Broadband services provider REDtone International Bhd and Mobile Money International Sdn Bhd have formalised a revision of an assignment consideration, which was part of an agreement inked between the two companies in 2006 involving the transfer of intellectual property rights.
“After observing the market, technology and industry trends, historical financial information of Mobile Money, the long payment period of the assignment consideration of up to 30 years and cash requirements of REDtone, REDtone has had various discussions with Mobile Money to revise the assignment consideration,” REDtone said in its exchange filing yesterday.
The assignment consideration has been revised to RM3.5 million is cash, payable in three tranches.
Upon full settlement of the revised assignment consideration, Mobile Money is deemed to have completed its obligations in respect of the revised consideration, it said.
In the original agreement dated on March 2006, REDtone sold its intellectual property rights in respect of its electronic purse transaction method and system to Mobile Money, and in consideration of the assignment, Mobile Money granted REDtone a non-exclusive and non-transferable perpetual licence to use the software.
In exchange for the assignment of intellectual propoerty rights, Mobile Money was to pay REDtone 20% of its gross profit (minimum RM15 million, maximum RM25 million) on the first year it generated a profit. The amount payable would decline with each subsequent year.
If Mobile Money makes losses, the amount payable will be deferred until it turns a profit.
Mobile Money recorded losses and only became profitable in its financial year ended Feb 28, 2011.
As at June 5, 2012, Mobile Money has paid a total of RM574,000 in assignment consideration, prior to the revised amount.
The revised consideration is expected to improve REDtone’s cash position by approximately RM2.93 million for its financial year ending May 31, 2013.
The changes are to be completed by November 2012, said REDtone.