The results show that the firm lost $122.1 million, or $3.34 a share, in the quarter, compared with a loss of $11 million, or 31 cents a share, a year earlier.
Revenue fell 12.6 percent to $160.9 million from $184.1 million.
Excluding the goodwill impairment, Mega Brands said it had returned to operating profitability with earnings from operations of $22.2 million, up from a year-ago operating loss of $5.1 million, following recalls of the Magnetix toys.
Third-quarter net sales of toys declined nine per cent to $101.7 million due to lower shipments in the boys five-plus category, including MagNext whose launch has been slower than expected.
"With the economic situation out there retail is tough pretty well everywhere and we're seeing some of that in the toy industry as well," CEO Marc Bertrand said in a conference call.