Quarterly report pursuant to Section 13 or 15(d)

Acquisitions and Disposals

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Acquisitions and Disposals
3 Months Ended
Jun. 30, 2014
Acquisitions and Disposals
3. Acquisitions and Disposals

DT APAC

On April 12, 2013, Mandalay Digital, through its indirect wholly owned subsidiary DT APAC, acquired all of the issued and outstanding stock of MIAH. MIAH owns directly or indirectly subsidiaries Mirror Image Access (Australia) Pty Ltd (MIA), MIA Technology Australia Pty Ltd (MIATA) and MIA Technology IP Pty Ltd.

The purpose of the DT APAC acquisition was an effort to not only build on the Company’s current distribution network, but to enhance its mobile content infrastructure with the IP acquired in the purchase.

The acquisition of DT APAC was capitalized through a combination of intercompany debt and the issuance of equity.

The purchase consideration for the transaction was comprised of cash, a note, and common stock of the Company, as follows:

 

  (1) At closing AUD 1,220 in cash, translated to $1,287 for US GAAP reporting purposes;

 

  (2) Convertible Note payable of AUD 2,280, translated to $2,404;

 

  (3) Shares of common stock of the Company (the “Closing Shares”) equivalent to AUD 3,500, translated to $3,691 and under the agreement, converted to shares at $3.65 per share, or 1,011,164 shares of the common stock of the Company. The closing price of the stock on that day was $4.40 per share, for a total value of $4,449.

The Closing Shares are subject to a Registration Rights Agreement that provides for piggyback rights for 3 years and inclusion on the Company’s Form S-3 filed August 30, 2013, and subsequently made effective on October 31, 2013.

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the date of acquisition.

 

     Unaudited  

Cash

   $ 513   

Accounts receivable

     2,809   

Prepaid expenses and other assets

     896   

Property, plant and equipment

     300   

Customer relationships

     1,600   

Developed technology

     3,400   

Trade names / trademarks

     54   

Library

     300   

Goodwill

     2,654   

Accounts payable

     (1,151

Accrued liabilities

     (2,890

Accrued compensation

     (345
  

 

 

 

Purchase price

   $ 8,140   
  

 

 

 

In addition to the value assigned to the acquired workforce, the Company recorded the excess of the purchase price over the estimated fair value of the assets acquired as an increase in goodwill. This goodwill arises because the purchase price reflects the strategic fit and resulting synergies that the acquired business brings to the Company’s existing operations. In the fiscal year ended March 31, 2014, the Company recorded an impairment charge of $54 to write down trade names pursuant to its decision to rename and rebrand DT APAC. In the period ended June 30, 2014, the Company finalized the purchase price allocation of DT APAC, which resulted in an adjustment from intangibles to goodwill of $1,472.

 

The amortization period for the intangible assets acquired in the MIA transaction is as follows:

 

     Remaining
Useful Life
 

Customer relationships

     14 years   

Developed technology

     5 years   

Trade names / Trademarks

     5 years   

Library

     5 years   

Goodwill

     Indefinite   

The pro forma financial information of the Company’s consolidated operations if the acquisition of DT APAC had occurred as of April 1, 2012 is presented below.

 

     Unaudited  
     Three Months Ended June 30,  
     2013  

Revenues

   $ 5,617   

Cost of goods sold

     3,640   

Gross profit

     1,977   

Operating expenses

     6,215   

Loss from operations

     (4,238 )

Non-operating expense

     1,600   

Loss before provision for income taxes

     (5,838 )

Provision for income taxes

     (135 )

Net loss

   $ (5,703 )

Basic and diluted loss per share

   $ (0.30 )