UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 2, 2015
MAD CATZ INTERACTIVE, INC.
(Exact Name of Registrant as Specified in Charter)
Canada | 001-14944 | N/A | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
10680 Treena Street, Suite 500
San Diego, California 92131
(Address of Principal Executive Offices)
(858) 790-5008
(Registrants telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14.a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. | Entry into a Material Definitive Agreement |
On February 2, 2015, Mad Catz, Inc. (MCI), a wholly-owned subsidiary of Mad Catz Interactive, Inc. (the Company), entered into an Amendment (the Amendment) to its Fourth Amended and Restated Loan Agreement (as amended, the Loan Agreement) between MCI and Wells Fargo Capital Finance, LLC (Wells Fargo). The Amendment adjusts the monthly EBITDA requirement contained in the Loan Agreement for the months of January 2015 through June 2015. Wells Fargo also provided a waiver of default related to the December 2014 EBIDTA requirement, as the Companys EBITDA for the trailing twelve months ended December 31, 2014 was lower than the required threshold. The description of the Amendment set forth under this Item 1.01 is qualified in its entirety by reference to the complete terms and conditions of the Amendment filed as Exhibit 10.1 hereto.
Item 2.02. | Results of Operations and Financial Condition |
The following information is furnished pursuant to Item 2.02, Results of Operations and Financial Condition, and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
On February 5, 2015, the Company issued a press release announcing its financial results for its fiscal third quarter ended December 31, 2014. A copy of the press release is attached hereto as Exhibit 99.1.
The information contained in this Current Report, including the exhibit, shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 9.01. | Financial Statements and Exhibits |
(d) | Exhibits. |
10.1 | Amendment, dated February 2, 2015, to Fourth Amended and Restated Loan Agreement between Wells Fargo Capital Finance, LLC, Mad Catz, Inc. and the Obligors party thereto. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. | |
99.1 | Press Release, dated February 5, 2015, issued by Mad Catz Interactive, Inc., furnished pursuant to Item 2.02 of Form 8-K. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: February 5, 2015 | MAD CATZ INTERACTIVE, INC. | |||||
By: | /s/ KAREN MCGINNIS | |||||
Name: | Karen McGinnis | |||||
Its: | Chief Financial Officer |
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Exhibit 10.1
CERTAIN INFORMATION INDICATED BY [***] HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24b-2.
[Letterhead of Wells Fargo Capital Finance, LLC]
February 2, 2015
Mad Catz, Inc.
10680 Treena Street
Suite 500
San Diego, CA
92131-2447
Dear Sirs/Mesdames:
Re: | Fourth Amended and Restated Loan Agreement dated August 1, 2012 (as amended, modified, supplemented, extended, renewed, restated or replaced from time to time, the Loan Agreement) between Wells Fargo Capital Finance, LLC (Wells Fargo), Mad Catz, Inc. (the Borrower) and the Obligors party thereto. Capitalized terms not otherwise defined in this Agreement shall have the meanings given to them in the Loan Agreement unless stated otherwise. |
We hereby notify you that an Event of Default (the Existing Event of Default) has occurred under Section 8.24 of the Loan Agreement as a result of MCIIs failure to maintain consolidated EBITDA of not less than [***] calculated on a rolling 12 month basis at the end of the month of December 2014. The financial statements recently delivered by the Borrower to Wells Fargo indicated that such EBITDA was $1,002,000.
In connection with the Existing Event of Default, you have requested that we provide this Agreement to you in order to, among other things, waive the Existing Event of Default and amend the Loan Agreement, all as specifically set out below.
1. | Limited Waiver. |
(a) | Wells Fargo hereby waives the Existing Event of Default. |
(b) | Notwithstanding the foregoing, the limited waiver by Wells Fargo above: |
(i) | shall not extend to any other Default or Event of Default by the Borrower or any Obligor under the Financing Agreements; |
(ii) | shall not be construed as a waiver of any other provisions of the Financing Agreements or consent to, or waiver of, any further or future action on the part of the Borrower or any Obligor; |
*** | Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
(iii) | is intended to be limited to the specific purpose and intent for which same has been provided, and does not prejudice any rights or remedies that Wells Fargo may have now or may have in the future under or in connection with the Financing Agreements. |
(c) | Wells Fargo reserves its rights and remedies at any time and from time to time arising in connection with any Defaults or Events of Default now existing or hereafter arising (other than the Existing Event of Default specifically waived above). |
2. | Amendments to Loan Agreement |
(a) | Section 8.24 (EBITDA) of the Loan Agreement is hereby deleted and replaced with the following: |
8.24 EBITDA
MCII shall maintain consolidated EBITDA of not less than the amounts set forth below calculated on a rolling 12 month basis and at the end of the months set forth below:
Month |
EBITDA | |
January 2015 | [***] | |
February 2015 | [***] | |
March 2015 | [***] | |
April 2015 | [***] | |
May 2015 | [***] | |
June 2015 | [***] |
and Lender, Borrower and Obligors shall agree to new financial covenants by June 15, 2015 and failure to so agree by such date shall be an Event of Default.
(b) | The compliance certificate required to be delivered by Borrower pursuant to Section 8.6(g) of the Loan Agreement shall be in the form attached hereto as Exhibit A. |
(c) | This Agreement is an amendment to the Loan Agreement. Unless the context of this Agreement otherwise requires, the Loan Agreement and this Agreement shall be read together and shall have effect as if the provisions of the Loan Agreement and this Agreement were contained in one agreement. The term Agreement when used in the Loan Agreement means the Loan Agreement as amended by this Agreement, together with all amendments, modifications, supplements, extensions, renewals, restatements and replacements thereof from time to time. |
*** | Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
(d) | Nothing in this Agreement when read together with this Agreement, shall constitute a novation, payment, re-advance or reduction or termination in respect of any Obligations. |
3. | Representations and Warranties |
In order to induce Wells Fargo to enter into this Agreement, the Borrower and each Obligor represent and warrant to Wells Fargo as follows, which representations and warranties shall survive the execution and delivery of this Agreement:
(a) | After giving effect to this Agreement: |
(i) | all of the representations and warranties in the Loan Agreement and the other Financing Agreements are true and correct as of the date hereof; |
(ii) | each of the Borrower and the Obligors is in compliance with all the covenants contained in the Loan Agreement and the other Financing Agreements; |
(iii) | no Default or Event of Default exists or is continuing; |
(b) | the execution, delivery and performance of this Agreement and the transactions contemplated hereunder are all within the Borrowers and each Obligors corporate powers, have been duly authorized and are not in contravention of law or the terms of the Borrowers or each Obligors certificate of incorporation, by-laws or other organizational documentation, or any indenture, agreement or undertaking to which the Borrower or an Obligor is a party or by which the Borrowers or an Obligors property is bound; |
(c) | each of the Borrower and the Obligors have duly executed and delivered this Agreement; and |
(d) | this Agreement constitutes a legal, valid and binding obligation of the Borrower and each Obligor, enforceable against them by Wells Fargo in accordance with the terms of this Agreement. |
4. | General |
(a) | The Loan Agreement, as amended by this Agreement, shall continue in full force and effect and the rights and obligations of all parties thereunder shall not be affected or prejudiced in any manner except as specifically provided for herein. |
(b) | It is agreed and confirmed that after giving effect to this Agreement, all security and guarantees delivered by the Borrower and each Obligor secures the payment and performance of all of the Obligations including, without limitation, the obligations, liabilities and indebtedness arising under the Loan Agreement. |
(c) | The Borrower and each Obligor shall execute and deliver such documents and take such actions as may be necessary or desirable by Wells Fargo to give effect to the provisions and purposes of this Agreement, all at the expense of the Borrower and each Obligor. |
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(d) | The Borrower agrees to pay Wells Fargo a $35,000 waiver and amendment fee which is earned by Wells Fargo and payable to Wells Fargo on the date hereof. |
(e) | The Borrower and each Obligor shall pay all fees, expenses and disbursements including, without limitation, legal fees, incurred by or payable to Wells Fargo in connection with the preparation, negotiation, execution, delivery, review and enforcement of this Agreement and all other documents and instruments arising therefrom and/or executed in connection therewith. |
(f) | This Agreement may be executed and delivered by facsimile or pdf and in any number of counterparts, each of which when so executed and delivered is an original and all of which taken together constitute one and the same instrument. |
(g) | This Agreement shall be governed by the laws of the State of Illinois. |
(h) | This Agreement is a Financing Agreement. |
If the foregoing correctly sets out our agreement, please indicate your acceptance of the terms and conditions of this Agreement by signing below and returning an executed copy to us by no later than 5:00 p.m. (PST) on February 18, 2015 after which time, if not accepted by all of you, this Agreement shall be null and void.
Yours truly,
WELLS FARGO CAPITAL FINANCE, LLC | ||
Per: | /s/ GARY WHITAKER | |
Name: Gary Whitaker Title: Authorized Signer |
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Agreed this 2nd day of February, 2015.
MAD CATZ, INC. | MAD CATZ INTERACTIVE, INC. | |||||||
Per: | /s/ DARREN RICHARDSON |
Per: | /s/ DARREN RICHARDSON | |||||
Name: Darren Richardson Title: President & CEO |
Name: Darren Richardson Title: President & CEO | |||||||
1328158 ONTARIO INC. | WINKLER ATLANTIC HOLDINGS LIMITED | |||||||
Per: | /s/ DARREN RICHARDSON |
Per: | /s/ DARREN RICHARDSON | |||||
Name: Darren Richardson Title: Director |
Name: Darren Richardson Title: Director | |||||||
MAD CATZ EUROPE LIMITED | MAD CATZ INTERACTIVE ASIA LIMITED | |||||||
Per: | /s/ BRIAN ANDERSEN |
Per: | /s/ DARREN RICHARDSON | |||||
Name: Brian Andersen Title: COO |
Name: Darren Richardson Title: Director | |||||||
FX UNLIMITED, INC. | MAD CATZ GMBH | |||||||
Per: | /s/ DARREN RICHARDSON |
Per: | /s/ DARREN RICHARDSON | |||||
Name: Darren Richardson Title: President & CEO |
Name: Darren Richardson Title: Director | |||||||
SAITEK, S.A. | MAD CATZ TECHNOLOGICAL DEVELOPMENT (SHENZHEN) CO., LTD. | |||||||
Per: | /s/ OLIVIER VOIRIN |
Per: | /s/ CHEUNG HING TIM (NICHOLAS) | |||||
Name: Olivier Voirin Title: President |
Name: Cheung Hing Tim (Nicholas) Title: Legal Representative | |||||||
MAD CATZ CO., LTD. | ||||||||
Per: | /s/ TAKETOSHI MATSUURA |
|||||||
Name: Taketoshi Matsuura Title: Representative Director, President |
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Exhibit A
Form of Compliance Certificate
MAD CATZ, INC.
Date: , .
This Compliance Certificate (this Certificate) is given by MAD CATZ, INC. (Borrower) pursuant to Section 8.6(g) of the Fourth Amended and Restated Loan Agreement dated as of August 1, 2012 (as amended, modified, supplemented, extended, renewed, restated or replaced from time to time, the Loan Agreement) between Wells Fargo Capital Finance, LLC, as Lender and US Collateral Agent, Borrower and Obligors. Capitalized terms used herein without definition shall have the meanings set forth in the Loan Agreement.
The officer executing this Certificate is the Chief Financial Officer of Borrower, and as such is duly authorized to execute and deliver this Certificate on behalf of Borrower. By so executing this Certificate, Borrower hereby certifies to Lender that:
(a) | the financial statements delivered with this Certificate comply with all requirements of the Loan Agreement and fairly present the financial position of Borrower or Obligor, as applicable, as of such date and for the applicable period then ended in accordance with GAAP; |
(b) | Borrower has reviewed the relevant terms of the Financing Agreements and the condition of Borrower, Obligors and their subsidiaries; |
(c) | Borrower and Obligors are in compliance with all financial covenants set forth in Sections 8.20 and 8.24 of the Loan Agreement, as demonstrated by the calculations of such covenants set forth in the Excel spreadsheets attached hereto and as indicated below; |
Covenant |
Compliance |
|||||
(i) |
Section 8.20 of Loan Agreement Software Expenditures | Yes/No | ||||
(ii) |
Section 8.24 of the Loan Agreement EBITDA | Yes/No |
(d) | the Fixed Change Coverage Ratio for purposes of assisting Lender in determining the Applicable Rate is [] for the final month of the most recently ended Fiscal Quarter, as demonstrated by the calculations set forth in the Excel spreadsheet attached hereto; and |
(e) | no Default or Event of Default exists, except as set forth below, which includes a description of the nature and status and period of existence of such Default or Event of Default and what action Borrower has taken, and is undertaking and proposes to take with respect thereto. |
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IN WITNESS WHEREOF, Borrower has caused this Certificate to be executed by of Borrower this day of , 20 .
MAD CATZ, INC. | ||
By: |
| |
Name: Title: |
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Exhibit 99.1
MAD CATZ® REPORTS FISCAL 2015 THIRD QUARTER FINANCIAL RESULTS
San Diego, CA February 5, 2015 Mad Catz Interactive, Inc. (Mad Catz or the Company) (NYSE MKT/TSX: MCZ), today announced financial results for the fiscal 2015 third quarter ended December 31, 2014.
Key Highlights of Fiscal 2015 Third Quarter and Subsequent:
| Fiscal 2015 third quarter net sales decreased 7% to $30.5 million, driven by a 15% decrease in EMEA and a 3% decrease in the Americas, partially offset by a 50% increase in net sales across APAC; |
| Gross margin improved to 26.9% from 24.1% in the prior year quarter; |
| Total operating expenses decreased 15% from the prior year period to $6.0 million; |
| Operating income increased 145% to $2.2 million; |
| Diluted income per share was $0.02 for the fiscal 2015 third quarter, compared to a diluted loss per share of ($0.01) last year; |
| Net position of bank loan, less cash, was $10.7 million at December 31, 2014, compared to $11.1 million at December 31, 2013; |
| Shipped the C.T.R.L.i and Micro C.T.R.L.i mobile gamepads, a new range of controllers designed for iPhone, iPad and iPod touch; |
| Shipped the F.R.E.Q.9 wireless surround headset for gaming, audio and smart devices; |
| Shipped the F.R.E.Q.TE (Tournament Edition) stereo gaming headset for Windows PC and Mac; |
| Shipped the G.L.I.D.E.TE (Tournament Edition) gaming surface; |
| Announced the R.A.T. PROX gaming mouse, a 2015 CES Innovation Award Honoree; |
| Announced the L.Y.N.X. 9 mobile hybrid controller for android smart devices, tablets and Windows PC; |
| Shipped the TRITTON Swarm wireless mobile headset; |
| Entered into an agreement with Capcom to produce the Ultra Street Fighter IV Arcade FightStick Tournament Edition 2; and |
| Teamed up with GIANTS Software® to create dedicated Saitek®-branded simulation hardware for the Farming Simulator series of games on Windows PC. |
1
Summary of Financials
(in thousands, except margins and per share data)
Three Months | Nine Months | |||||||||||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||||||||||
2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||||||||
Net sales |
$ | 30,451 | $ | 32,889 | (7 | %) | $ | 69,665 | $ | 69,412 | | % | ||||||||||||
Gross profit |
8,178 | 7,925 | 3 | % | 19,972 | 18,060 | 11 | % | ||||||||||||||||
Total operating expenses |
5,971 | 7,023 | (15 | %) | 19,320 | 22,893 | (16 | %) | ||||||||||||||||
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Operating income (loss) |
2,207 | 902 | 145 | % | 652 | (4,833 | ) | (113 | %) | |||||||||||||||
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Net income (loss) |
1,358 | (566 | ) | (340 | %) | (809 | ) | (7,176 | ) | (89 | %) | |||||||||||||
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Net income (loss) per share, basic and diluted |
$ | 0.02 | ($ | 0.01 | ) | (300 | %) | ($ | 0.01 | ) | ($ | 0.11 | ) | (91 | %) | |||||||||
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Gross margin |
26.9 | % | 24.1 | % | |
280 bps |
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28.7 | % | 26.0 | % | |
270 bps |
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Adjusted EBITDA (loss) (1) |
$ | 2,713 | $ | 1,333 | 104 | % | $ | 2,156 | ($ | 2,797 | ) | (177 | %) |
(1) | Definitions, disclosures and reconciliations regarding non-GAAP financial information are included on page 7. |
Commenting on the Companys fiscal 2015 third quarter results, Karen McGinnis, Chief Financial Officer of Mad Catz, said, Despite the challenging top-line environment, we continue to make operational progress across our organization, creating a more streamlined business model with greater accountability and cost efficiency. These efforts resulted in a 145% improvement in quarterly operating income over the prior year, and will ultimately allow us to better compete in a global marketplace and position Mad Catz for long-term success in growing our business.
Summary of Key Sales Metrics
Three Months | Nine Months | |||||||||||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||||||||||
(in thousands) | 2014 | 2013 | Change | 2014 | 2013 | Change | ||||||||||||||||||
Net Sales by Geography |
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EMEA |
$ | 17,825 | $ | 20,983 | (15 | %) | $ | 37,104 | $ | 40,575 | (9 | %) | ||||||||||||
Americas |
9,573 | 9,877 | (3 | %) | 22,281 | 23,195 | (4 | %) | ||||||||||||||||
APAC |
3,053 | 2,029 | 50 | % | 10,280 | 5,642 | 82 | % | ||||||||||||||||
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$ | 30,451 | $ | 32,889 | (7 | %) | $ | 69,665 | $ | 69,412 | | % | |||||||||||||
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Sales by Platform as a % of Gross Sales |
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PC and Mac |
43 | % | 40 | % | 44 | % | 44 | % | ||||||||||||||||
Next gen consoles (a) |
21 | % | 2 | % | 19 | % | 1 | % | ||||||||||||||||
Universal |
25 | % | 34 | % | 23 | % | 30 | % | ||||||||||||||||
Smart devices |
5 | % | 2 | % | 8 | % | 2 | % | ||||||||||||||||
Legacy consoles (b) |
6 | % | 20 | % | 6 | % | 21 | % | ||||||||||||||||
All others |
| % | 2 | % | | % | 2 | % | ||||||||||||||||
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100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||
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Three Months | Nine Months | |||||||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||||||
(in thousands) | 2014 | 2013 | Change | 2014 | 2013 | Change | ||||||||||||||
Sales by Category as a % of Gross Sales |
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Audio |
47 | % | 51 | % | 43 | % | 46 | % | ||||||||||||
Specialty controllers |
22 | % | 15 | % | 23 | % | 16 | % | ||||||||||||
Mice and keyboards |
23 | % | 25 | % | 23 | % | 29 | % | ||||||||||||
Controllers |
4 | % | 1 | % | 6 | % | 1 | % | ||||||||||||
Accessories |
4 | % | 5 | % | 4 | % | 6 | % | ||||||||||||
Games and Other |
| % | 3 | % | 1 | % | 2 | % | ||||||||||||
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Sales by Brand as a % of Gross Sales |
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Tritton |
44 | % | 46 | % | 39 | % | 42 | % | ||||||||||||
Mad Catz |
34 | % | 42 | % | 34 | % | 45 | % | ||||||||||||
Saitek |
17 | % | 11 | % | 18 | % | 12 | % | ||||||||||||
Other |
5 | % | 1 | % | 9 | % | 1 | % | ||||||||||||
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100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||
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(a) | Includes products developed for Xbox One, PlayStation 4 and Wii U. |
(b) | Includes products developed for Xbox 360, PlayStation 3 and Wii. |
Darren Richardson, President and Chief Executive Officer of Mad Catz, commented, Looking ahead, we remain confident that our brands are strong, that our product portfolio is poised to gain considerable leverage from the ongoing console transition as well as the shift towards mobile gaming, that our geographic footprint is broad and diverse and gaining clear market share in key markets like Asia, and that we are executing well in an evolving marketplace on the back of the recent console transition.
The Company will host a conference call and simultaneous webcast on February 5, 2015, at 5:00 p.m. ET, which can be accessed by dialing (212) 231-2910. Following its completion, a replay of the call can be accessed for 30 days at the Companys Web site (www.madcatz.com, select About Us/Investor Relations) or for seven days via telephone at (800) 633-8284 (reservation #21760805) or, for International callers, at (402) 977-9140.
About Mad Catz
Mad Catz Interactive, Inc. (Mad Catz) (NYSE MKT/TSX: MCZ) is a global provider of innovative interactive entertainment products marketed under its Mad Catz® (gaming), Tritton® (audio), and Saitek® (simulation) brands. Mad Catz products cater to passionate gamers across multiple platforms including in-home gaming consoles, handheld gaming consoles, Windows® PC and Mac® computers, smart phones, tablets and other mobile devices. Mad Catz distributes its products through its online store as well as distribution via many leading retailers around the globe. Headquartered in San Diego, California, Mad Catz maintains offices in Europe and Asia. For additional information about Mad Catz and its products, please visit the Companys website at www.madcatz.com.
Social Media
Safe Harbor
Information in this press release that involves the Companys expectations business prospects, plans, intentions or strategies regarding its future are forward-looking statements that are not facts and that involve substantial risks and uncertainties. You can identify these statements by the use of words such as anticipate, estimate, expect, project, intend, should, plan, goal, believe, and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause the Companys actual future results to differ materially from those expressed in the forward-looking statements set forth in this release are the following: the ability to maintain or renew the Companys licenses; competitive developments affecting the Companys current products; first-party price reductions; availability of capital under our credit facility; commercial acceptance of new in-home gaming consoles; the ability to successfully market both new and existing products domestically and internationally; difficulties or delays in manufacturing; unanticipated product delays; or a downturn in the market or industry. A further list and description of these and other factors, risks, uncertainties and other matters can be found in the Companys most recent annual report, and any subsequent quarterly reports, filed with the U.S. Securities and
3
Exchange Commission and the Canadian Securities Administrators. The forward-looking statements in this release are based upon information available to the Company as of the date of this release, and the Company assumes no obligation to update any such forward-looking statements as a result of new information or future events or developments, except as may be require by applicable law. Forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of the future performance of the Company and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.
Contact: | ||
Karen McGinnis | Joseph Jaffoni, Norberto Aja, Jim Leahy | |
Chief Financial Officer | JCIR | |
Mad Catz Interactive, Inc. | mcz@jcir.com or (212) 835-8500 | |
kmcginnis@madcatz.com or (858) 790-5040 |
- TABLES FOLLOW -
4
Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
Three Months | Nine Months | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net sales |
$ | 30,451 | $ | 32,889 | $ | 69,665 | $ | 69,412 | ||||||||
Cost of sales |
22,273 | 24,964 | 49,693 | 51,352 | ||||||||||||
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Gross profit |
8,178 | 7,925 | 19,972 | 18,060 | ||||||||||||
Operating expenses: |
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Sales and marketing |
2,673 | 3,189 | 8,562 | 10,018 | ||||||||||||
General and administrative |
2,337 | 2,655 | 8,210 | 8,903 | ||||||||||||
Research and development |
852 | 1,062 | 2,220 | 3,240 | ||||||||||||
Acquisition related items |
| (53 | ) | | 99 | |||||||||||
Amortization of intangible assets |
109 | 170 | 328 | 633 | ||||||||||||
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Total operating expenses |
5,971 | 7,023 | 19,320 | 22,893 | ||||||||||||
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Operating income (loss) |
2,207 | 902 | 652 | (4,833 | ) | |||||||||||
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Other (expense) income: |
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Interest expense, net |
(238 | ) | (223 | ) | (563 | ) | (476 | ) | ||||||||
Foreign currency exchange loss, net |
(83 | ) | (292 | ) | (500 | ) | (708 | ) | ||||||||
Change in fair value of warrant liability |
1 | 324 | 56 | (10 | ) | |||||||||||
Other income |
13 | 4 | 92 | 101 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other expense |
(307 | ) | (187 | ) | (915 | ) | (1,093 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before income taxes |
1,900 | 715 | (263 | ) | (5,926 | ) | ||||||||||
Income tax expense |
(542 | ) | (1,281 | ) | (546 | ) | (1,250 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
$ | 1,358 | ($ | 566 | ) | ($ | 809 | ) | ($ | 7,176 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) per share: |
||||||||||||||||
Basic |
$ | 0.02 | ($ | 0.01 | ) | ($ | 0.01 | ) | ($ | 0.11 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
$ | 0.02 | ($ | 0.01 | ) | ($ | 0.01 | ) | ($ | 0.11 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Shares used in per share computations: |
||||||||||||||||
Basic |
64,488,798 | 63,931,506 | 64,240,446 | 63,700,413 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
64,644,470 | 63,931,506 | 64,240,446 | 63,700,413 | ||||||||||||
|
|
|
|
|
|
|
|
5
Consolidated Balance Sheets
(in thousands)
(Unaudited)
December 31, | March 31, | |||||||
2014 | 2014 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash |
$ | 3,890 | $ | 1,496 | ||||
Accounts receivable, net |
14,471 | 8,059 | ||||||
Other receivables |
936 | 1,531 | ||||||
Inventories |
18,469 | 17,189 | ||||||
Deferred tax assets |
905 | 926 | ||||||
Income tax receivable |
1,083 | 895 | ||||||
Prepaid expenses and other current assets |
1,648 | 1,605 | ||||||
|
|
|
|
|||||
Total current assets |
41,402 | 31,701 | ||||||
Deferred tax assets |
1,229 | 1,334 | ||||||
Other assets |
450 | 499 | ||||||
Property and equipment, net |
3,233 | 2,737 | ||||||
Intangible assets, net |
2,694 | 3,022 | ||||||
|
|
|
|
|||||
Total assets |
$ | 49,008 | $ | 39,293 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Bank loan |
$ | 14,627 | $ | 5,612 | ||||
Accounts payable |
16,723 | 13,661 | ||||||
Accrued liabilities |
4,618 | 4,874 | ||||||
Note payable |
1,059 | 1,336 | ||||||
Income taxes payable |
521 | 330 | ||||||
|
|
|
|
|||||
Total current liabilities |
37,548 | 25,813 | ||||||
Note payable, less current portion |
589 | 1,023 | ||||||
Warrant liability |
19 | 75 | ||||||
Deferred tax liabilities |
166 | 178 | ||||||
Deferred rent |
722 | 78 | ||||||
|
|
|
|
|||||
Total liabilities |
39,044 | 27,167 | ||||||
Shareholders equity: |
||||||||
Common stock |
61,459 | 60,847 | ||||||
Accumulated other comprehensive loss |
(3,722 | ) | (1,757 | ) | ||||
Accumulated deficit |
(47,773 | ) | (46,964 | ) | ||||
|
|
|
|
|||||
Total shareholders equity |
9,964 | 12,126 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
$ | 49,008 | $ | 39,293 | ||||
|
|
|
|
6
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months | ||||||||
Ended December 31, | ||||||||
2014 | 2013 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
($ | 809 | ) | (7,176 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation and amortization |
1,549 | 2,017 | ||||||
Accrued and unpaid interest expense on note payable |
10 | | ||||||
Amortization of deferred financing fees |
57 | 26 | ||||||
Loss on disposal of assets |
8 | | ||||||
Stock-based compensation |
376 | 501 | ||||||
Change in fair value of contingent consideration |
| (764 | ) | |||||
Change in fair value of warrant liability |
(56 | ) | 10 | |||||
Provision for deferred income taxes |
114 | 12 | ||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(7,314 | ) | 789 | |||||
Other receivables |
511 | (1,009 | ) | |||||
Inventories |
(1,460 | ) | 3,833 | |||||
Prepaid expenses and other current assets |
(49 | ) | 124 | |||||
Other assets |
36 | (111 | ) | |||||
Accounts payable |
2,585 | (1,937 | ) | |||||
Accrued liabilities |
(292 | ) | (328 | ) | ||||
Deferred rent |
553 | | ||||||
Income taxes receivable/payable |
(50 | ) | 612 | |||||
|
|
|
|
|||||
Net cash used in operating activities |
(4,231 | ) | (3,401 | ) | ||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(1,604 | ) | (994 | ) | ||||
Purchases of intangible assets |
| (80 | ) | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(1,604 | ) | (1,074 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Borrowings on bank loan |
53,839 | 57,535 | ||||||
Repayments on bank loan |
(44,824 | ) | (51,791 | ) | ||||
Payment of financing fees |
(50 | ) | (40 | ) | ||||
Repayments on note payable |
(791 | ) | | |||||
Proceeds from exercise of stock options |
236 | 188 | ||||||
Payment of contingent consideration |
| (787 | ) | |||||
|
|
|
|
|||||
Net cash provided by financing activities |
8,410 | 5,105 | ||||||
|
|
|
|
|||||
Effects of foreign currency exchange rate changes on cash |
(181 | ) | 137 | |||||
|
|
|
|
|||||
Net increase in cash |
2,394 | 767 | ||||||
Cash, beginning of period |
1,496 | 2,773 | ||||||
|
|
|
|
|||||
Cash, end of period |
$ | 3,890 | $ | 3,540 | ||||
|
|
|
|
7
Supplementary Data
Adjusted EBITDA (Loss) Reconciliation (non-GAAP)
(in thousands)
(Unaudited)
Three Months | Nine Months | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net income (loss) |
$ | 1,358 | ($ | 566 | ) | ($ | 809 | ) | ($ | 7,176 | ) | |||||
Adjustments: |
||||||||||||||||
Depreciation and amortization |
440 | 618 | 1,536 | 2,043 | ||||||||||||
Stock-based compensation |
136 | 154 | 376 | 501 | ||||||||||||
Change in fair value of warrant liability |
(1 | ) | (324 | ) | (56 | ) | 10 | |||||||||
Acquisition related items |
| (53 | ) | | 99 | |||||||||||
Interest expense, net |
238 | 223 | 563 | 476 | ||||||||||||
Income tax expense |
542 | 1,281 | 546 | 1,250 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA (loss) |
$ | 2,713 | $ | 1,333 | $ | 2,156 | ($ | 2,797 | ) | |||||||
|
|
|
|
|
|
|
|
Adjusted EBITDA (loss), a non-GAAP financial measure, represents net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation, the gain/loss on the change in the fair value of the related warrant liability, goodwill impairment, if any, and acquisition related items. Adjusted EBITDA is not intended to represent cash flows for the period, nor is it being presented as an alternative to operating or net income (loss) as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. As defined, Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. We believe, however, that in addition to the performance measures found in our financial statements, Adjusted EBITDA is a useful financial performance measurement for assessing our Companys operating performance. We use Adjusted EBITDA as a measurement of operating performance in comparing our performance on a consistent basis over prior periods, as it removes from operating results the impact of our capital structure, including the interest expense resulting from our outstanding debt, and our asset base, including depreciation and amortization of our capital and intangible assets. In addition, Adjusted EBITDA is an important measure for our lender.
8