Subsequent Events |
12 Months Ended |
|---|---|
Mar. 31, 2018 | |
| Subsequent Events [Abstract] | |
| Subsequent Events |
Subsequent Events
Pay Transaction
On April 29, 2018, Digital Turbine Asia Pacific Pty, Ltd. and Digital Turbine Singapore Pte Ltd. (together, “Pay Seller”), each wholly owned subsidiaries of the Company, entered into an Asset Purchase Pay Agreement (the “Pay Agreement”), dated as of April 23, 2018, with Chargewave Ptd Ltd (“Pay Purchaser”) to sell certain assets (the “Pay Assets”) owned by the Pay Seller related to the Company’s Direct Carrier Billing business. The Pay Purchaser is principally owned and controlled by Jon Mooney, an officer of the Pay Seller. At the closing of the asset sale, Mr. Mooney will no longer be employed by the Company or Pay Seller.
Pursuant to the Pay Agreement, the Pay Seller will sell to Pay Purchaser their rights, title and interest in Pay Agreements between the applicable Pay Seller and carriers and content providers related to the Pay Assets as well as contracts with certain service providers. In addition, on July 1, 2019 (the “Technology Transfer Date”), the Pay Seller will transfer technology and infrastructure owned by the Pay Seller for the purpose of performing the business of the Pay Assets, and prior to such time Pay Seller will license such technology to Pay Purchaser for license fees described below. The Pay Seller continues to own all assets not specifically sold, including all accounts receivable for services supplied prior to the closing date and all Ignite related assets. On and after the closing, Pay Purchaser will assume and agree to pay and perform on any and all liabilities incurred in connection with transferred assets or the transferred contracts relating to the period after the closing date.
In consideration for the assets being transferred, the Pay Seller will receive license fees, revenue share and equity equivalent rights, as follows:
(1) Pay Purchaser will pay to the Pay Seller license fees, until the Technology Transfer Date, from a range of sources of gross profits related to the contracts transferred, in an amount equal to between zero to 70% of monthly gross profits, with the precise percentage of license fees varying based on the amount of such gross profits per a scale in the Pay Agreement, plus additional amounts for revenues generated from new customer introductions made by Pay Seller after the closing.
(2) For a period commencing on the Technology Transfer Date and ending on the date that is thirty-six (36) months from the closing, Pay Purchaser will pay Pay Seller revenue sharing payments, from a range of gross profits related to the contracts transferred, in an amount equal to between zero to 70% of monthly gross profits, with the precise percentage of revenue sharing varying based on the amount of such gross profits per a scale in the Pay Agreement, plus additional amounts for revenues generated from new customer introductions made by Pay Seller after the Technology Transfer Date.
(3) Pay Seller will also receive equity equivalent rights, including to be entitled to 20% of the net proceeds (in all forms of value) upon the closing of a wide variety of liquidity transactions involving the Pay Purchaser.
The Pay Agreement contains customary representations and warranties by each party with respect to itself and does not contain any representations or warranties by the Company with respect to the Company or its business. The Pay Sellers have also agreed to various customary covenants and Pay Agreements, including, among others, a non-compete, and the Pay Purchaser has agreed to provide a security interest in the transferred assets to secure its obligations.
The transaction is expected to be completed in June 2018.
The Pay assets and operations are now qualified as discontinued operations and, as a result, have been reclassified from loss from continuing operations to discontinued operations in accordance with the provisions of “Presentation of Financial Statements” in the Accounting Standards Codification in this and all future filings for all periods presented.
The foregoing description of the Pay Agreement does not purport to be complete and is qualified in its entirety by reference to the Pay Agreement, which was filed on a Form 8-K on April 29, 2018.
A&P Transaction
On April 29, 2018, Digital Turbine Media, Inc. (the “A&P Seller”), a wholly owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “A&P Agreement”), dated as of April 28, 2018, with Creative Clicks B.V. (the “A&P Purchaser”) to sell business relationships with various advertisers and publishers (the “A&P Assets”) related to the Company’s Advertising and Publishing business.
Pursuant to the A&P Agreement, the A&P Seller will sell to the A&P Purchaser its rights, title and interest in agreements between A&P Seller and specified advertisers and publishers, other than agreements or relationships, or parts thereof, relating to A&P Seller’s application (“app”) distribution services. The A&P Seller continues to own all assets not specifically sold, including integration, technology or operational assets or services, as well as contracts not transferred or assigned under the A&P Agreement. A&P Seller owns all accounts receivable for services supplied prior to the closing date, and all accounts receivable for services partially performed prior to and at the closing date will be prorated between A&P Seller and A&P Purchaser. On and after the closing, the A&P Purchaser will assume and agree to pay and perform on any and all liabilities incurred in connection with the transferred assets relating to the period after the closing date, in accordance with the terms of the respective agreements.
In consideration for the assets being transferred, the A&P Purchaser will, over a three year period after the closing, share revenue from transferred assets, new revenue streams from the transferred assets and new engagements with specified A&P Seller business partners. The revenue share is calculated as follows: A&P Purchaser will pay A&P Seller 27.5% of gross profits, with a revenue share maximum of $1,000,000 in year 1, scaling down to 15% of gross profits, with a revenue share maximum of $500,000, in year 3, as further specified in the A&P Agreement. Additionally, for each customer introduction A&P Seller makes to A&P Purchaser that leads to a customer contract with A&P Purchaser or an affiliate, A&P Purchaser will pay A&P Seller a percentage of gross profit earned from the contract.
The A&P Agreement contains customary representations and warranties by each party with respect to itself and does not contain any representations or warranties by the Company to the Company or its business. The A&P Seller has also agreed to various customary covenants and agreements, including, among others, a non-compete, and the A&P Purchaser has agreed to provide a security interest in the transferred assets to secure its obligations. The A&P Seller has further represented that it will make best efforts that certain employees specified in the A&P Agreement accept employment with the A&P Purchaser on or after the closing date.
The transaction is expected to be complete in June 2018.
The A&P assets and operations are now qualified as discontinued operations and, as a result, have been reclassified from loss from continuing operations to discontinued operations in accordance with the provisions of “Presentation of Financial Statements” in the Accounting Standards Codification in this and all future filings for all periods presented.
The foregoing description of the A&P Agreement does not purport to be complete and is qualified in its entirety by reference to the A&P Agreement, which was filed on a Form 8-K on April 29, 2018.
There can be no assurance that the transactions described above will be consummated on the terms described or at all. The Pay Agreement and the A&P Agreement has been included to provide investors with information regarding its terms and is not intended to provide any financial or other factual information about the Company or its subsidiaries. In particular, the representations, warranties and covenants contained in such agreements (a) were made only for purposes of such agreements and as of specific dates, (b) were solely for the benefit of the parties to such agreements, (c) may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures, (d) were made for the purposes of allocating contractual risk between the parties to such agreements instead of establishing matters subject to representations and warranties as facts, and (e) may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of such agreement, which subsequent information may or may not be fully reflected in public disclosures by the Company. Accordingly, investors should read the representations and warranties in such agreement not in isolation but only in conjunction with the other information about the Company that is included in reports, statements and other filings it makes with the U.S. Securities and Exchange Commission.
As previously disclosed, in 2016 the Company received an informal inquiry from the staff of the Securities and Exchange Commission’s Division of Enforcement requesting the voluntary provision of documents and information generally related to the Company’s internal controls over financial reporting and disclosure controls and procedures. On April 17, 2018, the Company received a “Wells Notice,” stating that the staff of the SEC has made a preliminary determination to recommend to the SEC that it file an enforcement action against the Company alleging violations of Sections 13(a) and 13(b)(2)(B) of the Securities and Exchange Act of 1934 and Rules 13a-1, 13a-13 and 13a-15 thereunder. Although the Company seeks to resolve this matter by settlement, there is no assurance that a settlement will be reached or as to terms and conditions. Please see the section of this filing entitled “Item 9A--Controls and Procedures” regarding the Company’s remediation efforts and results to date regarding the material weaknesses that previously rendered its internal controls ineffective. The Company believes that the resolution of this matter is unlikely to have a material impact on its operations or financial position.
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