Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v3.10.0.1
Discontinued Operations
9 Months Ended
Dec. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Discontinued Operations
On April 29, 2018, the Company entered into two distinct disposition agreements with respect to selected assets owned by our subsidiaries.
DT APAC and DT Singapore (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 was no longer employed by the Company or Pay Seller. As consideration for this asset sale, Digital Turbine is entitled to receive certain license fees, profit-sharing, and equity participation rights as outlined in the Company’s Form 8-K filed on May 1, 2018 with the SEC. The transaction was completed on July 1, 2018 with an effective date of July 1, 2018. With the sale of these assets, the Company has determined that it will exit the segment of the business previously referred to as the Content business.
In accordance with the Pay Agreement, the Company assigned and transferred a material contract to the Pay Purchaser. Subsequent to the transaction closing associated with the Pay Agreement, the Company received notification from the Pay Purchaser that the partner to the material contract had terminated the contract with the Pay Purchaser. Due to the material contract being terminated, the Company has determined that the estimated earn out from the Pay Purchaser to be $0. As all the assets being transferred had been fully impaired prior to the closing of the transaction, the gain/loss on sale related to the Pay Agreement transaction is currently estimated at $0. Furthermore, the Company retained certain receivables and payables for content delivered for the benefit of the partner to the material contract, where these certain receivables and payables were all recognized prior to the closing of the Pay Agreement. These amounts are presented below as assets and liabilities held for disposal. As of December 31, 2018, the Company has determined there to be uncertainty surrounding the collectability of the receivables due to ongoing discussions with the business partner. If at a later date it is determined that the amounts recorded are not collectible due to disputes surrounding the content delivered, the related payables would also be withheld. At this time, the Company has requested mediation but does not have enough information to reasonably estimate which receivables and payables, if any, may be uncollectable. The total net exposure to the Company if all of the remaining receivables and payables are determined to be uncollectable is approximately $931. These assets and liabilities remain on our books as a component of discontinued operations as of December 31, 2018.
DT Media, 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. As consideration for this asset sale, we are entitled to receive a percentage of the gross profit derived from these customer agreements, for a period of three years, as outlined in the Company’s Form 8-K filed on May 1, 2018 with the SEC. The transaction was completed on June 28, 2018 with an effective date of June 1, 2018. With the sale of these assets, the Company has determined that it will exit the operating segment of the business previously referred to as the A&P business, which was previously part of Advertising, the Company's sole continuing reporting unit. No gain or loss on sale was recognized related to this divestiture. All transferred assets and liabilities, with the exception of goodwill, were fully amortized prior to entering into the sales agreement. As the consideration given by the purchaser was already materially determined at March 31, 2018, goodwill was impaired to the estimated future cash flows of the divested business, which was effectively the purchase price. With the consummation of the sale, the remaining goodwill asset was netted against the purchase price receivable for a net impact of $0 on the Consolidated Statement of Operations for the three and nine months ended December 31, 2018.
These dispositions will allow the Company to benefit from a streamlined business model, simplified operating structure, and enhanced management focus.
The following table summarizes the financial results of our discontinued operations for all periods presented herein:

Condensed Statements of Operations and Comprehensive Loss
For Discontinued Operations
(in thousands, except per share amounts)
(Unaudited)
 
 
Three months ended December 31,
 
Nine months ended December 31,
 
 
2018
 
2017
 
2018
 
2017
Net revenues
 
$
3

 
$
15,298

 
$
3,880

 
$
38,251

Total cost of revenues
 

 
13,046

 
3,070

 
32,782

Gross profit
 
3

 
2,252

 
810

 
5,469

Product development
 
37

 
503

 
703

 
1,683

Sales and marketing
 
7

 
418

 
350

 
1,243

General and administrative
 
160

 
440

 
1,212

 
1,443

Income / (loss) from operations
 
(201
)
 
891

 
(1,455
)
 
1,100

Interest and other income / (expense), net
 
(11
)
 
105

 
(157
)
 
(47
)
Net income / (loss) from discontinued operations, net of taxes
 
$
(212
)
 
$
996

 
$
(1,612
)
 
$
1,053

Comprehensive income / (loss)
 
$
(212
)
 
$
996

 
$
(1,612
)
 
$
1,053

Basic and diluted net loss per common share
 

 
0.01

 
(0.02
)
 
0.02

Weighted-average common shares outstanding, basic
 
77,645

 
72,148

 
76,977

 
68,575

Weighted-average common shares outstanding, diluted
 
77,645

 
75,442

 
76,977

 
70,252

Details on assets and liabilities classified as held for disposal in the accompanying consolidated balance sheets are presented in the following table:
 
 
December 31, 2018
 
March 31, 2018
 
 
(Unaudited)
 
 
Assets held for disposal
 
 
 
 
Accounts receivable, net of allowances of $198 and $578, respectively
 
$
3,227

 
$
8,013

Property and equipment, net
 
175

 
377

Goodwill
 

 
309

Prepaid expenses and other current assets
 
32

 
54

Current assets held for disposal
 
3,434

 
8,753

Total assets held for disposal
 
$
3,434

 
$
8,753

 
 
 
 
 
Liabilities held for disposal
 
 
 
 
Accounts payable
 
$
4,114

 
$
8,789

Accrued license fees and revenue share
 
1,068

 
3,059

Accrued compensation
 
227

 
529

Other current liabilities
 
21

 
349

Current liabilities held for disposal
 
5,430

 
12,726

Total liabilities held for disposal
 
$
5,430

 
$
12,726


Assets and liabilities held for disposal as of December 31, 2018 and March 31, 2018 are classified as current since we expect the dispositions to be completed within one year.

The following table provides reconciling cash flow information for our discontinued operations:
 
 
Nine months ended December 31,
 
 
2018
 
2017
 
 
(Unaudited)
 
(Unaudited)
Cash flows from operating activities
 
 
 
 
Net income / (loss) from discontinued operations, net of taxes
 
$
(1,612
)
 
$
1,053

Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
247

 
749

Impairment of goodwill
 
309

 

Change in allowance for doubtful accounts
 
(380
)
 
13

Stock-based compensation
 
37

 
160

(Increase) / decrease in assets:
 
 
 
 
Accounts receivable
 
5,164

 
(3,477
)
Prepaid expenses and other current assets
 
95

 
19

Increase / (decrease) in liabilities:
 
 
 
 
Accounts payable
 
(4,675
)
 
1,503

Accrued license fees and revenue share
 
(1,991
)
 
654

Accrued compensation
 
(302
)
 
28

Other current liabilities
 
(328
)
 
149

Cash used in operating activities
 
(3,436
)
 
851

 
 
 
 
 
Cash flows from investing activities
 
 
 
 
Capital expenditures
 

 
(92
)
Cash used in investing activities
 

 
(92
)
 
 
 
 
 
Cash used in discontinued operations
 
$
(3,436
)
 
$
759