Monster Digital Announces Strategic and Legal Developments
December 04 2017 - 3:30PM
Monster Digital, Inc. (NASDAQ: MSDI) (the “Company”) announced
today certain strategic and legal developments.
The Company announced that it has forwarded Monster, Inc. a
notice of termination of that Trademark License Agreement by and
between Monster, Inc. and the Company’s wholly-owned subsidiary,
SDJ Technologies, Inc. (the “License Agreement”). The License
Agreement is terminated according to its terms ninety (90) days
after the receipt of the notice of termination by Monster, Inc.
The Company took this step as part of a strategic restructuring
effort with respect to its existing business. The Company has been
dissatisfied with the existing royalty rate under the License
Agreement, especially in light of decreasing sales and demand for
its action sports cameras and general softness in the overall
market for action sports cameras and accessories. After much
deliberation, management concluded that it could not continue to be
party to the License Agreement under the existing terms.
The termination is part of an overall restructuring of costs,
expenses and revenue sources at the Company. The proposed merger
with Innovate Biopharmaceuticals, Inc. allows existing stockholders
of the Company to participate in an opportunistic venture wholly
unrelated to the Company’s existing line of business. As previously
disclosed, the existing business of the Company has been
transferred to MD Holdings, Inc., a wholly-owned subsidiary of the
Company, which stock will be spun off to Company stockholders on a
pro rata basis immediately prior to the consummation of the
Company’s merger with Innovate. Management believes the Company’s
existing sports camera business can still be viable without the use
of the Monster brand and had has discussions with other companies
for a more cost effective license under which it could market
products, if so desired. Also, these products could be offered on a
self-branded basis.
The Company’s intent is to position MD Holdings to more
effectively operate and compete in its chosen market. As previously
disclosed, the Company has eliminated its substantial obligation to
Walgreens and raised substantial capital through recently concluded
Warrant Tender Offers. And as discussed below, the Company has
successfully had dismissed the pending lawsuit challenging its
merger with Innovate. The Company’s goal is that after the
spin-off, management of MD Holdings will have the option to
continue the existing action sports camera business without the
substantial ongoing royalty obligation to Monster, Inc., partner on
more attractive terms with another brand or even de-emphasize or
wind down the ongoing action sports camera business to merge with
an entity in an unrelated space or industry, all with the goal of
providing more accretive opportunities and heightened stockholder
value to the spun off entity.
David H. Clarke, Chairman and CEO said, “We are thankful for the
over five-year relationship with Monster, Inc. Through our joint
cooperation, we were able to achieve modest successes in our camera
and memory operations. However, we must be mindful of the business
of the Company to be spun off to our existing stockholders after
our merger with Innovate. The sports action camera has become
increasingly competitive in the past twelve months with margins
declining steadily. There is new low-priced competition. And, more
sophisticated cell phone cameras are, in some instances,
encroaching on the space occupied by sports action cameras. Our
management felt that continuing the relationship with Monster, Inc.
under the existing royalty structure was not in the best long-term
interests of our stockholders. We wish Monster, Inc. the best in
its future endeavors and will be open minded but careful with the
next phase of our development.”
In further developments, the Company also announced the
voluntary dismissal by the plaintiff in connection with the
previously disclosed putative class action complaint (the
“Complaint”) filed in the United States District Court for the
Central District of California against the Company, David H.
Clarke, the Company’s Chief Executive Officer and a member of the
Company’s Board of Directors, Jonathan Clark, the Company’s Interim
President and a member of the Company’s Board of Directors, Robert
Machinist, a member of the Company’s Board of Directors,
Christopher Miner, a member of the Company’s Board of Directors and
Steven Barre, a member of the Company’s Board of Directors. Each of
the Company’s directors are known as the “Individual Defendants”.
The Complaint sought class status on behalf of all of the Company’s
public shareholders persons and alleged violations by the Company
and the Individual Defendants of Sections 14(a) and 20(a) of the
Securities Exchange Act of 1934 (the “Exchange Act”) and the rules
promulgated thereunder, and secondary control person liability
against the Individual Defendants under Section 20(a) of the
Exchange Act primarily related to that Agreement and Plan of Merger
and Reorganization with Innovate. The Complaint sought to enjoin
the Company and the Individual Defendants from proceeding with an
anticipated stockholder vote on the Merger or consummating the
Merger, unless and until the Company disclosed certain alleged
material information which the Complaint alleged has been omitted
from the Proxy Statement or in the event the Merger is consummated,
to recover an unspecified amount of damages resulting from the
Individual Defendants’ alleged violations Sections 14(a) and 20(a)
of the Exchange Act.
David H. Clarke, Chairman and CEO noted, “We are thrilled with
the successful outcome of this complaint and removing another
potential obstacle to the proposed merger with Innovate.”
About Monster Digital, Inc.
Monster Digital develops, markets and
distributes Monster-branded products for use in high-performance
consumer electronics, mobile products and computing applications.
The Company designs and engineers premium action sports cameras and
accessories, in addition to advanced data storage and memory
products for professionals and consumers.
Monster Digital is a registered trademark of
Monster Products, Inc. in the U.S. and other countries.
For more information about the company, please
visit http://www.monsterdigital.com
Forward-Looking Statements:
Some of the statements in this press release are
"forward-looking" and are made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995.
Actual results and the timing of events could differ materially
from those anticipated in such forward-looking statements as a
result of risks and uncertainties including the timing and outcome
of any NASDAQ decision with respect to our requests; our inability
to take other actions to regain compliance with the NASDAQ
stockholders’ equity requirement; and our inability to maintain
compliance with other NASDAQ Capital Market listing requirements.
These statements involve risks and uncertainties that may cause
results to differ materially from the statements set forth in this
press release, including, among other things, our ability to obtain
and maintain regulatory approval for our products; plus other
factors described under the heading "Item 1A. Risk Factors" in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2016 or described in our other public filings. Our results may also
be affected by factors of which we are not currently aware. The
forward-looking statements in this press release speak only as of
the date of this press release. Monster Digital expressly disclaims
any obligation or undertaking to release publicly any updates or
revisions to such statements to reflect any change in its
expectations with regard thereto or any changes in the events,
conditions or circumstances on which any such statement is
based.
Contacts:
Monster Digital, Inc.
David Olert, CFO
dolert@monsterdigital.com
Investors:
PCG Advisory
Vivian Cervantes
646-863-6274
vivian@pcgadvisory.com
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