Mad Catz Reports $33 Million Net Loss, Company in Possible Trouble

For its fiscal fourth quarter ended March 31, 2009, Mad Catz reported a net loss of $3.637 million compared to a net loss of $832,000 in the same quarter the previous year. For the full fiscal year, Mad Catz reported a net loss of $32.614 million compared to net income of $3.168 million.

Mad Catz attributes much of its lower performance to disadvantageous exchange rates, price protections and retail inventory reductions.

Furthermore, Mad Catz has been forced to accept a less desirable credit facility thanks to its recent performance. Presumably, Mad Catz violated certain covenants, requiring the capital credit facility with Wachovia Capital Finance Corporation to be renegotiated. Mad Catz's available capital limit has been reduced from $35 to $30 million. Also the interest rate on the facility has increased from the previous level of U.S. Prime plus 0.75% to U.S. Prime plus 2.00% or LIBOR plus 3.50%.

Due to the company's financial difficulties, the company has reached an agreement to amend the $14.5 million convertible note it issued as part of the payment for acquiring Saitek. Originally, $4.5 million was supposed to be paid on October 31, 2009 with the remainder to be paid one year later. The new payment scheme is much less favorable to the note holders – Mad Catz will pay $500,000 on October 31, 2009 this year, $550,000 on March 31, 2010 and $2.4 million each March 31 thereafter until the note is fully paid on March 31, 2019. If the note holders accepted this new scheme, it's likely that Mad Catz is in real trouble.