Discontinued Operations

12 Months Ended

Oct. 31, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

14. DISCONTINUED OPERATIONS

On July 31, 2015, the Company transferred to Zift Interactive LLC (“Zift”), a newly-formed subsidiary, certain rights under certain of its publishing licenses related to developing, publishing and distributing video game products through retail distribution for a term of one year. The Company transferred Zift to its former chief executive officer, Jesse Sutton. In exchange, the Company received Mr. Sutton’s resignation from the position of chief executive officer of the Company, including waiver of any severance payments and the execution of a separation agreement, together with his agreement to serve as a consultant to the Company. In addition, Zift will pay the Company a specified percent of its net revenue from retail sales on a quarterly basis.

In addition, the Company entered into a conveyance agreement with Zift under which it assigned to Zift certain assets used in the retail business and Zift agreed to assume and indemnify the Company for liabilities and claims related to the retail business, including customer claims for price protection and promotional allowances. The assets transferred to Zift included cash in an amount of $800,000, of which $400,000 was transferred immediately and the remaining $400,000 was payable by the Company in twelve equal consecutive monthly installments of $33,000 commencing August 1, 2015, and certain accounts receivable and inventory with an aggregate carrying value of approximately $87,000.

On June 23, 2017, the Company sold Majesco Sub to Zift (the “Purchaser”) pursuant to a purchase agreement (the “Purchase Agreement”). Pursuant to the terms of the Purchase Agreement, the Company sold to the Purchaser 100% of the issued and outstanding shares of common stock of Majesco Sub, including all of the right, title and interest in and to Majesco Sub’s business of developing, publishing and distributing video game products through mobile and online digital downloading. Pursuant to the terms of the Purchase Agreement, the Company will receive total cash consideration of $100,000 ($5,000 upon signing the Purchase Agreement and 19 additional monthly payments of $5,000) plus contingent consideration based on net revenues with a fair value of $0. The Company received $25,000 in cash consideration as of October 31, 2017.

The Company recorded a gain of $100,000 on the sale of Majesco Sub, calculated as the difference between the $100,000 in non-contingent consideration and the net carrying amount of Majesco Sub, which was $0. The gain on the sale of Majesco Sub may be adjusted in future periods by the contingent consideration, based upon the achievement of pre-determined revenue milestones of more than $50,000 per month.

The sale of Majesco Sub, classified in the Company’s video games segment, qualifies as a discontinued operation as the sale represents a strategic shift that has (or will have) a major effect on operations and financial results.

The results of operations from the discontinued business for the years ended October 31, 2017 and 2016 are as follows (in thousands):

	For the Years Ended
	October 31,
	2017			2016
Revenues	$	558		$	1,542
Expenses		1,007			2,349
Loss from discontinued operations	$	(449	)	$	(807	)
Gain on sale of discontinued operations	$	100		$	-

The assets and liabilities related to the discontinued operations as of October 31, 2017 and October 31, 2016 are as follows (in thousands):

	October 31, 2017		October 31, 2016
Current assets related to discontinued operations
Accounts receivable	$	-	$	113
Capitalized software development costs and license fees		-		50
	$	-	$	163
Current liabilities related to discontinued operations
Accounts payable and accrued expenses	$	-	$	810
	$	-	$	810

The cash flows from the discontinued business for the years ended October 31, 2017 and 2016 are as follows (in thousands):

	For the Years Ended October 31,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from discontinued operations	$	(349	)	$	(807	)
Adjustments to reconcile net loss from discontinued operations to net cash used in discontinued operating activities:
Depreciation and amortization		11			27
Stock based compensation expense		1,118			1,100
Amortization of capitalized software development costs and license fees		50			150
Gain on sale of Majesco Sub		(100	)		-
Changes in operating assets and liabilities:
Accounts receivable		113			170
Capitalized software development costs and license fees		-			(21	)
Accounts payable and accrued expenses		(810	)		(487	)
Payable to Zift		-			(19	)
Net cash provided by discontinued operating activities	$	33		$	113
CASH FLOWS FROM INVESTING ACTIVITIES
Cash received from sale of Majesco Sub	$	25		$	-
Net cash provided by discontinued investing activities	$	25		$	-