 8-K/A.

/s/ Levine, Katz, Nannis + Solomon, PC  

Levine, Katz, Nannis + Solomon, PC 

Needham, MA 
July 13, 2011 

EX-99.1

Exhibit 99.1

Audited financial statements of Quick Hit, Inc. as of December 31, 2010 and for the two years in the period ended December 31, 2010.

Quick Hit, Inc.

Financial Statements

December 31, 2010 and 2009

Quick Hit, Inc.
Financial Statements
Years Ended December 31, 2010 and 2009
Contents

	Page
Independent Auditors’ Report		1
Financial Statements
Balance Sheets		2
Statements of Operations		3
Statements of Changes in Stockholders’ Equity (Deficit)		4
Statements of Cash Flows		5
Notes to Financial Statements		6-21

Independent Auditors’ Report

To the Board of Directors
Quick Hit, Inc.
Foxboro, Massachusetts

We have audited the accompanying balance sheets of Quick Hit, Inc. (a Delaware corporation) as of December 31, 2010 and 2009, and the related statements of operations, changes in stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Quick Hit, Inc. as of December 31, 2010 and 2009, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern as of December 31, 2010. As discussed in Note A to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency, which raised substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters at December 31, 2010 are also described in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Levine, Katz, Nannis + Solomon, PC

June 30, 2011

Needham, Massachusetts

Quick Hit, Inc.
Balance Sheets
December 31,

	2010			2009
Assets
Current Assets
Cash and cash equivalents	$	3,515,285		$	6,430,084
Accounts receivable, net of allowance for doubtful accounts: 2010 - $17,840; 2009 - $0		182,234			38,572
Prepaid expenses		2,317,392			436,375
Total Current Assets		6,014,911			6,905,031
Property and Equipment
Computer hardware and software		1,054,722			855,179
Furniture and fixtures		79,712			79,712
Leasehold improvements		14,675			14,675
Total		1,149,109			949,566
Accumulated depreciation		(596,318	)		(254,078	)
Net Property and Equipment		552,791			695,488
Other Assets
Restricted cash		75,000			75,000
Prepaid royalties		—			227,027
Intangible asset, net of accumulated amortization: 2010 - $5,556; 2009 - $0		44,444			50,000
Total Other Assets		119,444			352,027
Total Assets	$	6,687,146		$	7,952,546

	2010			2009
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities
Current portion of long-term debt	$	4,113,630		$	600,138
Current portion of capital lease obligations		318,404			188,612
Accounts payable		115,260			113,333
Accrued expenses		1,836,797			602,116
Deferred revenues		63,058			—
Total Current Liabilities		6,447,149			1,504,199
Long-Term Liabilities
Long-term debt, net of current portion		—			1,252,445
Long-term capital lease obligations, net of current portion		—			290,904
Accrued royalties		—			140,000
Deferred rent		112,842			129,548
Total Long-Term Liabilities		112,842			1,812,897
Commitments (Note I)		—			—
Total Liabilities		6,559,991			3,317,096
Stockholders’ Equity (Deficit)
Series B-1 convertible preferred stock		2,471,131			—
Series B convertible preferred stock		7,999,999			7,970,999
Series A convertible preferred stock		5,000,000			4,959,150
Common stock		803			800
Additional paid in capital — common		—			16,797
Additional paid in capital — warrants		244,548			77,518
Accumulated deficit		(15,589,326	)		(8,389,814	)
Total Stockholders’ Equity (Deficit)		127,155			4,635,450
Total Liabilities and Stockholders’ Equity (Deficit)	$	6,687,146		$	7,952,546

See accompanying notes.

2.

Quick Hit, Inc.
Statements of Operations
Years Ended December 31,

	2010			2009
Revenues	$	525,263		$	38,572
Cost of Revenues		295,244			49,977
Gross Margin		230,019			(11,405	)
Operating Expenses
Research and development		3,271,899			2,160,888
Operations		472,146			539,925
Sales and marketing		1,826,439			1,578,548
General and administrative		1,476,338			1,422,239
Total Operating Expenses		7,046,822			5,701,600
Loss from Operations		(6,816,803	)		(5,713,005	)
Other Income (Expense)
Interest income		3,406			43,569
Interest expense		(295,160	)		(85,593	)
Total Other Expense		(291,754	)		(42,024	)
Net Loss	$	(7,108,557	)	$	(5,755,029	)

See accompanying notes.

3.

Quick Hit, Inc.
Statements of Changes in Stockholders’ Equity (Deficit)
Years Ended December 31, 2010 and 2009

					Convertible Preferred Stock													Additional Paid in Capital								Total
	Series A				Series B				Series B-1					Common Stock				Common			Warrants		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount			Shares		Amount		Amount			Amount		Deficit			Equity
Balance at January 1, 2009		10,000,000	$	4,959,150		12,009,125	$	7,970,999		—	$	—			8,000,000	$	800	$	—		$	20,768	$	(2,634,785	)	$	10,316,932
Issuance of Series B warrants		—		—		—		—		—		—			—		—		—			56,750		—			56,750
Stock-based compensation		—		—		—		—		—		—			—		—		16,797			—		—			16,797
Net loss		—		—		—		—		—		—			—		—		—			—		(5,755,029	)		(5,755,029	)
Balance at December 31, 2009		10,000,000	$	4,959,150		12,009,125	$	7,970,999		—	$	—			8,000,000	$	800	$	16,797		$	77,518	$	(8,389,814	)	$	4,635,450
Issuance of Preferred Series B-1 stock		—		—		—		—		3,427,604		2,471,131			—		—		—			—		—			2,471,131
Legal costs associated with stock issuance		—		—		—		—		—		(39,670	)		—		—		—			—		—			(39,670	)
Issuance of Series B warrants		—		—		—		—		—		—			—		—		—			164,060		—			164,060
Issuance of Common Stock warrants		—		—		—		—		—		—			—		—		—			2,970		—			2,970
Exercise of stock options		—		—		—		—		—		—			35,416		3		1,768			—		—			1,771
Accretion of preferred stock legal costs		—		40,850		—		29,000		—		39,670			—		—		(18,565	)		—		(90,955	)		—
Net loss		—		—		—		—		—		—			—		—		—			—		(7,108,557	)		(7,108,557	)
Balance at December 31, 2010		10,000,000	$	5,000,000		12,009,125	$	7,999,999		3,427,604	$	2,471,131			8,035,416	$	803	$	—		$	244,548	$	(15,589,326	)	$	127,155

See accompanying notes.

4.

Quick Hit, Inc.
Statements of Cash Flows
Years Ended December 31,

	2010			2009
Operating Activities
Net loss	$	(7,108,557	)	$	(5,755,029	)
Adjustments to reconcile net loss to net cash operating activities:
Depreciation and amortization		347,796			214,761
Stock-based compensation		2,970			16,797
Amortization of debt discounts related to warrants		48,096			13,211
Provision for doubtful accounts		17,840			—
Increase (decrease) in cash from:
Accounts receivable, trade		(161,502	)		(38,572	)
Prepaid expenses		(1,653,990	)		130,998
Accounts payable		1,927			(72,779	)
Accrued expenses		1,094,681			(16,063	)
Deferred revenues		63,058			—
Deferred rent		(16,706	)		102,522
Net Cash Operating Activities		(7,364,387	)		(5,404,154	)
Investing Activities
Acquisition of equipment		(141,603	)		(87,619	)
Financing Activities
Proceeds from long-term debt		3,000,000			2,000,000
Payments on long-term debt		(616,516	)		(97,405	)
Payments on capital lease obligations		(225,525	)		(173,737	)
Proceeds from issuance of preferred stock, net		2,431,461			—
Proceeds from exercise of stock options		1,771			—
Net Cash Financing Activities		4,591,191			1,728,858
Net Change in Cash and Cash Equivalents		(2,914,799	)		(3,762,915	)
Cash and cash equivalents, beginning of year		6,430,084			10,192,999
Cash and Cash Equivalents, End of Year	$	3,515,285		$	6,430,084

See accompanying notes.

5.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

A.	Description of Business and Basis of Presentation
	Business
	Quick Hit, Inc. (the “Company”) was formed on February 27, 2008 as a Delaware corporation. The Company is redefining the gaming market with its free online sports games. The Company’s products will fill a void in the casual online sports game industry by offering head-to-head sports contests that combine the graphical appeal of console, the accessibility of Flash and the wide appeal of fantasy sports. The Company generates revenues through a combination of advertising, sponsorship, micro transactions and e-commerce.
	Basis of Presentation
	The Company is subject to a number of risks common to technology-based companies, including limited operating history, dependence on key individuals, rapid technological changes, competition from substitute products and larger companies, the need for adequate financing to fund future operations and the successful development and marketing of its products and services.
	The Company had recurring net losses since incorporation and negative cash flows from operations of $7,364,387 and $5,404,154 for 2010 and 2009, respectively, and as of December 31, 2010 had an accumulated deficit of $15,537,773. The Company’s future is dependent upon its ability to achieve cash flow positive operations and to raise additional financing. There is no assurance that the Company will meet its planned operations or that it will be successful in obtaining additional equity or debt financing on terms favorable to the Company.
	Management of the Company was pursuing additional equity financing, and was confident that additional funding would be available to the Company. At December 31, 2010, management believed that the current financial position and operations along with subsequent equity financing received would enable the Company to continue as a going concern through December 31, 2011.

B. Summary of Significant Accounting Policies

1. Use of estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions for the reporting period and as of the financial statement date. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management has made certain significant estimates and assumptions in these financial statements relating to revenues, accounts receivable and related reserves, deferred taxes, accrued liabilities, and stock option costs, among other accounts. Actual results could differ from those estimates.

6.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

B. Summary of Significant Accounting Policies (continued)

2.	Cash and cash equivalents — For purposes of financial statement preparation, the Company considers all highly liquid instruments with an original maturity date of three months or less to be cash equivalents.
3.	Concentrations of credit risk — Financial instruments that subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents. Non-interest bearing accounts are guaranteed in full by the Federal Deposit Insurance Corporation and interest bearing accounts are guaranteed up to $250,000 per institution. At December 31, 2010 and 2009, the Company had approximately $0 and $3,081,000 in excess of FDIC insured limits. The Company has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk on cash.
4.	Accounts receivable — The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions. The allowance for doubtful accounts was $17,840 and $0 at December 31, 2010 and 2009, respectively.
5.	Property, equipment and depreciation — Property and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the assets on a straight-line basis. Leasehold improvements are amortized over the life of the facility lease. Fully depreciated assets are retained in equipment and accumulated depreciation accounts until removed from service. Upon disposal, such assets and related accumulated depreciation are removed from the accounts and the net amount, less proceeds from disposal, is recorded in the statement of operations. Betterments and improvements to owned equipment are capitalized and amortized over their estimated lives. Maintenance and repair costs are expensed as incurred. Depreciation expense totaled $342,240 and $214,761 for the years ended December 31, 2010 and 2009, respectively. Estimated useful lives used for computing depreciation on property and equipment are as follows:

Classification	Life
Computer hardware and software	3 years
Furniture and fixtures	5 years
Leasehold improvements	5 years

6. Impairment of long-lived assets — Long-lived assets, which consist primarily of property and equipment as well as other intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such events occur, the Company compares the carrying amount of the assets to their undiscounted expected future cash flows. If this comparison indicates that there is impairment, the amount of the impairment is calculated as the difference between the carrying value and fair value. To date, the Company believes that no impairments have occurred.

7.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

B. Summary of Significant Accounting Policies (continued)

7.	Research and development and software development costs — Research and development costs, which consist primarily of software development costs, are expensed as incurred. In accordance with GAAP, the Company capitalizes certain software development costs incurred after technological feasibility of the software is established or for development costs that have alternative future uses. Under the Company’s current practice of developing new products, the technological feasibility of the underlying software is not established until substantially all product development and testing is complete, which generally includes the development of a working model. The Company has not capitalized any software development costs to date. Research and development expenses for the years ended December 31, 2010 and 2009 was $3,271,899 and $2,160,888, respectively.
8.	Income taxes — Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.
	Effective January 1, 2009, a new methodology by which a company must identify, recognize, measure and disclose in its financial statements the effects of any uncertain tax reporting positions that a company has taken or expects to take is required under GAAP. The Company must recognize an unrecognized tax benefit when, despite the Company’s belief that its tax return positions are supportable, it is possible that certain positions may not be fully sustained upon review by tax authorities. Benefits from tax positions are measured at the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon settlement. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense.
9.	Stock-based compensation — The Company measures stock compensation expense for awards of equity instruments to employees based on the grant-date fair value of those awards, measured using either current market data or an established option-pricing model. Stock-based compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award. Stock awards to nonemployees are accounted for using the fair-value method and are recognized as services are provided.
10.	Intangible asset — Intangible asset consists of costs incurred to acquire the domain name “Quick Hit” for $50,000. Effective January 1, 2010, the Company’s estimate of the expected useful life of the domain name is ten years. Amortization expense totaled $5,556 and $0 for the years ended December 31, 2010 and 2009, respectively.

8.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

B. Summary of Significant Accounting Policies (continued)

11. Revenue recognition — The Company recognizes revenue when all of the following conditions are met:

• There is persuasive evidence of an arrangement;

• The product has been delivered or the service has been provided to the customer;

• The collection of the fees is reasonably assured; and

• The amount of fees to be paid by the customer is fixed or determinable

	Advertising revenue from premium advertising sales is recognized as the ads are served against the agreed to insertion order, which dictates the number of impressions and CPM the Company is to serve.
	Through utilization of remnant partners, advertising revenue from remnant ad sales is recognized as the ads are served by the partner on the Company website.
	Micro transactions revenue is recognized when the digital content is utilized by customer accounts.
12.	Fair value of financial instruments — The Company’s financial instruments are cash and cash equivalents, accounts receivable and accounts payable. The recorded values of these accounts approximate their fair values based on their short-term nature.
13.	Subsequent events — The Company has evaluated all subsequent events through June 30, 2011, the date the financial statements were available to be issued.

C.	Capital Lease Obligations
	The Company acquired certain computer equipment and software under capital lease obligations consisting of the following at December 31, 2010 and 2009, net of interest:

	2010			2009
Capital lease obligations with interest imputed at 6.50% to 11.83%, payable in monthly installments aggregating approximately $22,076 through various dates until June 2013, with additional balloon payments on all software draws, secured by equipment. See Note N.	$	324,877		$	492,462
Less: current portion of capital lease obligations		(318,404	)		(188,612	)
Less: unamortized discount		( 6,473	)		(12,946	)
Noncurrent portion of capital lease obligations	$	—		$	290,904

9.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

C.	Capital Lease Obligations (continued)
	In June 2011, the Company entered into an asset purchase agreement that required full payment of all amounts outstanding under capital lease obligations. See Note N.
	The following is a schedule of future lease payments under capital lease obligations, as revised in June 2011:

2011	$	357,271
Less: imputed interest		(32,394	)
Present value of minimum lease payments	$	324,877

	Assets under capital leases included in computer and equipment and software at December 31, 2010 and 2009 were $724,139 and $672,692, respectively. Depreciation of assets under capital leases is included with depreciation for assets owned by the Company. Accumulated depreciation on assets under capital leases totaled $417,978 and $182,428 at December 31, 2010 and 2009, respectively.
D.	Long-Term Debt
	Long-term debt consisted of the following at December 31:

	2010			2009
Note payable to a bank, due October 2012, payable in monthly installments of $63,703, including interest at 9% per annum, secured by all business assets, subordinated to note below.	$	1,286,079		$	1,902,595
Note payable to a financial institution, due March 2014, interest only payments through March 2011, followed by monthly installments of $99,643, including interest at 12% per annum, secured by all business assets.		3,000,000			—
		4,286,079			1,902,595
Less: current portion of long-term debt		(4,113,630	)		(600,138	)
Less: unamortized discount		(172,449	)		(50,012	)
Noncurrent portion of long-term debt	$	—		$	1,252,445

10.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

D.	Long-Term Debt (continued)
	In March 2011, the Company entered into an amended credit agreement with a financial institution implementing a revised repayment and operational plan related to all outstanding debt. See Note N.
	The following is a schedule of future maturities of long-term debt, net of the unamortized debt discount, as revised in March 2011:

2011 $ 4,286,079

E.	Warrants
	In 2010, in connection with long-term debt financing, the Company issued warrants to purchase 450,342 shares of the Company’s Series B convertible preferred stock at an exercise price of $0.67 per share. The warrants vest immediately and, if not exercised, expire in October 2020. The warrants were valued at $164,060 using the Black-Scholes method of valuing warrants and were recorded as a debt discount and additional paid in capital. There were 450,342 warrants outstanding at December 31, 2010. The holder may convert the warrants into a number of shares as defined in the warrant agreement.
	In 2010, the Company issued warrants to purchase 300,000 shares of the Company’s common stock at an exercise price of $0.67 per share. The warrants vest immediately and, if not exercised, expire in October 2015. The warrants were valued at $2,970 using the Black-Scholes method of valuing warrants and were recorded as share based compensation and additional paid in capital. There were 300,000 warrants outstanding at December 31, 2010. The holder may convert the warrants into a number of shares as defined in the warrant agreement.
	In 2009, in connection with long-term debt financing, the Company issued warrants to purchase 150,114 shares of the Company’s Series B convertible preferred stock at have an exercise price of $0.67 per share. The warrants vest immediately and, if not exercised, expire in October 2019. The warrants were valued at $56,750 using the Black-Scholes method of valuing warrants and were recorded as a debt discount and additional paid in capital. There were 150,114 warrants outstanding at December 31, 2010 and 2009. The holder may convert the warrants into a number of shares as defined in the warrant agreement.
	In 2008, in connection with capital lease financing, the Company issued warrants to purchase 80,000 shares of the Company’s Series A convertible preferred stock at an exercise price of $0.50 per share. The warrants vest immediately and, if not exercised, expire in October 2018. The warrants were valued at $20,768 using the Black-Scholes method of valuing warrants and were recorded as a discount to the capital lease obligation and additional paid in capital. There were 80,000 warrants outstanding at December 31, 2010 and 2009. The holder may convert the warrants into a number of shares as defined in the warrant agreement.

11.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

F.	Capital Structure
	Series B-1 Preferred Stock
	Per the Amended and Restated Certificate of Incorporation the Company authorized 3,500,000 shares of Series B-1 convertible preferred stock at December 31, 2010. In 2010, the Company issued 3,427,604 shares of Series B-1 convertible preferred stock at $0.72095 for total gross proceeds of $2,471,131, net of issuance costs of $39,670. Total shares issued and outstanding at December 31, 2010 are 3,427,604.
	Series B Preferred Stock
	Per the Amended and Restated Certificate of Incorporation the Company authorized 12,620,000 and 12,170,114 shares of Series B convertible preferred stock at December 31, 2010 and 2009, respectively. Total shares issued and outstanding at December 31, 2010 and 2009 are 12,009,125.
	Series A Preferred Stock
	Per the Amended and Restated Certificate of Incorporation the Company authorized 10,080,000 shares of Series A convertible preferred stock. Total shares issued and outstanding at December 31, 2010 and 2009 are 10,000,000.
	Preferred Stock Rights and Preferences
	Voting — The holders of preferred stock are entitled to vote together with all other classes or series of stock, as a single class, on all matters to which stockholders of the Company vote or are entitled to vote. Each share of preferred stock is entitled to vote on an as-converted basis.
	Dividends — The holders of preferred stock are entitled to receive dividends when and if declared by the Board of Directors of the Company at the applicable dividend rates of $0.04663 for Series B-1 and Series B and $0.03500 for Series A. Dividends on Series B-1 and Series B shall be paid prior and in preference to any dividends on Series A and common stock. Dividends on Series A shall be paid prior and in preference to any dividends on common stock. At any time a dividend is declared or paid on common stock, there will simultaneously be dividends declared and paid to the holders of preferred stock in the amount which such holders would have received had all shares of preferred stock been converted into common stock at the conversion price then in effect. Dividends are noncumulative and therefore do not accrue prior to being declared by the Board of Directors. There have been no dividends declared by the Board of Directors as of December 31, 2010.

12.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

F.	Capital Structure (continued)
	Preferred Stock Rights and Preferences (continued)
	Liquidation — In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Company (a “Liquidation Event”), the holders of Series B-1 and Series B convertible preferred stock are entitled to receive an amount equal to the greater of the applicable original issue price ($0.72095 and $0.66616, respectively) for each share held, plus all declared but unpaid dividends or the amount to be distributed if all preferred shares were converted immediately prior to the liquidation event, prior to and in preference to any distribution to the holders of Series A and common stock. In the event, proceeds to be distributed are insufficient to pay the full preferential amounts of Series B-1 and Series B, the entire proceeds available for distribution shall be distributed ratably among the holders of Series B-1 and Series B. After payment in full of the Series B-1 and Series B liquidation preference, the holders of Series A preferred stock are entitled to receive an amount equal to the greater of the original issue price of $0.50 for each share held, plus all declared but unpaid dividends or the amount to be distributed if all preferred shares were converted immediately prior to the liquidation event, prior to and in preference to any distribution to the holders of common stock. In the event, remaining proceeds to be distributed are insufficient to pay the full preferential amount of Series A, the entire remaining proceeds available for distribution shall be distributed ratably among the holders of Series A. After payment in full of all preferred stock liquidation amounts, the remaining assets and funds of the Company available for distribution shall be distributed to the holders of common stock.
	Conversion — Each share of preferred stock is convertible at any time, at the option of the holder, into common stock. The preferred stock is convertible on a one-to-one basis into common stock, subject to certain adjustments, as defined. The preferred stock will be automatically converted into common stock upon the closing of an initial public offering of the common stock of the Company of not less than $30,000,000 or upon the decision of the holders of at least the majority of the outstanding preferred stock voting together as a single class.
	Redemption — The preferred stock is not redeemable at the option of the holders. Common Stock
	Common Stock
	Per the Amended and Restated Certificate of Incorporation, the Company authorized the issuance of 39,000,000 and 35,000,000 shares of common stock, with par value of $0.0001 per share at December 31, 2010 and 2009, respectively. In 2010, the Company issued 35,416 shares of common stock pursuant to stock option exercise agreements at $0.05 for total gross proceeds of $1,771. Total shares issued and outstanding at December 31, 2010 and 2009 are 8,035,416 and 8,000,000, respectively.
	The holders of the Company’s common stock are entitled to one vote for each share of common stock held. Dividends may be declared and paid on the common stock from funds lawfully available as and when determined by the Board of Directors and subject to any preferential rights of any preferred stockholders. Shareholders of common stock are entitled to receive all assets of the Company available for distribution upon the dissolution or liquidation of the Company, subject to any preferential rights of any preferred stockholders.

13.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

G.	Stock Option and Grant Plan
	The Company has a Stock Option Plan (the “Plan”) which provides for the granting of qualified incentive stock options, nonqualified stock options, restricted stock, or other awards to the Company’s employees, officers, directors, and outside consultants to purchase up to an aggregate of 4,437,098 shares of the Company’s common stock. Option awards are generally granted with an exercise price equal to the fair value of the Company’s common stock at the date of grant; those options generally vest over 4 years and have 10 year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the Plan. If an employee owns more than ten percent of the combined voting stock of the Company, the option price of the Incentive Stock Option may not be less than 110 percent of the fair market value of the stock on the grant date and the contractual term may not exceed five years. At December 31, 2010 and 2009, the maximum number of shares available for future grants was 3,308,182 and 2,870,598, respectively. In June 2011, the Company resolved to cancel the stock option plan. See Note N.
	The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model using the assumptions noted in the table below. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. The Company uses historical data on employee turnover and terminations when available to estimate the percentage of options that will ultimately be exercised. Expected volatility is based on average volatility for a representative sample of publicly traded companies in the online gaming industry. The expected term represents the period of time that the options are expected to be outstanding. The risk-free interest rate is estimated using the rate of return on U.S. Treasury Notes with a life that approximates the expected life of the option.

	2010			2009
Risk-free interest rates		1.95% — 3.28	%		3.01% — 3.39	%
Expected term	7 years			6.25 years
Expected volatility		65	%		65	%
Expected annual dividends		0	%		0	%

14.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

G.	Stock Option and Grant Plan (continued)
	A summary of option activity under the Plan as of December 31, 2010 and 2009, and changes during the years then ended is presented below:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
Options	Shares			Price		Term (in yrs)		Value
Outstanding at January 1, 2009		1,695,000		$	0.050
Granted		291,500		$	0.250
Exercised		—			—
Forfeited or expired		(420,000	)	$	0.050
Outstanding at December 31, 2009		1,566,500		$	0.087		8.70	$	81,992
Exercisable at December 31, 2009		475,938		$	0.050		8.50	$	13,655
Outstanding at January 1, 2010		1,566,500		$	0.087
Granted		593,250		$	0.154
Exercised		(35,416	)	$	0.050
Forfeited or expired		(1,030,834	)	$	0.108
Outstanding at December 31, 2010		1,093,500		$	0.105		8.50	$	71,122
Exercisable at December 31, 2010		380,376		$	0.105		7.82	$	15,977

The weighted-average grant-date fair value of options granted during the years ended December 31, 2010 and 2009 was $0.097 and $0.156, respectively.

As of December 31, 2010 and 2009, there was $35,092 and $67,945, respectively, of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 2.76 and 2.69 years, respectively. Total compensation expense of $0 and $16,797 has been recognized during the years ended December 31, 2010 and 2009, respectively, and is included in general and administrative expenses in the accompanying statements of operations.

15.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

G.	Stock Option and Grant Plan (continued)
	A summary of the status of the Company’s nonvested shares as of December 31, 2010 and 2009, and changes during the years then ended is presented below:

				Weighted
				Average
				Grant-Date
Nonvested Shares	Shares			Fair Value
Nonvested at January 1, 2009		1,695,000		$	0.029
Granted		291,500		$	0.156
Vested		( 575,938	)	$	0.029
Forfeited or expired		( 320,000	)	$	0.029
Nonvested at December 31, 2009		1,090,562		$	0.102
Granted		593,250		$	0.097
Vested		( 248,917	)	$	0.049
Forfeited or expired		( 721,771	)	$	0.081
Nonvested at December 31, 2010		713,124		$	0.189

H.	Income Taxes
	The following is a summary of the significant components of the Company’s deferred tax assets and liabilities as of December 31:

	2010			2009
Deferred tax assets:
Net operating loss carry forwards	$	6,264,000		$	3,160,000
Research and development credit carry forwards		331,000			368,000
Accounts payable and accrued expenses		783,000			174,000
Deferrals		50,000			52,000
Gross deferred tax assets		7,428,000			3,754,000
Deferred tax liabilities:
Prepaid expenses		(933,000	)		(94,000	)
Accounts receivable		(73,000	)		(16,000	)
Property, equipment and depreciation		(28,000	)		(2,000	)
Gross deferred tax liabilities		(1,034,000	)		(112,000	)
Valuation allowance		(6,394,000	)		(3,642,000	)
Net deferred tax assets	$	—		$	—

16.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

H.	Income Taxes (continued)
	No provision for federal or state income taxes has been recorded for the years ended December 31, 2010 and 2009, as the Company incurred net losses. Any benefit for federal or state income taxes has been reduced by a corresponding increase to the related valuation allowance for deferred taxes.
	The Company has federal net operating losses and research and development tax credits available to offset against future taxable income of approximately $15,700,000 and $260,000, respectively, which expire at various dates through 2030. In addition, the Company has state net operating losses and research and development tax credits available to offset against future taxable income of approximately $14,700,000 and $107,000, respectively, which expire at various dates through 2015. Based on available information, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Therefore, the Company has established a valuation allowance against the net deferred tax assets at December 31, 2010 and 2009.
	Under provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may limit the amount of the net operating loss carryforwards and research and development credit carryforwards which could be utilized annually to offset future taxable income and taxes payable. The Company has not determined whether there has been such a change in ownership or the impact on the utilization of the loss carryforwards if such change has occurred.
	The Company is subject to U.S. federal and state income tax audits by taxing authorities for years 2008 through 2010. These years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as it relates to the amount and or timing of income, deductions and tax credits. Although the outcome of tax audits is always uncertain, management has analyzed the Company’s tax positions taken for all open tax years and has concluded that no provision for unrecognized tax benefits from uncertain tax positions is required in the Company’s financial statements.
I.	Commitments

1. Future lease commitments — The Company leases its office facilities under a non-cancelable lease that expires in February 2014. The lease is subject to rent escalation clauses, and the Company is responsible for its share of certain operating costs and real estate taxes. Total rental costs of the lease contract are amortized on the straight-line method over the life of the lease. Deferred rent was $112,842 and $129,548 at December 31, 2010 and 2009, respectively. Rent expense under the operating lease was $126,686 for the years ended December 31, 2010 and 2009.

17.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

I. Commitments (continued)

1. Future lease commitments (continued) — Future minimum lease payments under the operating lease are as follows:

2011	$	155,515
2012		162,950
2013		170,385
2014		14,250
Total	$	503,100

	The Company has an irrevocable standby letter of credit in the amount of $75,000, which is being utilized as security for the Company’s office lease. The financial institution treats the letter of credit as unavailable cash in one of the Company’s operating accounts. This cash is classified as restricted cash on the accompanying balance sheets.
2.	License agreements — The Company has entered into various long-term, non-cancelable, license agreements whereby the Company may use certain trademarks and other rights in conjunction with its online sports games. The agreements contain various non-cancelable expiration dates through May 2012 and call for royalties to be paid monthly at rates ranging from 15% to 20% of adjusted gross revenues. Some license agreements include minimum guaranteed royalty payments, which are initially recorded as an asset and as a liability at the contractual amount when no performance remains with the licensor. When license contracts are renewable at either party’s option, guarantee payments are recorded as an asset when actually paid and amortized over the life of the contract. The Company accrued $1,500,000 and $420,000 related to non-cancelable minimum guarantees at December 31, 2010 and 2009, respectively, which are included in prepaid expenses in the accompanying balance sheets. Advance payments of $416,667 and $79,460 were included in prepaid expenses in the accompanying balance sheets at December 31, 2010 and 2009, respectively. Royalty expenses under these agreements for the years ended December 31, 2010 and 2009 were $855,793 and $272,432, respectively.
	Future non-cancelable minimum royalty commitments at December 31, 2010, are as follows:

2011 $ 1,500,000

One license agreement that expires in May 2013 contains an option to terminate as of May 31, 2012. The Company has accrued the minimum guarantee for the non-cancelable period through May 31, 2012. The minimum royalty commitment under this agreement, if not terminated at May 31, 2012, is $2,000,000 payable during the year ended December 31, 2012.

18.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

J. Concentrations

1.	Customers — Four and three customers accounted for approximately 83% and 95% of the Company’s accounts receivable balance at December 31, 2010 and 2009, respectively. Two and three customers accounted for approximately 23% and 95% of revenues during the years ended December 31, 2010 and 2009, respectively.
2.	Vendors — Two vendors accounted for approximately 57% and 55% of the Company’s accounts payable balance at December 31, 2010 and 2009, respectively.

K. Employee Benefit Plan

The Company has established a retirement savings plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan covers substantially all employees of the Company who meet minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the 401(k) Plan may be made at the discretion of the Board of Directors. The Company has not made any contributions to the 401(k) Plan during the years ended December 31, 2010 and 2009. In June 2011, the Company resolved to terminate the 401(k) Plan. See Note N.

L. Supplemental Cash Flow Information

Cash paid for interest during the years ended December 31, 2010 and 2009 was $241,339 and $72,382, respectively.

The Company acquired computer hardware and software of $53,470 and $503,178 under capital lease obligations during the years ended December 31, 2010 and 2009, respectively.

The Company issued warrants associated with debt financing valued at $164,060 and $56,751 during the years ended December 31, 2010 and 2009, respectively.

M. Reclassification

Certain items in the 2009 financial statements have been reclassified to conform to the current year presentation. There was no change in previously reported net loss or changes in accumulated deficit as a result of these reclassifications.

19.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

N. Subsequent Events

1.	Amended credit agreement — In February 2011, a financial institution issued a notice of default under a material adverse change clause in a credit agreement and called the outstanding loan balance of $3,000,000. In March 2011, the Company entered into an amended credit agreement with the financial institution that implemented a revised repayment and operational plan related to outstanding long-term debt and retracted the notice of default. Under the amended agreement, the Company is required to raise $450,000 from the sale of stock to certain investors, pay the note payable to bank in full, pay $1,250,000 toward the debt balance shortly after the closing, and to implement a new installment payment plan with a final maturity of December 31, 2011. In addition, the warrants to purchase 450,342 shares of the Company’s Series B convertible preferred stock at an exercise price of $0.67 per share, discussed in Note E, were reduced to 225,171 shares.
	In connection with this agreement, the note payable to bank, note payable to financial institution and related debt discounts have been presented as current liabilities in the accompanying balance sheet at December 31, 2010.
2.	Sale of preferred stock — In March 2011, in connection with the amended credit agreement, the Company issued 624,177 shares of Series B-2 convertible preferred stock at $0.72095 for total gross proceeds of $450,000. In connection with the sale, the Company amended and restated its certificate of incorporation increasing its authorized shares of stock as follows:

	Shares
Series	Authorized
Common stock		40,000,000
Series A		10,080,000
Series B		12,620,000
Series B-1		3,500,000
Series B-2		1,000,000
Total		67,200,000

	All rights of Series B-2 preferred stockholders are in preference to the rights of all other stockholders.
3.	Asset purchase agreement — In June 2011, the Company entered into an asset purchase agreement with a purchaser and its senior lender, the financial institution referred to in Note N, 1. Under the terms of the agreement, the Company changed its name to QH Holding Co., sold certain assets of the Company to the purchaser subject to certain assumed liabilities for $836,646 with payment by purchaser to senior lender. This sale was not to be treated as a liquidation event under the restated certificate of incorporation.
	Included in the assets sold, was equipment and software purchased by the Company under capital lease obligations. In connection with the agreement, all capital lease obligations were paid in full by the Company and have been presented as current liabilities in the accompanying balance sheet at December 31, 2010.

20.

Quick Hit, Inc.
Notes to Financial Statements
December 31, 2010 and 2009

N. Subsequent Events (continued)

3.	Asset purchase agreement (continued) — In conjunction with the asset purchase agreement, the Company entered into a bill of sale agreement with the senior lender, whereby the Company sold the game (software source code) to the senior lender in partial settlement of the outstanding debt.
	In conjunction with these agreements, the Company resolved to terminate all plans for the benefit of its employees, including, but not limited to, medical, dental, disability insurances, 401(k) and trust and stock option plan. In addition, the Company resolved to take actions necessary to terminate its operations.

21.

EX-99.2

Exhibit 99.2

Unaudited financial statements of Quick Hit, Inc. as of June 3, 2011 and for the periods from January 1, 2011 through June 3, 2011 and 2010.

QUICK HIT, INC
FINANCIAL STATEMENTS

	Page
Condensed Balance Sheets as of June 3, 2011 (unaudited) and December 31, 2010		1
Condensed Statements of Operations for the periods January 1 through June 3, 2011 and 2010 (unaudited)		2
Condensed Statements of Cash Flows for the periods January 1 through June 3, 2011 and 2010 (unaudited)		3
Notes to Condensed Financial Statements (unaudited)		4

QUICK HIT, INC.
CONDENSED BALANCE SHEETS
(In thousands)

	June 3,			December 31,
	2011			2010
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	37		$	3,515
Accounts receivable, net		48			182
Prepaid expenses		1,683			2,318
Total current assets		1,768			6,015
Property and equipment, net		403			553
Restricted cash		75			75
Intangible asset, net		42			44
Total assets	$	2,288		$	6,687
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Long-term debt	$	1,668		$	4,114
Capital lease obligations		216			318
Accounts payable		132			115
Accrued expenses		1,685			1,837
Advances from customers and deferred revenue		37			63
Total current liabilities		3,738			6,447
Deferred rent		108			113
Commitments and contingencies
Stockholders’ equity (deficit):
Series B-2 convertible preferred stock		450			—
Series B-1 convertible preferred stock		2,471			2,471
Series B convertible preferred stock		8,000			8,000
Series A convertible preferred stock		5,000			5,000
Common stock		1			1
Additional paid-in capital		244			244
Accumulated deficit		(17,724	)		(15,589	)
Net stockholders’ equity (deficit)		(1,558	)		127
Total liabilities and stockholders’ equity (deficit)	$	2,288		$	6,687

See accompanying notes

1

QUICK HIT, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited, in thousands)

	January 1 through June 3
	2011			2010
Revenues	$	457		$	119
Cost of revenues		132			108
Gross margin		325			11
Operating costs and expenses
Research and development		734			1,160
Operations		319			383
Sales and marketing		786			620
General and administrative		343			457
		2,182			2,620
Operating loss		(1,857	)		(2,609	)
Other expenses (income)
Interest and financing costs, net		278			71
Net Loss		(2,135	)		(2,680	)

See accompanying notes

2

QUICK HIT, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

	January 1 through June 3
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities		(1,269	)		(2,366	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(6	)		(92	)
Net cash used in investing activities		(6	)		(92	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt		(2,653	)		(307	)
Sale of stock		450			1
Net cash used in financing activities		(2,203	)		(306	)
Net increase (decrease) in cash and cash equivalents		(3,478	)		(2,764	)
Cash and cash equivalents — beginning of period		3,515			6,430
Cash and cash equivalents — end of period	$	37		$	3,666

See accompanying notes

3

QUICK HIT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited, in thousands, except share information)

A. Basis of Presentation

The accompanying unaudited interim condensed financial statements of Quick Hit, Inc. (the “Company”) as of June 3, 2011 and for the periods January 1 through June 3, 2011 and 2010 (the “interim periods”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are normal, recurring and necessary to present fairly the results for the interim periods. Operating results for interim periods are not necessarily indicative of the results that may be expected for the entire year.

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The condensed balance sheet at December 31, 2010 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

The Company had recurring net losses since incorporation and negative cash flows from operations of $7,364 and $5,404 for 2010 and 2009, respectively, and as of June 3, 2010 had an accumulated deficit of $17,724. The Company’s future is dependent upon its ability to achieve cash flow positive operations and to raise additional financing. There is no assurance that the Company will meet its planned operations or that it will be successful in obtaining additional equity or debt financing on terms favorable to the Company. See Note I.

For further information, refer to the financial statements and notes thereto included in the Quick Hit, Inc. financial statements as of December 31, 2010 and for the year then ended included in Majesco Entertainment Company’s Current Report on Form 8-K dated June 3, 2011, as amended.

B. Summary of Significant Accounting Policies

Use of estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions for the reporting period and as of the financial statement date. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management has made certain significant estimates and assumptions in these financial statements relating to revenues, accounts receivable and related reserves, deferred taxes, accrued liabilities and stock option costs, among other accounts. Actual results could differ from those estimates.

Accounts receivable — The Company carries its accounts receivable at cost less an allowance for doubtful accounts. The allowance for doubtful accounts was $18 at each of June 3, 2011 and December 31, 2010.

Property, equipment and depreciation — Property and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the assets on a straight-line basis. Depreciation expense totaled $155 and $133 for the interim periods ended June 3, 2011 and 2010.

Intangible asset — Intangible asset consists of costs incurred to acquire the domain name “Quick Hit” for $50. The Company’s estimate of the expected use of the domain name is ten years. Amortization expense totaled $2 for each of the interim periods ended June 3, 2011 and 2010.

4

C. Prepaid Expenses

Prepaid expenses consists of the following:

	June 3,		December 31,
	2011		2010
License fees	$	1,540	$	2,042
Customer acquisition costs		127		234
Other		16		41
	$	1,683	$	2,317

D. Capital Lease Obligations

Capital lease obligations consist of the following;

	June 3,			December 31,
	2011			2010
Capital lease obligations	$	220		$	325
Less: unamortized discount		(4	)		(7	)
Net	$	216		$	318

In June 2011, the Company entered into an asset purchase agreement that required full payment of all amounts outstanding under the capital lease obligations at closing. See Note I.

E. Long-Term Debt

Long-term debt consists of the following:

	June 3,			December 31,
	2011			2010
Note payable to a bank, due October 2012	$	—		$	1,286
Note payable to a financial institution, due December 2011		1,750			3,000
		1,750			4,286
Less: current portion of long-term debt		(1,668	)		(4,114	)
Less: unamortized discount		(82	)		(172	)
	$	—		$	—

In February 2011, a financial institution issued a notice of default under a material adverse change clause in a credit agreement and called the outstanding loan balance of $3,000. In March 2011, the Company entered into an amended credit agreement with a financial institution implementing a revised repayment plan related to all outstanding debt and the notice of default was retracted. Under the agreement, the Company was required to raise $450 from the sale of stock to certain investors, pay the note payable to a bank in full, pay $1,250 of outstanding principal balance and pay the remaining principal balance in installments through December 31, 2011. In addition, outstanding warrants to purchase 450,342 shares of the Company’s Series B Convertible Preferred Stock were reduced to 225,171 shares.

F. Capital Stock

Sale of preferred stock — In March 2011, in connection with the amended credit agreement described in Note E, the Company issued 624,177 shares of Series B-2 convertible preferred stock for total gross proceeds of $450. In connection with the sale, the Company amended and restated its certificate of incorporation increasing its authorized stock to the following:

Series	Shares Authorized
Common stock		40,000,000
Series A		10,080,000
Series B		12,620,000
Series B-1		3,500,000
Series B-2		1,000,000
		67,200,000

Rights of Series B-2 preferred stockholders are in preference to the rights of all other stockholders.

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G. Commitments

1. Lease commitments — Rent expense under the Company’s operating lease amounted to $52 in each of the interim periods ended June 3, 2011 and 2010. The Company has issued an irrevocable letter of credit in the amount of $75 as security for the Company’s office leases, for which $75 of cash is restricted for security. In connection with the asset purchase agreement described in Note I, the lease was assumed by the purchaser together with the letter of credit and restricted cash.

2. License agreements — Future non-cancelable minimum royalty commitments at June 3, 2011 for a license through May 31, 2012 amount to $1,500, which the Company has accrued as of June 3, 2011.

H. Employee Benefit Plans

The Company maintains a retirement savings plan and a stock option plan for the benefit of its employees. In conjunction with the asset purchase agreement described in Note I, the Company resolved to terminate these plans.

I. Asset Purchase Agreement

In June 2011, the Company entered into an asset purchase agreement with a purchaser and its senior lender, the financial institution referred to in Note D. Under the terms of the agreement, the Company changed its name to QH Holding Co., sold substantially all of its assets and transferred certain accounts payable and accrued expenses of the Company to the purchaser for $837, with payment being made by the purchaser as directed by the senior lender. The sale was not to be treated as a liquidation event under the restated certificate of incorporation.

Included in the assets sold was equipment and software purchased by the Company under capital lease obligations. In connection with the agreement, all capital lease obligations were paid in full by the Company and have been presented as current liabilities in the accompany balance sheet.

In conjunction with the asset purchase agreement, the Company entered into a bill of sale agreement with the senior lender whereby the Company sold software source code to the senior lender in partial settlement of outstanding debt.

These condensed financial statements do not include any adjustments for the carrying values of assets, liabilities or stockholders’ deficiency that are affected by the asset purchase agreement.

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EX-99.3

Exhibit 99.3

Unaudited Pro Forma Condensed Consolidated Financial Statements of Majesco Entertainment Company.

On June 3, 2011, the Company acquired certain assets and assumed certain liabilities of Quick Hit, a developer and operator of online games, and hired its twelve employees. The aggregate purchase price paid was approximately $837,000 in cash.

Based on the relationship of Quick Hit’s reported net loss for its year ended December 31, 2010 ($7.1 million) to the Company’s reported net loss for the fiscal year ended October 31, 2010, the Company is presenting the following pro forma condensed consolidated financial statements in accordance with the requirements of Form 8-K, which reflect costs of Quick Hit’s former strategy. The pro forma statements do not purport to represent the actual results of operations that would have occurred if the acquisition had taken place on the dates specified and are not expected to be indicative of the results of operations that may be achieved in the future. Further, the Company intends to reduce subcontracted development and other expenses incurred by it prior to the acquisition of the Quick Hit assets to pursue its social games strategy. No adjustments for cost savings expected to be achieved through the acquisition of the Quick Hit assets are reflected as adjustments to the pro forma results.

Quick Hit was originally formed in 2008 to develop and operate a series of online, head-to-head sports games (e.g. football, baseball, basketball, hockey and soccer) with aspects of massively multiplayer online role-playing games (MMORPG) and 3D technology. Between 2009 and 2011, Quick Hit revised its business plan to focus resources on adding features to its football game launched in 2009 and to delay its schedule of future releases. Accordingly, it reduced its workforce during this time from over 30 in 2009 to 12 by June 2011. The Company intends to utilize this workforce to operate its social games strategy and reduce its subcontracted development costs. Accordingly, the historical and pro forma results include significant personnel and licensing costs which will not be incurred by the Company on a going-forward basis. The pro forma financial statements presented do not include adjustments to reflect the expense reductions and synergies the Company expects to realize.

The assets purchased include substantially all of the assets of Quick Hit, consisting primarily of computer equipment and intangible assets, excluding assets related to its online interactive football game (the “Game”). The Company also entered into an exclusive license agreement with a senior lender to Quick Hit for the source code to the Game, with options to extend the license and purchase the game at the end of the license period. If exercised by the Company, extension and option payments of $125,000, $125,000 and $60,000 are due in September 2011, December 2011 and September 2012, respectively. There was no relationship between the Company and Quick Hit prior to the execution of the agreements.

In connection with the transaction, the Company hired twelve employees of Quick Hit, representing substantially all of its personnel. In addition, the Company issued 170,652 shares of restricted common stock as part of the inducement and retention of employees. The shares of restricted common stock have a transaction-date fair value of approximately $524,000, which will be recognized as compensation expense over the 18-month vesting period which began June 3, 2011.

The acquisition has been accounted for as a business combination in accordance with ASC 805, Business Combinations, and as such the Quick Hit assets acquired and liabilities assumed have been recorded at their respective fair values. The determination of fair value for the identifiable tangible and intangible assets acquired and liabilities assumed requires use of accounting estimates and judgments. Significant estimates and assumptions include, but are not limited to: estimated useful life of tangible and intangible assets acquired, projecting the likelihood and timing of the availability of games to the public and estimating future cash flows. The estimated fair values of the assets acquired and liabilities assumed at the acquisition date included in the unaudited pro forma

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condensed consolidated financial statements are provisional and are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

The unaudited pro forma financial statements included herein give effect to the Company’s acquisition of the selected assets of Quick Hit, Inc. and reflect adjustments having a continuing impact on the consolidated company as a result of using the acquisition method of accounting for the acquisition under ASC 805. The unaudited pro forma condensed consolidated balance sheet is based on historical data as reported by the separate companies, prepared as if the acquisition had occurred on April 30, 2011. The unaudited pro forma condensed consolidated statements of operations is based on historical data as reported by the separate companies, prepared as if the acquisition had occurred on November 1, 2009.

The unaudited pro forma financial statements have been prepared based on available information, using assumptions that our management believes are reasonable. The Statements do not reflect any adjustments for the effect of non-recurring items or operating synergies that we may realize as a result of the acquisition. The statements include certain reclassifications to conform the historical financial information of Quick Hit, Inc. to our presentation.

The assumptions used and adjustments made in preparing the unaudited pro forma financial statements are described in the Notes, which should be read in conjunction with the statements. The statements and related notes contained herein should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended October 31, 2010 and our Quarterly Report on Form 10-Q for the quarter ended April 30, 2011, and with Quick Hit’s audited financial statements for the two years in the period ended December 31, 2010 and unaudited financial statements as of and for the periods January 1 through June 3, 2010 and 2011, which are included in our Current Report on Form 8-K dated June 3, 2011, as amended. See Note 1 to the unaudited pro forma condensed consolidated financial statements.

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MAJESCO ENTERTAINMENT COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF APRIL 30, 2011
(In thousands, except per share amounts)

	Historical						Pro Forma					Pro Forma
	Majesco			Quick Hit*			Adjustments			Notes		Combined
ASSETS
Current assets:
Cash and cash equivalents	$	18,478		$	37		$	(837	)		A	$	17,678
Due from factor		6,357											6,357
Accounts and other receivables, net		1,219			48								1,267
Inventory, net		7,626											7,626
Advance payments for inventory		203											203
Capitalized software development costs and license fees		5,557											5,557
Prepaid expenses		698			1,683			(1,500	)		B		881
Total current assets		40,138			1,768			(2,337	)				39,569
Property and equipment, net		906			403			31			C		1,340
Other assets		88			117			63			D		268
Goodwill								73			E		73
Total assets	$	41,132		$	2,288		$	(2,170	)			$	41,250
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Long-term debt and capital lease obligation				$	1,884		$	(1,884	)		G
Accounts payable and accrued expenses	$	13,863			1,817			(1,736	)		F	$	13,944
Advances from customers and deferred revenue		560			37								597
Total current liabilities		14,423			3,738			(3,620	)				14,541
Warrant liability		2,551											2,551
Deferred rent					108			(108	)		F
Commitments and contingencies
Stockholders’ equity:
Common stock		40											40
Additional paid-in capital		118,138											118,138
Accumulated deficit — Majesco		(93,496	)										(93,496	)
Accumulated other comprehensive loss		(524	)										(524	)
Stockholders’ deficit—Quick Hit					(1,558	)		1,558			H
Net stockholders’ equity		24,158			(1,558	)		1,558					24,158
Total liabilities and stockholders’ equity	$	41,132		$	2,288		$	(2,170	)			$	41,250

The accompanying notes are an integral part of the unaudited pro forma condensed balance sheet.

*         As of June 3, 2011. See Note 1 to the unaudited pro forma condensed consolidated financial statements.

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MAJESCO ENTERTAINMENT COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED APRIL 30, 2011
(In thousands, except per share amounts)

						Pro Forma					Pro Forma
	Majesco		Quick Hit*			Adjustments			Notes		Combined
Net revenues	$	80,608	$	600							$	81,208
Cost of sales
Product costs		34,104		175								34,279
Software development costs and license fees		13,222				$	14			D		13,236
		47,326		175			14					47,515
Gross profit		33,282		425			(14	)				33,693
Operating costs and expenses
Product research and development		3,203		1,217								4,420
Selling and marketing		9,639		1,070								10,709
General and administrative		5,603		511			5			F		6,119
Loss on impairment of software development costs and license fees — cancelled games		1,362										1,362
Depreciation and amortization		102		155			5			C		262
		19,909		2,953			10					22,872
Operating income (loss)		13,373		(2,528	)		(24	)				10,821
Other expenses (income)
Interest and financing costs, net		955		332			(332	)		G		955
Change in fair value of warrant liability		3,344										3,344
Income (loss) before income taxes		9,074		(2,860	)		308					6,522
Income taxes		237					(51	)		I		186
Net income (loss)	$	8,837	$	(2,860	)	$	359				$	6,336
Net income per share:
Basic	$	0.23									$	0.17
Diluted	$	0.22									$	0.16
Weighted average shares outstanding:
Basic		37,841,453										37,841,453
Diluted		39,322,894										39,322,894

The accompanying notes are an integral part of the unaudited pro forma condensed consolidated statement of operations.

*       Six months ended June 3, 2011. See Note 1 to the unaudited pro forma condensed consolidated financial statements.

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MAJESCO ENTERTAINMENT COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED OCTOBER 31, 2010
(In thousands, except per share amounts)

							Pro Forma					Pro Forma
	Majesco			Quick Hit*			Adjustments			Notes		Combined
Net revenues	$	75,648		$	525							$	76,173
Cost of sales
Product costs		38,718			295								39,013
Software development costs and license fees		17,524					$	28			D		17,552
Loss on impairment of software development costs and license fees-future releases		1,021											1,021
		57,263			295			28					57,586
Gross profit		18,385			230			(28	)				18,587
Operating costs and expenses
Product research and development		3,347			3,744								7,091
Selling and marketing		8,432			1,827								10,259
General and administrative		8,127			1,134			10			F		9,271
Loss on impairment of software development costs and license fees — cancelled games		407											407
Depreciation and amortization		183			342			10			C		535
		20,496			7,047			20					27,563
Operating loss		(2,111	)		(6,817	)		(48	)				(8,976	)
Other expenses (income)
Interest and financing costs, net		999			292			(292	)		G		999
Change in fair value of warrant liability		(482	)										(482	)
Loss before income taxes		(2,628	)		(7,109	)		244					(9,493	)
Income taxes		(1,656	)										(1,656	)
Net loss	$	(972	)	$	(7,109	)	$	244				$	(7,837	)
Net loss per share:
Basic	$	(0.03	)									$	(0.21	)
Diluted	$	(0.03	)									$	(0.21	)
Weighted average shares outstanding:
Basic		37,019,750											37,019,750
Diluted		37,019,750											37,019,750

The accompanying notes are an integral part of the unaudited pro forma condensed consolidated statement of operations.

* Fiscal year ended December 31, 2010. See Note 1 to the unaudited pro forma condensed consolidated financial statements.

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MAJESCO ENTERTAINMENT COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANICAL STATEMENTS
(In thousands, except per share amounts)

Note 1 — Basis of Presentation

The unaudited pro forma condensed consolidated financial statements are not intended to represent or be indicative of the Company’s consolidated results of operations or financial position that would have been reported had the Quick Hit acquisition been completed as of the dates presented, and should not be taken as a representation of the Company’s future consolidated results of operations or financial position. The unaudited pro forma condensed consolidated financial statements do not reflect any operating efficiencies and associated cost savings that the Company may achieve with respect to the combined companies.

The unaudited pro forma condensed consolidated statement of operations is based on historical statements of operations of Majesco Entertainment Company (the “Company”) and Quick Hit, Inc. (“Quick Hit”), after giving effect to the acquisition of Quick Hit as if it occurred on November 1, 2009. Certain amounts in Quick Hit’s historical consolidated statement of operations have been reclassified to conform to the Company’s presentation.

The acquisition has been accounted for as a purchase business combination pursuant to ASC 805, Business Combinations, and as such the Quick Hit assets acquired and liabilities assumed have been recorded at their estimated respective fair values at the time of the acquisition as defined by ASC 820, Fair Value Measurements and Disclosures and determined by management. In accordance with ASC 805, Goodwill as of the acquisition date is measured as the excess of consideration transferred, which is also generally measured at fair value, and the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. The acquisition was financed with available cash on hand.

The Company has made significant assumptions and estimates in determining the preliminary estimated purchase price and the preliminary allocation of the estimated purchase price in the unaudited pro forma condensed combined financial statements. These preliminary estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuation of certain tangible and intangible assets acquired and liabilities assumed in connection with the acquisition. These changes could result in material variances between the Company’s future financial results and the amounts presented in these unaudited pro forma combined condensed financial statements, including variances in fair values recorded, as well as expenses and cash flows associated with these items.

The fiscal year of Quick Hit ends on December 31. The pro forma condensed consolidated statement of operations includes the Company’s operations for its fiscal year ended October 31, 2010 and the results of Quick Hit for its fiscal year ended December 31, 2010. The pro forma condensed consolidated statement of operations for the six months ended April 30, 2011 includes the results of the Company for the six months ended April 30, 2011 and the results of Quick Hit for their six months ended June 3, 2011. Accordingly, Quick Hit’s results for the month ended December 31, 2010, including $143 of revenue and $726 of net loss, are included in both periods presented. The pro forma condensed consolidated balance sheet includes the Company’s balance sheet as of April 30, 2011 and the balance sheet of Quick Hit as of June 3, 2011.

The unaudited pro forma combined condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended October 31, 2010 and our Quarterly Report on Form 10-Q for the quarter ended April 30, 2011, and with Quick Hit’s audited financial statements for the two years in the period ended December 31, 2010 and unaudited financial statements as of and for the periods January 1 through June 3, 2010 and 2011, which are included in our Current Report on Form 8-K dated June 3, 2011, as amended.

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Note 2 — Preliminary Purchase Price Allocation

Pursuant to the Company’s business combinations accounting policy, the total preliminary purchase price for Quick Hit was allocated to the preliminary net tangible and intangible assets based upon their preliminary fair values as set forth below. The Company acquired certain key operating assets as well as the Quick Hit development team to execute on its social games strategy. The Company believes the team can enhance its ability to build, deploy and monetize online games. These factors contributed to a purchase price in excess of the fair value of net tangible and intangible assets acquired, and as a result, the Company has recorded goodwill in connection with this transaction.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

	Valuation
Cash	$	37
Accounts receivable		48
Prepaid expenses		183
Property and equipment		434
Other assets		75
Accounts payable		(81	)
Customer advances		(37	)
Intangible assets		105
Net identifiable assets		764
Goodwill		73
Net assets acquired		837

The above estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed but the Company is waiting for additional information necessary to finalize those fair values. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

Of the $105 allocated to identifiable acquired intangible assets, $88 was provisionally assigned to the Company’s license and option for Quick Hit’s existing online football game and $17 to a game in the initial phases of development. The remaining $73 of purchase price was provisionally assigned to Goodwill.

The valuation of the intangible assets acquired and related amortization period is as follows:

	Valuation		Amortization Period
Online game license and option	$	88	7-15 months
In process research		17		N/A

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Note 3 — Pro Forma Adjustments

A.	Reflects cash paid in the purchase of the assets.
B.	Reflects prepaid balances on agreements related to Quick Hit’s online football game that were not acquired by the Company.
C.	Reflects the excess of the estimated fair value of website and network assets acquired over the cost of assets as recorded by Quick Hit and related depreciation.
D.	Reflects $105 of purchase price allocated to the Company’s license and option agreement related to Quick Hit’s online football game and a game in development, less related intangibles recorded by Quick Hit. Incremental amortization expense of $28 and $14 for the year ended October 31, 2010 and the six months ended April 30, 2011, respectively, relate to the Company’s acquired option.
E.	Reflects $73 of purchase price allocated to Goodwill.
F.	Reflects accounts payable and accrued liabilities not acquired by the Company in accordance with the Purchase Agreement, including primarily $1,500 pertaining to a license and $120 of accrued interest on long-term debt, and an adjustment to deferred rent recorded by Quick Hit.
G.	Reflects note payable balances outstanding to lenders of Quick Hit not assumed by the Company and the related elimination of Quick Hit’s historical interest expense.
H.	Reflects the elimination of Quick Hit’s historical equity balances.
I.	Reflects the application of Quick Hit operating losses to the Company’s taxable income based on the application of the Company’s effective tax rate, which primarily reflects alternative minimum taxes in the period.

8