10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2011

Commission File No. 000-51128

Majesco Entertainment Company

(Exact name of registrant as specified in its charter)

DELAWARE	06-1529524
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

160 Raritan Center Parkway, Edison, NJ 08837
(Address of principal executive offices)

Registrant’s Telephone Number, Including Area Code: (732) 225-8910

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.4.05 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of September 9, 2011, there were 41,295,721 shares of the Registrant’s common stock outstanding.

MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY
INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements:		3
Condensed Consolidated Balance Sheets as of July 31, 2011 (unaudited) and October 31, 2010		3
Condensed Consolidated Statements of Operations for the three and nine months ended July 31, 2011 and 2010 (unaudited)		4
Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2011 and 2010 (unaudited)		5
Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures about Market Risk		21
Item 4. Controls and Procedures		21
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		23
Item 1A. Risk Factors		23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 3. Defaults Upon Senior Securities		23
Item 4. (Removed and Reserved)		24
Item 5. Other Information		24
Item 6. Exhibits		24
SIGNATURES		25
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

	July 31,			October 31,
	2011			2010
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	19,674		$	8,004
Due from factor		1,409			1,015
Accounts and other receivables, net		2,788			725
Inventory, net		4,607			8,418
Advance payments for inventory		566			5,454
Capitalized software development costs and license fees		9,417			4,903
Prepaid expenses and other current assets		896			921
Total current assets		39,357			29,440
Property and equipment, net		1,289			520
Other assets		232			69
Total assets	$	40,878		$	30,029
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	12,351		$	11,375
Inventory financing payables		—			5,557
Advances from customers and deferred revenue		622			945
Total current liabilities		12,973			17,877
Warrant liability		1,187			144
Commitments and contingencies
Stockholders’ equity:
Common stock — $.001 par value; 250,000,000 shares authorized; 40,952,586 and 39,326,376 shares issued and outstanding at July 31, 2011 and October 31, 2010, respectively		41			39
Additional paid-in capital		118,811			114,824
Accumulated deficit		(91,607	)		(102,333	)
Accumulated other comprehensive loss		(527	)		(522	)
Net stockholders’ equity		26,718			12,008
Total liabilities and stockholders’ equity	$	40,878		$	30,029

See accompanying notes

3

MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share amounts)

	Three Months Ended						Nine Months Ended
	July 31						July 31
	2011			2010			2011		2010
Net revenues	$	19,545		$	12,153		$	100,154	$	52,265
Cost of sales
Product costs		8,577			7,398			42,681		24,573
Software development costs and license fees		3,015			1,975			16,237		12,074
Loss on impairment of software development costs and license fees-future releases		—			—			—		1,021
		11,592			9,373			58,918		37,668
Gross profit		7,953			2,780			41,236		14,597
Operating costs and expenses
Product research and development		1,947			720			5,150		2,361
Selling and marketing		2,313			1,641			11,952		6,225
General and administrative		2,484			2,004			8,089		6,394
Loss on impairment of software development costs and license fees — cancelled games		150			116			1,512		276
Depreciation and amortization		121			43			223		140
		7,015			4,524			26,926		15,396
Operating income (loss)		938			(1,744	)		14,310		(799	)
Other expenses (income)
Interest and financing costs, net		123			82			1,077		703
Change in fair value of warrant liability		(1,258	)		(183	)		2,085		(412	)
Income (loss) before income taxes		2,073			(1,643	)		11,148		(1,090	)
Income taxes		184			—			421		(1,647	)
Net income (loss)	$	1,889		$	(1,643	)	$	10,727	$	557
Net income (loss) per share:
Basic	$	0.05		$	(0.04	)	$	0.28	$	0.02
Diluted	$	0.05		$	(0.04	)	$	0.27	$	0.01
Weighted average shares outstanding:
Basic		38,803,090			36,934,987			38,165,521		36,838,981
Diluted		41,318,806			36,934,987			39,827,022		37,142,649

See accompanying notes

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MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

	Nine Months Ended
	July 31,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	10,727		$	557
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		223			140
Change in fair value of warrant liability		2,085			(412	)
Non-cash compensation expense		1,064			1,324
Loss on disposal of assets		—			19
Provision for price protection and customer allowances		2,380			3,073
Amortization of software development costs and license fees		3,467			3,629
Loss on impairment of software development costs and license fees		1,512			1,297
Inventory write-downs		1,612			—
Changes in operating assets and liabilities, net of acquisition:
Due from factor		(2,786	)		(940	)
Accounts and other receivables		(1,987	)		475
Inventory		2,199			2,672
Capitalized software development costs and license fees		(9,420	)		(6,705	)
Advance payments for inventory		4,888			—
Prepaid expenses and other assets		261			2,270
Accounts payable and accrued expenses		753			(2,115	)
Advances from customers and other liabilities		(376	)		(676	)
Net cash provided by operating activities		16,602			4,608
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(396	)		(192	)
Purchase of assets of Quick Hit, Inc., net of acquired cash		(800	)		—
Net cash used in investing activities		(1,196	)		(192	)
CASH FLOWS FROM FINANCING ACTIVITIES
Inventory financing		(5,557	)		(5,684	)
Proceeds from exercise of options and warrants		1,824			—
Net cash used in financing activities		(3,733	)		(5,684	)
Effect of exchange rates on cash and cash equivalents		(3	)		(22	)
Net increase (decrease) in cash and cash equivalents		11,670			(1,290	)
Cash and cash equivalents — beginning of period		8,004			11,839
Cash and cash equivalents — end of period	$	19,674		$	10,549
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Landlord-provided leasehold improvements	$	163		$	—
Warrant liability reclassified to additional paid-in capital upon exercise		1,042			—
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$	1,078		$	710

See accompanying notes

5

MAJESCO ENTERTAINMENT COMPANY AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except share amounts)

1. PRINCIPAL BUSINESS ACTIVITY AND BASIS OF PRESENTATION

     The accompanying financial statements present the financial results of Majesco Entertainment Company and Majesco Europe Limited, its wholly-owned subsidiary, (“Majesco” or the “Company”) on a consolidated basis.

     The Company is a provider of video game products primarily for the family-oriented, mass-market consumer. It sells its products primarily to large retail chains, specialty retail stores, and distributors. It publishes video games for major current generation interactive entertainment hardware platforms, including Nintendo’s DS, DSi and Wii, Sony’s PlayStation 3, or PS3, and PlayStation Portable, or PSP, Microsoft’s Xbox 360 and the personal computer, or PC. It also publishes games for numerous digital platforms, including mobile platforms such as iPhone, iPad and iPod Touch, as well as online platforms such as Facebook.

     The Company’s video game titles are targeted at various demographics at a range of price points. Due to the larger budget requirements for developing and marketing premium console titles for core gamers, the Company focuses on publishing casual games targeting mass-market consumers. In some instances, its titles are based on licenses of well-known properties and, in other cases based on original properties. The Company enters into agreements with content providers and video game development studios for the creation of its video games.

     The Company’s operations involve similar products and customers worldwide. These products are developed and sold domestically and internationally. The Company may also enter into agreements with licensees, particularly for sales of its products internationally. The Company is centrally managed and its chief operating decision makers, the chief executive and other officers, use consolidated and other financial information supplemented by sales information by product category, major product title and platform for making operational decisions and assessing financial performance. Accordingly, the Company operates in a single segment.

     Net revenues by geographic region were as follows:

	Three Months Ended July 31,										Nine Months Ended July 31,
	2011		%			2010		%			2011		%			2010		%
United States	$	14,214		72.7	%	$	12,122		99.7	%	$	91,425		91.3	%	$	50,488		96.6	%
Europe		5,331		27.3	%		31		0.3	%		8,729		8.7	%		1,777		3.4	%
Total	$	19,545		100.0	%	$	12,153		100.0	%	$	100,154		100.0	%	$	52,265		100.0	%

     The accompanying interim condensed consolidated financial statements of the Company are unaudited, but in the opinion of management, reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim period. Accordingly, they do not include all information and notes required by generally accepted accounting principles for complete financial statements. The Company’s financial results are impacted by the seasonality of the retail selling season and the timing of the release of new titles. The results of operations for interim periods are not necessarily indicative of results to be expected for the entire fiscal year. The balance sheet at October 31, 2010 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes for the year ended October 31, 2010 filed with the Securities and Exchange Commission on Form 10-K on January 31, 2011.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Revenue Recognition. The Company recognizes revenue upon the shipment of its products when: (1) title and the risks and rewards of ownership are transferred; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable. Certain products are sold to customers with a street date (the earliest date these products may be resold by retailers). Revenue for sales of these products is not recognized prior to their street date. Some of the Company’s software products provide limited online features at no additional cost to the consumer. Generally, such features have been considered to be incidental to the Company’s overall product offerings and an inconsequential deliverable. Accordingly, the Company does not defer any revenue related to products containing these limited online features. However, in instances where online features or additional functionality is considered a substantive deliverable in addition to the software product, such characteristics will be taken into account when applying the Company’s revenue recognition policy.

     The Company generally sells its products on a no-return basis, although in certain instances, the Company provides price protection or other allowances on certain unsold products. Price protection, when granted and applicable, allows customers a partial credit

6

against amounts they owe the Company with respect to merchandise unsold by them. Revenue is recognized, and accounts receivable is presented, net of estimates of these allowances.

     The Company estimates potential future product price protection and other allowances related to current period product revenue. The Company analyzes historical experience, current sell through of retailer inventory of the Company’s products, current trends in the video game market, the overall economy, changes in customer demand and acceptance of the Company’s products and other related factors when evaluating the adequacy of price protection and other allowances.

     Sales incentives or other consideration given by the Company to customers that are considered adjustments of the selling price of its products, such as rebates and product placement fees, are reflected as reductions of revenue. Sales incentives and other consideration that represent costs incurred by the Company for benefits received, such as the appearance of the Company’s products in a customer’s national circular ad, are reflected as selling and marketing expenses, in accordance with Accounting Standards Codification (“ASC”) 605-50, Customer Payments and Incentives.

     In addition, some of the Company’s software products are sold exclusively as downloads of digital content for which the consumer takes possession of the digital content for a fee. Revenue from product downloads is generally recognized when the download is made available (assuming all other recognition criteria are met).

     We operate hosted online games in which players can play for free and purchase virtual goods for use in the games. We recognize revenues from the sale of virtual goods as service revenues over the estimated period in which players use the goods in the game. We currently estimate these periods of use to be three to four months. We will periodically assess our estimates for this period of use and future increases or decreases in these estimates will affect our recognized revenues prospectively. We also recognize advertising revenue related to advertising placed on our game sites as ads are served.

     The Company records revenue for distribution agreements where it is acting as an agent as defined by ASC Topic 605, Revenue Recognition, Subtopic 45, Principal Agent Considerations, on a net basis. When the Company enters into license or distribution agreements that provide for multiple copies of games in exchange for guaranteed amounts, revenue is recognized in accordance with the terms of the agreements, generally upon delivery of a master copy, assuming our performance obligations are complete and all other recognition criteria are met, or as per-copy royalties are earned on sales of games. Royalty revenue from sales by our distribution partner in Europe amounted to $2,521 in the three months ended July 31, 2011, or approximately 13% of total revenue. Royalty revenue amounted to less than 10% of total revenue in other periods presented.

     Inventory. Inventory, which consists primarily of finished goods, is stated at the lower of cost as determined by the first-in, first-out method, or market. The Company estimates the net realizable value of slow-moving inventory on a title-by-title basis and charges the excess of cost over net realizable value to cost of sales. In the three and nine months ended July 31, 2011, such charges to cost of sales amounted to $743 and $1,612, respectively, based on current estimates of net realizable value. Such estimates may change and additional charges may be incurred until the related inventory items are sold.

     Capitalized Software Development Costs and License Fees. Software development costs include fees in the form of milestone payments made to independent software developers and licensors. Software development costs are capitalized once technological feasibility of a product is established and management expects such costs to be recoverable against future revenues. For products where proven game engine technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a product-by-product basis. Amounts related to software development that are not capitalized are charged immediately to product research and development costs. Commencing upon a related product’s release capitalized software development costs and prepaid license fees are amortized to cost of sales based upon the higher of (i) the ratio of current revenue to total projected revenue or (ii) straight-line charges over the expected marketable life of the product.

     Prepaid license fees represent license fees to owners for the use of their intellectual property rights in the development of the Company’s products. Minimum guaranteed royalty payments for intellectual property licenses are initially recorded as an asset (prepaid license fees) and a current liability (accrued royalties payable) at the contractual amount upon execution of the contract or when specified milestones or events occur and when no significant performance remains with the licensor. Licenses are expensed to cost of sales at the higher of (i) the contractual royalty rate based on actual sales or (ii) an effective rate based upon total projected revenue related to such license. Capitalized software development costs are classified as non-current if they relate to titles for which the Company estimates the release date to be more than one year from the balance sheet date.

     The amortization period for capitalized software development costs and prepaid license fees is usually no longer than one year from the initial release of the product. If actual revenues or revised forecasted revenues fall below the initial forecasted revenue for a particular license, the charge to cost of sales may be larger than anticipated in any given quarter. The recoverability of capitalized software development costs and prepaid license fees is evaluated quarterly based on the expected performance of the specific products to which the costs relate. When, in management’s estimate, future cash flows will not be sufficient to recover previously capitalized costs, the Company expenses these capitalized costs to “cost of sales-software development costs and license fees — future release,” in

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the period such a determination is made. These expenses may be incurred prior to a game’s release for games that have been developed. If a game is cancelled prior to completion of development and never released to market, the amount is expensed to general and administrative expenses. If the Company was required to write off licenses, due to changes in market conditions or product acceptance, its results of operations could be materially adversely affected.

     Costs of developing online free-to-play social games, including payments to third-party developers are expensed as research and development expenses. Revenue from these games is largely dependent on players’ future purchasing behavior in the game and currently the Company cannot reliably project that future net cash flows from developed games will exceed related development costs.

     Prepaid license fees and milestone payments made to the Company’s third party developers are typically considered non-refundable advances against the total compensation they can earn based upon the sales performance of the products. Any additional royalty or other compensation earned beyond the milestone payments is expensed to cost of sales as incurred.

     Estimates. The preparation of 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 or the disclosure of gain or loss contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Among the more significant estimates included in these financial statements are price protection and customer allowances, the valuation of inventory and the recoverability of advance payments for software development costs and intellectual property licenses. Actual results could differ from those estimates.

     Income (Loss) Per Share. Basic income (loss) per share of common stock is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Basic income (loss) per share excludes the impact of unvested shares of restricted stock issued as long term incentive awards to directors, officers and employees. Diluted income per share reflects the potential impact of common stock options and unvested shares of restricted stock and outstanding common stock purchase warrants that have a dilutive effect under the treasury stock method.

     Reclassifications. For comparability, certain 2010 amounts have been reclassified, where appropriate, to conform to the financial statement presentation used in 2011.

     Commitments and Contingencies. The Company records a liability for commitments and contingencies when the amount is both probable and reasonably estimable.

     Concentrations. The Company develops and distributes video game software for proprietary platforms under licenses from Nintendo, Sony and Microsoft, which must be periodically renewed. The Company’s agreements with these manufacturers also grant them certain control over the supply and manufacturing of the Company’s products. In addition, in the three and nine months ended July 31, 2011, sales of the Company’s Zumba Fitness game accounted for approximately 80% and 70% of revenues, respectively. We license the rights to publish these games from a third party and have rights to publish other Zumba Fitness games. If the new versions are not successful, this may have a significant impact on our future revenues. In addition, if these arrangements are disrupted, the Company’s operations could be adversely affected. In the nine months ended July 31, 2010, the Company’s Cooking Mama games accounted for 50% of revenues.

     Recent Accounting Pronouncements

     Fair Value — In May 2011, the FASB issued an update to ASC 820-10, Measuring Liabilities at Fair Values. The update to ASC 820-10 clarifies the application of fair value standards in certain circumstances and requires additional disclosures about fair value measurements within Level 3, including sensitivity to changes in unobservable inputs. The update will become effective for the Company on November 1, 2012. The Company is currently evaluating the potential impact of the update on its financial position, results of operations, and cash flows.

     Comprehensive Income — In June 2011, the FASB issued an update to ASC 220, Comprehensive Incomes. The update to ASC 220 establishes standards for the reporting and presentation of comprehensive income. The update will become effective for the Company on November 1, 2012. The Company is currently evaluating the potential impact of the update on its financial position, results of operations, and cash flows.

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3. FAIR VALUE

     The table below segregates all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

			Quoted prices				Significant
			in active markets		Significant other		unobservable
			for identical assets		observable inputs		inputs
	July 31, 2011		(level 1)		(level 2)		(level 3)
Assets:
Money market funds	$	19,046	$	19,046	$	—	$	—
Bank deposits	$	628	$	628	$	—	$	—
Total financial assets	$	19,674	$	19,674	$	—	$	—
Liabilities:
Warrant liability	$	1,187	$	—	$	—	$	1,187
Total financial liabilities	$	1,187	$	—	$	—	$	1,187

     The Company has outstanding warrants that may require settlement by transferring assets under certain change of control circumstances. These warrants are classified as liabilities in the accompanying balance sheet. The warrants have an exercise price of $2.04 per share and expire in September 2012. The Company measures the fair value of the warrants at each balance sheet date, using the Black-Scholes method, and a gain or loss is recorded in earnings each period as change in fair value of warrants.

     Assumptions used to determine the fair value of the warrants were:

	Three Months ended July 31,						Nine Months ended July 31,
	2011			2010			2011			2010
Estimated fair value of stock	$	2.45-$3.75		$	0.68-$0.86		$	0.62-$3.75		$	0.68-$1.02
Expected warrant term		1.6-1.9 years			2.6-2.9 years			1.6-2.4 years			2.6-3.4 years
Risk-free rate		0.3-0.6	%		0.7-1.4	%		0.3-0.8	%		0.7%-1.6	%
Expected volatility		77.9-77.9	%		74.3-75.9	%		73.5-77.9	%		74.3-76.1	%
Dividend yield		0	%		0	%		0	%		0	%

     A summary of the changes to the Company’s warrant liability, as measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended July 31, 2011 and 2010 is presented below:

	Three Months			Three Months Ended			Nine Months Ended			Nine Months Ended
	Ended July 31, 2011			July 31, 2010			July 31, 2011			July 31, 2010
Beginning balance	$	2,551		$	397		$	144		$	626
Warrants exercised		(106	)		—			(1,042	)		—
Total loss (gain) included in net income		(1,258	)		(183	)		2,085			(412	)
Ending balance	$	1,187		$	214		$	1,187		$	214

     In the three and nine months ended July 31, 2011, upon exercise of 60,706 and 598,440, respectively, of the warrants outstanding, the warrant liability associated with those warrants, amounting to $106 and $1,042 respectively, was reclassified to additional paid-in capital.

     The carrying value of accounts receivable, accounts payable and accrued expenses, due from factor, and advances from customers are reasonable estimates of their fair values because of their short-term maturity.

4. INCOME TAXES

     The federal and state income tax provisions recorded by the Company for the three and nine months ended July 31, 2011 reflect the use of available net operating loss carryforwards to offset taxable income. NOL carryforwards available for income tax purposes at July 31, 2011 amount to approximately $71 million for federal income taxes and approximately $24 million for certain state income taxes. Due to the Company’s history of losses, a valuation allowance sufficient to fully offset NOLs and other deferred tax assets has been established under current accounting pronouncements and this valuation allowance will be maintained until sufficient positive evidence exists to support its reversal.

     For the nine months ended July 31, 2010, the Company recorded an income tax benefit related to proceeds of $1,656 received in January 2010 from the sale of the rights to approximately $21,200 of New Jersey state income tax operating loss carryforwards, under the Technology Business Tax Certificate Program administered by the New Jersey Economic Development Authority.

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5. DUE FROM FACTOR

     Due from factor consists of the following:

	July 31,			October 31,
	2011			2010
Outstanding accounts receivable sold to factor	$	8,704		$	13,754
Less: allowances		(4,455	)		(3,298	)
Less: advances from factor		(2,840	)		(9,441	)
	$	1,409		$	1,015

     Outstanding accounts receivable sold to the factor as of July 31, 2011 and October 31, 2010 for which the Company retained credit risk amounted to $0.6 million and $1.4 million, respectively. As of July 31, 2011 and October 31, 2010, there were no allowances for uncollectible accounts.

     A summary of the changes in price protection and other customer sales incentive allowances included as a reduction of the amounts due from factor is presented below:

	Nine Months Ended
	July 31,
	2011			2010
Allowances — beginning of period	$	(3,298	)	$	(4,380	)
Provision for price protection		(2,392	)		(3,073	)
Amounts charged against allowance and other changes		1,235			4,506
Allowances — end of period	$	(4,455	)	$	(2,947	)

6. ACCOUNTS AND OTHER RECEIVABLES

     The following table presents the major components of accounts and other receivables:

	July 31,		October 31,
	2011		2010
Royalties receivable	$	2,391	$	—
Trade accounts receivable		359		726
Allowances		—		(25	)
Other		38		24
	$	2,788	$	725

7. INVENTORIES

     Inventories consist of the following:

	July 31,		October 31,
	2011		2010
Finished goods	$	3,798	$	6,711
Packaging and components		809		1,707
	$	4,607	$	8,418

8. PREPAID EXPENSES

     Prepaid expenses consist of the following:

	July 31,		October 31,
	2011		2010
Prepaid advertising	$	595	$	746
Other		301		175
	$	896	$	921

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9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses consist of the following:

	July 31,		October 31,
	2011		2010
Accounts payable — trade	$	3,394	$	4,856
Royalties and software development		5,149		5,517
Salaries, accrued bonuses and other compensation		2,477		592
Other accruals		1,331		410
	$	12,351	$	11,375

10. STOCK BASED COMPENSATION ARRANGEMENTS

     The Company issued 284,766 and 614,250 shares of restricted stock during the three and nine months ended July 31, 2011, respectively, and cancelled no shares in either period. The Company issued 163,949 and 279,131 shares of restricted stock during the three and nine months ended July 31, 2010, respectively, and cancelled 199,736 and 221,720 shares during the same respective periods. The Company values shares of restricted stock at fair value as of the grant date.

     The Company issued options to purchase 0 and 100,000 shares of common stock during the three and nine months ended July 31, 2011, respectively, and cancelled no options in the periods. The issued options have an exercise price of $1.64 per share, equal to the market value of a share of the Company’s stock on the grant date, and expire in 2018. The options have a total grant-date fair value of $95, based on the Black-Scholes model and estimated share-price volatility of 75.2%, estimated life of 4.3 years and a risk-free rate of 1.8%. The Company did not issue or cancel any options to purchase shares of common stock during the three and nine months ended July 31, 2010. The Company values options at fair value as of the grant date.

11. INCOME (LOSS) PER SHARE

     The table below provides a reconciliation of basic and diluted average shares outstanding used in computing income (loss) per share, after applying the treasury stock method.

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2011		2010		2011		2010
Basic weighted average shares outstanding		38,803,090		36,934,987		38,165,521		36,838,981
Common stock options		557,178		—		368,012		303,668
Non-vested portion of restricted stock grants		1,432,762		—		958,477		—
Warrants		525,776		—		335,012		—
Diluted weighted average shares outstanding		41,318,806		36,934,987		39,827,022		37,142,649

     Options and warrants to acquire 386,970 and 545,732 shares of common stock were not included in the calculation of diluted earnings per common share for the three and nine months ended July 31, 2011, respectively, as the effect of their inclusion would be anti-dilutive. Options and warrants to acquire 3,725,399 and 3,725,399 shares of common stock were not included in the calculation of diluted earnings per common share for the three and nine months ended July 31, 2010, respectively, as the effect of their inclusion would be anti-dilutive.

     The table below provides total potential shares outstanding, including those that are anti-dilutive, at the end of each reporting period:

	July 31,		July 31,
	2011		2010
Shares issuable under common stock warrants		1,296,501		2,241,470
Shares issuable under stock options		1,306,081		1,483,929
Non-vested portion of restricted stock grants		2,097,469		1,673,327
		4,700,051		5,398,726

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12. COMPREHENSIVE INCOME (LOSS)

     The components of comprehensive income (loss) for the three- and nine-month periods ended July 31, 2011 and 2010, are summarized as follows:

	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2011			2010			2011			2010
Net income (loss)	$	1,889		$	(1,643	)	$	10,727		$	557
Other comprehensive income (loss) — foreign currency translation adjustments		(3	)		(4	)		(5	)		(83	)
Total comprehensive income (loss)	$	1,886		$	(1,647	)	$	10,722		$	474

13. COMMITMENTS AND CONTINGENCIES

     Infringement claim

     In July 2011, a claim was made against Microsoft and certain game publishers, including the Company, that have released games for Microsoft’s Kinect for Xbox 360, alleging patent infringement and seeking monetary damages and injunctive relief. The Company intends to defend itself against the claim and believes it has third-party indemnity rights that may cover certain costs to the Company. The Company cannot currently estimate a potential range of loss if the claim against the Company is successful.

     Workforce reduction

     During January 2010, Company management initiated a plan of restructuring to better align its workforce to its revised operating plans. As part of the plan, the Company reduced its personnel count by 16 employees, then representing 17% of its workforce. The Company recorded charges of approximately $403 in the nine months ended July 31, 2010 in connection with the terminations, which consisted primarily of severance and unused vacation payments. The expenses were included in operating costs and expenses as shown in the table below:

	Nine Months Ended
	July 31, 2010
Product research and development	$	90
Selling and Marketing		243
General and Administrative		70
Total	$	403

     These payments were made during the Company’s fiscal year ended October 31, 2010. At July 31, 2011 and October 31, 2010, the Company had no remaining liability related to the workforce reduction.

14. RELATED PARTIES

     The Company currently has an agreement with Morris Sutton, the Company’s former Chief Executive Officer and father of the Company’s Chief Executive Officer, under which he provides services as a consultant. The agreement provides for a monthly retainer of $13. Mr. Sutton was also eligible to receive a commission in an amount equal to 2% of net sales to certain accounts before January 1, 2010. Commissions were recorded when the sales occurred, but not paid until collection of the related accounts receivable from customers. Therefore, some of these payments were made to Mr. Sutton in 2010.

     The following table summarizes expenses related these agreements with Mr. Sutton:

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2011		2010		2011		2010
Consulting	$	38	$	38	$	113	$	113
Commissions and fees		—		—		—		131
Total	$	38	$	38	$	113	$	244

     MSI Entertainment, a company controlled by Morris Sutton, acted as an agent for the Company in sales to a distributor. The titles, for which the Company had no other planned distribution, were paid for in advance by the distributor. In the nine months ended July 31, 2011, the Company paid MSI a fee of $78 in connection with the sales.

     The Company also has an agreement with a member of its board of directors to provide specified strategic consulting services, in addition to his services as a board member, on a month-to-month basis at a monthly rate of $10. Under this arrangement, fees earned in the three and nine months ended July 31, 2011 totaled $30 and $90, respectively. Fees earned in the three and nine months ended July 31, 2010 totaled $30 and $43, respectively.

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15. PURCHASE OF ASSETS

     On June 3, 2011, the Company acquired certain assets and assumed certain liabilities of Quick Hit, Inc. (“Quick Hit”), a developer and operator of online games. The aggregate purchase price paid was approximately $837 in cash. The Company also entered into an exclusive license agreement with a senior lender to Quick Hit for the source code to an online interactive football 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, $125 and $60 are due in September 2011, December 2011 and September 2012, respectively.

     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 were recorded at their estimated respective fair values and the excess of the purchase price over the fair value of the identifiable assets acquired and the liabilities assumed was recorded as Goodwill. 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. The acquisition was financed with available cash on hand. The Company made significant assumptions and estimates in determining the preliminary allocation of the purchase price, which 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.

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

	Valuation
Intangible assets	$	105
Property and equipment		434
Working Capital and other assets		225
Net identifiable assets		764
Goodwill		73
Net assets acquired	$	837

     In accordance with ASC 805, the following supplemental pro forma consolidated financial information is provided using historical data of Quick Hit, Inc. and of the Company, adjusted for the application of the acquisition method of accounting as if the acquisition had occurred on November 1, 2009 for the three and nine-month periods ended July 31, 2010 and on November 1, 2010 for the three and nine-month periods ended July 31, 2011.

     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, delayed its schedule of future releases and reduced its workforce 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 supplemental pro forma financial information is not intended to represent or be indicative of the Company’s consolidated results of operations 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 information also does not reflect any operating efficiencies and associated cost savings that the Company may achieve with respect to the combined companies.

	Three Months		Three Months Ended			Nine Months Ended		Nine Months Ended
	Ended July 31,		July 31,			July 31,		July 31,
	2011		2010			2011		2010
Net revenues	$	19,624	$	12,234		$	100,883	$	52,487
Net income (loss)	$	1,634	$	(3,403	)	$	7,731	$	(4,462	)
Basic net income (loss) per share	$	0.04	$	(0.09	)	$	0.20	$	(0.12	)
Diluted net income (loss) per share	$	0.04	$	(0.09	)	$	0.19	$	(0.12	)

     In both the three and nine-month periods ended July 31, 2011, net revenues and net losses related to the former Quick Hit operations amounted to approximately $77 and $540, respectively. In connection with the transaction, the Company hired 12 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 $524, which will be recognized as stock-based compensation expense as the shares vest at the rate of one-third of the shares granted every six months over the 18 month period following June 3, 2011.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     Statements in this quarterly report on Form 10-Q that are not historical facts constitute forward-looking statements that are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Those factors include, among other things, those listed under “Risk Factors” and elsewhere in our annual report on Form 10-K for the fiscal year ended October 31, 2010 and other filings with the SEC. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Moreover, neither we nor any other person assume responsibility for the accuracy or completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results. References herein to “we,” “us,” “our,” and the “Company” are to Majesco Entertainment Company.

Overview

     We are a provider of video game products primarily for the family-oriented, mass-market consumer. We sell our products primarily to large retail chains, specialty retail stores, and distributors. We publish video games for almost all major current generation interactive entertainment hardware platforms, including Nintendo’s DS, DSi and Wii, Sony’s PlayStation 3, or PS3, and PlayStation Portable, or PSP, Microsoft’s Xbox 360 and the personal computer, or PC. We also publish games for numerous digital platforms, including mobile platforms such as iPhone, iPad and iPod Touch, as well as online platforms such as Facebook.

     Our video game titles are targeted at various demographics at a range of price points. Due to the larger budget requirements for developing and marketing premium console titles for core gamers, we focus on publishing more casual games targeting mass-market consumers. In some instances, our titles are based on licenses of well-known properties and, in other cases based on original properties. We collaborate and enter into agreements with content providers and video game development studios for the creation of our video games.

     Our operations involve similar products and customers worldwide. These products are developed and sold domestically and internationally. The Company is centrally managed and our chief operating decision makers, the chief executive and other officers, use consolidated and other financial information supplemented by sales information by product category, major product title and platform for making operational decisions and assessing financial performance. Accordingly, we operate in a single segment.

     Net Revenues. Our revenues are principally derived from sales of our video games. We provide video games primarily for the mass market and casual game player. Our revenues are recognized net of estimated reserves for price protection and other allowances.

     Cost of Sales. Cost of sales consists of product costs and amortization and impairment of software development costs and license fees. A significant component of our cost of sales is product costs. Product costs are comprised primarily of manufacturing and packaging costs of the disc or cartridge media, royalties to the platform manufacturer and manufacturing and packaging costs of peripherals and accessories. In cases where we act as a distributor for other publishers’ products, cost of sales may increase as we acquire products at a higher fixed wholesale price. While product costs as a percentage of revenue are higher on these products, we do not incur upfront development and licensing fees or resulting amortization of software development costs. Commencing upon the related product’s release, capitalized software development and intellectual property license costs are amortized to cost of sales. When, in management’s estimate, future cash flows will not be sufficient to recover previously capitalized costs, we expense these capitalized costs to cost of sales — loss on impairment of software development costs and license fees — future releases. These expenses may be incurred prior to a game’s release.

     Gross Profit. Gross profit is the excess of net revenues over product costs and amortization and impairment of software development and license fees. Development and license fees incurred to produce video games are generally incurred up front and amortized to cost of sales. The recovery of these costs and total gross profit is dependent upon achieving a certain sales volume, which varies by title.

     Product Research and Development Expenses. Product research and development expenses relate principally to costs of third-party video game developers and related supervision, testing new products and conducting quality assurance evaluations during the development cycle not allocated to games for which technological feasibility has been established. Costs incurred are employee-related, may include equipment, and are not allocated to cost of sales. These costs also include the cost to develop and maintain free to play online games which are still considered to be in the planning stage, or for which costs cannot be reasonably expected to be recovered through future revenues.

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     Selling and Marketing Expenses. Selling and marketing expenses consist of marketing and promotion expenses, including television advertising, the cost of shipping products to customers and related employee costs. Credits to retailers for trade advertising are a component of these expenses.

     General and Administrative Expenses. General and administrative expenses primarily represent employee-related costs, including corporate executive and support staff, general office expenses, professional fees and various other overhead charges. Professional fees, including legal and accounting expenses, typically represent the second largest component of our general and administrative expenses. These fees are partially attributable to our required activities as a publicly traded company, such as filings with the Securities and Exchange Commission, or SEC.

     Loss on Impairment of Software Development Costs and License Fees — Cancelled Games. Loss on impairment of software development costs and license fees — cancelled games consists of contract termination costs, and the write-off of previously capitalized costs, for games that were cancelled prior to their release to market. We periodically review our games in development and compare the remaining cost to complete each game to projected future net cash flows expected to be generated from sales. In cases where we don’t expect the projected future net cash flows generated from sales to be sufficient to cover the remaining incremental cash obligation to complete the game, we cancel the game, and record a charge to operating expenses. While we incur a current period charge on these cancellations, we believe we are limiting the overall loss on a game project that is no longer expected to perform as originally expected due to changing market conditions or other factors. Significant management estimates are required in making these assessments, including estimates regarding retailer and customer interest, pricing, competitive game performance, and changing market conditions.

     Interest and Financing Costs. Interest and financing costs are directly attributable to our factoring and our purchase-order financing arrangements.

     Income Taxes. Income taxes consists of our provision for income taxes and proceeds from the sale of rights to certain net operating loss carryforwards in the state of New Jersey. Utilization of our net operating loss, or NOL, carryforwards may be subject to a substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code. The annual limitation may result in the expiration of net operating loss carryforwards before utilization. Due to our history of losses, a valuation allowance sufficient to fully offset our NOL and other deferred tax assets has been established under current accounting pronouncements, and this valuation allowance will be maintained until sufficient positive evidence exists to support its reversal.

Seasonality and Variations in Interim Quarterly Results

     Our quarterly net revenues, gross profit, and operating income are impacted significantly by the seasonality of the retail selling season, and the timing of the release of new titles. Sales of our catalog and other products are generally higher in the first and fourth quarters of our fiscal year (ending January 31 and October 31, respectively) due to increased retail sales during the holiday season. Sales and gross profit as a percentage of sales also generally increase in quarters in which we release significant new titles because of increased sales volume as retailers make purchases to stock their shelves and meet initial demand for the new release. These quarters also benefit from the higher selling prices that we are able to achieve early in the product’s life cycle. Therefore, sales results in any one quarter are not necessarily indicative of expected results for subsequent quarters during the fiscal year.

Critical Accounting Estimates

     Our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP.

     The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates under different assumptions or conditions.

     We have identified the policies below as critical to our business operations and to the understanding of our financial results. The impact and any associated risks related to these policies on our business operations is discussed throughout management’s discussion and analysis of financial condition and results of operations when such policies affect our reported and expected financial results.

     Revenue Recognition. We recognize revenue upon the shipment of our product when: (1) title and the risks and rewards of ownership are transferred; (2) persuasive evidence of an arrangement exists; (3) we have no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable. Certain products are sold to customers with a street date (the earliest date these products may be resold by retailers). Revenue for sales of these products is not recognized prior to their street date. Some of our software products provide limited online features at no additional cost to the consumer. Generally, we have considered such features to be incidental to our overall product offerings and an inconsequential deliverable. Accordingly, we do not defer any revenue

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related to products containing these limited online features. However, in instances where online features or additional functionality is considered a substantive deliverable in addition to the software product, such characteristics will be taken into account when applying our revenue recognition policy. In addition, some of our software products are sold exclusively as downloads of digital content for which the consumer takes possession of the digital content for a fee. Revenue from product downloads is generally recognized when the download is made available (assuming all other recognition criteria are met).

     When we enter into license or distribution agreements that provide for multiple copies of games in exchange for guaranteed amounts, revenue is recognized in accordance with the terms of the agreements, generally upon delivery of a master copy, assuming our performance obligations are complete and all other recognition criteria are met, or as per-copy royalties are earned on sales of games.

     Price Protection and Other Allowances. We generally sell our products on a no-return basis, although in certain instances, we provide price protection or other allowances on certain unsold products in accordance with industry practices. Price protection, when granted and applicable, allows customers a partial credit with respect to merchandise unsold by them. Revenue is recognized net of estimates of these allowances. Sales incentives and other consideration that represent costs incurred by us for benefits received, such as the appearance of our products in a customer’s national circular advertisement, are generally reflected as selling and marketing expenses. We estimate potential future product price protection and other discounts related to current period product revenue.

     Our provisions for price protection and other allowances fluctuate over periods as a result of a number of factors including analysis of historical experience, current sell-through of retailer inventory of our products, current trends in the interactive entertainment market, the overall economy, changes in customer demand and acceptance of our products and other related factors. Significant management judgments and estimates must be made and used in connection with establishing the allowance for returns and price protection in any accounting period. However, actual allowances granted could materially exceed our estimates as unsold products in the distribution channels are exposed to rapid changes in consumer preferences, market conditions, technological obsolescence due to new platforms, product updates or competing products. For example, the risk of requests for allowances may increase as consoles pass the midpoint of their lifecycle and an increasing number of competitive products heighten pricing and competitive pressures. While management believes it can make reliable estimates regarding these matters, these estimates are inherently subjective. Accordingly, if our estimates change, this will result in a change in our reserves, which would impact the net revenues and/or selling and marketing expenses we report. For the nine-month periods ended July 31, 2011 and 2010, we provided allowances for future price protection and other allowances of $2.4 million and $3.1 million, respectively. The fluctuations in the provisions reflect fluctuations in gross sales and our estimates of future price protection based on the factors discussed above.

     We attempt to limit our exposure to credit risk by factoring a significant portion of our receivables to a third party that primarily buys them without recourse. For receivables that are not sold without recourse, we analyze our aged accounts receivables, payment history and other factors to make a determination if collection of receivables is likely, or a provision for uncollectible accounts is necessary.

     Capitalized Software Development Costs and License Fees. Software development costs include development fees, in the form of milestone payments made to independent software developers. Software development costs are capitalized once technological feasibility of a product is established and management expects such costs to be recoverable against future revenues. For products where proven game engine technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a product-by-product basis. Amounts related to software development that are not capitalized are charged immediately to product research and development costs. Commencing upon a related product’s release, capitalized software development costs are amortized to cost of sales based upon the higher of (i) the ratio of current revenue to total projected revenue or (ii) straight-line charges over the expected marketable life of the product.

     Prepaid license fees represent license fees to holders for the use of their intellectual property rights in the development of our products. Minimum guaranteed royalty payments for intellectual property licenses are initially recorded as an asset (capitalized license fees) and a current liability (accrued royalties payable) at the contractual amount upon execution of the contract or when specified milestones or events occur and when no significant performance commitment remains with the licensor. Licenses are expensed to cost of sales at the higher of (i) the contractual royalty rate based on actual sales or (ii) an effective rate based upon total projected revenue related to such license.

     Capitalized software development costs are classified as non-current if they relate to titles for which we estimate the release date to be more than one year from the balance sheet date.

     The amortization period for capitalized software development costs and license fees is usually no longer than one year from the initial release of the product. If actual revenues or revised forecasted revenues fall below the initial forecasted revenue for a particular license, the charge to cost of sales may be larger than anticipated in any given quarter. The recoverability of capitalized software development costs and license fees is evaluated quarterly based on the expected performance of the specific products to which the costs relate.

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     When, in management’s estimate, future cash flows will not be sufficient to recover previously capitalized costs, we expense these capitalized costs to cost of sales — loss on impairment of software development costs and license fees — future releases, in the period such a determination is made. These expenses may be incurred prior to a game’s release for games that have been developed. If a game is cancelled prior to completion of development and never released to market, the amount is expensed to operating costs and expenses — loss on impairment of capitalized software development costs and license fees — cancelled games. As of July 31, 2011, the net carrying value of our licenses and software development costs was $9.4 million. If we were required to write off licenses or software development costs, due to changes in market conditions or product acceptance, our results of operations could be materially adversely affected.

     License fees and milestone payments made to our third-party developers are typically considered non-refundable advances against the total compensation they can earn based upon the sales performance of the products. Any additional royalty or other compensation earned beyond the milestone payments is expensed to cost of sales as incurred.

     We have expensed as research and development all costs associated with the development of social games. We have acquired an online game in connection with the June 2011 acquisition of selected assets of Quick Hit, Inc. and have developed and launched two additional games available on Facebook, which have not earned significant revenues to date, and are continuing to evaluate alternatives for future development and monetization. We have also added the former development team of Quick Hit, Inc., to enhance our abilities in the development and operation of our social games.

     Inventory. Inventory, which consists principally of finished goods, is stated at the lower of cost or market. Cost is determined by the first-in, first-out method. We estimate the net realizable value of slow-moving inventory on a title-by-title basis and charge the excess of cost over net realizable value to cost of sales. Some of our inventory items are packaged with accessories, such as belts for our Zumba games and dolls for our Babysitting Mama game. The purchase of these accessories involves longer lead times and minimum purchase amounts, which require us to maintain higher levels of inventory than for other games. Therefore, these items have a higher risk of obsolescence, which we review periodically based on inventory and sales levels. As of July 31, 2011, our net inventory balance includes an aggregate of approximately $1.6 million of accessories and games bundled with accessories.

     Accounting for Stock-Based Compensation. Stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. Determining the fair value of stock-based awards at the grant date requires judgment, including, in the case of stock option awards, estimating expected stock volatility. In addition, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

     Commitments and Contingencies. We are subject to claims and litigation in the ordinary course of our business. We record a liability for commitments and contingencies when the amount is both probable and reasonably estimable. See Note 13 to our Consolidated Financial Statements.

     Results of operations

Three months ended July 31, 2011 versus three months ended July 31, 2010

     Net Revenues. Net revenues for the three months ended July 31, 2011 increased to $19.5 million from $12.2 million in the comparable quarter last year. The increase was due to sales of Zumba Fitness released in the first quarter of fiscal 2011 on three platforms, the Nintendo Wii, Kinect for the Xbox 360, and Sony’s Move for the Playstation. In addition, we recognized revenue from royalties and sales of accessories related to sales of Zumba Fitness in Europe by our distribution partner. In total, revenue from Zumba Fitness accounted for approximately 80% of total revenue in the period. New releases affecting revenues in the three months ended July 31, 2011 included Cake Mania 4 and Spy Kids. The three months ended July 31, 2010 reflect the release of Tetris for the Nintendo Wii and Nintendo DS.

     The following table sets forth our net revenues by platform:

	Three Months Ended July 31,										Nine months Ended July 31,
	2011		%			2010		%			2011		%			2010		%
	(thousands)					(thousands)					(thousands)					(thousands)
Nintendo Wii	$	14,036		72	%	$	4,624		38	%	$	59,794		60	%	$	15,275		29	%
Microsoft Xbox 360		2,306		12	%		218		2	%		20,334		20	%		395		1	%
Nintendo DS		2,249		11	%		7,139		59	%		14,610		15	%		35,396		68	%
Sony Playstation 3		637		3	%		—		—			4,438		4	%		—		—
Royalties, accessories and other		317		2	%		172		1	%		978		1	%		1,199		2	%
TOTAL	$	19,545		100	%	$	12,153		100	%	$	100,154		100	%	$	52,265		100	%

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     Gross Profit. Gross profit for the three months ended July 31, 2011 was $8.0 million compared to a gross profit of $2.8 million in the same quarter last year. The increase in gross profit was primarily attributable to increased net revenues for the three months ended July 31, 2011, as discussed above. Gross profit as a percentage of net sales was 41% for the three months ended July 31, 2011, compared to 23% for the three months ended July 31, 2010. The increase in gross profit as a percentage of sales was primarily due to sales of Zumba Fitness in the United States and Europe. We license the rights to publish Zumba Fitness in Europe to another video game publisher and receive a royalty based on net revenues of the product. We record these revenues net in accordance with ASC 605-45, Revenue Recognition — Principal Agent Considerations.

     Product Research and Development Expenses. Research and development costs increased $1.2 million to $1.9 million for the three months ended July 31, 2011, from $0.7 million for the comparable period in 2010. The increase was primarily due to development costs related to our online games business and increased production headcount. In June 2011, we acquired assets from Quick Hit, Inc., a developer and operator of online games, and added their former development team to enhance our abilities in the development and operation of our social games. In addition, during 2011, we opened a second production facility in San Francisco and increased the number of producers we have managing game development due to an increase in the number and quality of games we are developing.

     Selling and Marketing Expenses. Total selling and marketing expenses were approximately $2.3 million for the three months ended July 31, 2011, compared to $1.6 million for the three months ended July 31, 2010. The increase was primarily due to increased media advertising, sales commissions and other variable costs associated with increased sales volumes, primarily due to Zumba Fitness.

     General and Administrative Expenses. For the three-month period ended July 31, 2011, general and administrative expenses increased to approximately $2.5 million, from $2.0 million in the three-month period ended June 30, 2010 due primarily to increases in employee compensation and professional services.

     Loss on Impairment of Software Development Costs and License Fees — Cancelled Games. For the three-month period ended July 31, 2011, loss on impairment of software development costs and license fees — cancelled games, amounted to $0.2 million compared to $0.1 million in the prior-year period. Our games in development are subject to periodic reviews to assess game design and changing market conditions. When we do not expect the projected future net cash flows generated from sales to be sufficient to cover the remaining incremental cash obligation to complete a game, we cancel the game, and record a charge to operating expenses for the carrying amount of the game.

     Operating Income. Operating income for the three months ended July 31, 2011 was approximately $0.9 million, compared to a loss of $1.7 million in the comparable period in 2010. As discussed above, increased revenues and gross profits during the three months ended July 31, 2011 were partially offset by increased development and other operating expenses and losses on impaired games during the period.

     Change in Fair Value of Warrant Liability. We have outstanding warrants that contain a provision that may require settlement by transferring assets and are, therefore, recorded at fair value as liabilities. We recorded a gain of $1.3 million for the three months ended July 31, 2011, which reflected a decrease in the fair value of the warrants primarily based upon the decreased market price of a share of our common stock during the period, compared to a gain of $0.2 million for the three months ended July 31, 2010. In the nine months ended July 31, 2011, 598,440 of the 1,697,735 previously-outstanding warrants subject to remeasurement were exercised. The remaining outstanding warrants expire in September 2012.

     Income Taxes. In the three months ended July 31, 2011, our income tax expense was $0.2, which represents our current alternative minimum tax provision and certain state income taxes and reflects the use of available net operating loss carryforwards to offset taxable income. In the three months ended July 31, 2010, no provision for income taxes was recorded due to the operating losses in the period.

     Net Income. Net income for the three months ended July 31, 2011 was $1.9 million compared to a $1.6 million loss for the three months ended July 31, 2010. As discussed above, increased revenues and gross profits and the change in the fair value of our warrant liability more than offset increased operating expenses.

Nine months ended July 31, 2011 versus nine months ended July 31, 2010

     Net Revenues. Net revenues for the nine months ended July 31, 2011 increased to $100.2 million from $52.3 million in the comparable period last year. During the nine months ended July 31, 2011, we released Babysitting Mama for the Nintendo Wii and Zumba Fitness on three platforms, the Nintendo Wii, Kinect for the Xbox 360, and Sony’s Move for the Playstation3. The strong performance of the Zumba titles was primarily responsible for the increased revenues over the prior-year period. Sales of Zumba Fitness accounted for approximately 70% of total revenue in the period. Sales from our series of products based on Cooking Mama accounted for approximately 50% of revenue in the nine months ended July 31, 2010.

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     Gross Profit. Gross profit for the nine months ended July 31, 2011 was $41.2 million compared to a gross profit of $14.6 million in the same period last year. The increase in gross profit was primarily attributable to increased net revenues for the nine months ended July 31, 2011, as discussed above. Gross profit as a percentage of net sales was 41% for the nine months ended July 31, 2011, compared to 28% for the nine months ended July 31, 2010. The increase in gross profit as a percentage of sales was primarily due to sales of Zumba Fitness in the United States and Europe. These factors were partially offset by inventory charges in the period related primarily to Babysitting Mama. In addition, we recognized $1.0 million of losses on impairment of software development costs and license fees in the nine months ended July 31, 2010.

     Product Research and Development Expenses. Research and development costs increased $2.8 million to $5.2 million for the nine months ended July 31, 2011, from $2.4 million for the comparable period in 2010. The increase was primarily due to costs related to our online games business, increased production headcount, and charges incurred for development of console game prototypes prior to reaching technological feasibility. We incurred approximately $1.0 million in the current period for third-party development of online games for Facebook. In addition, in June 2011, we acquired assets from Quick Hit, Inc., a developer and operator of online games, and added their former development team to enhance our abilities in the development and operation of our social games. In addition, during 2011, we opened a second production facility in San Francisco and increased the number of producers we have managing game development due to an increase in the number and quality of games we are developing. The effects of these costs were partially offset by the effects of $0.1 million severance charges recorded in the prior year.

     Selling and Marketing Expenses. Total selling and marketing expenses were approximately $12.0 million for the nine months ended July 31, 2011, compared to $6.2 million for the nine months ended July 31, 2010. The increase was primarily due to increased media advertising and other marketing costs associated with the launch of Zumba Fitness and Babysitting Mama, including several television and internet advertising campaigns. Variable costs including commissions, warehousing and freight also increased due to higher volume and, were partially offset by lower costs incurred in Europe following our shift from a publishing and distribution model to a licensing approach, including the effects of severance charges recorded in the prior year.

     General and Administrative Expenses. For the nine-month period ended July 31, 2011, general and administrative expenses were $8.1 million, an increase of $1.7 million from $6.4 million in the comparable period in 2010. The increase was primarily due to an increase in profit-based bonus compensation recognized in the current period.

     Loss on Impairment of Software Development Costs and License Fees — Cancelled Games. For the nine-month period ended July 31, 2011, loss on impairment of software development costs and license fees — cancelled games, amounted to $1.5 million compared to $0.3 million in the prior-year period, reflecting a greater number of projects cancelled. Our games in development are subject to periodic reviews to assess game design and changing market conditions. When we do not expect the projected future net cash flows generated from sales to be sufficient to cover the remaining incremental cash obligation to complete a game, we cancel the game, and record a charge to operating expenses for the carrying amount of the game. Charges for the nine months ended July 31, 2011 included several games in development for the Sony Move platform, which totaled $0.6 million, and other game projects totaling $0.9 million.

     Operating Income. Operating income for the nine months ended July 31, 2011 was approximately $14.3 million, an increase of $15.1 million from a $0.8 million loss in the comparable period in 2010. As discussed above, increased revenues and gross profits during the nine months ended July 31, 2011 more than offset increased sales, marketing and other operating expenses and impairments during the period.

     Change in Fair Value of Warrant Liability. We have outstanding warrants that contain a provision that may require settlement by transferring assets and are, therefore, recorded at fair value as liabilities. We recorded a loss of $2.1 million for the nine months ended July 31, 2011, which reflected an increase in the fair value of the warrants during the period primarily as a result of the increased market price for a share of our common stock, compared to a gain of $0.4 million for the nine months ended July 31, 2010, which reflected a decrease in the fair value of warrants during the period.

     Income Taxes. For the nine months ended July 31, 2010, we received proceeds of approximately $1.7 million from the sale of approximately $21.2 million of New Jersey state income tax net operating loss carryforwards under the state’s Technology Business Tax Certificate Program and recorded the proceeds as an income tax benefit in the period. In the nine months ended July 31, 2011, our income tax expense represents our current alternative minimum tax provision and certain state income taxes and reflects the use of available net operating loss carryforwards to offset taxable income. We did not sell New Jersey loss carryforwards in the period. Any potential future sales of New Jersey loss carryforwards that the Company may pursue will be subject to the provisions of the tax certificate program, including an application and qualification process, and the availability of approved funding.

     Net Income. Net income for the nine months ended July 31, 2011 was $10.7 million compared to $0.6 million for the nine months ended July 31, 2010. As discussed above, increased revenues and gross profits more than offset increased operating expenses, impairments and the change in the fair market value of our warrant liability.

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Liquidity and Capital Resources

     Our current plan is to fund our operations through product sales. However, our operating results may vary significantly from period to period and we have previously incurred operating losses. We may be required to modify our plan, or seek outside sources of financing, and/or equity sales, if our operating plan and sales targets are not met. There can be no assurance that such funds will be available on acceptable terms, if at all. In the event that we are unable to negotiate alternative financing, or negotiate terms that are acceptable to us, we may be forced to modify our business plan materially, including making reductions in game development and other expenditures. Additionally, we are dependent on our purchase order financing and account receivable factoring agreement to finance our working capital needs, including the purchase of inventory. If the current level of financing was reduced or we fail to meet our operational objectives, it could create a material adverse change in the business.

     As of July 31, 2011, our cash and cash equivalents balance was $19.7 million and funds available to us under our factoring and purchase order financing agreements were $3.7 million and $10.0 million, respectively. We expect continued fluctuations in the use and availability of cash due to the seasonality of our business, timing of receivables collections and working capital needs necessary to finance our business.

     Factoring and Purchase Order Financing.

     To satisfy our liquidity needs, we factor our receivables. Under our factoring agreement, we have the ability to take cash advances against accounts receivable and inventory of up to $20.0 million, and the availability of up to $2.0 million in letters of credit. The factor, in its sole discretion, can reduce the availability of financing at any time. We had outstanding advances against accounts receivable of approximately $2.8 million under our factoring agreement at July 31, 2011. We also utilize financing to provide funding for the manufacture of our products. Under an agreement with a finance company, we have up to $10.0 million of availability for letters of credit and purchase order financing. In connection with these arrangements, the finance company and the factor have a security interest in substantially all of our assets.

     Under the terms of our factoring agreement, we sell our accounts receivable to the factor. The factor, in its sole discretion, determines whether or not it will accept the credit risk associated with a receivable. If the factor does not accept the credit risk on a receivable, we may sell the accounts receivable to the factor while retaining the credit risk. In both cases we surrender all rights and control over the receivable to the factor. However, in cases where we retain the credit risk, the amount can be charged back to us in the case of non-payment by the customer. The factor is required to remit payments to us for the accounts receivable purchased from us, provided the customer does not have a valid dispute related to the invoice. The amount remitted to us by the factor equals the invoiced amount, adjusted for allowances and discounts we have provided to the customer, less factor charges of 0.45 to 0.5% of the invoiced amount.

     In addition, we may request that the factor provide us with cash advances based on our accounts receivable and inventory. The factor may either accept or reject our request for advances at its discretion. Generally, the factor allowed us to take advances in an amount equal to 70% of net accounts receivable, plus 60% of our inventory balance, up to a maximum of $2.5 million of our inventory balance. Occasionally, the factor allows us to take advances in excess of these amounts for short-term working capital needs. These excess amounts are typically repaid within a 30-day period. At July 31, 2011, we had no excess advances outstanding.

     Amounts to be paid to us by the factor for any accounts receivable are offset by any amounts previously advanced by the factor. The interest rate is prime plus 1.5%, annually, subject to a 5.5% floor. In certain circumstances, an additional 1.0% annually is charged for advances against inventory.

     Manufacturers require us to present a letter of credit, or pay cash in advance, in order to manufacture the products required under a purchase order. We utilize letters of credit either from a finance company or our factor. The finance company charges 1.5% of the purchase order amount for each transaction for 30 days, plus administrative fees. Our factor provides purchase order financing at a cost of 0.5% of the purchase order amount for each transaction for 30 days. Additional charges are incurred if letters of credit remain outstanding in excess of the original time period and/or the financing company is not paid at the time the products are received. When our liquidity position allows, we will pay cash in advance instead of utilizing purchase order financing. This results in reduced financing and administrative fees associated with purchase order financing.

     Advances from Customers. On a case by case basis, distributors and other customers have agreed to provide us with cash advances on their orders. These advances are then applied against future sales to these customers. In exchange for these advances, we offer these customers beneficial pricing or other considerations.

     Contingencies and Commitments. At times, we may be a party to routine claims and suits in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the outcome of any current such routine claims would not have a material adverse effect on the Company’s business, financial condition, and results of operations or liquidity.

     Commitments under development agreements amounted to $9.3 million at July 31, 2011, compared to $3.3 million at July 31, 2010. In addition, certain agreements provide for minimum commitments for marketing support.

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Off-Balance Sheet Arrangements

     As of July 31, 2011, we had no off-balance sheet arrangements.

Cash Flows

     Cash and cash equivalents were $19.7 million as of July 31, 2011 compared to $8.0 million at October 31, 2010 and $10.5 million at July 31, 2010. Working capital as of July 31, 2011 was $26.5 million compared to $11.6 million at October 31, 2010. Changes in cash and working capital balances reflect operating results as well as significant seasonal factors.

     Operating Cash Flows. Our principal operating source of cash is sales of our interactive entertainment products. Our principal operating uses of cash are for payments associated with third-party developers of our software, costs incurred to manufacture, sell and market our video games and general and administrative expenses.

     For the nine months ended July 31, 2011, we generated approximately $16.6 million in cash flow from operating activities, compared to $4.6 million in the same period last year. The increase in cash provided by operating activities was primarily due to increased operating income in the period, which increased $15.1 million from a $0.8 million loss in the nine months ended July 31, 2010 to $14.3 million of operating income in the nine months ended July 31, 2011. Operating income excludes the non-cash effects of the change in our warrant liability and interest and financing costs. Commitments under development agreements amount to $9.3 million at July 31, 2011, compared to $3.3 million at July 31, 2010. Accordingly, cash outflows for development may increase in future periods compared to comparable prior periods. In addition, certain agreements provide for minimum commitments for marketing support.

     Investing Cash Flows. Cash used in investing activities for the nine months ended July 31, 2011 increased compared to the nine months ended 2010 due to the acquisition of computer hardware, software and other assets from Quick Hit, Inc. in June 2011. Other investing outflows in the periods reflect primarily of purchases of computer equipment.

     Financing Cash Flows. Net cash used in financing activities for the nine months ended July 31, 2011 and 2010 primarily consisted of cash used to reduce outstanding borrowings under our purchase order financing agreement for seasonal inventory. In the nine months ended July 31, 2011, we received $1.8 million of proceeds from the exercise of outstanding units and warrants.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

     Not Applicable.

Item 4. Controls and Procedures

     Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in the Securities Exchange Act of 1934 Rule 13a-15(e) and 15d-15(e), as of the end of the period covered by this report.

     In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

     While we believe our disclosure controls and procedures and our internal control over financial reporting are adequate, no system of controls can prevent errors and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur. Controls can also be circumvented by individual acts of some people, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with its policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

     Subject to the limitations above, management believes that the consolidated financial statements and other financial information contained in this report, fairly present in all material respects our financial condition, results of operations, and cash flows for the periods presented.

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     Based on the evaluation of the effectiveness of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective at a reasonable assurance level.

     There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     On July 1, 2011, a complaint for patent infringement was filed in the United States District Court for the District of Delaware by Impulse Technology Ltd. against Microsoft Corporation and certain other game publisher defendants that have released games for Microsoft’s Kinect for Xbox 360, including the Company. The complaint alleges infringement relating to Microsoft’s Xbox Kinect hardware, and correspondingly, the Company’s Zumba Fitness game for Xbox 360, of Impulse’s patents for certain motion tracking technology. Impulse is seeking injunctive relief and monetary damages in an unspecified amount for the alleged infringement. The Company intends, in conjunction with Microsoft and the other defendants, to defend itself against the claim and believes it has third-party indemnity rights that may cover certain costs to the Company. The Company cannot currently estimate a potential range of loss if the claim against the Company is successful.

Item 1A. Risk Factors

     A description of the risks associated with our business, financial condition, and results of operations is set forth is Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended October 31, 2010. These factors continue to be meaningful for your evaluation of the Company and we urge you to review and consider the risk factors presented in the Form 10-K. There have been no material changes to these risks.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     Pursuant to previously issued warrants and unit purchase options, we issued shares of our common stock and received gross proceeds on the dates shown below.

Common stock issued pursuant to exercise of warrants at an exercise price of $2.04 per share:

	Common		Gross
	Shares		Proceeds
Date	Issued		Received
June 14, 2011		50,000	$	102,000
June 16, 2011		8,400	$	17,136

Common stock issued pursuant to exercise of unit purchase options at an exercise price of $1.50 per share:

	Common		Gross
	Shares		Proceeds
Date	Issued		Received
May 17, 2011		21,000	$	31,500

     The issuance of the shares of common stock and warrants issued upon exercise of such previously issued outstanding warrants and unit purchase options were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. The resale by

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the holders of the shares issued is covered by a registration statement on Form S-3 declared effective by the Securities and Exchange Commission on December 10, 2007.

Item 3. Defaults Upon Senior Securities

     None.

Item 4. (Removed and Reserved)

Item 5. Other Information

     None.

Item 6. Exhibits

10.1#	XBOX 360 Publisher License Agreement, effective September 13, 2005, by and between Microsoft Licensing, GP and Majesco Entertainment Company.
10.2#	Amendment to the XBOX 360 Publisher License Agreement (2008 renewal, etc.), effective September 1, 2009, by and between Microsoft Licensing, GP and Majesco Entertainment Company.
10.3#	Amendment to the XBOX 360 Publisher License Agreement (Russian Incentive Program, Hits Program Revisions), effective February 4, 2010, by and between Microsoft Licensing, GP and Majesco Entertainment Company.
10.4	Second Amendment to the Confidential License Agreement for Nintendo DS (Western Hemisphere), effective May 1, 2005 by and between Nintendo of America, Inc. and Majesco Entertainment Company.
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

# We have requested confidential treatment of certain provisions contained in this exhibit. The copy filed as an exhibit omits the information subject to the confidentiality request.

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SIGNATURE

     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 thereunto duly authorized.

MAJESCO ENTERTAINMENT COMPANY
 

/s/ Jesse Sutton  

Jesse Sutton 

Chief Executive Officer
Date: September 14, 2011

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EX-10.1

Exhibit 10.1

XBOX 360 PUBLISHER LICENSE AGREEMENT

     This Xbox 360 Publisher License Agreement (“Agreement”) is entered into and effective as of the later of the two signature dates below (the “Effective Date”) by and between Microsoft Licensing, GP, a Nevada general partnership (“Microsoft”), and Majesco Entertainment Company, a Delaware corporation (“Publisher”).

RECITALS

     A. Microsoft and its affiliated companies develop and license a computer game system known as the Xbox 360 game system and a proprietary online service accessible via the Xbox 360 game system known as Xbox Live.

     B. Publisher wishes to develop and/or publish one or more software products running on the Xbox 360 game system, which software products may also be made available to subscribers of Xbox Live, and to license proprietary materials from Microsoft on the terms and conditions set forth herein.

     Accordingly, for and in consideration of the mutual covenants and conditions contained herein, and for other good and valuable consideration, receipt of which each party hereby acknowledges, Microsoft and Publisher agree as follows:

1. Exhibits

The following exhibits are hereby incorporated to this Agreement (some require completion and/or execution by one or both parties):

Exhibit 1: Payments
Exhibit 2: Xbox 360 Royalty Tier Selection Form
Exhibit 3: Xbox 360 Publisher Enrollment Form
Exhibit 4: Authorized Subsidiaries
Exhibit 5: Non-Disclosure Agreement
Exhibit 6: Japan/Asian Royalty Incentive Program
Exhibit 7: Xbox Live Incentive Program

2. Definitions

As further described in this Agreement and the Xbox 360 Publisher Guide (defined below), the following terms have the following respective meanings:

     2.1 “Asian Manufacturing Region” means the region for manufacturing comprising Taiwan, Hong Kong, Singapore, Korea, Japan and any other countries that are included by Microsoft from time to time as set forth in the Xbox 360 Publisher Guide.

     2.2 “Asian Sales Territory” means the territory for sales distribution comprising Taiwan, Hong Kong, Singapore, Korea, and any other countries that are included by Microsoft from time to time as set forth in the Xbox 360 Publisher Guide. The Asian Sales Territory does not include Japan.

     2.3 “Authorized Replicator” means a software replicator certified and approved by Microsoft for replication of FPUs (defined below) that run on the Xbox 360.

     2.4 “Branding Specifications” means the specifications as provided by Microsoft from time to time for using the Licensed Trademarks in connection with a Software Title and/or Online Content and on Marketing Materials as set forth in the Xbox 360 Publisher Guide.

     2.5 “BTS” means a Microsoft designed break-the-seal sticker that will be issued to the Authorized Replicator for placement on the Packaging Materials (defined below) as specified in the Xbox 360 Publisher Guide.

     2.6 “Certification” means the final stage of the approval process by which Microsoft approves or disapproves of a Software Title or Online Content for manufacture and/or distribution. Certification is further defined in this Agreement and the Xbox 360 Publisher Guide.

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

     2.7 “Commercial Release” with respect to a Software Title means the first commercial distribution of an FPU that is not designated as a Demo Version. With respect to Online Content, Commercial Release means its first availability via Xbox Live to Xbox Live Users.

     2.8 “Concept” means the detailed description of Publisher’s proposed Software Title and/or Online Content in each case including such information as may be requested by Microsoft.

     2.9 “Demo Versions” means a small portion of an applicable Software Title that is provided to end users to advertise or promote a Software Title.

     2.10 “European Sales Territory” means the territory for sales distribution comprising the United Kingdom, France, Germany, Spain, Italy, Netherlands, Belgium, Sweden, Denmark, Norway, Finland, Austria, Switzerland, Ireland, Portugal, Greece, Australia, New Zealand and any other countries that are included by Microsoft from time to time as set forth in the Xbox 360 Publisher Guide

     2.11 “European Manufacturing Region” means the region for manufacturing comprising the United Kingdom, France, Germany, Spain, Italy, Netherlands, Belgium, Sweden, Denmark, Norway, Finland, Austria, Switzerland, Ireland, Portugal, Greece, Australia, New Zealand and any other countries that are included by Microsoft from time to time as set forth in the Xbox 360 Publisher Guide.

     2.12 “FPU” or “Finished Product Unit” means a copy of a Software Title in object code form that has passed Certification, has been affixed to a DVD disk and approved by Microsoft for release and manufacturing. Once the Packaging Materials have been added, and the BTS has been assigned or affixed to the FPU or its packaging, the FPU also includes its accompanying BTS and Packaging Materials.

     2.13 “Japan Sales Territory” means the territory for sales distribution comprising the country of Japan.

     2.14 “Licensed Trademarks” means the Microsoft trademarks identified in the Xbox 360 Publisher Guide.

     2.15 “Marketing Materials” collectively means the Packaging Materials and all press releases, marketing, advertising or promotional materials related to the Software Title, FPUs and/or Online Content (including without limitation Web advertising and Publisher’s Web pages to the extent they refer to the Software Title(s), FPU(s) and/or Online Content) that will be used and distributed by Publisher in the marketing of the Software Title(s), FPU(s) and/or Online Content.

     2.16 “Manufacturing Region” means the Asian Manufacturing Region, European Manufacturing Region, and/or North American Manufacturing Region.

     2.17 “North American Sales Territory” means the territory for sales distribution comprising the United States, Canada, Mexico, Colombia and any other countries that may be included by Microsoft from time to time as set forth in the Xbox 360 Publisher Guide

     2.18 “North American Manufacturing Region” means the region for manufacturing comprising the United States, Canada, Mexico, Colombia and any other countries that may be included by Microsoft from time to time as set forth in the Xbox 360 Publisher Guide

     2.19 “Online Content” means any content, feature, or access to software or online service that is distributed by Microsoft pursuant to this Agreement. Online Content includes, but is not limited to, Online Game Features, Title Updates, Demo Versions, trailers, “themes,” “gamer pictures” or any other category of online content or service approved by Microsoft from time to time. Trailers, “themes,” “gamer pictures” and any other approved Online Content will be further described in the Xbox 360 Publisher Guide.

     2.20 “Online Game Features” means a Software Title’s content, features and/or services that are available to Xbox Live Users via Xbox Live, whether included in the Software Title’s FPU or otherwise distributed via Xbox Live.

     2.21 “Packaging Materials” means art and mechanical formats for a Software Title including the retail packaging, end user instruction manual with end user license agreement and warranties, end user warnings, FPU media label, and any promotional inserts and other materials that are to be included in the retail packaging.

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

2

     2.22 “Pre-Certification” means the first stage of the approval process wherein Microsoft tests to provide feedback and/or identify any issues that may prevent the Software Title from being approved during the Certification phase. Pre-Certification is further described in this Agreement and the Xbox 360 Publisher Guide.

     2.23 “Sales Territory” means the Asian Sales Territory, European Sales Territory, Japan Sales Territory, and/or North American Sales Territory.

     2.24 “Software Title” means the single software product as approved by Microsoft for use on Xbox 360, including any Title Updates thereto (if and to the extent approved by Microsoft) and all Online Game Features for such Software Title. If Microsoft approves one or more additional single software product(s) proposed by Publisher to run on Xbox 360, this Agreement, and the term “Software Title,” will be broadened automatically to cover the respective new software product(s) as additional Software Title(s) under this Agreement.

     2.25 “Subscriber” means an Xbox Live User that establishes an account with Xbox Live.

     2.26 “Sub-Publisher” means an entity that has a valid Xbox 360 publisher license agreement with Microsoft or a Microsoft affiliate and with whom Publisher has entered an agreement to allow such entity to publish a Software Title or Online Content in specific Sales Territories.

     2.27 “Suggested Retail Price” means the highest per unit price that Publisher or its agent recommends the FPU be made commercially available to end-users in a particular Sales Territory. If the Suggested Retail Price of a particular Software Title varies among the countries in a single Sales Territory, then the highest Suggested Retail Price established for any of the countries will be used to determine the appropriate royalty fees for the entire Sales Territory.

     2.28 “Title Update” means an update, upgrade, or technical fix to a Software Title that Xbox Live Users can automatically download to the Xbox Live User’s Xbox 360.

     2.29 “Wholesale Price” means the highest per unit price that Publisher charges retailers and/or distributors in bona fide third party transactions for the right to distribute and sell the Software Title within a Sales Territory, it being agreed that (i) any transactions involving affiliates of Publisher (entities controlling, controlled by or under common control of, Publisher) are not to be considered in determining the Wholesale Price; (ii) if Publisher enters into an agreement with a third party (such as a Sub-Publisher) providing the third party with the exclusive right to distribute the Software Title in a Sales Territory, the Wholesale Price is governed by the price charged by the third party rather than the terms of the exclusive distribution agreement between Publisher and such third party; and (iii) if the Wholesale Price varies among countries in a single Sales Territory, the highest Wholesale Price used in the Sales Territory will be used to determine the appropriate royalty fees for the entire Sales Territory.

     2.30 “Xbox 360” means the second version of Microsoft’s proprietary game system, successor to the Xbox game system, including operating system software and hardware design specifications.

     2.31 “Xbox 360 Publisher Guide” means a document (in physical, electronic or Web site form) created by Microsoft that supplements this Agreement and provides detailed requirements regarding the Pre-Certification and Certification approval process, Branding Specifications, replication requirements, royalty payment process, marketing guidelines, technical specifications and certification requirements, Demo Version requirements, packaging requirements and other operational aspects of the Xbox 360 and Xbox Live. Microsoft may supplement, revise or update the Xbox 360 Publisher Guide from time to time in its reasonable discretion as set forth in this Agreement.

     2.32 “Xbox Live” means the proprietary online service offered by Microsoft to Xbox Live Users.

     2.33 “Xbox Live User” means any individual that accesses and uses Xbox Live.

     2.34 Other Terms. All other capitalized terms have the definitions set forth with the first use of such term as described in this Agreement.

3. Xbox 360 Development Kit License

Publisher shall enter into one or more development kit license(s) for the applicable territory(ies) to which Xbox 360 game development kits will be shipped for use by Publisher (each an “XDK License”) pursuant to which Microsoft or its affiliate may license to Publisher software development tools and hardware to assist Publisher in the development and testing of

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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Software Titles, including redistributable code that Publisher must incorporate into Software Titles pursuant to the terms and conditions contained in the XDK License.

4. Approval Process

     4.1 Standard Approval Process. The standard approval process for a Software Title is divided into four phases comprised of Concept approval, Pre-Certification, Certification, and Marketing Materials approval. Unless Publisher elects the EU Approval Option for a European FPU (described below), Publisher is required to submit its Software Title to Microsoft for evaluation at all four phases. Each phase is identified below and further described in the Xbox 360 Publisher Guide. Additional or alternate approval processes for Online Content may be further described in the Xbox 360 Publisher Guide

          4.1.1 Concept. For each Software Title, Publisher shall deliver to Microsoft a completed Concept submission form (in the form provided by Microsoft to Publisher) that describes the Software Title. In the event that Publisher desires to host or have a third party host or provide to Xbox Live Users any of Publisher’s Online Game Features, Publisher shall so indicate on the Concept submission form and must execute an addendum to this Agreement, which addendum is available upon request and will be incorporated into this Agreement upon execution. Following evaluation of Publisher’s Concept submission, Microsoft will notify Publisher of whether the Concept is approved or rejected. If approved, the Concept submission form, in the form submitted and approved by Microsoft, is incorporated herein by reference and adherence to its terms is a requirement for Certification. Publisher may propose Online Content at any time after a Concept has been approved, in which case Publisher shall deliver to Microsoft a separate Concept submission for each proposed piece of Online Content.

          4.1.2 Pre-Certification. If the Concept is approved, Publisher shall deliver to Microsoft a code-complete version of the Software Title or Online Content that includes all current features of the Software Title and such other content as may be required under the Xbox 360 Publisher Guide. Upon receipt, Microsoft shall conduct technical screen and/or other testing of the Software Title or Online Content consistent with the Xbox 360 Publisher Guide and will subsequently provide Publisher with advisory feedback regarding such testing.

          4.1.3 Certification. Following Pre-Certification, Publisher shall deliver to Microsoft the proposed final release version of the applicable Software Title that is complete, ready for access via Xbox Live (if applicable), release, manufacture, and commercial distribution. Such version must include the final content rating certification required by Section 4.4, have identified program errors corrected, and have any and all changes previously required by Microsoft implemented. Microsoft shall conduct compliance, compatibility, functional and other testing consistent with the Xbox 360 Publisher Guide (“Certification Testing”) and shall subsequently provide Publisher with the results of such testing, including any required fixes required prior to achieving Certification. Release from Certification for a Software Title (and for Online Content as applicable) is based on (1) passing the Certification Testing; (2) conformance with the approved Concept and any required submission materials as stated in the Xbox 360 Publisher Guide; (3) Packaging Materials approval; (4) consistency with the goals and objectives of the Xbox 360 console platform and Xbox Live; and (5) continuing and ongoing compliance with all Certification requirements and other requirements as set forth in the Xbox 360 Publisher Guide and this Agreement.

          4.1.4 Marketing Materials Approval. Publisher shall submit all Marketing Materials to Microsoft and shall not distribute such Marketing Materials unless and until Microsoft has approved them in writing. Prior to use or publication of any Marketing Materials, Publisher agrees to incorporate all changes relating to use of the Licensed Trademarks that Microsoft may request and will use its commercially reasonable efforts to incorporate other changes reasonably suggested by Microsoft (provided, however, that in any event Publisher shall at all times comply with the Branding Specifications).

     4.2 EU Approval Option. For a Software Title that Publisher intends to distribute solely in the European Sales Territory (a “European FPU”), Publisher may choose to forego Concept approval (Section 4.1.1), Pre-Certification (Section 4.1.2) and/or Marketing Materials approval (Section 4.1.4) and submit such Software Title to Microsoft only for Certification approval. This option is referred to herein as the “EU Approval Option.” The EU Approval Option applies solely to distribution of European FPUs, and is not available for Online Content intended to be available in the European Sales Territory. If Publisher chooses the EU Approval Option, Publisher shall not use the Licensed Trademarks on the European FPU and the license grant set forth in Section 12.1 is withdrawn as to such European FPU. In addition, Publisher shall make no statements in advertising, marketing materials, packaging, Web sites or otherwise that the European FPU is approved or otherwise sanctioned by Microsoft or is an official Xbox 360 Software Title. The European FPU may not be distributed outside the European Sales Territory without complying with all terms of this Agreement concerning approvals and the release of the FPU as deemed relevant by Microsoft. Microsoft may provide additional information in the Xbox 360

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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Publisher Guide regarding the European Approval Option. Notwithstanding Publisher’s choice of the EU Approval Option, all other portions of this Agreement other than those specifically identified above shall remain in effect.

     4.3 Resubmissions and Additional Review. If a Software Title or Online Content fails Certification, and if Publisher has made good faith efforts to address any issues raised by Microsoft, Microsoft will give Publisher the opportunity to resubmit such Software Title or Online Content for Certification. Microsoft may charge Publisher a reasonable fee designed to offset the costs associated with testing upon resubmission. Publisher may request the ability to submit versions of the Software Title or Online Content at stages of development other than as identified above for review and feedback by Microsoft. Such review is within the discretion of Microsoft and may require the payment of reasonable fees by Publisher to offset the costs associated with the review of such Software Titles or Online Content.

     4.4 Content Rating. For those Sales Territories that utilize a content rating system, Microsoft will not accept submission of a Software Title for Certification approval unless and until Publisher has obtained, at Publisher’s sole cost, a rating not higher than “Mature (17+)” or its equivalent from the appropriate rating bodies and/or any and all other independent content rating authority/authorities for the applicable Sales Territory(ies) reasonably designated by Microsoft (such as ESRB, ELSPA, CERO, etc.). Publisher shall include the applicable rating(s) prominently on FPUs and Marketing Materials, in accordance with the applicable rating body guidelines, and shall include the applicable rating in a header file of the Software Title and in Online Content, as described in the Xbox 360 Publisher Guide. For those Sales Territories that do not utilize a content rating system, Microsoft will not approve any Software Title or Online Content that, in its opinion, contains excessive sexual content or violence, inappropriate language or other elements deemed unsuitable for the Xbox 360 platform. If, after Commercial Release, a Software Title is determined as suitable for adults only or otherwise as indecent, obscene or otherwise prohibited by law, the Publisher shall at its own costs recall all FPUs. Publisher hereby represents and warrants that any Online Game Features and other game-related Online Content not included in the initial Software Title FPU will not be inconsistent with the content rating (or, in those countries that do not utilize a content rating system, with the overall nature of the content) of the underlying Software Title. Content rating information and requirements may be further described in the Xbox 360 Publisher Guide.

     4.5 Publisher Testing. Publisher shall perform its own testing of the Software Title and FPUs and shall keep written or electronic records of such testing during the term of this Agreement and for no less than [***] thereafter (“Test Records”). Upon Microsoft’s request, Publisher shall provide Microsoft with copies of, or reasonable access to inspect, the Test Records, FPUs and Software Title (either in pre-Commercial Release or Commercial Release versions, as Microsoft may request).

     4.6 Mutual Approval Required. Publisher shall not distribute the Software Title, nor manufacture any FPU intended for distribution, unless and until Microsoft has given its final approval and release from Certification version of the Software Title and both parties have approved the FPU in writing.

     4.7 Title Updates

          4.7.1 All Title Updates for Software Titles are subject to approval by Microsoft. Publisher may release one Title Update per Software Title free of charge. Any additional Title Updates proposed by Publisher may be subject to a reasonable charge.

          4.7.2 Microsoft may require Publisher to develop and provide a Title Update if (a) a Software Title or Online Content adversely affects Xbox Live, (b) if a change to the Xbox 360 Publisher Guide requires a Title Update, (c) if Certification is revoked for Online Content, or (d) for any other reason at Microsoft’s reasonable discretion. Microsoft will not charge Publisher for the Certification, hosting, and distribution of Title Updates to Xbox Live Users for the first Title Update (if any) per Software Title or Online Content required by a specific change in the Xbox 360 Publisher Guide or for any other reason at Microsoft’s reasonable discretion. Microsoft reserves the right to charge Publisher a reasonable fee to offset the costs associated with the Certification, hosting, and distribution of Title Updates to Xbox Live Users that are required because of revocation of Certification or a Software Title or Online Content adversely affecting Xbox Live.

5. Xbox 360 Publisher Guide

Publisher acknowledges that the Xbox 360 Publisher Guide is an evolving document and subject to change during the term of this Agreement. Publisher agrees to be bound by all provisions contained in the then-applicable version of the Xbox 360 Publisher Guide. Publisher agrees that upon Publisher’s receipt of notice of availability of the applicable supplement, revision, or updated version of the Xbox 360 Publisher Guide (which may be via a publisher newsletter or other electronic notification), Publisher automatically is bound by all provisions of the Xbox 360 Publisher Guide as supplemented, revised,

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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or updated. Publisher’s continued distribution of FPUs after a notice of supplement, revision or update is included in the Xbox 360 Publisher Guide or made available to Publisher constitutes Publisher’s agreement to the then-current Xbox 360 Publisher Guide as supplemented, revised or updated. Microsoft will specify in each such supplement, revision or update a reasonable effective date of each change if such change is not required to be effective immediately. Only with respect to a Software Title that has passed Pre-Certification prior to the applicable revision or update, Publisher will not be obligated to comply with any changes made to the technical or content requirements for Software Titles in the Xbox 360 Publisher Guide, except in circumstances where such change is deemed by Microsoft to be vitally important to the success of the Xbox 360 platform (e.g. changes due to piracy, technical failure) or will not add significant expense to the Software Title’s development. In addition, changes made in Branding Specifications or other Marketing Materials requirements will be effective as to a Software Title that has passed Certification only on a “going forward” basis (i.e., only to such Marketing Materials and/or FPUs as are manufactured after Microsoft notifies Publisher of the change). Notwithstanding the foregoing, Publisher shall comply with such changes to the Xbox 360 Publisher Guide related to Branding Specifications or other Marketing Materials requirements retroactively if Microsoft agrees to pay for Publisher’s direct, out-of-pocket expenses necessarily incurred as a result of its retrospective compliance with the change.

6. Post-Release Compliance

     6.1 Correction of Bugs or Errors. Notwithstanding Microsoft’s Certification, all Software Titles must remain in compliance with all Certification requirements and requirements set forth in the Xbox 360 Publisher Guide on a continuing and ongoing basis. Publisher must correct any material program bugs or errors in conformance with the Xbox 360 Publisher Guide whenever discovered and Publisher agrees to correct such material bugs and errors as soon as possible after discovery. With respect to bugs or errors discovered after Commercial Release of the applicable Software Title, Publisher will, at Microsoft’s request or allowance, correct the bug or error in all FPUs manufactured after discovery and Microsoft may charge a reasonable amount to cover the costs of Certifying the Software Title again.

     6.2 Online Content; Minimum Commitment

          6.2.1 Publisher agrees that each Online Game Feature of a Software Title will be made available via Xbox Live for at least [***] following the respective Commercial Release of the FPUs of the Software Title in each Sales Territory in which Xbox Live is available (the “Minimum Commitment”). Publisher is obligated to provide all necessary support for such Online Game Feature during its availability and for [***] after discontinuation . Following the Minimum Commitment period, Publisher may terminate Microsoft’s license associated with such Online Game Feature upon [***] prior written notice to Microsoft; and/or Microsoft may discontinue the availability of any or all such Online Game Feature via Xbox Live upon [***] prior written notice to Publisher. Publisher is responsible for communicating the duration of Online Game Feature availability to Xbox Live Users, and for providing reasonable advance notice to Xbox Live Users of any discontinuation of such Online Game Feature.

          6.2.2 Subject to Section 10.3, Publisher agrees that Microsoft has the right to make Online Content other than Online Games Features submitted by Publisher available to Xbox Live Users for the Term of this Agreement. Publisher agrees to provide all necessary support for such Online Content as long as such Online Content is made available to Xbox Live Users and for [***] thereafter.

          6.2.3 Archive Copies. Publisher agrees to maintain, and to possess the ability to support, copies in object code, source code and symbol format, of all Online Content available to Xbox Live Users during the term of this Agreement and for no less than [***] thereafter.

7. Manufacturing

     7.1 Authorized Replicators. Publisher will use only an Authorized Replicator to produce FPUs. Prior to placing an order with a replicator for FPUs, Publisher shall confirm with Microsoft that such entity is an Authorized Replicator. Microsoft will endeavor to keep an up-to-date list of Authorized Replicators in the Xbox 360 Publisher Guide. Publisher will notify Microsoft in writing of the identity of the applicable Authorized Replicator and the agreement for such replication services shall be as negotiated by Publisher and the applicable Authorized Replicator, subject to the requirements in this Agreement. Publisher acknowledges that Microsoft may charge the Authorized Replicator fees for rights, services or products associated with the manufacture of FPUs and that the agreement with the Authorized Replicator grants Microsoft the right to instruct the Authorized Replicator to cease the manufacture or FPU and/or prohibit the release of FPU to Publisher or its agents in the event Publisher is in breach of this Agreement or any credit arrangement entered into by Microsoft and Publisher or Publisher affiliates. Microsoft does not guarantee any level of performance by the Authorized Replicators, and Microsoft will have no liability to Publisher for any Authorized Replicator’s failure to perform its

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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obligations under any applicable agreement between Microsoft and such Authorized Replicator and/or between Publisher and such Authorized Replicator. Microsoft has no responsibility for ensuring that FPUs are free of all defects.

     7.2 Submissions to the Authorized Replicator. Microsoft, and not Publisher, will provide to the applicable Authorized Replicator the final release version of the Software Title and all specifications required by Microsoft for the manufacture of the FPUs including, without limitation, the Security Technology (as defined in Section 7.9 below). Publisher is responsible for preparing and delivering to the Authorized Replicator all other items required for manufacturing FPUs including approved Packaging Materials associated with the FPUs. Subject to the approval of Publisher (which approval shall not be unreasonably withheld), Microsoft has the right to have included in the packaging of FPUs such promotional materials for Xbox, Xbox 360, Xbox Live, and/or other Xbox or Xbox 360 products or services as Microsoft may determine in its reasonable discretion. Microsoft will be responsible for delivering to the Authorized Replicator all such promotional materials as it desires to include with FPUs, and, unless otherwise agreed by the parties, any incremental insertion costs relating to such marketing materials will be borne by Microsoft.

     7.3 Verification Versions. Publisher shall cause the Authorized Replicator to create several test versions of each FPU (“Verification Version(s)”) that will be provided to both Microsoft and Publisher for evaluation. Prior to full manufacture of a FPU by the Authorized Replicator, both Publisher and Microsoft must approve the applicable Verification Version. Throughout the manufacturing process and upon the request of Microsoft, Publisher shall cause the Authorized Replicator to provide additional Verification Versions of the FPU for evaluation by Microsoft. Microsoft’s approval is a condition precedent to manufacture, however Publisher shall grant the final approval and shall work directly with the Authorized Replicator regarding the production run. Publisher agrees that all FPUs must be replicated in conformity with all of the quality standards and manufacturing specifications, policies and procedures that Microsoft requires of its Authorized Replicators, and that all Packaging Materials must be approved by Microsoft prior to packaging. Publisher shall cause the Authorized Replicator to include the BTS on each FPU.

     7.4 Samples. For each Software Title sku, at Publisher’s cost, Publisher shall provide Microsoft with FPUs and accompanying Marketing Materials per Sales Territory in which the FPU will be released. Such units may be used in marketing, as product samples, for customer support, testing and for archival purposes. Publisher will not have to pay a royalty fee for such samples nor will such samples count towards the Unit Discounts under Exhibit 1.

     7.5 Minimum Order Quantities

          7.5.1 Within [***] after the date on which both Microsoft and Publisher have authorized the Authorized Replicator to begin replication of FPUs for distribution to a specified Sales Territory, (receipt of both approvals is referred to as “Release to Manufacture”), Publisher must place orders to manufacture the minimum order quantities (“MOQs”) as described in the Xbox 360 Publisher Guide. Microsoft may update and revise the MOQs [***] which will be effective starting the following [***]. Currently, the MOQs are as follows:

     [***]

          7.5.2 For the purposes of this section, a “Disc” shall mean an FPU that is signed for use on a certain defined range of Xbox 360 hardware, regardless of the number of languages or product skus contained thereon. The MOQs per Software Title are cumulative per Sales Territory. For example, if an FPU is released in both the North American Sales Territory and the European Sales Territory, the cumulative MOQ per Software Title would be [***]. The MOQ per Software Title and the MOQ per Disc, however, are not cumulative. For example, a single Disc FPU released only in the North America Sales Territory will have a total minimum order quantity of [***], which would cover the [***] MOQ per Software Title and the [***] MOQ per Disc (rather than [***] which would have been the total minimum order quantity if the MOQ per Software Title and the MOQ per Disc had been cumulative).

          7.5.3 If Publisher fails to place orders to meet any applicable minimum order quantity within [***] of Release to Manufacture, Publisher shall immediately pay Microsoft the applicable royalty fee for the number of FPUs represented by the difference between the applicable MOQ and the number of FPUs of the Software Title actually ordered by Publisher.

     7.6 Manufacturing Reports. For purposes of assisting in the scheduling of manufacturing resources, on a [***] basis, or as otherwise requested by Microsoft in its reasonable discretion, Publisher shall provide Microsoft with forecasts showing manufacturing projections by Sales Territory [***] out for each Software Title. Publisher will use commercially reasonable efforts to cause the Authorized Replicator to deliver to Microsoft true and accurate [***] statements of FPUs manufactured in each [***], on a Software Title-by-Software Title basis and in sufficient detail to satisfy Microsoft,

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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within [***]. Microsoft will have reasonable audit rights to examine the records of the Authorized Replicator regarding the number of FPUs manufactured.

     7.7 New Authorized Replicator. If Publisher requests that Microsoft certify and approve a third party replicator that is not then an Authorized Replicator, Microsoft will consider such request in good faith. Publisher acknowledges and agrees that Microsoft may condition certification and approval of such third party on the execution of an agreement in a form satisfactory to Microsoft pursuant to which such third party agrees to strict quality standards, non-disclosure requirements, license fees for use of Microsoft intellectual property and trade secrets, and procedures to protect Microsoft’s intellectual property and trade secrets. Notwithstanding anything contained herein, Publisher acknowledges that Microsoft is not required to certify, maintain the certification or approve any particular third party as an Authorized Replicator, and that the certification and approval process may be time-consuming.

     7.8 Alternate Manufacturing in Europe. Publisher may, solely with respect to FPUs manufactured for distribution in the European Sales Territory, utilize a different process or company for the combination of a FPU with Packaging Materials provided that such packaging process incorporates the BTS and otherwise complies with the Xbox 360 Publisher Guide. Publisher shall notify Microsoft regarding its use of such process or company so that the parties may properly coordinate their activities and approvals. To the extent that Microsoft is unable to accommodate such processes or company, Publisher shall modify its operations to comply with Microsoft’s requirements.

     7.9 Security. Microsoft has the right to add to the final release version of the Software Title delivered by Publisher to Microsoft, and to all FPUs, such digital signature technology and other security technology and copyright management information (collectively, “Security Technology”) as Microsoft may determine to be necessary, and/or Microsoft may modify the signature included in any Security Technology included in the Software Title by Publisher at Microsoft’s discretion. Additionally, Microsoft may add Security Technology that prohibits the play of Software Titles on Xbox 360 units manufactured in a region or country different from the location of manufacture of the respective FPUs or that have been modified in any manner not authorized by Microsoft.

     7.10 Demo Versions. If Publisher wishes to distribute a Demo Version in FPU format, Publisher must obtain Microsoft’s prior written approval and Microsoft may charge a reasonable fee to offset costs of the Certification. Subject to the terms of the Xbox 360 Publisher Guide, such Demo Version(s) may be placed on a single disc, either as a stand-alone or with other Demo Versions and the price of such units must be [***] or its equivalent in local currency. Unless separately addressed in the Xbox 360 Publisher Guide, all rights, obligations and approvals set forth in this Agreement as applying to Software Titles shall separately apply to any Demo Version. [***]. If Publishers wishes to distribute a Demo Versions in an online downloadable format, such downloadable Demo Version shall be distributed via by Microsoft Xbox Live in accordance with Section 10.3, and such downloadable Demo Version will be subject to all other terms and policies applicable to Online Content set forth herein and in the Xbox 360 Publisher Guide.

8. Payments

The Parties shall make payments to each other under the terms of Exhibit 1.

9. Marketing, Sales and Support

     9.1 Publisher Responsible. As between Microsoft and Publisher, Publisher is solely responsible for the marketing and sales of the Software Title. Publisher is also solely responsible for providing technical and all other support relating to the FPUs (including for Xbox Live Users of Online Content). Publisher shall provide all appropriate contact information (including without limitation Publisher’s address and telephone number, and the applicable individual/group responsible for customer support), and shall also provide all such information to Microsoft for posting on http://www.xbox.com, or such successor or related Web site identified by Microsoft or in Xbox Live. Customer support shall at all times conform to the Customer Service Requirements set forth in the Xbox 360 Publisher Guide and industry standards in the console game industry.

     9.2 Warranty. Publisher shall provide the original end user of any FPU a minimum warranty in accordance with local laws and industry practices. For example, in the United States, Publisher shall, as of the Effective Date, provide a minimum [***] limited warranty that the FPU will perform in accordance with its user documentation or Publisher will refund the purchase price or provide a replacement FPU at no charge. Publisher may offer additional warranty coverage consistent with the traditions and practices of video game console game publishers within the applicable Sales Territory or as otherwise required by local law.

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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     9.3 Recall. Notwithstanding anything to the contrary contained in this Agreement, if there is a material defect in a Software Title and/or any FPUs, which defect in the reasonable judgment of Microsoft would significantly impair the ability of an end user to play such Software Title or FPU or would adversely affect the gameplay of the Xbox 360 or Xbox Live, Microsoft may require Publisher to recall FPUs and undertake prompt repair or replacement of such Software Title and/or FPUs.

     9.4 No Bundling with Unapproved Peripherals, Products or Software. Except as expressly stated in this section, Publisher shall not market or distribute a FPU bundled with any other product or service, nor shall Publisher knowingly permit or assist any third party in such bundling, without Microsoft’s prior written consent. Publisher may market or distribute (i) FPU bundled with a Software Title(s) that has been previously certified and released by Microsoft for manufacturing; or (ii) FPU bundled with a peripheral product (e.g. game pads) that has been previously licensed as an “Xbox 360 Licensed Peripheral” by Microsoft, without obtaining the written permission of Microsoft. Publisher shall contact Microsoft in advance to confirm that the peripheral or Software Title to be bundled has previously been approved by Microsoft pursuant to a valid license.

     9.5 Software Title License. Publisher grants Microsoft a fully-paid, royalty-free, worldwide, non-exclusive license (i) to publicly perform the Software Titles at conventions, events, trade shows, press briefings, public interactive displays and the like; (ii) to use the title of the Software Title, and screen shots from the Software Title, in advertising and promotional material relating to Xbox 360 and related Microsoft products and services, as Microsoft may reasonably deem appropriate; (iii) distribute Demo Versions with the Official Xbox Magazine, as a standalone product with other demo software; and (iv) distribute Software Title trailers via xbox.com. Publisher may also select Online Content for inclusion in public interactive displays and/or compilation demo discs published by Microsoft, in which case Publisher grants Microsoft a fully-paid, royalty-free, worldwide, transferable, sublicenseable license to broadcast, transmit, distribute, host, publicly display, reproduce and manufacture such selected Online Content as part of public interactive displays and compilation demo discs, and to distribute and permit end users to download and store (and, at Publisher’s discretion, to make further copies) such Online Content via public interactive displays, The rights granted in the preceding sentence are in addition to any rights that Microsoft may have for uses of Publisher Software Titles under the applicable law, such as uses that are “referential,” “fair use” or “reasonable use.”

10. Grant of Distribution License, Limitations

     10.1 Distribution License. Upon Certification of the Software Title, approval of the Marketing Materials and the FPU test version of the Software Title by Microsoft, and subject to the terms and conditions contained within this Agreement, Microsoft grants Publisher a non-exclusive, non-transferable, license to distribute FPUs containing Redistributable and Sample Code (as defined in the XDK License) and Security Technology (as defined above) within the Sales Territories approved in the Software Title’s Concept in FPU form to third parties for distribution to end users and/or directly to end users. The license to distribute the FPUs is personal to Publisher and except for transfers of FPU through normal channels of distribution (e.g. wholesalers, retailers), absent the written approval of Microsoft, Publisher may not sublicense or assign its rights under this license to other parties. For the avoidance of doubt, without the written approval of Microsoft, Publisher may not sublicense, transfer or assign its right to distribute Software Titles or FPU to another entity that will brand, co-brand or otherwise assume control over such products as a “publisher” as that concept is typically understood in the console game industry. Publisher may only grant end users the right to make personal, non-commercial use of Software Titles and may not grant end users any of the other rights reserved to a copyright holder under US Copyright Law, Japanese Copyright Law, or its international equivalent. Publisher’s license rights do not include any license, right, power or authority to subject Microsoft’s software or derivative works thereof or intellectual property associated therewith in whole or in part to any of the terms of an Excluded License. “Excluded License” means any license that requires as a condition of use, modification and/or distribution of software subject to the Excluded License, that such software or other software combined and/or distributed with such software be (a) disclosed or distributed in source code form; (b) licensed for the purpose of making derivative works; or (c) redistributable at no charge.

     10.2 No Distribution Outside the Sales Territory. Publisher shall distribute FPUs only in Sales Territories for which the Software Title has been approved by Microsoft. Publisher shall not directly or indirectly export any FPUs from an authorized Sales Territory to an unauthorized territory nor shall Publisher knowingly permit or assist any third party in doing so, nor shall Publisher distribute FPUs to any person or entity that it has reason to believe may re-distribute or sell such FPUs outside authorized Sales Territories.

     10.3 Online Features. In consideration of the royalty payments as described in Exhibit 1, Publisher grants to Microsoft (i) a worldwide, transferable, sublicensable license to broadcast, transmit, distribute, host, publicly display, reproduce, and license Online Content for use on Xbox 360s, and (ii) a worldwide, transferable license solely to distribute to

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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end users and permit end users to download and store Online Content (and, at Publisher’s discretion, to make further copies). Publisher agrees that the license grants set forth in this section applicable to Online Content are exclusive, meaning that except as expressly permitted under this Agreement, the Xbox 360 Publisher Guide and/or as agreed by the Parties, Publisher shall not directly or indirectly permit or enable access to Online Content by any means, methods, platforms or services other than through Xbox Live, or as otherwise set forth in this Agreement. Notwithstanding the foregoing, this Section 10.3 does not prevent Publisher from making other platform versions of its Software Titles or Online Content available via other platform-specific online services. This Section 10.3 shall survive expiration or termination of this Agreement solely to the extent and for the duration necessary to effectuate Section 17.3 below.

     10.4 No Reverse Engineering. Publisher may utilize and study the design, performance and operation of Xbox 360 or Xbox Live solely for the purposes of developing the Software Title or Online Content. Notwithstanding the foregoing, Publisher shall not, directly or indirectly, reverse engineer or aid or assist in the reverse engineering of all or any part of Xbox 360 or Xbox Live except and only to the extent that such activity is expressly permitted by applicable law notwithstanding this limitation. In the event applicable law grants Publisher the right to reverse engineer the Xbox 360 or Xbox Live notwithstanding this limitation, Publisher shall provide Microsoft with written notice prior to such reverse engineering activity, information regarding Publisher’s intended method of reverse engineering, its purpose and the legal authority for such activity and shall afford Microsoft a reasonable period of time before initiating such activity in order to evaluate the activity and/or challenge the reverse engineering activity with the appropriate legal authorities. Publisher shall refrain from such reverse engineering activity until such time as any legal challenge is resolved in Publisher’s favor. Reverse engineering includes, without limitation, decompiling, disassembly, sniffing, peeling semiconductor components, or otherwise deriving source code. In addition to any other rights and remedies that Microsoft may have under the circumstances, Publisher shall be required in all cases to pay royalties to Microsoft in accordance with Exhibit 1 with respect to any games or other products that are developed, marketed or distributed by Publisher, and derived in whole or in part from the reverse engineering of Xbox 360, Xbox Live or any Microsoft data, code or other material.

     10.5 Reservation of Rights. Microsoft reserves all rights not explicitly granted herein.

     10.6 Ownership of the Software Titles. Except for the intellectual property supplied by Microsoft to Publisher (including without limitation the Licensed Trademarks hereunder and the licenses in certain software and hardware granted by an XDK License), ownership of which is retained by Microsoft, insofar as Microsoft is concerned, Publisher will own all rights in and to the Software Titles and Online Content.

     10.7 Sub-Publishing. Notwithstanding Section 10.1, Publisher may enter into independent agreements with other publishers to distribute Software Titles in multiple approved Sales Territories (a “Sub-Publishing Relationship”), so long as:

          10.7.1 Publisher provides written notice to Microsoft, at least [***] prior to authorizing a Sub-Publisher to manufacture any Software Title(s), of the Sub-Publishing relationship, along with (i) a summary of the scope and nature of the Sub-Publishing relationship including, without limitation, as between Publisher and Sub-Publisher, (ii) which party will be responsible for Certification of the Software Title(s) and/or any Online Content, (iii) a list of the Software Title(s) for which Sub-Publisher has acquired publishing rights, (iv) the geographic territory(ies) for which such rights were granted, and (v) the term of Publisher’s agreement with Sub-Publisher; and

          10.7.2 The Sub-Publisher has signed an Xbox 360 publisher license agreement (“Xbox 360 PLA”) and both Publisher and Sub-Publisher are and remain at all times in good standing under each of their respective Xbox 360 PLAs. Publisher is responsible for making applicable royalty payments for the FPUs for which it places manufacturing orders, and Sub-Publisher is responsible for making royalty payments for the FPUs for which it places manufacturing orders.

     10.8 Authorized Affiliates. If Publisher and an affiliate execute the “Publisher Affiliate Agreement” provided in Exhibit 4, then Publisher’s authorized affiliate may exercise the rights granted to Publisher under this Agreement. The foregoing shall not apply to any Publisher affiliate which pays or intends to pay royalties from a European billing address. Any such European affiliate shall instead execute an Xbox 360 Publisher Enrollment with MIOL, a copy of which is attached hereto as Exhibit 3.

11. Usage Data

Publisher acknowledges that the operation of the Xbox Live service requires that Microsoft collect and store Xbox Live User usage data, including, without limitation, Xbox Live User statistics, scores, ratings, and rankings (collectively, “Xbox Live User Data”), as well as personally-identifiable Xbox Live User data (e.g., name, email address) (“Personal Data”). Microsoft

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

10

reserves the right, in its discretion, to use such Xbox Live User Data for any purpose, including without limitation, posting the Xbox Live User Data on Xbox.com or other Microsoft Web sites. Microsoft agrees to use commercially reasonable efforts to periodically make certain Xbox Live User Data and Personal Data available to Publisher; provided that Publisher’s use of such data is in accordance with the then-current Xbox Live Privacy Statement and such other reasonable restrictions as Microsoft may require. Without limiting the foregoing, Publisher agrees that any disclosure of Personal Data to Publisher is only used by Publisher and may not be shared with any other third parties, and any permitted email communications with Xbox Live Users includes instructions for opting out of receiving any further communications from Publisher.

12. Trademark Rights and Restrictions

     12.1 Licensed Trademarks License. In each Software Title, FPU, Online Content and on all Marketing Materials, Publisher shall incorporate the Licensed Trademarks and include credit and acknowledgement to Microsoft as set forth in the Xbox 360 Publisher Guide. Microsoft grants to Publisher a non-exclusive, non-transferable, personal license to use the Licensed Trademarks in connection with Software Titles, FPUs, Online Content and Marketing Materials according to the Xbox 360 Publisher Guide and other conditions herein, and solely in connection with marketing, sale, and distribution in the approved Sales Territories or via Xbox Live.

     12.2 Limitations. Publisher is granted no right, and shall not purport, to permit any third party to use the Licensed Trademarks in any manner without Microsoft’s prior written consent. Publisher’s license to use Licensed Trademarks in connection with the Software Title, FPUs and/or Online Content does not extend to the merchandising or sale of related or promotional products.

     12.3 Branding Specifications. Publisher’s use of the Licensed Trademarks (including without limitation in FPUs, Online Content and Marketing Materials) must comply with the Branding Specifications set forth in the Xbox 360 Publisher Guide. Publisher shall not use Licensed Trademarks in association with any third party trademarks in a manner that might suggest co-branding or otherwise create potential confusion as to source or sponsorship of the Software Title, Online Content or FPUs or ownership of the Licensed Trademarks, unless Microsoft has otherwise approved such use in writing. Upon notice or other discovery of any non-conformance with the requirements or prohibitions of this section, Publisher shall promptly remedy such non-conformance and notify Microsoft of the non-conformance and remedial steps taken.

     12.4 Protection of Licensed Trademarks. Publisher shall assist Microsoft in protecting and maintaining Microsoft’s rights in the Licensed Trademarks, including preparation and execution of documents necessary to register the Licensed Trademarks or record this Agreement, and giving immediate notice to Microsoft of potential infringement of the Licensed Trademarks. Microsoft shall have the sole right to and in its sole discretion may, commence, prosecute or defend, and control any action concerning the Licensed Trademarks, either in its own name or by joining Publisher as a party thereto. Publisher shall not during the term of this Agreement contest the validity of, by act or omission jeopardize, or take any action inconsistent with, Microsoft’s rights or goodwill in the Licensed Trademarks in any country, including attempted registration of any Licensed Trademark, or use or attempted registration of any mark confusingly similar thereto.

     12.5 Ownership and Goodwill. Publisher acknowledges Microsoft’s ownership of all Licensed Trademarks, and all goodwill associated with the Licensed Trademarks. Use of the Licensed Trademarks shall not create any right, title or interest therein in Publisher’s favor. Publisher’s use of the Licensed Trademarks shall inure solely to the benefit of Microsoft.

13. Non-Disclosure; Announcements

     13.1 Non-Disclosure Agreement. The information, materials and software exchanged by the parties hereunder or under an XDK License, including the terms and conditions hereof and of the XDK License, are subject to the Non-Disclosure Agreement between the parties attached hereto as Exhibit 5 (the “Non-Disclosure Agreement”), which is incorporated herein by reference; provided, however, that for purposes of the foregoing, Section 2(a)(i) of the Non-Disclosure Agreement shall hereinafter read, “The Receiving Party shall: (i)] Refrain from disclosing Confidential Information of the Disclosing Party to any third parties for as long as such remains undisclosed under 1(b) above except as expressly provided in Sections 2(b) and 2(c) of this [Non-Disclosure] Agreement.” In this way, all Confidential Information provided hereunder or by way of the XDK License in whatever form (e.g. information, materials, tools and/or software exchanged by the parties hereunder or under an XDK License), including the terms and conditions hereof and of the XDK License, unless otherwise specifically stated, will be protected from disclosure for as long as it remains Confidential.

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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     13.2 Public Announcements. Neither party shall issue any such press release or make any such public announcement(s) related to the subject matter of this Agreement or any XDK License without the express prior consent of the other party, which consent will not be unreasonably withheld or delayed. Nothing contained in this Section 13.2 will relieve Publisher of any other obligations it may have under this Agreement, including without limitation its obligations to seek and obtain Microsoft approval of Marketing Materials.

     13.3 Required Public Filings. Notwithstanding Sections 13.1 and 13.2, the parties acknowledge that this Agreement, or portions thereof, may be required under applicable law to be disclosed, as part of or an exhibit to a party’s required public disclosure documents. If either party is advised by its legal counsel that such disclosure is required, it will notify the other in writing and the parties will jointly seek confidential treatment of this Agreement to the maximum extent reasonably possible, in documents approved by both parties and filed with the applicable governmental or regulatory authorities, and/or Microsoft will prepare a redacted version of this Agreement for filing.

14. Protection of Proprietary Rights

     14.1 Microsoft Intellectual Property. If Publisher learns of any infringement or imitation of the Licensed Trademarks, a Software Title, Online Content or FPU, or the proprietary rights in or related to any of them, it will promptly notify Microsoft thereof. Microsoft may take such action as it deems advisable for the protection of its rights in and to such proprietary rights, and Publisher shall, if requested by Microsoft, cooperate in all reasonable respects therein at Microsoft’s expense. In no event, however, shall Microsoft be required to take any action if it deems it inadvisable to do so. Microsoft will have the right to retain all proceeds it may derive from any recovery in connection with such actions.

     14.2 Publisher Intellectual Property. Publisher, without the express written permission of Microsoft, may bring any action or proceeding relating to infringement or potential infringement of a Software Title, Online Content or FPU, to the extent such infringement involves any proprietary rights of Publisher (provided that Publisher will not have the right to bring any such action or proceeding involving Microsoft’s intellectual property). Publisher shall make reasonable efforts to inform Microsoft regarding such actions in a timely manner. Publisher will have the right to retain all proceeds it may derive from any recovery in connection with such actions. Publisher agrees to use all commercially reasonable efforts to protect and enforce its proprietary rights in the Software Title or Online Content.

     14.3 Joint Actions. Publisher and Microsoft may agree to jointly pursue cases of infringement involving the Software Titles or Online Content (since such products will contain intellectual property owned by each of them). Unless the parties otherwise agree, or unless the recovery is expressly allocated between them by the court (in which case the terms of Sections 14.1 and 14.2 will apply), in the event Publisher and Microsoft jointly prosecute an infringement lawsuit under this provision, any recovery will be used first to reimburse Publisher and Microsoft for their respective reasonable attorneys’ fees and expenses, pro rata, and any remaining recovery shall also be given to Publisher and Microsoft pro rata based upon the fees and expenses incurred in bringing such action.

15. Warranties

     15.1 Publisher. Publisher warrants and represents that:

          15.1.1 It has the full power to enter into this Agreement;

          15.1.2 It has obtained and will maintain all necessary rights and permissions for its and Microsoft’s use of the Software Title, FPUs, Marketing Materials, Online Content, all information, data, logos, and software or other materials provided to Microsoft and/or made available to Xbox Live Users via Xbox Live (excluding those portions that consist of the Licensed Trademarks, Security Technology and redistributable components of the so-called “XDK” in the form as delivered to Publisher by Microsoft pursuant to an XDK License) (collectively, the “Publisher Content”), and that all Publisher Content complies with all laws and regulations, and does not and will not infringe upon or misappropriate any third party trade secrets, copyrights, trademarks, patents, publicity, privacy or other proprietary rights.

          15.1.3 It shall comply with all laws, regulations, industry content rating requirements and administrative orders and requirements within any applicable Sales Territory relating to the distribution, sale and marketing of the Software Title, and shall keep in force all necessary licenses, permits, registrations, approvals and/or exemptions throughout the term of this Agreement and for so long as it is distributing, selling or marketing the Software Title in any applicable Sales Territory.

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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          15.1.4 The Software Title, Online Content and/or information, data, logos and software or other materials provided to Microsoft and /or made available to Xbox Live Users via Xbox Live, do not and shall not contain any messages, data, images or programs that are, by law, defamatory, obscene or pornographic, or in any way violate any applicable laws or industry content rating requirements (including without limitation laws of privacy) of the applicable Sales Territory(ies) where the Software Title is marketed and/or distributed.

          15.1.5 The Online Content shall not harvest or otherwise collect information about Xbox Live Users, including e-mail addresses, without the Xbox Live Users’ express consent; and the Online Content shall not link to any unsolicited communication sent to any third party.

     15.2 Microsoft. Microsoft warrants and represents that it has the full power to enter into this Agreement and it has not previously and will not grant any rights to any third party that are inconsistent with the rights granted to Publisher herein.

     15.3 DISCLAIMER. EXCEPT AS EXPRESSLY STATED IN THIS SECTION 15, MICROSOFT PROVIDES ALL MATERIALS (INCLUDING WITHOUT LIMITATION THE SECURITY TECHNOLOGY) AND SERVICES HEREUNDER ON AN “AS IS” BASIS, AND MICROSOFT DISCLAIMS ALL OTHER WARRANTIES UNDER THE APPLICABLE LAWS OF ANY COUNTRY, EXPRESS OR IMPLIED, REGARDING THE MATERIALS AND SERVICES IT PROVIDES HEREUNDER, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR WARRANTY OF FREEDOM FROM COMPUTER VIRUSES. WITHOUT LIMITATION, MICROSOFT PROVIDES NO WARRANTY OF NON-INFRINGEMENT.

     15.4 EXCLUSION OF INCIDENTAL, CONSEQUENTIAL AND CERTAIN OTHER DAMAGES. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL MICROSOFT, ITS AFFILIATES, LICENSORS OR ITS SUPPLIERS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE WHATSOEVER, RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING WITHOUT LIMITATION, LOST PROFITS OR LOST GOODWILL AND WHETHER BASED ON BREACH OF ANY EXPRESS OR IMPLIED WARRANTY, BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR STRICT LIABILITY, REGARDLESS OF WHETHER SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR IF SUCH DAMAGE COULD HAVE BEEN REASONABLY FORESEEN.

     15.5 LIMITATION OF LIABILITY. THE MAXIMUM LIABILITY OF MICROSOFT TO PUBLISHER OR TO ANY THIRD PARTY ARISING OUT OF THIS AGREEMENT WILL BE [***]. FURTHERMORE, UNDER NO CIRCUMSTANCES SHALL MICROSOFT BE LIABLE TO PUBLISHER FOR ANY DAMAGES WHATSOEVER WITH RESPECT TO ANY CLAIMS RELATING TO THE SECURITY TECHNOLOGY AND/OR ITS EFFECT ON ANY SOFTWARE TITLE OR FOR ANY STATEMENTS OR CLAIMS MADE BY PUBLISHER, WHETHER IN PUBLISHER’S MARKETING MATERIALS OR OTHERWISE, REGARDING THE AVAILABILITY OR OPERATION OF ANY ONLINE FEATURES.

16. Indemnity; Insurance. A claim for which indemnity may be sought hereunder is referred to as a “Claim.”

     16.1 Mutual Indemnification. Each party hereby agrees to indemnify, defend, and hold the other party harmless from any and all third party claims, demands, costs, liabilities, losses, expenses and damages (including reasonable attorneys’ fees, costs, and expert witnesses’ fees) arising out of or in connection with any claim that, taking the claimant’s allegations to be true, would result in a breach by the indemnifying party of any of its representations, warranties or covenants set forth in Section 15.

     16.2 Additional Publisher Indemnification Obligation. Publisher further agrees to indemnify, defend, and hold Microsoft harmless from any and all third party claims, demands, costs, liabilities, losses, expenses and damages (including reasonable attorneys’ fees, costs, and expert witnesses’ fees) arising out of or in connection with any claim regarding any Software Title or FPU including without limitation any claim relating to quality, performance, safety thereof, or arising out of Publisher’s use of the Licensed Trademarks in breach of this Agreement.

     16.3 Notice and Assistance. The indemnified party shall: (i) provide the indemnifying party reasonably prompt notice in writing of any Claim and permit the indemnifying party to answer and defend such Claim through counsel chosen and paid by the indemnifying party; and (ii) provide information, assistance and authority to help the indemnifying party defend such Claim. The indemnified party may participate in the defense of any Claim at its own expense. The

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

13

indemnifying party will not be responsible for any settlement made by the indemnified party without the indemnifying party’s written permission, which will not be unreasonably withheld or delayed. In the event the indemnifying party and the indemnified party agree to settle a Claim, the indemnified party agrees not to publicize the settlement without first obtaining the indemnifying party’s written permission.

     16.4 Insurance. Publisher shall maintain sufficient and appropriate insurance coverage to enable it to meet its obligations under this Agreement and by law (whether Products Liability, General Liability or some other type of insurance). For FPUs distributed in the Japan Sales Territory, Publisher’s coverage will have minimum limits of the Japanese yen equivalent of [***] per occurrence, with a deductible of not more than the Japanese yen equivalent of [***]. For FPUs distributed in the Asian Sales Territory, Publisher’s coverage will have minimum limits of [***] per occurrence (or its equivalent value in local currency as of the date of issuance), with a deductible of not more than [***] (or its equivalent value in local currency as of the date of issuance). For FPUs distributed outside of Japan and the Asian Sales Territories, Publisher shall maintain Professional Liability and Errors & Omissions Liability Insurance (E&O) with policy limits of not less than [***] per occurrence (or its equivalent value in local currency as of the date of issuance), each claim with a deductible of not more than [***] (or its equivalent value in local currency as of the date of issuance). Such insurance shall include coverage for infringement of any proprietary right of any third party, including without limitation copyright and trademark infringement as related to Publisher’s performance under this Agreement. The E&O insurance retroactive coverage date will be no later than [***]. Publisher shall maintain an active policy, or purchase an extended reporting period providing coverage for claims first made and reported to the insurance company within [***] after [***]. Upon request, Publisher shall deliver to Microsoft proof of such coverage. In the event that Publisher’s proof evidences coverage that Microsoft reasonably determines to be less than that required to meet Publisher’s obligations created by this Agreement, then Publisher agrees that it shall promptly acquire such coverage and notify Microsoft in writing thereof.

17. Term and Termination

     17.1 Term. The term of this Agreement shall commence on the Effective Date and shall continue until [***]. Unless one party gives the other notice of non-renewal within [***] of the end of the then-current term, this Agreement shall automatically renew for successive [***] terms.

     17.2 Termination for Breach. If either party materially fails to perform or comply with this Agreement or any provision thereof, and fails to remedy the default within [***] after the receipt of notice to that effect, then the other party has the right, at its sole option and upon written notice to the defaulting party, to terminate this Agreement upon written notice; provided that if Publisher is the party that has materially failed to perform or comply with this Agreement, then Microsoft has the right, but not the obligation, to suspend availability of the Online Content during such [***] period. Any notice of default hereunder must be prominently labeled “NOTICE OF DEFAULT”; provided, however, that if the default is of Sections 10, 12 or Sections 1 or 2 of Exhibit 1, the Non-Disclosure Agreement, or an XDK License, then the non-defaulting party may terminate this Agreement immediately upon written notice, without being obligated to provide a [***] cure period. The rights and remedies provided in this section are not exclusive and are in addition to any other rights and remedies provided by law or this Agreement. If the uncured default is related to a particular Software Title or particular Online Content, then the party not in default has the right, in its discretion, to terminate this Agreement its entirety or with respect to the applicable Software Title or the particular Online Content. If Microsoft determines, at any time prior to the Commercial Release of a Software Title or Online Content, that such Software Title or Online Content does not materially comply with the requirements set forth in the Xbox 360 Publisher Guide or to any applicable laws, then Microsoft has the right, in Microsoft’s sole discretion and notwithstanding any prior approvals given by Microsoft, to terminate this Agreement without cost or penalty, as a whole or on a Software Title by Software Title, or Sales Territory by Sales Territory basis upon written notice to Publisher with respect to such Software Title or Sales Territory.

     17.3 Effect of Termination; Sell-off Rights. Upon termination or expiration of this Agreement, Publisher has no further right to exercise the rights licensed hereunder or within the XDK License and shall promptly cease all manufacturing of FPU through its Authorized Replicators and, other than as provided below, cease use of the Licensed Trademarks. Publisher shall have a period of [***] , to sell-off its inventory of FPUs existing as of the date of termination or expiration, after which sell-off period Publisher shall immediately return all FPUs to an Authorized Replicator for destruction. Publisher shall cause the Authorized Replicator to destroy all FPUs and issue to Microsoft written certification by an authorized representative of the Authorized Replicator confirming the destruction of FPUs required hereunder. All of Publisher’s obligations under this Agreement shall continue to apply during such [***] sell-off period. If this Agreement is terminated due to Publisher’s breach, at Microsoft’s option, Microsoft may require Publisher to immediately destroy all FPUs not yet distributed to Publisher’s distributors, dealers and/or end users and shall require all those distributing the FPU over which it has control to cease distribution. Upon termination or expiration of this Agreement, Publisher shall continue to

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

14

support existing Online Game Features for FPUs that have already been sold until the end of the Minimum Commitment term.

     17.4 Cross-Default. If Microsoft has the right to terminate this Agreement, then Microsoft may, at its sole discretion also terminate the XDK License. If Microsoft terminates the XDK License due to a breach by Publisher, then Microsoft may, at its sole discretion also terminate this Agreement.

     17.5 Survival. The following provisions shall survive expiration or termination of this Agreement: Sections 2, 6.2.2 (as to the Minimum Commitment), 6.2.3, 8 and Sections 1, 2 and 5 of Exhibit 1, 9.1-9.3, 10.3, 10.4, 11, 13.1, 14, 15, 16, 17.3, 17.5 and 18.

18. General

     18.1 Governing Law; Venue; Attorneys Fees. This Agreement is to be construed and controlled by the laws of the State of Washington, U.S.A., and Publisher consents to exclusive jurisdiction and venue in the federal courts sitting in King County, Washington, U.S.A., unless no federal jurisdiction exists, in which case Publisher consents to exclusive jurisdiction and venue in the Superior Court of King County, Washington, U.S.A. Publisher waives all defenses of lack of personal jurisdiction and forum non conveniens. Process may be served on either party in the manner authorized by applicable law or court rule. The English version of this Agreement is determinative over any translations thereof. If either party employs attorneys to enforce any rights arising out of or relating to this Agreement, the prevailing party is entitled to recover its reasonable attorneys’ fees, costs and other expenses. This choice of jurisdiction provision does not prevent Microsoft from seeking injunctive relief with respect to a violation of intellectual property rights or confidentiality obligations in any appropriate jurisdiction.

     18.2 Notices; Requests. All notices and requests in connection with this Agreement are deemed given on the [***] after they are deposited in the applicable country’s mail system ([***]), postage prepaid, certified or registered, return receipt requested; or [***] sent by overnight courier, charges prepaid, with a confirming fax; and addressed as follows:

Publisher:	MAJESCO ENTERTAINMENT COMPANY	Microsoft:	MICROSOFT LICENSING, GP
	160 Raritan Center Parkway Edison, NJ 08837		6100 Neil Road, Suite 100 Reno, NV 89511-1137
Attention:	Catherine Biebelberg
Fax:	732-225-5451	Attention:	Xbox Accounting Services
Phone:	732-225-8910	with a cc to:	MICROSOFT CORPORATION
Email:	catherineb@majescoentertainment.com		One Microsoft Way
			Redmond, WA 98052-6399
		Attention:	Law & Corporate Affairs Department
			Assoc. General Counsel,Consumer Legal
			Group (H&ED)
			Fax: (425) 936-7329

or to such other address as the party to receive the notice or request so designates by written notice to the other.

     18.3 No Delay or Waiver. No delay or failure of either party at any time to exercise or enforce any right or remedy available to it under this Agreement, and no course of dealing or performance with respect thereto, will constitute a waiver of any such right or remedy with respect to any other breach or failure by the other party. The express waiver by a party of any right or remedy in a particular instance will not constitute a waiver of any such right or remedy in any other instance. All rights and remedies will be cumulative and not exclusive of any other rights or remedies.

     18.4 Assignment. Publisher may not assign this Agreement or any portion thereof, to any third party unless Microsoft expressly consents to such assignment in writing. Microsoft will have the right to assign this Agreement and/or any portion thereof as Microsoft may deem appropriate and/or authorize its affiliates or partners to perform this Agreement in whole or part on its behalf. For the purposes of this Agreement, a merger, consolidation, or other corporate reorganization, or a transfer or sale of a controlling interest in a party’s stock, or of all or substantially all of its assets is to be deemed to be an

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

15

assignment. This Agreement will inure to the benefit of and be binding upon the parties, their successors, administrators, heirs, and permitted assigns.

     18.5 No Partnership. Microsoft and Publisher are entering into a license pursuant to this Agreement and nothing in this Agreement is to be construed as creating an employer-employee relationship, a partnership, a franchise, or a joint venture between the parties.

     18.6 Severability. if any provision of this Agreement is found invalid or unenforceable pursuant to judicial decree or decision, the remainder of this Agreement shall remain valid and enforceable according to its terms. The parties intend that the provisions of this Agreement be enforced to the fullest extent permitted by applicable law. Accordingly, the parties agree that if any provisions are deemed not enforceable, they are to be deemed modified to the extent necessary to make them enforceable.

     18.7 Injunctive Relief. The parties agree that Publisher’s threatened or actual unauthorized use of the Licensed Trademarks or other Microsoft proprietary rights whether in whole or in part, may result in immediate and irreparable damage to Microsoft for which there is no adequate remedy at law. Either party’s threatened or actual breach of the confidentiality provisions may cause damage to the non-breaching party, and in such event the non-breaching party is entitled to appropriate injunctive relief from any court of competent jurisdiction without the necessity of posting bond or other security.

     18.8 Entire Agreement; Modification; No Offer. This Agreement (including the Concept, the Non-Disclosure Agreement, the Xbox 360 Publisher Guide, written amendments thereto, and other incorporated documents) and the XDK License constitute the entire agreement between the parties with respect to the subject matter hereof and merges all prior and contemporaneous communications. This Agreement shall not be modified except by a written agreement dated subsequent hereto signed on behalf of Publisher and Microsoft by their duly authorized representatives. Neither this Agreement nor any written or oral statements related hereto constitute an offer, and this Agreement is not legally binding until executed by both parties hereto.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date on the dates indicated below.

MICROSOFT LICENSING, GP	MAJESCO ENTERTAINMENT COMPANY
/s/ Roxanne V. Spring	/s/ Jesse Sutton
By (sign)	By (sign)
Roxanne V. Spring	Jesse Sutton
Name (Print)	Name (Print)
	President
Title	Title
September 13, 2005	September 8, 2005
Date	Date

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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EXHIBIT 1

PAYMENTS

1. Platform Royalty

     a. For each FPU manufactured during the term of this Agreement, Publisher shall pay Microsoft nonrefundable royalties in accordance with the royalty tables set forth below (Tables 1 and 2) and the “Unit Discount” table set forth in Section 1.d of this Exhibit 1 (Table 3).

     b. The royalty fee is determined by the “Threshold Price” (which is the Wholesale Price (WSP) or Suggested Retail Price (SRP) at which Publisher intends to sell the Software Title in the applicable Sales Territory). To determine the applicable royalty rate for a particular Software Title in a particular Sales Territory, the applicable Threshold Price from Table 1 below will determine the correct royalty “Tier.” The royalty fee is then as set forth in Table 2 based on the Manufacturing Region in which the FPUs will be manufactured. For example, assume the Wholesale Price of a Software Title to be sold in the European Sales Territory is [***]. According to Table 1, [***] royalty rates will apply to that Software Title and the royalty rate is determined in Table 2 by the Manufacturing Region. If the Software Title were manufactured in the European Manufacturing Region, the royalty fee would be [***] per FPU. If the Software Title were manufactured in Asian Manufacturing Region, the royalty fee would be [***] per FPU.

     [***]

     c. [***] submit to Microsoft, at least [***] for a Software Title, a completed and signed “Royalty Tier Selection Form” in the form attached to this Agreement as Exhibit 2 for each Sales Territory. The selection indicated in the Royalty Tier Selection Form will only be effective once the Royalty Tier Selection Form has been accepted by Microsoft. If Publisher does not submit a Royalty Tier Selection Form as required hereunder, the royalty fee for such Software Title will default to [***], regardless of the actual Threshold Price. The selection of a royalty tier for a Software Title in a Sales Territory is binding for the life of that Software Title even if the Threshold Price is reduced following the Software Title’s Commercial Release.

     d. Unit Discounts. Publisher is eligible for a discount to FPUs manufactured for a particular Sales Territory (a “Unit Discount”) based on the number of FPUs that have been manufactured for sale in that Sales Territory as described in Table 3 below. Except as provided in Section 4 below, units manufactured for sale in a Sales Territory are aggregated only towards a discount on FPUs manufactured for that Sales Territory; there is no worldwide or cross-territorial aggregation of units for a particular Software Title. The discount will be rounded up to the nearest Cent, Yen or hundredth of a Euro.

     [***]

               i. For North American Sales Territory:

                    [***]

               ii. For Japan Sales Territory:

                    [***]

2. Payment Process

     a. [***]. Publisher shall not authorize its Authorized Replicators to begin production until such time as [***]. Depending upon Publisher’s credit worthiness, Microsoft may, but is not obligated to, offer Publisher credit terms for the payment of royalties due under this Agreement within [***] of receipt of invoice. All payments will be made by wire transfer only, in accordance with the payment instructions set forth in the Xbox 360 Publisher Guide.

     b. Publisher will pay royalties for FPUs manufactured in the North American Manufacturing Region in US Dollars, for FPUs manufactured in the Asian Manufacturing Region in Japanese Yen and for FPUs manufactured in the European Manufacturing Region in Euros.

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

3. Billing Address

     a. Publisher may have only two “bill to” addresses for the payment of royalties under this Agreement, one for the North American Manufacturing Region and one for the Asian Manufacturing Region. If Publisher desires to have a “bill-to” address in a European country, Publisher (or a Publisher Affiliate) must execute an MIOL Enrollment Form in the form attached to this Agreement as Exhibit 3.

Publisher’s billing address(es) is as follows:

North America Manufacturing Region:		Asian Manufacturing Region (if different):
Name:	Name:
Address:	Address:
Attention:	Attention:
Email address:	Email address:
Fax:	Fax:
Phone:	Phone:

4. Asia Simship Program

The purpose of this program is to encourage Publisher to release Japanese FPUs or North American FPUs, that have been multi-region signed to run on NTSC-J boxes (hereinafter collectively referred to as “Simship Titles”), in Hong Kong, Singapore and Taiwan (referred to as “Simship Territory”) at the same time as Publisher releases the Software Title in the Japan and/or North American Sales Territories. In order for a Software Title to qualify as a Simship Title, Publisher must release the Software Title in the Simship Territory on the same date as the Commercial Release date of such Software Title in the Japan and/or North American Sales Territories, wherever the Software Title was first Commercially Released (referred to as “Original Territory”). To the extent that a Software Title qualifies as a Simship Title, the applicable royalty tier (under Section 1.b of this Exhibit 1 above) and Unit Discount (under Section 1.d of this Exhibit 1 above) is determined as if all FPUs of such Software Title manufactured for distribution in both the Original Territory and the Simship Territory were manufactured for distribution in the Original Territory. For example, if a Publisher initially manufactures [***] FPUs of a Software Title for the Japan Sales Territory and simships [***] of those units to the Simship Territory, the royalty fee for all of the FPUs is determined by [***]. In this example, Publisher would also receive a [***] Unit Discount on [***] units for having exceeded the Unit Discount level specified in Section 1. d of this Exhibit 1 above applicable to the Japan Sales Territory. Publisher must provide Microsoft with written notice of its intention to participate in the Asian Simship Program with respect to a particular Software Title at least [***] prior to manufacturing any FPUs it intends to qualify for the program. In its notice, Publisher shall provide all relevant information, including total number of FPUs to be manufactured, number of FPUs to be simshipped into the Simship Territory, date of simship, etc. Publisher remains responsible for complying with all relevant import, distribution and packaging requirements as well as any other applicable requirements set forth in the Xbox 360 Publisher Guide.

5. Online Content

     a. For the purpose of this Section 5, the following capitalized terms have the following meanings:

     [***]

     b. Publisher may, from time to time, submit Online Content to Microsoft for Microsoft to distribute via Xbox Live. [***]

     c. [***]

     d. [***]

     e. Within [***] after the end of [***] with respect to which Microsoft owes Publisher any Royalty Fees, Microsoft shall furnish Publisher with a statement, together with payment for any amount shown thereby to be due to Publisher. The statement will contain information sufficient to discern how the Royalty Fees were computed.

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

2

6. Xbox Live Billing and Collection

Microsoft is responsible for billing and collecting all fees associated with Xbox Live, including fees for subscriptions and/or any Online Content for which a Xbox Live User may be charged. [***].

7. Taxes

     a. The amounts to be paid by either party to the other do not include any foreign, U.S. federal, state, local, municipal or other governmental taxes, duties, levies, fees, excises or tariffs, arising as a result of or in connection with the transactions contemplated under this Agreement including, without limitation, (i) any state or local sales or use taxes or any value added tax or business transfer tax now or hereafter imposed on the provision of any services to the other party under this Agreement, (ii) taxes imposed or based on or with respect to or measured by any net or gross income or receipts of either party, (iii) any franchise taxes, taxes on doing business, gross receipts taxes or capital stock taxes (including any minimum taxes and taxes measured by any item of tax preference), (iv) any taxes imposed or assessed after the date upon which this Agreement is terminated, (v) taxes based upon or imposed with reference to either parties’ real and/or personal property ownership and (vi) any taxes similar to or in the nature of those taxes described in (i), (ii), (iii), (iv) or (v) above, now or hereafter imposed on either party (or any third parties with which either party is permitted to enter into agreements relating to its undertakings hereunder) (all such amounts, together with any penalties, interest or any additions thereto, collectively “Taxes”). Neither party is liable for any of the other party’s Taxes incurred in connection with or related to the sale of goods and services under this Agreement, and all such Taxes are the financial responsibility of the party obligated to pay such taxes as determined by the applicable law, provided that both parties shall pay to the other the appropriate Collected Taxes in accordance with subsection 6.b below. Each party agrees to indemnify, defend and hold the other party harmless from any Taxes (other than Collected Taxes, defined below) or claims, causes of action, costs (including, without limitation, reasonable attorneys’ fees) and any other liabilities of any nature whatsoever related to such Taxes to the extent such Taxes relate to amounts paid under this Amendment.

     b. Any sales or use taxes described in 6.a above that (i) are owed by either party solely as a result of entering into this Agreement and the payment of the fees hereunder, (ii) are required to be collected from that party under applicable law, and (iii) are based solely upon the amounts payable under this Agreement (such taxes the “Collected Taxes”), will be stated separately as applicable on payee’s invoices and will be remitted by the other party to the payee, upon request payee shall remit to the other party official tax receipts indicating that such Collected Taxes have been collected and paid by the payee. Either party may provide the other party an exemption certificate acceptable to the relevant taxing authority (including without limitation a resale certificate) in which case payee shall not collect the taxes covered by such certificate. Each party agrees to take such commercially reasonable steps as are requested by the other party to minimize such Collected Taxes in accordance with all relevant laws and to cooperate with and assist the other party, in challenging the validity of any Collected Taxes or taxes otherwise paid by the payor party. Each party shall indemnify and hold the other party harmless from any Collected Taxes, penalties, interest, or additions to tax arising from amounts paid by one party to the other under this Agreement, that are asserted or assessed against one party to the extent such amounts relate to amounts that are paid to or collected by one party from the other under this section. If any taxing authority refunds any tax to a party that the other party originally paid, or a party otherwise becomes aware that any tax was incorrectly and/or erroneously collected from the other party, then that party shall promptly remit to the other party an amount equal to such refund, or incorrect collection as the case may be plus any interest thereon.

     c. If taxes are required to be withheld on any amounts otherwise to be paid by one party to the other, the paying party shall deduct such taxes from the amount otherwise owed and pay them to the appropriate taxing authority. At a party’s written request and expense, the parties shall use reasonable efforts to cooperate with and assist each other in obtaining tax certificates or other appropriate documentation evidencing such payment, provided, however, that the responsibility for such documentation shall remain with the payee party. If Publisher is required by any non-U.S.A. government to withhold income taxes on payments to Microsoft, then Publisher may deduct such taxes from the amount owed Microsoft and shall pay them to the appropriate tax authority, provided that within [***] of such payment, Publisher delivers to Microsoft an official receipt for any such taxes withheld or other documents necessary to enable Microsoft to claim a U.S.A. Foreign Tax Credit.

     d. This Section 7 shall govern the treatment of all taxes arising as a result of or in connection with this Agreement notwithstanding any other section of this Agreement.

8. Audit

During the term of this Agreement and for [***] each party shall keep all usual and proper records related to its performance under this Agreement, including but not limited to audited financial statements and support for all transactions related to the

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

3

ordering, production, inventory, distribution and billing/invoicing information. Such records, books of account, and entries will be kept in accordance with generally accepted accounting principles. Either party (the “Auditing Party”) may audit and/or inspect the other party’s (the “Audited Party”) records no more than [***] in any [***] period in order to verify compliance with the terms of this Agreement. The Auditing Party may, upon reasonable advance notice, audit the Audited Party’s records and consult with the Audited Party’s accountants for the purpose of verifying the Audited Party’s compliance with the terms of this Agreement and for a period of [***]. Any such audit will be conducted during regular business hours at the Audited Party’s offices. Any such audit will be paid for by Auditing Party unless Material discrepancies are disclosed. As used in this section, “Material” means [***]. If Material discrepancies are disclosed, the Audited Party agrees to pay the Auditing Party for [***].

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

4

EXHIBIT 2

XBOX 360 ROYALTY TIER SELECTION FORM

PLEASE COMPLETE THE BELOW INFORMATION, SIGN THE FORM, AND FAX IT TO MICROSOFT AT
+1 (425) 708-2300 TO THE ATTENTION OF MICROSOFT LICENSING, GP (MSLI) AND YOUR ACCOUNT
MANAGER.

NOTES:

1.	THIS FORM MUST BE SUBMITTED AT LEAST [***]. IF THIS FORM IS NOT SUBMITTED ON TIME, THE ROYALTY RATE WILL DEFAULT TO [***] FOR THE APPLICABLE SALES TERRITORY.
2.	A SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES TERRITORY.

1.	Publisher Name:_____________________________
2.	Xbox 360 Software Title Name: _____________________________

3.     XeMID Number: _____________________________

4.    Manufacturing Region (check one):

—— North American

—— European

—— Asian

5. Sales Territory (check one):

—— North American Sales Territory

—— Japan Sales Territory

—— European Sales Territory

—— Asian Sales Territory

6. Final Certification Date: _____________________________

7. Select Royalty Tier: (check one): [***]

The undersigned represents that he/she has authority to submit this form on behalf of the above publisher, and that the information contained herein is true and accurate.

By (sign)


Name, Title (Print)


E-Mail Address (for confirmation of receipt)


Date (Print mm/dd/yy)
 

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

EXHIBIT 3

XBOX 360 PUBLISHER ENROLLMENT FORM

PLEASE COMPLETE THIS FORM, SIGN IT, AND FAX IT TO MICROSOFT AT +1 (425) 708-2300 TO THE ATTENTION OF YOUR ACCOUNT MANAGER.

NOTE: PUBLISHER MUST COMPLETE, SIGN AND SUBMIT THIS ENROLLMENT FORM [***].

     This Xbox 360 Publisher License Enrollment (“Enrollment”) is entered into between Microsoft Ireland Operations Ltd. (“MIOL”) and Majesco Entertainment Company (“Publisher”), and is effective as of the latter of the two signatures identified below. The terms of that certain Xbox 360 Publisher License Agreement signed by Microsoft Licensing GP and Majesco Entertainment Company, dated on or about _________________ (the “Xbox 360 PLA”) are incorporated herein by reference.

     1. Term. This Enrollment will expire on the date on which the Xbox 360 PLA expires, unless it is terminated earlier as provided for in that agreement.

     2. Representations and Warranties. By signing this Enrollment, the parties agree to be bound by the terms of this Enrollment and Publisher represents and warrants that: (i) it has read and understood the Xbox 360 PLA, including any amendments thereto, and agree to be bound by those; (ii) it is either the entity that signed the Xbox 360 PLA or its affiliate; and (iii) the information that provided herein is accurate.

     3. Notices; Requests. All notices and requests in connection with this Enrollment are deemed given on (i) the [***] after they are deposited in the applicable country’s mail system ([***] if sent internationally), postage prepaid, certified or registered, return receipt requested; or (ii) [***] after they are sent by overnight courier, charges prepaid, with a confirming fax; and addressed as follows:

Publisher:	Microsoft:	MICROSOFT IRELAND OPERATIONS LTD.
		Microsoft European Operations Centre,
Address:		Atrium Building Block B,
		Carmenhall Road,
		Sandyford Industrial Estate
		Dublin 18
Attention:		Ireland
Fax:		Fax: 353 1 706 4110
Phone:	Attention:	MIOL Xbox Accounting Services
Email:	with a cc to:	MICROSOFT CORPORATION
		One Microsoft Way
		Redmond, WA 98052-6399
	Attention:	Law & Corporate Affairs Department
		Consumer
		Legal Group, H&ED (Xbox)
		Fax: +1 (425) 706-7329

or to such other address as the party to receive the notice or request so designates by written notice to the other.

[remainder of page intentionally left blank]

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

     4. Billing Address. For purposes of the Xbox 360 PLA, Exhibit 1, Section 3, Publisher’s billing address for the European Manufacturing Region is as follows:

Name:

Address:

VAT number:

Attention:

Email address:

Fax:

Phone:

MICROSOFT IRELAND OPERATIONS LTD.	MAJESCO ENTERTAINMENT COMPANY
By (sign)	By (sign)
Name (Print)	Name (Print)
Title	Title
Date (Print mm/dd/yy)	Date (Print mm/dd/yy)

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

2

EXHIBIT 4

AUTHORIZED AFFILIATES

Publisher affiliates authorized to perform the rights and obligations under this Agreement are:

I.	Name:	II.	Name:
	Address:		Address:
	Telephone:		Telephone:
	Fax:		Fax:

Publisher will provide Microsoft at least [***] written notice of the name and address of each additional Publisher affiliate that Publisher wishes to add to this Exhibit 4. Any additional Publisher affiliate may not perform any rights or obligations under this Agreement until it has signed and submitted a Publisher Affiliate Agreement (attached below) to Microsoft

PUBLISHER AFFILIATE AGREEMENT

For good and valuable consideration, ______________________, a corporation of ______________________ (“Publisher Affiliate”) hereby covenants and agrees with Microsoft Licensing, GP, a Nevada general partnership that Publisher Affiliate will comply with all obligations of ________________________(“Publisher”) pursuant to that certain Xbox 360 Publisher License Agreement between Microsoft and Publisher dated ______________, 200___ (the “Xbox 360 PLA”) and to be bound by the terms and conditions of this Publisher Affiliate Agreement. Capitalized terms used herein and not otherwise defined will have the same meaning as in the Agreement.

Publisher Affiliate acknowledges that its agreement herein is a condition for Publisher Affiliate to exercise the rights and perform the obligations established by the terms of the Xbox 360 PLA. Publisher Affiliate and Publisher will be jointly and severally liable to Microsoft for all obligations related to Publisher Affiliate’s exercise of the rights, performance of obligations, or receipt of Confidential Information under the Xbox 360 PLA. This Publisher Affiliate Agreement may be terminated in the manner set forth in the Xbox 360 PLA. Termination of this Publisher Affiliate Agreement does not terminate the Xbox 360 PLA with respect to Publisher or any other Publisher Affiliates.

IN WITNESS WHEREOF, Publisher Affiliate has executed this agreement as of the date set forth below. All signed copies of this Publisher Affiliate Agreement will be deemed originals.

___________________________
Signature

___________________________
Title

___________________________
Name (Print)

___________________________
Date

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

EXHIBIT 5

NON-DISCLOSURE AGREEMENT

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

EXHIBIT 6

JAPAN AND ASIA ROYALTY INCENTIVE PROGRAM

1. Overview

To encourage Publisher to release localized Software Titles in the Japan and Asian Sales Territories during [***], Publisher may qualify for a special incentive payment equal to [***] according to the terms of this Exhibit 6 (the “Royalty Incentive Program”).

2. Qualified FPUs

In order to qualify for the Royalty Incentive Program, the following requirements must be met.

     a. Approved Concept Submission Form. Publisher must send Microsoft a completed Concept submission form (in a format to be provided by Microsoft) for any Software Titles Publisher intends to qualify for the Royalty Incentive Program no later than [***]. In order for FPUs to qualify for the Royalty Incentive Program, Publisher’s Concept for the Software Title must be received on time and approved by Microsoft.

     b. J-signed. Only FPUs that are “J-signed” (as defined in the Xbox 360 Publisher Guide) to technically restrict their operation to Xbox consoles made for the Japan and Asian Sales Territories will qualify for the Royalty Incentive Program.

     c. [***]

     d. [***]

     e, Public Relations. In order to qualify for the Royalty Incentive Program, Publisher must allow Microsoft to publicly disclose that the Software Title will be released on Xbox 360 in the Japan or Asian Sales Territories.

     f. Timely Payment. Publisher must pay royalty fees on time in accordance with this Agreement or its credit arrangement with Microsoft in order to qualify for the Royalty Incentive Program.

3. Payment

     a. Manufacturing Periods. The Royalty Incentive Program will only apply to qualified FPUs manufactured [***] (as applicable for the FPU).

     b. Incentive Payments. Microsoft will make royalty incentive payments within [***] in which qualified FPUs were manufactured.

     c. Limit. Subject to the terms of this Exhibit 6, Publisher’s royalty incentive payment will equal [***]. Publisher acknowledges that the Royalty Incentive Payment will only apply to [***].

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

EXHIBIT 7

XBOX 360 LIVE INCENTIVE PROGRAM

1. Xbox 360 Live Incentive Program

To encourage Publisher to support functionality for Xbox Live in its Xbox 360 Software Titles and to drive increased usage of Xbox Live via Xbox 360, Publisher may qualify for certain payments based on the amount of Xbox Live Market Share (defined in Section 2.a. of this Exhibit 7 below) created by Publisher’s Multiplayer Software Titles (defined in Section 2.c. of this Exhibit 7 below). Each Accounting Period (defined in Section 3.c. of this exhibit below), Microsoft will calculate Publisher’s Xbox Live Market Share. If it is above [***], then Microsoft will pay Publisher an amount [***]. The basic equation for calculating the Publisher’s payment under this program is:

[***]

The following sections define the elements of this basic equation.

Notwithstanding anything herein to the contrary, use of or revenue derived from online games for which an end user pays a subscription separate from any account established for basic use of Xbox Live, are excluded from this Xbox 360 Live Incentive Program.

2. Xbox Live Market Share a.

     a.“Xbox Live Market Share” = [***].

     b. “Unique User Market Share” means [***].

     c. “Multiplayer Software Titles” means a Software Title for Xbox 360 that supports real-time multiplayer game play.

     d. “[***] Unique Users” means [***].

     e. “Paying Subscriber” means [***].

     f. “[***] Unique User Market Share” means [***].

     g. “[***] Unique Users” means the [***].

     h. “New Subscriber Market Share” means [***].

     i. “New Subscriber” means a Paying Subscriber who pays for an Xbox Live account for the first time. A New Subscriber is attributed to the first Multiplayer Software Title he or she plays, even if such play was during a free-trial period which was later converted into a paying subscription. Each Paying Subscriber can only be counted as a New Subscriber once.

3. Participation Pool

      a. “Participation Pool” means [***].

      b. “Subscription Revenue” means [***].

     c. “Accounting Period” means a [***], within the Term (defined below); provided that if the Effective Date of this Agreement or the expiration date of this program falls within such [***], then the applicable payment calculation set forth below shall be made for a partial Accounting Period, as appropriate.

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

4. Example

[***]

5. Term

This Xbox 360 Live Incentive Program will be available for [***]. Microsoft reserves the right to change the weights for averaging set forth in Section 2.a. of this exhibit upon written notice to Publisher, but no more frequently than [***].

6. Payments

In the event Publisher qualifies for a payment under this program during an Accounting Period, Microsoft shall furnish Publisher with a statement, together with payment for any amount shown thereby to be due to Publisher within [***].

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

2

EX-10.2

Exhibit 10.2

AMENDMENT TO THE
XBOX 360 PUBLISHER LICENSE AGREEMENT
(2008 Renewal; Tier C; Hits Program Revisions; Expansion Packs; New Xbox 360 Live and PDLC
Incentive Program; XLSP; Japan Volume Rebate Revision; Token Promotions; Joint Promotions)

     This Amendment to the Xbox 360 Publisher License Agreement (this “Amendment”) is entered into and effective as of the later of the two signature dates below (the “Amendment Effective Date”) by and between Microsoft Licensing, GP, a Nevada general partnership (“Microsoft”), and Majesco Entertainment Company(“Publisher”), and supplements that certain Xbox 360 Publisher License Agreement between the parties dated as of September 12, 2005, as amended (the “Xbox 360 PLA”).

RECITALS

     A. Microsoft and Publisher entered into the Xbox 360 PLA to establish the terms under which Publisher may publish video games for Microsoft’s Xbox 360 video game system.

     B. The parties now wish to extend the term and otherwise amend certain terms of the Xbox 360 PLA as set forth below.

     Accordingly, for and in consideration of the mutual covenants and conditions contained herein, and for other good and valuable consideration, receipt of which each party hereby acknowledges, Microsoft and Publisher agree as follows:

1. Definitions

1.1	The definitions of “Asian Manufacturing Region”, “North American Manufacturing Region”, “European Manufacturing Region” and “Manufacturing Region” are hereby deleted from the Xbox 360 PLA.
1.2	The definition of “Online Content” is hereby amended and restated in its entirety as follows:
	“Online Content” means any content, feature, or access to software or online service that is distributed by Microsoft pursuant to this Agreement. Online Content includes, but is not limited to, Online Game Features, Title Updates, Demo Versions, Xbox LIVE Arcade games, trailers, “themes,” “gamer pictures” or any other category of online content or service approved by Microsoft from time to time. Trailers, “themes,” “gamer pictures” and any other approved Online Content is further described in the Xbox 360 Publisher Guide.
1.3	The definition of “Software Title” is hereby expanded to include Expansion Pack(s).
1.4	The following definitions are hereby added to Section 2 of the Xbox 360 PLA.

1.4.1 “Expansion Pack” means an FPU that is an add-on, mission pack, game expansion, incremental content, and/or other addition to a Software Title that (i) would not be generally considered in the console game industry to be a next full version release (e.g., a version 1.0 to 1.5); (ii) requires another full version video game in order to

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

operate, (iii) is derived from the content, story, characters or other intellectual property of the full version video game required to play it, and (iv) has a WSP (defined below) that is equal to or below the Threshold Price (defined below) listed for the royalty tiers applicable to Expansion Packs in Section 1 b. of Exhibit 1 attached hereto. In order to meet this definition of Expansion Pack, such addition to a Software Title must be approved by Microsoft as an Expansion Pack.

1.4.2 “Family Hit” means any Hits Software Title that (i) received an “E,” or an “E10” rating from the ESRB; a “PEGI 3+” or “PEGI 7+” rating in Europe, an “A: All Ages” rating from CERO in Japan and/or an equivalent rating in the applicable Sales Territory (to the extent Software Titles are rated by regulatory boards within the applicable Sales Territory); and (ii) is character based and/or appeals, as determined by Microsoft in its sole good faith discretion, to children 12 years of age and younger. Notwithstanding the foregoing, annual sports titles will not qualify as a Family Hit.

1.4.3 “Hit(s) FPU” means each unit of a Software Title that is qualified and participating in a Hits Program.

1.4.4 “Hits Program(s)” mean Xbox 360 Platinum or Classic Hits and/or the Xbox 360 Family Hits programs.

1.4.5 “Hits Software Title” means any Software Title that qualifies to participate in the Hits Program pursuant to Section 2 of Exhibit 1 attached hereto.

1.4.6 “Standard FPU” means an FPU of a Software Title that is not a Hits FPU.

1.4.7 “Standard Software Title” means any Software Title that is not a Hits Software Title or an Expansion Pack.

1.4.8 “Threshold Price” means the Wholesale Price (WSP) in the case of the North American, European, and Asian Sales Territories, or Suggested Retail Price (SRP) in the Japan Sales Territory at which Publisher intends to sell the Software Title. If the Software Title is bundled with any other product or service that is not another Software Title, the Threshold Price will be the applicable WSP or SRP for the entire bundle.

1.5 Except as expressly provided otherwise in this Amendment, capitalized terms shall have the same meanings as those ascribed to them in the Xbox 360 PLA.

2. Term

Section 17.1 of the Xbox 360 PLA is hereby amended and restated in its entirety as follows:

“17.1 Term. The term of this Agreement shall commence on the Effective Date and shall continue until [***] Unless one party gives the other notice of non-renewal within [***] of the end of the then-current term, this Agreement shall automatically renew for successive [***] terms.”

3. Pre-Certification

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

2

Section 4.1.2 of the Xbox 360 PLA is hereby amended and restated in its entirety as follows:

“4.1.2 Pre-Certification. If the Concept is approved, Publisher may, at Publisher’s option, deliver to Microsoft a code-complete version of the Software Title or Online Content that includes all current features of the Software Title and such other content as may be required under the Xbox 360 Publisher Guide. Upon receipt thereof and payment by Publisher of the applicable Pre-Certification fee as set forth in the Xbox 360 Publisher Guide, Microsoft shall conduct technical screen and/or other testing of the Software Title or Online Content consistent with the Xbox 360 Publisher Guide and will subsequently provide Publisher with advisory feedback regarding such testing.”

4. Exhibits

4.1 Exhibits 1, 2 and 3 of the Xbox 360 PLA are hereby amended and restated in their entirety as attached hereto. Exhibit 6 (Japan/Asian Royalty Incentive Program) of the Xbox 360 PLA has expired. Exhibits 6, 8 and 9 attached hereto are hereby added to the Xbox 360 PLA.

4.2 The term of the Xbox 360 Live Incentive Program attached as Exhibit 7 of the Xbox 360 PLA (the “Original Live Incentive Program”) is hereby[***]. Effective [***], the Original Live Incentive Program is replaced by the Xbox Live and PDLC Incentive Program attached as Exhibit 7 to this Amendment.

5. Non-Disclosure

Section 13.1 of the Xbox 360 PLA is hereby deleted and replaced by the following:

     “13.1 “Non-Disclosure Agreement. The information, materials and software exchanged by the parties hereunder or under an XDK License, including the terms and conditions hereof and of the XDK License, are subject to the Non-Disclosure Agreement between the parties attached hereto as Exhibit 5 (the “Non-Disclosure Agreement”), which is incorporated herein by reference; provided, however, that for purposes of the foregoing, any time limitation in the Non-Disclosure Agreement on the parties’ obligations to refrain from disclosing information protected under the Non-Disclosure Agreement (“Confidential Information”) shall be extended so that any Confidential Information provided in relation to this Agreement or by way of the XDK License in whatever form (e.g. information, materials, tools and/or software exchanged by the parties hereunder or under an XDK License), including the terms and conditions hereof and of the XDK License, unless otherwise specifically stated, will be protected from disclosure for as long as it remains confidential.”

6. Promotions

6.1 Token Promotions. In the event Publisher desires to distribute password-protected codes representing “tokens” (a “Token Promotion”) that are redeemable by users for Online Content downloads from Xbox Live (“Content Tokens”) as part of promotional activities related to a Software Title using Xbox Live Marketplace, Publisher shall submit to Microsoft a Content Token Request form available in the Xbox 360 Publisher Guide (“Token Form”) for approval by Microsoft. [***], or Microsoft may, but is not obligated to, offer Publisher credit terms for payment of such fees. As soon as commercially feasible after payment by Publisher for an order for Content Tokens (or Microsoft’s determination of Publisher’s credit worthiness), Microsoft shall create Content Tokens and deliver them to Publisher. Publisher may distribute the Content

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

3

Tokens for the Content download solely as part of the Token Promotion within the Sales Territory and during the term of the Token Promotion specified on the Token Form. No other payments under the Xbox 360 PLA (MS Points or otherwise) will be paid with respect to the Content Tokens. Publisher shall be solely responsible for all aspects of marketing and fulfillment of the Token Promotion, including without limitation all advertising and other promotional materials related to the Token Promotion which shall be deemed Marketing Materials.

6.2 Joint Promotions. Microsoft and Publisher may from time to time to develop, execute, and administer promotions involving the Software Title(s) (e.g., Play and Win weekends for the Software Titles on Xbox LIVE, promotional sweepstakes involving the Software Titles, etc.) (each, a “Promotion”). In connection therewith, the parties shall execute a promotion schedule to this Agreement in the form set forth in the Xbox 360 Publisher Guide (each, a “Promotion Schedule”). The parties agree that the following additional terms and conditions shall apply to each Promotion for which a Promotion Schedule has been fully executed: (i) each party shall have the right and license to use the specific properties indentified in the Promotion Schedule solely in connection with the Promotion during the promotional period and territory identified in the Promotion Schedule; (ii) all promotional materials prepared by or on behalf of the parties for the Promotion shall be subject to the other party’s approval. The party approving such materials shall have [***] to approve or disapprove such materials. Failure to respond within such [***] period shall be deemed an approval; and (iii) the parties shall comply with all other obligations set forth in the Promotion Schedule.

7. Online Content Samples.

7.1 Xbox LIVE Arcade. For each piece of Online Content that is an Xbox LIVE Arcade game, Microsoft will be entitled to create [***] Content Tokens, [***] of which Microsoft will provide to the Publisher and [***] of which Microsoft may use in marketing, as product samples, for customer support, testing and archival purposes. Publisher shall not be entitled to any Royalty Fee or other compensation with respect to Microsoft’s distribution of Content Tokens as authorized under this Section 7.1.

7.2 Premium Online Content. For each piece of Premium Online Content, Microsoft will be entitled to create up to [***] Content Tokens, which Publisher and Microsoft may use in marketing, as product samples, for customer support, testing and archival purposes (the Content Tokens will be split approximately [***] between Publisher and Microsoft respectively). Publisher shall not be entitled to any Royalty Fee or other compensation with respect to Microsoft’s distribution of Content Tokens as authorized under this Section 7.2

8. Online Content

Notwithstanding any termination or expiration of Microsoft’s license to distribute Online Content, Publisher acknowledges and agrees that Microsoft will retain a copy of Online Content, and Publisher hereby grants Microsoft the license to redistribute the final version of any Online Content to Xbox Live Users who have previously purchased it, directly or indirectly, from Microsoft.

9. Minimum Order Quantities

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

4

9.1 The MOQ per Software Title set forth in Section 7.5.1 of the Xbox 360 PLA for the [***].

9.2 Section 7.5.2 of the Xbox 360 PLA is hereby amended and restated as follows:

“7.5.2 For the purposes of this section, a “Disc” shall mean an FPU that is signed for use on a certain defined range of Xbox 360 hardware, regardless of the number of languages or product skus contained thereon. Publisher must meet the MOQs independently for each Sales Territory. For example, if an FPU is released in both the North American Sales Territory and the European Sales Territory, then the Publisher must place orders to manufacture (i) at least [***] FPUs for sale in the North American Sales Territory, including a minimum of [***] per Disc included in such FPUs, and (ii) [***] FPUs for the European Sales Territory, including a minimum of [***] per Disc included in such FPUs.”

10. Except and to the extent expressly modified by this Amendment, the Xbox 360 PLA shall remain in full force and effect and is hereby ratified and confirmed. In the event of any conflict between this Amendment and the Xbox 360 PLA the terms of this Amendment shall control.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the Amendment Effective Date.

MICROSOFT LICENSING, GP	MAJESCO ENTERTAINMENT COMPANY
/s/ Astrid B. Ford	/s/ Jesse Sutton
By (sign)	By (sign)
Astrid B. Ford	Jesse Sutton
Name (Print)	Name (Print)
Sr. XBOX Program Manager	Chief Executive Officer
Title	Title
09/01/09	08/20/09
Date (Print mm/dd/yy)	Date (Print mm/dd/yy)

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

5

EXHIBIT 1

PAYMENTS

1. Platform Royalty

     a. For each FPU manufactured during the term of this Agreement, Publisher shall pay Microsoft nonrefundable royalties in accordance with the royalty tables set forth below (Tables 1 and 2) and the “Unit Discount” table set forth in Section 1.d of this Exhibit 1 (Table 3).

     b. To determine the applicable royalty rate for a particular Software Title that will be sold in a particular Sales Territory, the applicable Threshold Price from Table 1 below for the category of Software Title (Standard Software Title, Hits Software Title and Expansion Pack) will determine the correct royalty “Tier” (except with respect to the first Commercial Release of Hits Software Titles as described further in (ii) below). The royalty rate is then as set forth in Table 2 based on such Tier and the Sales Territory in which the FPUs will be sold. For example, assume the Wholesale Price of a Standard Software Title to be sold in the European Sales Territory is [***]. According to Table 1, Tier B royalty rates will apply to that Software Title and the royalty rate for each FPU as set forth in Table 2 is €6.70.

     [***]

     [***]

     c. [***].

(i) Standard Software Titles and Expansion Packs. Publisher shall submit to Microsoft, at [***] for a Standard Software Title or an Expansion Pack, a completed and signed “Xbox 360 Royalty Tier Selection Form” in the form attached to this Agreement as Exhibit 2 for each Sales Territory. The selection indicated in the Xbox 360 Royalty Tier Selection Form will only be effective once it has been approved by Microsoft. If a Standard Software Title or Expansion Pack does not have an approved Xbox 360 Royalty Tier Selection Form as required hereunder (e.g. as a result of the Publisher not providing a Xbox 360 Royalty Tier Selection Form or because Microsoft has not approved the Xbox 360 Royalty Tier Selection Form), the royalty rate for such Standard Software Title will default to [***] or for such Expansion Pack will default to [***], regardless of the actual Threshold Price (i.e., if Microsoft does not approve an Xbox 360 Royalty Tier Selection Form because it is filled out incorrectly, the royalty rate will default to[***]). Except as set forth in Section 2 (Hits Programs), the selection of a royalty tier for a Standard Software Title or Expansion Pack in a Sales Territory is binding for the life of that Software Title or Expansion Pack even if the Threshold Price is reduced following the Software Title’s Commercial Release.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

6

(ii) Hits Software Title. Publisher shall submit to Microsoft, at [***] a completed and signed Hits Programs Election Form in the form attached hereto as Exhibit 6 for each Sales Territory. The Hits Programs Election Form will only be effective once it has been approved by Microsoft. If a Hits Software Title does not have an approved Hits Programs Election Form as required hereunder (e.g. as a result of the Publisher not providing a Hits Programs Election Form or because Microsoft has not approved the Hits Programs Election Form), the royalty rate for such Hits Software Title will default to [***] (i.e., if Microsoft does not approve a Hits Programs Election Form because it is filled out incorrectly, the royalty rate will default to[***]). Unless the Software Title is a Family Hits Title, the first time a Software Title is Commercially Released as a Hits Software Title, the [***] royalty rate will apply. However, if the Software Title is a Family Hits Title and meets the WSP requirements set forth in Table 1 above, Publisher may select the [***] royalty rate. For the avoidance of doubt, all Hits Software Titles for the European Sales Territory shall default to the [***] royalty rate.

     [***] after the Commercial Release of a Hits Software Title at the [***] royalty rate, Publisher may elect to change the previously elected royalty rate for such Hits Software Title to [***] in a specific Sales Territory provided that the Hits Software Title has a WSP or SRP that meets the requirements for [***] royalty rate in Table 1 above. Publisher must submit to Microsoft, at least [***] before placing the first manufacturing order for the applicable Hits Software Title, a completed Xbox 360 Royalty Tier Migration Form (a “Tier Migration Form”) set forth in Exhibit 8 for each Sales Territory. The change in royalty rate will only apply to manufacturing orders for such Hits Software Title placed after the relevant Tier Migration Form has been approved by Microsoft.

(iii) Cross Territory Sales. Except for FPUs manufactured pursuant to Section 5 below (Asia Simship Program), Publisher may not sell FPUs in a certain Sales Territory that were manufactured for a different Sales Territory. For example, if Publisher were to manufacture and pay royalties on FPUs designated for sale in the Asian Sales Territory, Publisher could not sell those FPUs in the European Sales Territory.

     d. Unit Discounts. Publisher is eligible for a discount to FPUs manufactured for a particular Sales Territory (a “Unit Discount”) based on the number of FPUs that have been manufactured for sale in that Sales Territory as described in Table 3 below. Except as provided in Section 5 below, units manufactured for sale in a Sales Territory are aggregated only towards a discount on FPUs manufactured for that Sales Territory; there is no worldwide or cross-territorial aggregation of units for a particular Software Title. The discount will be rounded up to the nearest Cent, Yen or hundredth of a Euro.

     [***]

2. Hits Programs

     a. If a Software Title meets the criteria set forth below and the applicable participation criteria in a particular Sales Territory at the time of the targeted Commercial Release date of the Hits FPU and Microsoft receives the Hits Programs Election Form within the time period set forth in Section 2.a.iv below, Publisher is authorized to manufacture and distribute Hits FPUs in such Sales Territory and at the royalty rate in Table 2 of Section 1 above applicable to Hits FPUs. In order for a Software Title to

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

7

qualify as a Hits FPU in a Sales Territory, the following conditions, as applicable per Hits Program, must be satisfied:

     i. the Software Title must have been commercially available as a Standard FPU in the applicable Sales Territory for at least [***] but not more than [***] at the time of Commercial Release of the Hits FPU.

     ii. In any calendar year in a Sales Territory, Publisher may not publish more than [***] Software Titles as a Family Hit.

     iii. The Threshold Price for the Hits FPU must not exceed a maximum Threshold Price for the relevant Sales Territory ([***]for the North American Sales Territory, [***] in the European Sales Territory, [***] in the Japan Sales Territory, or the equivalent of [***] for the Asian Sales Territory).

     iv. Publisher must provide notice to Microsoft, at least [***] prior to the targeted Commercial Release, of its intent to have a certain Software Title participate in the Hits Program by providing Microsoft with a completed Hits Program Election Form.

     b. As of the date Publisher wishes to Commercially Release the Software Title as a Hits FPU, Publisher must have manufactured the following minimum FPUs of the Software Title as a Standard Software Title for the applicable time period, Sales Territory and Hits Program.

[***]

     c. All Marketing Materials for a Hits Software Title must comply with all Microsoft branding requirements as may be required in each Sales Territory, and Publisher shall submit all such Marketing Materials to Microsoft for its approval in accordance with the Xbox 360 PLA. Notwithstanding the foregoing, all Hit FPUs must comply with the basic branding and other requirements for Marketing Materials set forth in the Xbox 360 Publisher Guide.

     d. The Hit FPU version must be the same or substantially equivalent to the Standard FPU version of the Software Title. Publisher may modify or add additional content or features to the Hit FPU version of the Software Title (e.g., demos or game play changes) subject to Microsoft’s review and approval, and Publisher acknowledges that any such modifications or additions may require the Software Title to be re-Certified at Publisher’s expense.

     e. Publisher acknowledges that Microsoft may change any of the qualifications for participation in a Hit Program upon [***] days advanced written notice to Publisher.

3. Payment Process

     [***], in United States dollars for all FPUs manufactured for sale in the North American Sales Territory, in Euros for all FPUs manufactured for sale in the European Sales Territory and in Yen for all FPUs manufactured for sale in the Japan and Asian Sales Territories. Publisher shall not authorize its Authorized Replicators to begin production until such time as [***]. Depending upon Publisher’s credit worthiness, Microsoft may, but is not obligated to, offer Publisher credit terms for the payment of royalties due under this Agreement within [***] from invoice creation. All payments will be made by

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

8

wire transfer only, in accordance with the payment instructions set forth in the Xbox 360 Publisher Guide.

4. Billing Address

     a. Publisher may have only two “bill to” addresses for the payment of royalties under this Agreement, one for FPUs manufactured by Authorized Replicators located in the North American Sales Territory and one for FPUs manufactured by Authorized Replicators located in the Japan Sales Territory and Asian Sales Territory. If Publisher desires to have a “bill-to” address in a European country, Publisher (or a Publisher Affiliate) must execute an Xbox 360 Publisher Enrollment Form with MIOL within ten (10) business days prior to establishing a billing address in a European country in the form attached to this Agreement as Exhibit 3.

Publisher’s billing address(es) is as follows:

North American Sales Territory:	Japan and Asian Sales Territory (if different than the North American billing address):
Name:	Name:
Address:	Address:
Attention:	Attention:
Email address:	Email address:
Fax:	Fax:
Phone:	Phone:

5. Asia Simship Program

The purpose of this program is to encourage Publisher to release Japanese, North American or European FPUs, that have been multi-region signed to run on NTSC-J boxes (hereinafter collectively referred to as “Simship Titles”), in Hong Kong, Singapore, Korea and Taiwan (referred to as “Simship Territory”) at the same time as Publisher releases the Software Title in the Japan, European and/or North American Sales Territories. In order for a Software Title to qualify as a Simship Title, Publisher must Commercially Release the Software Title in the Simship Territory on the same date as the Commercial Release date of such Software Title in the Japan, European and/or North American Sales Territories, wherever the Software Title was first Commercially Released (referred to as “Original Territory”). To the extent that a Software Title qualifies as a Simship Title, the applicable royalty tier (under Section 1.b of this Exhibit 1 above) and Unit Discount (under Section 1.d of this Exhibit 1 above) is determined as if all FPUs of such Software Title manufactured for distribution in both the Original Territory and the Simship Territory were manufactured for distribution in the Original Territory. For example, if a Publisher initially manufactures [***] FPUs of a Software Title for the Japan Sales Territory and simships [***] of those units to the Simship Territory, the royalty rate for all of the FPUs is determined by [***]. In this example, Publisher would also receive a [***] Unit Discount on [***] units for having exceeded the Unit Discount level specified in Section 1.d. of this Exhibit 1 above applicable to the Japan Sales Territory. Publisher must provide Microsoft with written notice of its intention to participate in the Asian Simship Program with respect to a particular Software Title at least [***] prior to manufacturing any FPUs it intends to qualify for the program. In its notice, Publisher shall provide all

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

9

relevant information, including total number of FPUs to be manufactured, number of FPUs to be simshipped into the Simship Territory, date of simship, etc. Publisher remains responsible for complying with all relevant import, distribution and packaging requirements as well as any other applicable requirements set forth in the Xbox 360 Publisher Guide.

6. Online Content

     a. For the purpose of this Section 6, the following capitalized terms have the following meanings:

          [***]

          [***]

     b. Publisher may, from time to time, submit Online Content to Microsoft for Microsoft to distribute via Xbox Live. [***]

     10.1.1 c. For Premium Online Content made available for redemption with MS Points, the Royalty Fee will equal the greater of (i) the wholesale price (multiplied by the MS Points Remittance Rate, unless it is for subscription-based Premium Online Content); and (ii) Royalty Percentage (set forth in e. below) of the MS Points received by Microsoft for such Premium Online Content multiplied by the MS Points Remittance Rate. For example, if a certain unit of Premium Online Content were sold for 800 MS Points and the current MS Points Remittance Rate were $0.0121 per MS Point, the Royalty Fee would equal $6.776 [(0.70*800)*.0121] per unit sold.

     d. [***]

     e. [***]

     f. [***]

     g. [***]

7. Xbox Live Billing and Collection

Microsoft is responsible for billing and collecting all fees associated with Xbox Live, including fees for subscriptions and/or any Online Content for which an Xbox Live User may be charged. [***]

8. Taxes

     a. The amounts to be paid by either party to the other do not include any foreign, U.S. federal, state, local, municipal or other governmental taxes, duties, levies, fees, excises or tariffs, arising as a result of or in connection with the transactions contemplated under this Agreement including, without limitation, (i) any state or local sales or use taxes or any value added tax or business transfer tax now or hereafter imposed on the provision of any services to the other party under this Agreement, (ii) taxes imposed or based on or with respect to or measured by any net or gross income or receipts of either party, (iii) any franchise taxes, taxes on doing business, gross receipts taxes or capital stock taxes (including any minimum taxes and taxes measured by any item of tax preference), (iv) any taxes imposed or assessed after the date upon which this Agreement is terminated, (v) taxes based upon or imposed with reference to either parties’ real and/or personal property ownership and (vi) any taxes similar to or in the nature of those taxes described in (i), (ii), (iii), (iv) or (v) above, now or hereafter

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

10

imposed on either party (or any third parties with which either party is permitted to enter into agreements relating to its undertakings hereunder) (all such amounts, together with any penalties, interest or any additions thereto, collectively “Taxes”). Neither party is liable for any of the other party’s Taxes incurred in connection with or related to the sale of goods and services under this Agreement, and all such Taxes are the financial responsibility of the party obligated to pay such taxes as determined by the applicable law, provided that both parties shall pay to the other the appropriate Collected Taxes in accordance with subsection b below. Each party agrees to indemnify, defend and hold the other party harmless from any Taxes (other than Collected Taxes, defined below) or claims, causes of action, costs (including, without limitation, reasonable attorneys’ fees) and any other liabilities of any nature whatsoever related to such Taxes to the extent such Taxes relate to amounts paid under this Amendment.

     b. Any sales or use taxes described in a. above that (i) are owed by either party solely as a result of entering into this Agreement and the payment of the fees hereunder, (ii) are required to be collected from that party under applicable law, and (iii) are based solely upon the amounts payable under this Agreement (such taxes the “Collected Taxes”), will be stated separately as applicable on payee’s invoices and will be remitted by the other party to the payee, upon request payee shall remit to the other party official tax receipts indicating that such Collected Taxes have been collected and paid by the payee. Either party may provide the other party an exemption certificate acceptable to the relevant taxing authority (including without limitation a resale certificate) in which case payee shall not collect the taxes covered by such certificate. Each party agrees to take such commercially reasonable steps as are requested by the other party to minimize such Collected Taxes in accordance with all relevant laws and to cooperate with and assist the other party, in challenging the validity of any Collected Taxes or taxes otherwise paid by the payor party. Each party shall indemnify and hold the other party harmless from any Collected Taxes, penalties, interest, or additions to tax arising from amounts paid by one party to the other under this Agreement, that are asserted or assessed against one party to the extent such amounts relate to amounts that are paid to or collected by one party from the other under this section. If any taxing authority refunds any tax to a party that the other party originally paid, or a party otherwise becomes aware that any tax was incorrectly and/or erroneously collected from the other party, then that party shall promptly remit to the other party an amount equal to such refund, or incorrect collection as the case may be plus any interest thereon.

     c. If taxes are required to be withheld on any amounts otherwise to be paid by one party to the other, the paying party shall deduct such taxes from the amount otherwise owed and pay them to the appropriate taxing authority. At a party’s written request and expense, the parties shall use reasonable efforts to cooperate with and assist each other in obtaining tax certificates or other appropriate documentation evidencing such payment, provided, however, that the responsibility for such documentation shall remain with the payee party. If Publisher is required by any non-U.S.A. government to withhold income taxes on payments to Microsoft, then Publisher may deduct such taxes from the amount owed Microsoft and shall pay them to the appropriate tax authority, provided that within [***] of such payment, Publisher delivers to Microsoft an official receipt for any such taxes withheld or other documents necessary to enable Microsoft to claim a U.S.A. foreign tax credit.

     b. This Section 7 shall govern the treatment of all taxes arising as a result of or in connection with this Agreement notwithstanding any other section of this Agreement.

9. Audit

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

11

During the term of this Agreement and for [***] thereafter each party shall keep all usual and proper records related to its performance under this Agreement, including but not limited to audited financial statements and support for all transactions related to the ordering, production, inventory, distribution and billing/invoicing information. Such records, books of account, and entries will be kept in accordance with generally accepted accounting principles. Either party (the “Auditing Party”) may audit and/or inspect the other party’s (the “Audited Party”) records no more than [***] in any [***] period in order to verify compliance with the terms of this Agreement. The Auditing Party may, upon reasonable advance notice, audit the Audited Party’s records and consult with the Audited Party’s accountants for the purpose of verifying the Audited Party’s compliance with the terms of this Agreement and for a period of [***]. Any such audit will be conducted during regular business hours at the Audited Party’s offices. Any such audit will be paid for by Auditing Party unless Material discrepancies are disclosed. As used in this section, “Material” means [***]. If Material discrepancies are disclosed, the Audited Party agrees to pay the Auditing Party for [***].

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

12

EXHIBIT 2

XBOX 360 ROYALTY TIER SELECTION FORM

PLEASE COMPLETE THE BELOW INFORMATION, SIGN THE FORM, AND FAX IT TO MICROSOFT AT
+1 (425) 708-2300 TO THE ATTENTION OF MICROSOFT LICENSING, GP (MSLI) AND YOUR ACCOUNT MANAGER.

NOTES:

1. THIS FORM MUST BE SUBMITTED AT LEAST[***]. IF THIS FORM IS NOT SUBMITTED ON TIME OR IS REJECTED BY MICROSOFT, THE ROYALTY RATE WILL DEFAULT TO [***] FOR THE APPLICABLE SALES TERRITORY.

2. A SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES TERRITORY.

1. Publisher Name:

2. Xbox 360 Software Title Name:

3. XeMID Number:

4. Sales Territory (check one):

o     North American Sales Territory

o     Japan Sales Territory

o     European Sales Territory

o     Asian Sales Territory

5. Final Certification Date:

Select Royalty Tier: (check one): [***]

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

13

The undersigned represents that he/she has authority to submit this form on behalf of the above Publisher, and that the information contained herein is true and accurate.

By (sign)

Name, Title (Print)

E-Mail Address (for confirmation of receipt)

Date (Print mm/dd/yy)

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

14

EXHIBIT 3

XBOX 360 PUBLISHER ENROLLMENT FORM

PLEASE COMPLETE THIS FORM, SIGN IT, AND FAX IT TO MICROSOFT AT
+1 (425) 708-2300 TO THE ATTENTION OF YOUR ACCOUNT MANAGER.

NOTE: PUBLISHER MUST COMPLETE, SIGN AND SUBMIT THIS ENROLLMENT FORM [***].

     This Xbox 360 Publisher Enrollment Form (“Enrollment”) is entered into between Microsoft Ireland Operations Ltd. (“MIOL”) and the following publisher (“Publisher”):

Publisher:

Address:

Attention:

Fax:

Phone:

Email:

VAT number:

and is effective as of the latter of the two signatures identified below. The terms of that certain Xbox 360 Publisher License Agreement signed by Microsoft Licensing, GP and __________________ dated _________________ (the “Xbox 360 PLA”) are incorporated herein by reference.

     1. Term. This Enrollment will expire on the date on which the Xbox 360 PLA expires, unless it is terminated earlier as provided for in the Xbox 360 PLA.

     2. Representations and Warranties. By signing this Enrollment, the parties agree to be bound by the terms of this Enrollment, and Publisher represents and warrants that: (i) it has read and understands the Xbox 360 PLA, including any amendments thereto, and agrees to be bound by those; (ii) it is either the entity that signed the Xbox 360 PLA or its affiliate; and (iii) the information that it has provided herein is accurate.

     3. Notices; Requests. All notices and requests in connection with this Enrollment are deemed given on (i) the third day after they are deposited in the applicable country’s mail system ([***] if sent internationally), postage prepaid, certified or registered, return receipt requested; or (ii) [***] after they are sent by overnight courier, charges prepaid, with a confirming fax; and addressed to the Publisher as set forth above and to MIOL as follows:

Microsoft:	MICROSOFT IRELAND OPERATIONS LTD.
	Microsoft European Operations Centre,
	Atrium Building Block B,
	Carmenhall Road,
	Sandyford Industrial Estate

Microsoft Confidential

1

	Dublin 18
	Ireland
	Fax: 353 1 706 4110
Attention:	MIOL Xbox Accounting Services
with a cc to:	MICROSOFT CORPORATION
	One Microsoft Way
	Redmond, WA 98052-6399
Attention:	Legal & Corporate Affairs Department
	Legal Group, E&D (Xbox)
	Fax: +1 (425) 706-7329

or to such other address as the party to receive the notice or request so designates by written notice to the other.

     4. Billing Address. For purposes of the Xbox 360 PLA, Exhibit 1, Section 4, Publisher’s billing address for FPUs manufactured by Authorized Replicators located in the European Sales Territory is as follows:

Name:

Address:

Attention:

Email address:

Fax:

Phone:

MICROSOFT IRELAND OPERATIONS LTD. PUBLISHER:

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

2

By (sign)	By (sign)
Name (Print)	Name (Print)
Title	Title
Date (Print mm/dd/yy)	Date (Print mm/dd/yy)

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

3

EXHIBIT 6

XBOX 360 HITS PROGRAMS ELECTION FORM

PLEASE COMPLETE THE BELOW INFORMATION, SIGN THE FORM, AND FAX IT TO MICROSOFT AT
+1 (425) 708-2300 TO THE ATTENTION OF MICROSOFT LICENSING, GP (MSLI) AND YOUR ACCOUNT MANAGER.

NOTES:

• THIS FORM MUST BE SUBMITTED BY A PUBLISHER AT LEAST [***].

• A SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES TERRITORY IN WHICH THE PUBLISHER WISHES TO PUBLISH A SOFTWARE TITLE AS PART OF A HITS PROGRAM AND FOR EACH HITS PROGRAM.

1) Publisher Name:

2) Xbox 360 Software Title Name:

3) XMID Number:

4) Hits Program (circle one)

Platinum Hits	Platinum Family Hits
Classic Hits	Classic Family Hits

5) Royalty Tier if Family Hits (select one [***]):

[***]

6) Sales Territory for which Publisher wants to publish the Software Title as a Hit FPU (check one):

o North American Sales Territory	o Japan Sales Territory
o European Sales Territory	o Asian Sales Territory

7) Date of Commercial Release of Software Title in applicable Sales Territory: __________________

8) Number of Standard FPUs manufactured to date for the Software Title in the applicable Sales Territory: __________

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

4

9) Projected Commercial Release date of Software Title in the applicable Sales Territory as part of Hits Program: _______________

The undersigned represents that he/she has authority to submit this form on behalf of the above publisher, and that the information contained herein is true and accurate.

By (sign)

Name, Title (Print)

E-Mail Address (for confirmation of receipt)

Date (Print mm/dd/yy)

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

5

EXHIBIT 7

XBOX 360 LIVE AND PDLC INCENTIVE PROGRAM

1. Xbox 360 Live and PDLC Incentive Program

To encourage Publisher to support functionality for Xbox Live in its Xbox 360 Software Titles, to drive increased usage of Xbox Live via Xbox 360 and to increase support of Premium Downloadable Content, Publisher may qualify for certain payments based on the amount of Xbox Live Market Share (defined in Section 2.k. of this Exhibit 7 below) created by Publisher’s Multiplayer Software Titles (defined in Section 2.c. of this Exhibit 7 below). Each Accounting Period (defined in Section 2.a. of this Exhibit 7 below), Microsoft will calculate Publisher’s Xbox Live Market Share. If Publisher [***], then Microsoft will pay Publisher the applicable Incentive set forth in the table in Section 3 of this Exhibit 7 based on [***] in the applicable Accounting Period.

Notwithstanding anything herein to the contrary, use of or revenue derived from online games for which an end user pays a subscription separate from any account established for basic use of Xbox Live, are excluded from this Xbox 360 Live and PDLC Incentive Program.

2. Definitions

     a. “Accounting Period” means [***], within the Term (defined in Section 5 below); provided that if the Effective Date of this Agreement or the expiration date of this program falls within such[***], then the applicable payment calculation set forth below shall be made for a partial Accounting Period, as appropriate.

     b. “[***]Unique User Market Share” means [***].

     c. “Multiplayer Software Titles” means a Software Title for Xbox 360 that supports real-time multiplayer game play.

     d. “[***]Unique Users” means [***].

     e. “New Subscriber Market Share” means[***].

     f. “New Subscriber” means a Paying Subscriber who pays for an Xbox Live account for the first time. A New Subscriber is attributed to the first Multiplayer Software Title he or she plays, even if such play was during a free-trial period which was later converted into a paying subscription. Each Paying Subscriber can only be counted as a New Subscriber once, [***].

     g. “Paying Subscriber” means[***].

     h. “PDLC Revenue” means[***].

     i. “PDLC Revenue Market Share” means[***].

     j. “Subscription Revenue” means[***].

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

6

     k. “Xbox Live Market Share”[***].

3. Incentive Table

Publisher’s “Incentive” shall be determined pursuant to the following table:

[***]

4. Example

     [***]

5. Term

This Xbox 360 Live and PDLC Incentive Program will commence on [***]. Microsoft reserves the right to change the Xbox Live Market Share upon written notice to Publisher, but no more frequently than [***].

6. Payments

In the event Publisher qualifies for a payment under this program during an Accounting Period, Microsoft shall furnish Publisher with a statement, together with payment for any amount shown thereby to be due to Publisher, within [***].

7. Modifications to Xbox 360 Live and PDLC Incentive Program

[***]

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

7

EXHIBIT 8

XBOX 360 HITS ROYALTY TIER MIGRATION FORM

PLEASE COMPLETE THE BELOW INFORMATION, SIGN THE FORM, AND FAX IT TO MICROSOFT AT +1 (425) 708-2300 TO THE ATTENTION OF MICROSOFT LICENSING, GP (MSLI) AND YOUR ACCOUNT MANAGER.

NOTES:

• THIS FORM MUST BE SUBMITTED AT LEAST [***] PRIOR TO THE FIRST MANUFACTURING ORDER TO WHICH PUBLISHER DESIRES THE NEW BASE ROYALTY TO APPLY FOR EACH RESPECTIVE SALES TERRITORY.

• A HITS SOFTWARE TITLE MAY NOT CHANGE ROYALTIES TIERS UNTIL AFTER IT HAS BEEN IN THE HITS PROGRAM FOR AT LEAST[***].

• A SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES TERRITORY IN WHICH PUBLISHER DESIRES TO CHANGE THE APPLICABLE BASE ROYALTY.

1. Publisher Name:

2. Xbox 360 Software Title Name:

3. XMID Number:

4. Sales Territory (check one;[***]):

o     North American Sales Territory

o     Japan Sales Territory

o     Asia Sales Territory

5. Date of First Commercial Release:

7. Current royalty tier: [***]

8. Select New Royalty Tier: [***]

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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The undersigned represents that he/she has authority to submit this form on behalf of the above publisher, and that the information contained herein is true and accurate.

By (sign)

Name, Title (Print)

E-Mail Address (for confirmation of receipt)

Date (Print mm/dd/yy)

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

9

EXHIBIT 9

XLSP Terms

The following terms and conditions apply to Publisher’s use of the Xbox Live Server Platform (“XLSP Terms”):

1. Definitions

     1.1 “Publisher Hosted Online Content” means any content, including without limitation any Online Content, that is hosted and served through the Publisher Hosting Services.

     1.2 “Publisher Hosting Services” means Publisher’s hosting of Publisher Hosted Online Content pursuant to these XLSP Terms, whether performed by Publisher or a Third Party Host, including operating, maintaining and controlling the servers necessary for the provision of Publisher Hosted Online Content.

     1.3 “Third Party Host” means a third party providing Publisher Hosting Services on behalf of Publisher.

     1.4 “Xbox Live Server Platform” or “XLSP” means Microsoft’s platform and/or server architecture which enables the Publisher Hosting Services to function as an expansion to the features available from the Xbox Live service.

     1.5 “Xbox Live User Content” means any content that originates from Xbox Live Users in any format and that is published through or as part of any Publisher Hosted Online Content, but excluding Xbox Live User Communications.

     1.6 “Xbox Live User Communications” means transient voice and text communications sent from an Xbox Live User to one or more Xbox Live Users (e.g., voice chat).

2. Approval and Certification

All proposed Publisher Hosting Services and Publisher Hosted Online Content must go through the same approval process as set forth in the Xbox 360 PLA (i.e., the stages for Concept approval, pre-Certification, Certification and Marketing Materials approvals that apply to all aspects of the Software Title). All Publisher Hosting Services and Publisher Hosted Online Content is subject to the same terms to which any Software Title and/or Online Content is subject per the Xbox 360 PLA. In order to pass a Software Title using XLSP through Certification, Publisher may be required to submit additional information about its server architecture and access to its server environment sufficient to enable Microsoft to conduct testing of the Publisher Hosting Services. In addition to the requirements under these XLSP Terms, Publisher acknowledges and agrees that it will be bound by all XLSP policies set forth in the Xbox 360 Publisher Guide.

3. Privacy

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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As a condition for Certification, Microsoft may require Publisher to have a separate terms of use or privacy policy under Publisher’s name and implemented in a manner that is acceptable to Microsoft. Microsoft must expressly consent to any collection of Xbox Live User’s personally identifiable information and in such event, Publisher may collect only what user data that is legitimately necessary for the intended purpose and may not use any such user data relating to the Xbox 360 and the Xbox Live service in any manner outside of the Publisher Hosting Services. In the event Microsoft requires that Publisher use a separate terms of use or privacy policy for the Publisher Hosting Services, then such policies will clearly state that (i) that the Xbox Live User’s personal information will be shared with Microsoft, and (ii) that the Xbox Live User will be subject to the terms and conditions of the Microsoft Privacy Statement and the Xbox Terms of Use. Such notice must contain hyperlinks to the Xbox Live terms of use, privacy statement, and code of conduct currently located at http://www.xbox.com/en-US/xboxlive. Publisher agrees that any separate terms of use or privacy policy will be in addition to and not conflicting with the Xbox Live terms of use, privacy statement and code of conduct.

4. Beta Trials

At any time prior to Certification of the Software Title, Microsoft may require that internal or public beta testing be conducted by or on behalf of Microsoft (the “Beta Trials”). Microsoft’s prior written approval, which may be withheld in Microsoft’s sole discretion, is required for any Beta Trials. All feedback provided by Microsoft to Publisher as a result of the Beta Trials is advisory in nature, and satisfactory feedback from the Beta Trials is not an indication that the Publisher Hosted Online Content will be approved following the Certification submission. Likewise, Beta Trial feedback may include information regarding violations of technical Certification requirements that could, if not addressed by Publisher, result in Certification failure.

5. Publisher Hosting Services

     5.1 Publisher Responsibility. Publisher is responsible for hosting the Publisher Hosted Online Content and providing the Publisher Hosting Services. Publisher shall operate the Publisher Hosting Services in a manner that meets or exceeds standards of quality, performance, stability, and security generally accepted in the industry, and those specific requirements set forth below in this section and in the Xbox 360 Publisher Guide.

     5.2 Third Party Host. If Publisher is using a Third Party Host to provide the Publisher Hosting Services, Publisher may provide the Third Party Host with access to only those portions of the XDK that are necessary for the Third Party Host to perform the Publisher Hosting Services. Prior to using the services of any Third Party Host, the Third Party Host and Publisher must sign a Third Party Hosting Agreement substantially and materially in the form set forth in the Xbox 360 Publisher Guide, and Microsoft must accept and approve such agreement in writing. Publisher hereby unconditionally and irrevocably guarantees the Third Party Host’s performance of the applicable obligations and restrictions imposed by these XLSP Terms and the Third Party Hosting Agreement.

     5.3 Publisher Hosting Service Requirements. Publisher shall adhere to the following requirements and upon request from Microsoft, Publisher shall provide Microsoft with sufficient information to verify compliance with these requirements:

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

11

     5.3.1 Operation. Publisher shall monitor the operation and performance of the Publisher Hosting Services, respond to technical and Xbox Live User inquiries, and have rules, policies, and procedures for the Publisher Hosting Services that are consistent with the standards defined below or as otherwise provided by Microsoft from time to time in the event Microsoft reasonably determines that the standards need to be updated in light of industry standards.

     5.3.2 Reporting and Technical Policies. The parties shall follow the communication processes for sharing and updating each other’s technical teams set forth in the Xbox 360 Publisher Guide. In addition, Publisher shall follow the technical processes, policies, rules, and detailed procedures for notification, escalation and reporting of scheduled and unscheduled maintenance, and problems that might occur with the Publisher Hosting Services as set forth in the Xbox 360 Publisher Guide. Each party is responsible for notifying the other in the event that it discovers a technical problem with the service of the other party. Publisher shall provide Microsoft [***] advanced written notice of Publisher’s scheduled downtimes, and Publisher shall use commercially reasonable efforts to schedule maintenance downtimes for the Publisher Hosting Services at the same time as Microsoft’s scheduled downtimes for Xbox Live. Upon notification of a scheduled downtime for the Publisher Hosting Services, Microsoft may at its option request an alternate time for such scheduled maintenance and Publisher shall use commercially reasonable efforts to accommodate Microsoft’s request.

     5.3.3 Server Capacity and Load. Publisher shall use commercially reasonable efforts to support all users of its Publisher Hosting Services, including operating sufficient computing resources for user traffic, and shall immediately inform Microsoft of the failure of relevant Publisher Hosting Services. Publisher shall ensure that load on the Publisher Hosting Services system does not exceed [***] of the measured capacity of the system, where “capacity” is defined as the maximum load which can be sustained by the system. Publisher must describe in writing the tools and techniques to be used in measuring system capacity and load, which tools and techniques must be recognizable as industry standard practices and which must be agreed to in advance by Microsoft. Publisher shall measure the load on the Publisher Hosting Services at intervals of no more than [***]. Publisher shall retain records of load measurements for no less than one week, and shall make such records accessible to Microsoft upon request. Should changes to the system occur which necessitate changes in the tools and techniques used to measure capacity and load, or should the capacity of the system materially increase or decrease, Publisher shall inform Microsoft within [***].

     5.3.4 Uptime. The Publisher Hosting Services shall have uptime of [***] per month, where uptime is defined as the portion of time when the system is accessible and available to Xbox Live Users. Uptime will be calculated on a monthly basis assuming conformance with the industry standard of monitoring uptime [***]. Publisher will report the uptime statistics to Microsoft upon request. Scheduled maintenance done pursuant to Section 5.3.2 above may be deducted when calculating uptime.

     5.3.5 Server Location. Publisher must locate all servers used to operate the Publisher Hosting Services in approved territories as provided for in the Xbox 360 Publisher Guide.

     5.3.6 Troubleshooting; Notice to Users. If the Publisher Hosting Services are unable to establish a connection to Xbox Live, then Publisher will work with Microsoft to troubleshoot the cause of the problem and diligently work to fix any such problem. During any time in which a Software Title or any Publisher Hosted Online Content using the Publisher Hosting Services are unable to

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

12

establish a connection to the Publisher Hosting Services, then Publisher will display the appropriate message to the Xbox Live User in accordance with the Xbox 360 Publisher Guide.

     5.4 Customer Support. As set forth in the Xbox 360 PLA, as between Microsoft and Publisher, Publisher is solely responsible for providing customer support to Xbox Live Users for Publisher Hosted Online Content and Publisher Hosting Services. Except as expressly set forth herein, Publisher acknowledges and agrees that Microsoft has no support responsibilities whatsoever to Xbox Live Users for the Publisher Hosted Online Content and Publisher Hosting Services.

     5.5 Xbox Live Family Settings Features. Publisher Hosting Services and Publisher Hosted Online Content shall at all times comply with the requirements of the Xbox 360 Publisher Guide and the technical Certification requirements related to the family settings features of the Xbox 360 and Xbox Live..

     5.6 Law Enforcement and Regulatory Requirements. Publisher is responsible for ensuring that the Publisher Hosting Services and Publisher Hosted Online Content comply with all legal and regulatory requirements that apply in the jurisdictions in which such services or content are made available. Publisher may be required to provide Microsoft with information including legal opinions to verify that the Publisher Hosting Services and Publisher Hosted Online Content comply with applicable laws. In addition, Publisher agrees that it will promptly reply to and comply with any requests by any law enforcement officials regarding the Publisher Hosting Services or Publisher Hosted Online Content.

     5.7 Publisher Contact. As provided in the Xbox 360 Publisher Guide, Publisher shall designate at least one full-time employee as a product or program manager to the services contemplated under these XLSP Terms, responsible for serving as Microsoft’s liaison, performing Publisher’s obligations under this Agreement, and serving as primary contact to Microsoft.

6. Xbox Live User Content

     6.1 Microsoft Approval. Publisher may not allow Xbox Live Users to create, share or otherwise provide Xbox Live User Content in connection with a Software Title without Microsoft’s express approval. If Publisher wants to make Xbox Live User Content available as part of Publisher Hosted Online Content, Publisher will provide to Microsoft a detailed description of the process and procedures Publisher will have in place regarding such Xbox Live User Content.

     6.2 Claim of Infringement. If Microsoft has approved Publisher allowing Xbox Live User Content, Publisher shall maintain a procedure for removing Xbox Live User Content in the event of a claim of infringement, which procedure shall comply with all applicable laws and regulations. Microsoft may notify Publisher of any complaints Microsoft receives related to Xbox Live User Content. Publisher shall remove allegedly infringing Xbox Live User Content upon receipt of a third party claim or notice from Microsoft, but in any event no later than [***] after receipt of such claim. Publisher agrees to notify Microsoft as soon as commercially reasonable (and in any event no later than [***] after receipt) of any such claims of infringement and to update Microsoft as to steps taken in response thereto. In order to mitigate escalation of any such claims, Microsoft may in its good faith discretion take control over any such claim and be the sole source of communications to the claimant.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

13

     6.3 Additional Circumstances for Removal of Xbox Live User Content. Microsoft may in its discretion request that Xbox Live User Content be removed by Publisher pursuant to the procedures described above for Xbox Live User violations of the Xbox Terms of Use and/or Code of Conduct.

7. Action by Microsoft

In the event Publisher fails to perform any of its obligations under these XLSP Terms, including failure to conform to the approved Concept for the Software Title and/or Publisher Hosting Services, Microsoft has the right, without limiting any of its other rights and remedies under the Agreement, to restrict access to the Publisher Hosted Online Content and disconnect Publisher Hosting Services from Xbox Live. Microsoft, in its discretion, may restrict the uploading of Xbox Live User Content to, or require Publisher to remove Xbox Live User Content from, Xbox Live in accordance with the Xbox Live Terms of Use, the Xbox Live Privacy Policy and the Xbox Live Code of Conduct.

8. Termination

     8.1 Termination. In addition to the termination provisions of the Xbox 360 PLA, Microsoft may terminate Publisher’s use of XLSP at any time for Publisher’s failure to comply with these XLSP Terms.

     8.2 Effect of Termination. Upon termination or expiration of the Xbox 360 PLA Publisher shall continue to support existing Publisher Hosted Online Content until the earlier of (1) the end of the FPU sell-off period as set forth in the Xbox 360 PLA, or (2) the end of the Minimum Commitment term for Online Content (as defined in the Xbox 360 PLA). Additionally, Publisher shall continue to support any event-based Publisher Hosted Online Content that started before termination or expiration. To the extent Publisher has support obligations pursuant to this Section 8.2 following termination or expiration, all of Publisher’s obligations under these XLSP Terms will continue to apply. If Publisher’s use of XLSP is terminated due to Publisher’s failure to comply with these XLSP Terms or Publisher’s breach of the Xbox 360 PLA, then Microsoft has the right to immediately terminate the availability of the Publisher Hosted Online Content and require that the operation of Publisher Hosting Services immediately cease, and all Microsoft software or materials be immediately returned to Microsoft.

     8.3 Survival. The following Sections of these XLSP Terms shall survive expiration or termination of these XLSP Terms: 9 and 10. Other sections shall survive in accordance with their terms.

9. Warranties

In addition to the warranties set forth in the Xbox 360 PLA, Publisher additionally warrants and represents that:

     9.1 Any and all information, data, logos, software or other materials provided to Microsoft and/or made available to Xbox Live Users via Publisher Hosted Online Content or the Publisher Hosting Services complies with all laws and regulations and does not and will not infringe upon or misappropriate any third party trade secrets, copyrights, trademarks, patents, publicity, privacy or other proprietary rights.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

14

     9.2 The Publisher Hosted Online Content and the Publisher Hosting Services do not and will not contain any messages, data, images or programs which are, by law, defamatory, obscene or pornographic, or in any way violate any applicable laws (including without limitation laws of privacy) of the territory where the Publisher Hosted Online Content is distributed or hosted.

     9.3 The Publisher Hosted Online Content and the Publisher Hosting Services do not harvest or otherwise collect information about Xbox Live Users, including e-mail addresses, and the Publisher Hosted Online Content and the Publisher Hosting Services do not link to any unsolicited communication sent to any third party.

     9.4 Publisher will not serve any Publisher Hosted Online Content that is not approved in the Software Title’s Concept.

     9.5 Publisher has obtained all necessary rights and permissions for its and Microsoft’s use of the Xbox Live User Content and the Xbox Live User Content does not infringe the intellectual property rights of any third party.

10. Indemnification

The indemnification obligations of the parties under the Xbox 360 PLA extends to any breach by either party of its warranties, representations or covenants set forth in these XLSP Terms. With regard to the Publisher Hosting Services, Publisher’s warranties, representation, covenants and indemnification obligations apply regardless of whether or not Publisher has engaged a Third Party Host to perform all or any of the Publisher Hosting Services. Publisher’s indemnity obligation applies to any third party claims arising out of Microsoft’s use of the Xbox Live User Content.

11. Sub-Publishing

Publisher may enter into sub-publishing arrangements as provided for in the Xbox 360 PLA with respect to Software Titles subject to these XLSP Terms, provided that Publisher remains in control of and responsible for the operations of all Publisher Hosted Online Content and Publisher Online Services. If Publisher desires to transfer the ownership and operation of Publisher Online Services to its sub-publishing partner, then the sub-publisher must be treated as a Third Party Host hereunder or Publisher must get confirmation in writing that the sub-publisher has its own XLSP Addendum in place with Microsoft.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

15

EX-10.3

Exhibit 10.3

AMENDMENT TO THE
XBOX 360 PUBLISHER LICENSE AGREEMENT
(Russian Incentive Program; Hits Program Revisions)

     This Amendment to the Xbox 360 Publisher License Agreement (this “Amendment”) is entered into and effective as of the later of the signature dates below (the “Amendment Effective Date”) by and between Microsoft Licensing, GP, a Nevada general partnership (“Microsoft”), and Majesco Entertainment Company (“Publisher”), and supplements that certain Xbox 360 Publisher License Agreement between the parties dated as of September 12, 2005, as amended (the “Xbox 360 PLA”). Microsoft Corporation, a Washington corporation, is a party to this Amendment only with respect to its acknowledgement of Section 6.2 and Exhibit 1, Section 6 of the Xbox 360 PLA.

RECITALS

A.	Microsoft and Publisher entered into the Xbox 360 PLA to establish the terms under which Publisher may publish video games for Microsoft’s Xbox 360 video game system.
B.	The parties now wish to amend certain terms of the Xbox 360 PLA as set forth below.

     Accordingly, for and in consideration of the mutual covenants and conditions contained herein, and for other good and valuable consideration, receipt of which each party hereby acknowledges, Microsoft and Publisher agree as follows:

1. Definitions.

Except as expressly provided otherwise in this Amendment, capitalized terms shall have the same meanings as those ascribed to them in the Xbox 360 PLA.

2. Exhibits.

Exhibits 1, 6 and 8 of the Xbox 360 PLA are hereby amended and restated in their entirety as attached hereto.

3. Loaned Equipment.

Microsoft may from time-to-time agree to loan Publisher certain Microsoft assets in connection with Publisher’s marketing and promotional activities for the Software Titles. Such loaned assets may include without limitation Xbox 360 kiosks, Xbox 360 consoles and accessories (the “Loaned Equipment”). With respect to all Loaned Equipment provided to Publisher hereunder, Publisher agrees that: (i) Publisher shall not provide the Loaned Equipment to any third party unless such third party is approved by Microsoft in advance (“Approved Third Party”) and, if so approved, Publisher shall be responsible for ensuring that the Approved Third Party complies with the terms of this Section 3; (ii) Publisher shall assume all responsibility for theft, damage, loss or injuries to people or property that occur while such Loaned Equipment is in Publisher’s and/or an Approved Third Party’s possession, control or use; (iii) the Loaned Equipment shall only be used in a location approved by Microsoft; (iv) Publisher’s insurance policy set forth in Section 16.4 of the Xbox 360 PLA shall cover all theft, damage, loss or injuries to people or property in connection with Publisher’s or an Approved Third Party’s use or possession of the Loaned Equipment; (v) Publisher (and any Approved Third Party) shall only use power supplies, power cords, cables, and other parts and accessories provided by Microsoft in connection with the Loaned Equipment; and (vi) Publisher shall, at its expense, return the Loaned Equipment to Microsoft by the date requested by Microsoft and in accordance with any shipping instructions provided by Microsoft.

4. Content Rating. Section 4.4 of the Xbox 360 PLA is hereby amended and restated in its entirety:

“For those Sales Territories that utilize a content rating system, Microsoft will not accept submission of a Software Title (including any Online Content) for Certification approval unless and until Publisher has obtained, at Publisher’s sole cost, a rating not higher than “Mature (17+)” or its equivalent from the appropriate rating bodies and/or any and all other independent content rating authority/authorities for the applicable Sales Territory(ies) reasonably designated by Microsoft (such as ESRB, ELSPA, CERO, etc.). Publisher shall include the applicable rating(s) prominently on FPUs and Marketing Materials, in accordance with the applicable rating body guidelines, and shall include the applicable rating in a header file of the Software Title and in Online Content, as described in the Xbox 360 Publisher Guide. For those Sales Territories that

Microsoft Confidential

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

1

do not utilize a content rating system, Microsoft will not approve any Software Title or Online Content that, in its opinion, contains excessive sexual content or violence, inappropriate language or other elements deemed unsuitable for the Xbox 360 platform. If, after Commercial Release, a Software Title is determined as suitable for adults only or otherwise as indecent, obscene or otherwise prohibited by law, the Publisher shall at its own costs recall all FPUs. Unless Publisher has obtained a separate rating for Online Content and communicated such separate rating to Microsoft in the header file of the Online Content and/or as otherwise described in the Xbox 360 Publisher Guide, Publisher warrants and represents that all Online Content not included in the initial Software Title FPU will not be inconsistent with the content rating (or, in those countries that do not utilize a content rating system, with the overall nature of the content) of the underlying Software Title. Content rating information and requirements may be further described in the Xbox 360 Publisher Guide.”

5. Publisher Bankruptcy.

5.1 Microsoft and Publisher agree that the rights conferred by Publisher upon Microsoft under the Xbox 360 PLA, including, without limitation, those described in Paragraph 6.2 of the Xbox 360 PLA, constitute a license running from Publisher to Microsoft of a right to intellectual property for purposes of Section 365(n) of the United States Bankruptcy Code (11 U.S.C. 101, et seq.), and that Microsoft shall have, in a bankruptcy proceeding in which the Publisher is a debtor, the rights of a “licensee” as set forth in that provision.

5.2 Microsoft and Publisher acknowledge and agree that, in a bankruptcy proceeding of Publisher, and notwithstanding any other provision contained in the Xbox 360 PLA or in this Amendment, Publisher shall not have the power, absent Microsoft’s consent, to assume or assign to a third-party any license running from Microsoft to Publisher of any property, interest or right created in the Xbox 360 PLA or in this Amendment. Microsoft and Publisher hereby express their mutual intention that all such rights be purely personal to Publisher, such that governing non-bankruptcy law shall preclude Publisher’s assignment (and, if applicable, assumption) of those rights without Microsoft’s consent.

6. Sub-Publishing. Section 10.7.1 of the Xbox 360 PLA is hereby amended and restated in its entirety:

“Publisher completes and provides Microsoft with the Sub-Publishing Notification Form (located in the Publisher Guide) at least [***] to authorizing a Sub-Publisher to manufacture any Software Title(s), of the Sub-Publishing relationship, along with (i) a summary of the scope and nature of the Sub-Publishing relationship including, without limitation, as between Publisher and Sub-Publisher, (ii) which party will be responsible for Certification of the Software Title(s) and/or any Online Content, (iii) a list of the Software Title(s) for which Sub-Publisher has acquired publishing rights, (iv) the geographic territory(ies) for which such rights were granted, and (v) the term of Publisher’s agreement with Sub-Publisher; and”

7. Except and to the extent expressly modified by this Amendment, the Xbox 360 PLA shall remain in full force and effect and is hereby ratified and confirmed. In the event of any conflict between this Amendment and the Xbox 360 PLA the terms of this Amendment shall control.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the Amendment Effective Date.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

MICROSOFT LICENSING, GP	MAJESCO ENTERTAINMENT COMPANY
/s/ Astrid B. Ford	/s/ Joseph Sutton
By (sign)	By (sign)
Astrid B. Ford	Joseph Sutton
Name (Print)	Name (Print)
Sr. XBOX Program Manager	Executive Vice President
Title	Title
02/24/10	02/19/10
Date (Print mm/dd/yy)	Date (Print mm/dd/yy)
MICROSOFT CORPORATION
/s/ Astrid B. Ford
By (sign)
Astrid B. Ford
Name (Print)
Sr. XBOX Program Manager
Title
02/24/10
Date (Print mm/dd/yy)

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

EXHIBIT 1

PAYMENTS

1. Platform Royalty

     a. For each FPU manufactured during the term of this Agreement, Publisher shall pay Microsoft nonrefundable royalties in accordance with the royalty tables set forth below (Tables 1 and 2) and the “Unit Discount” table set forth in Section 1.d of this Exhibit 1 (Table 3).

     b. To determine the applicable royalty rate for a particular Software Title that will be sold in a particular Sales Territory, the applicable Threshold Price from Table 1 below for the category of Software Title (Standard Software Title, Hits Software Title and Expansion Pack) will determine the correct royalty “Tier” (except with respect to the first Commercial Release of Hits Software Titles as described further in (ii) below). The royalty rate is then as set forth in Table 2 based on such Tier and the Sales Territory in which the FPUs will be sold. For example, assume the Wholesale Price of a Standard Software Title to be sold in the European Sales Territory [***]. According to Table 1, Tier B royalty rates will apply to that Software Title and the royalty rate for each FPU as set forth in Table 2[***].

     [***]

     c. Setting the Royalty.

(i) Standard Software Titles and Expansion Packs. Publisher shall submit to Microsoft, at least[***] before placing the first manufacturing order for a Standard Software Title or an Expansion Pack, a completed and signed “Xbox 360 Royalty Tier Selection Form” in the form attached to this Agreement as Exhibit 2 for each Sales Territory. The selection indicated in the Xbox 360 Royalty Tier Selection Form will only be effective once it has been approved by Microsoft. If a Standard Software Title or Expansion Pack does not have an approved Xbox 360 Royalty Tier Selection Form as required hereunder (e.g. as a result of the Publisher not providing a Xbox 360 Royalty Tier Selection Form or because Microsoft has not approved the Xbox 360 Royalty Tier Selection Form), the royalty rate for such Standard Software Title will default to Tier A or for such Expansion Pack will default to Packs Tier 1, regardless of the actual Threshold Price (i.e., if Microsoft does not approve an Xbox 360 Royalty Tier Selection Form because it is filled out incorrectly, the royalty rate will default to Tier A). Except as set forth in Section 2 (Hits Programs), the selection of a royalty tier for a Standard Software Title or Expansion Pack in a Sales Territory is binding for the life of that Software Title or Expansion Pack even if the Threshold Price is reduced following the Software Title’s Commercial Release.

(ii) Hits Software Title. Publisher shall submit to Microsoft, at least [***] prior to the targeted Commercial Release of the Hits Software Title a completed and signed Hits Programs Election Form in the form attached hereto as Exhibit 6 for each Sales Territory. The Hits Programs Election Form will only be effective once it has been approved by Microsoft. If a Hits Software Title does not have an approved Hits Programs Election Form as required hereunder (e.g. as a result of the Publisher not providing a Hits Programs Election Form or because Microsoft has not approved the Hits Programs Election Form), the royalty rate for such Hits Software Title will default to Tier A (i.e., if Microsoft does not approve a Hits Programs Election Form because it is filled out incorrectly, the royalty rate will default to Tier A). Unless the Software Title is a Family Hits Title, the first time a Software Title is Commercially Released as a Hits Software Title, the Hits Tier 1 royalty rate will apply. However, if the Software Title is a Family Hits Title and meets the WSP requirements set forth in Table 1 above, Publisher may select the Hits Tier 2 royalty rate.

     Beginning six (6) months after the Commercial Release of a Hits Software Title at the Hits Tier 1 royalty rate, Publisher may elect to change the previously elected royalty rate for such Hits Software Title to Hits Tier 2 in a specific Sales Territory provided that the Hits Software Title has a WSP or SRP that meets the requirements for Hits Tier 2 royalty rate in Table 1 above. Publisher must submit to Microsoft, at least [***] before placing the first manufacturing order for the applicable Hits Software Title, a completed Xbox 360 Royalty Tier Migration Form (a “Tier Migration Form”) set forth in Exhibit 8 for each Sales Territory. The change in royalty rate will only apply to

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

manufacturing orders for such Hits Software Title placed after the relevant Tier Migration Form has been approved by Microsoft.

(iii) Cross Territory Sales. Except for FPUs manufactured pursuant to Section 5 below (Asia Simship Program), Publisher may not sell FPUs in a certain Sales Territory that were manufactured for a different Sales Territory. For example, if Publisher were to manufacture and pay royalties on FPUs designated for sale in the Asian Sales Territory, Publisher could not sell those FPUs in the European Sales Territory.

     d. Russian Manufacturing Incentive Program. [***], for Software Titles releasing in Russia, these Software Titles may qualify for Tier C, even if the Software Title qualifies for a different Tier in the rest of the European Sales Territory, if the following requirements are met:

(i) [***]applies only to FPUs that are sold in Russia, Poland, Hungary, and Czech Republic.

(ii) The Xbox360 version of the Software Title must commercially release no later than all other platform versions including PC.

(iii) To qualify, the Software Title must be fully localized, including voice, text, and packaging; and must not contain any other language except Russian, Polish, Hungarian, and Czech. The Xbox 360 version of the Software Title must have at least localization parity with other platform versions.

     e. Unit Discounts. Publisher is eligible for a discount to FPUs manufactured for a particular Sales Territory (a “Unit Discount”) based on the number of FPUs that have been manufactured for sale in that Sales Territory as described in Table 3 below. Except as provided in Section 5 below, units manufactured for sale in a Sales Territory are aggregated only towards a discount on FPUs manufactured for that Sales Territory; there is no worldwide or cross-territorial aggregation of units for a particular Software Title. The discount will be rounded up to the nearest Cent, Yen or hundredth of a Euro.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

     [***]

* [***] the Amendment Effective Date of the Amendment to the Xbox 360 Publisher License Agreement (2008 Renewal; Tier C; Hits Program Revisions; Expansion Packs; New Xbox 360 Live and PDLC Incentive Program; XLSP; Japan Volume Rebate Revision; Token Promotions; Joint Promotions)(“PLA Amendment No. 2”). All Software Titles initially manufactured prior to the PLA Amendment No. 2 Effective Date are subject to the Unit Discounts set forth in the Xbox 360 PLA prior to the PLA Amendment No. 2.

2. Hits Programs

     a. If a Software Title meets the criteria set forth below and the applicable participation criteria in a particular Sales Territory at the time of the targeted Commercial Release date of the Hits FPU and Microsoft receives the Hits Programs Election Form within the time period set forth in Section 2.a.iv below, Publisher is authorized to manufacture and distribute Hits FPUs in such Sales Territory and at the royalty rate in Table 2 of Section 1 above applicable to Hits FPUs. In order for a Software Title to qualify as a Hits FPU in a Sales Territory, the following conditions, as applicable per Hits Program, must be satisfied:

     i. the Software Title must have been commercially available as a Standard FPU in the applicable Sales Territory for at least [***] at the time of Commercial Release of the Hits FPU. For the European Sales Territory, a Software Title releasing as Family Hit [***] may be available as a Standard FPU in the European Sales Territory for longer than [***] at the time of Commercial Release of the Hits FPU.

     ii. The Threshold Price for the Hits FPU must not exceed a maximum Threshold Price for the relevant Sales Territory ([***] for the North American Sales Territory, [***] in the European Sales Territory, [***] in the Japan Sales Territory, or the equivalent of [***] for the Asian Sales Territory).

     iii. Publisher must provide notice to Microsoft, at least [***] prior to the targeted Commercial Release, of its intent to have a certain Software Title participate in the Hits Program by providing Microsoft with a completed Hits Program Election Form.

     b. As of the date Publisher wishes to Commercially Release the Software Title as a Hits FPU, Publisher must have manufactured the following minimum FPUs of the Software Title as a Standard Software Title for the applicable time period, Sales Territory and Hits Program.

     [***]

     c. All Marketing Materials for a Hits Software Title must comply with all Microsoft branding requirements as may be required in each Sales Territory, and Publisher shall submit all such Marketing Materials to Microsoft for its approval in accordance with the Xbox 360 PLA. Notwithstanding the foregoing, all Hit FPUs must comply with the basic branding and other requirements for Marketing Materials set forth in the Xbox 360 Publisher Guide.

     d. The Hit FPU version must be the same or substantially equivalent to the Standard FPU version of the Software Title. Publisher may modify or add additional content or features to the Hit FPU version of the Software Title (e.g., demos or game play changes) subject to Microsoft’s review and approval, and Publisher acknowledges that any such modifications or additions may require the Software Title to be re-Certified at Publisher’s expense.

     e. Publisher acknowledges that Microsoft may change any of the qualifications for participation in a Hit Program upon [***] notice to Publisher.

3. Payment Process

     Publisher will pre-pay all royalties owed to Microsoft for all FPUs manufactured by its Authorized Replicator, in United States dollars for all FPUs manufactured for sale in the North American Sales Territory, in Euros for all FPUs

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

manufactured for sale in the European Sales Territory and in Yen for all FPUs manufactured for sale in the Japan and Asian Sales Territories. Publisher shall not authorize its Authorized Replicators to begin production until such time as Microsoft has verified that the funds were received in its bank account. Depending upon Publisher’s credit worthiness, Microsoft may, but is not obligated to, offer Publisher credit terms for the payment of royalties due under this Agreement within thirty (30) days from invoice creation. All payments will be made by wire transfer only, in accordance with the payment instructions set forth in the Xbox 360 Publisher Guide.

4. Billing Address

     a. Publisher may have only two “bill to” addresses for the payment of royalties under this Agreement, one for FPUs manufactured by Authorized Replicators located in the North American Sales Territory and one for FPUs manufactured by Authorized Replicators located in the Japan Sales Territory and Asian Sales Territory. If Publisher desires to have a “bill-to” address in a European country, Publisher (or a Publisher Affiliate) must execute an Xbox 360 Publisher Enrollment Form with MIOL within ten (10) business days prior to establishing a billing address in a European country in the form attached to this Agreement as Exhibit 3.

Publisher’s billing address(es) is as follows:

North American Sales Territory:	Japan and Asian Sales Territory (if different than the North American billing address):
Name:	Name:
Address:	Address:
Attention:	Attention:
Email address:	Email address:
Fax:	Fax:
Phone:	Phone:

5. Asia Simship Program

The purpose of this program is to encourage Publisher to release Japanese, North American or European FPUs, that have been multi-region signed to run on NTSC-J boxes (hereinafter collectively referred to as “Simship Titles”), in Hong Kong, Singapore, Korea and Taiwan (referred to as “Simship Territory”) at the same time as Publisher releases the Software Title in the Japan, European and/or North American Sales Territories. In order for a Software Title to qualify as a Simship Title, Publisher must Commercially Release the Software Title in the Simship Territory on the same date as the Commercial Release date of such Software Title in the Japan, European and/or North American Sales Territories, wherever the Software Title was first Commercially Released (referred to as “Original Territory”). To the extent that a Software Title qualifies as a Simship Title, the applicable royalty tier (under Section 1.b of this Exhibit 1 above) and Unit Discount (under Section 1.d of this Exhibit 1 above) is determined as if all FPUs of such Software Title manufactured for distribution in both the Original Territory and the Simship Territory were manufactured for distribution in the Original Territory. For example, if a Publisher initially manufactures [***] FPUs of a Software Title for the Japan Sales Territory and simships [***] of those units to the Simship Territory, the royalty rate for all of the FPUs is determined by the applicable tier based on the Suggested Retail Price set forth in the Japan Sales Territory. In this example, Publisher would also receive [***] above applicable to the Japan Sales Territory. Publisher must provide Microsoft with written notice of its intention to participate in the Asian Simship Program with respect to a particular Software Title at least [***] prior to manufacturing any FPUs it intends to qualify for the program. In its notice, Publisher shall provide all relevant information, including total number of FPUs to be manufactured, number of FPUs to be simshipped into the Simship Territory, date of simship, etc. Publisher remains responsible for complying with all relevant import, distribution and packaging requirements as well as any other applicable requirements set forth in the Xbox 360 Publisher Guide.

6. Online Content. This section applies to Microsoft Corporation and Publisher.

     a. For the purpose of this Section 6, the following capitalized terms have the following meanings:

     [***]

     [***]

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

     b. Publisher may, from time to time, submit Online Content to Microsoft for Microsoft to distribute via Xbox Live. [***]

     c.      [***]

     d.      [***]

     e.      [***]

     f.      [***]

     g. Within [***] after the end of [***] with respect to which Microsoft owes Publisher any Royalty Fees, Microsoft shall furnish Publisher with a statement, together with payment for any amount shown thereby to be due to Publisher. The statement will contain information sufficient to discern how the Royalty Fees were computed.

7. Xbox Live Billing and Collection

Microsoft is responsible for billing and collecting all fees associated with Xbox Live, including fees for subscriptions and/or any Online Content for which an Xbox Live User may be charged. [***].

8. Third Party Royalties and Other Payments

Publisher acknowledges and understands that under Section 15 of the Xbox 360 PLA, Publisher warrants and represents that Publisher has obtained and will maintain all third-party rights, consents and licenses necessary for the permitted exploitation of Software Title Content and Online Content under this Agreement, including without limitation payment of: (i) all so-called “record” royalties payable to artists, producers, engineers, mixers, A&R executives and other royalty participants arising from or related to the sales of Software Titles; (ii) all mechanical royalties payable to publishers of copyrighted musical compositions embodied in Software Title Content and Online Content; (iii) all synchronization royalties payable to publishers of copyrighted musical compositions embodied in Software Title Content and Online Content; (iv) all payments that may be required under collective bargaining agreements applicable to Publisher or its affiliates; and (v) any and all other royalties, fees or other amounts required to be paid.

9. Taxes

     a. The amounts to be paid by either party to the other do not include any foreign, U.S. federal, state, local, municipal or other governmental taxes, duties, levies, fees, excises or tariffs, arising as a result of or in connection with the transactions contemplated under this Agreement including, without limitation, (i) any state or local sales or use taxes or any value added tax or business transfer tax now or hereafter imposed on the provision of any services to the other party under this Agreement, (ii) taxes imposed or based on or with respect to or measured by any net or gross income or receipts of either party, (iii) any franchise taxes, taxes on doing business, gross receipts taxes or capital stock taxes (including any minimum taxes and taxes measured by any item of tax preference), (iv) any taxes imposed or assessed after the date upon which this Agreement is terminated, (v) taxes based upon or imposed with reference to either parties’ real and/or personal property ownership and (vi) any taxes similar to or in the nature of those taxes described in (i), (ii), (iii), (iv) or (v) above, now or hereafter imposed on either party (or any third parties with which either party is permitted to enter into agreements relating to its undertakings hereunder) (all such amounts, together with any penalties, interest or any additions thereto, collectively “Taxes”). Neither party is liable for any of the other party’s Taxes incurred in connection with or related to the sale of goods and services under this Agreement, and all such Taxes are the financial responsibility of the party obligated to pay such taxes as determined by the applicable law, provided that both parties shall pay to the other the appropriate Collected Taxes in accordance with subsection b below. Each party agrees to indemnify, defend and hold the other party harmless from any Taxes (other than Collected Taxes, defined below) or claims, causes of action, costs (including, without limitation, reasonable attorneys’ fees) and any other liabilities of any nature whatsoever related to such Taxes to the extent such Taxes relate to amounts paid under this Amendment.

     b. Any sales or use taxes described in a. above that (i) are owed by either party solely as a result of entering into this Agreement and the payment of the fees hereunder, (ii) are required to be collected from that party under applicable law, and (iii) are based solely upon the amounts payable under this Agreement (such taxes the “Collected Taxes”), will be stated separately as applicable on payee’s invoices and will be remitted by the other party to the payee, upon request payee shall remit to the other party official tax receipts indicating that such Collected Taxes have been collected and paid by the

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

payee. Either party may provide the other party an exemption certificate acceptable to the relevant taxing authority (including without limitation a resale certificate) in which case payee shall not collect the taxes covered by such certificate. Each party agrees to take such commercially reasonable steps as are requested by the other party to minimize such Collected Taxes in accordance with all relevant laws and to cooperate with and assist the other party, in challenging the validity of any Collected Taxes or taxes otherwise paid by the payor party. Each party shall indemnify and hold the other party harmless from any Collected Taxes, penalties, interest, or additions to tax arising from amounts paid by one party to the other under this Agreement, that are asserted or assessed against one party to the extent such amounts relate to amounts that are paid to or collected by one party from the other under this section. If any taxing authority refunds any tax to a party that the other party originally paid, or a party otherwise becomes aware that any tax was incorrectly and/or erroneously collected from the other party, then that party shall promptly remit to the other party an amount equal to such refund, or incorrect collection as the case may be plus any interest thereon.

     c. If taxes are required to be withheld on any amounts otherwise to be paid by one party to the other, the paying party shall deduct such taxes from the amount otherwise owed and pay them to the appropriate taxing authority. At a party’s written request and expense, the parties shall use reasonable efforts to cooperate with and assist each other in obtaining tax certificates or other appropriate documentation evidencing such payment, provided, however, that the responsibility for such documentation shall remain with the payee party. If Publisher is required by any non-U.S.A. government to withhold income taxes on payments to Microsoft, then Publisher may deduct such taxes from the amount owed Microsoft and shall pay them to the appropriate tax authority, provided that within sixty (60) days of such payment, Publisher delivers to Microsoft an official receipt for any such taxes withheld or other documents necessary to enable Microsoft to claim a U.S.A. foreign tax credit.

     b. This Section 7 shall govern the treatment of all taxes arising as a result of or in connection with this Agreement notwithstanding any other section of this Agreement.

10. Audit

During the term of this Agreement and for [***] thereafter each party shall keep all usual and proper records related to its performance under this Agreement, including but not limited to audited financial statements and support for all transactions related to the ordering, production, inventory, distribution and billing/invoicing information. Such records, books of account, and entries will be kept in accordance with generally accepted accounting principles. Either party (the “Auditing Party”) may audit and/or inspect the other party’s (the “Audited Party”) records no more than [***] in any [***] period in order to verify compliance with the terms of this Agreement. The Auditing Party may, upon reasonable advance notice, audit the Audited Party’s records and consult with the Audited Party’s accountants for the purpose of verifying the Audited Party’s compliance with the terms of this Agreement and for a period of [***].Any such audit will be conducted during regular business hours at the Audited Party’s offices. Any such audit will be paid for by Auditing Party unless Material discrepancies are disclosed. As used in this section, “Material” means the[***]. If Material discrepancies are disclosed, the Audited Party agrees to pay the Auditing Party for the [***].

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

EXHIBIT 2

XBOX 360 ROYALTY TIER SELECTION FORM

PLEASE COMPLETE THE BELOW INFORMATION, SIGN THE FORM, AND FAX IT TO MICROSOFT AT +1 (425) 708-2300 TO THE ATTENTION OF MICROSOFT LICENSING, GP (MSLI) AND YOUR ACCOUNT MANAGER.

NOTES:

1.	THIS FORM MUST BE SUBMITTED AT LEAST [***] IF THIS FORM IS NOT SUBMITTED ON TIME OR IS REJECTED BY MICROSOFT, THE ROYALTY RATE WILL DEFAULT TO [***] FOR THE APPLICABLE SALES TERRITORY.
2.	A SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES TERRITORY.
1.	Publisher Name: _____________________________
2.	Xbox 360 Software Title Name: _____________________________
3.	XeMID Number:

4. Sales Territory (check one):

      o      North American Sales Territory

      o      Japan Sales Territory

      o      European Sales Territory

      o      Russian Incentive Manufacturing Program (See exhibit 1 of the PLA for qualification criteria)

      o      Asian Sales Territory

5.	Final Certification Date: ___________________
6.	Select Royalty Tier: (check one): [***]

The undersigned represents that he/she has authority to submit this form on behalf of the above Publisher, and that the information contained herein is true and accurate.

By (sign) 

Name, Title (Print) 

E-Mail Address (for confirmation of receipt) 

Date (Print mm/dd/yy) 

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

EXHIBIT 6

XBOX 360 HITS PROGRAMS ELECTION FORM

PLEASE COMPLETE THE BELOW INFORMATION, SIGN THE FORM, AND FAX IT TO MICROSOFT AT +1 (425) 708-2300 TO THE ATTENTION OF MICROSOFT LICENSING, GP (MSLI) AND YOUR ACCOUNT MANAGER.

NOTES:

•	THIS FORM MUST BE SUBMITTED BY A PUBLISHER AT LEAST [***] PRIOR TO THE TARGET COMMERCIAL RELEASE DATE FOR A SOFTWARE TITLE IN A HITS PROGRAM IN ANY SALES TERRITORY.
•	A SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES TERRITORY IN WHICH THE PUBLISHER WISHES TO PUBLISH A SOFTWARE TITLE AS PART OF A HITS PROGRAM AND FOR EACH HITS PROGRAM.
1)	Publisher Name: _____________________________
2)	Xbox 360 Software Title Name: _____________________________
3)	XMID Number: ____________________________
4)	Hits Program (circle one)

          [***]

5) Royalty Tier if Family Hits (select one):

          [***]

6) Sales Territory for which Publisher wants to publish the Software Title as a Hit FPU (check one):

o	North American Sales Territory	o	Japan Sales Territory
o	European Sales Territory	o	Asian Sales Territory

7)	Date of Commercial Release of Software Title in applicable Sales Territory: __________________
8)	Number of Standard FPUs manufactured to date for the Software Title in the applicable Sales Territory: __________
9)	Projected Commercial Release date of Software Title in the applicable Sales Territory as part of Hits Program: _______________

The undersigned represents that he/she has authority to submit this form on behalf of the above publisher, and that the information contained herein is true and accurate.

By (sign) 

Name, Title (Print) 

E-Mail Address (for confirmation of receipt) 

Date (Print mm/dd/yy) 

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

EXHIBIT 8

XBOX 360 HITS ROYALTY TIER MIGRATION FORM

PLEASE COMPLETE THE BELOW INFORMATION, SIGN THE FORM, AND FAX IT TO MICROSOFT AT +1 (425) 708-2300 TO THE ATTENTION OF MICROSOFT LICENSING, GP (MSLI) AND YOUR ACCOUNT MANAGER.

NOTES:

•	THIS FORM MUST BE SUBMITTED[***].
•	A HITS SOFTWARE TITLE MAY NOT CHANGE ROYALTIES TIERS UNTIL AFTER IT HAS BEEN IN THE HITS PROGRAM FOR AT LEAST [***].
•	A SEPARATE FORM MUST BE SUBMITTED FOR EACH SALES TERRITORY IN WHICH PUBLISHER DESIRES TO CHANGE THE APPLICABLE BASE ROYALTY.
1.	Publisher Name: _____________________________
2.	Xbox 360 Software Title Name: _____________________________
3.	XMID Number: _____________________
4.	Sales Territory (check one):

     o       North American Sales Territory

     o       European Sales Territory

     o       Japan Sales Territory

     o       Asian Sales Territory

5.	Date of First Commercial Release: _____________________
6.	Current royalty tier: [***]
7.	Select New Royalty Tier: [***]

The undersigned represents that he/she has authority to submit this form on behalf of the above publisher, and that the information contained herein is true and accurate.

By (sign) 

Name, Title (Print) 

E-Mail Address (for confirmation of receipt) 

Date (Print mm/dd/yy) 

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

EX-10.4

Exhibit 10.4

SECOND AMENDMENT TO

CONFIDENTIAL LICENSE AGREEMENT FOR NINTENDO DS

(Western Hemisphere)

THIS SECOND AMENDMENT (“Second Amendment”) amends that certain Confidential License Agreement for Nintendo DS (Western Hemisphere) effective May 1, 2005 between Nintendo of America Inc. (“Nintendo”) and Majesco Entertainment Company (“Licensee”) (“Agreement”).

RECITALS

WHEREAS, Nintendo and Licensee entered into the Agreement;

WHEREAS, the Agreement (as amended) currently expires on April 30, 2011, and the parties now desire to extend the Term (as such term is defined in the Agreement) of the Agreement as set forth below.

AMENDMENT

NOW, THEREFORE, the parties agree as follows:

1.	The definition of “Term” as set forth in Section 2.20 of the Agreement is hereby deleted in its entirety and replaced with the following:
	“‘Term’ means nine (9) years from the Effective Date.”
2.	The Term of the Agreement shall now expire on April 30, 2014.
3.	All other terms and conditions of the Agreement shall remain in full force and effect. This Second Amendment may be signed in counterparts, which together shall constitute one original Second Amendment.
4.	Signatures provided by facsimile or by email (i.e., a scanned document) shall be the equivalent of originals.

This Second Amendment shall be effective as of May 1, 2011.

IN WITNESS WHEREOF, the parties have entered into this Second Amendment.

NINTENDO:		LICENSEE:
Nintendo of America Inc.		Majesco Entertainment Company
By:	/s/ James R. Cannataro	By:	/s/ Adam Suttan
Name:	James R. Cannataro	Name:	Adam Suttan
Its:	EVP, Administration	Its:	GC & SVP Business & Legal Affairs

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Jesse Sutton, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Majesco Entertainment Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 14, 2011

/s/ Jesse Sutton  

Title: Chief Executive Officer 

          (Principal Executive Officer) 

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Michael Vesey, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Majesco Entertainment Company:
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 14, 2011

/s/ Michael Vesey  

Title: Chief Financial Officer 

          (Principal Financial Officer) 

EX-32

EXHIBIT 32

Certification
Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002
(Subsections (A) And (B) Of Section 1350, Chapter 63 of Title 18, United States Code)

     Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officers of Majesco Entertainment Company and Subsidiary (the “Company”), do hereby certify, to such officers’ knowledge, that:

     The Quarterly Report on Form 10-Q for the period ending July 31, 2011 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: September 14, 2011

/s/ Jesse Sutton  

Title: Chief Executive Officer 

          (Principal Executive Officer) 

/s/ Michael Vesey  

Title: Chief Financial Officer 

          (Principal Financial Officer) 

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jul. 31, 2011	Oct. 31, 2010
Stockholders' equity:
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	40,952,586	39,326,376
Common stock, shares outstanding	40,952,586	39,326,376

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data	3 Months Ended		9 Months Ended
	Jul. 31, 2011	Jul. 31, 2010	Jul. 31, 2011	Jul. 31, 2010
Condensed Consolidated Statements of Operations
Net revenues	$ 19,545	$ 12,153	$ 100,154	$ 52,265
Cost of sales
Product costs	8,577	7,398	42,681	24,573
Software development costs and license fees	3,015	1,975	16,237	12,074
Loss on impairment of software development costs and license fees-future releases				1,021
Total cost of sales	11,592	9,373	58,918	37,668
Gross profit	7,953	2,780	41,236	14,597
Operating costs and expenses
Product research and development	1,947	720	5,150	2,361
Selling and marketing	2,313	1,641	11,952	6,225
General and administrative	2,484	2,004	8,089	6,394
Loss on impairment of software development costs and license fees - cancelled games	150	116	1,512	276
Depreciation and amortization	121	43	223	140
Total operating costs and expenses	7,015	4,524	26,926	15,396
Operating income (loss)	938	(1,744)	14,310	(799)
Other expenses (income)
Interest and financing costs, net	123	82	1,077	703
Change in fair value of warrant liability	(1,258)	(183)	2,085	(412)
Income (loss) before income taxes	2,073	(1,643)	11,148	(1,090)
Income taxes	184		421	(1,647)
Net income (loss)	$ 1,889	$ (1,643)	$ 10,727	$ 557
Net income (loss) per share:
Basic	$ 0.05	$ (0.04)	$ 0.28	$ 0.02
Diluted	$ 0.05	$ (0.04)	$ 0.27	$ 0.01
Weighted average shares outstanding:
Basic	38,803,090	36,934,987	38,165,521	36,838,981
Diluted	41,318,806	36,934,987	39,827,022	37,142,649

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Document and Entity Information (USD $) In Millions, except Share data	9 Months Ended
	Jul. 31, 2011	Sep. 09, 2011	Apr. 30, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	MAJESCO ENTERTAINMENT CO
Entity Central Index Key	0001076682
Document Type	10-Q
Document Period End Date	Jul. 31, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--10-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 24.2
Entity Common Stock, Shares Outstanding		41,295,721

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Inventories

9 Months Ended

Jul. 31, 2011

Inventories [Abstract]

INVENTORIES

7. INVENTORIES

     Inventories consist of the following:

	July 31,		October 31,
	2011		2010
Finished goods	$	3,798	$	6,711
Packaging and components		809		1,707
	$	4,607	$	8,418

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Comprehensive Income (Loss)

9 Months Ended

Jul. 31, 2011

Comprehensive Income (Loss) [Abstract]

COMPREHENSIVE INCOME (LOSS)

12. COMPREHENSIVE INCOME (LOSS)

     The components of comprehensive income (loss) for the three- and nine-month periods ended July 31, 2011 and 2010, are summarized as follows:

	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2011			2010			2011			2010
Net income (loss)	$	1,889		$	(1,643	)	$	10,727		$	557
Other comprehensive income (loss) — foreign currency translation adjustments		(3	)		(4	)		(5	)		(83	)
Total comprehensive income (loss)	$	1,886		$	(1,647	)	$	10,722		$	474

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Fair Value

9 Months Ended

Jul. 31, 2011

Fair Value [Abstract]

FAIR VALUE

3. FAIR VALUE

     The table below segregates all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

			Quoted prices				Significant
			in active markets		Significant other		unobservable
			for identical assets		observable inputs		inputs
	July 31, 2011		(level 1)		(level 2)		(level 3)
Assets:
Money market funds	$	19,046	$	19,046	$	—	$	—
Bank deposits	$	628	$	628	$	—	$	—
Total financial assets	$	19,674	$	19,674	$	—	$	—
Liabilities:
Warrant liability	$	1,187	$	—	$	—	$	1,187
Total financial liabilities	$	1,187	$	—	$	—	$	1,187

     The Company has outstanding warrants that may require settlement by transferring assets under certain change of control circumstances. These warrants are classified as liabilities in the accompanying balance sheet. The warrants have an exercise price of $2.04 per share and expire in September 2012. The Company measures the fair value of the warrants at each balance sheet date, using the Black-Scholes method, and a gain or loss is recorded in earnings each period as change in fair value of warrants.

     Assumptions used to determine the fair value of the warrants were:

	Three Months ended July 31,						Nine Months ended July 31,
	2011			2010			2011			2010
Estimated fair value of stock	$	2.45-$3.75		$	0.68-$0.86		$	0.62-$3.75		$	0.68-$1.02
Expected warrant term		1.6-1.9 years			2.6-2.9 years			1.6-2.4 years			2.6-3.4 years
Risk-free rate		0.3-0.6	%		0.7-1.4	%		0.3-0.8	%		0.7%-1.6	%
Expected volatility		77.9-77.9	%		74.3-75.9	%		73.5-77.9	%		74.3-76.1	%
Dividend yield		0	%		0	%		0	%		0	%

     A summary of the changes to the Company’s warrant liability, as measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended July 31, 2011 and 2010 is presented below:

	Three Months			Three Months Ended			Nine Months Ended			Nine Months Ended
	Ended July 31, 2011			July 31, 2010			July 31, 2011			July 31, 2010
Beginning balance	$	2,551		$	397		$	144		$	626
Warrants exercised		(106	)		—			(1,042	)		—
Total loss (gain) included in net income		(1,258	)		(183	)		2,085			(412	)
Ending balance	$	1,187		$	214		$	1,187		$	214

     In the three and nine months ended July 31, 2011, upon exercise of 60,706 and 598,440, respectively, of the warrants outstanding, the warrant liability associated with those warrants, amounting to $106 and $1,042 respectively, was reclassified to additional paid-in capital.

     The carrying value of accounts receivable, accounts payable and accrued expenses, due from factor, and advances from customers are reasonable estimates of their fair values because of their short-term maturity.

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Accounts Payable and Accrued Expenses

9 Months Ended

Jul. 31, 2011

Accounts Payable and Accrued Expenses [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses consist of the following:

	July 31,		October 31,
	2011		2010
Accounts payable — trade	$	3,394	$	4,856
Royalties and software development		5,149		5,517
Salaries, accrued bonuses and other compensation		2,477		592
Other accruals		1,331		410
	$	12,351	$	11,375

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Related Parties

9 Months Ended

Jul. 31, 2011

Related Parties [Abstract]

RELATED PARTIES

14. RELATED PARTIES

     The Company currently has an agreement with Morris Sutton, the Company’s former Chief Executive Officer and father of the Company’s Chief Executive Officer, under which he provides services as a consultant. The agreement provides for a monthly retainer of $13. Mr. Sutton was also eligible to receive a commission in an amount equal to 2% of net sales to certain accounts before January 1, 2010. Commissions were recorded when the sales occurred, but not paid until collection of the related accounts receivable from customers. Therefore, some of these payments were made to Mr. Sutton in 2010.

     The following table summarizes expenses related these agreements with Mr. Sutton:

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2011		2010		2011		2010
Consulting	$	38	$	38	$	113	$	113
Commissions and fees		—		—		—		131
Total	$	38	$	38	$	113	$	244

     MSI Entertainment, a company controlled by Morris Sutton, acted as an agent for the Company in sales to a distributor. The titles, for which the Company had no other planned distribution, were paid for in advance by the distributor. In the nine months ended July 31, 2011, the Company paid MSI a fee of $78 in connection with the sales.

     The Company also has an agreement with a member of its board of directors to provide specified strategic consulting services, in addition to his services as a board member, on a month-to-month basis at a monthly rate of $10. Under this arrangement, fees earned in the three and nine months ended July 31, 2011 totaled $30 and $90, respectively. Fees earned in the three and nine months ended July 31, 2010 totaled $30 and $43, respectively.

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Stock Based Compensation Arrangements

9 Months Ended

Jul. 31, 2011

Stock Based Compensation Arrangements [Abstract]

STOCK BASED COMPENSATION ARRANGEMENTS

10. STOCK BASED COMPENSATION ARRANGEMENTS

     The Company issued 284,766 and 614,250 shares of restricted stock during the three and nine months ended July 31, 2011, respectively, and cancelled no shares in either period. The Company issued 163,949 and 279,131 shares of restricted stock during the three and nine months ended July 31, 2010, respectively, and cancelled 199,736 and 221,720 shares during the same respective periods. The Company values shares of restricted stock at fair value as of the grant date.

     The Company issued options to purchase 0 and 100,000 shares of common stock during the three and nine months ended July 31, 2011, respectively, and cancelled no options in the periods. The issued options have an exercise price of $1.64 per share, equal to the market value of a share of the Company’s stock on the grant date, and expire in 2018. The options have a total grant-date fair value of $95, based on the Black-Scholes model and estimated share-price volatility of 75.2%, estimated life of 4.3 years and a risk-free rate of 1.8%. The Company did not issue or cancel any options to purchase shares of common stock during the three and nine months ended July 31, 2010. The Company values options at fair value as of the grant date.

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Prepaid Expenses

9 Months Ended

Jul. 31, 2011

Prepaid Expenses [Abstract]

PREPAID EXPENSES

8. PREPAID EXPENSES

     Prepaid expenses consist of the following:

	July 31,		October 31,
	2011		2010
Prepaid advertising	$	595	$	746
Other		301		175
	$	896	$	921

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Principal Business Activity and Basis of Presentation

9 Months Ended

Jul. 31, 2011

Principal Business Activity and Basis of Presentation [Abstract]

PRINCIPAL BUSINESS ACTIVITY AND BASIS OF PRESENTATION

1. PRINCIPAL BUSINESS ACTIVITY AND BASIS OF PRESENTATION

     The accompanying financial statements present the financial results of Majesco Entertainment Company and Majesco Europe Limited, its wholly-owned subsidiary, (“Majesco” or the “Company”) on a consolidated basis.

     The Company is a provider of video game products primarily for the family-oriented, mass-market consumer. It sells its products primarily to large retail chains, specialty retail stores, and distributors. It publishes video games for major current generation interactive entertainment hardware platforms, including Nintendo’s DS, DSi and Wii, Sony’s PlayStation 3, or PS3, and PlayStation Portable, or PSP, Microsoft’s Xbox 360 and the personal computer, or PC. It also publishes games for numerous digital platforms, including mobile platforms such as iPhone, iPad and iPod Touch, as well as online platforms such as Facebook.

     The Company’s video game titles are targeted at various demographics at a range of price points. Due to the larger budget requirements for developing and marketing premium console titles for core gamers, the Company focuses on publishing casual games targeting mass-market consumers. In some instances, its titles are based on licenses of well-known properties and, in other cases based on original properties. The Company enters into agreements with content providers and video game development studios for the creation of its video games.

     The Company’s operations involve similar products and customers worldwide. These products are developed and sold domestically and internationally. The Company may also enter into agreements with licensees, particularly for sales of its products internationally. The Company is centrally managed and its chief operating decision makers, the chief executive and other officers, use consolidated and other financial information supplemented by sales information by product category, major product title and platform for making operational decisions and assessing financial performance. Accordingly, the Company operates in a single segment.

     Net revenues by geographic region were as follows:

	Three Months Ended July 31,										Nine Months Ended July 31,
	2011		%			2010		%			2011		%			2010		%
United States	$	14,214		72.7	%	$	12,122		99.7	%	$	91,425		91.3	%	$	50,488		96.6	%
Europe		5,331		27.3	%		31		0.3	%		8,729		8.7	%		1,777		3.4	%
Total	$	19,545		100.0	%	$	12,153		100.0	%	$	100,154		100.0	%	$	52,265		100.0	%

     The accompanying interim condensed consolidated financial statements of the Company are unaudited, but in the opinion of management, reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim period. Accordingly, they do not include all information and notes required by generally accepted accounting principles for complete financial statements. The Company’s financial results are impacted by the seasonality of the retail selling season and the timing of the release of new titles. The results of operations for interim periods are not necessarily indicative of results to be expected for the entire fiscal year. The balance sheet at October 31, 2010 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes for the year ended October 31, 2010 filed with the Securities and Exchange Commission on Form 10-K on January 31, 2011.

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Income Taxes

9 Months Ended

Jul. 31, 2011

Income Taxes [Abstract]

INCOME TAXES

4. INCOME TAXES

     The federal and state income tax provisions recorded by the Company for the three and nine months ended July 31, 2011 reflect the use of available net operating loss carryforwards to offset taxable income. NOL carryforwards available for income tax purposes at July 31, 2011 amount to approximately $71 million for federal income taxes and approximately $24 million for certain state income taxes. Due to the Company’s history of losses, a valuation allowance sufficient to fully offset NOLs and other deferred tax assets has been established under current accounting pronouncements and this valuation allowance will be maintained until sufficient positive evidence exists to support its reversal.

     For the nine months ended July 31, 2010, the Company recorded an income tax benefit related to proceeds of $1,656 received in January 2010 from the sale of the rights to approximately $21,200 of New Jersey state income tax operating loss carryforwards, under the Technology Business Tax Certificate Program administered by the New Jersey Economic Development Authority.

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Due From Factor

9 Months Ended

Jul. 31, 2011

Due From Factor [Abstract]

DUE FROM FACTOR

5. DUE FROM FACTOR

     Due from factor consists of the following:

	July 31,			October 31,
	2011			2010
Outstanding accounts receivable sold to factor	$	8,704		$	13,754
Less: allowances		(4,455	)		(3,298	)
Less: advances from factor		(2,840	)		(9,441	)
	$	1,409		$	1,015

     Outstanding accounts receivable sold to the factor as of July 31, 2011 and October 31, 2010 for which the Company retained credit risk amounted to $0.6 million and $1.4 million, respectively. As of July 31, 2011 and October 31, 2010, there were no allowances for uncollectible accounts.

     A summary of the changes in price protection and other customer sales incentive allowances included as a reduction of the amounts due from factor is presented below:

	Nine Months Ended
	July 31,
	2011			2010
Allowances — beginning of period	$	(3,298	)	$	(4,380	)
Provision for price protection		(2,392	)		(3,073	)
Amounts charged against allowance and other changes		1,235			4,506
Allowances — end of period	$	(4,455	)	$	(2,947	)

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Commitments and Contingencies

9 Months Ended

Jul. 31, 2011

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

13. COMMITMENTS AND CONTINGENCIES

     Infringement claim

     In July 2011, a claim was made against Microsoft and certain game publishers, including the Company, that have released games for Microsoft’s Kinect for Xbox 360, alleging patent infringement and seeking monetary damages and injunctive relief. The Company intends to defend itself against the claim and believes it has third-party indemnity rights that may cover certain costs to the Company. The Company cannot currently estimate a potential range of loss if the claim against the Company is successful.

     Workforce reduction

     During January 2010, Company management initiated a plan of restructuring to better align its workforce to its revised operating plans. As part of the plan, the Company reduced its personnel count by 16 employees, then representing 17% of its workforce. The Company recorded charges of approximately $403 in the nine months ended July 31, 2010 in connection with the terminations, which consisted primarily of severance and unused vacation payments. The expenses were included in operating costs and expenses as shown in the table below:

	Nine Months Ended
	July 31, 2010
Product research and development	$	90
Selling and Marketing		243
General and Administrative		70
Total	$	403

     These payments were made during the Company’s fiscal year ended October 31, 2010. At July 31, 2011 and October 31, 2010, the Company had no remaining liability related to the workforce reduction.

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Accounts and Other Receivables

9 Months Ended

Jul. 31, 2011

Accounts And Other Receivables [Abstract]

ACCOUNTS AND OTHER RECIEVABLES

6. ACCOUNTS AND OTHER RECEIVABLES

     The following table presents the major components of accounts and other receivables:

	July 31,		October 31,
	2011		2010
Royalties receivable	$	2,391	$	—
Trade accounts receivable		359		726
Allowances		—		(25	)
Other		38		24
	$	2,788	$	725

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands	9 Months Ended
	Jul. 31, 2011	Jul. 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 10,727	$ 557
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	223	140
Change in fair value of warrant liability	2,085	(412)
Non-cash compensation expense	1,064	1,324
Loss on disposal of assets		19
Provision for price protection and customer allowances	2,380	3,073
Amortization of software development costs and license fees	3,467	3,629
Loss on impairment of software development costs and license fees	1,512	1,297
Inventory write-downs	1,612
Changes in operating assets and liabilities, net of acquisition:
Due from factor	(2,786)	(940)
Accounts and other receivables	(1,987)	475
Inventory	2,199	2,672
Capitalized software development costs and license fees	(9,420)	(6,705)
Advance payments for inventory	4,888
Prepaid expenses and other assets	261	2,270
Accounts payable and accrued expenses	753	(2,115)
Advances from customers and other liabilities	(376)	(676)
Net cash provided by operating activities	16,602	4,608
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(396)	(192)
Purchase of assets of Quick Hit, Inc., net of acquired cash	(800)
Net cash used in investing activities	(1,196)	(192)
CASH FLOWS FROM FINANCING ACTIVITIES
Inventory financing	(5,557)	(5,684)
Proceeds from exercise of options and warrants	1,824
Net cash used in financing activities	(3,733)	(5,684)
Effect of exchange rates on cash and cash equivalents	(3)	(22)
Net increase (decrease) in cash and cash equivalents	11,670	(1,290)
Cash and cash equivalents - beginning of period	8,004	11,839
Cash and cash equivalents - end of period	19,674	10,549
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Landlord-provided leasehold improvements	163
Warrant liability reclassified to additional paid-in capital upon exercise	1,042
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$ 1,078	$ 710

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Summary of Significant Accounting Policies

9 Months Ended

Jul. 31, 2011

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Revenue Recognition. The Company recognizes revenue upon the shipment of its products when: (1) title and the risks and rewards of ownership are transferred; (2) persuasive evidence of an arrangement exists; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable is probable. Certain products are sold to customers with a street date (the earliest date these products may be resold by retailers). Revenue for sales of these products is not recognized prior to their street date. Some of the Company’s software products provide limited online features at no additional cost to the consumer. Generally, such features have been considered to be incidental to the Company’s overall product offerings and an inconsequential deliverable. Accordingly, the Company does not defer any revenue related to products containing these limited online features. However, in instances where online features or additional functionality is considered a substantive deliverable in addition to the software product, such characteristics will be taken into account when applying the Company’s revenue recognition policy.

     The Company generally sells its products on a no-return basis, although in certain instances, the Company provides price protection or other allowances on certain unsold products. Price protection, when granted and applicable, allows customers a partial credit against amounts they owe the Company with respect to merchandise unsold by them. Revenue is recognized, and accounts receivable is presented, net of estimates of these allowances.

     The Company estimates potential future product price protection and other allowances related to current period product revenue. The Company analyzes historical experience, current sell through of retailer inventory of the Company’s products, current trends in the video game market, the overall economy, changes in customer demand and acceptance of the Company’s products and other related factors when evaluating the adequacy of price protection and other allowances.

     Sales incentives or other consideration given by the Company to customers that are considered adjustments of the selling price of its products, such as rebates and product placement fees, are reflected as reductions of revenue. Sales incentives and other consideration that represent costs incurred by the Company for benefits received, such as the appearance of the Company’s products in a customer’s national circular ad, are reflected as selling and marketing expenses, in accordance with Accounting Standards Codification (“ASC”) 605-50, Customer Payments and Incentives.

     In addition, some of the Company’s software products are sold exclusively as downloads of digital content for which the consumer takes possession of the digital content for a fee. Revenue from product downloads is generally recognized when the download is made available (assuming all other recognition criteria are met).

     We operate hosted online games in which players can play for free and purchase virtual goods for use in the games. We recognize revenues from the sale of virtual goods as service revenues over the estimated period in which players use the goods in the game. We currently estimate these periods of use to be three to four months. We will periodically assess our estimates for this period of use and future increases or decreases in these estimates will affect our recognized revenues prospectively. We also recognize advertising revenue related to advertising placed on our game sites as ads are served.

     The Company records revenue for distribution agreements where it is acting as an agent as defined by ASC Topic 605, Revenue Recognition, Subtopic 45, Principal Agent Considerations, on a net basis. When the Company enters into license or distribution agreements that provide for multiple copies of games in exchange for guaranteed amounts, revenue is recognized in accordance with the terms of the agreements, generally upon delivery of a master copy, assuming our performance obligations are complete and all other recognition criteria are met, or as per-copy royalties are earned on sales of games. Royalty revenue from sales by our distribution partner in Europe amounted to $2,521 in the three months ended July 31, 2011, or approximately 13% of total revenue. Royalty revenue amounted to less than 10% of total revenue in other periods presented.

     Inventory. Inventory, which consists primarily of finished goods, is stated at the lower of cost as determined by the first-in, first-out method, or market. The Company estimates the net realizable value of slow-moving inventory on a title-by-title basis and charges the excess of cost over net realizable value to cost of sales. In the three and nine months ended July 31, 2011, such charges to cost of sales amounted to $743 and $1,612, respectively, based on current estimates of net realizable value. Such estimates may change and additional charges may be incurred until the related inventory items are sold.

     Capitalized Software Development Costs and License Fees. Software development costs include fees in the form of milestone payments made to independent software developers and licensors. Software development costs are capitalized once technological feasibility of a product is established and management expects such costs to be recoverable against future revenues. For products where proven game engine technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a product-by-product basis. Amounts related to software development that are not capitalized are charged immediately to product research and development costs. Commencing upon a related product’s release capitalized software development costs and prepaid license fees are amortized to cost of sales based upon the higher of (i) the ratio of current revenue to total projected revenue or (ii) straight-line charges over the expected marketable life of the product.

     Prepaid license fees represent license fees to owners for the use of their intellectual property rights in the development of the Company’s products. Minimum guaranteed royalty payments for intellectual property licenses are initially recorded as an asset (prepaid license fees) and a current liability (accrued royalties payable) at the contractual amount upon execution of the contract or when specified milestones or events occur and when no significant performance remains with the licensor. Licenses are expensed to cost of sales at the higher of (i) the contractual royalty rate based on actual sales or (ii) an effective rate based upon total projected revenue related to such license. Capitalized software development costs are classified as non-current if they relate to titles for which the Company estimates the release date to be more than one year from the balance sheet date.

     The amortization period for capitalized software development costs and prepaid license fees is usually no longer than one year from the initial release of the product. If actual revenues or revised forecasted revenues fall below the initial forecasted revenue for a particular license, the charge to cost of sales may be larger than anticipated in any given quarter. The recoverability of capitalized software development costs and prepaid license fees is evaluated quarterly based on the expected performance of the specific products to which the costs relate. When, in management’s estimate, future cash flows will not be sufficient to recover previously capitalized costs, the Company expenses these capitalized costs to “cost of sales-software development costs and license fees — future release,” in the period such a determination is made. These expenses may be incurred prior to a game’s release for games that have been developed. If a game is cancelled prior to completion of development and never released to market, the amount is expensed to general and administrative expenses. If the Company was required to write off licenses, due to changes in market conditions or product acceptance, its results of operations could be materially adversely affected.

     Costs of developing online free-to-play social games, including payments to third-party developers are expensed as research and development expenses. Revenue from these games is largely dependent on players’ future purchasing behavior in the game and currently the Company cannot reliably project that future net cash flows from developed games will exceed related development costs.

     Prepaid license fees and milestone payments made to the Company’s third party developers are typically considered non-refundable advances against the total compensation they can earn based upon the sales performance of the products. Any additional royalty or other compensation earned beyond the milestone payments is expensed to cost of sales as incurred.

     Estimates. The preparation of 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 or the disclosure of gain or loss contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Among the more significant estimates included in these financial statements are price protection and customer allowances, the valuation of inventory and the recoverability of advance payments for software development costs and intellectual property licenses. Actual results could differ from those estimates.

     Income (Loss) Per Share. Basic income (loss) per share of common stock is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Basic income (loss) per share excludes the impact of unvested shares of restricted stock issued as long term incentive awards to directors, officers and employees. Diluted income per share reflects the potential impact of common stock options and unvested shares of restricted stock and outstanding common stock purchase warrants that have a dilutive effect under the treasury stock method.

     Reclassifications. For comparability, certain 2010 amounts have been reclassified, where appropriate, to conform to the financial statement presentation used in 2011.

     Commitments and Contingencies. The Company records a liability for commitments and contingencies when the amount is both probable and reasonably estimable.

     Concentrations. The Company develops and distributes video game software for proprietary platforms under licenses from Nintendo, Sony and Microsoft, which must be periodically renewed. The Company’s agreements with these manufacturers also grant them certain control over the supply and manufacturing of the Company’s products. In addition, in the three and nine months ended July 31, 2011, sales of the Company’s Zumba Fitness game accounted for approximately 80% and 70% of revenues, respectively. We license the rights to publish these games from a third party and have rights to publish other Zumba Fitness games. If the new versions are not successful, this may have a significant impact on our future revenues. In addition, if these arrangements are disrupted, the Company’s operations could be adversely affected. In the nine months ended July 31, 2010, the Company’s Cooking Mama games accounted for 50% of revenues.

     Recent Accounting Pronouncements

     Fair Value — In May 2011, the FASB issued an update to ASC 820-10, Measuring Liabilities at Fair Values. The update to ASC 820-10 clarifies the application of fair value standards in certain circumstances and requires additional disclosures about fair value measurements within Level 3, including sensitivity to changes in unobservable inputs. The update will become effective for the Company on November 1, 2012. The Company is currently evaluating the potential impact of the update on its financial position, results of operations, and cash flows.

     Comprehensive Income — In June 2011, the FASB issued an update to ASC 220, Comprehensive Incomes. The update to ASC 220 establishes standards for the reporting and presentation of comprehensive income. The update will become effective for the Company on November 1, 2012. The Company is currently evaluating the potential impact of the update on its financial position, results of operations, and cash flows.

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Income (Loss) Per Share

9 Months Ended

Jul. 31, 2011

Earnings Per Share [Abstract]

INCOME (LOSS) PER SHARE

11. INCOME (LOSS) PER SHARE

     The table below provides a reconciliation of basic and diluted average shares outstanding used in computing income (loss) per share, after applying the treasury stock method.

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2011		2010		2011		2010
Basic weighted average shares outstanding		38,803,090		36,934,987		38,165,521		36,838,981
Common stock options		557,178		—		368,012		303,668
Non-vested portion of restricted stock grants		1,432,762		—		958,477		—
Warrants		525,776		—		335,012		—
Diluted weighted average shares outstanding		41,318,806		36,934,987		39,827,022		37,142,649

     Options and warrants to acquire 386,970 and 545,732 shares of common stock were not included in the calculation of diluted earnings per common share for the three and nine months ended July 31, 2011, respectively, as the effect of their inclusion would be anti-dilutive. Options and warrants to acquire 3,725,399 and 3,725,399 shares of common stock were not included in the calculation of diluted earnings per common share for the three and nine months ended July 31, 2010, respectively, as the effect of their inclusion would be anti-dilutive.

     The table below provides total potential shares outstanding, including those that are anti-dilutive, at the end of each reporting period:

	July 31,		July 31,
	2011		2010
Shares issuable under common stock warrants		1,296,501		2,241,470
Shares issuable under stock options		1,306,081		1,483,929
Non-vested portion of restricted stock grants		2,097,469		1,673,327
		4,700,051		5,398,726

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Purchase of Assets

9 Months Ended

Jul. 31, 2011

Purchase of Assets [Abstract]

PURCHASE OF ASSETS

15. PURCHASE OF ASSETS

     On June 3, 2011, the Company acquired certain assets and assumed certain liabilities of Quick Hit, Inc. (“Quick Hit”), a developer and operator of online games. The aggregate purchase price paid was approximately $837 in cash. The Company also entered into an exclusive license agreement with a senior lender to Quick Hit for the source code to an online interactive football 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, $125 and $60 are due in September 2011, December 2011 and September 2012, respectively.

     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 were recorded at their estimated respective fair values and the excess of the purchase price over the fair value of the identifiable assets acquired and the liabilities assumed was recorded as Goodwill. 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. The acquisition was financed with available cash on hand. The Company made significant assumptions and estimates in determining the preliminary allocation of the purchase price, which 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.

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

	Valuation
Intangible assets	$	105
Property and equipment		434
Working Capital and other assets		225
Net identifiable assets		764
Goodwill		73
Net assets acquired	$	837

     In accordance with ASC 805, the following supplemental pro forma consolidated financial information is provided using historical data of Quick Hit, Inc. and of the Company, adjusted for the application of the acquisition method of accounting as if the acquisition had occurred on November 1, 2009 for the three and nine-month periods ended July 31, 2010 and on November 1, 2010 for the three and nine-month periods ended July 31, 2011.

     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, delayed its schedule of future releases and reduced its workforce 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 supplemental pro forma financial information is not intended to represent or be indicative of the Company’s consolidated results of operations 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 information also does not reflect any operating efficiencies and associated cost savings that the Company may achieve with respect to the combined companies.

	Three Months		Three Months Ended			Nine Months Ended		Nine Months Ended
	Ended July 31,		July 31,			July 31,		July 31,
	2011		2010			2011		2010
Net revenues	$	19,624	$	12,234		$	100,883	$	52,487
Net income (loss)	$	1,634	$	(3,403	)	$	7,731	$	(4,462	)
Basic net income (loss) per share	$	0.04	$	(0.09	)	$	0.20	$	(0.12	)
Diluted net income (loss) per share	$	0.04	$	(0.09	)	$	0.19	$	(0.12	)

     In both the three and nine-month periods ended July 31, 2011, net revenues and net losses related to the former Quick Hit operations amounted to approximately $77 and $540, respectively. In connection with the transaction, the Company hired 12 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 $524, which will be recognized as stock-based compensation expense as the shares vest at the rate of one-third of the shares granted every six months over the 18 month period following June 3, 2011.

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Condensed Consolidated Balance Sheets (USD $) In Thousands	Jul. 31, 2011	Oct. 31, 2010
Current assets:
Cash and cash equivalents	$ 19,674	$ 8,004
Due from factor	1,409	1,015
Accounts and other receivables, net	2,788	725
Inventory, net	4,607	8,418
Advance payments for inventory	566	5,454
Capitalized software development costs and license fees	9,417	4,903
Prepaid expenses and other current assets	896	921
Total current assets	39,357	29,440
Property and equipment, net	1,289	520
Other assets	232	69
Total assets	40,878	30,029
Current liabilities:
Accounts payable and accrued expenses	12,351	11,375
Inventory financing payables	0	5,557
Advances from customers and deferred revenue	622	945
Total current liabilities	12,973	17,877
Warrant liability	1,187	144
Commitments and contingencies
Stockholders' equity:
Common stock - $.001 par value; 250,000,000 shares authorized; 40,952,586 and 39,326,376 shares issued and outstanding at July 31, 2011 and October 31, 2010, respectively	41	39
Additional paid-in capital	118,811	114,824
Accumulated deficit	(91,607)	(102,333)
Accumulated other comprehensive loss	(527)	(522)
Net stockholders' equity	26,718	12,008
Total liabilities and stockholders' equity	$ 40,878	$ 30,029