Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v3.19.2
Discontinued Operations
 3 Months Ended
Jun. 30, 2019
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 exited 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 June 30, 2019, 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 un-collectible and un-payable, respectively. The total net exposure to the Company if all of the remaining receivables and payables are determined to be un-collectible and un-payable, respectively, is approximately $194. These assets and liabilities remain on our books as a component of discontinued operations as of June 30, 2019.
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.
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 June 30,
 
 
2019
 
2018
Net revenues
 
$
—

 
$
3,870

Total cost of revenues
 
—

 
3,074

Gross profit
 
—

 
796

Product development
 
33

 
571

Sales and marketing
 
—

 
227

General and administrative
 
62

 
910

Loss from operations
 
(95
)
 
(912
)
Interest and other income / (expense), net
 
(53
)
 
(132
)
Loss from discontinued operations before income taxes
 
(148
)
 
(1,044
)
Loss from discontinued operations, net of taxes
 
$
(148
)
 
$
(1,044
)
Comprehensive loss
 
$
(148
)
 
$
(1,044
)
Basic and diluted net loss per common share
 
—

 
(0.01
)
Weighted-average common shares outstanding, basic and diluted
 
81,814

 
76,204

Details on assets and liabilities classified as held-for-disposal in the accompanying consolidated balance sheets are presented in the following table:
 
 
June 30, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Assets held for disposal
 
 
 
 
Accounts receivable, net of allowances of $1,559 and $1,589, respectively
 
$
1,813

 
$
1,883

Property and equipment, net
 
4

 
143

Current assets held for disposal
 
1,817

 
2,026

Total assets held for disposal
 
$
1,817

 
$
2,026

 
 
 
 
 
Liabilities held for disposal
 
 
 
 
Accounts payable
 
$
2,981

 
$
3,158

Accrued license fees and revenue share
 
467

 
537

Accrued compensation
 
206

 
226

Other current liabilities
 
—

 
3

Current liabilities held for disposal
 
3,654

 
3,924

Total liabilities held for disposal
 
$
3,654

 
$
3,924


Assets and liabilities held for disposal as of June 30, 2019 and March 31, 2019 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:
 
 
Three months ended June 30,
 
 
2019
 
2018
 
 
(Unaudited)
 
(Unaudited)
Cash flows from operating activities
 
 
 
 
Net loss from discontinued operations, net of taxes
 
$
(148
)
 
$
(1,044
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
19

 
155

Change in allowance for doubtful accounts
 
(30
)
 
(310
)
Loss on disposal of fixed assets
 
103

 
—

Stock-based compensation
 
—

 
37

(Increase) / decrease in assets:
 
 
 
 
Accounts receivable
 
100

 
4,533

Goodwill
 
—

 
309

Prepaid expenses and other current assets
 
—

 
(214
)
Increase / (decrease) in liabilities:
 
 
 
 
Accounts payable
 
(155
)
 
(4,265
)
Accrued license fees and revenue share
 
(96
)
 
(613
)
Accrued compensation
 
(20
)
 
330

Other current liabilities
 
(3
)
 
(142
)
Cash used in operating activities
 
(230
)
 
(1,224
)
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
Capital expenditures
 
—

 
(41
)
Cash used in investing activities
 
—

 
(41
)
 
 
 
 
 
Cash used in discontinued operations
 
$
(230
)
 
$
(1,265
)