UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 20172020
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-35958
DIGITAL TURBINE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware22-2267658
(State or Other Jurisdiction of

Incorporation or Organization)
(I.R.S. Employer

Identification No.)
110 San Antonio Street, Suite 160, Austin, TX78701
(Address of Principal Executive Offices)(Zip Code)
(512) 387-7717
(Issuer’sRegistrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, Par Value $0.0001 Per Share
APPSThe Nasdaq Stock Market LLC
(NASDAQ Capital Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ý☒    No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ý☒    No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of a “large accelerated filer,” “accelerated filer,”, “smaller reporting company”,company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check One)
Large Accelerated Filer☐Accelerated Filer☒
Non-accelerated Filer☐Smaller Reporting Company☐
Large Accelerated Filer¨Accelerated Filerý
Non-accelerated Filer
¨  (do not check if smaller reporting company)
Smaller Reporting Company¨
Emerging Growth Company
¨

☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).    Yes ¨☐    No ý☒
As of January 31, 2018,28, 2021, the Company had  75,143,35489,413,606 shares of its common stock, $0.0001 par value per share, outstanding.




Digital Turbine, Inc.
QUARTERLY REPORT ON FORM 10-Q QUARTERLY REPORT FOR THE QUARTER ENDED December 31, 20172020
TABLE OF CONTENTS
Item 1.
Item 1.
Consolidated Financial Statements
3
4
5
6
68
Item 2.
3627
Item 3.
4737
Item 4.
4738
Item 1.
4940
Item 1 (A).1A.
4940
Item 2.
4940
Item 3.
4940
Item 4.
4940
Item 5.
4940
Item 6.
5042
5143




PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
Digital Turbine, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except par value and share amounts)
 December 31, 2017 March 31, 2017December 31, 2020March 31, 2020
 (Unaudited)  (Unaudited)
ASSETS    ASSETS  
Current assets    Current assets
Cash $6,883
 $6,149
Cash$43,659 $21,534 
Restricted cash 331
 331
Restricted cash0 125 
Accounts receivable, net of allowances of $841 and $597, respectively 32,494
 16,554
Deposits 155
 121
Accounts receivable, net of allowances of $4,913 and $4,059, respectivelyAccounts receivable, net of allowances of $4,913 and $4,059, respectively59,027 33,135 
Prepaid expenses and other current assets 551
 510
Prepaid expenses and other current assets1,955 3,653 
Total current assets 40,414
 23,665
Total current assets104,641 58,447 
Property and equipment, net 2,693
 2,377
Property and equipment, net11,670 8,183 
Deferred tax assets 593
 352
Right-of-use assetsRight-of-use assets3,807 4,237 
Intangible assets, net 2,844
 4,565
Intangible assets, net41,871 43,882 
Goodwill 76,621
 76,621
Goodwill70,452 69,262 
TOTAL ASSETS $123,165
 $107,580
TOTAL ASSETS$232,441 $184,011 
LIABILITIES AND STOCKHOLDERS' EQUITY    LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities    Current liabilities 
Short-term debt, net of issuance costs of $62 and $62, respectivelyShort-term debt, net of issuance costs of $62 and $62, respectively$1,938 $1,188 
Accounts payable $28,404
 $19,868
Accounts payable34,142 $31,579 
Accrued license fees and revenue share 12,857
 8,529
Accrued license fees and revenue share36,188 19,423 
Accrued compensation 3,456
 1,073
Accrued compensation8,340 4,311 
Short-term debt, net of debt issuance costs of $247 and $0, respectively 1,653
 —
Accrued earn-outAccrued earn-out10,000 23,735 
Other current liabilities 1,844
 1,304
Other current liabilities7,849 2,573 
Total current liabilities 48,214
 30,774
Total current liabilities98,457 82,809 
Convertible notes, net of debt issuance costs and discounts of $2,881 and $6,315, respectively 5,751
 9,685
Convertible note embedded derivative liability 5,896
 3,218
Warrant liability 3,602
 1,076
Long-term debt, net of issuance costs of $198 and $245, respectivelyLong-term debt, net of issuance costs of $198 and $245, respectively17,052 18,505 
Other non-current liabilities 51
 782
Other non-current liabilities4,758 5,243 
Total liabilities 63,514
 45,535
Total liabilities120,267 106,557 
Commitments and contingencies (Note 15)Commitments and contingencies (Note 15)00
Stockholders' equity    Stockholders' equity  
Preferred stock    Preferred stock 
Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1,000) 100
 100
Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1,000)100 100 
Common stock    Common stock
$0.0001 par value: 200,000,000 shares authorized; 74,079,153 issued and 73,344,697 outstanding at December 31, 2017; 67,329,262 issued and 66,594,807 outstanding at March 31, 2017 10
 8
$0.0001 par value: 200,000,000 shares authorized; 90,143,539 issued and 89,409,083 outstanding at December 31, 2020; 88,041,240 issued and 87,306,784 outstanding at March 31, 2020$0.0001 par value: 200,000,000 shares authorized; 90,143,539 issued and 89,409,083 outstanding at December 31, 2020; 88,041,240 issued and 87,306,784 outstanding at March 31, 202010 10 
Additional paid-in capital 311,621
 299,580
Additional paid-in capital370,435 360,224 
Treasury stock (754,599 shares at December 31, 2017 and March 31, 2017) (71) (71)
Treasury stock (754,599 shares at December 31, 2020 and March 31, 2020)Treasury stock (754,599 shares at December 31, 2020 and March 31, 2020)(71)(71)
Accumulated other comprehensive loss (326) (321)Accumulated other comprehensive loss(910)(591)
Accumulated deficit (251,683) (237,251)Accumulated deficit(257,390)(282,218)
Total stockholders' equity 59,651
 62,045
Total stockholders' equity112,174 77,454 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $123,165
 $107,580
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$232,441 $184,011 
The accompanying notes are an integral part of these consolidated financial statements.

3


Digital Turbine, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive LossIncome / (Loss) (Unaudited)
(in thousands, except per share amounts)
  Three Months Ended December 31,Nine Months Ended December 31,
  2017 20162017 2016
Net revenues $38,031
 $22,285
$92,042
 $69,156
Cost of revenues       
License fees and revenue share 27,719
 17,039
66,485
 54,060
Other direct cost of revenues 651
 1,878
1,917
 5,640
Total cost of revenues 28,370
 18,917
68,402
 59,700
Gross profit 9,661
 3,368
23,640
 9,456
Operating expenses       
Product development 3,623
 3,113
9,218
 9,065
Sales and marketing 2,042
 1,683
5,288
 4,655
General and administrative 4,592
 3,982
12,504
 13,902
Total operating expenses 10,257
 8,778
27,010
 27,622
Loss from operations (596) (5,410)(3,370) (18,166)
Interest and other expense, net       
Interest expense, net (446) (725)(1,815) (2,029)
Foreign exchange transaction gain / (loss) 35
 (9)(182) (13)
Change in fair value of convertible note embedded derivative liability (1,658) 2,853
(6,310) 2,423
Change in fair value of warrant liability (898) 937
(2,526) 797
Loss on extinguishment of debt (284) —
(1,166) (293)
Other income / (expense) (36) 68
—
 101
Total interest and other expense, net (3,287) 3,124
(11,999) 986
Loss from operations before income taxes (3,883) (2,286)(15,369) (17,180)
Income tax provision / (benefit) (84) 300
(937) 159
Net loss $(3,799) $(2,586)$(14,432) $(17,339)
Other comprehensive income / (loss)       
Foreign currency translation adjustment —
 5
(5) (48)
Comprehensive loss $(3,799) $(2,581)$(14,437) $(17,387)
Basic and diluted net loss per common share $(0.05) $(0.04)$(0.21) $(0.26)
Weighted-average common shares outstanding, basic and diluted 72,148
 66,634
68,575
 66,416
Three months ended December 31,Nine months ended December 31,
2020201920202019
Net revenues$88,592 $36,016 $218,497 $99,364 
Cost of revenues
License fees and revenue share50,144 21,576 122,976 59,997 
Other direct costs of revenues749 400 1,971 1,022 
Total cost of revenues50,893 21,976 124,947 61,019 
Gross profit37,699 14,040 93,550 38,345 
Operating expenses  
Product development5,202 2,783 13,827 8,312 
Sales and marketing5,219 2,815 14,372 7,534 
General and administrative6,761 4,310 22,096 12,212 
Total operating expenses17,182 9,908 50,295 28,058 
Income from operations20,517 4,132 43,255 10,287 
Interest and other income / (expense), net  
Interest income / (expense), net(266)59 (859)118 
Change in fair value of warrant liability0 (870)0 (10,601)
Change in estimated contingent consideration(4,662)0 (15,419)0 
Other income / (expense)(13)(19)(51)455 
Total interest and other income / (expense), net(4,941)(830)(16,329)(10,028)
Income from continuing operations before income taxes15,576 3,302 26,926 259 
Income tax provision1,061 41 2,098 6 
Income from continuing operations, net of taxes14,515 3,261 24,828 253 
Income / (loss) from discontinued operations0 65 0 (171)
Net income / (loss) from discontinued operations, net of taxes0 65 0 (171)
Net income$14,515 $3,326 $24,828 $82 
Other comprehensive loss  
Foreign currency translation adjustment(132)(44)(319)(364)
Comprehensive income$14,383 $3,282 $24,509 $(282)
Basic net income per common share
Continuing operations$0.16 $0.04 $0.28 $0 
Discontinued operations0 0 0 0 
Net income$0.16 $0.04 $0.28 $0 
Weighted-average common shares outstanding, basic89,003 85,876 88,140 83,869 
Diluted net income per common share
Continuing operations$0.15 $0.04 $0.26 $0 
Discontinued operations0 0 0 0 
Net income$0.15 $0.04 $0.26 $0 
Weighted-average common shares outstanding, diluted96,976 92,472 95,563 89,759 
The accompanying notes are an integral part of these consolidated financial statements.

4


Digital Turbine, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 Nine Months Ended December 31,Nine months ended December 31,
 2017 201620202019
Cash flows from operating activities  
  
Cash flows from operating activities  
Net loss $(14,432) $(17,339)
Adjustments to reconcile net loss to net cash used in operating activities:    
Net income from continuing operations, net of taxesNet income from continuing operations, net of taxes$24,828 $253 
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization 2,707
 6,325
Depreciation and amortization5,062 1,484 
Change in allowance for doubtful accounts 244
 130
Amortization of debt discount and debt issuance costs 875
 969
Accrued interest 165
 297
Loss on disposal of fixed assetsLoss on disposal of fixed assets0 4 
Provision for doubtful accountsProvision for doubtful accounts854 206 
Non-cash interest expenseNon-cash interest expense55 0 
Stock-based compensation 2,296
 3,335
Stock-based compensation3,545 2,044 
Stock-based compensation for services rendered
 224
 276
Stock-based compensation for services rendered741 470 
Change in fair value of convertible note embedded derivative liability 6,310
 (2,423)
Change in fair value of warrant liability 2,526
 (797)Change in fair value of warrant liability0 10,601 
Loss on extinguishment of debt 1,166
 293
Change in estimated contingent considerationChange in estimated contingent consideration15,419 0 
Payment of contingent consideration in excess of amount capitalized at acquisitionPayment of contingent consideration in excess of amount capitalized at acquisition(5,419)0 
(Increase) / decrease in assets:    (Increase) / decrease in assets:
Restricted cash transferred from operating cash —
 (323)
Accounts receivable (16,184) (1,877)Accounts receivable(26,746)(4,193)
Deposits (34) 83
Deferred tax assets (241) 212
Deferred tax assets0 40 
Prepaid expenses and other current assets (41) 30
Prepaid expenses and other current assets1,698 (829)
Right-of-use assetsRight-of-use assets430 (2,029)
Increase / (decrease) in liabilities:    Increase / (decrease) in liabilities:
Accounts payable 8,536
 4,509
Accounts payable2,563 5,908 
Accrued license fees and revenue share 4,328
 (712)Accrued license fees and revenue share16,765 59 
Accrued compensation 2,383
 (241)Accrued compensation4,029 855 
Other current liabilities 385
 (818)Other current liabilities5,273 3,459 
Other non-current liabilities (731) 283
Other non-current liabilities(485)1,823 
Net cash provided by (used in) operating activities 482
 (7,788)
Net cash provided by operating activities - continuing operationsNet cash provided by operating activities - continuing operations48,612 20,155 
Net cash used in operating activities - discontinued operationsNet cash used in operating activities - discontinued operations0 (145)
Net cash provided by operating activitiesNet cash provided by operating activities48,612 20,010 

    
Cash flows from investing activities  
  
Cash flows from investing activities  
Acquisition of Mobile PosseAcquisition of Mobile Posse(7,968)0 
Capital expenditures (1,312) (1,381)Capital expenditures(6,545)(3,179)
Proceeds from sale of cost method investment in Sift —
 999
Net cash used in investing activities (1,312) (382)Net cash used in investing activities(14,513)(3,179)

    
Cash flows from financing activities  
  
Cash flows from financing activities  
Cash received from issuance of convertible notes —
 16,000
Proceeds from short-term borrowings 2,500
 —
Options exercised 261
 11
Payment of contingent considerationPayment of contingent consideration(16,957)0 
Options and warrants exercisedOptions and warrants exercised5,927 6,353 
Repayment of debt obligations (847) (11,000)Repayment of debt obligations(750)0 
Payment of debt issuance costs (346) (2,319)
Net cash provided by financing activities 1,568
 2,692
Net cash (used in) / provided by financing activitiesNet cash (used in) / provided by financing activities(11,780)6,353 

    
Effect of exchange rate changes on cash (4) (48)Effect of exchange rate changes on cash(319)(364)

    
Net change in cash 734
 (5,526)Net change in cash22,000 22,820 

    
Cash, beginning of period 6,149
 11,231
Cash and restricted cash, beginning of periodCash and restricted cash, beginning of period21,659 11,059 

    
Cash, end of period $6,883
 $5,705
Cash and restricted cash, end of periodCash and restricted cash, end of period$43,659 $33,879 

 

 

Supplemental disclosure of cash flow information  
  
Supplemental disclosure of cash flow information
Interest paid $770
 $741
Interest paid$832 $0 
Supplemental disclosure of non-cash financing activities 

 

Common stock of the Company issued for extinguishment of debt $9,510
 $—
Cashless exercise of warrants to purchase common stock of the CompanyCashless exercise of warrants to purchase common stock of the Company$0 $791 
The accompanying notes are an integral part of these consolidated financial statements.

5


Digital Turbine, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Unaudited)
(in thousands, except share counts)
Common Stock
Shares		AmountPreferred Stock
Shares		AmountTreasury Stock
Shares		AmountAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Income / (Loss)		Accumulated
Deficit		Total
Balance at March 31, 202087,306,784 $10 100,000 $100 754,599 $(71)$360,224 $(591)$(282,218)$77,454 
Net income— — — — — — — — 9,940 9,940 
Foreign currency translation— — — — — — — (142)— (142)
Stock-based compensation— — — — — — 1,438 — — 1,438 
Stock-based compensation for services rendered— — — — — — 173 — — 173 
Options exercised224,012 — — — — — 437 — — 437 
Balance at June 30, 202087,530,796 $10 100,000 $100 754,599 $(71)$362,272 $(733)$(272,278)$89,300 
Net income— — — — — — — — 373 373 
Foreign currency translation— — — — — — — (45)— (45)
Stock-based compensation61,553 — — — — — 2,230 — — 2,230 
Stock-based compensation for services rendered45,110 — — — — — 285 — — 285 
Options exercised1,059,644 — — — — — 3,089 — — 3,089 
Balance at September 30, 202088,697,103 $10 100,000 $100 754,599 $(71)$367,876 $(778)$(271,905)$95,232 
Net income— — — — — — — — 14,515 14,515 
Foreign currency translation— — — — — — — (132)— (132)
Stock-based compensation15,768 — — — — — (123)— — (123)
Stock-based compensation for services rendered— — — — — — 283 — — 283 
Options exercised696,212 — — — — — 2,399 — — 2,399 
Balance at December 31, 202089,409,083 $10 100,000 $100 754,599 $(71)$370,435 $(910)$(257,390)$112,174 
The accompanying notes are an integral part of these consolidated financial statements.
6

Digital Turbine, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Unaudited)
(in thousands, except share counts)
Common Stock
Shares		AmountPreferred Stock
Shares		AmountTreasury Stock
Shares		AmountAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Income / (Loss)		Accumulated
Deficit		Total
Balance at March 31, 201981,620,485 $10 100,000 $100 754,599 $(71)$332,793 $(356)$(296,118)$36,358 
Net loss— — — — — — — — (1,819)(1,819)
Foreign currency translation— — — — — — — 98 — 98 
Settlement of warrant derivative liability— — — — — — 715 — — 715 
Stock-based compensation38,759 — — — — — 560 — — 560 
Stock-based compensation for services rendered— — — — — — 122 — — 122 
Options exercised616,208 — — — — — 910 — — 910 
Warrants exercised212,250 — — — — — 289 — — 289 
Balance at June 30, 201982,487,702 $10 100,000 $100 754,599 $(71)$335,389 $(258)$(297,937)$37,233 
Net loss— — — — — — — — (1,425)(1,425)
Foreign currency translation— — — — — — — (418)— (418)
Settlement of warrant derivative liability— — — — — — 8,648 — — 8,648 
Stock-based compensation9,690 — — — — — 740 — — 740 
Stock-based compensation for services rendered75,494 — — — — — 175 — — 175 
Options exercised1,006,792 — — — — — 1,891 — — 1,891 
Warrants exercised1,667,293 — — — — — 1,723 — — 1,723 
Balance at September 30, 201985,246,971 10 100,000 100 754,599 (71)348,566 (676)(299,362)48,567 
Net income— — — — — — — — 3,326 3,326 
Foreign currency translation— — — — — — — (44)— (44)
Settlement of warrant derivative liability— — — — — — 2,945 — — 2,945 
Stock-based compensation— — — — — — 744 — — 744 
Stock-based compensation for services rendered— — — — — — 173 — — 173 
Options exercised546,876 — — — — — 927 — — 927 
Warrants exercised529,118 — — — — — 613 — — 613 
Balance at December 31, 201986,322,965 10 100,000 100 754,599 (71)353,968 (720)(296,036)57,251 
The accompanying notes are an integral part of these consolidated financial statements.
7

Digital Turbine, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
December 31, 20172020
(in thousands, except share and per share amounts)
1.    Description of Business
Digital Turbine, Inc., through its subsidiaries, operates atsimplifies content discovery and delivers it directly to the convergence ofdevice. Its on-device media platform powers frictionless application and mobile communications, delivering end-to-end productscontent discovery, user acquisition and solutions forengagement, operational efficiency, and monetization opportunities. Through December 31, 2020, Digital Turbine's technology platform has been adopted by more than 40 mobile operators application advertisers,and device original equipment manufacturers ("OEMs"), and other third parties to enable them to effectively monetize mobile content and generate higher value user acquisition.has delivered more than 4.8 billion application preloads for tens of thousands of advertising campaigns. The Company operates itsthis business as 1 operating and reportable segment - Media Distribution, which was previously referred to as the operating segment O&O (operators and OEMs) and the reportable segment Advertising.
As the Company's suite of product offerings expands, both organically and through acquisitions, we believe that this renaming of our reporting and operating segment better reflects the way management views the business. There are no changes or historical differences to product offerings and financial information that were referred to as the Advertising segment in two reportable segments – Advertisingprior periods. While advertising, in general, remains a focus of our Media Distribution segment, we feel that this change in name more accurately conveys to the reader what we do for our customers and Content.partners.
The Company's AdvertisingMedia Distribution business is comprisedconsists of two businesses:
Operatorproducts and OEM ("O&O"), an advertiser solution for uniqueservices that simplify the discovery and exclusive carrier and original equipment manufacturer ("OEM") inventory which is compriseddelivery of services including:
◦Ignite™ ("Ignite"), a mobile device management platform with targeted application distribution capabilities, and
◦Other professional services directly related to the Ignite platform.
Advertiser and Publisher ("A&P"), a worldwide mobile user acquisition network which is comprised of the Syndicated network service.
The Company's Content business is comprised of services including:
Marketplace™ ("Marketplace"), an application and content store,media for consumers.

•Application Media represents the portion of the business where our platform delivers apps to end users through partnerships with carrier networks and OEMs. Application Media optimizes revenues by using the developed technology to streamline, track and manage app install demand from hundreds of application developers across various publishers, carriers, OEMs and devices.
Pay™ ("Pay")
•Content Media represents the portion of the business where our platform presents news, weather, sports and other content directly within the native device experience (e.g., as the start page in the mobile browser, a widget, on unlock, etc.) through partnerships with carrier networks and OEMs. Content Media optimizes revenue by a combination of:

◦Programmatic Ad Partner Revenue – advertising within the content managementmedia that’s sold on an ad exchange, at a market rate (CPM - Cost Per Thousand),
◦Sponsored Content – sponsored content media from 3rd party content providers – presented similar to an ad – that is monetized when a recommended story is viewed (CPC – Cost Per Click)
◦Editorial Content – owned or licensed media – presented similar to an ad – that is monetized when the media is clicked on (CPC - Cost Per Click).
    On February 28, 2020, the Company completed the acquisition of Mobile Posse, Inc. (the "Acquisition") from ACME Mobile, LLC (“ACME”). The Company acquired all of the outstanding capital stock of Mobile Posse in exchange for an estimated total consideration of: (1) $41,500 in cash paid at closing (subject to customary closing purchase price adjustments) and (2) an estimated earn-out of $23,735, to be paid in cash, based on Mobile Posse achieving certain future target net revenues, less associated revenue shares, over a twelve-month period (the “Earn-Out Period”) following the closing of the Acquisition, noting that the earn-out amount is subject to change based on final results and calculation. Under the terms of the earn-out, over the Earn-Out Period, the Company will pay ACME a certain percentage of actual net revenues (less associated revenue shares) of Mobile Posse depending on the extent to which Mobile Posse achieves certain target net revenues (less associated revenue shares) for the relevant period. The earn-out payments will be paid quarterly with a true-up calculation and payment after the first nine months of the Earn-Out Period. The acquisition of cash is not reflected in the total consideration detailed above. Final working capital adjustments were determined during the quarter ended June 30, 2020 and resulted in additional purchase price consideration of $453, which was reflected on the balance sheet as an increase in goodwill. This changed the initial cash consideration, not inclusive of the earn-out, to $41,953.
8

During the three and nine months ended December 31, 2020, $4,662 and $15,419 was added to the previous estimated earn-out of $23,735, bringing the estimated total earn-out related to the acquisition of Mobile Posse to $39,154. Of the amounts recorded and accrued for the earn-out related to the Acquisition, $29,154 has been paid to ACME, and $10,000 remains accrued as of December 31, 2020. See Note "Commitments and Contingencies" for more information regarding the estimated earn-out. As of December 31, 2020, estimated total consideration, inclusive of estimated remaining earn-out, for the Acquisition is $81,107, of which $71,107 has been paid and $10,000 remains accrued. The actual remaining earn-out payment is subject to continued performance of the Acquisition and is subject to re-valuation prior to the final settlement based on final actual results and calculations in March 2021.
During the nine month period ended December 31, 2020 an adjustment to increase goodwill in the amount of $736 was made to reclassify the impact of a change in assumptions related to deferred tax assets previously booked as a component of purchase accounting for the Acquisition.
The Acquisition is consistent with the Company's strategy to provide a comprehensive media and advertising solution for operator and OEM partners while enriching the mobile payment solution.experience for end users by delivering relevant media rich content to their fingertips. The addition of Mobile Posse's offerings will provide synergies and options for our partners and advertisers. The Company's suite of offerings continue to focus on promoting higher user engagement and boosting advertising revenue for mobile operators and OEMs.
With global headquarters in Austin, Texas and offices in Durham, North Carolina,Carolina; San Francisco, California, Singapore, Sydney,California; Arlington, Virginia; São Paulo, Brazil; Mexico City, Mexico; Mumbai, India; Singapore; and Tel Aviv, Israel, Digital Turbine’s solutions are available worldwide. For additional information, please visit www.digitalturbine.com.
Unless the context otherwise indicates, the use of the terms “we,” “our,” “us,” “Digital Turbine,” “DT,” or the “Company” refer to the collective businessbusinesses and operations of Digital Turbine, Inc. through its operating and wholly-owned subsidiaries,subsidiaries: Digital Turbine USA, Inc. (“DT USA”), Digital Turbine (EMEA)EMEA Ltd. (“DT EMEA”), Digital Turbine Australia Pty Ltd (“DT APAC”), Digital Turbine Singapore Pte. Ltd. (“DT Singapore”), Digital Turbine Luxembourg S.a.r.l. (“DT Luxembourg”), Digital Turbine Germany, GmbH (“DT Germany”), and Digital Turbine Media, Inc. (“DT Media” or "DTM"), Mobile Posse Inc., and Digital Turbine LATAM Intermediacao De Servicos De Midia LTDA ("DT LATAM"). We refer to all of the Company's subsidiaries collectively as "wholly-owned subsidiaries." We refer to Appia, Inc., a company we acquired on March 6, 2015, as “DT Media” or "DTM."
2.    Liquidity
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"), which contemplate continuation of the Company as a going concern.

Our primary sources of liquidity have historically been cash from operations, issuance of common stock, preferred stock, and debt. As of December 31, 2017,2020, we had cash and restricted cash totaling approximately $7,214.$43,659.
On September 28, 2016, the Company closed a private placement of $16,000 aggregate principal amount of 8.75% Convertible Senior Notes due 2020 (the “Notes”), netting cash proceeds to the Company of $14,316, after deducting the initial purchaser's discounts and commissions and the estimated offering expenses payable by Digital Turbine. The net proceeds from the issuance of the Notes were used to repay approximately $11,000 of secured indebtedness, consisting of approximately $3,000 to Silicon Valley Bank ("SVB") and $8,000 to North Atlantic Capital ("NAC"), retiring both such debts in their entirety, and will otherwise be used for general corporate purposes and working capital. Refer to Note 7 "Debt" for more details.
On May 23, 2017, the Company entered into a Business Finance Agreement (the "Credit Agreement") with Western Alliance Bank (the "Bank"). The Credit Agreement providesprovided for a $5,000 total facility. ReferOn May 22, 2019, the Company amended its existing Credit Agreement with the Bank. The Credit Agreement, as amended, provided for up to Note 7a $20,000 total revolving credit facility, subject to draw limitations derived from current levels of eligible domestic receivables.
On February 28, 2020, the Company entered into a new credit agreement (the "New Credit Agreement") with the Bank, which provides for (1) a term loan of $20,000, the proceeds of which the Company used to pay a portion of the closing cash purchase price for the Acquisition, and (2) a revolving line of credit of $5,000 to be used for working capital purposes. DT USA and DT Media are additional co-borrowers under the New Credit Agreement. The term loan must be repaid on a quarterly basis which began on July 2020 until the term loan maturity date of February 28, 2025, at which time the remaining unpaid principal balance must be repaid. The quarterly principal payment amounts increase from $250 to $1,250 over the term of the term loan. In addition, the Company must, following each fiscal year-end, make principal repayments equal to a percentage of its excess cash flow (as defined under the New Credit Agreement) for the fiscal year, which percentage is determined based on the Company’s total funded debt to consolidated adjusted EBITDA ratio. The revolving line of credit matures on February 28, 2025.
    In connection with the Company entering into the New Credit Agreement with the Bank on February 28, 2020, the Company and the Bank terminated the Credit Agreement, which was the previous revolving credit facility of the Company.
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    As of December 31, 2020, the Company's principal amount outstanding under the New Credit Agreement was $19,250 and 0 amount was drawn on the $5,000 revolving line of credit. Please refer to the "Debt" footnote for more details.


detail.
The Company anticipates that its primary sources of liquidity will continue to be cash on hand,cash-on-hand, cash provided by operations, and the remaining credit available under the New Credit Agreement. In addition, the Company may raise additional capital through future equity or, subject to restrictions contained in the indenture for the Notes and theNew Credit Agreement, debt financing to provide for greater flexibility to make acquisitions, make new investments in under-capitalized opportunities, or to invest in organic opportunities. Additional financing may not be available on acceptable terms or at all. If the Company issues additional equity securities to raise funds, the ownership percentage of its existing stockholders would be reduced. New investors may demand rights, preferences, or privileges senior to those of existing holders of common stock.
In viewDuring the evaluation by management of the matters described inCompany’s financial position, factors such as working capital, current market capitalization, enterprise value, and the preceding paragraphs, recoverabilityfiscal year 2021 operating plan of the Company were considered when determining the ability of the Company to continue as a going concern. Recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Company’s ability to generate positive cash flows from operations. TheBased on the year-over-year revenue and gross margin increases, coupled with the Company’s management of operating expenses and access to debt, management has determined that when considering all relevant quantitative and qualitative factors, the Company appears to have sufficient cash and capital resources to continue to operate its business for at least twelve months from the filing date of this quarterly report on Form 10-Q.
In view of the matters described in the preceding paragraphs, the consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities, that might be necessary should the Company be unable to continue its existence. The Company believes that it has sufficient cash and capital resources to operate its business for at least the next twelve months from the issuance date of this quarterly report on Form 10-Q.
3.    Summary of Significant Accounting Policies
Basis of Presentation
    The financial statements have been prepared in accordance with US GAAP and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for annual financial statements. The financial statements, in the opinion of management, include all adjustments necessary for a fair statement of the results of operations, financial position and cash flows for each period presented.
Interim Consolidated Financial Information
The accompanying consolidated financial statements of Digital Turbine, Inc. and its subsidiaries should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission ("SEC")SEC in Digital Turbine, Inc.'s Annual Report on Form 10-K for the fiscal year ended March 31, 2017, as amended.2020 (the "Annual Report"). The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of Digital Turbine, Inc. and its consolidated subsidiaries at December 31, 2017,2020, the results of itstheir operations and corresponding comprehensive loss,income / (loss) for the three and itsnine months ended December 31, 2020 and 2019, and their cash flows for the nine months ended December 31, 20172020 and 2016.2019. The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2018.2021.
The significantRecently Issued Accounting Pronouncements
Significant accounting policies and recent accounting pronouncements wereare described in Note 4the Notes of the consolidated financial statements, under the heading "Summary of Significant Accounting Policies," included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2017.2020. There have been no significant changes in or updates to the accounting policies since March 31, 2017.2020. Only significant new accounting pronouncements, pertinent to the Company, issued and adopted subsequent to the issuance of our Annual Report are described below. Accounting pronouncements issued and adopted not described in either the Annual Report or in this quarterly report have been determined to either not apply or to have an immaterial impact on our business and related disclosures.
Recently Issued
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Accounting Pronouncements Adopted During the Period
In August 2017,2018, the FASBFinancial Accounting Standards Board ("FASB") issued Accounting Standard Update 2017-12: Targeted Improvements("ASU") 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to Accounting for Hedging Activities. This update makes more financial and non-financial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness.develop or obtain internal-use software (and hosting arrangements that include an internal use software license). This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted upon its issuance. The amendments in2019. As such, the Company adopted this update should be applied on a modified retrospective basis except for the presentation and disclosure guidance which is required prospectively. The Company will adopt ASU 2017-12standard during the quarter ended June 30, 2019,2020 on a prospective basis, and is currently assessingsuch adoption has not had a material impact on the impact of the future adoption of this standard on itsCompany's consolidated results of operations, financial condition, and cash flows.flows in the current presented periods.
In July 2017,August 2018, the FASB issued ASU 2017-11, Accounting for Certain Financial Instruments with Down Round Features, which addresses the complexity of accounting for certain financial instruments with down round features under current guidance criterion. With this new update, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock.2018-13: Fair Value Measurement (Topic 820). The amendments also clarify existingin this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, as a result of the FASB’s final deliberations of the financial reporting concepts pursuant to the March 4, 2014 issued FASB Concepts Statement, Conceptual Framework for equity-classified instruments. This guidance isFinancial Reporting—Chapter 8: Notes to Financial Statements, as they relate to fair value measurement disclosures. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied retrospectivelyprospectively for instruments outstanding asonly the most recent interim or annual period presented in the initial fiscal year of the adoption date.adoption. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. Early application is permitted. The2019. As such, the Company will adopt ASU 2017-11has adopted this standard during theour quarter ended June 30, 2019,2020, and doesit has not expect the impact of this ASU to have a material impact on itsmaterially impacted our consolidated results of operations, financial condition and cash flows.


In May 2017,June 2016, the FASB issued ASU 2017-09, Compensation – Stock Compensation, which modifies2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments". Financial Instruments—Credit Losses (Topic 326) amends guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of share-based payment award modification accounting in an effortthat have the contractual right to provide clarity and reduce diversity in practice under old guidance. Under this new standard, an entity should apply modification accounting (Topic 718) unless specific criterion related to fair value, vesting conditions, and equity/liability classification are all met. This guidance is to be applied prospectively for awards modified on or after the adoption date.receive cash. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017. Early application is permitted. The2019. As such, the Company will adopt ASU 2017-09has adopted this standard during theour quarter ended June 30, 2018,2020, and doesit has not expect the impact of this ASU to have a material impact on itsmaterially impacted our consolidated results of operations, financial condition and cash flows.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. Additionally, ASU 2014-09 requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In July 2015, the FASB decided to delay the effective date of ASU 2014-09 by one year. The deferral results in the new revenue standard being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. ASU 2014-09, as amended, is effective using either the full retrospective or modified retrospective transition approach for fiscal years, and for interim periods within those years. In 2016 and 2017, the FASB has issued several accounting standards updates to clarify certain topics within ASU 2014-09. The Company will adopt ASU 2014-09, and its related clarifying ASUs, during the quarter ended June 30, 2018.  Further, the Company is currently determining the impact of the standard on its consolidated results of operations, financial condition and cash flows.
Other authoritative guidance issued by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified Public Accountants, and the SEC did not, or are not expected to have a material effect on the Company’s consolidated financial statements.
Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. A significant portion of the Company’s cash is held at one major financial institution that the Company's management has assessed to be of high credit quality. The Company has not experienced any losses in such accounts.
The Company mitigates its credit risk with respect to accounts receivable by performing credit evaluations and monitoring advertisers' and carriers' accounts receivable balances. The Company counts all advertisers and carriers within a single corporate structure as one customer, even in cases where multiple brands, branches, or divisions of an organization enter into separate contracts with the Company. As of December 31, 2017,2020, one major Advertising customers and one Content customer represented approximately 20.8% and 15.7%, respectively,12.7% of the Company’s net accounts receivable balance. As of March 31, 2017,2020, two major customers represented 11.2%11.6% and 10.7%11.5% of the Company's net accounts receivable balance, both within the Advertising business.balance.
With respect to customer revenue concentration, the Company defines a customer as an advertiser or a carrier that is a distinct source of revenue and is legally bound to pay for the services that the Company delivers on the advertiser’s or carrier's behalf. During the three and nine months ended December 31, 2017, Singapore Telecommunications Limited, a Content2020, no single customer represented 20.5% and 19.4%10.0% or greater of the Company's net revenues, respectively; Oath Inc., an Advertising customer represented 14.0% and 13.4% of net revenues, respectively; Telstra Corporation Limited, a Content customer represented 13.6% and 12.7% of net revenues, respectively; and Machine Zone, Inc., an Advertising customer represented 10.6% and 10.5% of net revenues, respectively.revenues. During the three and nine months ended December 31, 2016, Telstra Corporation Limited, a Content customer2019, Verizon Communications Inc., primarily through its subsidiary Oath Inc., represented 16.2%14.4% and 23.7%17.7%, respectively, of net revenues, respectively, Oath Inc., an Advertising customer, represented 16.2% and 13.4% of net revenues, respectively, and Jam City Inc., an Advertising customer represented 13.9% and 11.4% of net revenues, respectivelyrevenues.
The
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With respect to revenue partner concentration, the Company partners with mobile carriers and OEMSOEMs to deliver applications on our Ignite platform through the carrier network. During the three and nine months ended December 31, 2017,2020, Verizon Wireless, a carrier partner, generated 29.6%16.5% and 30.9% of our net revenues,18.6%, respectively; while AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 20.3% and 22.0%, respectively; T-Mobile US Inc., including Sprint and other subsidiaries, generated 30.6% and 27.0%, respectively; and America Movil Inc., a carrier partner, primarily through its Cricket subsidiary TracFone Wireless Inc., generated 24.0%10.4% and 19.0%10.4%, respectively, of our net revenue, respectively.revenues. During the three and nine months ended December 31, 2016,2019, Verizon Wireless, a carrier partner, generated 32.9%37.5% and 26.6%40.3%, respectively; and AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 29.8% and 30.9%, respectively, of our net revenues, respectively.revenues.


TheThere is no assurance that the Company may notwill continue to receive significant revenues from any of these or from other large customers. A reduction or delay in operating activity from any of the Company’s significant customers or partners, or a delay or default in payment by any significant customer, or a termination of agreements with significant customers, could materially harm the Company’s business and prospects. Because of the Company’s significant customer concentration,concentrations, its net sales and operating income could fluctuate significantly due to changes in political or economic conditions, or the loss of, reduction of business from, or less favorable terms forwith any of the Company's significant customers.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates that impact the reported amounts in the consolidated financial statements and accompanying notes. These estimates are recurring in nature and relate to transactions occurring in the normal course of business. In the opinion of management, these are appropriate estimates for arrangements to be settled at a later date based on the factfacts and circumstances available at the time of filing. Actual results could differ materially from those estimates.
The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns, depress demand for our advertising business, and adversely impact our results of operations. We expect uncertainties around our key accounting estimates to continue to evolve depending on the duration and degree of impact associated with the COVID-19 pandemic. Our estimates may change as new events occur and additional information emerges, and such changes may be recognized and disclosed in our consolidated financial statements.
4.    Discontinued Operations
    On April 29, 2018, the Company entered into 2 distinct disposition agreements with respect to selected assets owned by our subsidiaries.
    DT APAC and DT Singapore (together, “Pay Seller”), each wholly-owned subsidiaries of the Company, entered into an Asset Purchase Pay Agreement (the “Pay Agreement”), dated as of April 23, 2018, with Chargewave Ptd Ltd (“Pay Purchaser”) to sell certain assets (the “Pay Assets”) owned by the Pay Seller related to the Company’s Direct Carrier Billing business. The Pay Purchaser is principally-owned and controlled by Jon Mooney, an officer of the Pay Seller. At the closing of the asset sale, Mr. Mooney was no longer employed by the Company or Pay Seller. As consideration for this asset sale, Digital Turbine is entitled to receive certain license fees, profit-sharing, and equity participation rights as disclosed in the Company’s Form 8-K filed on May 1, 2018 with the SEC. The transaction was completed on July 1, 2018. With the sale of these assets, the Company exited the segment of the business previously referred to as the Content business.
    In accordance with the Pay Agreement, the Company assigned and transferred a material contract to the Pay Purchaser. Subsequent to the transaction closing associated with the Pay Agreement, the Company received notification from the Pay Purchaser that the partner to the material contract had terminated the contract with the Pay Purchaser. Due to the material contract being terminated, the Company determined that the estimated earn-out from the Pay Purchaser was $0. As all the assets being transferred had been fully impaired prior to the closing of the transaction, the gain/loss on sale related to the Pay Agreement transaction was $0. Furthermore, the Company retained certain receivables and payables for content delivered for the benefit of the partner to the material contract, where these certain receivables and payables were all recognized prior to the closing of the Pay Agreement. As of December 31, 2020, the Company has determined there to be uncertainty surrounding the collectability of the receivables due to ongoing discussions with the business partner. We have determined that the amounts recorded are more likely than not to be uncollectible due to disputes surrounding the content delivered. Furthermore, the related payables would also be contractually withheld unless payment is received at a later date. At this time, the Company has reserved for all balances remaining, both receivables and payables, related to the discontinued operations of the Pay business. The total impact to the Company if all of the remaining receivables and payables are subsequently collected and paid is immaterial. These fully reserved assets and liabilities remain on our books as of December 31, 2020.
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    DT Media, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “A&P Agreement”), dated as of April 28, 2018, with Creative Clicks B.V. (the “A&P Purchaser”) to sell business relationships with various advertisers and publishers (the “A&P Assets”) related to the Company’s Advertising and Publishing business. As consideration for this asset sale, we are entitled to receive a percentage of the gross profit derived from these customer agreements, for a period of three years, as outlined in the Company’s Form 8-K filed on May 1, 2018 with the SEC. The transaction was completed on June 28, 2018 with an effective date of June 1, 2018. With the sale of these assets, the Company exited the operating segment of the business previously referred to as the A&P business, which was previously part of Advertising, the Company's sole reporting segment (which is now Media Distribution). No gain or loss on sale was recognized related to this divestiture. All transferred assets and liabilities, with the exception of goodwill, were fully amortized prior to entering into the sales agreement. As the consideration given by the purchaser was already materially determined at March 31, 2018, goodwill was impaired to the estimated future cash flows of the divested business, which was effectively the purchase price. With the consummation of the sale, the remaining goodwill asset was netted against the purchase price receivable for a net impact of $0 on the Consolidated Statement of Operations and Comprehensive Loss for the year ended March 31, 2019.
    These dispositions have allowed the Company to benefit from a streamlined business model, simplified operating structure, and enhanced management focus.
    No assets or liabilities were held for disposal as of December 31, 2020 or March 31, 2020.
The following table summarizes the financial results of our discontinued operations for all periods presented in the accompanying Consolidated Statements of Operations and Comprehensive Income / (Loss):

Condensed Statements of Operations and Comprehensive Income / (Loss)
For Discontinued Operations
(in thousands, except per share amounts)
(Unaudited)
Three months ended December 31,Nine months ended December 31,
2020201920202019
Net revenues$0 $0 $0 $0 
Total cost of revenues0 (102)0 (102)
Gross profit0 102 0 102 
Product development0 0 0 62 
General and administrative0 37 0 122 
Loss from operations0 65 0 (82)
Interest and other income / (expense), net0 0 0 (89)
Loss from discontinued operations before income taxes0 65 0 (171)
Loss from discontinued operations, net of taxes0 65 0 (171)
Comprehensive loss$0 $65 $0 $(171)
Basic and diluted net loss per common share$0 $0 $0 $0 
Weighted-average common shares outstanding, basic0 85,876 0 83,869 
Weighted-average common shares outstanding, diluted0 92,472 0 89,759 

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    The following table provides reconciling cash flow information for our discontinued operations:
Nine months ended December 31,
20202019
(Unaudited)(Unaudited)
Cash flows from operating activities
Net loss from discontinued operations, net of taxes$0 $(171)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization0 19 
Change in allowance for doubtful accounts0 (47)
Loss on disposal of fixed assets0 104 
(Increase) / decrease in assets:
Accounts receivable0 405 
Increase / (decrease) in liabilities:
Accounts payable0 (232)
Accrued license fees and revenue share0 (202)
Accrued compensation0 (56)
Other current liabilities0 35 
Cash used in operating activities0 (145)
Cash used in discontinued operations$0 $(145)
5.    Accounts Receivable
 December 31, 2017 March 31, 2017December 31, 2020March 31, 2020
 (Unaudited)  (Unaudited)
Billed $19,236
 $9,367
Billed$28,672 $18,927 
Unbilled 14,099
 7,784
Unbilled35,268 18,267 
Allowance for doubtful accounts (841) (597)Allowance for doubtful accounts(4,913)(4,059)
Accounts receivable, net $32,494
 $16,554
Accounts receivable, net$59,027 $33,135 
Billed accounts receivable representrepresents amounts billed to customers that have yet to be collected. Unbilled accounts receivable representrepresents revenue recognized but billed after period end. All unbilled receivables as of December 31, 20172020 and March 31, 20172020 are expected to be billed and collected (subject to the reserve for allowance for doubtful accounts) within twelve months.
The Company recorded $21$187 and $256$415 of bad debt expense during the three and nine months ended December 31, 2017, respectively. The Company recorded $1232020 , and $528$56 and $184 of bad debt expense during the three and nine months ended December 31, 2016, respectively.2019.
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5.

6.    Property and Equipment
December 31, 2020March 31, 2020
(Unaudited)
Computer-related equipment$2,141 $1,953 
Developed software15,989 9,696 
Furniture and fixtures689 681 
Leasehold improvements2,147 2,099 
Property and equipment, gross20,966 14,429 
Accumulated depreciation(9,296)(6,246)
Property and equipment, net$11,670 $8,183 
  December 31, 2017 March 31, 2017
  (Unaudited)  
Computer-related equipment $5,452
 $4,133
Furniture and fixtures 116
 116
Leasehold improvements 143
 143
Property and equipment, gross 5,711
 4,392
Accumulated depreciation (3,018) (2,015)
Property and equipment, net $2,693
 $2,377
Depreciation expense was $1,151 and $3,052 for the three and nine months ended December 31, 2020, respectively, and $540 and $1,484 for the three and nine months ended December 31, 2019, respectively. Depreciation expense for the three and nine months ended December 31, 2017 was $3502020 includes $403 and $986, respectively; and $248 and $685 for the three and nine months ended December 31, 2016, respectively. Depreciation expense in the three and nine months ended December 31, 2017 includes $261 and $803,$1,081, respectively, related to internal useinternal-use assets included in Generalgeneral and Administrative Expenseadministrative expense and $89$748 and $184,$1,971, respectively, related to internally developedinternally-developed software to be sold, leased, or otherwise marketed included in Other Direct Costsother direct costs of Revenue.revenue. Depreciation expense for the three and nine months ended December 31, 2019 includes $140 and $462, respectively, related to internal-use assets included in general and administrative expense and $400 and $1,022, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue.
7.    Leases
The Company has entered into various non-cancelable operating lease agreements for certain offices. These leases currently have lease periods expiring between fiscal years 2024 and 2026. The lease agreements may include 1 or more options to renew. Renewals were not assumed in the priorCompany's determination of the lease term unless the renewals were deemed to be reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease costs, weighted-average lease term, and discount rate are detailed below.
    Schedule, by fiscal year, comparative periods related exclusively to internal use assets andof maturities of lease liabilities as of:
December 31, 2020
(Unaudited)
Remainder of fiscal year 2021$366 
Fiscal year 20221,493 
Fiscal year 20231,549 
Fiscal year 20241,374 
Fiscal year 20251,081 
Thereafter882 
Total undiscounted cash flows6,745 
(Less imputed interest)(853)
Present value of lease liabilities$5,892 

    The current portion of our lease liabilities, payable within the next 12 months, is included in Generalother current liabilities and Administrative Expense.

the long-term portion of our lease liabilities is included in other non-current liabilities on our Consolidated Balance Sheets.


6.    Associated with this financial liability, the Company has a right-of-use asset of $3,807 as of December 31, 2020, which is calculated using the present value of lease liabilities less any lease incentives received from our landlords and any deferred rent liability balance as of the date of implementation. The discount rate used to calculate the imputed interest above ranges from 5.50% to 6.75% and the weighted-average remaining lease term is 4.59 years.
15

8.    Intangible Assets
The components of intangible assets at December 31, 20172020 and March 31, 20172020 were as follows:
 As of December 31, 2020
(Unaudited)
CostAccumulated AmortizationNet
Developed technology$7,926 $(6,101)$1,825 
Customer relationships46,971 (6,925)40,046 
Total$54,897 $(13,026)$41,871 
  As of December 31, 2017
  (Unaudited)
  Cost Accumulated Amortization Net
Software $11,544
 $(9,781) $1,763
Trade name / trademark 380
 (380) —
Customer list 11,300
 (10,238) 1,062
License agreements 355
 (336) 19
Total $23,579
 $(20,735) $2,844
  As of March 31, 2017
  Cost Accumulated Amortization Net
Software $11,544
 $(8,191) $3,353
Trade name / trademark 380
 (380) —
Customer list 11,300
 (10,152) 1,148
License agreements 355
 (291) 64
Total $23,579
 $(19,014) $4,565
The Company has included amortization of acquired intangible assets directly attributable to revenue-generating activities in cost of revenues; since all of our acquired intangible assets are directly attributable to revenue-generating activities, all intangible amortization is included in cost of revenues.
 As of March 31, 2020
CostAccumulated AmortizationNet
Developed technology$7,926 $(5,861)$2,065 
Customer relationships46,971 (5,154)41,817 
Total$54,897 $(11,015)$43,882 
The Company recorded amortization expense of $549$670 and $1,721,$2,011, respectively, during the three and nine months ended December 31, 2017,2020 and $1,878 and $5,640, respectively,$0 during the three and nine months ended December 31, 2016. The decrease in amortization2019. Amortization expense overfor the comparative three and nine month periods was primarily attributable to advertisermonths ended December 31, 2020 is a component of general and publisher relationships acquiredadministrative operating expenses in the Appia Inc. transaction being fully amortizedConsolidated Statements of Operations and Comprehensive Income / (Loss). The determination of the write-offexpense category for amortization of certainintangible assets during fiscal year 2017.is determined by capitalization under ASC 350, Intangibles - Goodwill and Other, or ASC 985-20, Costs of Software to be Sold, Leased, or Otherwise Marketed. ASC 350 leads to accounting for amortization of intangible assets under operating expenses, while ASC 985-20 leads to accounting for amortization of intangible assets under other direct costs of revenues.
Based on the amortizable intangible assets as of December 31, 2017, we estimate2020, the Company expects future amortization expense forto be approximately $2,681 per year over the next five fiscal years to be as follows:and $28,465 in residual expense thereafter.
Year Ending March 31, Amortization Expense
2018 $549
2019 1,375
2020 114
2021 114
2022 114
Thereafter 578
Total $2,844


7.9.    Debt
  December 31, 2017 March 31, 2017
  (Unaudited)  
Short-term debt    
Secured line of credit, net of debt issuance costs of $247 and $0, respectively $1,653
 $—
Total short-term debt $1,653
 $—
  December 31, 2017 March 31, 2017
  (Unaudited)  
Long-term debt    
Convertible notes, net of issuance costs and discounts of $2,881 and $6,315, respectively $5,751
 $9,685
Total long-term debt $5,751
 $9,685
Convertible Notes
On September 28, 2016, the Company sold to BTIG, LLC (the "Initial Purchaser"), $16,000 aggregate principal amount of 8.75% convertible notes maturing on September 23, 2020, unless converted, repurchased or redeemed in accordance with their terms prior to such date. The $16,000 aggregate principal received from the issuance of the Notes was initially allocated between long-term debt at $11,084, the convertible note embedded derivative liability at $3,693 (see Note 8. "Fair Value Measurements" for more information), and the warrant liability at $1,223 (see Note 8. "Fair Value Measurements" for more information), within the consolidated balance sheet. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the liability. Fair value of the Notes is determined using the residual method of accounting whereby, first, a portion of the proceeds from the issuance of the Notes is allocated to derivatives embedded in the Notes and the warrants issued in connection with the issuance of the Notes, and the proceeds so allocated are accounted for as a convertible note embedded derivative liability and warrant liability, respectively (see Note 8. "Fair Value Measurements" for more information), and second, the remainder of the proceeds from the issuance of the Notes is allocated to the convertible notes, resulting in an original issue debt discount amounting to $4,916. As of the close of the issuance of the Notes on September 28, 2016, the Company incurred $1,700 in debt issuance costs directly related to the issuance of the Notes, which in accordance with ASU 2015-03, the Company has recorded these costs as a direct reduction to the face value of the Notes and will amortize this amount over the life of the Notes as a component of interest expense on the consolidated statement of operation and comprehensive loss. During the three months ended December 31, 2016, the Company further incurred $212 in costs directly associated with the issuance of the Notes, for the preparation and filing of a registration statement on Form S-1 to register the underlying common stock related to the Notes issued and related Warrants issued along with the Notes, which was required to be done in accordance with the Indenture (as defined below). The convertible notes will remain on the consolidated balance sheet at historical cost, accreted up for the amount of cumulative amortization of the debt discount over the life of the debt. If we or the note holders elect not to settle the debt through conversion, we must settle the Notes at face value. Therefore, the liability component will be accreted up to the face value of the Notes, which will result in additional non-cash interest expense being recognized within the consolidated statements of operations and comprehensive loss through the Notes maturity date.
The Company sold the Notes to the Initial Purchaser at a purchase price of 92.75% of the principal amount. The initial purchaser also received an additional 250,000 warrants on the same terms as the warrants issued with the Notes (as detailed below) and has the right to receive 2.5% of any cash consideration received by the Company in connection with a future exercise of any of the warrants issued with the Notes. The Notes were issued under an Indenture dated September 28, 2016, as amended and supplemented (the "Indenture"), between Digital Turbine, Inc., US Bank National Association, as trustee, and certain wholly-owned subsidiaries of the Company, specifically, DT USA, DT Media, DT EMEA, and DT APAC (collectively referred to as the "Guarantors"). The Notes are senior unsecured obligations of the Company, and bear interest at a rate of 8.75% per year, payable semiannually in arrears on March 15th and September 15th of each year, beginning on March 15, 2017. The Notes are unconditionally guaranteed by the Guarantors as to the payment of principal, premium, if any, and interest on a senior unsecured basis. The Notes were issued with an initial conversion price equal to $1.364 per share of the Company's common stock, subject to proportional adjustment for adjustments to outstanding common stock and anti-dilution provisions in case of dividends or distributions, stock split or combination, or if the Company issues or sells shares of common stock at a price per share less than the conversion price on the trading day immediately preceding such issuance of sale.


With respect to any conversion prior to September 23, 2019, in addition to the shares deliverable upon conversion, holders of the Notes will be entitled to receive a payment equal to the remaining scheduled payments of interest that would have been made on the notes being converted from the date of conversion until September 23, 2019 (an “Early Conversion Payment”). We may pay the Early Conversion Payment in cash or, subject to certain equity-related conditions set forth in the Indenture, in shares of our common stock.
Unless stockholder approval is obtained as required by NASDAQ rules, the Company will not have the right to issue shares of common stock as payment of the Early Conversion Payment, if the aggregate number of shares issued (and any other transaction aggregated for such purpose) after giving effect to such conversion or payment, as applicable, would exceed 19.99% of the number of shares of the Company’s common stock outstanding as of the Conversion date (or the "Notes Exchange Cap"). The Company will pay cash in lieu of any shares that would otherwise be deliverable in excess of the Notes Exchange Cap. The required stockholder approval was originally obtained at our annual meeting of stockholders held in January 2017. Due to the supplemental indenture entered in May 2017, a new stockholder approval was required to issue shares in excess of the Notes Exchange Cap, and such new stockholder approval was obtained at our annual meeting of stockholders held in January 2018. Please see the proxy statement for our 2018 annual meeting of stockholders for more information about the effect of the stockholder approval and our ability to issues shares of stock to satisfy our obligations under the Indenture and the warrants issued in connection with the Notes.
The Company may redeem the Notes, for cash, in whole or in part, at any time after September 23, 2018, at a redemption price equal to $1 per $1 principal amount of the notes to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the date of redemption, plus an additional payment (payable in cash or stock) equivalent to the amount of, and subject to equivalent terms and conditions applicable for, an Early Conversion Payment had the notes been converted on the date of redemption, if (1) the closing price of our common shares on the NASDAQ Capital Market has exceeded 200% of the conversion price then in effect (but disregarding the effect on such price from certain anti-dilution adjustments) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending within the five trading days immediately preceding the date on which we provide the redemption notice, (2) for the 15 consecutive trading days following the last trading day on which the closing price of our common shares was equal to or greater than 200% of the conversion price in effect (but disregarding the effect on such price from certain anti-dilution adjustments) on such trading day for the purpose of the foregoing clause, the closing price of our common shares remains equal to or greater than 150% of the conversion price in effect (but disregarding the effect on such price from certain anti-dilution adjustments) on the given trading day and (3) we are in compliance with certain other equity-related conditions as set forth in the Indenture.



If we undergo a fundamental change (as described below), holders may require us to purchase the Notes in whole or in part for cash at a price equal to 120% of the principal amount of the Notes to be purchased plus any accrued and unpaid interest, including additional interest, if any, to, but excluding, the repurchase date. Conversions that occur in connection with a fundamental change may entitle the holder to receive an increased number of shares of common stock issuable upon such conversion, depending on the date of such fundamental change and the valuation of the Company’s common stock related thereto. A fundamental change is defined as follows:
a “person” or “group” within the meaning of Section 13(d) of the Exchange Act other than the Company, the Company’s Subsidiaries or the Company’s or the Company’s Subsidiaries’ employee benefit plans files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of the Company’s common equity representing more than 50% of the voting power of all outstanding classes of the Company’s common equity entitled to vote generally in the election of the Company’s directors;
consummation of (A) any share exchange, consolidation or merger involving the Company pursuant to which the Common Stock will be converted into cash, securities or other property or (B) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and the Company’s Subsidiaries, taken as a whole, to any person other than one or more of the Company’s Subsidiaries; provided, however, that a share exchange, consolidation or merger transaction described in clause (A) above in which the holders of more than 50% of all shares of Common Stock entitled to vote generally in the election of the Company’s directors immediately prior to such transaction own, directly or indirectly, more than 50% of all shares of Common Stock entitled to vote generally in the election of the directors of the continuing or surviving entity or the parent entity thereof immediately after such transaction in substantially the same proportions (relative to each other) as such ownership immediately prior to such transaction will not, in either case, be a Fundamental Change;
the Company’s shareholders approve any plan or proposal for the liquidation or dissolution of the Company; or
the Common Stock (or other Capital Stock into which the Notes are then convertible pursuant to the terms of this Indenture) ceases to be listed on any of The New York Stock Exchange, The NASDAQ Global Select Market, The NASDAQ Global Market, The NASDAQ Capital Market or The NYSE MKT (or their respective successors) (each, an “ Eligible Market ”).
Subject to limited exceptions, the Indenture prohibits us from incurring additional indebtedness at any time while the Notes remain outstanding.
Each purchaser of the Notes also received warrants to purchase 256.60 shares of the Company's common stock for each $1 in Notes purchased, or up to 4,105,600 warrants in aggregate, in addition to the 250,000 warrants issued to the initial purchaser, as described above. The warrants were issued under a Warrant Agreement (the "Warrant Agreement"), dated as of September 28, 2016, between Digital Turbine, Inc. and US Bank National Association, as the warrant agent.
The warrants are immediately exercisable on the date of issuance at an initial exercise price of $1.364 per share and will expire on September 23, 2020. The exercise price is subject to proportional adjustment for adjustments to outstanding common stock and anti-dilution provisions in case of dividends or distributions, stock split or combination, or if the Company issues or sells shares of common stock at a price per share less than the conversion price on the trading day immediately preceding such issuance of sale. Certain caps on the number of shares that could be issued under the Notes and the Warrants were effectively lifted by our stockholders approving the full issuance of all potentially issuable shares at our January 2017 annual meeting of stockholders.
In the event of a fundamental change, as set forth in the Warrant Agreement, the holders can elect to exercise their warrants or to receive an amount of cash under a Black-Scholes calculation of the value of such warrants.
The Company received net cash proceeds of $14,316, after deducting the initial purchaser's discounts and commissions and the estimated offering expenses payable by Digital Turbine. The net proceeds from the issuance of the Notes were used to repay $11,000 of secured indebtedness, retiring such debt in its entirety, and will otherwise be used for general corporate purposes and working capital.


In May 2017, the Company entered a supplemental indenture and warrant amendment, described in its Current Report on Form 8-K filed May 24, 2017, which provided for a 30 day stock price measurement period to determine whether or not there would be any change to the conversion price or exercise price of the Company’s outstanding convertible notes or related warrants. The measurement period concluded on September 20, 2017, with no change to the existing $1.364 per share conversion or exercise price of our convertible notes or related warrants.
During September 2017, holders of $6,000 of Notes elected to convert such Notes. These Notes were extinguished by issuing shares of common stock, based on the applicable conversion price of $1.364 per share, plus additional shares of common stock and cash to satisfy the early conversion payments required by the Indenture. Associated with this conversion, gross debt net of debt discount and capitalized debt issuance costs of $1,579 and $621, respectively, was extinguished for a net debt extinguishment of $3,800. In total, 5,043,018 shares of common stock were issued and $247 in cash was paid to settle these positions. This resulted in an adjustment of approximately $7,187 to additional paid in capital to reflect the shares issued upon conversion. A loss on extinguishment of debt of $882 was recorded as a result of the difference in carrying value of the debt, inclusive of the associated debt discount and capitalized debt issuance costs, compared to the fair market value of the consideration given comprising both common stock issued and cash paid. The proportionate amount of the underlying derivative instrument was also extinguished as calculated on the respective conversion dates in September 2017. See Note 8. "Fair Value Measurements" for more information.
During December 2017, holders of $1,368 of Notes elected to convert such Notes. These Notes were extinguished by issuing shares of common stock, based on the applicable conversion price of $1.364 per share, plus additional shares of common stock and cash to satisfy the early conversion payments required by the Indenture. Associated with this conversion, gross debt net of debt discount and capitalized debt issuance costs of $328 and $129, respectively, was extinguished amounting to a net debt extinguishment of $911. In total, 1,149,424 shares of common stock were issued to settle these positions. This resulted in an adjustment of approximately $2,074 to additional paid in capital to reflect the shares issued upon conversion. A loss on extinguishment of debt of $284 was recorded as a result of the difference in carrying value of the debt, inclusive of the associated debt discount and capitalized debt issuance costs, compared to the fair market value of the consideration given comprising of the issuance of common stock. The proportionate amount of the underlying derivative instrument was also extinguished as calculated on the respective conversion dates in December 2017. See Note 8. "Fair Value Measurements" for more information.
As of December 31, 2017, the outstanding principal on the Notes was $8,632, the unamortized debt issuance costs and debt discount in aggregate was $2,881, and the net carrying amount of the Notes was $5,751 , which was recorded as long-term debt within the consolidated balance sheet. The Company recorded $195 and $875, respectively, of aggregate debt discount and debt issuance cost amortization during the three and nine months ended December 31, 2017, and $288 and $969, respectively, for the three and nine months ended December 31, 2016.


Senior Secured Credit Facility
On May 23, 2017, the Company entered into a Business Finance Agreement (the “Credit Agreement”) with Western Alliance Bank (the “Bank”). The Credit Agreement providesprovided for a $5,000 total revolving credit facility.
On May 22, 2019, the Company amended its existing Credit Agreement with the Bank, to extend the term of the agreement to May 22, 2021, to increase the maximum available revolving credit and to modify the covenants as detailed below. The Credit Agreement, as amended, provided for up to a $20,000 total facility, subject to draw limitations derived from current levels of eligible domestic receivables.
The amounts advanced under the Credit Agreement, mature in two (2) years, and accrueas amended, accrued interest at prime, as published in the following rates and bear the following fees:
(1) Wall Street Journal, Prime Rate + 1.25% (currently approximately 5.25%)plus 0.50%, withsubject to a floor6.00% floor. The Credit Agreement contained customary covenants, representations, indemnities, and events of 4.0%.
(2) Annual Facility Fee of $45.5.
(3) Early termination fee of 0.5% if terminated during the first year.
Thedefault.The obligations under the Credit Agreement arewere secured by a perfected first positionfirst-position security interest in all assets of the Company and its subsidiaries, subject to partial (65%) pledgessubsidiaries. Two of stock of non-US subsidiaries. Thethe Company’s subsidiaries, Digital Turbine USA and Digital Turbine Media, arewere additional co-borrowers.
On February 28, 2020, the Company entered into a new credit agreement (the "New Credit Agreement") with the Bank, which provides for (1) a term loan of $20,000, the proceeds of which the Company used to pay a portion of the closing cash purchase price for the Acquisition, and (2) a revolving line of credit of $5,000 to be used for working capital purposes. DT Media and DT USA are also additional co-borrowers under the New Credit Agreement.
16

The term loan must be repaid on a quarterly basis, beginning in July 2020, until the term loan maturity date of February 28, 2025, at which time the remaining unpaid principal balance must be repaid. The quarterly principal payment amounts increase from $250 to $1,250 over the term of the term loan. In addition, the Company must, following each fiscal year-end, make principal repayments equal to a percentage of its excess cash flow (as defined under the New Credit Agreement) for the fiscal year, which percentage is determined based on the Company’s total funded debt to consolidated adjusted EBITDA ratio.
The revolving line of credit matures on February 28, 2025.
Amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to LIBOR (or, if necessary, a broadly-adopted replacement index), subject to a 1.75% floor, plus 3.75%. The obligations under the New Credit Agreement are secured by a perfected first-priority security interest in all the assets of the Company and its subsidiaries. The New Credit Agreement contains customary covenants, including restrictions on payments (subject to specified exceptions),representations and restrictions on indebtedness (subject to specified exceptions), the Credit Agreementevents of default, and also requires the Company to comply with a fixed charge coverage ratio and total funded debt to consolidated adjusted EBITDA ratio.
The New Credit Agreement contains representations and warranties by each of the following financialparties to the New Credit Agreement, which were made only for purposes of the New Credit Agreement and as of specified dates. The representations, warranties and covenants measuredin the New Credit Agreement were made solely for the benefit of the parties to the New Credit Agreement, are subject to limitations agreed upon by such parties, including being qualified by schedules, may have been made for the purposes of allocating contractual risk between the parties instead of establishing these matters as facts, and are subject to standards of materiality applicable to the parties that may differ from those applicable to others. Others should not rely on a monthly basis:the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the New Credit Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
(1) Maintain a Current RatioIn connection with the Company entering into the New Credit Agreement with the Bank, on February 28, 2020, the Company and the Bank terminated the existing Credit Agreement, which was the previous revolving credit facility of at least 0.65, defined as unrestricted cash plus accounts receivable, divided by all current liabilities.the Company.
(2) Revenue must exceed 85% of projected quarterly revenue.
As ofAt December 31, 2017,2020, there was $19,250 outstanding principal on the New Credit Agreement and the Company had $5,000 available to draw under the revolving line of credit.
The Company was in compliance with theall covenants of the Credit Agreement.
TheNew Credit Agreement required that at least two-thirds (2/3rds)as of the holders of the Notes at all times be subject to subordination agreements with the Bank. The Company obtained the consent of the holders of at least two-thirds (2/3rds) of the Notes, which were held by a small number of institutional investors. In consideration for such consents,December 31, 2020.
On February 3, 2021, the Company entered into a Second Supplemental Indenture, dated May 23, 2017 (the “Supplemental Indenture”) tonew $100,000 revolving credit facility with Bank of America and, in connection therewith, terminated the Indenture,New Credit Agreement and also entered into a First Amendment, dated May 23, 2017 (the “Warrant Amendment”) to the Warrant Agreement. The Supplemental Indenture and Warrant Amendment provided for a 30 day stock price measurement period to determine whether or not there would be any change to the conversion price or exercise price of the Company’srepaid all amounts outstanding convertible notes or related warrants. The measurement period concluded on September 20, 2017, with no change to the existing $1.364 per share conversion or exercise price of our convertible notes or related warrants.thereunder. For further discussion, see Note "Subsequent Events."
Interest Income / (Expense)
The Credit Agreement contains other customary covenants, representations, indemnities and events of default.
At December 31, 2017, the gross outstanding principle on the Credit Agreement was $1,900 which is presented, net of capitalized debt issuance costs of $247, as net secured short-term line of credit of $1,653.
Interest Expense
Inclusive of the Notes issued on September 28, 2016 and the Credit Agreement entered into on May 23, 2017 during the current fiscal year, and the Notes and the NAC subordinated debenture which was retired in full on September 28, 2016 during the prior fiscal year, the Company recorded $251$(266) and $940,$(859), respectively, of interest expenseincome / (expense), net, during the three and nine months ended December 31, 2017 and $437 and $1,060, respectively, for the three and nine months ended December 31, 2016.
Additionally, aggregate debt discount and debt issuance cost amortization related to the Notes, detailed in the paragraph above,2020. This is reflected on the Consolidated Statementcomprised of Operations as interest expense. Inclusive of this amortization of $195annual facility fees and $875interest accrued on drawn amounts under the New Credit Agreement, partially offset by interest income earned on cash balances.
In the prior fiscal year, the Company recorded $59 and $118, respectively, of interest income / (expense) during the three and nine months ended December 31, 2017, respectively, and the $288 and $969 recorded during the three and nine months ended December 31, 2016, respectively, the Company recorded $446 and $1,8152019. This is comprised of total interest expense for the three and nine months ended December 31, 2017, respectively, and $725 and $2,029 of total interest expense for the three and nine months ended December 31, 2016, respectively.income earned on cash balances.

17



8.10.    Fair Value Measurements
The inputs to the valuation techniques used to measure fair value are classified into the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The Company’s financial liabilities as of the issuance date of the convertible notes on the initial measurement date of September 28, 2016 are presented below at fair value and were classified within the fair value hierarchy as follows:
  Level 1 Level 2 Level 3 Balance at Inception
Financial Liabilities        
Convertible note embedded derivative liability $—
 $—
 $3,693
 $3,693
Warrant liability —
 —
 1,223
 1,223
Total $—
 $—
 $4,916
 $4,916
The Company’s assessment of the significance ofUnder ASC 820, a particular input to the fair value measurement of a nonfinancial asset considers a market participant’s ability to generate economic benefits by using the asset in its entirety requires managementhighest and best use or by selling it to make judgmentsanother market participant that would use the asset in its highest and consider factors specificbest use. Therefore, fair value is a market-based measurement and not an entity-specific measurement. It is determined based on assumptions that market participants would use in pricing the asset or liability. The exit price objective of a fair value measurement applies regardless of the reporting entity’s intent and/or ability to sell the liability. Considerable judgment is necessary to interpret market data and determine an estimatedasset or transfer the liability at the measurement date. The fair value. The use of different market assumptions or valuation methods may have a material effect onvalue was measured by applying the estimated fair values. Fairpresent value of the Notes is determined using the residual methodexpected contingent payments to be made to a Monte Carlo probability-weighted discounted cash flow model for probabilities of accounting whereby, first, a portion of the proceeds from the issuance of the Notes is allocated to derivatives embedded in the Notes and the warrants issued in connection with the issuance of the Notes, and the proceeds so allocated are accounted for as a convertible note embedded derivative liability and warrant liability, respectively, and second, the remainder of the proceeds from the issuance of the Notes is allocated to the convertible notes, resulting in an original debt discount amounting to $4,916. The convertible notes will remain on the consolidated balance sheet at historical cost, accreted up for the amount of cumulative amortization of the debt discount over the life of the debt. The method of determining the fair value of the convertible note embedded derivative liability and warrant liability are described subsequently in this note. Market risk associated with the convertible note embedded derivative liability and warrant liability relates to the potential reduction in fair value and negative impact topossible future earnings from an increase in price of the Company's common stock. Please refer to Note 7. "Debt" for more information.
The carrying amounts of certain financial instruments, such as cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.


payments.
As of December 31, 20172020, the carrying value of cash and March 31, 2017, the Company’s financial assetscash equivalents, trade accounts receivables, and financial liabilities are presented below ataccounts payable approximates fair value and were classified within the fair value hierarchy as follows:
  Level 1 Level 2 Level 3 Balance as of December 31, 2017
        (Unaudited)
Financial Liabilities        
Convertible note embedded derivative liability $—
 $—
 $5,896
 $5,896
Warrant liability —
 —
 3,602
 3,602
Total $—
 $—
 $9,498
 $9,498
  Level 1 Level 2 Level 3 Balance as of March 31, 2017
Financial Liabilities        
Convertible note embedded derivative liability $—
 $—
 $3,218
 $3,218
Warrant liability —
 —
 1,076
 1,076
Total $—
 $—
 $4,294
 $4,294
Convertible Note Embedded Derivative Liability
We evaluated the terms and features of our convertible notes and identified embedded derivatives (conversion options that contain “make-whole interest” provisions, fundamental change provisions, or down round conversion price adjustment provisions; collectively called the "convertible note embedded derivative liability") requiring bifurcation and accounting at fair value because the economic and contractual characteristics of the embedded derivatives met the criteria for bifurcation and separate accounting. ASC 815-10-15-83 (c) states that if terms implicitly or explicitly require or permit net settlement, then it can readily be settled net by means outside the contract, or it provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement. The conversion features relateddue to the convertible notes consistsshort-term nature of a “make-whole interest” provision, fundamental change provision, and down round conversion price adjustment provisions, which if the convertible notes were to be converted, would put the convertible note holder in a position not substantially different from net settlement. Given this fact pattern, the conversion features meet the definition of embedded derivatives and require bifurcation and accounting at fair value.such instruments.
During September 2017 and December 2017, holders of $6,000 and $1,368 of the Notes, respectively, elected to convert such Notes. At December 31, 2017, aggregate principal amount of $8,632 remained outstanding and is reflected on the balance sheet, net of debt issuance costs and discounts of $2,881, in the amount of $5,751. Refer to Note 7 "Debt - Convertible Notes" and Note 10 "Capital Stock Transactions" for more details.
The convertible note embedded derivative liability representfollowing table summarizes the fair value of the conversion option, fundamental change provision,our financial assets and "make-whole" provisions, as well as the down round conversion price adjustment or conversion rate adjustment provisions of the convertible notes. There is no current observable market for these types of derivatives and, as such, the Company determined theliabilities that are measured at fair value of the derivative liability using a lattice approach that incorporates a Monte Carlo simulation valuation model. A Monte Carlo simulation valuation model considers the Company's future stock price, stock price volatility, probability of a change of control and the trading information of the Company's common stock into which the notes are or may become convertible. The Company marks the derivative liability to market at the end of each reporting period due to the conversion price not being indexed to the Company's own stock.value:
Changes in the fair value of the convertible note embedded derivative liability is reflected in our consolidated statements of operations as “Change in fair value of convertible note embedded derivative liability.”
Level 1Level 2Level 3As of December 31, 2020
Financial Liabilities
Estimated earn-out related to the purchase of Mobile Posse$0 0 10,000 $10,000 
Total0 0 10,000 10,000 



The following table provides a reconciliation of the beginning and ending balances for the convertible note embedded derivativeestimated contingent earn-out liability measured at fair value using significant unobservable inputs (Level 3):
  Level 3
Balance at March 31, 2017 $3,218
Change in fair value of convertible note embedded derivative liability 6,310
     Derecognition on extinguishment or conversion (3,632)
Balance at December 31, 2017 $5,896
Due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the loss and gain, respectively. During the three months ended December 31, 2017, the Company recorded a loss from change in fair value of convertible note embedded derivative liability of $1,658 due to the increase in the Company's closing stock price during the current quarter from $1.51 to $1.79, offset by the extinguishment of $1,368 of Notes, and the underlying derivative instruments, during the current quarter. During the nine months ended December 31, 2017, the Company recorded a loss from change in fair value of convertible note embedded derivative liability of $6,310 due to the increase in the Company's closing stock price during the current fiscal year from $0.94 to $1.79, offset by the derecognition of $3,632 of derivative liability on the extinguishment of $7,368 of Notes, and the underlying derivative instruments, during the fiscal year. During the three and nine months ended December 31, 2016, the Company recorded a gain from change in fair value of convertible note embedded derivative liability of $2,853 and $2,423, respectively, due to the decrease in the Company's closing stock price from September 30, 2017 to December 31, 2016 from $1.05 to $0.68, and a decrease in the Company's closing stock price from inception of the issuance of the Notes from September 28, 2016 to December 31, 2016 from $0.99 to $0.68, respectively.
The market-based assumptions and estimates used in valuing the convertible note embedded derivative liability include amounts in the following amounts:
Level 3
DecemberBalance at March 31, 20172020
Stock price volatility70%
Probability of change in control1.75%
Stock price (per share)$1.79
Expected term2.75 years
Risk-free rate (1)1.94%
Assumed early conversion/exercise price (per share)$2.73
(1) The Monte Carlo simulation assumes the continuously compounded equivalent (CCE) interest rate of 1.0% based on the average of the 3-year and 5-year U.S. Treasury securities as of the valuation date.
Changes in valuation assumptions can have a significant impact on the valuation of the convertible note embedded derivative liability. For example, all other things being equal, a decrease/increase in our stock price, probability of change of control, or stock price volatility decreases/increases the valuation of the liabilities, whereas a decrease/increase in risk-free interest rates increases/decreases the valuation of the liabilities.


Warrant Liability
The Company issued detachable warrants with the convertible notes issued on September 28, 2016. The Company accounts for its warrants issued in accordance with US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that these warrants did not meet the criteria for classification as equity. Accordingly, the Company classified the warrants as long-term liabilities. The warrants are subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net in the statements of operations. We estimated the fair value of these warrants at the respective balance sheet dates using a lattice approach that incorporates a Monte Carlo simulation that considers the Company's future stock price. Option pricing models employ subjective factors to estimate warrant liability; and, therefore, the assumptions used in the model are judgmental.
Changes in the fair value of the warrant liability is primarily related to the change in price of the underlying common stock of the Company and is reflected in our consolidated statements of operations as “Change in fair value of warrant liability.”
The following table provides a reconciliation of the beginning and ending balances for the warrant liability measured at fair value using significant unobservable inputs (Level 3):
  Level 3
Balance at March 31, 2017 $1,076
Change in fair value of warrant liability 2,526
Balance at December 31, 2017 $3,602
Due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the loss and gain, respectively. Due to the Company's closing stock price increasing during the three and nine months ended December 31, 2017, from $1.51 to $1.79 and $0.94 to $1.79, respectively, this had the impact during the three and nine months ended December 31, 2017 of recording a loss from change in fair value of the warrant liability of $898 and $2,526, respectively. During the three and nine months ended December 31, 2016, the Company recorded a gain from change in fair value of the warrant liability of $937 and $797, respectively, due to the decrease in the Company's closing stock price from September 30, 2017 to December 31, 2016 from $1.05 to $0.68, and a decrease in the Company's closing stock price from inception of the issuance of the Notes on September 28, 2016 to December 31, 2016 from $0.99 to $0.68, respectively.
The market-based assumptions and estimates used in valuing the warrant liability include amounts in the following amounts:
$23,735 
Change in estimated earn-out consideration15,419 
Payment of earn-out consideration(29,154)
Balance at December 31, 2017
Stock price volatility202070%
Probability of change in control$1.7510,000 %
Stock price (per share)$1.79
Expected term2.75 years
Risk-free rate (1)1.94%
Assumed early conversion/exercise price (per share)$2.73
(1) The Monte Carlo simulation assumes the continuously compounded equivalent (CCE) interest rate of 1.0% based on the average of the 3-year and 5-year U.S. Treasury securities as of the valuation date.
Changes in valuation assumptions can have a significant impact on the valuation of the warrant liability. For example, all other things being equal, a decrease/increase in our stock price, probability of change of control, or stock price volatility decreases/increases the valuation of the liabilities, whereas a decrease/increase in risk-free interest rates increases/decreases the valuation of the liabilities.


9.11.    Description of Stock Plans
Employee Stock Plan
The Company is currently issuing stock awards underOn September 15, 2020, the Amended and RestatedCompany’s stockholders approved the 2020 Equity Incentive Plan of Digital Turbine, Inc. 2011 Equity Incentive Plan (the “2011“2020 Plan”), which was approved and adopted by our stockholders by written consent on May 23, 2012. No future grants will be made under the previous plan, the 2007 Employee, Director and Consultant Stock Plan (the “2007 Plan”). The 2011 Plan and 2007 Plan are collectively referredpursuant to as "Digital Turbine's Incentive Plans." In the year ended March 31, 2015, in connection with the acquisition of Appia,which the Company assumed the Appia, Inc. 2008 Stock Incentive Plan (the “Appia Plan”). Digital Turbine’s Incentive Plans and the Appia Plan are all collectively referred to as the “Stock Plans.”
The 2011 Plan provides for grants of stock-basedmay grant equity incentive awards to ourdirectors, employees and our subsidiaries’ officers, employees, non-employee directors, and consultants. Awards issuedother eligible participants. A total of 12,000,000 shares of common stock are reserved for grant under the 20112020 Plan. The types of awards that may be granted under the 2020 Plan can include incentive and non-qualified stock options, stock appreciation rights, (“SARs”), restricted stock, and restricted stock units (sometimes referred to individually or collectively as “Awards”).units. The 2020 Plan became effective on September 15, 2020 and has a term of ten years. Stock options may be either “incentive stock options” (“ISOs”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or non-qualified stock options (“NQSOs”).
Previous to the approval of the Plan, stock awards were issued under the Amended and Restated Digital Turbine, Inc. 2011 Equity Incentive Plan (the “2011 Plan”), which was approved and adopted by our stockholders by written consent on May 23, 2012. The 2011 Plan reservesprovided for grants of stock-based incentive awards to our and our subsidiaries’ officers, employees, non-employee directors, and consultants. Awards issued under the 2011 Plan can include stock options, stock appreciation rights, restricted stock, and restricted stock units. Stock options may be either ISOs, as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or NQSOs.
18

The 2011 Plan and 2020 Plan are collectively referred to as "Digital Turbine's Incentive Plans."
The 2011 Plan reserved 20,000,000 shares for issuance, of which 9,033,5060 and 9,665,1236,366,088 remained available for future grants as of December 31, 20172020 and March 31, 2017,2020, respectively. No future grants will be issued pursuant to the 2011 Plan. At the point when the 2011 Plan was retired, 4,452,064 remained unissued. All future awards will be issued under the 2020 Plan.
The 2020 Plan reserves 12,000,000 shares for issuance, of which 11,965,342 remained available for issuance as of December 31, 2020. The change over the comparative period represents stock option grants, stock option forfeitures/cancellations, and restricted sharesshares/units of common stock of 1,338,778, 972,299,34,658 shares, 0 shares, and 265,138,0 shares, respectively.

Restricted Stock Units

    Awards of restricted stock units ("RSUs") may be either grants of time-based restricted units or performance-based restricted units that are issued at no cost to the recipient. The cost of these awards is determined using the fair market value of the Company’s common stock on the date of the grant. No capital transaction occurs until the units vest, at which time they are converted to unrestricted stock. Compensation expense for RSUs with a time condition is recognized on a straight-line basis over the requisite service period. Compensation expense for RSUs with a performance condition are recognized on a straight-line basis based on the most likely attainment scenario, which is re-evaluated each reporting period.
In June 2018, the Company issued 232,558 RSUs to its Chief Executive Officer and Chief Financial Officer. The shares vest over three years. The fair value of the shares on the date of issuance was $400.
In May 2019, the Company issued 109,416 RSUs to its Chief Executive Officer and Chief Financial Officer. The shares vest over three years. The fair value of the shares on the date of issuance was $413.
In May 2020, the Company issued 109,034 RSUs to its Chief Executive Officer and Chief Financial Officer. The shares vest over three years. The fair value of the shares on the date of issuance was $700.
With respect to RSUs, the Company expensed $126 and $339 during the three and nine months ended December 31, 2020, respectively, and $68 and $152 during the three and nine months ended December 31, 2019, respectively. Remaining unamortized expense, with respect to RSUs, of $815 is expected to be recognized over a weighted-average period of approximately 2.42 years.
Number of SharesWeighted-Average Grant Date Fair Value
Unvested restricted units outstanding as of March 31, 2020293,525 $2.48 
Granted109,034 6.42 
Vested(77,321)2.49 
Cancelled0 0 
Unvested restricted units outstanding as of December 31, 2020325,238 $3.91 
Stock Option Agreements
Stock options granted under Digital Turbine's StockIncentive Plans typically vest over a three-to-fourthree-to-four year period. These options, which are granted with option exercise prices equal to the fair market value of the Company’s common stock on the date of grant, generally expire up to ten years from the date of grant. In the year ended March 31, 2015, in connection with the Appia acquisition, the Company exchanged stock options previously granted under the Appia Plan for options to purchase shares of the Company’s common stock under the 2011 Plan. These assumed Appia options typically vest over a period of four years and generally expire within ten years from the date of grant. Compensation expense for all stock options is recognized on a straight-line basis over the requisite service period.
19

Stock Option Activity
The following table summarizes stock option activity for the StockDigital Turbine's Incentive Plans for the periods or as of the dates indicated:
  Number of
Shares		 Weighted Average
Exercise Price (per share)		 Weighted Average
Remaining Contractual
Life (in years)		 Aggregate Intrinsic
Value (in thousands)
Options Outstanding, March 31, 2017 9,735,778
 $2.56
 7.95 $801
Granted 1,338,778
 1.17
    
Forfeited / Cancelled (972,299) 1.91
    
Exercised (182,769) 1.05
    
Options Outstanding, December 31, 2017 9,919,488
 2.48
 7.36 4,977
Vested and expected to vest (net of estimated forfeitures) at December 31, 2017 (a) 8,984,997
 2.63
 7.19 4,228
Exercisable, December 31, 2017 5,065,645
 $3.81
 5.97 $1,196
Number of
Shares		Weighted Average
Exercise Price (per share)		Weighted Average
Remaining Contractual
Life (in years)		Aggregate Intrinsic
Value (in thousands)
Options Outstanding, March 31, 20208,984,430 $2.75 7.17$16,517 
Granted1,937,462 6.47 
Forfeited / Cancelled(282,840)5.58 
Exercised(1,979,387)2.99 
Options Outstanding, December 31, 20208,659,665 3.44 7.11460,038 
Vested and expected to vest (net of estimated forfeitures) at December 31, 2020 (a)7,784,550 3.14 6.90415,871 
Exercisable, December 31, 20204,870,289 $2.43 6.10$263,634 
(a) For options vested and expected to vest, options exercisable, and options outstanding, the aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Digital Turbine's closing stock price on December 31, 20172020 and the exercise price multiplied by the number of in-the-money options) that would have been received by the option holders, had the holders exercised their options on December 31, 2017.2020. The intrinsic value changes based on changes in the price of the Company's common stock.


Information about options outstanding and exercisable at December 31, 20172020 is as follows:
  Options Outstanding Options Exercisable
Exercise Price Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Life (Years) Number of Shares Weighted-Average Exercise Price
$0.00 - 0.50 7,652
 $0.24
 2.23 7,652
 $0.24
$0.51 - 1.00 3,202,046
 $0.73
 8.82 520,025
 $0.71
$1.01 - 1.50 2,832,305
 $1.27
 8.42 1,215,155
 $1.31
$1.51 - 2.00 446,000
 $1.55
 8.95 148,622
 $1.51
$2.01 - 2.50 253,779
 $2.43
 3.08 220,445
 $2.42
$2.51 - 3.00 908,756
 $2.61
 6.19 818,757
 $2.62
$3.51 - 4.00 907,384
 $3.96
 5.75 850,507
 $3.96
$4.01 - 4.50 831,566
 $4.14
 5.45 763,443
 $4.14
$4.51 - 5.00 60,000
 $4.65
 5.24 60,000
 $4.65
$5.01 and over 470,000
 $16.32
 1.01 461,039
 $16.53
  9,919,488
     5,065,645
  
Options OutstandingOptions Exercisable
Exercise PriceNumber of SharesWeighted-Average Exercise PriceWeighted-Average Remaining Life (Years)Number of SharesWeighted-Average Exercise Price
$0.00 - 5.006,008,608 $2.09 6.224,417,792 $2.08 
$5.01 - 10.002,458,446 $5.67 9.10446,846 $5.65 
$10.01 - 15.00126,272 $13.43 9.520 $0 
$15.01 - 20.0031,681 $15.54 9.533,734 $15.54 
$30.01 - and over34,658 $30.03 9.831,917 $30.03 
8,659,665 3.44 7.114,870,289 2.43 
Other information pertaining to stock options for the StockDigital Turbine's Incentive Plans for the nine months ended December 31, 20172020 and 2016,2019, as stated in the table below, is as follows:
 December 31,December 31,
 2017 2016 20202019
Total fair value of options vested $2,750
 $2,250
Total fair value of options vested$3,340 $2,028 
Total intrinsic value of options exercised (a) $101
 $8
Total intrinsic value of options exercised (a)$52,657 $10,364 
(a) The total intrinsic value of options exercised represents the total pre-tax intrinsic value (the difference between the stock price at exercise and the exercise price multiplied by the number of options exercised) that was received by the option holders who exercised their options during the nine months ended December 31, 20172020 and 2016.2019.
During the nine months ended December 31, 20172020 and 2016,2019, the Company granted options to purchase 1,338,7781,937,462 and 1,525,5001,738,750 shares of its common stock, respectively, to employees with weighted-average grant-date fair values of $1.17$6.47 and $0.64,$4.34, respectively.
At December 31, 20172020 and 2016,2019, there was $2,691$6,495 and $5,706$3,518 of total unrecognized stock-based compensation expense, respectively, net of estimated forfeitures, related to unvested stock options expected to be recognized over a weighted-average period of 2.042.12 and 2.272.16 years, respectively.
Valuation of Awards
20

For stock options granted under Digital Turbine’s StockTurbine's Incentive Plans, the Company typically uses the Black-Scholes option pricing model to estimate the fair value of stock options at grant date. The Black-Scholes option pricing model incorporates various assumptions, including volatility, expected term, risk-free interest rates, and dividend yields. The assumptions utilized in this model for options granted during the nine months ended December 31, 20172020 are presented below.
December 31, 2020

December 31, 2017
Risk-free interest rate 1.8%0.21% to 2.4%0.36%
Expected life of the options 5.695.02 to 9.435.23 years
Expected volatility68%64% to 73%69%
Expected dividend yield—%0%
Expected forfeitures20%28% to 29%


Expected volatility is based on a blend of implied and historical volatility of the Company's common stock over the most recent period commensurate with the estimated expected term of the Company’s stock options. The Company uses this blend of implied and historical volatility, as well as other economic data, because management believes such volatility is more representative of prospective trends. The expected term of an award is based on historical experience and on the terms and conditions of the stock awards granted to employees.
Total stock compensation expense for the Company’s StockDigital Turbine's Incentive Plans for the three and nine months ended December 31, 2017 and 2016,2020, which includes both stock options and restricted stock, was $891$160 and $2,520,$4,126, respectively, inclusive of an adjustment during the three months ended December 31, 2020 of $(1,397) as a true-up related to the Company's adoption of ASU 2018-07. Although this is an out-of-period adjustment, the Company determined that the adjustment was not material to the consolidated financial statements for any previously reported annual or interim period, nor to the three and $1,118nine months ended December 31, 2020. Therefore, we recorded the adjustment in the third quarter of fiscal year 2021 rather than revising prior periods presented. Total stock compensation expense for Digital Turbine's Incentive Plans for the three and $3,611,nine months ended December 31, 2019, which includes both stock options and restricted stock, was $915 and $1,597, respectively. Please refer to Note 10. "Capital Stock Transactions" regarding restricted stock.
10.12.    Capital Stock Transactions
Preferred Stock
There are 2,000,000 shares of Series A Convertible Preferred Stock authorized, $0.0001 par value per share (“Series A”), authorized and 100,000 shares of Series A issued and outstanding, which are currently convertible into 20,000 shares of common stock. The Series A holders are entitled to: (1) vote on an equal per shareper-share basis as common stock, (2) dividends paid to the common stock holders on an if-converted basis, and (3) a liquidation preference equal to the greater of $10 per share of Series A (subject to adjustment) or such amount that would have been paid to the common stock holders on an if-converted basis.
Common Stock and Warrants
For the nine months ended December 31, 2017,2020, the Company issued 182,7691,979,387 shares of common stock forfrom the exercise of employee options.
In December 2017, in connection with the redemption of $1,368 of the Notes, the Company issued 1,149,414 shares to the holders of those Notes in exchange for the extinguishment of the Notes. Refer to Note 7 "Debt" and Note 8 "Fair Value Measurements" for more details.
In September 2017, in connection with the redemption of $6,000 of the Notes, the Company issued 5,043,018 shares to the holders of those Notes in exchange for the extinguishment of the Notes. Refer to Note 7 "Debt" and Note 8 "Fair Value Measurements" for more details.options under Digital Turbine's Incentive Plans.
The following table provides activity for warrants issued and outstanding during the nine months ended December 31, 2017:2020:
Number of Warrants OutstandingWeighted-Average Exercise Price
Outstanding as of March 31, 202025,000 $2.04 
Issued0 0 
Exercised0 0 
Cancelled0 0 
Expired0 0 
Outstanding as of December 31, 202025,000 $2.04 
21
  Number of Warrants Outstanding Weighted-Average Exercise Price
Outstanding as of March 31, 2017 5,003,813
 1.62
Issued —
 —
Exercised —
 —
Expired (166,070) 3.50
Outstanding as of December 31, 2017 4,837,743
 1.56

Restricted Stock AgreementsAwards
From time to time, the Company enters into restricted stock agreementsaward (“RSAs”) agreements with certain employees, directors, and consultants. The RSAs have performance conditions, market conditions, time conditions, or a combination thereof. In some cases, once the stock vests, the individual is restricted from selling the shares of stock for a certain defined period, from three months to two years, depending on the terms of the RSA. As reported in our Current Reports on Form 8-K filed withRSA, except for Company Board members and the SEC on February 12, 2014 and June 25, 2014,Chief Executive Officer, who are subject to the Company adopted aCompany's Board Member Equity Ownership Policy, thatwhich supersedes any post-vesting lock-up in RSAs that are applicable to people covered by the policy, which includes the Company’s Board of Directors and Chief Executive Officer.


such persons.
Service and Time Condition RSAs
Awards of restricted stock are grants of restricted stock that are issued at no cost to the recipient. The cost of these awards is determined using the fair market value of the Company’s common stock on the date of the grant. Compensation expense for restricted stock awards with a service and time condition is recognized on a straight-line basis over the requisite service period.

In August 2017,July 2019, the Company issued 265,13875,494 restricted shares to its directorsBoard of Directors for services.their next annual service period. The shares vest quarterly over one year. The fair value of the shares on the date of issuance was $289.$421.

In August 2020, the Company issued 45,110 restricted shares to its Board of Directors for their next annual service period. The shares vest quarterly over one year. The fair value of the shares on the date of issuance was $626.
With respect to time condition RSAs, the Company expensed $74$157 and $224$419 during the three and nine months ended December 31, 2017,2020, respectively; and $92$105 and $258$318 during the three and nine months ended December 31, 2016,2019, respectively.
The following is a summary of restricted stock awards and activities for all vesting conditions for the nine months ended December 31, 2017:2020:
  Number of Shares Weighted-Average Grant Date Fair Value
Unvested restricted stock outstanding as of March 31, 2017 139,318
 1.10
Granted 265,138
 1.09
Vested (205,602) 1.10
Cancelled —
 —
Unvested restricted stock outstanding as of December 31, 2017 198,854
 1.09
Number of SharesWeighted-Average Grant Date Fair Value
Unvested restricted stock outstanding as of March 31, 202037,746 $5.58 
Granted45,110 13.88 
Vested(49,023)7.49 
Unvested restricted stock outstanding as of December 31, 202033,833 $13.88 
All restricted shares, vested and unvested, cancellable and not cancelled, have been included in the outstanding shares as of December 31, 2017.2020.
At December 31, 2017,2020, there was $169$365 of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested restricted stock awards expected to be recognized over a weighted-average period of approximately 0.58 years.
22
11.Net Loss Per

13.Earnings per Share
Basic net lossincome per share is calculated by dividing net lossincome by the weighted-average number of shares of common stock outstanding during the period.
Diluted net income per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the period less shares subject to repurchase, and excludes anyincluding the dilutive effects of employee stock-based awards in periods whereoutstanding during the Company has net losses. Because the Company had net losses for the three and nine months ended December 31, 2017 and 2016, all potentially dilutive shares of common stock were determined to be anti-dilutive, and accordingly, were not included in the calculation of diluted net loss per share.period.
The following table sets forth the computation of net lossincome from continuing operations, net of taxes, per share of common stock (in thousands, except per share amounts):
 Three months ended December 31,Nine months ended December 31,
2020201920202019
Income from continuing operations, net of taxes$14,515 $3,261 $24,828 $253 
Weighted-average common shares outstanding, basic89,003 85,876 88,140 83,869 
Basic net income per common share$0.16 $0.04 $0.28 $0 
Weighted-average common shares outstanding, diluted96,976 92,472 95,563 89,759 
Diluted net income per common share0.15 0.04 0.26 0 
23
  Three Months Ended December 31, Nine Months Ended December 31,
  2017 2016 2017 2016
Net loss $(3,799) $(2,586) $(14,432) $(17,339)
Weighted-average common shares outstanding, basic and diluted 72,148
 66,634
 68,575
 66,416
Basic and diluted net loss per common share $(0.05) $(0.04) $(0.21) $(0.26)
Common stock equivalents excluded from net loss per diluted share because their effect would have been anti-dilutive 3,294
 123
 1,677
 218



12.14.    Income Taxes
Our provision for income taxes as a percentage of pre-tax earnings (“effective tax rate”) is based on a current estimate of the annual effective income tax rate, adjusted to reflect the impact of discrete items. In accordance with ASC 740, jurisdictions forecasting losses that are not benefited due to valuation allowances are not included in our forecasted effective tax rate.
During the three and nine months ended December 31, 2017,2020, a tax benefitprovision of $84$1,061 and $937, respectively,$2,098 resulted in an effective tax rate of 2.2%6.8% and 6.1%7.8%, respectively. Differences in the tax provision and the statutory rate are primarily due to changes in the valuation allowance. The tax benefit reported in the current year is largely due to the true up of an estimate resulting from the finalization of a transfer pricing study.
During the three and nine months ended December 31, 2016,2019, a tax expenseprovision of $300$41 and $159, respectively,$6 resulted in an effective tax rate of (13.1)%1.2%. and (0.9)%2.3%, respectively. Differences in the tax provision and statutory rate are primarily due to changes in the valuation allowance.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the Tax Act). The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U. S. corporate income tax rate from 35% to 21% and implementing a territorial tax system. As the Company has a March 31 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 31.5% for the fiscal year ending March 31, 2018, and 21 % for subsequent fiscal years.

Since the Company has a valuation allowance recorded against all of its U.S. federal deferred tax assets the change in U.S. federal statutory tax rate and the related remeasurement of U.S. federal deferred tax assets and liabilities had no impact on the Company’s third quarter income tax provision.

The new U.S. tax law also requires corporations to include in income a deemed repatriation of foreign earnings and profits previously unremitted to the U.S. and pay a repatriation tax for the move to a territorial system, whether or not the foreign subsidiaries repatriate cash or property to the U.S. The payment of the repatriation tax can be spread over eight years with the first installment due April 15, 2018. Since the Company’s foreign corporate subsidiaries have a net deficit in earnings and profits no transition tax accrual is required or expected.

As a result of the valuation allowance against U.S. deferred tax assets and the Company’s U.S. federal and state NOL carryovers, the Company does not anticipate the changes in U.S. tax law to impact its annual effective tax rate in future periods for which the valuation allowance remains.

13.15.    Commitments and Contingencies
Legal Matters
Contingent Earn-Out Considerations

The Acquisition includes contingent earn-out consideration as part of the purchase price under which the Company maywill make future payments to the seller upon the achievement of certain benchmarks. The fair value of the contingent earn-out consideration is estimated as of the balance sheet date at the present value of the expected contingent payments to be involved in various claims, suits, assessments, investigations,made using a Monte Carlo probability-weighted discounted cash flow model for probabilities of possible future payments. Future payments are driven by the continued performance of the the Acquisition through the end of the earn-out period ending February 28, 2021. The fair value estimates use unobservable inputs that reflect our own assumptions as to the ability of the acquired business to meet the targeted benchmarks and legal proceedings that arise from time to timediscount rates used in the ordinary course of its business, including any thatcalculations. The unobservable inputs are identified below,defined in FASB ASC Topic 820, “Fair Value Measurements and unlrss otherwise stated below, we do not believe that these proceedings and claims would reasonably be expectedDisclosures,” as Level 3 inputs discussed in detail in Note "Fair Value Measurements."

At December 31, 2020, the estimated contingent earn-out was $10,000, as compared to have a material adverse effect on our financial position, results of operations or cash flows.$23,735 at March 31, 2020. The Company accrues arecorded cash payments against the estimated contingent earn-out liability when it is both probable that a liability has been incurred,of $13,073 and the amount of the loss can be reasonably estimated. The Company reviews these accruals at least quarterly, and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and the Company's views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in the Company's accrued liabilities would be recorded in the period in which such determination is made. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated, and therefore, accruals have not been made. In those cases, we assess whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred. If there is a reasonable possibility that a loss or additional loss may have been incurred for such proceedings, we disclose the estimate of the amount of loss or possible range of loss, or disclose that an estimate of loss cannot be made, as applicable.
No legal matters or other proceedings requiring disclosure or accrual exist at this time.


14.    Segment and Geographic Information
The Company manages its business in three operating segments: O&O, A&P, and Content. The three operating segments have been aggregated into two reportable segments: Advertising and Content. Our chief operating decision maker does not evaluate operating segments using asset information. The Company has considered guidance in Accounting Standards Codification (ASC) 280 in reaching its conclusion with respect to aggregating its operating segments into two reportable segments. Specifically, the Company has evaluated guidance in ASC 280-10-50-11 and determined that aggregation is consistent with the objectives of ASC 280 in that aggregation into two reportable segments allows users of our financial statements to view the Company’s business through the eyes of management based upon the way management reviews performance and makes decisions. Additional factors that were considered included: whether or not the operating segments have similar economic characteristics, the nature of the products/services under each operating segment, the nature of the production/go-to-market process, the type and geographic location of our customers, and the distribution of our products/services.
The following table sets forth segment information on our net revenues and loss from operations$29,154 for the three and nine months ended December 31, 20172020, respectively. Furthermore, the Company recorded adjustments to increase the remaining estimated earn-out by $4,662 and 2016.$15,419 during the three and nine months ended December 31, 2020, respectively, resulting in a net earn-out balance of $10,000 as of the balance sheet date. The increase in the remaining estimated earn-out is reflected as other income / (expense) on the Consolidated Statements of Operations and Comprehensive Income / (Loss).

The Company reviews the probabilities of possible future payments to the estimated fair value of any contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in forecasts. Should actual results of the acquired business increase or decrease as compared to the estimates and assumptions used, the estimated fair value of the contingent earn-out consideration liability will increase or decrease. Changes in the estimated fair value of the contingent earn-out consideration, as a factor of a change in inputs, would be reflected in the Company's results of operations in the period in which they are identified. The Company believes that the value of the earn-out, based on the evaluation of the performance, is materially accurate as of December 31, 2020.
24
  Three Months Ended December 31, 2017 Three Months Ended December 31, 2016
  Content Advertising Total Content Advertising Total
Net revenues $13,830
 $24,201
 $38,031
 $6,073
 $16,212
 $22,285
Loss from operations (1,146) 550
 (596) (1,229) (4,181) (5,410)
             
  Nine Months Ended December 31, 2017 Nine Months Ended December 31, 2016
  Content Advertising Total Content Advertising Total
Net revenues $31,544
 $60,498
 $92,042
 $24,929
 $44,227
 $69,156
Loss from operations (3,254) (116) (3,370) (3,980) (14,186) (18,166)
             

16.    Geographic Information
The following table sets forth geographic information on our net revenues for the three and nine months ended December 31, 20172020 and 2016.2019. Net revenues by geography are based on the billing addresses of our customers.
Three months ended December 31,
 20202019
(Unaudited)
Net revenues
     United States and Canada$59,192 $22,486 
     Europe, Middle East, and Africa21,168 9,205 
     Asia Pacific and China7,047 3,731 
     Mexico, Central America, and South America1,185 594 
Consolidated net revenues$88,592 $36,016 
Nine months ended December 31,
20202019
(Unaudited)
Net revenues
     United States and Canada$144,550 $66,057 
     Europe, Middle East, and Africa54,051 24,129 
     Asia Pacific and China18,159 8,137 
     Mexico, Central America, and South America1,737 1,041 
Consolidated net revenues$218,497 $99,364 
17.    Subsequent Event
  Three Months Ended December 31,
  2017 2016
Net revenues    
     United States and Canada $11,715
 $8,197
     Europe, Middle East, and Africa 2,757
 3,575
     Asia Pacific and China 22,436
 9,746
     Mexico, Central America, and South America 1,123
 767
Consolidated net revenues $38,031
 $22,285
     
  Nine Months Ended December 31,
  2017 2016
Net revenues    
     United States and Canada $27,200
 $23,677
     Europe, Middle East, and Africa 7,642
 11,380
     Asia Pacific and China 53,384
 32,700
     Mexico, Central America, and South America 3,816
 1,399
Consolidated net revenues $92,042
 $69,156
     
New Credit Facility



15.    Guarantor and Non-Guarantor Financial Statements
On September 28, 2016,February 3, 2021, the Company soldentered into a Credit Agreement with Bank of America, N.A. (the “Bank”), which provides for a revolving line of credit of $100,000, with an accordion feature enabling the Company to increase the Initial Purchaser, $16,000 principal amount of 8.75% convertible notes maturing on September 23, 2020, unless converted, repurchased or redeemed in accordance with their terms prior to such date. The Notes were issuedup to $200,000, to be used for acquisitions, working capital, and general corporate purposes. Digital Turbine Media, Inc. (“DT Media”) and Digital Turbine USA, Inc. (“DT USA”) are additional co-borrowers under the Indenture, as amended and supplementedCredit Agreement.

The revolving line of credit matures on February 3, 2024.

Amounts outstanding under the Credit Agreement accrue interest at an annual rate equal to date, between Digital Turbine, Inc.LIBOR (or, if necessary, a broadly-adopted replacement index) plus an applicable margin which ranges from 1.50% to 2.25%, US Bank National Association, as trustee, and certain wholly-owned subsidiariesdepending on the Company’s consolidated leverage ratio. The obligations under the Credit Agreement are secured by a grant of a security interest in substantially all of the assets of the Company specifically, DT USA,and its subsidiaries. The Credit Agreement contains customary covenants, representations, and events of default, and also requires the Company to comply with a maximum consolidated leverage ratio and minimum fixed charge coverage ratio.

The description of the Credit Agreement provided herein is qualified by reference to the Credit Agreement, which is attached to this Form 10-Q as Exhibit 10.1 and is incorporated by reference herein.

The Credit Agreement contains representations and warranties by each of the parties to the Credit Agreement, which were made only for the purposes of the Credit Agreement and, in some cases, as of specified dates. The representations, warranties, and covenants in the Credit Agreement were made solely for the benefit of the parties to the Credit Agreement, are subject to limitations agreed upon by such parties (including being qualified by schedules), may have been made for the purposes of allocating contractual risk between the parties instead of establishing these matters as facts, and are subject to standards of materiality applicable to the parties that may differ from those applicable to others. Others should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, and covenants may change after the date of the Credit Agreement and such subsequent information may or may not be fully reflected in the Company’s public disclosures.

25

Termination of Existing Credit Facility

In connection with the Company entering into the Credit Agreement with the Bank as described above, on February 3, 2021, the Company and Western Alliance Bank terminated the Credit Agreement, dated February 28, 2020, by and among the Company, DT Media, DT EMEA,USA, and DT APAC. GivenWestern Alliance Bank (and the Notes are unconditionally guaranteed as toamendments thereto), which was the payment of principal, premium, if any,previous term loan and interest on a senior unsecured basis by fourrevolving credit facility of the wholly-owned subsidiaries of the Company, the Company is required by SEC Reg S-X 210.3-10 to include, in a footnote, consolidating financial information for the same periods with a separate column for:Company.
The parent company;
26
The subsidiary guarantors on a combined basis;
Any other subsidiaries of the parent company on a combined basis;
Consolidating adjustments; and
The total consolidated amounts.
The following consolidated financial information includes:
(1) Consolidated balance sheets as of December 31, 2017 and March 31, 2017; consolidated statements of operations for the three and nine months ended December 31, 2017 and 2016; and consolidated statements of cash flows for the nine months ended December 31, 2017 and 2016 of (a) Digital Turbine, Inc. as the parent, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries, and (d) Digital Turbine, Inc. on a consolidated basis; and
(2) Elimination entries necessary to consolidate Digital Turbine, Inc., as the parent, with its guarantor and non-guarantor subsidiaries.
Digital Turbine, Inc. owns 100% of all of the guarantor subsidiaries, and as a result, in accordance with Rule 3-10(d) of Regulation S-X promulgated by the SEC, no separate financial statements are required for these subsidiaries as of and for the three and nine months ended December 31, 2017 or 2016.



Consolidated Balance Sheet
as of December 31, 2017 (Unaudited)
(in thousands, except par value and share amounts)
  Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidated Total
ASSETS        
Current assets        
Cash $176
 $6,094
 $613
 $6,883
Restricted cash 156
 175
 —
 331
Accounts receivable, net of allowance of $841 —
 31,857
 637
 32,494
Deposits 34
 117
 4
 155
Prepaid expenses and other current assets 299
 239
 13
 551
Total current assets 665
 38,482
 1,267
 40,414
Property and equipment, net 64
 2,614
 15
 2,693
Deferred tax assets 593
 

 

 593
Intangible assets, net 1
 1,565
 1,278
 2,844
Goodwill —
 70,377
 6,244
 76,621
TOTAL ASSETS $1,323
 $113,038
 $8,804
 $123,165
INTERCOMPANY        
Intercompany payable/receivable, net 120,223
 (104,874) (15,349) —
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities        
Accounts payable $791
 $27,307
 $306
 $28,404
Accrued license fees and revenue share —
 12,369
 488
 12,857
Accrued compensation 2,057
 1,393
 6
 3,456
Short-term debt, net of debt issuance costs and discounts of $247 1,653
 —
 —
 1,653
Other current liabilities 1,002
 (516) 1,358
 1,844
Total current liabilities 5,503
 40,553
 2,158
 48,214
Convertible notes, net of debt issuance costs and discounts of $3,491 5,751
 —
 —
 5,751
Convertible note embedded derivative liability 5,896
 —
 —
 5,896
Warrant liability 3,602
 —
 —
 3,602
Other non-current liabilities —
 51
 —
 51
Total liabilities 20,752
 40,604
 2,158
 63,514
Stockholders' equity        
Preferred stock        
Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1,000) 100
 —
 —
 100
Common stock        
$0.0001 par value: 200,000,000 shares authorized; 74,079,153 issued and 73,344,697 outstanding at December 31, 2017. 10
 —
 —
 10
Additional paid-in capital 311,621
 —
 —
 311,621
Treasury stock (754,599 shares at December 31, 2017) (71) —
 —
 (71)
Accumulated other comprehensive loss (18) (1,443) 1,135
 (326)
Accumulated deficit (210,848) (30,997) (9,838) (251,683)
Total stockholders' equity 100,794
 (32,440) (8,703) 59,651
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $121,546
 $8,164
 $(6,545) $123,165


Consolidated Balance Sheet
as of March 31, 2017 (Unaudited)
(in thousands, except par value and share amounts)

  Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidated Total
ASSETS        
Current assets        
Cash $258
 $5,333
 $558
 $6,149
Restricted cash 156
 175
 —
 331
Accounts receivable, net of allowance of $597 —
 15,740
 814
 16,554
Deposits —
 121
 —
 121
Prepaid expenses and other current assets 282
 226
 2
 510
Total current assets 696
 21,595
 1,374
 23,665
Property and equipment, net 64
 2,296
 17
 2,377
Deferred tax assets 352
 —
 —
 352
Intangible assets, net —
 2,647
 1,918
 4,565
Goodwill —
 70,377
 6,244
 76,621
TOTAL ASSETS $1,112
 $96,915
 $9,553
 $107,580
INTERCOMPANY        
Intercompany payable/receivable, net 123,800
 (107,348) (16,452) —
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities        
Accounts payable $1,023
 $18,697
 $148
 $19,868
Accrued license fees and revenue share —
 8,312
 217
 8,529
Accrued compensation 32
 1,041
 —
 1,073
Other current liabilities 794
 510
 —
 1,304
Total current liabilities 1,849
 28,560
 365
 30,774
Convertible notes, net of debt issuance costs and discounts of $6,315 9,685
 —
 —
 9,685
Convertible note embedded derivative liability 3,218
 —
 —
 3,218
Warrant liability 1,076
 —
 —
 1,076
Other non-current liabilities 695
 87
 —
 782
Total liabilities 16,523
 28,647
 365
 45,535
Stockholders' equity        
Preferred stock        
Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1,000) 100
 —
 —
 100
Common stock        
$0.0001 par value: 200,000,000 shares authorized; 67,329,262 issued and 66,594,806 outstanding at March 31, 2017 8
 —
 —
 8
Additional paid-in capital 299,580
 —
 —
 299,580
Treasury stock (754,599 shares at March 31, 2017) (71) —
 —
 (71)
Accumulated other comprehensive loss —
 (1,704) 1,383
 (321)
Accumulated deficit (191,228) (37,376) (8,647) (237,251)
Total stockholders' equity 108,389
 (39,080) (7,264) 62,045
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $124,912
 $(10,433) $(6,899) $107,580


Consolidated Statement of Operations and Comprehensive Loss
for the three months ended December 31, 2017 (Unaudited)
(in thousands, except par value and share amounts)
  Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Consolidated Total
Net revenues $—
 $56,730
 $470
 $(19,169) $38,031
Cost of revenues          
License fees and revenue share —
 46,598
 290
 (19,169) 27,719
Other direct cost of revenues —
 437
 214
 —
 651
Total cost of revenues —
 47,035
 504
 (19,169) 28,370
Gross profit —
 9,695
 (34) —
 9,661
Operating expenses          
Product development 2
 3,560
 61
 —
 3,623
Sales and marketing 75
 1,860
 107
 —
 2,042
General and administrative 3,769
 700
 123
 —
 4,592
Total operating expenses 3,846
 6,120
 291
 —
 10,257
Income / (loss) from operations (3,846) 3,575
 (325) —
 (596)
Interest and other expense, net          
Interest expense, net (446) —
 —
 —
 (446)
Foreign exchange transaction gain / (loss) —
 34
 1
 —
 35
Change in fair value of convertible note embedded derivative liability (1,658) —
 —
 —
 (1,658)
Change in fair value of warrant liability (898) —
 —
 —
 (898)
Loss on extinguishment of debt (284) —
 —
 —
 (284)
Other income / (expense) 27
 (63) 

 —
 (36)
Total interest and other expense, net (3,259) (29) 1
 —
 (3,287)
Income / (loss) from operations before income taxes (7,105) 3,546
 (324) —
 (3,883)
Income tax benefit (88) 6
 (2) —
 (84)
Net income / (loss) $(7,017) $3,540
 $(322) $—
 $(3,799)
Other comprehensive income / (loss)          
Foreign currency translation adjustment —
 —
 —
 —
 —
Comprehensive income / (loss) $(7,017) $3,540
 $(322) $—
 $(3,799)


Consolidated Statement of Operations and Comprehensive Loss
for the nine months ended December 31, 2017 (Unaudited)
(in thousands, except par value and share amounts)
(dollars in thousands) Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Consolidated Total
Net revenues $—
 $135,442
 $1,321
 $(44,721) $92,042
Cost of revenues          
License fees and revenue share —
 110,458
 748
 (44,721) 66,485
Other direct cost of revenues —
 1,276
 641
 —
 1,917
Total cost of revenues —
 111,734
 1,389
 (44,721) 68,402
Gross profit —
 23,708
 (68) —
 23,640
Operating expenses          
Product development 14
 9,113
 91
 —
 9,218
Sales and marketing 249
 4,810
 229
 —
 5,288
General and administrative 8,487
 3,700
 317
 —
 12,504
Total operating expenses 8,750
 17,623
 637
 —
 27,010
Income / (loss) from operations (8,750) 6,085
 (705) —
 (3,370)
Interest and other expense, net          
Interest expense, net (1,815) —
 —
 —
 (1,815)
Foreign exchange transaction gain / (loss) —
 (183) 1
 —
 (182)
Change in fair value of convertible note embedded derivative liability (6,310) —
 —
 —
 (6,310)
Change in fair value of warrant liability (2,526) —
 —
 —
 (2,526)
Loss on extinguishment of debt (1,166) —
 —
 —
 (1,166)
Other income / (expense) 6
 (6) —
 —
 —
Total interest and other expense, net (11,811) (189) 1
 —
 (11,999)
Income / (loss) from operations before income taxes (20,561) 5,896
 (704) —
 (15,369)
Income tax benefit (941) 6
 (2) —
 (937)
Net income / (loss) $(19,620) $5,890
 $(702) $—
 $(14,432)
Other comprehensive income / (loss)          
Foreign currency translation adjustment —
 (5) —
 —
 (5)
Comprehensive income / (loss) $(19,620) $5,885
 $(702) $—
 $(14,437)



Consolidated Statement of Operations and Comprehensive Loss
for the three months ended December 31, 2016 (Unaudited)
(in thousands, except par value and share amounts)
  Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Consolidated Total
Net revenues $—
 $30,897
 $751
 $(9,363) $22,285
Cost of revenues          
License fees and revenue share —
 26,176
 226
 (9,363) 17,039
Other direct cost of revenues —
 1,589
 289
 —
 1,878
Total cost of revenues —
 27,765
 515
 (9,363) 18,917
Gross profit —
 3,132
 236
 —
 3,368
Operating expenses          
Product development 15
 3,082
 16
 —
 3,113
Sales and marketing 77
 1,558
 48
 —
 1,683
General and administrative 2,468
 1,444
 70
 —
 3,982
Total operating expenses 2,560
 6,084
 134
 —
 8,778
Loss from operations (2,560) (2,952) 102
 —
 (5,410)
Interest and other expense, net          
Interest expense, net (674) (51) —
 —
 (725)
Foreign exchange transaction gain / (loss) —
 (9) —
 —
 (9)
Change in fair value of convertible note embedded derivative liability 2,853
 —
 —
 —
 2,853
Change in fair value of warrant liability 937
 —
 —
 —
 937
Loss on extinguishment of debt —
 —
 —
 —
 —
Other income / (expense) 22
 46
 —
 —
 68
Total interest and other expense, net 3,138
 (14) —
 —
 3,124
Loss from operations before income taxes 578
 (2,966) 102
 —
 (2,286)
Income tax provision / (benefit) 300
 —
 —
 —
 300
Net loss $278
 $(2,966) $102
 $—
 $(2,586)
Other comprehensive income / (loss)          
Foreign currency translation adjustment 5
 —
 —
 —
 5
Comprehensive loss $283
 $(2,966) $102
 $—
 $(2,581)


Consolidated Statement of Operations and Comprehensive Loss
for the nine months ended December 31, 2016 (Unaudited)
(in thousands, except par value and share amounts)
  Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Elimination Consolidated Total
Net revenues —
 90,839
 1,331
 (23,014) 69,156
Cost of revenues          
License fees and revenue share —
 76,600
 474
 (23,014) 54,060
Other direct cost of revenues —
 4,774
 866
   5,640
Total cost of revenues —
 81,374
 1,340
 (23,014) 59,700
Gross profit —
 9,465
 (9) —
 9,456
Operating expenses          
Product development 24
 8,967
 74
 —
 9,065
Sales and marketing 159
 4,468
 28
 —
 4,655
General and administrative 9,562
 4,516
 (176) —
 13,902
Total operating expenses 9,745
 17,951
 (74) —
 27,622
Loss from operations (9,745) (8,486) 65
 —
 (18,166)
Interest and other expense, net          
Interest expense, net (680) (1,349) —
 —
 (2,029)
Foreign exchange transaction gain / (loss) —
 (9) (4) —
 (13)
Change in fair value of convertible note embedded derivative liability 2,423
 —
 —
 —
 2,423
Change in fair value of warrant liability 797
 —
 —
 —
 797
Loss on extinguishment of debt (293) —
 —
 —
 (293)
Other income / (expense) 52
 49
 —
 —
 101
Total interest and other expense, net 2,299
 (1,309) (4) —
 986
Loss from operations before income taxes (7,446) (9,795) 61
 —
 (17,180)
Income tax provision / (benefit) 159
 —
 —
 —
 159
Net loss (7,605) (9,795) 61
 —
 (17,339)
Other comprehensive income / (loss)          
Foreign currency translation adjustment (48) —
 —
 —
 (48)
Comprehensive loss (7,653) (9,795) 61
 —
 (17,387)



Consolidated Statement of Cash Flows
for the nine months ended December 31, 2017 (Unaudited)
(in thousands, except par value and share amounts)
  Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidated Total
Cash flows from operating activities        
Net loss $(19,620) $5,890
 $(702) $(14,432)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization —
 2,093
 614
 2,707
Change in allowance for doubtful accounts —
 252
 (8) 244
Amortization of debt discount and debt issuance costs 875
 —
 —
 875
Accrued interest 165
 —
 —
 165
Stock-based compensation 2,296
 —
 —
 2,296
Stock-based compensation for services rendered
 224
 —
 —
 224
Change in fair value of convertible note embedded derivative liability 6,310
 —
 —
 6,310
Change in fair value of warrant liability 2,526
 —
 —
 2,526
Loss on extinguishment of debt 1,166
 —
 —
 1,166
(Increase) / decrease in assets:        
Accounts receivable —
 (16,370) 186
 (16,184)
Deposits (34) 4
 (4) (34)
Deferred tax assets (241) —
 —
 (241)
Prepaid expenses and other current assets (54) 24
 (11) (41)
Increase / (decrease) in liabilities:        
Accounts payable (232) 8,611
 157
 8,536
Accrued license fees and revenue share —
 4,055
 273
 4,328
Accrued compensation 2,024
 353
 6
 2,383
Other current liabilities 3,666
 (2,831) (450) 385
Other non-current liabilities (692) (39) —
 (731)
Intercompany movement of cash (16) 18
 (2) —
Net cash provided by (used in) operating activities (1,637) 2,060
 59
 482
         
Cash flows from investing activities        
Capital expenditures (13) (1,294) (5) (1,312)
Net cash used in investing activities (13) (1,294) (5) (1,312)
         
Cash flows from financing activities        
Proceeds from short-term borrowings 2,500
 —
 —
 2,500
Payment of debt issuance costs (346) —
 —
 (346)
Options exercised 261
 —
 —
 261
Stock issued for cash in stock offering, net (847) —
 —
 (847)
Net cash provided by financing activities 1,568
 —
 —
 1,568
         
Effect of exchange rate changes on cash —
 (5) 1
 (4)
         
Net change in cash (82) 761
 55
 734
         
Cash, beginning of period 258
 5,333
 558
 6,149
         
Cash, end of period $176
 $6,094
 $613
 $6,883


Consolidated Statement of Cash Flows
for the nine months ended December 31, 2016 (Unaudited)
(in thousands, except par value and share amounts)
  Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidated Total
Cash flows from operating activities        
Net loss $(7,605) $(9,795) $61
 $(17,339)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization 9
 5,518
 798
 6,325
Change in allowance for doubtful accounts —
 130
 —
 130
Amortization of debt discount and debt issuance costs 287
 682
 —
 969
Accrued interest 388
 (91) —
 297
Stock-based compensation 3,335
 —
 —
 3,335
Stock-based compensation for services rendered
 276
 —
 —
 276
Change in fair value of convertible note embedded derivative liability (2,423) —
 —
 (2,423)
Change in fair value of warrant liability (797) —
 —
 (797)
Loss on extinguishment of debt 293
 —
 —
 293
(Increase) / decrease in assets:        
Restricted cash transferred from operating cash —
 (323) —
 (323)
Accounts receivable 19
 (976) (920) (1,877)
Deposits —
 (34) 117
 83
Deferred tax assets 212
 —
 —
 212
Prepaid expenses and other current assets (86) 104
 12
 30
Increase / (decrease) in liabilities:        
Accounts payable 340
 4,003
 166
 4,509
Accrued license fees and revenue share —
 (830) 118
 (712)
Accrued compensation 576
 (720) (97) (241)
Other current liabilities (34) (862) 78
 (818)
Other non-current liabilities 1,927
 (1,370) (274) 283
Net cash provided by (used in) operating activities (3,283) (4,564) 59
 (7,788)
         
Cash flows from investing activities        
Capital expenditures (3) (1,358) (20) (1,381)
Net cash proceeds from cost method investment in Sift —
 999
 —
 999
Net cash used in investing activities (3) (359) (20) (382)
         
Cash flows from financing activities        
Cash received from issuance of convertible notes —
 16,000
 —
 16,000
Proceeds from short-term borrowings —
 (11,000) —
 (11,000)
Payment of debt issuance costs (1,912) (407) —
 (2,319)
Options exercised 11
 —
 —
 11
Net cash provided by financing activities (1,901) 4,593
 —
 2,692
         
Effect of exchange rate changes on cash (48) —
 —
 (48)
         
Net change in cash (5,235) (330) 39
 (5,526)
         
Cash, beginning of period 6,712
 4,466
 53
 11,231
         
Cash, end of period $1,477
 $4,136
 $92
 $5,705


16.    Subsequent Events
Subsequent to period end, Telstra Corporation Limited informed the Company that it did not plan to continue utilizing the Company's Pay service at the conclusion of the current contracted period which ends in March 2018. While this is not a discontinuation of all services provided to Telstra Corporation Limited by the Company, it will substantially impact the total activity between the two parties. The Company does not believe the non-renewal will have a material impact on its Consolidated Statement of Operations as the gross profit contribution resulting from the impacted revenue is nominal.


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in its entirety by, the Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q (the “Report”). The following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1993,1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements involve substantial risks and uncertainties. When used in this Report, the words “anticipate,” “believe,” “estimate,” “expect,” “will,” “seeks,” “should,” “could,” “would,” “may”“may,” and similar expressions, as they relate to our management or us, are intended to identify such forward-looking statements. Our actual results, performance, or achievements could differ materially from those expressed in, or implied by, these forward-looking statements as a result of a variety of factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 20172020, as well as those described elsewhere in this Report and in our other public filings. The risks included are not exhaustive, and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Historical operating results are not necessarily indicative of the trends in operating results for any future period. We do not undertake any obligation to update any forward-looking statements made in this Report. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends. This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.
All numbers are in thousands, except share and per share amounts.
Company Overview
Digital Turbine, Inc., through its subsidiaries, operates atsimplifies content discovery and delivers it directly to the convergence ofdevice. Its on-device media platform powers frictionless application and mobile communications, delivering end-to-end productscontent discovery, user acquisition and solutions forengagement, operational efficiency, and monetization opportunities. Through December 31, 2020, Digital Turbine's technology platform has been adopted by more than 40 mobile operators and device original equipment manufacturers ("OEMs"), and has delivered more than 4.8 billion application advertisers, device OEMs and other third parties to enable them to effectively monetize mobile content and generate higher value user acquisition.preloads for tens of thousands of advertising campaigns. The Company operates itsthis business as one operating and reportable segment - Media Distribution, which was previously referred to as the operating segment O&O (which refers to operators and OEMs) and the reportable segment Advertising.
    As the Company's suite of product offerings expands, both organically and through acquisition, we believe that this renaming of our reporting and operating segment better reflects the way management views the business. There are no changes or historical differences to product offerings and financial information that were referred to as the Advertising segment in two reportable segments – Advertisingprior periods. While advertising, in general, remains a focus of our Media Distribution segment, we feel that this change in name more accurately conveys to the reader what we do for our customers and Content.partners.
27

The Company's AdvertisingMedia Distribution business is comprisedconsists of two businesses:
O&O, an advertiser solution for uniqueproducts and exclusive carrierservices that simplify the discovery and OEM inventory which is compriseddelivery of services including:
◦Ignite, a mobile device management platform with targeted application distribution capabilities, and
◦Other professional services directly related to the Ignite platform.
A&P, a leading worldwide mobile user acquisition network which is comprised of the Syndicated network.
The Company's Content business is comprised of services including:
Marketplace, an application and content store,media for consumers.

•Application Media represents the portion of the business where our platform delivers apps to end users through partnerships with carrier networks and OEMs. Application Media optimizes revenues by using the developed technology to streamline, track, and manage app install demand from hundreds of application developers across various publishers, carriers, OEMs, and devices.
Pay,
•Content Media represents the portion of the business where our platform presents news, weather, sports, and other content directly within the native device experience (e.g., as the start page in the mobile browser, a widget, on unlock, etc.) through partnerships with carrier networks and OEMs. Content Media optimizes revenue by a combination of:

◦Programmatic Ad Partner Revenue – advertising within the content managementmedia that’s sold on an ad exchange at a market rate (CPM - Cost Per Thousand);
◦Sponsored Content – sponsored content media from 3rd party content providers, presented similarly to an ad, that is monetized when a recommended story is viewed (CPC – Cost Per Click);
◦Editorial Content – owned or licensed media, presented similarly to an ad, that is monetized when the media is clicked on (CPC - Cost Per Click).
    With global headquarters in Austin, Texas and mobileoffices in Durham, North Carolina; San Francisco, California; Arlington, Virginia; São Paulo, Brazil; Mexico City, Mexico; Mumbai, India; Singapore; and Tel Aviv, Israel, Digital Turbine’s solutions are available worldwide. For additional information, please visit www.digitalturbine.com.
Recent Developments
On February 28, 2020, the Company completed the acquisition of Mobile Posse, Inc. (the "Acquisition") from ACME Mobile, LLC (“ACME”). The Company acquired all of the outstanding capital stock of Mobile Posse in exchange for an estimated total consideration of: (1) $41,500 in cash paid at closing (subject to customary closing purchase price adjustments) and (2) an estimated earn-out of $23,735, to be paid in cash, based on Mobile Posse achieving certain future target net revenues, less associated revenue shares, over a twelve-month period (the “Earn-Out Period”) following the closing of the Acquisition, noting that the earn-out amount is subject to change based on final results and calculation. Under the terms of the earn-out, over the Earn-Out Period, the Company will pay ACME a certain percentage of actual net revenues (less associated revenue shares) of Mobile Posse depending on the extent to which Mobile Posse achieves certain target net revenues (less associated revenue shares) for the relevant period. The earn-out payments will be paid quarterly with a true-up calculation and payment solution.after the first nine months of the Earn-Out Period. The acquisition of cash is not reflected in the total consideration detailed above. Final working capital adjustments were determined during the quarter ended June 30, 2020 and resulted in additional purchase price consideration of $453, which is reflected on the balance sheet as an increase in goodwill. As of December 31, 2020, $15,419 was added to the previous estimated earn-out of $23,735. Of the amounts recorded and accrued related to the Acquisition, $29,154 had been paid to the seller and $10,000 remains accrued as of December 31, 2020. See Note "Commitments and Contingencies" for more information regarding the estimated earn-out.



    On February 28, 2020, the Company entered into a Credit Agreement (the “New Credit Agreement”) with Western Alliance Bank (the “Bank”), which provides for (1) a term loan of $20.0 million, the proceeds of which the Company used to pay a portion of the closing cash purchase price for the Acquisition, and (2) a revolving line of credit of $5.0 million to be used for working capital purposes. DT Media and Digital Turbine USA, Inc. (“DT USA”) are additional co-borrowers under the New Credit Agreement. The term loan must be repaid on a quarterly basis beginning in July 2020 until the term loan maturity date of February 28, 2025, at which time the remaining unpaid principal balance must be repaid. The quarterly principal payment amounts increase from $0.25 million to $1.25 million over the term of the term loan. The revolving line of credit matures on February 28, 2025. No amount was drawn on the revolver as of December 31, 2020. The Company’s Business Finance Agreement, dated May 23, 2017 (the “Credit Agreement”), with the Bank was terminated on February 28, 2020.
Advertising
O&O
28

Media Distribution Business
The Company's O&OMedia Distribution business is an advertiser solution for unique and exclusive carrier and OEM inventory, which is comprised of Ignitefirst boot and recurring life-cycle products, features, and professional services delivered through our platform.
    Our software platform enables mobile operators and OEMs to control, manage, and monetize devices through application installation at the time of activation and over the life of a device. The platform allows mobile operators to personalize the application activation experience for customers and monetize their home screens via revenue share agreements such as: Cost-Per-Install (CPI), Cost-Per-Placement (CPP), Cost-Per-Action (CPA) with third-party advertisers; or via Per-Device-License Fees (PDL) agreements, which allow operators and OEMs to leverage the platform, its products, and other professionalfeatures for a structured fee. Setup Wizard, Dynamic Installs, or Software Development Kit ("SDK") are the delivery methods available to operators and OEMs on first boot of the device. Additional products and features are available throughout the life-cycle of the device that provide operators and OEMs additional opportunity for media delivery revenue streams. The Company has launched its software with operators and OEMs in North America, Latin America, Europe, Israel, and Asia-Pacific.
    The acquisition of Mobile Posse provides an additional platform option, outside of our core platform, to monetize user actions over the life-cycle of a device by delivering media rich advertising content to the end user and providing operators and OEMs with an additional opportunity for revenue streams synergistic with our core platform.
The Company's Media Distribution business consists of products and services that simplify the discovery and delivery of mobile application and content media for consumers.

•Application Media represents the portion of the business where our platform delivers apps to end users through partnerships with carrier networks and OEMs. Application Media optimizes revenues by using the developed technology to streamline, track and manage app install demand from hundreds of application developers across various publishers, carriers, OEMs and devices.

•Content Media represents the portion of the business where our platform presents news, weather, sports and other content directly within the native device experience (e.g., as the start page in the mobile browser, a widget, on unlock, etc.) through partnerships with carrier networks and OEMs. Content Media optimizes revenue by a combination of:

▪Programmatic Ad Partner Revenue – advertising within the content media that’s sold on an ad exchange, at a market rate (CPM - Cost Per Thousand),
▪Sponsored Content – sponsored content media from 3rd party content providers – presented similar to an ad – that is monetized when a recommended story is viewed (CPC – Cost Per Click)
▪Editorial Content – owned or licensed media – presented similar to an ad – that is monetized when the media is clicked on (CPC - Cost Per Click).
Disposition of the Content Reportable Segment and A&P Business
    On April 29, 2018, the Company entered into two distinct disposition agreements with respect to select assets owned by our subsidiaries.
    DT APAC and DT Singapore (together, “Pay Seller”), each wholly-owned subsidiaries of the Company, entered into an Asset Purchase Pay Agreement (the “Pay Agreement”), dated April 23, 2018, with Chargewave Ptd Ltd (“Pay Purchaser”) to sell certain assets (the “Pay Assets”) owned by the Pay Seller related to the Ignite platform.Company’s Direct Carrier Billing business. The Pay Purchaser is principally owned and controlled by Jon Mooney, an officer of the Pay Seller. At the closing of the asset sale, Mr. Mooney was no longer employed by the Company or Pay Seller. As consideration for this asset sale, Digital Turbine is entitled to receive certain license fees, profit-sharing, and equity participation rights as outlined in the Company’s Form 8-K filed May 1, 2018 with the SEC. The transaction was completed on July 1, 2018 with an effective date of July 1, 2018. With the sale of these assets, the Company exited the reporting segment of the business previously referred to as the Content business.
Ignite
29

    DT Media, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “A&P Agreement”), dated April 28, 2018, with Creative Clicks B.V. (the “A&P Purchaser”) to sell business relationships with various advertisers and publishers (the “A&P Assets”) related to the Company’s Advertising and Publishing business. As consideration for this asset sale, we are entitled to receive a percentage of the gross profit derived from these customer agreements for a period of three years as outlined in the Company’s Form 8-K filed May 1, 2018 with the SEC. The transaction was completed on June 28, 2018 with an effective date of June 1, 2018. With the sale of these assets, the Company exited the operating segment of the business previously referred to as the A&P business, which was previously part of the Advertising segment, the Company's sole reporting segment (which is now Media Distribution).
These dispositions have allowed the Company to benefit from a mobilestreamlined business model, simplified operating structure, and enhanced management focus.
Discontinued Operations
    As a result of the dispositions, the results of operations from our Content reporting segment and A&P business within the Media Distribution reporting segment, previously referred to as the Advertising segment, are reported as “Loss from discontinued operations, net of taxes” and the related assets and liabilities are classified as “held for disposal" on the prior comparative period Consolidated Financial Statements in Item 1 of this Quarterly Report. The Company has recast prior period amounts presented within this report to provide visibility and comparability.
Results of Operations
    All discussions in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, unless otherwise noted, relate to the remaining continuing operations in our sole operating segment after the dispositions, the Media Distribution business.

30

RESULTS OF OPERATIONS
(Unaudited)
Three months ended December 31,Nine months ended December 31,
 20202019% of Change20202019% of Change
(in thousands, except per share amounts)(in thousands, except per share amounts)
Net revenues$88,592 $36,016 146.0 %$218,497 $99,364 119.9 %
License fees and revenue share50,144 21,576 132.4 %122,976 59,997 105.0 %
Other direct costs of revenues749 400 87.3 %1,971 1,022 92.9 %
Gross profit37,699 14,040 168.5 %93,550 38,345 144.0 %
Total operating expenses17,182 9,908 73.4 %50,295 28,058 79.3 %
Income from operations20,517 4,132 396.5 %43,255 10,287 320.5 %
Interest income / (expense), net(266)59 (550.8)%(859)118 (828.0)%
Change in fair value of warrant liability— (870)100.0 %— (10,601)100.0 %
Change in estimated contingent consideration(4,662)— (100.0)%(15,419)— (100.0)%
Other income / (expense)(13)(19)(31.6)%(51)455 (111.2)%
Income from continuing operations before income taxes15,576 3,302 371.7 %26,926 259 10,296.1 %
Income tax provision1,061 41 2,487.8 %2,098 6 34,866.7 %
Income from continuing operations, net of taxes14,515 3,261 345.1 %24,828 253 9,713.4 %
Net income$14,515 $3,326 336.4 %$24,828 $82 30,178.0 %
Basic net income per common share$0.16 $0.04 300.0 %$0.28 $— 100.0 %
Weighted-average common shares outstanding, basic89,003 85,876 3.6 %88,140 83,869 5.1 %
Diluted net income per common share$0.15 $0.04 275.0 %$0.26 $— 100.0 %
Weighted-average common shares outstanding, diluted96,976 92,472 4.9 %95,563 89,759 6.5 %
Comparison of the three and nine months ended December 31, 2020 and 2019
Net revenues
During the three and nine months ended December 31, 2020, there was an approximately $52,576 or 146.0% and $119,133 or 119.9% increase in overall revenue, respectively, as compared to the three and nine months ended December 31, 2019.
The Company's Media Distribution business is an advertiser solution for unique and exclusive carrier and OEM inventory. During the three and nine months ended December 31, 2020 and 2019, the Media Distribution business, primarily through silent application delivery, was the main driver of our revenues. Application Media revenue totaled $56,938 and $150,228, respectively, for the three and nine months ended December 31, 2020, while Content Media revenue, primarily related to the Acquisition, totaled $31,654 and $68,269, respectively. Our application delivery and management software that enables mobile operators and OEMs to control, manage, and monetize applications installed at the time of activation and over the life of a mobile device. Ignite allows mobile operatorsThis increase in net revenues was attributable to personalizeincreased demand for our core services, which led to higher CPI and CPP revenue per available placement, and which was driven primarily by increased revenue from advertising partners as placement across existing commercial partners expands, as well as expanded distribution with new partners and the app activation experience for customersdeployment or expansion of new services and monetize their home screens via Cost-Per-Installfeatures and through acquisition.
With respect to customer revenue concentration, the Company defines a customer as an advertiser or CPI arrangements, Cost-Per-Placement or CPP arrangements, and/or Cost-Per-Action or CPA arrangements with third-party advertisers. There are several different delivery methods available to operators and OEMs on first boot of the device: Wizard, Silent, or Software Development Kit ("SDK"). Optional notification features are available throughout the life cycle of the device, providing operators additional opportunity for advertising revenue streams. The Company has launched Ignite with mobile operators and OEMs in North America, Latin America, Europe, Asia Pacific, India, and Israel. Since inception, Ignite has delivered over one billion application preloads.
A&P Business
The Company's A&P business, formerly Appia Core,a carrier that is a worldwide mobile user acquisition network. Its mobile user acquisition platformdistinct source of revenue and is a demand side platform,legally bound to pay for the services that the Company delivers on the advertiser’s or DSP. This platform allows mobile advertisers to engage with the right customers for their applications at the right time to gain them as customers. The A&P business, through its syndicated network service, accesses mobile ad inventory through publishers including direct developer relationships, mobile websites, mobile carriers, and mediated relationships. The A&P business also accesses mobile ad inventory by purchasing inventory through exchanges using RTB. The advertising revenue generated by A&P platform is shared with publishers according to contractual rates in the case of direct or mediated relationships. When inventory is accessed using RTB, A&P buys inventory at a rate determined by the marketplace.
Content
Pay is an Application Programming Interface ("API") that integrates billing infrastructure between mobile operators and content publishers to facilitate mobile commerce. Increasingly, mobile content publishers want to go directly to consumers to sell their content rather than sell through traditional distributors such as Google Play or the Apple Application Store, which are not as prominent in select countries. Pay allows publishers and carriers to monetize those applications by allowing the content to be billed directly to the consumer via carrier billing. Pay has been launched in Australia, Philippines, India, and Singapore.
Marketplace is a white-label solution for mobile operators and OEMs to offer their own branded content store. Marketplace can be sold as an application storefront that manages the retailing of mobile content including features such as merchandising, product placements, reporting, pricing, promotions, and distribution of digital goods. Marketplace also includes the distribution and licensing of content across multiple content categories including music, applications, wallpapers, videos, and games. Marketplace is deployed with many operators across multiple countries including Australia, Philippines, Singapore, and Indonesia.


RESULTS OF OPERATIONS (unaudited)
  Three Months Ended December 31,   Nine Months Ended December 31,  
  2017 2016 % of Change 2017 2016 % of Change
  (in thousands, except per share amounts)   (in thousands, except per share amounts)  
Net revenues $38,031
 $22,285
 70.7 % $92,042
 $69,156
 33.1 %
License fees and revenue share 27,719
 17,039
 62.7 % 66,485
 54,060
 23.0 %
Other direct cost of revenues 651
 1,878
 (65.3)% 1,917
 5,640
 (66.0)%
Gross profit 9,661
 3,368
 186.8 % 23,640
 9,456
 150.0 %
Total operating expenses 10,257
 8,778
 16.8 % 27,010
 27,622
 (2.2)%
Loss from operations (596) (5,410) (89.0)% (3,370) (18,166) (81.4)%
Interest expense, net (446) (725) (38.5)% (1,815) (2,029) (10.5)%
Foreign exchange transaction gain / (loss) 35
 (9) (488.9)% (182) (13) 1,300.0 %
Change in fair value of convertible note embedded derivative liability (1,658) 2,853
 (158.1)% (6,310) 2,423
 (360.4)%
Change in fair value of warrant liability (898) 937
 (195.8)% (2,526) 797
 (416.9)%
Loss on extinguishment of debt (284) —
 100.0 % (1,166) (293) 298.0 %
Other income / (expense) (36) 68
 (152.9)% —
 101
 (100.0)%
Loss from operations before income taxes (3,883) (2,286) 69.9 % (15,369) (17,180) (10.5)%
Income tax provision / (benefit) (84) 300
 (128.0)% (937) 159
 (689.3)%
Net loss $(3,799) $(2,586) 46.9 % $(14,432) $(17,339) (16.8)%
Basic and diluted net loss per common share $(0.05) $(0.04) 25.0 % $(0.21) $(0.26) (19.2)%
Weighted-average common shares outstanding, basic and diluted 72,148
 66,634
 8.3 % 68,575
 66,416
 3.3 %



Comparison of the three and nine months ended December 31, 2017 and 2016
Revenues
  Three Months Ended December 31,   Nine Months Ended December 31,  
  2017 2016 % of Change 2017 2016 % of Change
  (in thousands)   (in thousands)  
Revenues by type:            
Content $13,830
 $6,073
 127.7% $31,544
 $24,929
 26.5%
Advertising 24,201
 16,212
 49.3% 60,498
 44,227
 36.8%
Total $38,031
 $22,285
 70.7%
$92,042

$69,156
 33.1%
carrier's behalf. During the three and nine months ended December 31, 2017 there was an approximately $15,746 and $22,8862020, no single customer represented 10.0% or 70.7% and 33.1% increase, in overall revenue, as compared togreater of the Company's net revenues. During the three and nine months ended December 31, 2016, respectively. This is2019, Verizon Communications Inc., primarily duethrough its subsidiary Oath Inc., represented 14.4% and 17.7%, respectively, of net revenues.
31

With respect to growth in Advertising revenue driven by increased O&O revenue from Advertising partners across existing carrier distribution partners as well as expansion with multiple new carrier distribution partners, partially offset by a decline in traditional A&P revenue. A&P revenue declined due to decrease in demand from advertising partners and a decline in publisher distribution partners, reflecting a trend we expect to continue aspartner concentration, the market shifts away from non-automated syndicated networks such as our current A&P business towards more programmatic advertising. The increase in the Content business was driven primarily by growth in Pay from overall increased demand for the product with customers in Australia, and the continued increase of Pay revenue from other Asia-Pacific markets. The increase in the Pay business was partially offset by a continued decline in Marketplace. For more details on the Company's services included in the Advertising and Content segments, see PART I Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, section titled "Revenues by Product and Service Category."
Revenues from Oath, Inc. and Machine Zone, Inc., both Advertising customers; and Singapore Telecommunications Limited and Telstra Corporation Limited, both Content customers, each represented more than 10% of the Company's total revenue for the three and nine months ended December 31, 2017. A reduction or delay in the collective operating activity from these customers, or a delay or default in payment by these customers could potentially harm the Company’s business and prospects. The Company does not expect to experience reductions or delays in operating activity with these customers that would cause a material impact on the Consolidated Statement of Operations.
Subsequent to period end, Telstra Corporation Limited informed the Company that it did not plan to continue utilizing the Company's Pay service at the conclusion of the current contracted period which ends in March 2018. While this is not a discontinuation of all services provided to Telstra Corporation Limited by the Company, it will substantially impact the total activity between the two parties. The Company does not believe the non-renewal will have a material impact on its Consolidated Statement of Operations as the gross profit contribution resulting from the impacted revenue is nominal.
The Company partners with mobile carriers and OEMSOEMs to deliver applications on our Ignite platform through the carrier network. During the three and nine months ended December 31, 2017,2020, Verizon Wireless, a carrier partner, generated 29.6%16.5% and 30.9% of our net revenues; while18.6%, respectively; AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 20.3% and 22.0%, respectively; T-Mobile US Inc., including Sprint and other subsidiaries, generated 30.6% and 27.0%, respectively; and America Movil Inc., a carrier partner, primarily through its Cricket subsidiary TracFone Wireless Inc., generated 24.0%10.4% and 19.0%10.4%, respectively, of our net revenue.revenues. During the three and nine months ended December 31, 2016,2019, Verizon Wireless, a carrier partner, generated 32.9%37.5% and 26.6%40.3%, respectively; and AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 29.8% and 30.9%, respectively, of our net revenues.


A reduction or delay in operating activity from these customers or partners, or a delay or default in payment by these customers, or a termination of the Company's agreements with these customers, could materially harm the Company’s business and prospects.
Gross Marginsmargin
  Three Months Ended December 31,   Nine Months Ended December 31,  
  2017 2016 % of Change 2017 2016 % of Change
  (in thousands)   (in thousands)  
Gross margin by type:            
Content gross margin $ $1,541
 $478
 222.4% $3,491
 $2,448
 42.6%
Content gross margin % 11.1% 7.9%   11.1% 9.8%  
Advertising gross margin $ $8,120
 $2,890
 181.0% $20,149
 $7,008
 187.5%
Advertising gross margin % 33.6% 17.8%   33.3% 15.8%  
Total gross margin $ $9,661
 $3,368
 186.8% $23,640
 $9,456
 150.0%
Total gross margin % 25.4% 15.1%   25.7% 13.7%  
Three months ended December 31,Nine months ended December 31,
 20202019% of Change20202019% of Change
(in thousands) (in thousands) 
Gross margin $$37,699 $14,040 168.5 %$93,550 $38,345 144.0 %
Gross margin %42.6 %39.0 %9.2 %43.0 %38.6 %11.4 %
Total gross margin, inclusive of the impact of other direct costcosts of revenues (including amortization of intangibles), was approximately $9,661$37,699 or 42.6% and $23,640$93,550 or 25.4% and 25.7%43.0% of net revenues, respectively, for the three and nine months ended December 31, 2017, respectively,2020 versus approximately $3,368$14,040 or 39.0% and $9,456$38,345 or 15.1% and 13.7%38.6% of net revenues, respectively, for the three and nine months ended December 31, 2016, respectively. Overall gross margin increased as growth in higher gross margin Advertising revenue was coupled with lower amortization of intangibles.
Advertising gross margin, inclusive of the impact of other direct cost of revenues (including amortization of intangibles), was approximately $8,120 and $20,149 or 33.6% and 33.3% for the three and nine months ended December 31, 2017, respectively, versus approximately $2,890 and $7,008 or 17.8% and 15.8% for the three and nine months ended December 31, 2016, respectively.2019. The increase in Advertising gross margin dollarsover the comparative periods was $23,659 or 168.5% and percentage is$55,205 or 144.0%, respectively. Of the increases in gross profit and gross margin, application media delivery drove approximately $16,149 or 68.3% and $30,716 or 55.6%, respectively, of the period-over-period increases driven by continued organic expansion of our platform while content media delivery contributed the remaining $7,510 or 31.7% and $24,489 or 44.4%, respectively, of the period-over-period increases largely driven from the additional content delivery solutions provided by the Acquisition. The increase was primarily attributable to an increase in Advertiser demand in the O&O business, which carriesincreased yield from an improved mix of partner diversification and non-dynamic application media install revenue on our Media Distribution platform and from a higherfull two quarters of accretive gross margin thancontribution from content media distribution from the A&P business, and a decrease in overall amortization of intangibles dueAcquisition, as compared to intangibles becoming fully amortized over the prior comparative periods. For more details on the Company's services included in the Advertising segment, see PART I Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, section titled "Revenues by Product and Service Category."
Content gross margin, inclusive of the impact of other direct cost of revenues (including amortization of intangibles), was approximately $1,541 and $3,491 or 11.1% and 11.1% for the three and nine months ended December 31, 2017, respectively, versus approximately $478 and $2,448 or 7.9% and 9.8% for the three and nine months ended December 31, 2016, respectively. The increase in Content gross margin percentage was driven primarily by an increase in professional services within Pay, which carry a higher margin than the actual Pay service offering. The increase in Content gross margin dollars was due primarily to an increase in activity over comparative periods with Pay partners. For more details on the Company's services included in the Content segment, see PART I Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, section titled "Revenues by Product and Service Category."
Operating Expensesexpenses
 Three Months Ended December 31,   Nine Months Ended December 31,  Three months ended December 31,Nine months ended December 31,
 2017 2016 % of Change 2017 2016 % of Change 20202019% of Change20202019% of Change
 (in thousands)   (in thousands)  (in thousands) (in thousands) 
Product development $3,623
 $3,113
 16.4% $9,218
 $9,065
 1.7 %Product development$5,202 $2,783 86.9 %$13,827 $8,312 66.3 %
Sales and marketing 2,042
 1,683
 21.3% 5,288
 4,655
 13.6 %Sales and marketing5,219 2,815 85.4 %14,372 7,534 90.8 %
General and administrative 4,592
 3,982
 15.3% 12,504
 13,902
 (10.1)%General and administrative6,761 4,310 56.9 %22,096 12,212 80.9 %
Total operating expenses $10,257
 $8,778

16.8%
$27,010

$27,622
 (2.2)%Total operating expenses$17,182 $9,908 73.4 %$50,295 $28,058 79.3 %
Total operating expenses for the three and nine months ended December 31, 2017, and 20162020 were approximately $10,257$17,182 and $27,010;$50,295, respectively, and $8,778for the three and $27,622,nine months ended December 31, 2019 were approximately $9,908 and $28,058, respectively, an increase of approximately $1,479$7,274 or 16.8%73.4% and $22,237 or 79.3% over the comparative periods, respectively. This change was a decreaseresult of $612 or 2.2%, respectively, over comparative periods.continued growth, including the acquisition of Mobile Posse. Company-wide cost control measures show the Company's ability to scale revenue at a greater rate than operating expense.

32


Product development expenses include the development maintenance, and hostingmaintenance of the Company's product suite, including A&P and O&O, as well as the costs to support Pay and Marketplace through the optimization of content for consumption on a mobile phone.suite. Expenses in this area are primarily a function of personnel and hosting expenses.personnel. Product development expenses for the three and nine months ended December 31, 2017 and 20162020 were approximately $3,623$5,202 and $9,218;$13,827, respectively, and $3,113for the three and $9,065,nine months ended December 31, 2019 were approximately $2,783 and $8,312, respectively, an increase of approximately $510$2,419 or 16.4%86.9% and $153$5,515 or 1.7%66.3%, respectively, over the comparative periods. The increase in costsproduct development expenses over the comparative periods was primarily a function of recently hired incremental personnel offset by efficiencies in data hosting realized byattributable to increased product development headcount, both organic and through the Acquisition, and other employee-related and third-party development-related costs as the Company leadingcontinues to cost savings.scale its product development organization to support the Company's growth.
Sales and marketing expenses represent the costs of sales and marketing personnel, advertising and marketing campaigns, and campaign management. Sales and marketing expenses for the three and nine months ended December 31, 2017, and 20162020 were approximately $2,042$5,219 and $5,288;$14,372, respectively, and $1,683for the three and $4,655,nine months ended December 31, 2019 were approximately $2,815 and $7,534, respectively, an increase of approximately $359 and$633$2,404 or 21.3%85.4% and 13.6%$6,838 or 90.8%, respectively, over the comparative periods. The increase in sales and marketing expenses over the comparative three and nine month periods was primarily attributable to increased travel expensethe addition of new personnel in existing markets related to the Company's continued expansion of its global footprint and increased commissions associated with the sales team generating more revenue through new and existing advertising relationships.relationships and markets.
General and administrative expenses represent management, finance, and support personnel costs in both the parent and subsidiary companies, which include professional and consulting costs in addition to other costs such as rent, stock-based compensation, and depreciation expense. General and administrative expenses for the three and nine months ended December 31, 2017, and 20162020 were approximately $4,592$6,761 and $12,504;$22,096, respectively, and $3,982for the three and $13,902,nine months ended December 31, 2019 were approximately $4,310 and $12,212, respectively, an increase of approximately $610$2,451 or 15.3%56.9% and a decrease of $1,398$9,884 or 10.1%80.9%, respectively, over the comparative periods. The increase in general and administrative expenses over the comparative three month periods is primarily attributable to a company wide bonus accrual of $1,525 in the current three month period based on the attainment of certain financial performance goals, compared to no bonus accrual in the prior three month period partially offset by lower stock option expense due to stock option grants issued over the comparative periods being issued at lower fair values, which has the impact of lower expense being recorded. The decrease over the comparative nine month periods iswas primarily attributable to lower legal, accounting, professional consulting costs;employee-related expenses as a function of higher headcount, inclusive of an increase in the Company's annual accrued bonus expense, increase in depreciation and reduced stock option compensationamortization related to capitalized internal-use software, and continued growth including the acquisition of Mobile Posse. These increases in expense duewere partially offset by a true-up credit of $1,397 to stock option grants issued overexpense related to the comparativeCompany's adoption of ASU 2018-07. Although this is an out-of-period adjustment, the Company determined that the adjustment was not material to the consolidated financial statements for any previously reported annual or interim period, nor to the three and nine months ended December 31, 2020. Therefore, we recorded the adjustment in the third quarter of fiscal year 2021 rather than revising prior periods being issued at lower fair values, which has the impact of lower expense being recorded.presented.
33

Interest and Other Incomeother income / (Expense)(expense), net
  Three Months Ended December 31,   Nine Months Ended December 31,  
  2017 2016 % of Change 2017 2016 % of Change
  (in thousands)   (in thousands)  
Interest expense, net $(446) $(725) (38.5)% $(1,815) $(2,029) (10.5)%
Foreign exchange transaction gain / (loss) 35
 (9) (488.9)% (182) (13) 1,300.0 %
Change in fair value of convertible note embedded derivative liability (1,658) 2,853
 (158.1)% (6,310) 2,423
 (360.4)%
Change in fair value of warrant liability (898) 937
 (195.8)% (2,526) 797
 (416.9)%
Loss on extinguishment of debt (284) —
 100.0 % (1,166) (293) 298.0 %
Other income / (expense) (36) 68
 (152.9)% —
 101
 (100.0)%
Total interest and other expense, net $(3,287) $3,124
 (205.2)% $(11,999) $986
 (1,316.9)%
Three months ended December 31,Nine months ended December 31,
20202019% of Change20202019% of Change
(in thousands) (in thousands) 
Interest income / (expense), net$(266)$59 (550.8)%$(859)$118 (828.0)%
Change in fair value of warrant liability— (870)100.0 %— (10,601)100.0 %
Change in estimated contingent consideration(4,662)— (100.0)%(15,419)— (100.0)%
Other income / (expense)(13)(19)(31.6)%(51)455 (111.2)%
Total interest and other income / (expense), net$(4,941)$(830)(495.3)%$(16,329)$(10,028)(62.8)%
Total interest and other income / (expense), net, for the three and nine months ended December 31, 2017,2020 was approximately $4,941 and 2016 were$16,329, respectively, and for the three and nine months ended December 31, 2019 was approximately $(3,287)$830 and $(11,999); and $3,124 and $986,$10,028, respectively, an increase in interest and other income / (expense), net, expenses of approximately $6,411$4,111 or 495.3% and $12,985$6,301 or 205.2% and 1,316.9%62.8%, respectively, over the comparative periods. The increase in expenseinterest and other income / (expense), net, over the comparative three and nine month periods iswas primarily attributable to the change in fair value of convertible note embedded derivativewarrant liability, due to the conversion of all warrants during fiscal year 2020, as well as the change in fair value of warrant liability, and loss on extinguishment of debt associated withestimated contingent consideration for adjustments to the conversion of the Notes.earn-out due to ACME. Interest and other income / (expense), net, includes net interest expense, foreign exchange transaction loss, change in fair value of convertible note embedded derivative liability,income / (expense), change in fair value of warrant liability, change in estimated contingent consideration, and other ancillary income / (expense) earned or incurred by the Company.


Interest Expense, Net
Interest expense is generated from the Notes and the Western Alliance Bank Credit Agreement in the current comparative period; and from our debt under the Term Loan Agreement with SVB and the Secured Debenture with NAC, both of which the Company entered into during March 2015 and retired in their entirety on September 28, 2016 in connection with the issuance of the Notes (see further details at Note 7 "Debt") during the prior period. Interest income consists/ (expense), net
The Company recorded $(266) and $(859), respectively, of interest income earned on our cash and cash equivalents. The decrease in total interest expense,/ (expense), net, was primarily attributable to less underlying debt outstanding during the current period as compared to the comparative period. This is a trend we expect to continue as holders of our Notes continue to convert their positions to equity. Inclusive of the Notes issued on September 28, 2016 and the Western Alliance Bank Credit Agreement, the Company recorded $195 and $875, and $288 and $969 of aggregate debt discount and debt issuance cost amortization during the three and nine months ended December 31, 2017,2020. This is comprised of amortization of annual facility fees and 2016, respectively. Inclusive ofinterest accrued on drawn amounts under the Notes issued on September 28, 2016 and theNew Credit Agreement, entered intopartially offset by interest income earned on May 23, 2017 during the current fiscal year, and the Notes and the NAC subordinated debenture which was retired in full on September 28, 2016 duringcash balances.
In the prior fiscal year, the Company recorded $251$59 and $940$118, respectively, of interest expenseincome / (expense), net, during the three and nine months ended December 31, 2017, respectively, and $437 and $1,060 for the three and nine months ended December 31, 2016, respectively. In total, the Company recorded $446 and $1,8152019. This is comprised of interest expense for the three and nine months ended December 31, 2017, respectively, and $725 and $2,029 of interest expense for the three and nine months ended December 31, 2016, respectively.
Foreign Exchange Transaction Loss
Foreign exchange transaction gain/(loss) for the three and nine months ended December 31, 2017, and 2016 consists of foreign exchange gains and losses, basedincome earned on fluctuations of the Company’s foreign denominated currencies.
Loss From Change in Fair Value of Convertible Note Embedded Derivative Liability
The Company accounts for the convertible note embedded derivative liability in accordance with US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings.
Due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the loss and gain, respectively. During the three months ended December 31, 2017, the Company recorded a loss from change in fair value of convertible note embedded derivative liability of $1,658 due to the increase in the Company's closing stock price during the current quarter from $1.51 to $1.79, offset by the extinguishment of $1,368 of Notes, and the underlying derivative instruments, during the current quarter. During the nine months ended December 31, 2017, the Company recorded a loss from change in fair value of convertible note embedded derivative liability of $6,310 due to the increase in the Company's closing stock price during the current fiscal year from $0.94 to $1.79, partially offset by a derecognition of derivative liability of $3,632 on the extinguishment of $7,368 of Notes, and the underlying derivative instruments, during the current fiscal year. During the three months ended December 31, 2016, the Company recorded a gain from change in fair value of convertible note embedded derivative liability of $2,853 due to the decrease in the Company's closing stock price from September 30, 2016 to December 31, 2016 from $1.05 to $0.68. During the nine months ended December 31, 2016 the Company recorded a gain from change in fair value of convertible note embedded derivative liability of $2,423 due to the decrease in the Company's closing stock price from inception to December 31, 2016 from $0.99 to $0.68.
Loss From Change in Fair Value of Warrant Liability
The Company accounts for the warrants issued in connection with the above-noted sale of Notes to the Initial Purchaser in accordance with US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that these warrants did not meet the criteria for classification as equity. Accordingly, the Company classified the warrants as long-term liabilities. The warrants are subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net in the statements of operations.


For similar reasons as applicable to the convertible notes, due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the (loss) and gain, respectively. During the three and nine months ended December 31, 2017, the Company recorded a loss from change in fair value of warrant liability of $898 and $2,526, respectively, due to the increase in the Company's closing stock price during the comparative period from $1.51 to $1.79, and $0.94 to $1.79, respectively. During the three months ended December 31, 2016, the Company recorded a gain from change in fair value of warrant liability of $937 due to the decrease in the Company's closing stock price from September 30, 2016 to December 31, 2016 from $1.05 to $0.68. During the nine months ended December 31, 2016 the Company recorded a gain from change in fair value of warrant liability of $797 due to the decrease in the Company's closing stock price from inception of the issuance of the Notes from September 28, 2016 to December 31, 2016 from $0.99 to $0.68.
Revenues by Product and Service Categories
The following table summarizes our net revenues by product and service categories for the three and nine months ended December 31, 2017 and 2016. The amount or percentage of total revenue contributed by class of products and services has been presented for those classes accounting for more than 10% or more of total net revenue in any of the periods presented, with all other amounts individually representing less than 10% of total net revenue included in the Other categories.
  Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 % of Change Nine Months Ended December 31, 2017 Nine Months Ended December 31, 2016 % of Change
  Dollars % of Net Revenues Dollars % of Net Revenues  Dollars % of Net Revenues Dollars % of Net Revenues 
Net revenues (in thousands) (in thousands)   (in thousands) (in thousands)  
                     
Ignite 22,693
 59.7% 11,572
 51.9% 96.1 % 53,598
 58.2% 27,698
 40.1% 93.5 %
Other O&O 42
 0.1% 202
 0.9% (79.2)% 193
 0.2% 911
 1.3% (78.8)%
Total O&O 22,735
 59.8% 11,774
 52.8% 93.1 % 53,791
 58.4% 28,609
 41.4% 88.0 %
                     
Syndicated Network 1,466
 3.9% 4,378
 19.6% (66.5)% 6,707
 7.3% 15,378
 22.2% (56.4)%
Other A&P —
 —% 60
 0.3% (100.0)% —
 —% 240
 0.3% (100.0)%
Total A&P 1,466
 3.9% 4,438
 19.9% (67.0)% 6,707
 7.3% 15,618
 22.6% (57.1)%
                     
Total Advertising 24,201
 63.6% 16,212
 72.7% 49.3 % 60,498
 65.7% 44,227
 64.0% 36.8 %
                     
Pay 13,657
 35.9% 5,696
 25.6% 139.8 % 30,889
 33.6% 23,608
 34.1% 30.8 %
Other Content 173
 0.5% 377
 1.7% (54.1)% 655
 0.7% 1,321
 1.9% (50.4)%
Total Content 13,830
 36.4% 6,073
 27.3% 127.7 % 31,544
 34.3% 24,929
 36.0% 26.5 %
                     
Total net revenues 38,031
 100.0% 22,285
 100.0% 70.7 % 92,042
 100.0% 69,156
 100.0% 33.1 %
Advertising
The Company's O&O business is an advertiser solution for unique and exclusive carrier and OEM inventory. During the three and nine months ended December 31, 2017, the main revenue driver for the O&O business was the Ignite platform. Ignite is a mobile application management software that enables mobile operators and OEMs to control, manage, and monetize applications installed at the time of activation and over the life of a mobile device. During the current periods there was an approximately $11,121 and $25,900 or 96.1% and 93.5% increase in Ignite net revenues as compared to the three and nine months ended December 31, 2016. This increase in Ignite net revenue was attributable to increased demand for the Ignite service, driven primarily by increased CPI and CPP revenue from advertising partners across existing commercial deployments of Ignite with carrier partners as well as expanded distribution with new carrier partners.


The Company's A&P business, is a worldwide mobile user acquisition network. Its mobile user acquisition platform is a demand side platform, or DSP. This platform allows mobile advertisers to engage with the right customers for their applications at the right time to gain them as customers. The A&P business, through its Syndicated network service, accesses mobile ad inventory through publishers including direct developer relationships, mobile websites, mobile carriers and mediated relationships. The advertising revenue generated by A&P platform is shared with publishers according to contractual rates in the case of direct or mediated relationships. During the three and nine months ended December 31, 2017, there was an approximately $2,912 and $8,671 or 66.5% and 56.4% decrease in Syndicated network net revenues as compared to the three and nine months ended December 31, 2016. This decrease in Syndicated network revenue was attributable primarily to the decrease in demand from advertising partners, reflecting a trend we expect to continue as the market shifts away from non-automated networks such as our current A&P business towards more programmatic advertising.
Content
Pay is an API that integrates billing infrastructure between mobile operators and content publishers to facilitate mobile commerce. Increasingly, mobile content publishers want to go directly to consumers to sell their content rather than sell through traditional distributors such as Google Play or the Apple Application Store, which are not as prominent in select countries. Pay allows publishers and carriers to monetize those applications by allowing the content to be billed directly to the consumer via carrier billing. Pay has been launched in Australia, Philippines, India, and Singapore. During the three and nine months ended December 31, 2017 there was an approximately $7,961 and $7,281 or 139.8% and 30.8% increase in Pay net revenues as compared to the three and nine months ended December 31, 2016, respectively.
The increase in the Content business over the comparative periods for the three and nine months ended December 31, 2017 and 2016 was attributable primarily to a increase in activity with multiple large partners as compared to the same period in prior year, partially offset by a continued decline in Marketplace revenues. The decline in Marketplace revenues reflects a trend we expect to continue as the end user market has shifted away from carrier specific content stores in favor of a growing number of other application delivery options.cash balances.
Liquidity and Capital Resources
Selected Liquidity Information
  December 31, 2017 March 31, 2017
  (unaudited)  
  (in thousands)
Cash $6,883
 $6,149
     
Short-term debt    
Short-term debt, net of debt issuance costs of $247 and $0, respectively 1,653
 —
Total short-term debt $1,653
 $—
     
Long-term debt    
Convertible notes, net of debt issuance costs and discounts of $2,881 and $6,315, respectively 5,751
 9,685
Total long-term debt $5,751
 $9,685
Total debt $7,404
 $9,685
     
Working capital    
Current assets $40,414
 $23,665
Current liabilities 48,214
 30,774
Working capital $(7,800) $(7,109)


Working Capital
Cash totaled approximately $6,883 and $6,149 at December 31, 2017 and March 31, 2017, respectively, an increase of approximately $734 or 11.9%. Current assets totaled $40,414 and $23,665 at December 31, 2017 and March 31, 2017, respectively, an increase of approximately $16,749 or 70.8%. As of December 31, 2017 and March 31, 2017, the Company had approximately $32,494 and $16,554, respectively, in accounts receivable, an increase of $15,940 or 96.3%. As of December 31, 2017 and March 31, 2017 the Company's working capital deficit was $7,800 and $7,109, respectively, an increase in working capital deficit of $691 or 9.7%. The working capital deficit as of December 31, 2017 includes the impact of the Western Alliance Bank Credit Agreement being classified as a current liability of $1,653 (net of aggregate debt issuance costs and debt discount of $247), as compared to $0 as of March 31, 2017 due to the payoff of the subordinated debenture with NAC on September 28, 2016.
Our primary sources of liquidity have historically been issuance of common, preferred stock,are cash from operations and debt. The Company may raise additional capital through future equity raises or, subject to restrictions contained in our Indenture and Credit Agreement, debt financing to provide for greater flexibility for the Company to complete acquisitions, fund new investments in under-capitalized opportunities, or invest in organic opportunities. Additional financing may not be available on acceptable terms or at all. If the Company issues additional equity or equity linked securities to raise funds, the ownership percentage of its existing stockholders would be reduced. New investors may demand rights, preferences, or privileges senior to those of existing holders of common stock. The Company believes that it has sufficient cash and capital resources to operate its business for at least the next twelve months from the issuance date of this Report. See Note 2 - Liquidity for more discussion.
As of December 31, 2017, our total contractual2020, we had cash obligations were as follows:
totaling approximately $43,659 and $5,000 available to draw on the New Credit Agreement.
  Payments Due by Period
  Total Within the Next 12 Months 1 to 3 Years 3 to 5 Years More Than 5 Years
Contractual cash obligations (in thousands)
Convertible notes (a) $8,632
 $—
 $8,632
 $—
 $—
Operating leases (b) 6,396
 1,069
 2,280
 1,789
 1,258
Employment agreements and other obligations (c) 325
 325
 —
 —
 —
Interest and bank fees 2,312
 755
 1,557
 —
 —
Uncertain tax positions (d) —
 —
 —
 —
 —
Total contractual cash obligations $17,665
 $2,149
 $12,469
 $1,789
 $1,258
On February 3, 2021, the Company entered into a new $100,000 revolving credit facility with Bank of America and, in connection therewith, terminated the New Credit Agreement and repaid all amounts outstanding thereunder. For further discussion, see Part II, Item 5 of this Form 10-Q.
(a) convertible notes maturing on September 23, 2020 (the “Notes”), unless converted, repurchased or redeemed in accordance with their terms prior to such date.
(b) Consists of operating leases for our office facilities.
(c) Consists of various employment agreements and severance agreements.
(d) We have approximately $921 in additional liabilities associated with uncertain tax positions that are not expected to be liquidated within the next twelve months. We are unable to reliably estimate the expected payment dates for these additional non-current liabilities.

Cash Flow Summary
Nine months ended December 31,
20202019% of Change
(in thousands) 
Consolidated statements of cash flows data:  
Net cash provided by operating activities - continuing operations$48,612 $20,155 141.2 %
Acquisition of Mobile Posse(7,968)— (100.0)%
Capital expenditures(6,545)(3,179)(105.9)%
Payment of contingent consideration(16,957)— (100.0)%
Options and warrants exercised5,927 6,353 (6.7)%
Repayment of debt obligations(750)— (100.0)%
Effect of exchange rate changes on cash(319)(364)12.4 %
34
  Nine Months Ended December 31,  
  2017 2016 % of Change
  (in thousands)  
Consolidated statement of cash flows data:      
Net cash provided by (used in) operating activities $482
 $(7,788) (106.2)%
Capital expenditures (1,312) (1,381) (5.0)%
Proceeds from sale of cost method investment in Sift —
 999
 (100.0)%
Cash received from issuance of convertible notes —
 16,000
 (100.0)%
Proceeds from short-term borrowings 2,500
 —
 100.0 %
Payment of debt issuance costs (346) (2,319) (85.1)%
Options exercised 261
 11
 2,272.7 %
Repayment of debt obligations (847) (11,000) (92.3)%
Effect of exchange rate changes on cash (4) (48) (91.7)%



Operating Activities
During the nine months ended December 31, 20172020 and 2016,2019, the Company's net cash provided by / (used in) operating activities from continuing operations was $482$48,612 and $(7,788),$20,155, respectively, a positive change of $8,270$28,457 or 106.2%141.2%. The increase in net cash provided by operating activities was primarily attributable to the Company's net income for the nine months ended December 31, 2020 and the change in working capital accounts over the comparative periods.
During the nine months ended December 31, 2017,2020, net cash provided by operating activities from continuing operations was $482,$48,612, resulting from a net lossincome of $14,432$24,828 offset by net non-cash expenses of $16,513,$20,257, which included depreciation and amortization, expense, change in the allowanceprovision for doubtful accounts, amortization of debt discount and debt issuance costs, accruednon-cash interest stock option expense, stock-based compensation, related to vesting of restricted stockstock-based compensation for services rendered, change in fair valueestimated contingent consideration, and payment of convertible note embedded derivative liability, changecontingent consideration in fair valueexcess of warrant liability, and loss on extinguishment of debtamount capitalized at acquisition of approximately $2,707, $244, $875, $165, $2,296, $224, $6,310, $2,526,$5,062, $854, $55, $3,545, $741, 15,419, and $1,166,$5,419, respectively. Net cash used inprovided by operating activities during the nine months ended December 31, 20172020 was also impacted by the change in net working capital accounts as of December 31, 20172020 as compared to March 31, 2017,2020, with a net increase in current liabilities of approximately $14,901$28,630 (inclusive of accounts payable, accrued license fees and revenue share, accrued compensation, and other current liabilities), offset by a net increase in current assets of approximately $16,500$25,048 (inclusive of accounts receivable deposits, and prepaid expenses and other current assets)assets but excluding cash) over the comparative periods. The net increase in working capital account liabilities was driven primarily by the increase in accounts payable and accrued license fees and revenue share of $12,864, mostly due to the timing of payments to our carrier partners. The net increase in working capital assets was driven primarily by the increase in accounts receivable of $16,184, mostly due to the timing of payments from our advertising and content customers.
During the nine months ended December 31, 2016,Lastly, net cash used in operating activities was $7,788, resulting from a net loss of $17,339 offsetprovided by net non-cash expenses of $8,405, which included depreciation and amortization, stock option expense, stock-based compensation related to vesting of restricted stock for services, amortization of debt discount, amortization of debt issuance costs, an decrease in the allowance for doubtful accounts, change in fair value of convertible note embedded derivative liability, change in fair value of warrant liability, loss on extinguishment of debt, and an increase in accrued interest of approximately $6,325, $3,335, $276, $450, $519, $130, $(2,423), $(797), $293, and $297, respectively. Net cash used in operating activities during the nine months ended December 31, 20162020 was also impacted by the changedecreases in net working capital accounts as of December 31, 2016 compared to March 31, 2016, with a net increase in current liabilities of approximately $2,738 (inclusive only of accounts payable, accrued license fees and revenue share, accrued compensation, and other liabilities), offset by a net increase in currentright-of-use assets of approximately $1,875 (inclusive only of restricted cash, accounts receivable, deposits,$430 and prepaid expenses and other current assets) over the comparative periods. The net increase in working capital account liabilities was driven primarily by the increase in accounts payable of $4,509, mostly due to the timing of payments to our carrier partners. Net cash used in operating activities was further impacted by an increase in other non-current liabilities of $283, related entirely$485, mainly due to changes in non-current uncertain tax liabilities over the comparative periods.long-term components of our leases from our implementation of ASC 842.
Investing Activities
For the nine months ended December 31, 2017 and 2016,2020, net cash used in investing activities was approximately $1,312 and $382, respectively,$14,513, which is comprised of capital expenditures related mostly to internally developedinternally-developed software of $6,545 and additional consideration paid related to working capital adjustments and earn-out payments in connection with our acquisition of Mobile Posse of $7,968. For the current fiscal year, andnine months ended December 31, 2019, net cash used in investing activities was approximately $3,179, which is comprised of capital expenditures related mostly to internally developed software of $1,381 offset by proceeds from the sale of a cost method investment of $999 in the prior fiscal year.internally-developed software.
Financing Activities
For the nine months ended December 31, 2017, cash provided by financing activities was approximately $1,568, inclusive of $2,500 in proceeds from our Credit Agreement, and $261 in proceeds from the exercise of stock options; offset by cash paid for the settlement of debt of $847, and the payment of capitalized debt issuance cots of $346. For the nine months ended December 31, 2016,2020, net cash used in financing activities was approximately $2,692, primarily due to proceeds from the issuance$11,780, comprised of payment of contingent consideration of $16,957 and repayment of debt obligations of $16,000 and$750, offset by proceeds from the exercise of stock options of $11, offset$5,927. For the nine months ended December 31, 2019, net cash provided by financing activities was approximately $6,353, comprised of proceeds from the repaymentexercise of stock options and warrants.
The Company believes it has sufficient liquidity and capital resources to meet its business requirements for at least twelve months from the filing date of this quarterly report on Form 10-Q.
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Senior Secured Credit Facility
On May 23, 2017, the Company entered into a Business Finance Agreement (the “Credit Agreement”) with Western Alliance Bank (the “Bank”). The Credit Agreement provided for a $5,000 total revolving credit facility.
On May 22, 2019, the Company amended its existing Credit Agreement with the Bank, to extend the term of the agreement to May 22, 2021, to increase the maximum available revolving credit and to make certain other amendments. The Credit Agreement, as amended, provided for up to a $20,000 total facility, subject to draw limitations derived from current levels of eligible domestic receivables.
On February 28, 2020, the Company entered into a new credit agreement (the "New Credit Agreement") with the Bank, which provides for (1) a term loan of $20,000, the proceeds of which the Company used to pay a portion of the closing cash purchase price for the Acquisition, and (2) a revolving line of credit of $5,000 to be used for working capital purposes. DT Media and DT USA are also additional co-borrowers under the New Credit Agreement.
The term loan must be repaid on a quarterly basis, beginning in July 2020, until the term loan maturity date of February 28, 2025, at which time the remaining unpaid principal balance must be repaid. The quarterly principal payment amounts increase from $250 to $1,250 over the term of the term loan. In addition, the Company must, following each fiscal year-end, make principal repayments equal to a percentage of its excess cash flow (as defined under the New Credit Agreement) for the fiscal year, which percentage is determined based on the Company’s total funded debt to consolidated adjusted EBITDA ratio.
The revolving line of $11,000credit matures on February 28, 2025.
Amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to LIBOR (or, if necessary, a broadly-adopted replacement index), subject to a 1.75% floor, plus 3.75%. The obligations under the New Credit Agreement are secured by a perfected first-priority security interest in all the assets of the Company and $2,319its subsidiaries. The New Credit Agreement contains customary covenants, representations and events of default, and also requires the Company to comply with a fixed charge coverage ratio and total funded debt to consolidated adjusted EBITDA ratio.
The New Credit Agreement contains representations and warranties by each of the parties to the New Credit Agreement, which were made only for purposes of the New Credit Agreement and as of specified dates. The representations, warranties and covenants in debt issuance costs payments.the New Credit Agreement were made solely for the benefit of the parties to the New Credit Agreement, are subject to limitations agreed upon by such parties, including being qualified by schedules, may have been made for the purposes of allocating contractual risk between the parties instead of establishing these matters as facts, and are subject to standards of materiality applicable to the parties that may differ from those applicable to others. Others should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the New Credit Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
In connection with the Company entering into the New Credit Agreement with the Bank, on February 28, 2020, the Company and the Bank terminated the existing Credit Agreement, which was the previous revolving credit facility of the Company.
At December 31, 2020, there was $19,250 outstanding principal on the New Credit Agreement and the Company had $5,000 available to draw under the revolving line of credit.
The Company was in compliance with all covenants of the New Credit Agreement as of December 31, 2020.
On February 3, 2021, the Company entered into a new $100,000 revolving credit facility with Bank of America and, in connection therewith, terminated the New Credit Agreement and repaid all amounts outstanding thereunder. For further discussion, see Part II, Item 5 of this Form 10-Q.
36

Earn-Out Payment Obligation Under Mobile Posse Stock Purchase Agreement
On February 28, 2020, the Company completed the acquisition of Mobile Posse, Inc. (the "Acquisition") from ACME Mobile, LLC (“ACME”). The Company acquired all of the outstanding capital stock of Mobile Posse in exchange for an estimated total consideration of: (1) $41,500 in cash paid at closing (subject to customary closing purchase price adjustments) and (2) an estimated earn-out of $23,735, to be paid in cash, based on Mobile Posse achieving certain future target net revenues, less associated revenue shares, over a twelve-month period (the “Earn-Out Period”) following the closing of the Acquisition, noting that the earn-out amount is subject to change based on final results and calculation. Under the terms of the earn-out, over the Earn-Out Period, the Company will pay ACME a certain percentage of actual net revenues (less associated revenue shares) of Mobile Posse depending on the extent to which Mobile Posse achieves certain target net revenues (less associated revenue shares) for the relevant period. The earn-out payments will be paid quarterly with a true-up calculation and payment after the first nine months of the Earn-Out Period. The acquisition of cash is not reflected in the total consideration detailed above. Final working capital adjustments were determined during the quarter ended June 30, 2020 and resulted in additional purchase price consideration of $453, which was reflected on the balance sheet as an increase in goodwill. This changed the initial cash consideration, not inclusive of the earn-out, to $41,953.
During the three and nine months ended December 31, 2020, $4,662 and $15,419 was added to the previous estimated earn-out of $23,735, bringing the estimated total earn-out related to the acquisition of Mobile Posse to $39,154. Of the amounts recorded and accrued for the earn-out related to the Acquisition, $29,154 has been paid to ACME and $10,000 remains accrued as of December 31, 2020. See Note "Commitments and Contingencies" for more information regarding the estimated earn-out. As of December 31, 2020, estimated total consideration, inclusive of estimated remaining earn-out, for the Acquisition is $81,107, of which $71,107 has been paid and $10,000 remains accrued. The actual remaining earn-out payment is subject to continued performance of the Acquisition, and is subject to re-valuation prior to the final settlement based on final actual results and calculations in March 2021.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not have any undisclosed borrowings or debt, and we have not entered into any synthetic leases. We believe, therefore, that we are not materially exposed to any financing, liquidity, market, or credit risk that couldwould arise if we had engaged in such relationships.


Critical Accounting Policies and Judgments
Management’s discussion and analysis of our financial condition and results of operations is based on our unaudited financial statements. The preparation of these financial statements is based on themanagement's selection of accounting policies and the application of significant accounting estimates, some of which require management to make judgments, estimates, and assumptions that affect the amounts reported in the financial statements and notes. For more information regarding our critical accounting estimates and policies, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-CriticalOperations - Critical Accounting Policies, and Judgments”” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, as amended2020.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have operations both within the United States and internationally and we are exposed to market risks in the ordinary course of our business, primarily interest rate and foreign currency exchange risks.
Interest Rate Fluctuation Risk
The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Our cash and cash equivalents consist of cash and deposits, which are not insensitivesensitive to interest rate changes.
Our borrowings under our credit facility are subject to variable interest rates and thus expose us to interest rate fluctuations depending on the extent to which we utilize the credit facility. If market interest rates materially increase, our results of operations could be adversely affected. A hypothetical increase in market interest rates of 100 basis points would result in an increase in our interest expense of $0.01 million per year for every $1 million of outstanding debt under the credit facility.
37

Foreign Currency Exchange Risk
We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the Australian dollar. While a portion of our sales are denominated in foreign currencies and then translated into U.S. dollars, the vast majority of our media costs are billed in U.S. dollars, causing both our revenue and, disproportionately, our operating lossincome / (loss) and net lossincome / (loss) to be impacted by fluctuations in exchange rates. In addition, gains/gains / (losses) related to translating certain cash balances, trade accounts receivable balances, and inter-company balances that are denominated in these currencies impact our net income/income / (loss). As our foreign operations expand, our results may be more impacted by fluctuations in the exchange rates of the currencies in which we do business.

38

ITEM 4.    CONTROLS AND PROCEDURES
This Report includes the certifications of our Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See Exhibits 31.1 and 31.2.31.2 to this Report. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.
Background
As previously disclosed under “Part II - Item 9A - Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, management concluded that our internal controls over financial reporting were not effective as of March 31, 2017, because of certain deficiencies that constituted material weaknesses in our internal controls over financial reporting. Material weaknesses could result in material misstatements of substantially all of our financial statement accounts, which would result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.
Our management has been actively engaged in the implementation of remediation efforts to address the material weaknesses, as well as other identified areas of risk. For a complete description of management’s remediation plan, see “Part II - Item 9A - Controls and Procedures” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, as amended.


Evaluation of Disclosure Controls and Procedures
DisclosureUnder the supervision of and with the participation of our management, including our chief executive officer, who is our principal executive officer, and our chief financial officer, who is our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as definedas of the end of the period covered by this Report. The term “disclosure controls and procedures,” as set forth in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports filedthat it files or submittedsubmits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SECthe SEC's rules and forms,forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including the Chief Executive Officerits principal executive and the Chief Financial Officer,principal financial officers, as appropriate to allow timely decisions regarding required disclosures.
In connection withdisclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the preparationcost-benefit relationship of this Report, Digital Turbine's management, under the supervision of and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosurepossible controls and procedures. Based on thatthe evaluation and the identification of certain material weaknesses in internal controls over financial reporting, which we view as an integral part of our disclosure controls and procedures as of the end of the period covered by this Report, our Chief Executive Officerchief executive officer and Chief Financial Officer havechief financial officer concluded that, as of such date, our disclosure controls and procedures were not effective as of December 31, 2017. Nevertheless, based on a number of factors, including the performance of additional procedures by management designed to ensure the reliability of our financial reporting, we believe that the consolidated financial statements in this Report fairly present, in all material respects, our financial position, results of operations, and cash flows as of the dates, and for the periods, presented, in conformity with US GAAP.
Management’s Plan for Remediation
The material weakness we identified associated with the Financial Close and Reporting process arises primarily from (i) a lack of a sufficient complement of accounting and financial reporting personnel, hindering the Company's ability to implement formal accounting policies with an appropriate level of accounting knowledge and experience commensurate with our financial reporting requirements, and (ii) inadequate accounting systems including information technology systems directly related to financial statement processes and a heavy reliance on manual processes.
The lack of staff resources and financial expertise arose as a result of employee turnover and our inability to timely fill accounting and financial-related positions. During the second half of fiscal 2017 we had filled all open accounting and financial-related positions with qualified replacements and continue to more fully develop the technical expertise of our existing staff and newly hired staff.
In addition, we had implemented a consolidated accounting ERP system across the entire organization and stock option accounting software during the third and fourth quarter of fiscal 2017, respectively, which has significantly enhanced our capabilities and efficiencies across many accounting disciplines, particularly as it relates to consolidation of financial information, foreign currency translation, and share-based compensation.
Many of the remedial actions we have taken are recent, and other planned remedial actions are in process of being implemented as detailed below. Because many of the remedial actions taken are very recent, management will not be able to conclude that the material weakness has been eliminated until the controls have been successfully operated and tested. We, along with our Audit Committee, will continue to monitor and evaluate the effectiveness of these remedial actions and make further changes as deemed appropriate. Management, with the oversight of our Audit Committee, has devoted considerable effort to remediate the material weakness identified above, with the planned actions detailed below to be completed during fiscal 2018 to remediate the material weakness.
Planned Actions
Completing the development and execution of the plan to fully implement and effectively operate the key controls identified through the completion of the documentation of internal control procedures over all significant accounting areas and information technology that have an impact on financial reporting.
Completing the implementation of a cyclical process for evaluating and testing the control environment to help ensure any future key control failures will be identified on a timely basis, and allow for the possibility of immediate detection and remediation.
Continue conducting formal training related to key accounting policies, internal controls, and SEC compliance for all key personnel who have an impact on the transactions underlying the financial statements.
The remediation plan, once fully implemented and determined to be operating effectively, is expected to result in the remediation of the identified material weaknesses in internal controls over financial reporting.


effective.
Changes in Internal ControlsControl Over Financial Reporting
There were no changes in our internal controlscontrol over financial reporting identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during the three months ended December 31, 2017fiscal quarter covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal controlscontrol over financial reporting.
39

PART II - OTHER INFORMATION
Item 1.Legal Proceedings
See Note 13 “Commitments and Contingencies - Legal Matters” of our Notes to Consolidated Financial Statements, which is incorporated herein by reference.
None.
Item 1 (A).1A. Risk Factors
Registrant    The Company is not aware of any material changes from the risk factors since those set forth under “Risk Factors” in its Annual Report inon Form 10-K as amended, for the year ended March 31, 2017.2020.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.Defaults Upon Senior Securities
Not applicable.
Item 4.Mine Safety Disclosures
Not applicable.
Item 5.Other Information
None.


Fourth Amendment to Bylaws of Digital Turbine, Inc.


On January 29, 2021, the Board of Directors (the “Board”) of Digital Turbine, Inc. (the “Company”) approved amendments to Article II and Article III of the Bylaws of the Company (the “Amendment”).

The Amendment contains an advance notice procedure with regard to items of business to be brought before an annual or special meeting of stockholders by a stockholder. These procedures require that the stockholder give timely notice in writing to the Secretary of the Company and that such item of business otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice must be received by the Secretary of the Company at the principal executive offices of the Company not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders of the Company. In the event that the annual meeting is called for a date more than 50 days prior to such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was first mailed or public disclosure of the date of the meeting was first made, whichever first occurs. Stockholder proposals to be brought before the 2022 annual meeting of stockholders of the Company under these procedures will be considered untimely if they are submitted before May 18, 2021 or after June 17, 2021. The Amendment requires that the notice of the proposal contain certain information concerning the proposing stockholder and the proposal.

The Amendment also contains a similar advance notice procedure for the nomination of candidates for election to the Board by stockholders. Director nominations to be brought by stockholders before the 2022 annual meeting of stockholders of the Company will be considered untimely if they are submitted before May 18, 2021 or after June 17, 2021.

New Credit Facility

On February 3, 2021, the Company entered into a Credit Agreement with Bank of America, N.A. (the “Bank”), which provides for a revolving line of credit of $100,000,000, with an accordion feature enabling the Company to increase the amount to up to $200,000,000, to be used for acquisitions, working capital, and general corporate purposes. Digital Turbine Media, Inc. (“DT Media”) and Digital Turbine USA, Inc. (“DT USA”) are additional co-borrowers under the Credit Agreement.

The revolving line of credit matures on February 3, 2024.

Amounts outstanding under the Credit Agreement accrue interest at an annual rate equal to LIBOR (or, if necessary, a broadly-adopted replacement index) plus an applicable margin which ranges from 1.50% to 2.25%, depending on the Company’s consolidated leverage ratio. The obligations under the Credit Agreement are secured by a grant of a security interest in substantially all of the assets of the Company and its subsidiaries. The Credit Agreement contains customary covenants, representations, and events of default, and also requires the Company to comply with a maximum consolidated leverage ratio and minimum fixed charge coverage ratio.

40

The description of the Credit Agreement provided herein is qualified by reference to the Credit Agreement, which is attached to this Form 10-Q as Exhibit 10.1 and is incorporated by reference herein.

The Credit Agreement contains representations and warranties by each of the parties to the Credit Agreement, which were made only for the purposes of the Credit Agreement and, in some cases, as of specified dates. The representations, warranties, and covenants in the Credit Agreement were made solely for the benefit of the parties to the Credit Agreement, are subject to limitations agreed upon by such parties (including being qualified by schedules), may have been made for the purposes of allocating contractual risk between the parties instead of establishing these matters as facts, and are subject to standards of materiality applicable to the parties that may differ from those applicable to others. Others should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, and covenants may change after the date of the Credit Agreement and such subsequent information may or may not be fully reflected in the Company’s public disclosures.

Termination of Existing Credit Facility

In connection with the Company entering into the Credit Agreement with the Bank as described above, on February 3, 2021, the Company and Western Alliance Bank terminated the Credit Agreement, dated February 28, 2020, by and among the Company, DT Media, DT USA, and Western Alliance Bank (and the amendments thereto), which was the previous term loan and revolving credit facility of the Company.
41

ITEM 6.    EXHIBITS
101
INS XBRL Instance Document.*
101
SCH XBRL Schema Document.*
101
CAL XBRL Taxonomy Extension Calculation Linkbase Document.*
101
DEF XBRL Taxonomy Extension Definition Linkbase Document.*
101
LAB XBRL Taxonomy Extension Label Linkbase Document.*
101
PRE XBRL Taxonomy Extension Presentation Linkbase Document.*
*
*    Filed herewith.
+In accordance with SEC Release No. 33-8212, these exhibits are being furnished, and are not being filed, as part of the Report on Form 10-Q or as a separate disclosure document, and are not being incorporated by reference into any Securities Act registration statement.


+    In accordance with SEC Release No. 33-8212, these exhibits are being furnished, and are not being filed, as part of the Report on Form 10-Q or as a separate disclosure document, and are not being incorporated by reference into any Securities Act registration statement.
42

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d)the Securities Exchange Act of the Exchange Act,1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Digital Turbine, Inc.
Dated: February 7, 20183, 2021
By:/s/ William Stone
William Stone
Chief Executive Officer
(Principal Executive Officer)


Digital Turbine, Inc.
Dated: February 7, 20183, 2021
By:/s/ Barrett Garrison
Barrett Garrison
Chief Financial Officer
(Principal Financial Officer)

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