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 January 31, 2005 Commission File No. 000-51128

Majesco Holdings Inc.

(Exact name of registrant as specified in its charter)

DELAWARE				606-1529524
(State or Other Jurisdiction of Incorporation or Organization)				(I.R.S. Employer Identification No.)

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

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (732) 225-8910

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            No    

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes            No    

As of March 15, 2005, there were 22,104,804 shares of the Registrant's common stock outstanding.

MAJESCO HOLDINGS INC. AND SUBSIDIARIES
JANUARY 31, 2005 QUARTERLY REPORT ON FORM 10-Q
INDEX

								Page
PART I – FINANCIAL INFORMATION
Item 1.				Financial Statements:
				Condensed Consolidated Balance Sheet as of January 31, 2005 (unaudited) and October 31, 2004					3
				Condensed Consolidated Statement of Operations for the three months ended January 31, 2005 and 2004 (unaudited)					4
				Condensed Consolidated Statement of Cash Flows for the three months ended January 31, 2005 and 2004 (unaudited)					5
				Condensed Consolidated Statement of Stockholders' Equity for the three months ended January 31, 2005 (unaudited)					6
				Notes to Condensed Consolidated Financial Statements (unaudited)					7
Item 2.				Management's Discussion and Analysis of Financial Condition and Results of Operations					14
Item 3.				Quantitative and Qualitative Disclosures about Market Risk					20
Item 4.				Controls and Procedures					21
PART II – OTHER INFORMATION
Item 1.				Legal Proceedings					21
Item 2.				Unregistered Sales of Equity Securities and Use of Proceeds					21
Item 3.				Defaults Upon Senior Securities					22
Item 4.				Submission of Matters to a Vote of Security Holders					22
Item 5.				Other Information					22
Item 6.				Exhibits					22
SIGNATURES									23
CERTIFICATIONS

MAJESCO HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands, except share amounts)

				January 31, 2005				October 31, 2004
				(unaudited)
ASSETS
Current assets
Cash and cash equivalents				$	54,548			$	4,170
Due from factor					9,061				9,491
Inventory					8,455				12,755
Capitalized software development costs and prepaid license fees - current portion					15,357				10,574
Prepaid expenses					2,143				831
Total current assets					89,564				37,821
Property and equipment - net					765				798
Capitalized software development costs and prepaid license fees					9,093				4,952
Other assets					536				381
Total assets				$	99,958			$	43,952
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses				$	22,667			$	19,985
Inventory financing payable					540				6,750
Advances from customers					2,043				2,171
Total current liabilities					25,250				28,906
Dividend payable in common stock					—				1,261
Commitments and contingencies
Stockholders' equity
Common stock - $.001 par value; 250,000,000 shares authorized; 22,104,804, and 15,403,704 issued and outstanding at January 31, 2005 and October 31, 2004, respectively					22				15
Additional paid in capital					90,503				29,194
Accumulated deficit					(15,788	)			(15,388	)
Accumulated other comprehensive loss					(29	)			(36	)
Total stockholders' equity					74,708				13,785
Total liabilities and stockholders' equity				$	99,958			$	43,952

See accompanying notes

3

MAJESCO HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except share amounts)

				Three Months Ended January 31,
				2005				2004
				(unaudited)
Net revenues				$	30,719			$	24,619
Cost of sales
Product costs					16,724				15,191
Software development costs and license fees					3,030				1,932
Total cost of sales					19,754				17,123
Gross profit					10,965				7,496
Operating expenses
Research and development					814				574
Selling and marketing					5,276				2,798
General and administrative					2,153				1,685
Non-cash compensation					465				—
Depreciation and amortization					287				90
Total operating expenses					8,995				5,147
Operating income					1,970				2,349
Other non-operating expenses
Interest expense and financing costs					734				635
Unrealized loss on foreign exchange contract					69				315
Merger costs					—				342
Income before income taxes					1,167				1,057
Provision for income taxes					467				—
Net income					700				1,057
Fair value charge for warrants exercised at discount					1,100				—
Net income (loss) attributable to common stockholders				$	(400	)		$	1,057
Net income (loss) attributable to common stockholders per share
Basic				$	(0.02	)		$	0.25
Diluted				$	(0.02	)		$	0.10
Weighted average shares outstanding
Basic					16,175,243				4,247,510
Diluted					16,175,243				10,162,339

See accompanying notes

4

MAJESCO HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)

				Three Months Ended January 31,
				2005				2004
				(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income				$	700			$	1,057
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization					287				90
Non-cash compensation expense					465				—
Changes in operating assets and liabilities
Decrease in due from factor					430				301
Decrease in inventory					4,300				9,159
(Increase) in capitalized software development costs and prepaid license fees					(9,049	)			(1,388	)
(Increase) in prepaid expenses					(1,313	)			(57	)
(Increase) decrease in other assets					(186	)			8
Increase in accounts payable and accrued expenses					1,447				2,667
(Decrease) in advances from customers					(128	)			(9,992	)
Net cash (used in) provided by operating activities					(3,047	)			1,845
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment					(97	)			(22	)
Net cash (used in) investing activities					(97	)			(22	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from secondary offering					41,925				—
Net proceeds from exercise of warrants at discount					6,482				—
Net proceeds from exercise of warrants					11,318
Inventory financing					(6,210	)			(2,399	)
Repayments of loans from stockholders					—				(87	)
Repayments to officer					—				(200	)
Convertible loan from related party					—				1,000
Net cash provided by (used in) investing activities					53,515				(1,686	)
Effect of exchange rates on cash and cash equivalents					7				(17	)
Net increase (decrease) in cash					50,378				120
Cash and cash equivalents - beginning of period					4,170				314
Cash and cash equivalents - end of period				$	54,548			$	434
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest				$	1,084			$	659
Cash paid during the period for income taxes				$	1,180			$	—
Fair value charge for warrants exercised at discount				$	1,100			$	—
Issuance of common stock in connection with 7% Preferred Stock dividend				$	1,261			$	—

See accompanying notes

5

MAJESCO HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)

				Common Stock – $0.001 per share								Additional Paid in Capital				Accum. Deficit				Accum. Other Comp. Loss				Total Stockholders' Equity
				Shares				Amount
Balance – October 31, 2004					15,403,704			$	15			$	29,194			$	(15,388	)		$	(36	)		$	13,785
Issuance of common stock in connection with:
– secondary offering (net of underwriing discounts, commissions and expenses of $4,102)					3,682,176				4				41,921				—				—				41,925
– exercise of warrants at $5.95 (net of expenses of $488)					1,171,418				1				6,481				—				—				6,482
– exercise of warrants at $7.00 (net of expenses of $1,062)					1,768,559				2				11,316				—				—				11,318
– 7% Preferred Stock					78,283				0				1,261				—				—				1,261
Settlement obligation related to predecessor company					664				—				(1,235	)			—				—				(1,235	)
Non-cash compensation charge					—				—				465				—				—				465
Fair value charge for warrants exercised at discounted strike price					—				—				1,100				(1,100	)			—				—
Net income					—				—				—				700				—				700
Foreign currency translation adjustment					—				—				—				—				7				7
Total comprehensive income																									707
Balance – January 31, 2005					22,104,804			$	22			$	90,503			$	(15,788	)		$	(29	)		$	74,708

See accompanying notes

6

MAJESCO HOLDINGS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.    PRINCIPAL BUSINESS ACTIVITY AND BASIS OF PRESENTATION

Majesco Holdings Inc. and subsidiaries ("Majesco" or "Company") is an innovative provider of diversified products and content for digital entertainment platforms. The Company's three main product lines include games, which includes titles such as Advent Rising, Psychonauts and Jaws; video, which highlights the Company's platform-independent compression technology; and gadgets, which includes innovative digital entertainment products like TV Arcade and Wireless Messenger for Game Boy Advance. The Company's diverse products provide it with multiple opportunities to capitalize on the large and growing installed base of digital entertainment platforms and an increasing number of digital entertainment enthusiasts. The Company sells its products directly and through resellers primarily to U.S. retail chains, including Best Buy, Electronics Boutique, GameStop, Kmart, Target, Toys "R" Us and Wal-Mart.

On December 5, 2003, the Company (formerly ConnectivCorp) consummated a merger (the "Merger") with Majesco Sales Inc. ("MSI"). Pursuant to the Merger, MSI became a wholly-owned subsidiary of the Company. The operations of the Company are conducted principally through MSI.

As a result of the Merger, the former stockholders of MSI were the controlling stockholders of the Company. Additionally, prior to the Merger, ConnectivCorp had no substantial assets. Accordingly, the transaction was treated for accounting purposes as a reverse acquisition of a public shell, and the transaction has been accounted for as a recapitalization of MSI, rather than a business combination. Therefore, the historical financial statements of MSI are the historical financial statements of the Company and historical stockholders' equity of MSI has been restated to reflect the recapitalization. Pro forma information has not been presented since the transaction is not a business combination.

Costs incurred by MSI, principally professional fees in connection with the Merger, amounting to $342,000, were charged to operations during the three month period ended January 31, 2004.

All amounts of common stock have been retroactively restated throughout these consolidated financial statements to give effect to the one-for-seven reverse stock split which was effectuated on December 31, 2004.

The accompanying interim 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 results of operations for interim periods are not necessarily indicative of results to be expected for the entire fiscal year or any other period. These interim consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes for the year ended October 31, 2004 filed on Form 10-K on January 31, 2005.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation.    The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition.    The Company recognizes revenue upon shipment of its product as title and risk of loss are transferred at such time. In order to recognize revenue, the Company must not have any continuing obligations and it must also be probable that the Company will collect the accounts receivable. Revenues, including sales to resellers and distributors, are recognized when these conditions are met.

For those agreements that provide customers with the right to multiple copies in exchange for guaranteed minimum royalty amounts, revenue is recognized at delivery of the product master or the

7

MAJESCO HOLDINGS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

first copy since the Company has no continuing obligations, including requirements for duplication. Royalties on sales that exceed the guaranteed minimum are recognized as earned.

The Company generally sells its products on a no-return basis, although in certain instances the Company may provide price protection or other allowances on certain unsold products. Price protection, when granted and applicable, allows customers a partial credit against amounts owed to the Company for merchandise unsold by them. Revenue is recognized 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 assets or services received, such as the appearance of the Company's products in a customer's national circular ad, are reflected as selling and marketing expenses.

Shipping and handling, which consist principally of packaging and transportation charges incurred to move finished goods to customers, amounted to $1.1 million and $372,000 and are included in selling expenses for the three months ended January 31, 2005 and 2004, respectively.

Software Development Costs and Prepaid License Fees.    Software development costs include milestone payments made to independent software developers. Software development costs are capitalized once technological feasibility of a product is established and such costs are determined 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 development costs. Prepaid license fee costs represent fees paid to intellectual property rights holders for use of their trademarks or copyrights 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 when no significant performance remains with the licensor. Capitalized software development costs classified as non-current relate to titles for which the Company estimates the release date to be more than one year from the balance sheet date.

Commencing upon the related product's release, capitalized software development costs and prepaid license fees are amortized to cost of sales based upon the higher of the ratio of current revenue to total projected revenue or on the straight line method. The amortization period is usually no longer than one year from the initial release of the product. The recoverability of capitalized software development costs and prepaid license fees is evaluated based on the expected performance of the specific products for which the costs relate. The following criteria are used to evaluate expected product performance: historical performance of comparable products using comparable technology; orders for the product prior to its release; and estimated performance of a sequel product based on the performance of the product on which the sequel is based.

Advertising Expenses.    The Company generally expenses advertising costs as incurred except for production costs associated with media campaigns which are deferred and charged to expense at the first run of the ad. Advertising costs charged to operations were $1.7 million and $1.0 million for the three months ended January 31, 2005 and 2004, respectively.

Income taxes.     The provision for income taxes for the three months ended January 31, 2005 is based on the Company's estimated annualized effective tax rates for the year. The estimated

8

MAJESCO HOLDINGS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

annualized effective tax rate for fiscal 2005 is 40%. No tax provision was recorded in the comparable 2004 period due to the utilization of tax loss carryforwards.

Stock Based Compensation.    The Company follows the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") and SFAS No. 148, "Accounting for Stock-Based Compensation, Transition and Disclosure" ("SFAS 148"). The provisions of SFAS 123 allow companies either to expense the estimated fair value of stock options or to continue to follow the intrinsic value method set forth in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and disclose the pro forma effects on net income (loss) had the fair value of the options been expensed. The Company has elected to apply APB 25 in accounting for its stock option incentive plans. The provisions of SFAS 148 require that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed prominently and in a tabular format. See the table below for the disclosures required by SFAS 123 and SFAS 148.

In accordance with APB 25 and related interpretations, compensation expense for stock options is recognized in income based on the excess, if any, of the quoted market price of the stock at the grant date of the award or other measurement date over the amount an employee must pay to acquire the stock. Generally, the exercise price for stock options granted to the Company's employees equals or exceeds the fair market value of the Company's common stock at the date of grant, thereby resulting in no recognition of compensation expense. For awards that generate compensation expense as defined under APB 25, the Company calculates the amount of compensation expense and recognizes the expense over the vesting period of the award.

Had compensation cost for the Company's stock option plan adopted in March 2004 been determined based on the fair value method set forth in SFAS 123, the Company's net loss and per share amounts for the three months ended January 31, 2005 would approximate the pro forma amounts indicated below:

				(in thousands, except per share amounts)
Net income – as reported				$	700
Less: Intrinsic value of stock based compensation included in net loss as reported, net of related tax effect					279
Add: Stock based employee compensation determined under fair value based method net of income tax effect					(534	)
Net income – pro forma				$	445
Net loss attributable to common stockholders per share:
Basic and diluted-as reported				$	(.02	)
Basic and diluted-pro forma				$	(.04	)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk free interest rate (annual)				Various rates ranging from 2.71% to 3.83% at date of grant
Expected volatility				30% and 50%
Expected life				5 years
Assumed dividends				None

Cash and cash equivalents.    Cash equivalents consist of highly liquid investments with insignificant rate risk and with maturities of three months or less at the date of purchase.

9

MAJESCO HOLDINGS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

At various times, the Company had deposits in excess of the Federal Deposit Insurance Corporation limit. The Company has not experienced any losses on these accounts.

Inventory.    Inventory, which principally consists 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.

Property and equipment.    Property and equipment is stated at cost. Depreciation and amortization is being provided for by the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is provided for over the shorter of the term of the lease or the life of the asset.

Estimates.    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 period. Among the more significant estimates included in these financial statements are the estimated 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.

Foreign Currency Translation.    The functional currency of the Company's foreign subsidiary is its local currency. All assets and liabilities of the Company's foreign subsidiary are translated into U.S. dollars at the exchange rate in effect at the end of the year, and revenue and operating expenses are translated at weighted average exchange rates during the year. The resulting translation adjustments are included in other comprehensive loss in the statement of stockholders' equity (deficiency).

Earnings (loss) per share.    For the three months ended January 31, 2005, net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted loss per common share has not been presented for the three months ended January 31, 2005 because the impact of the conversion or exercise, as applicable, of the warrants (1,035,736); stock options (1,689,748); placement agent warrants (622,858) and lock-up warrants (526,377), would be antidilutive. For the three months ended January 31, 2004 basic earnings per share is computed by dividing net income applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share for the same period is computed by dividing net income applicable to common stock-holders by the weighted-average number of common stock and common stock equivalents (Series A Preferred Stock – 9,382,142 equivelent shares) outstanding for the period.

Recent accounting pronouncements.    In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS 123(R)"). SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. SFAS 123(R) is effective for the Company beginning in the third quarter of this fiscal year. The new standard allows for two transition alternatives, either the modified-prospective method or the modified-retrospective method. The Company has not completed its evaluation of SFAS 123(R) and therefore has not selected a transition method or determined the impact that adopting SFAS 123(R) will have on its results of operations.

The Company does not believe that any other recently issued but not yet effective accounting standards will have a material effect on the Company's financial position or results of operations.

3.    SECONDARY OFFERING AND RELATED WARRANT EXERCISE

On January 31, 2005, the Company completed a $75 million secondary offering, resulting in approximately $41.9 million in net proceeds to the Company through the sale of 3,682,176 shares of

10

MAJESCO HOLDINGS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

common stock. In addition, certain existing stockholders sold an aggregate of 2,317,824 shares in the offering for which the Company did not receive the proceeds. However, the Company received approximately $11.3 million of net proceeds from the exercise of 1,768,559 warrants by the selling stockholders at an exercise price of $7 per share, which were previously issued in the Company's February 2004 private placement. The Company currently intends to use the proceeds of these transactions to fund the growth of its business and for general corporate purposes, including working capital. Proceeds may also be used to acquire products, technologies, content or businesses that are complementary to the Company's business. The Company has no current plans, agreements or commitments for acquisitions of any businesses, rights to products or technologies. Simultaneous to the completion of the secondary offering, the Company's common stock began trading on the NASDAQ National Market System.

In December 2004, the Company offered certain holders who were eligible, in accordance with rules promulgated by the Securites and Exchange Commission, the right to exercise warrants to purchase 1,171,418 shares of common stock at a reduced exercise price of $5.95 per share. The warrants were initially issued in the February 2004 private placement and exercisable at $7.00 per share. The Company received proceeds from the exercise of $6.5 million. As a result of this transaction, the Company recorded a non-cash charge to "Additional Paid in Capital" of $1.1 million to recognize the exercise of warrants at a reduced exercise price. This charge is also reflected in net loss attributable to common stockholders in the calculation of earnings (loss) per share.

Upon completion of the secondary offering, any warrants issued in our February 2004 private placement that have not been previously exercised are eligible to be called by the Company at a price of $0.007 subject to any contractual restrictions. To avoid their warrants being called, holders may exercise the warrants, which would at this time result in net proceeds to the Company of approximately $6.7 million.

4.    DUE FROM FACTOR

Due from factor consists of the following (in thousands):

				January 31, 2005				October 31, 2004
Outstanding accounts receivable sold to factor, net of allowances of $3,323 and $4,860, respectively				$	18,392			$	31,794
Less: advances from factor					9,331				22,303
				$	9,061			$	9,491

The following table sets forth the adjustments to the price protection and other customer sales incentive allowances included as a reduction of the amounts due from factor:

				Three Months Ended January 31, (in thousands)
				2005				2004
Balance — beginning of period				$	(4,860	)		$	(2,173	)
Add: provision					(1,364	)			(1,297	)
Less: amounts charged against allowance					2,911				1,508
Balance — end of period				$	(3,323	)		$	(1,962	)

11

MAJESCO HOLDINGS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

5.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consists of the following (in thousands):

				January 31, 2005				October 31, 2004
Accounts payable-trade				$	10,946			$	9,373
Royalties					5,704				5,777
Income taxes					810				1,271
Sales commissions					1,547				1,255
Salaries and other compensation					586				1,154
Litigation settlements					1,708				778
Other accruals					1,366				377
				$	22,667			$	19,985

6.    CONTINGENCIES AND COMMITMENTS

Commitments

The Company may utilize forward contracts in order to reduce financial market risks. These instruments are used to hedge foreign currency exposures of underlying assets, liabilities, or certain forecasted foreign currency denominated transactions. The Company does not use forward exchange contracts for speculative or trading purposes. The Company's accounting policies for these instruments are based on whether they meet the criteria for designation as hedging transactions. These contracts do not meet the criteria for hedge accounting and are recorded at fair value with unrealized gains (losses) included in net income (loss). The fair value of foreign currency contracts is estimated based on the spot rate of the hedged currency as of the end of the period. As of January 31, 2005, the contractual amount outstanding was $2.8 million, which required the Company to record an unrealized loss of $69,000 during the three months ended January 31, 2005 which is included in accounts payable and accrued expenses. The risk of counter party nonperformance associated with this contract was not considered to be material. Notwithstanding the Company's efforts to manage foreign exchange risk, there can be no assurance that the Company's hedging activities will adequately protect against the risks associated with foreign currency fluctuations.

At January 31, 2005, the Company was committed under agreements with certain developers for future milestone and license fee payments aggregating $30.8 million and $593,000, respectively, which are payable through October 31, 2006. Milestone payments represent scheduled installments due to the Company's developers based upon the developers providing the Company certain deliverables, as predetermined in the Company's contracts. In addition, the Company may have to pay royalties for products sold. These payments will be used to reduce future royalties due to the developers from sales of the Company's products.

At January 31, 2005, the Company had open letters of credit aggregating $7.2 million under the Company's purchase order assignment arrangements for inventory to be delivered during the subsequent quarter.

The Company has entered into "at will" employment agreements with several key executives. These employment agreements include provisions for, among other things, annual compensation, bonus arrangements and stock option grants. These agreements also contain provisions related to severance terms and change of control provisions.

Contingencies

On September 20, 2002, Rage Games Limited filed a complaint against the Company based on claims of breach of contract and other claims and sought $6 million in damages. On December 28,

12

MAJESCO HOLDINGS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

2004, the parties entered into a settlement agreement, and, in February 2005, the Company paid $650,000 in accordance with the agreement for a full and complete settlement of the litigation, including all claims and counterclaims.

On December 17, 2003, the Company received a letter from the NASD's Market Regulation Department stating that the NASD was conducting a review of unusual trading activity in the Company's common stock between the time of the signing of the letter of intent with respect to the Merger and the date that the Company announced that a letter of intent was signed. There also appeared to have been unusual trading activity around the time of the signing of the definitive agreement for the Merger and prior to the announcement of such signing.

By letter dated April 22, 2004, the NASD indicated that it had concluded its review and thanked the Company for its cooperation in the review. The letter indicated that the NASD referred the matter to the Securities and Exchange Commission ("SEC") for action, if any, the SEC deems appropriate. The letter concluded that "This referral should not be construed as indicating that any violations of the federal securities laws or the NASD Conduct Rules have occurred, or as a reflection upon the merits of the security involved or upon any person who effected transactions in such security." If the Company is sanctioned or otherwise held liable for this trading any such sanctions could have a material adverse effect on the Company's reputation, listing, financial condition, results of operations and liquidity. In addition, it is possible that such matters may give rise to civil or criminal actions.

On September 1, 2004, Entertainment Finance International, LLC ("EFI") commenced a breach of contract action relating to an outstanding warrant held by EFI. EFI alleged that pursuant to the terms of the warrant, the Company was obligated to pay $1,750,000 for the repurchase of the shares underlying the warrant. In July 2004, the Company issued 21,018 shares of Majesco stock pursuant to the exercise of the warrant. Pursuant to a settlement agreement dated January 10, 2005, the Company paid $250,000 to EFI, and, in February 2005, paid an additional $985,000 from the proceeds raised in the secondary offering. The settlement is reflected as an adjustment to "Additional paid in capital", since the alleged obligation existed prior to the Merger. The unpaid amount as of January 31, 2005 is included in accounts payable and accrued expenses in the accompanying consolidated balance sheet.

The Company is party to other routine claims and suits brought by the Company and against the Company in the ordinary course of business, including disputes arising over contractual claims and collection matters. In the opinion of management, after consultation with legal counsel, the outcome of such routine claims will not have a material adverse effect on the Company's business, financial condition, and results of operations or liquidity. However, the costs and other effects of pending or future litigation, governmental investigations, legal and administrative cases and proceedings (whether civil or criminal), settlements, judgments and investigations, claims and changes in those matters (including those matters described above), and developments or assertions by or against the Company relating to intellectual property rights and intellectual property licenses, could have a material adverse effect on the Company's business, financial condition, and results of operations or liquidity.

7.    RELATED PARTIES

The Company receives printing and packaging services from a business of which the brother of Morris Sutton, the Company's Chairman Emeritus, is a principal. During the three months ended January 31, 2005 and 2004, the Company was charged $1.2 million and $524,000, respectively, which is included in product costs in the accompanying consolidated statement of operations. Such charges are, to the Company's knowledge, on terms no less favorable to what the Company could receive from providers of similar services. At January 31, 2005, there was $599,000 due under these arrangements, which is included in accounts payable and accrued expenses in the accompanying consolidated balance sheet.

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

Overview

We are an innovative provider of diversified offerings for digital entertainment platforms. Our offerings include games, which includes titles such as Advent Rising, Psychonaut, and Jaws; video, which highlights the Company's platform-independent compression technology; and gadgets, which includes innovative digital entertainment products like TV Arcade and Wireless Messenger for Game Boy Advance. Our diverse products provide us with multiple opportunities to capitalize on the large and growing installed base of digital entertainment platforms and an increasing number of digital entertainment enthusiasts. We sell our products directly and through resellers primarily to U.S. retail chains, including Best Buy, Electronics Boutique, GameStop, Kmart, Target, Toys "R" Us and Wal-Mart.

On December 5, 2003, Majesco Sales Inc., a privately held company with an 18-year operating history, completed a reverse merger with ConnectivCorp, then a publicly traded company with no active operations. As a result of the merger, Majesco Sales Inc. became a wholly-owned subsidiary of the public company and its sole operating business. All financial information presented reflects the results of Majesco Sales Inc. as if Majesco Sales Inc. had acquired ConnectivCorp on December 5, 2003. Subsequently, we changed the public company's name from ConnectivCorp to Majesco Holdings Inc.

The primary components of our consolidated statement of operations include the following:

Net Revenues.    Our revenues are derived from three general types of offerings:

	•	Games.    Our video games consist of "premium" titles and "value" titles. Premium-priced video games typically involve higher development and marketing costs. We work with leading development studios to develop our own proprietary titles and we also license rights to well-known properties from third parties. Value titles are typically sold at retail prices below $20 and typically involve lower development and marketing costs than our premium titles;

	•	Videos.    Our GBA Video titles utilize our proprietary compression technology that enables users to view up to 45 minutes of color video content with stereo audio on their GBA, using a standard GBA cartridge and with no additional hardware required. We enter into licensing agreements with entertainment industry leaders for GBA Video content; and

	•	Gadgets.    We develop, manufacture and market a variety of digital media peripherals and applications, or gadgets. Our peripheral products and applications for the GBA include headphones, "wireless link" and "wireless messenger." Our stand-alone TV Arcade "plug-and-play" video game systems consist of a firmware-enabled joystick that connects directly to a user's television and plays pre-installed video games without the need for a dedicated console.

Historically, most of our revenues were derived from being a leading distributor of value video game titles. Although sales of value titles will continue to constitute a significant portion of our revenues, we are diversifying our sources of revenue and have introduced or expanded our other offerings. For instance, during fiscal 2004 we launched additional premium-priced titles, our GBA video titles and our gadgets. We expect value products to decrease as a percentage of our revenues as we generate significantly more revenues from these additional product areas. The continued diversification of our revenue sources and our revenue growth are dependent upon our ability to provide a wide variety of appealing products at different price points aimed at different demographics. Our revenues are recognized net of reserves for price protection and other allowances. See "Critical Accounting Policies" below.

Cost of Sales.    Cost of sales consists of product costs and amortization of software development costs and license fees. A significant component of our cost of sales is product costs. These 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 digital media peripherals and

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applications. Commencing upon the related product's release, capitalized software development and intellectual property license costs are amortized to cost of sales.

Gross Profit.    Our gross profit is directly affected by the mix of revenues from our products. Gross profit margins have the potential to be substantially higher from publishing our premium-priced titles given the higher sales prices. If a frontline title is a highly successful "hit" and manufacturing and licensing costs are recouped, economies of scale occur as the incremental sales of a premium-priced game produce greater profitability. Our value titles are generally characterized as having lower gross profit margin potential than premium-priced titles as a result of their lower sales price. Gross profit margins from our GBA products generally are the lowest of our products given the high manufacturing and licensing costs associated with these products, particularly GBA video titles. Although we have only recently launched our gadgets, our experience to date has been that gross margins for these products are higher than achieved for our value video games and GBA video titles. We believe our overall gross profit and gross profit margins will increase as we increase our sales of premium-priced video games and gadgets.

Product Research and Development Expenses.    Product research and development expenses relate principally to our cost of supervision of the third-party developers of our new video games and the technologies related to GBA video and gadgets, testing new products and conducting quality evaluations during the development cycle. Costs incurred are employee related, may include equipment and are not allocated to cost of sales. With the expansion of our product offerings, our expenditures for product research and development are expected to increase.

Selling and Marketing Expenses.    Selling and marketing expenses consist of marketing and promotion expenses, the cost of shipping products to customers and related employee costs. The largest component of this expense relates to marketing and promotion expenses, which includes certain customer marketing allowances. Marketing and promotion expenses associated with frontline titles are significantly higher than with respect to our other offerings. As we increase the number of our premium-priced titles and seek to increase awareness of our video content and gadgets, our marketing and promotion expenses will rise accordingly.

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. We expect that our personnel costs, the largest component of our general and admistrative expenses, will increase as our business continues to grow. 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 SEC filings. We expect to incur increased costs for personnel and consultants in connection with our required compliance as a public company with new regulations regarding corporate governance and accounting.

Interest and Financing Costs.    Interest and financing costs are directly attributable to our factoring and our purchase-order financing arrangements. We expect that as a result of our recently completed secondary offering, we will be able to lessen both our need to take advances from the factor as well as to use the finance company for letters of credit, and therefore we expect our interest and financing costs to decrease, at least on a temporary basis.

Warrant Accounting and Other Non-Cash Compensation.    During December 2004, a portion of the warrants issued in connection with our February 2004 private placement were exercised at a reduced exercise price. Accordingly, we recorded a non-cash charge of $1.1 million to recognize the exercise of these warrants at a reduced price during the three months ended January 31, 2005. This charge reduced net income attributable to common stockholders in the calculation of earnings per share.

We granted options to purchase 992,856 shares of common stock to Carl Yankowski in connection with his employment as our Chief Executive Officer in August 2004. A portion of the option grant, 297,857 shares, was at an exercise price of $7.00 per share, a 64% discount to the market price of our common stock on the date of grant (the balance of the options were granted at or above the then

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market price). As a result of this issuance, we incurred non-cash compensation expense of $465,000 for the three months ended January 31, 2005 and will additionally charge operations $465,000 for each of the succeeding six quarters.

Provision for Income Taxes.    Effective November 1, 2003, we revoked our election to be treated as an S Corporation and we are therefore subject to federal income taxes. We estimate that our effective tax rate will be approximately 40% in fiscal year 2005.

Critical Accounting Policies

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. 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 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 where such policies affect our reported and expected financial results.

Reserves for Price Protection and Other Allowances.    We derive revenue from the sale of packaged video game software designed for play on consoles such as PlayStation 2, Xbox and GameCube, and hand-held game devices, principally the GBA. We generally sell our products on a no-return basis, although in certain instances, we may 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 assets or services received, such as the appearance of our products in a customer's national circular advertisement, are reflected as selling and marketing expenses. We estimate potential future product price protection and other discounts related to current period product revenue. Generally our price protection for premium-priced titles is higher than that needed for our value titles. Our reserves 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 video game market, the overall economy, changes in customer demand and acceptance of our products and other related factors. 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 or 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 three months ended January 31, 2005 and 2004, we provided allowances for future price protection and other allowances of $1.4 million and $1.3 million,, respectively. The fluctuations in the provisions reflected our estimates of future price protection based on the factors discussed above. We do not have significant exposure to credit risk as the factor generally buys our receivables without recourse; however, during the three months ended January 31, 2004, we recorded a charge for an accounts receivable write-off of $577,000 as a result of the January 2004 bankruptcy filing of Kay-Bee Toys, because sales to this customer were not factored.

Software development costs and prepaid license fees.    Software development costs include milestone payments made to independent software developers under development arrangements.

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Software development costs are capitalized once technological feasibility of a product is established and it is determined that such costs should 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. Prepaid license fees represent license fees paid to intellectual property rights holders for use of their trademarks or copyrights in the development of our 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 when no significant performance remains with the licensor. Capitalized software development costs classified as non-current relate to titles for which we estimate the release date to be more than one year from the balance sheet date.

Commencing upon the related product's release, capitalized software development 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) the straight-line method. The amortization period is usually no longer than one year from the initial release of the product. The recoverability of capitalized software development costs and prepaid license fees is evaluated based on the expected performance of the specific products for which the costs relate. The following criteria are used to evaluate expected product performance: historical performance of comparable products using comparable technology; orders for the product prior to its release; and estimated performance of a sequel product based on the performance of the product on which the sequel is based.

Accounting for Stock-Based Compensation.    In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS 123(R)"). SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. SFAS 123(R) is effective for us beginning in the third quarter of this fiscal year. The new standard allows for two transition alternatives, either the modified-prospective method or the modified-retrospective method. We have not completed our evaluation of SFAS 123(R) and therefore have not selected a transition method or determined the impact that adopting SFAS 123(R) will have on our results of operations.

Results of Operations

Three months ended January 31, 2005 versus three months ended January 31, 2004

Net Revenues.    Net revenues for the three months ended January 31, 2005 increased to $30.7 million from $24.6 million in the comparable quarter last year. The net increase is principly attributable to sales of GBA video and gadget products, products which were not launched until the third and fourth quarters, respectively, of last year, partially offset by a decline in game sales. There were no new premium-price games launched in the three months ended January 31, 2005 compared to three in the prior year period. In the three months ended January 31, 2005 the sales mix attributable to games, video and gadgets was 45%, 20% and 35%, respectively, compared to the same period last year when games represented 100% of net revenues.

Gross Profit.    Gross profit for the three months ended January 31, 2005 increased to $11.0 million from $7.5 million in the first quarter last year and the gross profit margin increased to 35.7% from 30.4% in the prior year period. This improvement is primarily attributable to sales of gadgets, which operate at significantly higher margins than games and video.

Product Research and Development Expenses.    For the three months ended January 31, 2005, product research and development costs increased to $814,000 from $574,000 in the comparable 2004 period. The increase is mostly attributable to employee related costs which include the hiring of additional quality control personnel necessary to support the increased number of projects in the development cycle.

Selling and Marketing Expenses.    In the three months ended January 31, 2005, selling and marketing expenses increased 88.6% to $5.3 million from $2.8 million in the same three month period

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in 2004, an increase of $2.5 million. Approximately $1.7 million of the increase is the result of promotions, including higher in-store programs incurred over the holiday season in support of our products and television campaigns to promote BloodRayne2 and GBA video. Variable costs, principally freight and warehousing, increased approximately $731,000 in the current year period due to the increased unit volume in the current period as well as the additional costs incurred in the delivery of games, videos and gadgets imported from Japan and China.

General and Administrative Expenses.    For the three month period ended January 31, 2005, general and administrative expenses increased approximately $468,000, or 27.8%, to $2.2 million from $1.7 million in the comparable 2004 period. As expected, we had increased costs as a result of becoming a NASDAQ-listed company, and in building our infrastructure to support current and future growth. The increase in general and administrative expenses was attributable to increased staffing costs of $568,000, and $577,000 of increased expenses related to being a publicly-held company. These increases were offset by the absence of a bad debt expense of approximately $577,000 related to the Kay-Bee Toys bankruptcy incurred in the three month period ended January 31, 2004.

Non-Cash Compensation Charge.    In the three months ended January 31, 2005 we recorded a non-cash compensation charge of $465,000 related to a below market stock option grant to our Chief Executive Officer in connection with his employment agreement. There was no comparable charge in the same period last year.

Depreciation and Amortization Expenses.    For the three months ended January 31, 2005, depreciation and amortization expense was $287,000 compared to $90,000 in the comparable 2004 period. Depreciation and amortization expense increased due to additional equipment acquired and as a result the amortization of a non-compete agreement and tooling costs.

Operating Income.    For the three month period ended January 31, 2005, operating income decreased approximately $300,000 to $2.0 million from $2.3 million in 2004. The decrease in operating income was due to the planned increases in our infrastructure to support current and future growth as well as increased costs related to becoming a NASDAQ-listed company. Although there can be no assurance, we anticipate that these higher levels of expenditures will be offset by the higher gross margin in the latter part of the year, during the seasonal peak sales periods.

Interest and Financing Costs.    For the three months ended January 31, 2005, interest and financing costs increased approximately $100,000 to $734,000 from $635,000 in 2004. This increase is due primarily to higher sales volumes, which are subject to purchase order financing, as well as incremental factoring costs.

Other Non-Operating Expenses.    In the three months ended January 31, 2005, we recorded a charge of $69,000 related to a foreign exchange contract. For the three months ended January 31, 2004, a comparable charge of $315,000 was recorded.

Income Taxes.    A provision for federal and state income taxes has been provided for at a combined effective rate of 40%. As a result of the benefit of certain losses carried forward from the period during which the company was treated as an S corporation, no tax provision was recorded in the comparable 2004 period.

Net Income.    For the three month period ended January 31, 2005, we generated net income of $700,000 compared to a net income of $1.1 million in 2004. The net loss attributable to common stockholders of $400,000 for the 2005 period reflects net income of $700,000 less the $1.1 million charge related to an incentive granted to certain holders for the exercise of warrants.

Liquidity and Capital Resources

Historically, we have met our capital needs through our factoring and purchase order financing arrangements, loans from related persons and advances from customers. In addition, as a result of a series of transactions during our fiscal year 2004 and during the quarter ended January 31, 2005, primarily our February 2004 private placment and our recently completed secondary public offering, in which we sold equity securities, including issuances upon the exercise of warrants, we received

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aggregate net proceeds of approximately $81 million over the last twelve months. We have used a portion of these proceeds to reduce indebtedness, to satisfy certain settlements in connection with litigation, and to fund the growth of our business, as well as for general corporate purposes, including working capital.

While our cash and cash equivalents balance was $54.5 million at January 31, 2005, we expect continued volatility 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 and growth objectives. Although there can be no assurance, management believes that there will be sufficient capital resources from our operations and financing arrangements in order to meet our requirements for development, production, marketing, purchases of equipment, and the acquisiiton of intellectual property rights for future products for the next twelve months.

If unforeseen events occur that require us to locate additional funding, we may be required to issue additional equity or undertake debt financing and/or loans from financial institutions. However, there can be no assurance that these funds will be available to us on acceptable terms, if at all. Failure to obtain such financing or obtaining it on terms not favorable to us could have a material adverse effect on future operating prospects and continued growth. Management believes it can operate under a curtailed operating plan if suitable financing is not available.

Factoring and Purchase Order Financing.    We do not have any bank debt. To satisfy our liquidity needs, we factor our receivables. We also utilize purchase order financing through the factor and through a finance company to provide funding for the manufacture of our products. In connection with these arrangements, the finance company and the factor have a security interest in substantially all of our assets. In addition, certain of our officers provide personal guarantees in connection with these arrangements.

Under the terms of our factoring agreement, we assign our accounts receivable to the factor. The factor, in its sole discretion, determines whether or not it will accept a receivable based on its assessment of its credit risk. Once a receivable is accepted by the factor, the factor assumes substantially all of the credit risk associated with the receivable. The factor is required to remit payments to us for the assigned accounts receivable in accordance with the terms of the assigned invoice, regardless of whether the factor receives payment on the receivable, so long as 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. The factor charges 0.5% of invoiced amounts for these credit and collection services.

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 in its discretion. Amounts to be paid to us by the factor for any assigned receivable are offset by any amounts previously advanced by the factor. As our needs require, we may request that the factor advance 80% of the eligible receivables and advance 50% of inventory, up to a maximum of $1 million. Total advances under the factor arrangement, including letters of credit for purchase order financing is limited to $30 million in the aggregate. The interest rate for advances taken is prime plus 1%.

We utilize purchase order financing arrangements in order to enable us to provide letters of credit necessary for the manufacture of our products. Manufacturers require us to present a letter of credit in order to manufacture the products required under a purchase order. Currently, we utilize letters of credit from a finance company which charges 3.3% of the purchase order amount for each transaction for 60 days. Our factor also 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 under both arrangements if letters of credit remain outstanding in excess of the original time period.

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.

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Commitments and Contingencies.    At January 31, 2005, we are committed under agreements with certain developers and content providers for milestone and license fee payments aggregating $31.4 million payable through October 31, 2006.

We do not currently have any material commitments with respect to any capital expenditures.

At January 31, 2005, we had open letters of credit aggregating $7.2 million under our purchase order assignment arrangement for inventory to be delivered during the subsequent quarter.

As of January 31, 2005 we had entered into "at will" employment agreements with several key executives. These employment agreements include provisions for, among other things, annual compensation, bonus arrangements and stock option grants. These agreements also contain provisions related to severance terms and change of control provisions.

As of January 31, 2005 we were committed under operating leases for office space and equipment for approximately $1.9 million through July 2009.

As of January 31, 2005, we had an outstanding foreign currency forward exchange contract to exchange 2.4 million euros into $2.8 million which expires March 31, 2005 and, accordingly, recorded as a liability (in accounts payable and accrued expenses) an unrealized loss of $360,000.

We are party to other routine claims and suits brought by us and against us in the ordinary course of business, including disputes arising over contractual claims and collection matters. In the opinion of management, after consultation with legal counsel, the outcome of such routine claims will not have a material adverse effect on our business, financial condition, and results of operations or liquidity. In addition, the costs and other effects of pending or future litigation, governmental investigations, legal and administrative cases and proceedings (whether civil or criminal), settlements, judgments and investigations, claims and changes in those matters (including those matters described above), and developments or assertions by or against the Company relating to intellectual property rights and intellectual property licenses, could have a material adverse effect on the Company's business, financial condition, and results of operations or liquidity.

Cash Flows

Cash and cash equivalents were $54.5 million at January 31, 2005 compared to $4.2 million at October 31, 2004.

Operating Cash Flows.    For the three months ended January 31, 2005, we used cash of $3.0 million in operating activities. The principal operating use of cash was expenditures of $9.0 million for capitalized software development costs and prepaid license fees related to new games, videos and gadgets in development for sale in 2005 and later periods and $1.3 million of other prepayments. Operating sources of cash included a decrease in inventory build-up from year end of $4.3 milion, an increase in accounts payable and accrued expenses of $1.4 million and net income of $700,000 generated during the period, adjusted for non-cash charges of $750,000 related to depreciation, amortization and officer compensation.

Investing Cash Flows.    Cash used in investing activities for the three months ended January 31, 2005 consists primarily of purchases of upgraded computer equipment and leasehold improvements necessary to accommodate our infrastructure growth.

Financing Cash Flows.    Net cash generated from financing activities for the three month
period ended January 31, 2005 was $53.5 million and consisted of (i) net proceeds of $6.5 million
from the exercise of warrants at a discount; (ii) net proceeds from the exercise of stockholder and placement agent warrants, issued in the February 2004 private placement of $11.3 million and (iii) net proceeds of $41.9 million from the sale of stock in a secondary public offering, partially offset by
(iv) repayments of $6.2 million of inventory financing.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

We are exposed to various market risks, including the changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from changes in market rates and prices.

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Foreign exchange contracts used to hedge foreign currency exposure are subject to market risk. We do not enter into derivatives or other financial instruments for trading or speculative purposes. As of January 31, 2005, we had an outstanding foreign currency forward exchange contract to exchange 2.4 million euros into $2.8 million which expires March 31, 2005 and, accordingly, recorded as a liability (in accounts payable and accrued expenses) the unrealized loss of $360,000.

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.    As of January 31, 2005, with the participation of our management, the Chief Executive Officer and Chief Financial Officer of the Company evaluated our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-15(c) and 15d-1.5(e)). 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. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of January 31, 2005, our disclosure controls and procedures were effective, in that they provide reasonable assurance that information required to he disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that management is timely alerted to material information relating to the company during the period when our periodic reports are being prepared .

As a closely-held company with no public reporting obligations prior to our merger with ConnectivCorp in December 2003, we had previously committed limited personnel and resources to the development of our internal financial controls and systems. In addition, as of October 31, 2005, we will become subject to the heightened internal control and procedure requirements of Section 404 of the Sarbanes-Oxley Act. Therefore, management has intensified its review and documentation of our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and is focused on a number of areas that we would like to improve, including the segregation of duties in key functions; the creation of formal accounting controls, policies and procedures; the hiring of additional management and staff experienced in financial reporting; and finalizing documentation of our accounting and disclosure internal controls and procedures. Further, management continues to look for methods to ensure that our systems evolve with our business and to improve our overall system of control. In order to aid management in these efforts, we have recently retained consultants to assist in the assessment of our internal accounting and disclosure controls and to make recommendations for timely corrective actions.

Changes in Internal Controls.    No change in our internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the fiscal quarter ended January 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

On December 28, 2004, we entered into a settlement agreement relating to our previously reported litigation with Rage Games Limited. Pursuant to the agreement, on February 15, 2005, we paid $650,000 for a full and complete settlement of all litigation between the parties.

On January 10, 2005, we entered into a settlement agreement relating to our previously reported litigation with Entertainment Finance International, pursuant to which, on January 12, 2005, we paid to EFI $250,000, and thereafter, on February 3, 2005, as a result of the closing of our secondary public offering, an additional $985,000, resulting in a full and complete settlement of all litigation between the parties.

We are party to other routine claims and suits brought by us and against us in the ordinary course of business, including disputes arising over contractual claims and collection matters. In the opinion

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of management, after consultation with legal counsel, the outcome of such routine claims will not have a material adverse effect on our business, financial condition, and results of operations or liquidity. In addition, the costs and other effects of pending or future litigation, governmental investigations, legal and administrative cases and proceedings (whether civil or criminal), settlements, judgments and investigations, claims and changes in those matters (including those matters described above), and developments or assertions by or against us relating to intellectual property rights and intellectual property licenses, could have a material adverse effect on our business, financial condition, and results of operations or liquidity.

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

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Submission of Matters to a Vote of Security Holders

None.

Item 5.    Other Information

None.

Item 6.    Exhibits

	10.1			Employment Agreement, dated February 2, 2005, by and between Majesco Holdings Inc., Majesco Sales Inc. and Lester E. Greenman.
	31.1			Certification of Carl Yankowski pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2			Certification of Jan E. Chason pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1			Certification of Carl Yankowski pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2			Certification of Jan E. Chason pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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 HOLDINGS INC.

/s/ Jan E. Chason
Jan E. Chason
Chief Financial Officer
Date: March 17, 2005

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EX-10.1

LESTER E. GREENMAN EMPLOYMENT AGREEMENT

This Agreement is entered into as of February 2, 2005 (the "Effective Date") by and between Majesco Sales Inc. ("Majesco"), a New Jersey corporation, Majesco Holdings Inc., a Delaware corporation, ("Holdings") (Majesco and Holdings collectively referred to herein as the "Company"), on the one hand and Lester E. Greenman ("Executive"), on the other hand.

I.    Duties and Scope of Employment.

(a)    Positions and Duties.    During the Employment Term (as defined below), Executive will serve as Executive Vice President Chief Legal Officer General Manager of Video S.B.U. ("EVP") of each of Majesco and Holdings and will report directly to the Company's Chief Executive Officer (the "CEO"). Executive will render such business and professional services in the performance of his duties, consistent with Executive's position as the EVP, as will reasonably be assigned to him by the Company's CEO. The period of Executive's employment under this Agreement is referred to herein as the "Employment Term."

(b)    Obligations.

(1) During the Employment Term and except as provided in Section 1(c)(II) below, Executive agrees that he will (i) devote his full business efforts and time to the Company, (ii) devote all of his business time and attention, his best efforts, and apply his skill and ability to promote the interest of the Company; (iii) carry out his duties in a professional and competent manner and faithfully serve the Company and (iv) generally promote the interest of the Company.

(II) The Company may from time to time establish written rules, regulations and policies and Executive shall faithfully observe these in the performance of his duties; provided that any such rules, regulations and policies shall not serve to amend any provisions of this Agreement. For the duration of the Employment Term, Executive agrees not to actively engage in any other incremental new employment, occupation, or consulting activity for any direct or indirect remuneration without the prior written approval of the CEO (which approval will not be unreasonably withheld); provided, however, that Executive may, without the approval of the CEO, serve in any capacity with any civic, educational, or charitable organization provided such services do not interfere with Executive's obligations to the Company.

2.    At-Will Employment.    Executive and the Company agree that Executive's employment with the Company constitutes "at-will" employment. Executive and the Company acknowledge that this employment relationship may be terminated at any time, upon written notice to the other party, with or without Cause (as defined herein) or with or without Good Reason (as defined herein), at the option either of the Company or Executive. However, as described in this Agreement, Executive may be entitled to severance benefits depending upon the circumstances of Executive's termination of employment as set forth in Section 6. Upon the termination of Executive's employment with the Company for any reason, subject to the terms of this Agreement, Executive will be entitled to payment of any accrued but unpaid salary, accrued but unused vacation, expense reimbursements, and other benefits due to Executive through his termination date under any Company-provided or paid plans, policies, and arrangements in accordance with and subject to the terms of such plans, policies and arrangements. Executive agrees to resign from all positions that he holds with the Company, immediately following the termination of his employment if the CEO so requests.

Nothwithstanding the foregoing, in the event Executive voluntarily terminates his employment without Good Reason, he must provide one (1) month prior written notice of termination to the Company. If Executive terminates his employment pursuant to the preceeding sentence, the Company shall have the right at any time during the one (1)-month notice period to reduce his offices, duties and responsibilites, or to relieve him of such offices, duties and responsibilites and to place him on a paid leave-of-absence status, provided that during such notice period he shall remain a full-time employee of the Company and shall continue to receive his salary and all other compensation and other benefits as provided in this Agreement.

3.    Compensation.

(a)    Base Salary.    During the Employment Term, Majesco will pay Executive an annual salary of $200,000 as compensation for his services (the "Base Salary"). The Base Salary will be paid periodically in accordance with Majesco's normal payroll practices (but no less frequently than once per month) and be subject to the usual, required withholding. Executive's salary will be subject to review and any increases will be made based upon the Company's standard practices.

(b)    Annual Bonus.    Commencing with the annual period November 1, 2004 through October 31, 2005 (the "Annual Period" and where the Annual Period shall represent Holdings' fiscal year) and for each Annual Period (or portion thereof, it being understood that with respect to any partial Annual Period hereunder the Annual Bonus shall be pro-rated based on the number of days in such Annual Period that Executive was an employee of the Company) thereafter during the Employment Term, Executive will be eligible to receive a discretionary bonus (the "Annual Bonus). The target bonus for each Annual Period shall be 50% of Executive's Base Salary (with such Base Salary determined as of the end of the applicable performance period) unless such target bonus percentage is subsequently increased by the CEO (the "Target Bonus"). Based on the evaluation by the CEO in his sole and absolute discretion that the Executive achieved some or all of the goals established by the Company in its sole and absolute discretion (the "Established Goals") for such Annual Period, the CEO shall determine in his sole and absolute discretion the amount of the Annual Bonus that will be paid to Executive and the CEO shall also have the right in his sole and absolute discretion to increase the amount of Executive's Annual Bonus for any Annual Period based upon his evaluation that Executive exceeded the Established Goals provided, however, Executive will be given the opportunity to provide to the CEO his own evaluation of the achievement of such Established Goals. Executive may also provide his own input with respect to what objectives should constitute the Established Goals but the actual determination of the Established Goals shall be decided by the Company in its sole and absolute discretion. Any Annual Bonus shall be paid to Executive within ninety (90) days after the end of the Annual Period and is subject to Executive being a Company employee and on working status with the Company through the last day of the Annual Period.

(c)    Equity Compensation.    For purposes of this Section 3(c), the following definitions shall apply: "Employed Percentage" means the fraction that is equal to the number of calendar days that Executive was employed by the Company during the twelve (12) month period beginning on the Effective Date, divided by 365. "Option Number" means 14,285. "Exercised Percentage" means the aggregate number of shares of the "Fully Vested Option" (as defined below) that Executive has acquired by exercising the Fully Vested Option prior to his termination of employment, divided by the Option Number.

(I) On the Effective Date, Executive will be granted non-qualified stock options pursuant to the Company's 2004 Employee, Director and Consultant Stock Option Plan (the "Stock Plan") to purchase 71,429 shares of Holdings' common stock (the "Grant"). The Grant reflects the reverse stock split of Holdings' common stock that was effected on December 29, 2004. Of the Grant, options to purchase 57,144 shares (i) will have a per-share exercise price equal to the fair market value of a Holdings' common share as determined by the closing trading price of Holdings' common shares on the Effective Date and (ii) will vest and become exercisable as to 1 /36^th of such share grant amount each month commencing as of the Effective Date, subject to Executive's continuous "Service" with the Company ("Time Vested Option"). For purposes of this Agreement, "Service" shall mean providing service to the Company (or any Company affiliate) as either a director, employee and/or consultant. Of the Grant, options to purchase 14,285 shares (i) will have a per-share exercise price equal to the fair market value of a Holdings' common share as determined by the closing trading price of Holdings' common shares on the Effective Date and (ii) will be immediately and fully vested, provided however the Executive agrees he will not sell, transfer, or otherwise dispose of such options or the shares of common stock underlying such options prior to the one-year anniversary of the Effective Date ("Fully Vested Option"). Before the first anniversary of the Effective Date, Executive agrees that his exercise(s) of the Fully Vested Option shall be such that the Exercised Percentage does not exceed ,the Employed Percentage.

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(II) In the event that Executive's employment with the Company is terminated for Cause by the Company the unexercised portions of the Time Vested Option and Fully Vested Option at the time of such termination shall be forfeited and cancelled without consideration.

(III) In the event that Executive's employment with the Company terminates voluntarily by Executive without Good Reason before the first anniversary of the Effective Date, then the following number of unexercised shares subject to the Fully Vested Option shall be forfeited and cancelled without consideration as of the termination of Executive's employment: (a) the Option Number multiplied by (b) the difference of 100% minus theEmployed Percentage.

(IV) Except as otherwise provided in this Agreement, the Grant will be subject to the Company's standard terms and conditions for executive stock option awards and will be issued pursuant to and consistent with the terms of the Stock Plan which includes a provision that options may be exercised in accordance with a cashless exercise program established with a securities brokerage firm. All stock options granted to Executive will have a ten-year maximum term and any vested portions of such options (subject to subsection 3(c)(III) above in the case of the Fully Vested Option) will remain exercisable after Executive's employment with the Company terminates as follows, subject to the ten-year term: (i) if Executive's employment with the Company terminates by the Executive with Good Reason or is terminated by the Company without Cause the options will remain exercisable for twelve (12) months, (ii) if Executive's employment with the Company terminates voluntarily by the Executive without Good Reason such options, will remain exercisable for three (3) months, (iii) if Executive's employment with the Company is terminated for Cause by the Company such options, will be forfeited as soon as the Executive is notified that he has been terminated for Cause as set forth in the Stock Plan, and (iv) if Executive's employment with the Company terminates by reason of death or Disability (as defined in the Stock Plan) such vested options will remain exercisable for twelve (12) months.

(d)    Vacation.    During the Employment Term, Executive shall be eligible for three (3) weeks paid vacation per year in accordance with Company policy in effect at this time.

4.    Employee Benefits.    During the Employment Term, Executive (and his dependents as-applicable) will be eligible to participate in accordance with the terms of all Company employee benefit plans (including without limitation health, medical and dental insurance coverage), policies, and arrangements that are applicable to other senior executives of Company, as such plans, policies, and arrangements may exist from time to time and subject to the terms and conditions of such plans, policies and arrangements. The Company agrees to pay the cost of the premiums for at least $25,000 term life insurance on the life of the Executive during the Employment Period. The Executive shall have the right to designate the beneficiary of such policy or policies. Should the Executive not be insurable at the time of his employment under this Agreement, the Company's duty to furnish such insurance shall be suspended until such time as Executive becomes insurable during the Employment Period.

5.    Expenses.    During the Employment Term, the following provisions in this Section 5 shall be applicable:

(a) Company will reimburse Executive for reasonable travel, entertainment, ordinary course professional membership and state bar dues, ordinary course continuing legal education (it being understood that extraordinary continuing legal education expenses shall require the pre-approval of the Company) and other business expenses incurred by Executive in the furtherance of the performance of Executive's duties hereunder, in accordance with the Company's expense reimbursement policy as in effect from time to time.

(b) Company will pay a monthly allowance of $1,000 to Executive for costs associated with the Executive's use of his automobile and for related transportation expenses.

(c) Use of the Company's apartment will be available on an as needed basis at no expense to the Executive.

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6.    Severance.

(a)    Termination Without Cause or Resignation for Good Reason.    If Executive's employment is terminated by the Company without Cause or by Executive for Good Reason, then, subject to Section 7, Executive (or Executive's heirs or estate in the event of Executive's death after Executive has become entitled to the following payments and benefits) will receive from the Company: (i) continued payment of Executive's then Base Salary for a period of 12 months (the "Continuance Period") payable in accordance with Ma jesco's regular payroll practices (ii) for any such termination occurring within 90 days after an Annual Period, but prior to the payment of any Annual Bonus for such Annual Period, an Annual Bonus with respect to such preceding Annual Period (payable within 90 days following the end of such Annual Period), provided that Executive would have otherwise received an Annual Bonus if he had remained employed as of the date of the payment of such Annual Bonus for such Annual Period; (iii) reimbursement for any applicable premiums Executive pays to continue coverage for Executive and Executive's eligible dependents under the Company's Group Health benefit plans under COBRA for a period of eighteen months, or, if earlier, until Executive is eligible for similar benefits from another employer (provided Executive validly elects to continue coverage under applicable law), (iv) Executive will be paid any accrued but unpaid salary, accrued but unused vacation, expense reimbursements and other benefits due to Executive through his termination date under any Company-provided or paid plans, policies, and arrangements in accordance with and subject to the terms of such plans, policies and arrangements.

(b)    Voluntary Termination without Good Reason.    If Executive's employment with the Company terminates voluntarily by Executive without Good Reason, then, subject to the terms of this Agreement (including Section 3 (c)) (i) all further vesting of Executive's outstanding equity awards will terminate immediately, (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately, (iii) Executive will be paid any accrued but unpaid salary, accrued but unused vacation, expense reimbursements and other benefits due to Executive through his termination date under any Company-provided or paid plans, policies, and arrangements in accordance with and subject to the terms of such plans, policies and arrangements, and (iv) Executive will not be eligible for severance benefits under this Agreement or otherwise.

(c)    Termination for Cause.    If Executive's employment with the Company is terminated for Cause by the Company, then, subject to the terms of this Agreement (including Section 3 (c)) (i) all of Executive's vested and unvested outstanding stock options will be forfeited and cancelled without consideration as soon as Executive is notified that he has been terminated for Cause, (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately, (iii) Executive will be paid any accrued but unpaid salary, accrued but unused vacation, expense reimbursements and other benefits due to Executive through his termination date under any Company-provided or paid plans, policies, and arrangements in accordance with and subject to the terms of such plans, policies and arrangements, and (iv) Executive will not be eligible for severance benefits under this Agreement or otherwise.

(d)    Termination due to Death or Disability:    If Executive's employment terminates by reason of death or Disability (as defined in the Stock Plan), then (i) Executive will be paid any accrued but unpaid salary, accrued but unused vacation, expense reimbursements and other benefits due to Executive through his termination date under any Company-provided or paid plans, policies, and arrangements and will be entitled to receive benefits only in accordance with the Company's then applicable plans, policies, and arrangements and (ii) subject to Section 3(c), Executive's outstanding equity awards will be governed in accordance with the terms and conditions of this Agreement and the applicable award agreement(s).

(e)    Sole Right to Severance.    This Agreement is intended to represent Executive's sole entitlement to severance payments and benefits in connection with the termination of his employment. To the extent Executive receives severance or similar payments and/or benefits under any other Company plan, program, agreement, policy, practice, or the like, severance payments and benefits due to Executive under this Agreement will be correspondingly reduced (and vice-versa).

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7.    Conditions to Receipt of Severance; No Duty to Mitigate.

(a)    Separation Agreement and Release of Claims.    The receipt of any severance pursuant to Section 6 will be subject to Executive signing and not revoking a separation agreement and release of claims in a form acceptable to the Company, which includes a general release in favor of the Company and its affiliates together with their respective officers, directors, shareholders, employees, agents and successors and assigns from any and all claims Executive may have against them including but not limited to, arising from Executive's employment and/or termination of employment. The aforementioned general release shall not include a waiver of claims against the shareholders, employees or agents of the Company that do not arise out of or relate to Executive's employment with the Company. In the event Executive breaches the provisions of Section 8 of this Agreement, in addition to any other remedies of law or in equity, the Company may cease making any payments or benefits to which Executive otherwise may be entitled to under Section 6. No severance will be paid or provided until the separation agreement and release agreement becomes effective.

(b)    No Duty to Mitigate.    Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.

8.    Confidential and Proprietary Information; Non-Competition; Non-Solicitation.

(a)    Confidentiality.    Except in the performance of Executive's duties hereunder, at no time during the Term or any time thereafter, shall Executive, individually or jointly with others, for his benefit or the benefit of any third party, publish, disclose, use or authorize anyone else to publish, disclose or use, any secret or confidential and proprietary information relating to any aspect of the business or operations of the Company, including, without limitation, any trade secrets, customer lists and programs, manuals and forms, customer files, financial data, employee-related information, marketing or business plans, suppliers, tirade or industrial practices of the Company, and any Company information concerning purchasing, finances, accounting, engineering, methods, processes, compositions, technology, formulas, electronic information processing procedures (including computer software), research and development programs, potential client lists, marketing, affiliations, sales and inventions. Executive acknowledges and agrees that such information is a valuable asset of the Company and is the Company's sole and exclusive property. Upon the termination of his employment, regardless of the reason for or circumstances giving rise to such termination or at any other time at the request of the Company, he shall immediately return to the Company all of the property of the Company, including all such confidential and proprietary information, in his possession or control and agrees not to retain any copies, duplicates, reproductions or excerpts in whatsoever form of any Company property.

(b) Non-Competition/Non-Solicitation.

(i) In the course of Executive's employment with the Company, he will acquire and have access to confidential or proprietary information concerning the Company. Furthermore, his position as EVP of the Company places him in a position of confidence and trust with the clients and employees of the Company. Executive also acknowledges that the clients serviced by the Company are located throughout the world and accordingly, it is reasonable that the restrictive covenants set forth below are not limited by specific geographic area but by the location of the Company's clients. He further acknowledges that the rendering of services to the Company's clients necessarily requires the disclosure of confidential information and trade secrets of the Company and its subsidiaries (such as without limitation, marketing plans, budgets, designs, client preferences and policies, and identity of appropriate personnel of clients with sufficient authority to influence a shift in suppliers.) Executive and the Company agree that in the course of employment hereunder, he will develop a personal acquaintanceship and relationship with the Company's clients, and knowledge of those clients' affairs and requirements which may constitute the Company's primary or only contact with such clients. Executive acknowledges that the Company's relationships with its established clientele may therefore be placed in his hands in confidence and trust. Executive consequently agrees that it is reasonable and necessary for the protection of the goodwill and business of the Company that he makes the covenants contained herein; and accordingly, Executive agrees that while he is in the Company's

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employ and for a one year period (and in the case of Section 8(b) (i) (b) a two-year period) after the termination of his employment for any reason whatsoever, he shall not directly or indirectly except on behalf of the Company:

a) attempt in any manner to solicit from any client (as hereinafter defined) business of the type performed by the Company or to persuade any client of the Company to cease to do business or to reduce the amount of business which any such client has customarily done or, to the best of Executive's knowledge, that is likely to do with the Company (as of the date of termination of employment), whether or not the relationship between the Company and such client was originally established in whole or in part through his efforts; or

b) employ (including to retain, engage or conduct business with) or attempt to employ or assist anyone else to employ any person who is then or at any time during the preceding year was in the Company's employ; or

c) render any services of the type rendered by the Company to its clients to or for any client of the Company; provided, however, that this Section 8(b)(i)(c) shall not prevent Executive from becoming employed by a client.

As used in this Section 8(b), the term "Company" shall include subsidiaries of the Company and the term "client" shall mean (1) anyone who is a client of the Company at the time of the termination of his employment with the Company or, if his employment shall not have terminated, at the time of the alleged prohibited conduct; (2) anyone who was a client at any time during the two year period immediately preceding the termination of his employment with the Company or, if his employment shall not have terminated, during the two year period immediately preceding the date of the alleged prohibited conduct; and (3) any prospective clients to whom the Company had made a presentation (or similar offering of services) within the one year period immediately preceding the termination of his employment with the Company or if his employment shall not have terminated, within the one year period immediately preceding the date of the alleged prohibited conduct.

(c)    Injunctive Relief.    Executive acknowledges that a breach or threatened breach of any of the terms set forth in this Section 8 shall result in an irreparable and continuing harm to the Company for which there shall be no adequate remedy of law. The Company shall, without posting a bond, be entitled to obtain injunctive and other equitable relief, in addition to any other remedies available to the Company.

(d)    Survival of Terms; Representations.    Executive's and Company^'s obligations under this Section 8 hereof shall remain in full force and effect notwithstanding the termination of Executive's employment. Executive acknowledges that he is sophisticated in business, and that the restrictions and remedies set forth in this Section 8 do not create an undue hardship on him and will not prevent him from earning a livelihood. Executive and the Company agree that the restrictions and remedies contained in this Section 8 are reasonable and necessary to protect the Company's legitimate business interests regardless of the reason for or circumstances giving rise to such termination and that Executive and the Company intend that such restrictions and remedies shall be enforceable to the fullest extent permissible by law. If it shall be found by a court of competent jurisdiction that any such restriction or remedy is unenforceable but would be enforceable if some part thereof were deleted or modified, then such restriction or remedy shall apply with such modification as shall be necessary to make it enforceable to the fullest extent permissible under law.

9.    Intellectual Property.    Executive expressly understands and agrees that any and all improvements, inventions, discoveries, processes, know-how or other intellectual property (including without limitation patents, licenses, copyrights, trade names, trademarks, assumed names and service marks and applications therefor, marketing and advertising campaigns, logos and slogans, designs and software programs) developed, conceived or created by him in the course of his employment hereunder, either individually or in collaboration with others, and whether or not during normal working hours or on the premises of the Company (collectively, "Developments") shall be, as between Executive and the Company, the sole and absolute property of the Company, and he will, whenever requested to do so (either during the Employment Term or thereafter), execute and assign any and all

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applications, assignments and/or other instruments and do all things which the Company may deem necessary or appropriate in order to apply for, obtain, maintain, enforce and defend patents, copyrights, trade names or trademarks of the United States or of foreign countries for said Developments, or in order to assign and convey or otherwise make available to the Company the sole and exclusive right, title, and interest in and to said Developments (provided that where Executive is providing assistance to the Company pursuant to this Section 9 after Executive's employment has terminated, the Company shall promptly reimburse Executive for any pre-approved reasonable out of pocket expenses and reimburse him for pre-approved time over 5 hours per month at a rate of $200 per hour).

Executive agrees to make full and prompt disclosure to the Company of all Developments conceived or created by him during his employment with the Company.

10.    Definitions.

(a)    Benefit Plans.    For purposes of this Agreement, "Benefit Plans" means plans, policies, or arrangements that Company sponsors (or participates in) and that immediately prior to Executive's termination of employment provide Executive and Executive's eligible dependents with medical, dental, or vision benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, financial counseling, disability, life insurance, or retirement benefits).

(b)    Cause.    For purposes of this Agreement, "Cause" means (i) Executive's act of dishonesty or fraud in connection with the performance of his responsibilities to the Company with the intention that such act result in Executive's substantial personal enrichment, (ii) Executive's conviction of, or pleas of nolo contendere to, a felony, (iii) Executive's willful failure to follow lawful, reasonable instructions of the CEO, (iv) Executive's willful misconduct provided such misconduct is injurious to the Company, or (v) Executive's violation or breach of any fiduciary or contractual duty to the Company which results in material damage to the Company or its business; provided that if any of the foregoing events is capable of being cured, the Company will provide written notice to Executive describing the specific nature of such event and Executive will thereafter have 20 days to cure such event. During any cure period, Executive will continue to receive all of the compensation and benefits provided under this Agreement; provided, however, that Executive may not exercise any of his outstanding stock options (or any other unexercised Company equity awards) unless and until he cures the events or items in question to the Company's satisfaction. The date of termination of employment for Cause shall be (x) the 21st day after notice was provided to the Executive if the event(s) in question is/are not cured to the Company's satisfaction or (y) the date that notice was provided to the Executive if the event(s) is/are not capable of being cured including without limitation an occurrence of subsection 10(Ib)(ii). For purposes of this Section 10(b), no lawful act or failure to act will be considered "willful" unless the act or failure to act was committed/omitted by Executive without a reasonable, good faith belief that it was in the best interests of the Company and/or was inconsistent with prior direction of the CEO or Company policy.

(c)    Good Reason.    For purposes of this Agreement, "Good Reason" means the occurrence of any of the following without Executive's express prior written consent: (i) a material reduction in Executive's position or duties, (ii) a reduction of Executive's Base Salary or Target Bonus percentage other than a reduction that also is applied to substantially all of the Company's other senior executives, (iii) a material reduction in the aggregate level of benefits made available to Executive other than a reduction that also is applied to substantially all of the Company's other senior executives, (iv) relocation of Executive's primary place of business for the performance of his duties to the Company to a location that is, more than 30 miles from its location as of the Effective Date, unless it is closer to Executive's residence as of the Effective Date or (v) any material breach or material violation of a material provision of this Agreement by the Company (or any successor to the Company); provided that the Executive must provide written notice to the Company of not more than thirty (30) days after the occurrence of the event(s) constituting Good Reason and providing further that if any of the foregoing events is capable of being cured, the Executive will provide notice to Company describing the specific nature of such event and Company will thereafter have 20 days to cure such event.

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11.    Indemnification and Insurance.    Executive will be covered under the Company's insurance policies and, subject to applicable law, will be provided indemnification to the maximum extent permitted by the Company's bylaws and Certificates of Incorporation, with such insurance coverage and indemnification to be in accordance with the Company's standard practices for senior executive officers but on terms no less favorable than provided to any other Company senior executive officer or director.

12.    Confidential Information.    Executive agrees to execute the Company's standard form of employee confidential information agreement (the "Confidential Information Agreement") upon commencement of employment. During the Employment Term, Executive further agrees to execute any updated versions of the Confidential Information Agreement (any such updated version also referred to as the "Confidential Information Agreement") as may be required of substantially all of the Company's executive officers.

13.    Assignment.    This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors, and legal representatives of Executive upon Executive's death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. Any successor will expressly assume in writing all of the Company's obligations under this Agreement. For this purpose, "successor" means any person, firm, corporation, or other business entity which at any time, whether by purchase, merger, or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance, or other disposition of Executive's right to compensation or other benefits will be null and void.

14.    Notices.    All notices, requests, demands, and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally, (b) one day after being sent by a well established commercial overnight service, or (c) four days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

If to the Company:

Majesco Sales Inc.
P.O. Box 6570
Edison, NJ 08818

	Attn:	Carl J. Yankowski, Chief Executive Officer Majesco Sales Inc.

If to Executive:

Lester E. Greenman
210 Riverside Drive #11A
New York, NY 10025

with a copy to:

Wollmiuth Maher & Deutsch LLP
500 Fifth Avenue
New York, NY 10110
Attn: Mason H. Drake

or at the last residential address known by the Company as provided by Executive in writing.

15.    Severability; Obligations.    If any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or void, this Agreement will continue in full force and effect without said provision. Each of Majesco and Holdings shall be jointly and severally liable for any Company, Majesco or Holdings obligations and commitments under this Agreement.

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16.    Arbitration.

(a) If any dispute arises between the Company and Executive that the parties cannot resolve themselves, including any dispute over the application, validity, construction, or interpretation ofthis Agreement, arbitration in accordance with the then-applicable National Rules for the Resolution of Employment disputes of the American Arbitration Association shall provide the exclusive remedy for resolving any such dispute, regardless of its nature; provided, however, the Company may enforce Executive's obligations under Sections 8 and 12 hereof by an action for injunctive relief and damages in a court of competent jurisdiction.

(b) This Section 16 shall apply to claims arising under state and federal statutes, local ordinances, and the common law. The arbitrator shall apply the same substantive law that a court with jurisdiction over the parties and their dispute would apply under the terms of this Agreement. The arbitrator's remedial authority shall equal 1:he remedial power that a court with jurisdiction over the parties and their dispute would have. If the then-applicable rules of the American Arbitration Association conflict with the procedures of this Section 16, the latter shall apply.

(c) If the parties cannot agree upon an arbitrator, the parties shall select a single arbitrator from a list of seven arbitrators provided by the American Arbitration Association ("AAA"). The names of the seven listed arbitrators shall be derived from the AAA employment law roster. If the parties cannot agree on selecting an arbitrator from that list, then the parties shall alternately strike names from the list, with the first party to strike being determined by lot. After each party has used three strikes, the remaining name on the list shall be the arbitrator.

(d) Each party may be represented by counsel or by another representative of the party's choice and each party shall pay the costs and fees of its counsel or other representative and its own filing and administrative fees provided, however, that Executive will only be responsible to pay those costs and fees which he would have had to pay for had the disputed matter been initiated in court.

(e) The arbitrator shall render an award and opinion in the form typical of those rendered in labor arbitrations, and that award shall be final and binding and non-appealable except as specifically provided by law. To the extent that any part of this Section 16 is found to be legally unenforceable for any reason, that part shall be modified dr deleted in such a manner as to render this Section 16 (or the remainder of this Section 16) legally enforceable and as to ensure that except as provided in clause (b) of this Section 16, all conflicts between the Company and Executive shall be resolved by neutral, binding arbitration. The remainder of this Section 16 shall not be affected by any such modification or deletion but shall be construed as severable and independent. If a court finds that the arbitration procedures of this Section 16 are not absolutely binding, then the parties intend any arbitration decision to be fully admissible in evidence, given great weight by any finder of fact, and treated as determinative to the maximum extent permitted by law.

(f) Unless the parties agree otherwise, any arbitration shall take place in the American Arbitration Association's offices in Somerset, New Jersey.

(g) Executive has read and understands this Section 16, which discusses arbitration. Executive understands that by signing this Agreement, Executive agrees to submit any claims arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach or termination thereof, or Executive's employment or the termination thereof, to binding arbitration, and that this arbitration provision constitutes a waiver of Executive's right to a jury trial and relates to the resolution of all disputes relating to all aspects of the employer/employee relationship, including but not limited to the following:

(i) Any and all claims for wrongful discharge of employment, breach of contract, both express and implied; breach of the covenant of good faith and fair dealing, both express and implied; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; and defamation;

(ii) Any and all claims for violation of any federal, state or municipal statute, including, without limitation, Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of

9

1991, the Equal Pay Act, the Employee Retirement Income Security Act, as amended, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Fair Labor Standards Act, the New Jersey Family Leave Act, the New Jersey Conscientious Employee Protection Act and the New Jersey Law Against Discrimination; and

(iii) Any and all claims arising out of any other federal, state or local laws or regulations relating to employment or employment discrimination.

(h) Executive (i) understands that other options such as federal and state administrative remedies and judicial remedies exist and (ii) knows that by signing this Agreement those remedies are forever precluded and that regardless of the nature of Executive's complaint, he knows that it can only be resolved by arbitration.

(i) To the extent Executive asserts a claim that would otherwise require filing the claim with a governmental agency, Executive may, but need not, file such claim with the applicable agency (including, without limitation, the Equal Employment Opportunity Commission), and if Executive fails to do so, the Company shall not assert a defense of failure to exhaust administrative remedies.

17.    No Conflict.    Executive represents and warrants that he is not subject to any agreement, instrument, order, judgment or decree of any kind, or any other restrictive agreement of any character, which would prevent him from entering into this Agreement or which would be breached by him upon the performance of his duties pursuant to this Agreement.

18.    Integration.    Except as otherwise provided herein, this Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in a writing that specifically references this Section and is signed by duly authorized representatives of all of the parties hereto.

19.    Waiver of Breach.    The waiver of a breach of any term or provision of this Agreement, which must be in writing signed by all of the parties, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement.

20.    Survival.    The Confidential Information Agreement, the Company's and Executive's responsibilities under Sections 3, 6, 7, 8, 9, 11, 12, 16 and Section 18 will survive the termination of this Agreement.

21.    Headings.    All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

22.    Tax Withholding.    All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

23.    Governing Law.    This Agreement will be governed by the laws of the State of New Jersey (with the exception of its conflict of laws provisions).

24.    Jurisdiction.    The State of New Jersey shall have exclusive jurisdiction to entertain any legal or equitable action with respect to Sections 8 or 12 of this Agreement except that the Company may institute any such suit against Executive in any jurisdiction in which he may be at the time. In the event suit is instituted in New Jersey, it is agreed that service of summons or other appropriate legal process may be effected upon any party by delivery it has to the last known address.

25.    Acknowledgment.    Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

26.    Counterparts.    This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.

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27.    Attorney Fees.    The Company shall pay or reimburse Executive for his reasonable legal fees and expenses, not to exceed $4,000, incurred in connection with the review and negotiation of this Agreement. The Executive or the Executive's legal counsel shall provide the Company with a detailed invoice, describing the work that was performed and the expenses that were incurred, before any payment will be made pursuant to this section.

28.    No Strict Construction:    The language used in this Agreement will be deemed to be the language chosen by the Company and Executive to express the parties' mutual intent, and no rule of law or contract interpretation that provides that in the case of ambiguity or uncertainty a provision should be construed against the draftsperson will be applied against any party.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by a duly authorized officer, as of the day and year written below.

COMPANY:

Majesco Sales Inc.

By: /s/ Carl Yankowski
Date: February 2, 2005
Title: Chairman and CEO

Majesco Holdings Inc.

By: /s/ Carl Yankowski
Date: February 2, 2005
Title: Chairman and CEO

EXECUTIVE: /s/ Lester Greenman        
Lester Greenman

Date: February 7, 2005        

11

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Carl Yankowski, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ending January 31, 2005, of Majesco Holdings Inc.;

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 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)) 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) 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

c) 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 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 registrant's board of directors (or persons performing the equivalent function);

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: March 17, 2005

	By:				/s/ Carl Yankowski
					Name: Carl Yankowski Title: Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Jan E. Chason, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ending January 31, 2005, of Majesco Holdings Inc.;

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 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)) 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) 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

c) 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 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 registrant's board of directors (or persons performing the equivalent function);

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: March 17, 2005

	By:				/s/ Jan E. Chason
					Name: Jan E. Chason Title: Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF THE CEO OF MAJESCO HOLDINGS INC. PURSUANT TO 18 U.S.C.
SECTION 1350, AS ADOPTED PURSUANT TO 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Majesco Holdings Inc. (the "Company") on Form 10-Q for the period ending January 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Carl Yankowski, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	By:				/s/ Carl Yankowski
					Name: Carl Yankowski
					Title: Chief Executive Officer

Date: March 17, 2005

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF THE CFO OF MAJESCO HOLDINGS INC. PURSUANT TO 18 U.S.C.
SECTION 1350, AS ADOPTED PURSUANT TO 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Majesco Holdings Inc. (the "Company") on Form 10-Q for the period ending January 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jan E. Chason, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By:				/s/ Jan E. Chason
				Name: Jan E. Chason
				Title: Chief Financial Officer

Date: March 17, 2005