Mad Catz Warns of "Substantial" Doubts About Survival

Business issues credit warning, explaining increased reliance on strong Rock Band 4 sales.


Mad Catz, the prominent peripherals company that has been designing arcade sticks and other esoteric accessories since 1989, could soon face the prospect of closure if its income does not increase significantly.

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In late June, the corporation offered a warning to investors, explaining that it had failed to meet a monthly target that had been implemented as a failsafe by its credit lender, Wells Fargo.

Because Mad Catz was unable to generate as much money as Wells Fargo had asked, the bank was given the option to call in its loan. Had this occurred, Mad Catz may not have been able to continue as a going concern.

However, on June 23, Well Fargo waived Mad Catz' violation, and entered into a new agreement with the corporation that will carry on until July 31, 2016.

But Mad Catz, which has been losing money for three years straight since 2011, said it requires "significant contributions from anticipated sales of products related to the Rock Band 4 video game."

Mad Catz is co-publishing the Harmonix-developed title. The company also manufactures arcade boards for Street Fighter IV and Street Fighter V.

It added that the uncertainty surrounding Rock Band 4's sales, along with a number of other factors, "raise substantial doubt about the company’s ability to continue as a going concern."

Speaking to Game Informer, Mad Catz claims that it has overcome a major hurdle by securing a new line of credit. Initially the company will be loaned $20 million, which could increase to $35 million from September in order to ship Rock Band 4.

Karen McGinnis, chief financial officer at the company, claimed that part of the reason it needed to issue a credit warning was because of the necessity to use unequivocal language in financial documents. She claims that the reality of the situation is far more nuanced and positive.

For the financial year that ended in March 2015, Mad Catz posted a net income of $4.7 million. Representatives for the corporation were unavailable at the time of going to press.

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