Monster Digital, Inc., makers of action sports cameras, has announced that it has forwarded Monster, Inc. a notice of termination of a 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 90 days after the receipt of the notice of termination by Monster, Inc., makers of cables for the custom installation market.
Monster Digital states that it took this step as part of a strategic restructuring effort with respect to its existing business. The company says it has been dissatisfied with the existing royalty rate under the license agreement due to the market's decreasing sales and demand for its action sports cameras and general softness 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.
“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,” comments David H. Clarke, Chairman and CEO, Monster Digital Inc.
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“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.”
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.
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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.
