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, ~~2017~~2021



¨☐			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)



Delaware						22-2267658
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

110 San Antonio Street, Suite 160, Austin, TX						78701
(Address of Principal Executive Offices)						(Zip Code)

(512) 387-7717

(~~Issuer’s~~Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:


Common Stock, Par Value $0.0001 Per Share	APPS	The Nasdaq Stock Market LLC
		(NASDAQ Capital Market)
(Title of Class)	(Trading Symbol)	(Name of Each Exchange on Which Registered)

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	ý☐
Non-Accelerated Filer			☐
~~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,~~2022, the Company had ~~75,143,354~~96,961,158 shares of its common stock, $0.0001 par value per share, outstanding.

Digital Turbine, Inc.

~~FORM 10-Q~~ QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED December 31, ~~2017~~2021

TABLE OF CONTENTS



			PART I -	FINANCIAL INFORMATION

~~Item 1.~~	~~Consolidated Financial Statements~~

	~~Consolidated Balance Sheets as of December 31, 2017 (Unaudited) and March 31, 2017~~	3

	~~Consolidated Statements of Operations and Comprehensive Loss (Unaudited) for the Three and Nine Months Ended December 31, 2017 and 2016~~ITEM 1.	4CONSOLIDATED FINANCIAL STATEMENTS			3

	~~Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2017 and 2016 (Unaudited)~~CONDENSED CONSOLIDATED BALANCE SHEETS			53

	~~Notes to Unaudited Consolidated Financial Statements~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)			64

~~Item 2.~~	~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS			365

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY			476

~~Item 4.~~	~~Controls and Procedures~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			478

	~~PART II - OTHER INFORMATION~~ITEM 2.

~~Item 1.~~	~~Legal Proceedings~~	49MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			27

~~Item 1 (A).~~	~~Risk Factors~~ITEM 3.	49QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			38

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~ITEM 4.	49CONTROLS AND PROCEDURES			38

~~Item 3.~~	~~Defaults~~PART II	49OTHER INFORMATION			40

~~Item 4.~~	~~Mine Safety Disclosures~~ITEM 1.	49LEGAL PROCEEDINGS			40

~~Item 5.~~	~~Other Information~~ITEM 1A.	49RISK FACTORS			40

	~~Exhibits~~ITEM 2.	50UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			40
ITEM 3.			DEFAULTS UPON SENIOR SECURITIES			40
			~~Signatures~~ITEM 4.	51MINE SAFETY DISCLOSURES			40
ITEM 5.			OTHER INFORMATION			40
ITEM 6.			EXHIBITS			41
			SIGNATURES			42

PART I - FINANCIAL INFORMATION

ITEM ~~1 -~~1. CONSOLIDATED FINANCIAL STATEMENTS

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets1

(in thousands, except par value and share amounts)


	December 31, 2017			March 31, 2017				December 31, 2021		March 31, 2021
	(Unaudited)							(Unaudited)
ASSETS							ASSETS
Current assets							Current assets
Cash	$	6,883		$	6,149		Cash	$	115,046	$	30,778
Restricted cash	331			331			Restricted cash	394		340
Accounts receivable, net of allowances of $841 and $597, respectively	32,494			16,554
Deposits	155			121
Accounts receivable, net							Accounts receivable, net	291,200		61,985
Prepaid expenses and other current assets	551			510			Prepaid expenses and other current assets	21,928		4,282
Total current assets	40,414			23,665			Total current assets	428,568		97,385
Property and equipment, net	2,693			2,377			Property and equipment, net	25,862		13,050
Deferred tax assets	593			352
Right-of-use assets							Right-of-use assets	16,657		3,495
Intangible assets, net	2,844			4,565			Intangible assets, net	446,535		53,300
Goodwill	76,621			76,621			Goodwill	554,975		80,176
Deferred tax assets, net							Deferred tax assets, net	—		12,963
Other non-current assets							Other non-current assets	883		—
TOTAL ASSETS	$	123,165		$	107,580		TOTAL ASSETS	$	1,473,480	$	260,369
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDER'S EQUITY							LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities							Current liabilities
Accounts payable	$	28,404		$	19,868		Accounts payable	$	171,562	$	34,953
Accrued license fees and revenue share	12,857			8,529			Accrued license fees and revenue share	111,173		46,196
Accrued compensation	3,456			1,073			Accrued compensation	37,106		9,817
Short-term debt, net of debt issuance costs of $247 and $0, respectively	1,653			—
Acquisition purchase price liabilities							Acquisition purchase price liabilities	253,700		—
Short-term debt							Short-term debt	12,501		14,557
Other current liabilities	1,844			1,304			Other current liabilities	23,586		5,626
Total current liabilities	48,214			30,774			Total current liabilities	609,628		111,149
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 debt issuance costs							Long-term debt, net of debt issuance costs	341,590		—
Deferred tax liabilities, net							Deferred tax liabilities, net	18,856		—
Other non-current liabilities	51			782			Other non-current liabilities	17,540		4,108
Total liabilities	63,514			45,535			Total liabilities	987,614		115,257
Commitments and contingencies (Note 13)							Commitments and contingencies (Note 13)	0		0
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)							Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1)	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; 97,471,352 issued and 96,731,227 outstanding at December 31, 2021; 90,685,553 issued and 89,949,847 outstanding at March 31, 2021							$0.0001 par value: 200,000,000 shares authorized; 97,471,352 issued and 96,731,227 outstanding at December 31, 2021; 90,685,553 issued and 89,949,847 outstanding at March 31, 2021	10		10
Additional paid-in capital	311,621			299,580			Additional paid-in capital	740,592		373,310
Treasury stock (754,599 shares at December 31, 2017 and March 31, 2017)	(71		)	(71		)
Treasury stock (758,125 shares at December 31, 2021 and March 31, 2021)							Treasury stock (758,125 shares at December 31, 2021 and March 31, 2021)	(71)		(71)
Accumulated other comprehensive loss	(326		)	(321		)	Accumulated other comprehensive loss	(45,051)		(903)
Accumulated deficit	(251,683		)	(237,251		)	Accumulated deficit	(211,888)		(227,334)
Total stockholders' equity	59,651			62,045			Total stockholders' equity	483,692		145,112
Non-controlling interest							Non-controlling interest	2,174		—
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	123,165		$	107,580		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,473,480	$	260,369

1In the fiscal quarter ended June 30, 2021, the Company initiated 2 significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive ~~Loss~~ Income / (Loss)1

(Unaudited)

(in thousands, except per share amounts)


	Three months ended December 31,				Nine months ended December 31,
	2021		2020		2021		2020
Net revenue	$	375,487	$	88,592	$	898,307	$	218,497
Costs of revenue and operating expenses
License fees and revenue share	267,722		50,144		619,215		122,976
Other direct costs of revenue	5,125		749		11,496		1,971
Product development	17,720		5,202		51,171		13,827
Sales and marketing	15,857		5,219		47,072		14,372
General and administrative	39,924		6,761		104,537		22,096
Total costs of revenue and operating expenses	346,348		68,075		833,491		175,242
Income from operations	29,139		20,517		64,816		43,255
Interest and other income / (expense), net
Change in fair value of contingent consideration	(18,200)		(4,662)		(40,287)		(15,419)
Interest expense, net	(2,195)		(266)		(5,307)		(859)
Foreign exchange transaction gain	2,122		—		1,603		—
Other expense, net	(86)		(13)		(598)		(51)
Total interest and other income / (expense), net	(18,359)		(4,941)		(44,589)		(16,329)
Income before income taxes	10,780		15,576		20,227		26,926
Income tax provision	3,718		1,061		4,799		2,098
Net income	7,062		14,515		15,428		24,828
Less: net income / (loss) attributable to non-controlling interest	48		—		(18)		—
Net income attributable to Digital Turbine, Inc.	7,014		14,515		15,446		24,828
Other comprehensive loss
Foreign currency translation adjustment	(8,389)		(132)		(45,062)		(319)
Comprehensive income / (loss)	(1,327)		14,383		(29,634)		24,509
Less: comprehensive loss attributable to non-controlling interest	(11)		—		(932)		—
Comprehensive income / (loss) attributable to Digital Turbine, Inc.	$	(1,316)	$	14,383	$	(28,702)	$	24,509
Net income per common share
Basic	$	0.07	$	0.16	$	0.16	$	0.28
Diluted	$	0.07	$	0.15	$	0.15	$	0.26
Weighted-average common shares outstanding
Basic	96,548		89,003		94,620		88,140
Diluted	103,287		96,976		101,346		95,563

Three Months Ended December 31, Nine Months Ended December 31,
2017 2016 2017 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
1In the fiscal quarter ended June 30, 2021, the Company initiated 2 significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows1

(Unaudited)

(in thousands)


	Nine months ended December 31,
	2021		2020
Cash flows from operating activities
Net income	$	15,428	$	24,828
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,946		5,062
Non-cash interest expense	500		55

Stock-based compensation expense	15,369		4,286
Foreign exchange transaction (gain) / loss	(1,603)		—
Change in fair value of contingent consideration	40,287		15,419
Payment of contingent consideration in excess of amount capitalized at acquisition	—		(5,419)
Right-of-use asset	3,270		430
Deferred income taxes	4,799		—
(Increase) / decrease in assets:
Accounts receivable, gross	(104,535)		(26,746)
Allowance for credit losses	412		854
Prepaid expenses and other current assets	(5,760)		1,698
Other non-current assets	74		—
Increase / (decrease) in liabilities:
Accounts payable	38,467		2,563
Accrued license fees and revenue share	29,377		16,765
Accrued compensation	(33,506)		4,029
Other current liabilities	1,114		5,273
Other non-current liabilities	(1,177)		(485)
Net cash provided by operating activities	43,462		48,612

Cash flows from investing activities
Business acquisitions, net of cash acquired	(148,192)		(7,968)
Capital expenditures	(15,692)		(6,545)
Net cash used in investing activities	(163,884)		(14,513)

Cash flows from financing activities
Payment of contingent consideration	—		(16,957)
Proceeds from borrowings	369,913		—
Payment of debt issuance costs	(4,044)		—
Payment of deferred business acquisition consideration	(98,175)		—
Options and warrants exercised	2,814		5,927
Payment of withholding taxes for net share settlement of equity awards	(7,587)		—
Repayment of debt obligations	(52,623)		(750)
Net cash provided by / (used in) financing activities	210,298		(11,780)

Effect of exchange rate changes on cash	(5,554)		(319)

Net change in cash	84,322		22,000

Cash and restricted cash, beginning of period	31,118		21,659

Cash and restricted cash, end of period	$	115,440	$	43,659

Supplemental disclosure of cash flow information
Interest paid	$	3,882	$	832
Income taxes paid	$	954	$	—

Supplemental disclosure of non-cash activities
Common stock for the acquisition of Fyber	$	356,686	$	—
Unpaid cash consideration for the acquisition of Fyber Minority Interest	$	3,106	$	—

Fair value of contingent consideration in connection with business acquisition	$	204,500	$	—

Nine Months Ended December 31,
2017 2016
Cash flows from operating activities

Net loss $ (14,432 ) $ (17,339 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,707
6,325
Change in allowance for doubtful accounts 244
130
Amortization of debt discount and debt issuance costs 875
969
Accrued interest 165
297
Stock-based compensation 2,296
3,335
Stock-based compensation for services rendered
224
276
Change in fair value of convertible note embedded derivative liability 6,310
(2,423 )
Change in fair value of warrant liability 2,526
(797 )
Loss on extinguishment of debt 1,166
293
(Increase) / decrease in assets:
Restricted cash transferred from operating cash —
(323 )
Accounts receivable (16,184 ) (1,877 )
Deposits (34 ) 83
Deferred tax assets (241 ) 212
Prepaid expenses and other current assets (41 ) 30
Increase / (decrease) in liabilities:
Accounts payable 8,536
4,509
Accrued license fees and revenue share 4,328
(712 )
Accrued compensation 2,383
(241 )
Other current liabilities 385
(818 )
Other non-current liabilities (731 ) 283
Net cash provided by (used in) operating activities 482
(7,788 )

Cash flows from investing activities

Capital expenditures (1,312 ) (1,381 )
Proceeds from sale of cost method investment in Sift —
999
Net cash used in investing activities (1,312 ) (382 )

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
Repayment of debt obligations (847 ) (11,000 )
Payment of debt issuance costs (346 ) (2,319 )
Net cash provided by financing activities 1,568
2,692

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

Net change in cash 734
(5,526 )

Cash, beginning of period 6,149
11,231

Cash, end of period $ 6,883
$ 5,705

Supplemental disclosure of cash flow information

Interest paid $ 770
$ 741
Supplemental disclosure of non-cash financing activities

Common stock of the Company issued for extinguishment of debt $ 9,510
$ —
1In the fiscal quarter ended June 30, 2021, the Company initiated 2 significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity1

(Unaudited)

(in thousands, except share counts)


	Common Stock Shares	Amount		Preferred Stock Shares	Amount		Treasury Stock Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Non-Controlling Interest		Total
Balance at March 31, 2021	89,790,086	$	10	100,000	$	100	758,125	$	(71)	$	373,310	$	(903)	$	(227,334)	$	—	$	145,112
Net income	—	—		—	—		—	—		—		—		14,284		(31)		14,253
Foreign currency translation	—	—		—	—		—	—		—		(20,019)		—		(762)		(20,781)
Stock-based compensation expense	207,758	—		—	—		—	—		3,705		—		—		—		3,705
Shares issued:
Exercise of stock options	178,127	—		—	—		—	—		695		—		—		—		695

Shares for acquisition of Fyber	4,716,935	—		—	—		—	—		359,233		—		—		—		359,233
Acquisition of non-controlling interests in Fyber	—	—		—	—		—	—		—		—		—		24,558		24,558



Balance at June 30, 2021	94,892,906	$	10	100,000	$	100	758,125	$	(71)	$	736,943	$	(20,922)	$	(213,050)	$	23,765	$	526,775
Net income	—	—		—	—		—	—		—		—		(5,852)		(35)		(5,887)
Foreign currency translation	—	—		—	—		—	—		—		(15,799)		—		(93)		(15,892)
Stock-based compensation expense	28,477	—		—	—		—	—		5,925		—		—		—		5,925
Shares issued:
Exercise of stock options	480,422	—		—	—		—	—		1,460		—		—		—		1,460

Shares for acquisition of Fyber	1,058,364	—		—	—		—	—		(2,547)		—		—		—		(2,547)
Acquisition of non-controlling interests in Fyber	—	—		—	—		—	—		—		—				(21,452)		(21,452)



Balance at September 30, 2021	96,460,169	$	10	100,000	$	100	758,125	$	(71)	$	741,781	$	(36,721)	$	(218,902)	$	2,185	$	488,382
Net income	—	—		—	—		—	—		—		—		7,014		48		7,062
Foreign currency translation	—	—		—	—		—	—		—		(8,330)		—		(59)		(8,389)
Stock-based compensation expense	—	—		—	—		—	—		5,739		—		—		—		5,739
Shares issued:
Exercise of stock options	201,015	—		—	—		—	—		659		—		—		—		659
Vesting of restricted and performance stock units	70,043	—		—	—		—	—		—		—		—		—		—




Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(7,587)		—		—		—		(7,587)
Balance at December 31, 2021	96,731,227	$	10	100,000	$	100	758,125	$	(71)	$	740,592	$	(45,051)	$	(211,888)	$	2,174	$	485,866

1In the fiscal quarter ended June 30, 2021, the Company initiated 2 significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity1

(Unaudited)

(in thousands, except share counts)


	Common Stock Shares*	Amount		Preferred Stock Shares	Amount		Treasury Stock Shares*	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Non-Controlling Interest		Total
Balance at March 31, 2020	87,147,023	$	10	100,000	$	100	758,125	$	(71)	$	360,224	$	(591)	$	(282,218)	$	—	$	77,454
Net income	—	—		—	—		—	—		—		—		9,940		—		9,940
Foreign currency translation	—	—		—	—		—	—		—		(142)		—		—		(142)
Stock-based compensation expense	—	—		—	—		—	—		1,611		—		—		—		1,611
Shares issued:
Exercise of stock options	224,012	—		—	—		—	—		437		—		—		—		437






Balance at June 30, 2020	87,371,035	$	10	100,000	$	100	758,125	$	(71)	$	362,272	$	(733)	$	(272,278)	$	—	$	89,300
Net income	—	—		—	—		—	—		—		—		373		—		373
Foreign currency translation	—	—		—	—		—	—		—		(45)		—		—		(45)
Stock-based compensation expense	106,663	—		—	—		—	—		2,515		—		—		—		2,515
Shares issued:
Exercise of stock options	1,059,644	—		—	—		—	—		3,089		—		—		—		3,089






Balance at September 30, 2020	88,537,342	$	10	100,000	$	100	758,125	$	(71)	$	367,876	$	(778)	$	(271,905)	$	—	$	95,232
Net income	—	—		—	—		—	—		—		—		14,515		—		14,515
Foreign currency translation	—	—		—	—		—	—		—		(132)		—		—		(132)
Stock-based compensation expense	15,768	—		—	—		—	—		160		—		—		—		160
Shares issued:
Exercise of stock options	696,212	—		—	—		—	—		2,399		—		—		—		2,399






Balance at December 31, 2020	89,249,322	$	10	100,000	$	100	758,125	$	(71)	$	370,435	$	(910)	$	(257,390)	$	—	$	112,174

*De minimis adjustment to previously disclosed share count; no impact on quarter-to-date or year-to-date earnings per share in any period presented.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

December 31, ~~2017~~2021

(in thousands, except share and per share amounts)

1. Description of Business

Digital Turbine, Inc., through its subsidiaries ~~operates at~~(collectively "Digital Turbine" or the ~~convergence of media and mobile communications, delivering~~"Company"), is a leading end-to-end ~~products and solutions~~solution for mobile ~~operators,~~technology companies to enable advertising and monetization solutions. Its digital media platform powers frictionless end-to-end applications ("app" or "apps") for brand discovery and advertising, user acquisition and engagement, operational efficiency, and monetization opportunities. The Company provides on-device solutions to all participants in the mobile application ~~advertisers,~~ecosystem that want to connect with end users and consumers who hold the device, including mobile carriers and device original equipment manufacturers ~~("OEMs"~~(“OEMs”) that participate in the app economy, app publishers and ~~other third parties to enable them to effectively monetize mobile content~~developers, and ~~generate higher value user acquisition. The Company operates its business in two reportable segments – Advertising~~brands and ~~Content.~~advertising agencies.

~~The Company's Advertising business is comprised of two businesses:~~

~~Operator and OEM ("O&O"), an advertiser solution for unique and exclusive carrier and original equipment manufacturer ("OEM") inventory which is comprised 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, and~~

~~Pay™ ("Pay"), a content management and mobile payment solution.~~

~~With global headquarters in Austin, Texas and offices in Durham, North Carolina, San Francisco, California, Singapore, Sydney, and Tel Aviv, Digital Turbine’s solutions are available worldwide.~~

Unless the context otherwise indicates, the use of the terms “we,” “our,” “us,” “Digital Turbine,” “DT,” or the “Company” refer to the collective business and operations of Digital Turbine, Inc. through its operating and wholly-owned subsidiaries, Digital Turbine USA, Inc. (“DT USA”), Digital Turbine (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"). We refer to all 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~~Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements ~~have been prepared~~are presented in ~~conformity~~accordance with accounting principles generally accepted in the United States ~~of America ("US GAAP"~~(“GAAP”)~~, which contemplate continuation~~. The condensed consolidated financial statements include the accounts of the Company ~~as a going concern.~~

~~Our primary sources~~ and its subsidiaries. The Company consolidates the financial results and reports non-controlling interests representing the economic interests held by other equity holders of ~~liquidity have historically been issuance~~subsidiaries that are not 100% owned by the Company. The calculation of ~~common stock, preferred stock, and debt. As of December 31, 2017, we had cash and restricted cash totaling approximately $7,214.~~

~~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~~non-controlling interests excludes any net income / (loss) attributable directly to the ~~Company of $14,316, after deducting the initial purchaser's discounts~~Company. All intercompany balances 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 debtstransactions have been eliminated in ~~their entirety, and will otherwise be used for general corporate purposes and working capital. Refer to Note 7 "Debt" for more details.~~consolidation.

On May 23, 2017, the Company entered into a Business Finance Agreement (the "Credit Agreement") with Western Alliance Bank (the "Bank"). The Credit Agreement provides for a $5,000 total facility. Refer to Note 7 "Debt" for more details.

The Company anticipates that its primary sources of liquidity will continue be cash on hand, cash provided by operations, and the remaining credit available under the 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 the Credit Agreement, debt financing to provide for greater flexibility to make acquisitions, make 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 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 view of the matters described in the preceding paragraphs, 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. TheThese 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~~

~~Interim Consolidated Financial Information~~

~~The accompanying consolidated financial statements of Digital Turbine, Inc.~~ should be read in conjunction with the ~~consolidated~~Company's audited financial statements and ~~accompanying~~related notes ~~filed with the U.S. Securities and Exchange Commission ("SEC")~~included in ~~Digital Turbine, Inc.'s~~its Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017, as amended. The~~2021 (the "2021 Form 10-K").

Unaudited Interim Financial Information

These accompanying unaudited condensed consolidated financial statements have been prepared ~~in accordance with U.S. GAAP and~~ pursuant to the rules and regulations of the ~~SEC. Certain information~~Securities and ~~footnote disclosures normally included in~~Exchange Commission ("SEC") for interim financial ~~statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations.~~reporting. In the opinion of management, ~~the accompanying~~these unaudited condensed consolidated financial statements reflect all adjustments, consisting of a normal recurring ~~nature~~items, considered necessary to present fairly ~~state~~ the Company’s financial ~~position of Digital Turbine, Inc. and its consolidated subsidiaries at December 31, 2017, the~~condition, results of ~~its~~ operations, ~~and corresponding~~ comprehensive ~~loss,~~income, stockholders’ equity, and ~~its~~ cash flows for the nine months ended December 31, 2017 and 2016. 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.interim periods indicated. 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.~~

The significant accounting policies and recent accounting pronouncements were described in Note 4 of the consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2017. There have been no significant changes in or updates to the accounting policies since March 31, 2017. Only new accounting pronouncements, pertinent to the Company, issued subsequent to the issuance of our Annual Report are described below.

~~Recently Issued Accounting Pronouncements~~

In August 2017, the FASB issued Accounting Standard Update 2017-12: Targeted Improvements 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. 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 in 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 2017-12 during the quarter ended June 30, 2019, and is currently assessing the impact of the future adoption of this standard on its consolidated results of operations, financial condition and cash flows.

In July 2017, 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. The amendments also clarify existing disclosure requirements for equity-classified instruments. This guidance is to be applied retrospectively for instruments outstanding as of the adoption date. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. Early application is permitted. The Company will adopt ASU 2017-11 during the quarter ended June 30, 2019, and does not expect the impact of this ASU to have a material impact on its consolidated results of operations, financial condition and cash flows.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation, which modifies the scope of share-based payment award modification accounting in an effort 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. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017. Early application is permitted. The Company will adopt ASU 2017-09 during the quarter ended June 30, 2018, and does not expect the impact of this ASU to have a material impact on its 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~~

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, one major Advertising customers and one Content customer represented approximately 20.8% and 15.7%, respectively, of the Company’s net accounts receivable balance. As of March 31, 2017, two major customers represented 11.2% and 10.7% of the Company's net accounts receivable balance, both within the Advertising business.

With respect to 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 Content customer represented 20.5% and 19.4% of 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. During the three and nine months ended December 31, 2016, Telstra Corporation Limited, a Content customer represented 16.2% and 23.7% 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, respectively

The Company partners with mobile carriers and OEMS to deliver applications on our Ignite platform through the carrier network. During the three and nine months ended December 31, 2017, Verizon Wireless, a carrier partner, generated 29.6% and 30.9% of our net revenues, respectively; while AT&T Inc., a carrier partner, primarily through its Cricket subsidiary, generated 24.0% and 19.0% of our net revenue, respectively. During the three and nine months ended December 31, 2016, Verizon Wireless, generated 32.9% and 26.6% of our net revenues, respectively.

~~The Company may~~2021, are not ~~continue to receive significant revenues from any of these or from other large customers. A reduction or delay in operating activity from any~~necessarily indicative of the ~~Company’s significant customers, or a delay or default in payment by any significant customer could materially harm~~operating results for the Company’s business and prospects. Because of the Company’s significant customer concentration, its net sales and operating income could fluctuate significantly due to changes in political or economic conditions, or the loss, reduction of business, or less favorable terms for any of the Company's significant customers.full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make ~~certain~~ estimates and assumptions that ~~impact~~affect the reported amounts inof assets and liabilities, disclosure of contingent assets and liabilities at the ~~consolidated~~date of the financial statements, and ~~accompanying notes.~~the reported amounts of income and expenses during the reporting period. Significant estimates and assumptions reflected in the financial statements include revenue recognition, including the determination of gross versus net revenue reporting, allowance for credit losses, stock-based compensation, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, fair value of contingent earn-out considerations (please see Note 13, "Commitments and Contingencies," for further information on the fair value of the Company's contingent earn-out considerations), incremental borrowing rates for right-of-use assets and lease liabilities, and tax valuation allowances. 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 information available as of the ~~fact and circumstances available at~~date of the ~~time of filing. Actual~~financial statements; therefore, actual results could differ materially from ~~those~~management’s estimates using different assumptions or under different conditions.

In light of the ongoing and quickly evolving COVID-19 pandemic, management has considered the impacts of the COVID-19 pandemic on the Company’s critical and significant accounting estimates. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates or judgments or revise the carrying value of its assets or liabilities as a result of the COVID-19 pandemic. Management's estimates may change as new events occur and additional information is obtained. Actual results could differ from estimates and any such differences may be material to the Company’s condensed consolidated financial statements.

Summary of Significant Accounting Policies

There have been no significant changes to the Company’s significant accounting policies in Note 4, “Summary of Significant Accounting Policies,” of the notes to the consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2021, other than the "New Accounting Standards Adopted" disclosed below and changes to the Company's segment reporting disclosed in Note 4, "Segment Information."

Revenue Recognition

As mentioned above, there have been no significant changes to the Company's revenue recognition policies, now inclusive of the acquisitions of AdColony and Fyber defined and disclosed below in Note 3, "Acquisitions," since its Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Segment Reporting

Prior to the acquisitions of AdColony and Fyber, the Company had 1 operating and reportable segment called Media Distribution. As a result of the acquisitions, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2021, the Company reports its results of operations through the 3 segments disclosed below in Note 4, "Segment Information," each of which represents an operating and reportable segment.

On Device Media

This segment is the legacy single operating and reporting segment (Media Distribution) of the Company prior to the AdColony and Fyber acquisitions.

In App Media - AdColony

AdColony’s principal operations consist of supplying a mobile advertising platform that includes a direct supply of in-app advertising inventory to its customers. AdColony's customers provide insertion orders for advertising during campaign windows where AdColony provides, inserts, and tracks the performance of the advertising to serve as the direct supplier for the customer. AdColony's customers contract for this service, which is monetized through a measurement of the user views, clicks, or installs of the target product or service offered by the customer. AdColony's customers are generally billed on a monthly basis based on the total aggregation of the views, clicks, and installs billed. Specifically, the aggregated activities include the following:

i.When a user installs a game (i.e., a user plays a game, sees advertising, clicks on it, and installs a game), based on a cost per install (CPI) arrangement.

ii.When a mobile ad is delivered to a user, based on a CPM (cost per thousand impressions) arrangement (i.e., every thousand impressions of a mobile ad inside the publisher's inventory, which can be on a mobile app or website).

iii.When a user plays a mobile video ad all the way to completion, based on a CPCV (cost per completed view) arrangement.

iv.When a user clicks on a mobile ad, based on a CPC (cost per click) arrangement (i.e., after each instance when an ad is clicked inside the publisher's inventory).

Due to the nature of AdColony's principal operations and the similarities between how customers obtain control of promised services between this segment and the Company's other two segments, revenues for this segment are recognized in a manner consistent with the Company's legacy On Device Media business.

In App Media - Fyber

Fyber’s principal operations consist of supplying a mobile advertising platform that includes a direct supply of in-app advertising inventory to its customers. Fyber specializes in software-based automated ("programmatic") trading of advertisements and aims to enable mobile app publishers to monetize their digital contents through the placement of targeted, high-quality ads within their apps. Fyber connects app developers and their users with advertisers worldwide, who bid on the ad space within the apps (predefined spaces and instances within apps where ads can be displayed at certain points of time during a session of a user engaging with the app). Fyber’s customers provide insertion orders or equivalent contracts for advertising during campaign windows where Fyber provides, inserts, and tracks the performance of the advertising to serve as the direct supplier for the customer. Alternatively, Fyber also contracts with customers using a framework agreement that is not specific to a campaign or budget, but instead determines parameters for the mobile advertising service. Customers will contract for these services, which are monetized through a measurement of user impressions, clicks, or installs of the target product or service offered by the customer. Fyber’s customers generally pay subsequently to the total aggregation of the impressions, clicks, and installs billed on a monthly basis. Specifically, the aggregated activities include the following:

i.When a user installs a game (i.e., a user plays a game, sees advertising, clicks on it, and installs a game) based on a CPA (cost per action) arrangement.

iii.When a user plays a mobile video ad all the way to completion, based on a CPCV (cost per completed view) arrangement.

iv.When a user clicks on a mobile ad, based on a CPC (cost per click) arrangement (i.e., after each instance when an ad is clicked inside the publisher's inventory).

Due to the nature of Fyber's principal operations and the similarities between how customers obtain control of promised services between this segment and the Company's other two segments, revenues for this segment are recognized in a manner consistent with the Company's legacy On Device Media business.

Recently Issued Accounting Pronouncements Not Yet Adopted

ASU 2020-04

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period.

ASU 2020-04 became effective for all entities as of March 12, 2020, and will continue through December 31, 2022. The Company is implementing a transition plan to identify and modify, if necessary, its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is continuing to assess ASU 2020-04 and its impact on the Company’s condensed consolidated financial statements.

Recently Adopted Accounting Standards

ASU 2019-12

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The Company adopted this guidance as of April 1, 2021. ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements upon adoption.

3. Acquisitions

Acquisition of Fyber N.V.

On May 25, 2021, the Company completed the initial closing of the acquisition of 95.1% of the outstanding voting shares (the “Majority Fyber Shares”) of Fyber N.V. (“Fyber”) pursuant to a Sale and Purchase Agreement (the "Fyber Acquisition") between Tennor Holding B.V., Advert Finance B.V., and Lars Windhorst (collectively, the “Seller”), the Company, and Digital Turbine Luxembourg S.ar.l., a wholly-owned subsidiary of the Company. The remaining outstanding shares in Fyber (the “Minority Fyber Shares”) are (to the Company's knowledge) held by other shareholders of Fyber (the “Minority Fyber Shareholders”) and are presented as non-controlling interests within these financial statements.

Fyber is a leading mobile advertising monetization platform empowering global app developers to optimize profitability through quality advertising. Fyber’s proprietary technology platform and expertise in mediation, real-time bidding, advanced analytics tools, and video combine to deliver publishers and advertisers a highly valuable app monetization solution. Fyber represents an important and strategic addition for the Company in its mission to develop one of the largest full-stack, fully-independent, mobile advertising solutions in the industry. The combined platform offering is advantageously positioned to leverage the Company’s existing on-device software presence and global distribution footprint.

The Company acquired Fyber in exchange for an estimated aggregate consideration of up to $600,000, consisting of:

i.Approximately $150,000 in cash, $124,336 of which was paid to the Seller at the closing of the acquisition and the remainder of which is to be paid to the Minority Fyber Shareholders for the Minority Fyber Shares pursuant to the tender offer described below;

ii.5,816,588 newly-issued shares of common stock of the Company to the Seller, which such number of shares was determined based on the volume-weighted average price of the common stock on NASDAQ during the 30-day period prior to the closing date, equal in value to $359,233 at the Company's common stock closing price on May 25, 2021, as follows.

1.3,216,935 newly-issued shares of common stock of the Company equal in value to $198,678, issued at the closing of the acquisition;

2.1,500,000 newly-issued shares of common stock of the Company equal in value to $92,640, issued on June 17, 2021;

3.1,040,364 newly-issued shares of common stock of the Company equal in value to $64,253, issued on July 16, 2021;

4.59,289 shares of common stock equal in value to $3,662, to be newly-issued during its fiscal second quarter 2022, but subject to a true-up reduction based on increased transaction costs associated with the staggered delivery of the Majority Fyber Shares to the Company, which true-up reduction has been finalized, as described below; and

iii.Contingent upon Fyber’s net revenues (revenues less associated license fees and revenue share) being equal to or higher than $100,000 for the 12-month earn-out period ending on March 31, 2022, as determined in the manner set forth in the Sale and Purchase Agreement, a certain number of shares of the Company's common stock, which will be newly-issued to the Seller at the end of the earn-out period, and under certain circumstances, an amount of cash, which value of such shares, based on the weighted average share price for the 30-days prior to the end of the earn-out period, and cash in aggregate will not exceed $50,000 (subject to set-off against certain potential indemnification claims against the Seller). Based on estimates at the time of the acquisition, the Company initially determined it was unlikely Fyber would achieve the earn-out net revenue target and, as a result, no contingent liability was recognized at that time.

The Company paid the cash closing amount on the closing date with a combination of available cash-on-hand and borrowings under the Company’s senior credit facility.

On September 30, 2021, the Company entered into the Second Amendment Agreement (the “Second Amendment Agreement”) to the Sale and Purchase Agreement for the Fyber Acquisition. Pursuant to the Second Amendment Agreement, the parties agreed to settle the remaining number of shares of Company common stock to be issued to the Seller at 18,000 shares (i.e., a reduction of 41,289 shares from the 59,289 shares described in (ii)(4) above). As a result, the Company issued a total of 5,775,299 shares of Company common stock to the Seller in connection with the Company’s acquisition of Fyber.

As of September 30, 2021, the Company determined it was likely Fyber would achieve the earn-out net revenue target, based on estimates available at that time. As a result, the Company recognized and accrued the fair value of the contingent earn-out consideration of $31,000.

As of December 31, 2021, the Company re-evaluated the fair value of the contingent earn-out consideration based on current estimates. The Company recognized a charge to change in fair value of contingent consideration on the condensed consolidated statement of operations and comprehensive income / (loss) of $18,200 for the three months ended December 31, 2021, resulting in a total accrued fair value of the contingent earn-out consideration of $49,200. The fair value of the contingent consideration is subject to material changes based upon certain assumptions, primarily the estimated likelihood of Fyber achieving the earn-out net revenue target. The Company will re-evaluate the fair value of the contingent consideration at the end of the earn-out period on March 31, 2022.

Pursuant to certain German law on public takeovers, following the closing, the Company launched a public tender offer to the Minority Fyber Shareholders to acquire from them the Minority Fyber Shares. The tender offer was approved and published in July 2021, and is subject to certain minimum price rules under German law. The timing and the conditions of the tender offer, including the consideration of €0.84 per share offered to the Minority Fyber Shareholders in connection with the tender offer, was determined by the Company pursuant to the applicable Dutch and German takeover laws. During the fiscal quarter ended September 30, 2021, the Company purchased approximately $21,000 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.4%. The Company expects to complete the purchase of the remaining outstanding Fyber shares during its fiscal fourth quarter 2022.

The delisting of Fyber's remaining outstanding shares on the Frankfurt Stock Exchange was completed on August 6, 2021.

The fair values of the assets acquired and liabilities assumed at the date of acquisition are presented on a preliminary basis and are as follows1:


	May 25, 2021		Measurement Period Adjustments		May 25, 2021 (adjusted)
Assets acquired
Cash	$	71,489	$	—	$	71,489
Accounts receivable	64,877		293		65,170
Other current assets	10,470		—		10,470
Property and equipment	1,561		—		1,561
Right-of-use asset	13,191		—		13,191
Publisher relationships	106,400		(95)		106,305
Developed technology	86,900		—		86,900
Trade names	32,100		474		32,574
Customer relationships	31,400		—		31,400
Favorable lease	1,483		—		1,483
Goodwill	303,015		(4,104)		298,911
Other non-current assets	851		—		851
Total assets acquired	$	723,737	$	(3,432)	$	720,305

Liabilities assumed
Accounts payable	$	78,090	$	(1,501)	$	76,589
Accrued license fees and revenue share	5,929		—		5,929
Accrued compensation	52,929		—		52,929
Other current liabilities	12,273		(224)		12,049
Short-term debt	25,789		—		25,789
Deferred tax liability, net	25,213		707		25,920
Other non-current liabilities	15,386		—		15,386
Total liabilities assumed	$	215,609	$	(1,018)	$	214,591
Total purchase price	$	508,128	$	(2,414)	$	505,714

During the nine months ended December 31, 2021, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $4,104, as presented in the table above. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.

The excess of cost of the Fyber Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the Company’s In App Media - Fyber segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes.

The identifiable intangible assets consist of publisher relationships, developed technology, trade names, customer relationships, and a favorable lease. The publisher relationships, developed technology, trade names, and customer relationships intangibles were assigned useful lives of 20.0 years, 7.0 years, 7.0 years, and 3.0 years, respectively. The below-market favorable lease was derived from Fyber's office lease in Berlin, Germany and, per ASC 842, Leases, will be combined with Fyber's right-of-use asset for that lease and will be amortized over the remaining life of that lease. The values for the identifiable intangible assets were determined using the following valuation methodologies:

•Publisher Relationships - Multi-Period Excess Earnings Method

•Developed Technology - Relief from Royalty Method

•Trade Names - Relief from Royalty Method

•Customer Relationships - With-and-Without Method

•Favorable Lease - Income Approach

1The purchase consideration was translated using the Euro-to-United States ("U.S.") dollar exchange rate in effect on the acquisition closing date, May 25, 2021, of approximately €1.22 to $1.00.

The Company recognized $5,183 and $16,898 of costs related to the Fyber Acquisition, which were included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss) for the three and nine months ended December 31, 2021, respectively.

Acquisition of AdColony Holdings AS

On April 29, 2021, the Company completed the acquisition of AdColony Holding AS, a Norway company (“AdColony”), pursuant to a Share Purchase Agreement (the "AdColony Acquisition"). The Company acquired all outstanding capital stock of AdColony in exchange for an estimated total consideration in the range of $400,000 to $425,000, to be paid as follows: (1) $100,000 in cash paid at closing (subject to customary closing purchase price adjustments), (2) $100,000 in cash to be paid six months after closing, and (3) an estimated earn-out in the range of $200,000 to $225,000, to be paid in cash, based on AdColony achieving certain future target net revenues, less associated cost of goods sold (as such term is referenced in the Share Purchase Agreement), over a 12-month period ending on December 31, 2021 (the “Earn-Out Period”). Under the terms of the earn-out, the Company would pay the seller a certain percentage of actual net revenues (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) of AdColony, depending on the extent to which AdColony achieves certain target net revenues (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) over the Earn-Out Period. The earn-out payment will be made following the expiration of the Earn-Out Period.

AdColony is a leading mobile advertising platform servicing advertisers and publishers. AdColony’s proprietary video technologies and rich media formats are widely viewed as a best-in-class technology delivering third-party verified viewability rates for well-known global brands. With the addition of AdColony, the Company will expand its collective experience, reach, and suite of capabilities to benefit mobile advertisers and publishers around the globe. Performance-based spending trends by large, established brand advertisers present material upside opportunities for platforms with unique technology deployable across exclusive access to inventory.

On August 27, 2021, the Company entered into an Amendment to Share Purchase Agreement (the “Amendment Agreement”) with AdColony and Otello Corporation ASA, a Norway company (“Otello”) and AdColony's previous parent company. Pursuant to the Amendment Agreement, the Company and Otello agreed to set a fixed dollar amount of $204,500 for the earn-out payment obligation, to set January 15, 2022, as the payment due date for such payment amount, and to eliminate all of the Company’s earn-out support obligations under the Share Purchase Agreement. As a result, the Company recognized an $8,913 reduction of the earn-out payment obligation in change in fair value of contingent consideration on the condensed consolidated statement of operations and comprehensive income / (loss) for the fiscal second quarter ended September 30, 2021.

The Company paid the cash consideration amounts that were due at closing and on October 26, 2021, with a combination of available cash-on-hand and borrowings under the Company’s senior credit facility. The Company intends to pay the remaining cash consideration with a combination of available cash-on-hand and borrowings under the Company's New Credit Agreement (as defined in Note 9, "Debt").

The payment made on October 26, 2021, was reduced to $98,175 due to an adjustment for the impact of accrued and unpaid taxes to the net working capital acquired. The difference between the amount due of $100,000 and amount paid resulted in an adjustment to goodwill.

The fair values of the assets acquired and liabilities assumed at the date of acquisition are presented on a preliminary basis and are as follows:


	April 29, 2021		Measurement Period Adjustments		April 29, 2021 (adjusted)
Assets acquired
Cash	$	24,793	$	—	$	24,793
Accounts receivable	57,285		—		57,285
Other current assets	1,845		—		1,845
Property and equipment	1,566		—		1,566
Right-of-use asset	2,460		—		2,460
Customer relationships	102,400		(600)		101,800
Developed technology	51,100		—		51,100
Trade names	36,100		(100)		36,000
Publisher relationships	4,400		—		4,400
Goodwill	202,552		(3,502)		199,050
Other non-current assets	131		—		131
Total assets acquired	$	484,632	$	(4,202)	$	480,430

Liabilities assumed
Accounts payable	$	21,140	$	—	$	21,140
Accrued license fees and revenue share	28,920		—		28,920
Accrued compensation	8,453		—		8,453
Other current liabilities	1,867		—		1,867
Deferred tax liability, net	10,520		(2,377)		8,143
Other non-current liabilities	1,770		—		1,770
Total liabilities assumed	$	72,670	$	(2,377)	$	70,293
Total purchase price	$	411,962	$	(1,825)	$	410,137

During the nine months ended December 31, 2021, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $3,502, as presented in the table above. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.

The excess of cost of the AdColony Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the Company’s In App Media - AdColony segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes.

The identifiable intangible assets consist of customer relationships, developed technology, trade names, and publisher relationships and were assigned useful lives of 8.0 years to 15.0 years, 7.0 years, 7.0 years, and 10.0 years, respectively. The values for the identifiable intangible assets were determined using the following valuation methodologies:

•Customer Relationships - Multi-Period Excess Earnings Method

•Developed Technology - Relief from Royalty Method

•Trade Names - Relief from Royalty Method

•Publisher Relationships - Cost Approach

The Company recognized $486 and $3,977 of costs related to the AdColony Acquisition, which were included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss) for the three and nine months ended December 31, 2021, respectively.

Acquisition of Appreciate

On March 1, 2021, Digital Turbine, through its subsidiary Digital Turbine (EMEA) Ltd. ("DT EMEA"), an Israeli company and wholly-owned subsidiary of the Company, entered into a Share Purchase Agreement with Triapodi Ltd., an Israeli company (d/b/a Appreciate) (“Appreciate”), the stockholder representative, and the stockholders of Appreciate, pursuant to which DT EMEA acquired, on March 2, 2021, all of the outstanding capital stock of Appreciate in exchange for total consideration of $20,003 in cash (the "Appreciate Acquisition"). Under the terms of the Purchase Agreement, DT EMEA entered into bonus arrangements to pay up to $6,000 in retention bonuses and performance bonuses to the founders and certain other employees of Appreciate. None of the goodwill recognized was deductible for tax purposes.

The acquisition of Appreciate delivers valuable deep ad-tech and algorithmic expertise to help Digital Turbine execute on its broader, longer-term vision. Deploying Appreciate's technology expertise across Digital Turbine’s global scale and reach should further benefit partners and advertisers that are a part of the combined Company’s platform.

Acquisition Purchase Price Liability

The Company has recognized acquisition purchase price liability of $253,700 on its condensed consolidated balance sheet as of December 31, 2021, comprised of the following components:

•$204,500 of contingent earn-out consideration for the AdColony Acquisition

•$49,200 of contingent earn-out consideration for the Fyber Acquisition

Pro Forma Financial Information (Unaudited)

The pro forma information below gives effect to the Fyber Acquisition, the AdColony Acquisition, and the Appreciate Acquisition (collectively, the “Acquisitions”) as if they had been completed on the first day of each period presented. The pro forma results of operations are presented for information purposes only. As such, they are not necessarily indicative of the Company’s results had the Acquisitions been completed on the first day of each period presented, nor do they intend to represent the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the Acquisitions and does not reflect additional revenue opportunities following the Acquisitions. The pro forma information includes adjustments to record the assets and liabilities associated with the Acquisitions at their respective fair values, which are preliminary at this time, based on available information and to give effect to the financing for the Acquisitions.


	Three months ended December 31,				Nine months ended December 31,
	2021		2020		2021		2020
	Unaudited		Unaudited		Unaudited		Unaudited
	(in thousands, except per share amounts)
Net revenue	$	375,487	$	271,536	$	977,740	$	604,556
Net income / (loss) attributable to controlling interest	$	7,007	$	(19,183)	$	(17,262)	$	(15,226)
Basic net income / (loss) attributable to controlling interest per common share	$	0.07	$	(0.20)	$	(0.18)	$	(0.16)
Diluted net income / (loss) attributable to controlling interest per common share	$	0.07	$	(0.19)	$	(0.17)	$	(0.15)

4. Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer ("CEO") is the CODM.

Prior to the acquisitions of both AdColony and Fyber disclosed above in Note 3, "Acquisitions," the Company had 1 operating and reportable segment called Media Distribution. As a result of the acquisitions, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2021, the Company reports its results of operations through the following 3 segments, each of which represents an operating and reportable segment, as follows:

•On Device Media ("ODM") - This segment is the legacy single operating and reporting segment of Digital Turbine prior to the AdColony and Fyber acquisitions. This segment generates revenues from services that deliver mobile application media or content media to end users. The Company provides ODM solutions to all participants in the mobile application ecosystem that want to connect with end users and consumers who hold the device, including mobile carriers and device original equipment manufacturers (“OEMs”) that participate in the app economy, app publishers and developers, and brands and advertising agencies. This segment's product offerings are enabled through relationships with mobile device carriers and OEMs.

•In App Media – AdColony("IAM-A") - This segment is inclusive of the acquired AdColony business and generates revenues from services provided as an end-to-end platform for brands, agencies, publishers, and application developers to deliver advertising to consumers on mobile devices around the world. IAM-A customers are primarily advertisers.

•In App Media – Fyber ("IAM-F") - This segment is inclusive of the acquired Fyber business and generates revenues from services provided to mobile application developers and digital publishers to monetize their content through advanced technologies, innovative advertisement formats, and data-driven decision making. IAM-F customers are primarily publishers.

The Company's CODM evaluates segment performance and makes resource allocation decisions primarily through the metric of net revenues less associated license fees and revenue share, as shown in the segment information summary table below. The Company's CODM does not allocate other direct costs of revenues, operating expenses, interest and other income / (expense), net, or provision for income taxes to these segments for the purpose of evaluating segment performance. Additionally, the Company does not allocate assets to segments for internal reporting purposes as the CODM does not manage the Company's segments by such metrics.

A summary of segment information follows:


	Three months ended December 31, 2021
	ODM		IAM-A		IAM-F		Eliminations		Consolidated
Net revenues	$	133,594	$	94,335	$	157,380	$	(9,822)	$	375,487
License fees and revenue share	86,504		64,348		126,692		(9,822)		267,722
Segment profit	$	47,090	$	29,987	$	30,688	$	—	$	107,765


	Three months ended December 31, 2020
	ODM		IAM-A		IAM-F		Eliminations		Consolidated
Net revenues	$	88,592	$	—	$	—	$	—	$	88,592
License fees and revenue share	50,144		—		—		—		50,144
Segment profit	$	38,448	$	—	$	—	$	—	$	38,448


	Nine months ended December 31, 2021
	ODM		IAM-A		IAM-F		Eliminations		Consolidated
Net revenues	$	383,426	$	200,767	$	332,748	$	(18,634)	$	898,307
License fees and revenue share	232,122		136,375		269,352		(18,634)		619,215
Segment profit	$	151,304	$	64,392	$	63,396	$	—	$	279,092


	Nine months ended December 31, 2020
	ODM		IAM-A		IAM-F		Eliminations		Consolidated
Net revenues	$	218,497	$	—	$	—	$	—	$	218,497
License fees and revenue share	122,976		—		—		—		122,976
Segment profit	$	95,521	$	—	$	—	$	—	$	95,521

Geographic Area Information

Long-lived assets, excluding deferred tax assets and intangible assets, by region follow:


	December 31, 2021		March 31, 2021
United States and Canada	$	20,026	$	12,995
Europe, Middle East, and Africa	5,729		40
Asia Pacific and China	107		15
Mexico, Central America, and South America	—		—
Consolidated property and equipment, net	$	25,862	$	13,050

Net revenue by geography is based on the billing addresses of the Company's customers and a reconciliation of disaggregated revenue by segment follows:


	Three months ended December 31, 2021
	ODM		IAM-A		IAM-F		Total
United States and Canada	$	74,430	$	44,215	$	93,058	$	211,703
Europe, Middle East, and Africa	35,667		42,299		40,898		118,864
Asia Pacific and China	19,877		7,598		23,112		50,587
Mexico, Central America, and South America	3,619		224		312		4,155
Elimination	—		—		—		(9,822)
Consolidated net revenue	$	133,593	$	94,336	$	157,380	$	375,487


	Three months ended December 31, 2020
	ODM		IAM-A		IAM-F		Total
United States and Canada	$	59,192	$	—	$	—	$	59,192
Europe, Middle East, and Africa	21,168		—		—		21,168
Asia Pacific and China	7,047		—		—		7,047
Mexico, Central America, and South America	1,185		—		—		1,185
Consolidated net revenue	$	88,592	$	—	$	—	$	88,592


	Nine months ended December 31, 2021
	ODM		IAM-A		IAM-F		Total
United States and Canada	$	220,661	$	93,016	$	191,540	$	505,217
Europe, Middle East, and Africa	96,318		93,506		89,770		279,594
Asia Pacific and China	54,636		13,284		50,747		118,667
Mexico, Central America, and South America	11,810		962		691		13,463
Elimination	—		—		—		(18,634)
Consolidated net revenue	$	383,425	$	200,768	$	332,748	$	898,307


	Nine months ended December 31, 2020
	ODM		IAM-A		IAM-F		Total
United States and Canada	$	144,550	$	—	$	—	$	144,550
Europe, Middle East, and Africa	54,051		—		—		54,051
Asia Pacific and China	18,159		—		—		18,159
Mexico, Central America, and South America	1,737		—		—		1,737
Consolidated net revenue	$	218,497	$	—	$	—	$	218,497

5. Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill, net, by segment follow:


	ODM		IAM-A		IAM-F		Consolidated
Goodwill as of March 31, 2021	$	80,176	$	—	$	—	$	80,176
Purchase of AdColony	—		199,050		—		199,050
Purchase of Fyber	—		—		298,911		298,911
Foreign currency translation and other	—		(10)		(23,152)		(23,162)
Goodwill as of December 31, 2021	$	80,176	$	199,040	$	275,759	$	554,975

Intangible Assets

The components of intangible assets as of December 31, 2021, and March 31, 2021, were as follows:


	As of December 31, 2021
	(Unaudited)
	Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
Customer relationships	12.34 years	$	173,408	$	(16,488)	$	156,920
Developed technology	6.51 years	151,973		(23,675)		128,298
Trade names	6.44 years	68,260		(6,374)		61,886
Publisher relationships	19.00 years	102,587		(3,156)		99,431
Total		$	496,228	$	(49,693)	$	446,535


	As of March 31, 2021
	Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
Customer relationships	16.81 years	$	46,400	$	(4,171)	$	42,229
Developed technology	9.12 years	20,526		(11,141)		9,385
Trade names	9.92 years	2,000		(314)		1,686
Total		$	68,926	$	(15,626)	$	53,300

The Company recorded amortization expense of $13,773 and $34,873, respectively, during the three and nine months ended December 31, 2021, and $670 and $2,011, respectively, during the three and nine months ended December 31, 2020, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss).

Estimated amortization expense in future fiscal years is expected to be:


Remainder of fiscal year 2022	$	13,561
Fiscal year 2023	54,243
Fiscal year 2024	54,243
Fiscal year 2025	46,147
Fiscal year 2026	44,240
Thereafter	234,101
Total	$	446,535

6. Accounts Receivable


	December 31, 2017			March 31, 2017				December 31, 2021		March 31, 2021
	(Unaudited)							(Unaudited)
Billed	$	19,236		$	9,367		Billed	$	201,814	$	28,636
Unbilled	14,099			7,784			Unbilled	97,028		38,837
Allowance for doubtful accounts	(841		)	(597		)
Allowance for credit losses							Allowance for credit losses	(7,642)		(5,488)
Accounts receivable, net	$	32,494		$	16,554		Accounts receivable, net	$	291,200	$	61,985

Billed accounts receivable represent amounts billed to customers ~~that have yet~~for which the Company has an unconditional right to ~~be collected.~~consideration. Unbilled accounts receivable ~~represent revenue~~represents revenues recognized but billed after ~~period end.~~period-end. All unbilled receivables as of December 31, ~~2017~~2021, and March 31, ~~2017~~2021, are expected to be billed and collected (subject to the allowance for credit losses) within twelve months.

Allowance for Credit Losses

The Company maintains reserves for current expected credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves.

The Company recorded ~~$21~~$512 and ~~$256~~$693 of bad debt expense during the three and nine months ended December 31, ~~2017, respectively. The Company recorded $123~~2021, respectively, and ~~$528~~$187 and $415 of bad debt expense during the three and nine months ended December 31, ~~2016, respectively.~~2020, respectively, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss).

5.7. Property and Equipment


	December 31, 2021		March 31, 2021
	(Unaudited)
Computer-related equipment	$	2,676	$	2,263
Developed software	33,510		18,473
Furniture and fixtures	1,966		714
Leasehold improvements	3,724		2,182
Property and equipment, gross	41,876		23,632
Accumulated depreciation	(16,014)		(10,582)
Property and equipment, net	$	25,862	$	13,050

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 $2,192 and $6,073 for the three and nine months ended December 31, 2021, respectively, and $1,151 and $3,052 for the three and nine months ended December 31, 2020, respectively. Depreciation expense for the three and nine months ended December 31, ~~2017 was $350~~2021, includes $1,316 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,$3,137, respectively, related to ~~internal use~~internal-use assets included in ~~General~~general and ~~Administrative Expense~~administrative expense and ~~$89~~$1,510 and ~~$184,~~$2,936, respectively, related to ~~internally developed~~internally-developed software to be sold, leased, or otherwise marketed included in ~~Other Direct Costs of Revenue. Depreciation expense in the prior year comparative periods related exclusively to internal use assets and is included in General and Administrative Expense.~~

~~6. Intangible Assets~~

~~The components of intangible assets at December 31, 2017 and March 31, 2017 were as follows:~~

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.

The Company recorded amortization expense of $549 and $1,721, respectively, during the three and nine months ended December 31, 2017, and $1,878 and $5,640, respectively, during the three and nine months ended December 31, 2016. The decrease in amortization expense over the comparative three and nine month periods was primarily attributable to advertiser and publisher relationships acquired in the Appia Inc. transaction being fully amortized and the write-off of certain assets during fiscal year 2017.

~~Based on the amortizable intangible assets as of December 31, 2017, we estimate amortization expense for the next five years to be as follows:~~

Year Ending March 31, Amortization Expense
2018 $ 549
2019 1,375
2020 114
2021 114
2022 114
Thereafter 578
Total $ 2,844

~~7. 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 aother 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 a Business Finance Agreement (the “Credit Agreement”) with Western Alliance Bank (the “Bank”). The Credit Agreement provides for a $5,000 total facility.~~

~~The amounts advanced under the Credit Agreement mature in two (2) years, and accrue interest at the following rates and bear the following fees:~~

~~(1) Wall Street Journal Prime Rate + 1.25% (currently approximately 5.25%), with a floor of 4.0%.~~

~~(2) Annual Facility Fee of $45.5.~~

~~(3) Early termination fee of 0.5% if terminated during the first year.~~

The obligations under the Credit Agreement are secured by a perfected first position security interest in all assets of the Company and its subsidiaries, subject to partial (65%) pledges of stock of non-US subsidiaries. The Company’s subsidiaries Digital Turbine USA and Digital Turbine Media are co-borrowers.

In addition to customary covenants, including restrictions on payments (subject to specified exceptions), and restrictions on indebtedness (subject to specified exceptions), the Credit Agreement requires the Company to comply with the following financial covenants, measured on a monthly basis:

~~(1) Maintain a Current Ratio of at least 0.65, defined as unrestricted cash plus accounts receivable, divided by all current liabilities.~~

~~(2) Revenue must exceed 85% of projected quarterly~~ revenue.

~~As of December 31, 2017, the Company was in compliance with the covenants of the Credit Agreement.~~

The Credit Agreement required that at least two-thirds (2/3rds) 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, the Company entered into a Second Supplemental Indenture, dated May 23, 2017 (the “Supplemental Indenture”) to the Indenture, 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’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.

~~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 and $940, respectively, of interest expense 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, is reflected on the Consolidated Statement of Operations as interest expense. Inclusive of this amortization of $195 and $875 recorded 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 $1,815 of total interest Depreciation expense for the three and nine months ended December 31, ~~2017,~~2020, includes $403 and $1,081, respectively, related to internal-use assets included in general and administrative expense and $748 and $1,971, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue.

8. Leases

The Company has entered into various non-cancellable operating lease agreements for certain offices as well as assumed various leases through its recent acquisitions. These leases currently have lease periods expiring between fiscal years 2022 and 2029. The lease agreements may include 1 or more options to renew. Renewals were not assumed in the Company's determination of the lease term unless the renewals were deemed to be reasonably assured at lease commencement. The Company's 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 rates are detailed below.

Schedule, by fiscal year, of maturities of lease liabilities as of:


	December 31, 2021
	(Unaudited)
Remainder of fiscal year 2022	$	1,277
Fiscal year 2023	4,576
Fiscal year 2024	4,101
Fiscal year 2025	3,028
Fiscal year 2026	2,578
Thereafter	3,000
Total undiscounted cash flows	18,560
(Less imputed interest)	(1,626)
Present value of lease liabilities	$	16,934

The current portion of the Company's lease liabilities, payable within the next 12 months, is included in other current liabilities, and the long-term portion of the Company's lease liabilities is included in other non-current liabilities on the condensed consolidated balance sheets.

Associated with these financial liabilities, the Company has right-of-use assets of $16,657 as of December 31, 2021, which is calculated using the present value of lease liabilities less any lease incentives received from landlords and any deferred rent liability balances as of the date of implementation. The discount rates used to calculate the imputed interest above range from 2.00% to 6.75% and the weighted-average remaining lease term is 4.76 years.

9. Debt

The following table summarizes borrowings under the Company's debt obligations and the associated interest rates:


	December 31, 2021
	Balance		Interest Rate		Unused Line Fee
Revolver (subject to variable rate)	$	345,134	1.99	%	0.30	%
Fyber - Bank Leumi (subject to variable rate)	$	12,501	5.90	%	1.00	%

Debt obligations on the condensed consolidated balance sheets consist of the following:


	December 31, 2021		March 31, 2021
	(Unaudited)
Revolver	$	345,134	$	15,000
Less: Debt issuance costs	(3,544)		(443)
Debt assumed through Fyber Acquisition	12,501		—
Total debt, net	354,091		14,557
Less: Current portion of debt	(12,501)		(14,557)
Non-current debt	$	341,590	$	—

Revolver

On February 3, 2021, the Company entered into a credit agreement (the "Credit Agreement") with Bank of America, N.A. (“BoA”), which provides for a revolving line of credit (the "Revolver") of up to $100,000 with an accordion feature enabling the Company to increase the total amount up to $200,000. Funds are to be used for acquisitions, working capital, and general corporate purposes. 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 Company incurred debt issuance costs of $469 to secure the Revolver and had $15,000 drawn against the Revolver, classified as short-term debt on the condensed consolidated balance sheet, with remaining unamortized debt issuance costs of $443 as of March 31, 2021. Deferred debt issuance costs associated with the Revolver are recorded as a reduction of the carrying value of the debt on the condensed consolidated balance sheets. All deferred debt issuance costs are amortized on a straight-line basis over the term of the loan to interest expense.

On April 29, 2021, the Company amended and restated the Credit Agreement (the "New Credit Agreement”) with BoA, as a lender and administrative agent, and a syndicate of other lenders, which provided for a revolving line of credit of up to $400,000. The revolving line of credit matures on April 29, 2026, and contains an accordion feature enabling the Company to increase the total amount of the revolver by $75,000 plus an amount that would enable the Company to remain in compliance with its consolidated secured net leverage ratio, on such terms as agreed to by the parties. The New Credit Agreement contains customary covenants, representations, and events of default and also requires the Company to comply with a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio.

On December 29, 2021, the Company amended the New Credit Agreement (the "First Amendment"), which provides for an increase in the revolving line of credit by $125,000, which increased the maximum aggregate principal amount of the revolving line of credit to $525,000. The First Amendment made no other changes to the term or interest rates of the New Credit Agreement.

The Company incurred debt issuance costs of $4,044 for the New Credit Agreement, inclusive of costs incurred for the First Amendment. The Company had $345,134 drawn against the New Credit Agreement, classified as long-term debt on the condensed consolidated balance sheet, with remaining unamortized debt issuance costs of $3,544 as of December 31, 2021. Deferred debt issuance costs associated with the New Credit Agreement and First Amendment are recorded as a reduction of the carrying value of the debt on the condensed consolidated balance sheets. All deferred debt issuance costs are amortized on a straight-line basis over the term of the loan to interest expense.

Amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to, at the Company’s election, (i) London Inter-Bank Offered Rate ("LIBOR") plus between 1.50% and 2.25%, based on the Company’s consolidated leverage ratio, or (ii) a base rate based upon the highest of (a) the federal funds rate plus 0.50%, (b) BoA's prime rate, or (c) LIBOR plus 1.00% plus between 0.50% and 1.25%, based on the Company’s consolidated leverage ratio. Additionally, the New Credit Agreement is subject to an unused line of credit fee between 0.15% and 0.35% per annum, based on the Company’s consolidated leverage ratio. As of December 31, 2021, the interest rate was 1.99% and the unused line of credit fee was 0.30%.

The Company’s payment and performance obligations under the New Credit Agreement and related loan documents are secured by its grant of a security interest in substantially all of its personal property assets, whether now existing or hereafter acquired, subject to certain exclusions. If the Company acquires any real property assets with a fair market value in excess of $5,000, it is required to grant a security interest in such real property as well. All such security interests are required to be first priority security interests, subject to certain permitted liens.

As of December 31, 2021, the Company had $179,866 available to withdraw on the revolving line of credit under the New Credit Agreement and was in compliance with all covenants. The fair value of the Company’s outstanding debt approximates its carrying value.

Subsequently to December 31, 2021, the Company drew an additional $179,000 against the New Credit Agreement. The proceeds, combined with available cash-on-hand, were used to satisfy the AdColony Acquisition earn-out payment of $204,500, which was made on January 15, 2022.

Debt Assumed Through Fyber Acquisition

As a part of the Fyber Acquisition, the Company assumed $25,789 of debt previously held by Fyber. This debt was comprised of amounts drawn against 3 separate revolving lines of credit. The Company settled 2 of the 3 revolving lines of credit, resulting in payments of $13,288, during the nine months ended December 31, 2021. Details for the remaining line of credit can be found in the first table in this note. The remaining revolving line of credit from Bank Leumi matures on January 30, 2022. The balance of this line of credit is classified as short-term debt on the condensed consolidated balance sheet as of December 31, 2021.

Interest income / (expense), net

Interest income / (expense), net, amortization of debt issuance costs, and unused line of credit fees were recorded in interest and other income / (expense), net, on the condensed consolidated statements of operations and comprehensive income, as follows:


	Three months ended December 31,				Nine months ended December 31,
	2021		2020		2021		2020
Interest income / (expense), net	$	(1,940)	$	(266)	$	(4,565)	$	(859)
Amortization of debt issuance costs	(190)		—		(500)		—
Unused line of credit fees and other	(65)		—		(242)		—
Total interest income / (expense), net	$	(2,195)	$	(266)	$	(5,307)	$	(859)

10. Stock-Based Compensation

Equity Plan Activity

The following table summarizes stock option activity:


	Number of Shares	Weighted-Average Exercise Price (per share)		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Options outstanding as of March 31, 2021	8,146,445	$	4.01	6.86	$	622,249
Granted	642,507	71.12
Forfeited / Cancelled	(288,460)	18.57
Exercised	(859,564)	3.28
Options outstanding as of December 31, 2021	7,640,928	$	9.17	6.21	$	402,471
Vested and expected to vest (net of estimated forfeitures) at December 31, 2021	7,553,669	$	8.88	6.18	$	399,790
Exercisable as of December 31, 2021	5,813,445	$	4.19	5.48	$	331,487

At December 31, 2021 and 2020, total unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, was $24,233 and $6,495, respectively, with expected remaining weighted-average recognition periods of 2.26 years and 2.12 years, respectively.

The following table summarizes restricted stock unit ("RSU") and restricted stock award ("RSA") activity:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested restricted shares outstanding as of March 31, 2021	333,544	$	4.55
Granted	332,061	45.62
Vested	(298,350)	3.69
Cancelled	(3,526)	13.88
Unvested restricted shares outstanding as of December 31, 2021	363,729	$	42.65

At December 31, 2021 and 2020, total unrecognized stock-based compensation expense related to RSUs and RSAs was $9,448 and $1,463, respectively, with expected remaining weighted-average recognition periods of 1.86 years and 2.01 years, respectively.

Stock-Based Compensation Expense

As of December 31, 2021, 11,304,613 shares of common stock were available for issuance as future awards under the Company's equity incentive plans. Stock-based compensation expense for the three and nine months ended December 31, 2021, was $5,739 and $15,369, respectively, and ~~$725~~was recorded within general and ~~$2,029~~administrative expenses on the condensed consolidated statements of ~~total interest~~operations and comprehensive income. Stock-based compensation expense for the three and nine months ended December 31, ~~2016, respectively.~~

~~8. 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~~2020, was $160 and $4,286, respectively, and was recorded within general and administrative expenses 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 of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the liability. Considerable judgment is necessary to interpret market data and determine an estimated fair value. The use of different market assumptions or valuation methods may have a material effect on the estimated fair values. 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, 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 to 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.

As of December 31, 2017 and March 31, 2017, the Company’s financial assets and financial liabilities are presented below at 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 related to the convertible notes consists 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.

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 represent the fair value of the conversion option, fundamental change provision, 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 the 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.

~~Changes in the fair value of the convertible note embedded derivative liability is reflected in our~~condensed consolidated statements of operations ~~as “Change in fair value of convertible note embedded derivative liability.”~~and comprehensive income.

The following table provides a reconciliation of the beginning and ending balances for the convertible note embedded derivative 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:~~



	~~December 31, 2017~~
~~Stock price volatility~~	70	%
~~Probability of change in control~~	~~1.75~~	%
~~Stock price (per share)~~	~~$1.79~~
~~Expected term~~	~~2.75 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:~~



	~~December 31, 2017~~
~~Stock price volatility~~	70	%
~~Probability of change in control~~	~~1.75~~	%
~~Stock price (per share)~~	~~$1.79~~
~~Expected term~~	~~2.75 years~~
~~Risk-free rate (1)~~	~~1.94~~	%
~~Assumed early conversion/exercise price (per share)~~	~~$2.73~~

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. Description of Stock Plans~~

~~Employee Stock Plan~~

The Company is currently issuing stock awards 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. 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 referred to as "Digital Turbine's Incentive Plans." In the year ended March 31, 2015, in connection with the acquisition of Appia, 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-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 (“SARs”), restricted stock, and restricted stock units (sometimes referred to individually or collectively as “Awards”). 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”).

The 2011 Plan reserves 20,000,000 shares for issuance, of which 9,033,506 and 9,665,123 remained available for future grants as of December 31, 2017 and March 31, 2017, respectively. The change over the comparative period represents stock option grants, stock option forfeitures/cancellations, and restricted shares of common stock of 1,338,778, 972,299, and 265,138, respectively.

~~Stock Option Agreements~~

Stock options granted under Digital Turbine's Stock Plans typically vest over a three-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.

~~Stock Option Activity~~

~~The following table summarizes stock option activity for the Stock 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

(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, 2017 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. 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, 2017 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

~~Other information pertaining to stock options for the Stock Plans for the nine months ended December 31, 2017 and 2016, as stated in the table below, is as follows:~~

December 31,
2017 2016
Total fair value of options vested $ 2,750
$ 2,250
Total intrinsic value of options exercised (a) $ 101
$ 8

(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, 2017 and 2016.

~~During the nine months ended December 31, 2017 and~~ ~~2016, the Company granted options to purchase 1,338,778 and 1,525,500 shares of its common stock, respectively, to employees with weighted-average grant-date fair values of $1.17 and $0.64, respectively.~~

At December 31, 2017 and 2016, there was $2,691 and $5,706 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 2.04 and 2.27 years, respectively.

~~Valuation of Awards~~

For stock options granted under Digital Turbine’s Stock 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, 2017 are presented below.



		~~December 31, 2017~~
~~Risk-free interest rate~~		~~1.8% to 2.4%~~
~~Expected life of the options~~		~~5.69 to 9.43 years~~
~~Expected volatility~~		~~68% to 73%~~
~~Expected dividend yield~~		—%
~~Expected forfeitures~~		~~20%~~

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 Stock Plans for the three and nine months ended December 31, 2017 and 2016, which includes both stock options and restricted stock, was $891 and $2,520, respectively, and $1,118 and $3,611, respectively. Please refer to Note 10. "Capital Stock Transactions" regarding restricted stock.

~~10. Capital Stock Transactions~~

~~Preferred Stock~~

~~There are 2,000,000 shares of Series A Convertible Preferred Stock, $0.0001 par value~~11.Earnings per share (“Series A”), authorized and 100,000 shares 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 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, the Company issued 182,769 shares of common stock for 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.

~~The following table provides activity for warrants issued and outstanding during the nine months ended December 31, 2017:~~

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 Agreements~~

From time to time, the Company enters into restricted stock agreements (“RSAs”) 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 with the SEC on February 12, 2014 and June 25, 2014, the Company adopted a Board Member Equity Ownership Policy that 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.

~~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 condition is recognized on a straight-line basis over the requisite service period.

~~In August 2017, the Company issued 265,138 restricted shares to its directors for services. The shares vest over one year. The fair value of the shares on the date of issuance was $289.~~

With respect to time condition RSAs, the Company expensed $74 and $224 during the three and nine months ended December 31, 2017, and $92 and $258 during three and nine months ended December 31, 2016, respectively.

~~The following is a summary of restricted stock awards and activities for all vesting conditions for the nine months ended December 31, 2017:~~

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

~~All restricted shares, vested and unvested, cancellable and not cancelled, have been included in the outstanding shares as of December 31, 2017.~~

At December 31, 2017, there was $169 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.

~~11.Net Loss Per~~ Share

Basic net ~~loss~~income per common share is calculated by dividing net ~~loss~~income by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income per common 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 any~~including the dilutive effects of employee stock-based awards ~~in periods where~~outstanding 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 basic and diluted net ~~loss~~income per share of common stock (in thousands, except per share amounts):


	Three months ended December 31,				Nine months ended December 31,
	2021		2020		2021		2020
Net income	7,062		14,515		15,428		24,828
Less: net income / (loss) attributable to non-controlling interest	48		—		(18)		—
Net income attributable to Digital Turbine, Inc.	$	7,014	$	14,515	$	15,446	$	24,828
Weighted-average common shares outstanding, basic	96,548		89,003		94,620		88,140
Basic net income per common share attributable to Digital Turbine, Inc.	$	0.07	$	0.16	$	0.16	$	0.27
Weighted-average common shares outstanding, diluted	103,287		96,976		101,346		95,563
Diluted net income per common share attributable to Digital Turbine, Inc.	$	0.07	$	0.15	$	0.15	$	0.26

12.Income Taxes

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.~~ I~~ncome Taxes~~

~~Our~~The Company's 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, Accounting for Income Taxes, 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,~~2021, a tax ~~benefit~~provision of ~~$84~~$3,718 and ~~$937,~~$4,799, respectively, resulted in an effective tax rate of ~~2.2%~~34.5% and ~~6.1%~~23.7%, respectively. Differences inbetween the tax provision and the statutory rate ~~are~~ primarily relate to state income taxes, nontaxable adjustments to the AdColony and Fyber earn-outs, and tax deductions for stock compensation that exceed the book expense.

The Company recorded a net increase to deferred tax liabilities of $35,733 in the fiscal first quarter 2022 ended June 30, 2021, related to the AdColony and Fyber acquisitions. The increase in deferred tax liabilities primarily resulted from the revaluation of the acquired intangible assets. The Company’s valuation allowance increased by $13,667 for certain acquired deferred tax assets of Fyber GmbH due to ~~changes~~a history of losses in the ~~valuation allowance. The tax benefit reported~~taxing jurisdiction. Net operating loss (NOL) carryforwards acquired in the ~~current year is largely due to the true up of an estimate resulting from the finalization of a transfer pricing study.~~AdColony and Fyber acquisitions were as follows:

AdColony

Jurisdiction

NOLs

Expiration Dates

U.S. Federal

$60,924

2032 through 2037

U.S. Federal

$47,704

Indefinite

State taxing jurisdictions

$129,685

2026 through 2041

Fyber

Jurisdiction

NOLs

Expiration Dates

Germany

$90,203

Indefinite

Israel

$17,885

Indefinite

During the three and nine months ended December 31, ~~2016,~~2020, a tax ~~expense~~provision of ~~$300~~$1,061 and ~~$159, respectively,~~$2,098 resulted in an effective tax rate of ~~(13.1)%~~6.8% and ~~(0.9)%~~7.8%, 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. Commitments and Contingencies

~~Legal Matters~~Contingent Earn-Out Considerations

The Company's acquisitions of AdColony and Fyber include contingent earn-out considerations as part of the purchase prices, under which it will make future payments or issue shares of common stock to the sellers upon the achievement of certain benchmarks.

AdColony

Under the terms of the Share Purchase Agreement for the AdColony Acquisition, the Company ~~may be involved~~must pay an earn-out estimated between $200,000 to $225,000 in ~~various claims, suits, assessments, investigations,~~cash following December 31, 2021. On August 27, 2021, the Company entered into an Amendment to Share Purchase Agreement (the “Amendment Agreement”) with AdColony and ~~legal proceedings that arise from time~~Otello Corporation ASA, a Norway company (“Otello”) and AdColony's previous parent company. Pursuant to ~~time in~~ the ~~ordinary course of its business, including any that are identified below,~~Amendment Agreement, the Company and ~~unlrss otherwise stated below, we do not believe that these proceedings and claims would reasonably be expected~~Otello agreed to ~~have~~set a ~~material adverse effect on our financial position, results of operations or cash flows. The Company accrues a liability when it is both probable that a liability has been incurred, and the~~fixed dollar amount of $204,500 for the ~~loss can be reasonably estimated. The Company reviews these accruals at least quarterly,~~earn-out payment obligation, to set January 15, 2022, as the payment due date for such payment amount, and ~~adjusts them~~ to ~~reflect ongoing negotiations, settlements, rulings, advice~~eliminate all of ~~legal counsel, and other relevant information. To~~ the ~~extent new information~~Company’s earn-out support obligations under the Share Purchase Agreement. This amount is ~~obtained and the Company's views~~included in acquisition purchase price liabilities 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 for the three and nine months ended December 31, 2017 and 2016.~~

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 )

The following table sets forth geographic information on our net revenues for the three and nine months ended December 31, 2017 and 2016. Net revenues by geography are based on the billing addresses of our customers.

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

~~15. Guarantor and Non-Guarantor Financial Statements~~

On September 28, 2016, the Company sold to 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 issued under the Indenture, as amended and supplemented to date, 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. Given the Notes are unconditionally guaranteed as to the payment of principal, premium, if any, and interest on a senior unsecured basis by four 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:

~~The parent company;~~

~~The subsidiary guarantors on a combined basis;~~

~~Any other subsidiaries of the parent company on a combined basis;~~

~~Consolidating adjustments; and~~

~~The total~~condensed consolidated ~~amounts.~~

~~The following consolidated financial information includes:~~

~~(1) Consolidated~~ balance ~~sheets~~sheet as of December 31, ~~2017~~2021 and was paid in full on January 15, 2022.

Fyber

Under the terms of the Fyber Acquisition, the Company may have to make an earn-out payment of up to $50,000 through the issuance of a variable number of shares of its common stock or, under certain circumstances, cash, if Fyber's net revenues are equal to or higher than $100,000 for the 12-month period ending on March 31, ~~2017; consolidated statements~~2022. As of ~~operations for the three and nine months ended~~ December 31, ~~2017 and 2016; and~~2021, the Company estimates the fair value of this payment to be $49,200. See Note 3, "Acquisitions," for additional discussion regarding the Fyber earn-out payment.

Acquisition Purchase Price Liability

The Company has recognized acquisition purchase price liabilities of $253,700 on its condensed 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~~

balance sheet as of December 31, ~~2017 (Unaudited)~~2021, comprised of the following components:

~~(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•$204,500 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~~

earn-out consideration for the ~~three months ended December 31, 2017 (Unaudited)~~AdColony Acquisition

~~(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~~•$49,200 of ~~Operations and Comprehensive Loss~~

contingent earn-out consideration for the ~~nine months ended December 31, 2017 (Unaudited)~~

~~(in thousands, except par value and share amounts)~~Fyber Acquisition

(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 )
Hosting Agreements

The Company enters into hosting agreements with service providers and in some cases, those agreements include minimum commitments that require the Company to purchase a minimum amount of service over a specified time period ("the minimum commitment period"). The minimum commitment period is generally one-year in duration and the hosting agreements include multiple minimum commitment periods. Our minimum purchase commitments under these hosting agreements total approximately $228,800 over the next five years.

~~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.~~14. Subsequent Events

~~Subsequent~~Debt

Subsequently to ~~period end, Telstra Corporation Limited informed~~December 31, 2021, the Company ~~that it did not plan~~drew an additional $179,000 against the New Credit Agreement. The proceeds, combined with available cash-on-hand, were used to ~~continue utilizing~~satisfy the ~~Company's Pay service at the conclusion~~AdColony Acquisition earn-out payment, which was made on January 15, 2022.

Acquisition 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~~AdColony

On January 15, 2022, the Company ~~it will substantially impact~~paid the ~~total activity between~~AdColony Acquisition earn-out consideration of $204,500 with available cash-on-hand and borrowings under the ~~two parties. The Company does not believe~~New Credit Agreement.

Please refer to Note 3, "Acquisitions," for further information regarding 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.~~

AdColony Acquisition.


~~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~~condensed consolidated 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~~Quarterly Report on Form ~~10-K~~10-Q for the fiscal ~~year~~quarter ended ~~March 31, 2017~~June 30, 2021, 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,~~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~~(collectively "Digital Turbine" or the "Company"), is a leading end-to-end solution for mobile technology companies to enable advertising and monetization solutions. Its digital media platform powers frictionless end-to-end application for brand discovery and advertising, user acquisition and engagement, operational efficiency, and monetization opportunities. The Company provides on-device solutions to all participants in the mobile application ecosystem that want to connect with end users and consumers who hold the device, including mobile carriers and device original equipment manufacturers (“OEMs”) that participate in the app economy, app publishers and developers, and brands and advertising agencies.

Recent Developments

Credit Agreement

On April 29, 2021, the Company entered into an amended and restated Credit Agreement (the "New Credit Agreement”) with BoA, as a lender and administrative agent, and a syndicate of other lenders, which provides for a revolving line of credit of up to $400,000. The revolving line of credit matures on April 29, 2026 and contains an accordion feature enabling the Company to increase the total amount of the revolver by $75,000 plus an amount that would enable the Company to remain in compliance with its consolidated secured net leverage ratio, on such terms as agreed to by the parties. The New Credit Agreement contains customary covenants, representations, and events of default and also requires the Company to comply with a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio.

Amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to, at the ~~convergence~~Company’s election, (i) the London Inter-Bank Offered Rate ("LIBOR") plus between 1.50% and 2.25%, based on the Company’s consolidated leverage ratio, or (ii) a base rate based upon the highest of ~~media~~(a) the federal funds rate plus 0.50%, (b) BoA's prime rate, or (c) LIBOR plus 1.00% plus between 0.50% and ~~mobile communications, delivering end-to-end products~~1.25%, based on the Company’s consolidated leverage ratio. Additionally, the New Credit Agreement is subject to an unused line of credit fee between 0.15% and ~~solutions for mobile operators, application advertisers, device OEMs~~0.35% per annum, based on the Company’s consolidated leverage ratio.

As of December 31, 2021, we had $345,134 drawn against the revolving line of credit under the New Credit Agreement. The proceeds were used to finance the acquisitions detailed below. As of December 31, 2021, we were in compliance with the consolidated leverage ratio, interest coverage ratio, and other ~~third parties~~covenants under the New Credit Agreement.

Subsequently to ~~enable them~~December 31, 2021, the Company drew an additional $179,000 against the New Credit Agreement. The proceeds, combined with available cash-on-hand, were used to ~~effectively monetize mobile content~~satisfy the AdColony Acquisition earn-out payment described below, which was made on January 15, 2022.

Acquisitions

Appreciate On March 1, 2021, Digital Turbine, through its subsidiary Digital Turbine (EMEA) Ltd. ("DT EMEA"), an Israeli company and ~~generate higher value user acquisition.~~wholly-owned subsidiary of the Company, entered into a Share Purchase Agreement with Triapodi Ltd., an Israeli company (d/b/a Appreciate) (“Appreciate”), the stockholder representative, and the stockholders of Appreciate, pursuant to which DT EMEA acquired, on March 2, 2021, all of the outstanding capital stock of Appreciate in exchange for total consideration of $20,003 in cash (the "Appreciate Acquisition"). Under the terms of the Purchase Agreement, DT EMEA entered into bonus arrangements to pay up to $6,000 in retention bonuses and performance bonuses to the founders and certain other employees of Appreciate. None of the goodwill recognized was deductible for tax purposes.

AdColony Holding AS. On April 29, 2021, the Company completed the acquisition of AdColony Holding AS, a Norway company (“AdColony”), pursuant to a Share Purchase Agreement (the "AdColony Acquisition"). The Company ~~operates~~acquired all outstanding capital stock of AdColony in exchange for an estimated total consideration in the range of $400,000 to $425,000, to be paid as follows: (1) $100,000 in cash paid at closing (subject to customary closing purchase price adjustments), (2) $100,000 in cash to be paid six months after closing, and (3) an estimated earn-out in the range of $200,000 to $225,000, to be paid in cash, based on AdColony achieving certain future target net revenues, less associated cost of goods sold (as such term is referenced in the Share Purchase Agreement), over a 12-month period ending on December 31, 2021 (the “Earn-Out Period”). Under the terms of the earn-out, the Company would pay the seller a certain percentage of actual net revenues (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) of AdColony, depending on the extent to which AdColony achieves certain target net revenues (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) over the Earn-Out Period. The earn-out payment will be made following the expiration of the Earn-Out Period.

AdColony is a leading mobile advertising platform servicing advertisers and publishers. AdColony’s proprietary video technologies and rich media formats are widely viewed as a best-in-class technology delivering third-party verified viewability rates for well-known global brands. With the addition of AdColony, the Company will expand its ~~business~~collective experience, reach, and suite of capabilities to benefit mobile advertisers and publishers around the globe. Performance-based spending trends by large, established brand advertisers present material upside opportunities for platforms with unique technology deployable across exclusive access to inventory.

On August 27, 2021, the Company entered into an Amendment to Share Purchase Agreement (the “Amendment Agreement”) with AdColony and Otello Corporation ASA, a Norway company (“Otello”) and AdColony's previous parent company. Pursuant to the Amendment Agreement, the Company and Otello agreed to set a fixed dollar amount of $204,500 for the earn-out payment obligation, to set January 15, 2022, as the payment due date for such payment amount, and to eliminate all of the Company’s earn-out support obligations under the Share Purchase Agreement. As a result, the Company recognized an $8,913 reduction of the earn-out payment obligation in ~~two reportable segments – Advertising~~change in fair value of contingent consideration on the condensed consolidated statement of operations and ~~Content.~~comprehensive income / (loss) for the fiscal second quarter ended September 30, 2021.

The ~~Company's Advertising business is comprised~~Company paid the fixed earn-out payment obligation of ~~two businesses:~~

~~O&O, an advertiser solution for unique~~$204,500 in full on January 15, 2022. The Company paid the cash consideration amounts that were due at closing, on October 26, 2021, and ~~exclusive carrier~~on January 15, 2022, with a combination of available cash-on-hand and ~~OEM inventory which is comprised 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~~borrowings under the ~~Syndicated network.~~Company’s senior credit facility.

The ~~Company's Content business is comprised~~payment made on October 26, 2021, was reduced to $98,175 due to an adjustment for the impact of ~~services including:~~

~~Marketplace,~~accrued and unpaid taxes to the net working capital acquired. The difference between the amount due of $100,000 and amount paid resulted in an ~~application and content store, and~~

~~Pay, a content management and mobile payment solution.~~

~~Advertising~~

~~O&O Business~~adjustment to goodwill.

The ~~Company's O&O business is an advertiser solution for unique~~Company recognized $486 and ~~exclusive carrier and OEM inventory, which is comprised~~$3,977 of ~~Ignite and other professional services directly~~costs related to the ~~Ignite platform.~~AdColony Acquisition, which were included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss) for the three and nine months ended December 31, 2021, respectively.

~~Ignite~~Fyber N.V. On May 25, 2021, the Company completed the initial closing of the acquisition of at least 95.1% of the outstanding voting shares (the “Majority Fyber Shares”) of Fyber N.V. (“Fyber”) pursuant to a Sale and Purchase Agreement (the "Fyber Acquisition") between Tennor Holding B.V., Advert Finance B.V., and Lars Windhorst (collectively, the “Seller”), the Company, and Digital Turbine Luxembourg S.ar.l., a wholly-owned subsidiary of the Company. The remaining outstanding shares in Fyber (the “Minority Fyber Shares”) are (to the Company's knowledge) widely held by other shareholders of Fyber (the “Minority Fyber Shareholders”) and are presented as non-controlling interests within these financial statements.

Fyber is a leading mobile ~~application management~~advertising monetization platform empowering global app developers to optimize profitability through quality advertising. Fyber’s proprietary technology platform and expertise in mediation, real-time bidding, advanced analytics tools, and video combine to deliver publishers and advertisers a highly valuable app monetization solution. Fyber represents an important and strategic addition for the Company in its mission to develop one of the largest full-stack, fully-independent, mobile advertising solutions in the industry. The combined platform offering is advantageously positioned to leverage the Company’s existing on-device software ~~that enables mobile operators~~presence and ~~OEMs~~global distribution footprint.

The Company acquired Fyber in exchange for an estimated aggregate consideration of up to ~~control, manage,~~$600,000, consisting of:

i.Approximately $150,000 in cash, $124,336 of which was paid to the Seller at the closing of the acquisition and ~~monetize applications installed~~the remainder of which is to be paid to the Minority Fyber Shareholders for the Minority Fyber Shares pursuant to the tender offer described below;

ii.5,816,588 newly-issued shares of common stock of the Company to the Seller, which such number of shares were determined based on the volume-weighted average price of the common stock on NASDAQ during the 30-day period prior to the closing date, equal in value to $359,233 at the Company's common stock closing price on May 25, 2021, as follows.

1.3,216,935 newly-issued shares of common stock of the Company equal in value to $198,678, issued at the closing of the acquisition;

2.1,500,000 newly-issued shares of common stock of the Company equal in value to $92,640, issued on June 17, 2021;

3.1,040,364 newly-issued shares of common stock of the Company equal in value to $64,253, issued on July 16, 2021;

iii.Contingent upon Fyber’s net revenues (revenues less associated license fees and revenue share) being equal to or higher than $100,000 for the 12-month earn-out period ending on March 31, 2022, as determined in the manner set forth in the Sale and Purchase Agreement, a certain number of shares of the Company's common stock, which will be newly-issued to the Seller at the end of the earn-out period, and under certain circumstances, an amount of cash, which value of such shares, based on the weighted average share price for the 30-days prior to the end of the earn-out period, and cash in aggregate will not exceed $50,000 (subject to set-off against certain potential indemnification claims against the Seller). Based on estimates at the time of ~~activation~~the acquisition, the Company initially determined it was unlikely Fyber would achieve the earn-out net revenue target and, ~~over~~as a result, no contingent liability was recognized at that time.

The Company paid the ~~life~~cash closing amount on the closing date with a combination of available cash-on-hand and borrowings under the Company’s senior credit facility.

Pursuant to certain German law on public takeovers, following the closing, the Company launched a public tender offer to the Minority Fyber Shareholders to acquire from them the Minority Fyber Shares. The tender offer was approved and published in July 2021, and is subject to certain minimum price rules under German law. The timing and the conditions of the tender offer, including the consideration of €0.84 per share offered to the Minority Fyber Shareholders in connection with the tender offer, was determined by the Company pursuant to the applicable Dutch and German takeover laws. During the quarter ended December 31, 2021, the Company purchased approximately $21,000 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.4%. The Company expects to complete the purchase of the remaining outstanding Fyber shares during its fiscal fourth quarter 2022.

The delisting of Fyber's remaining outstanding shares on the Frankfurt Stock Exchange was completed on August 6, 2021.

Segment Reporting

Prior to the acquisitions of both AdColony and Fyber, the Company had one operating and reportable segment called Media Distribution. As a result of the acquisitions, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2021, the Company reports its results of operations through the following three segments, each of which represents a reportable segment, as follows:

•On Device Media ("ODM") - This segment is the legacy single reporting segment of Digital Turbine prior to the AdColony and Fyber acquisitions. This segment generates revenues from services that deliver mobile ~~device. Ignite allows~~application media or content media to end users. The Company provides ODM solutions to all participants in the mobile ~~operators~~application ecosystem that want to ~~personalize~~connect with end users and consumers who hold the device, including mobile carriers and device original equipment manufacturers (“OEMs”) that participate in the app ~~activation experience~~economy, app publishers and developers, and brands and advertising agencies. This segment's product offerings are enabled through relationships with mobile device carriers and OEMs.

•In App Media – Fyber ("IAM-F") - This segment is inclusive of the acquired Fyber business and generates revenues from services provided to mobile application developers and digital publishers to monetize their ~~home screens via Cost-Per-Install or CPI arrangements, Cost-Per-Placement or CPP arrangements, and/or Cost-Per-Action or CPA arrangements with third-party advertisers.~~content through advanced technologies, innovative advertisement formats, and data-driven decision making. IAM-F customers are primarily publishers.

Impact of COVID-19

Our results of operations are affected by economic conditions, including macroeconomic conditions, levels of business confidence, and consumer confidence. There ~~are several different delivery methods available~~is some uncertainty regarding the extent to ~~operators~~which COVID-19 will impact our business and ~~OEMs~~the demand for our service offerings. The extent to which COVID-19 impacts our operational and financial performance will depend 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 operatorsimpact to carriers and OEMs in ~~North America, Latin America, Europe, Asia Pacific, India,~~relation to their sales of smartphones, tablets, and ~~Israel. Since inception, Ignite has delivered~~other devices, and on the impact to application developers and in-app advertisers. If COVID-19 continues to have a significant negative impact on global economic conditions over ~~one billion application preloads.~~

~~A&P Business~~

~~The Company's A&P~~a prolonged period of time, our results of operations and financial condition could be adversely impacted. Presently, we are conducting business ~~formerly Appia Core, is a worldwide mobile user acquisition network. Its mobile user acquisition platform is a demand side platform,~~as usual, with some modifications to employee travel, employee work locations, and cancellation of certain marketing events, among other modifications. We will continue to actively monitor the situation and may take further actions that alter our business operations, as required, 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 ratesthat we determine are in the ~~case~~best interests of ~~direct or mediated relationships. When inventory is accessed using RTB, A&P buys inventory at a rate determined by the marketplace.~~our employees, customers, partners, suppliers, and stockholders.

~~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)~~

(Unaudited)

Net revenues

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 %


	Three months ended December 31,						Nine months ended December 31,
	2021		2020		% of Change		2021		2020		% of Change
Net revenue
On Device Media	$	133,594	$	88,592	50.8	%	$	383,426	$	218,497	75.5	%
In App Media - AdColony	94,335		—		100.0	%	200,767		—		100.0	%
In App Media - Fyber	157,380		—		100.0	%	332,748		—		100.0	%
Elimination	(9,822)		—		(100.0)	%	(18,634)		—		(100.0)	%
Total net revenues	$	375,487	$	88,592	323.8	%	$	898,307	$	218,497	311.1	%

Comparison of the three and nine months ended December 31, ~~2017~~2021 and ~~2016~~2020

~~Revenues~~Over the three-month comparative periods, net revenues increased by 323.8% ($286,894), and over the nine-month comparative periods, net revenues increased by 311.1% ($679,809). The changes are due to a combination of continuing organic growth of the Company's historical legacy business (now the On Device Media segment) and contributions from recent acquisitions.

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 %
On Device Media

~~During~~The Company's On Device Media segment generates revenues from services that deliver mobile application media or content media to end users. This segment is the legacy single reporting segment of Digital Turbine (previously called Media Distribution) and its customers are mobile device carriers and OEMs that pay for the distribution of media. Over the three and nine months ended December 31, ~~2017 there was an approximately $15,746~~2021, On Device Media revenues increased by 50.8% ($45,002) and ~~$22,886 or 70.7% and 33.1% increase, in overall revenue, as~~75.5% ($164,929), respectively, compared to the three and nine months ended December 31, ~~2016, respectively. This is~~2020. The increase was primarily due to ~~growth in Advertising revenue driven by~~ increased ~~O&O revenue from Advertising partners across existing carrier~~demand for our application media and content media distribution ~~partners~~services, which led to higher CPI and CPP revenues per available placement, 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~~increased revenues from advertising partners as placement across existing commercial partners expanded, distribution with new partners expanded, and new services and features were deployed or expanded upon.

In App Media - AdColony

The Company's IAM-A segment generates revenues from services provided as an end-to-end platform for brands, agencies, publishers, and application developers to deliver advertising to consumers on mobile devices around the world and is comprised of the AdColony Acquisition and, as a ~~decline~~result, there are no revenues in ~~publisher distribution partners, reflecting~~the three and nine months ended December 31, 2020. IAM-A customers are primarily advertisers. Please see Note 3, "Acquisitions," for further information.

In App Media - Fyber

The Company's IAM-F segment generates revenues from services provided to mobile application developers and digital publishers to monetize their content through advanced technologies, innovative advertisement formats, and data-driven decision making, and is comprised of the Fyber Acquisition and, as a ~~trend we expect~~result, there are no revenues in the three and nine months ended December 31, 2020. IAM-F customers are primarily publishers. Please see Note 3, "Acquisitions," for further information.

Costs of revenue and operating expenses


	Three months ended December 31,						Nine months ended December 31,
	2021		2020		% of Change		2021		2020		% of Change
Costs of revenue and operating expenses
License fees and revenue share	$	267,722	$	50,144	433.9	%	$	619,215	$	122,976	403.5	%
Other direct costs of revenue	5,125		749		584.2	%	11,496		1,971		483.3	%
Product development	17,720		5,202		240.6	%	51,171		13,827		270.1	%
Sales and marketing	15,857		5,219		203.8	%	47,072		14,372		227.5	%
General and administrative	39,924		6,761		490.5	%	104,537		22,096		373.1	%
Total costs of revenue and operating expenses	$	346,348	$	68,075	408.8	%	$	833,491	$	175,242	375.6	%

Comparison of the three and nine months ended December 31, 2021, and 2020

Over the three and nine months ended December 31, 2021, total costs of revenue and operating expenses increased by $278,273 and $658,249, respectively, compared to ~~continue as~~ the ~~market shifts away from non-automated syndicated networks such as our current A&P business towards more programmatic advertising.~~three and nine months ended December 31, 2020. The increase in ~~the Content business~~total costs of revenue and operating expenses was ~~driven primarily by~~a result of continuing organic growth ~~in Pay from overall increased demand for the product with customers in Australia,~~ and the ~~continued increase~~acquisitions of ~~Pay~~Appreciate, AdColony, and Fyber. Costs of 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~~and operating expenses included ~~in the Advertising~~transaction costs of $6,167 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$23,671, respectively, 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~~2021, compared to $12 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 OEMS to deliver applications on our Ignite platform through the carrier network. During the three and nine months ended December 31, 2017, Verizon Wireless, a carrier partner, generated 29.6% and 30.9% of our net revenues; while AT&T Inc., a carrier partner, primarily through its Cricket subsidiary, generated 24.0% and 19.0% of our net revenue. During the three and nine months ended December 31, 2016, Verizon Wireless, generated 32.9% and 26.6% of our net revenues.

~~Gross Margins~~

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 %

~~Total gross margin, inclusive of the impact of other direct cost of revenues (including amortization of intangibles), was approximately $9,661 and $23,640 or 25.4% and 25.7%~~$462, respectively, for the three and nine months ended December 31, ~~2017, respectively, versus approximately $3,368~~2020.

License fees and ~~$9,456~~revenue share

License fees and revenue share are reflective of amounts paid to our carrier and OEM partners, as well as application developers who drive the revenue generated from advertising via direct CPI, CPP, or ~~15.1%~~CPA arrangements and ~~13.7%~~are recorded as a cost of revenue. In addition, when indirect arrangements exist through advertising aggregators (ad networks) and revenue is shared with our carrier and application development partners, the shared revenue is recorded as a cost of revenue.

License fees and revenue share increased by $217,578 to $267,722 in the three months ended December 31, 2021, and was 71.3% as a percentage of total net revenue compared to $50,144, or 56.6% of total net revenue, for the three months ended December 31, 2020.

License fees and revenue share increased by $496,239 to $619,215 in the nine months ended December 31, 2021, and was 68.9% as a percentage of total net revenue compared to $122,976, or 56.3% of total net revenue, for the nine months ended December 31, 2020.

The increase in license fees and revenue share was attributable to the increase in total net revenue over the same period as these costs are paid as a percentage of our revenue. The increase in license fees and revenue share as a percentage of total net revenue was primarily due to our recent acquisitions having higher license fees and contractual revenue cost percentages compared to the legacy business.

Other direct costs of revenue

Other direct costs of revenue are comprised primarily of hosting expenses directly related to the generation of revenue and depreciation expense accounted for under ASC 985-20, Costs of Software to be Sold, Leased, or Otherwise Marketed.

Other direct costs of revenue increased by $4,376 to $5,125 in the three months ended December 31, 2021, and was 1.4% as a percentage of total net revenue compared to $749, or 0.8% of total net revenue, for the three months ended December 31, 2020.

Other direct costs of revenue increased by $9,525 to $11,496 in the nine months ended December 31, 2021, and was 1.3% as a percentage of total net revenue compared to $1,971, or 0.9% of total net revenue, for the nine months ended December 31, 2020.

The increase in other direct costs of revenue in both the three and nine months ended December 31, ~~2016, respectively. Overall gross margin increased~~2021, compared to the prior year comparative periods, was primarily driven by our recent acquisitions and continued On-Device Media segment growth. The increase in other direct costs of revenue as ~~growth in higher gross margin Advertising~~a percentage of total net revenue was ~~coupled with lower amortization of intangibles.~~primarily due to higher hosting expenses to support revenue growth.

~~Advertising gross margin, inclusive~~Product development

Product development expenses include the development and maintenance of the ~~impact~~Company's product suite and are primarily a function of ~~other direct cost~~personnel.

Product development expenses increased by $12,518 to $17,720 in the three months ended December 31, 2021, and was 4.7% as a percentage of ~~revenues (including amortization~~total net revenue compared to $5,202, or 5.9% of ~~intangibles),~~total net revenue, for the three months ended December 31, 2020. The three months ended December 31, 2021, included acquisition-related costs of $454. Excluding acquisition-related costs, product development expenses as a percentage of total net revenue was ~~approximately $8,120~~4.6% in the three months ended December 31, 2021.

Product development expenses increased by $37,344 to $51,171 in the nine months ended December 31, 2021, and ~~$20,149~~was 5.7% as a percentage of total net revenue compared to $13,827, or ~~33.6% and 33.3%~~6.3% of total net revenue, for the nine months ended December 31, 2020. For the nine months ended December 31, 2021, product development expenses included $2,364 of acquisition-related costs. Excluding acquisition-related costs, product development expenses as a percentage of total net revenue was 5.4% in the three months ended December 31, 2021.

The increase in product development expenses in both the three and nine months ended December 31, ~~2017, respectively, versus approximately $2,890 and $7,008 or 17.8% and 15.8% for~~2021, compared to the three and nine months ended December 31, 2016, respectively. The increase in Advertising gross margin dollars and percentage is primarily attributable to an increase in Advertiser demand in the O&O business, which carries a higher gross margin than the A&P business, and a decrease in overall amortization of intangibles due to intangibles becoming fully amortized over the 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 Expenses~~

Three Months Ended December 31, Nine Months Ended December 31,
2017 2016 % of Change 2017 2016 % of Change
(in thousands) (in thousands)
Product development $ 3,623
$ 3,113
16.4 % $ 9,218
$ 9,065
1.7 %
Sales and marketing 2,042
1,683
21.3 % 5,288
4,655
13.6 %
General and administrative 4,592
3,982
15.3 % 12,504
13,902
(10.1 )%
Total operating expenses $ 10,257
$ 8,778

16.8 %
$ 27,010

$ 27,622
(2.2 )%

Total operating expenses for the three and nine months ended December 31, 2017, and 2016 were approximately $10,257 and $27,010; and $8,778 and $27,622, respectively, an increase of approximately $1,479 or 16.8% and a decrease of $612 or 2.2%, respectively, over comparative periods.

Product development expenses include the development, maintenance, and hosting 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. Expenses in this area are primarily a function of personnel and hosting expenses. Product development expenses for the three and nine months ended December 31, 2017 and 2016 were approximately $3,623 and $9,218; and $3,113 and $9,065, respectively, an increase of approximately $510 or 16.4% and $153 or 1.7%, respectively, over the comparative periods. The increase in costs over theprior year comparative periods, was primarily due to increased headcount, both organically and through our recent acquisitions, and incremental, third-party development costs to support increased development activities to support revenue growth. The decrease in product development expenses as a ~~function~~percentage of ~~recently hired incremental personnel offset by efficiencies in data hosting realized by the Company leading~~total net revenue was primarily due to ~~cost savings.~~higher leverage product development expenses and resources as total net revenue grows at a higher rate.

Sales and marketing

Sales and marketing expenses represent the costs of sales and marketing personnel, advertising and marketing campaigns, and campaign management.

Sales and marketing expenses increased by $10,638 to $15,857 in the three months ended December 31, 2021, and was 4.2% as a percentage of total net revenue compared to $5,219, or 5.9% of total net revenue, for the three months ended December 31, 2020.

Sales and marketing expenses increased by $32,700 to $47,072 in the nine months ended December 31, 2021, and was 5.2% as a percentage of total net revenue compared to $14,372, or 6.6% of total net revenue, for the nine months ended December 31, 2020.

The increase in sales and marketing expenses in both the three and nine months ended December 31, ~~2017, and 2016 were approximately $2,042 and $5,288; and $1,683 and $4,655, respectively, an increase of approximately $359 and$633 or 21.3% and 13.6%, respectively, over~~2021, compared to the prior year comparative ~~periods. The increase in sales and marketing expenses over the comparative three and nine month~~ periods, was primarily ~~attributable~~due to ~~increased travel expense related~~our recent acquisitions and additional headcount in existing markets to support the Company's continued expansion of its global ~~footprint~~footprint. For the three and ~~increased commissions associated with the~~nine months ended December 31, 2021, sales ~~team generating more revenue through new~~ and ~~existing advertising relationships.~~marketing expenses included $37 and $441, respectively, of acquisition-related costs.

General and administrative

General and administrative expenses represent management, finance, and support personnel costs in both the parent and subsidiary companies, which include professional services and consulting costs, in addition to other costs such as rent, stock-based compensation, and depreciation and amortization expense.

General and administrative expenses increased by $33,163 to $39,924 in the three months ended December 31, 2021, and was 10.6% as a percentage of total net revenue compared to $6,761, or 7.6% of total net revenue, for the three months ended December 31, 2020. The three months ended December 31, 2021 and 2020 included acquisition-related costs of $5,676 and $12, respectively. Excluding acquisition-related costs, general and administrative expenses as a percentage of total net revenue were 9.1% and 7.6% in the three months ended December 31, 2021 and 2020, respectively.

General and administrative expenses increased by $82,441 to $104,537 in the nine months ended December 31, 2021, and was 11.6% as a percentage of total net revenue compared to $22,096, or 10.1% of total net revenue, for the nine months ended December 31, 2020. The nine months ended December 31, 2021 and 2020 included acquisition-related costs of $20,866 and $462, respectively. Excluding acquisition-related costs, general and administrative expenses as a percentage of total net revenue were 9.3% and 9.9% in the nine months ended December 31, 2021 and 2020, respectively.

The increase in general and administrative expenses in both the three and nine months ended December 31, ~~2017,~~2021, compared to the prior year comparative periods, was primarily due to the recent acquisitions of AdColony and 2016 were approximately $4,592 and $12,504; and $3,982 and $13,902, respectively, an increase of approximately $610 or 15.3% and a decrease of $1,398 or 10.1%, respectively, over the comparative periods. The increase inFyber. In addition, 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 expenseincreased due to ~~stock option grants issued over~~higher employee-related expenses, including stock-based compensation, primarily from higher headcount to support the ~~comparative periods being issued at lower fair values, which has the impact~~Company’s growth, higher professional service costs, and an increase in amortization of ~~lower expense being recorded. The decrease over the comparative nine month periods is primarily attributable to lower legal, accounting, professional consulting costs;~~intangibles and ~~reduced stock option compensation 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.~~depreciation for capitalized internal-use software.

Interest ~~and Other Income / (Expense)~~

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 )%

~~Total interest~~ and other income / (expense), net ~~for~~


	Three months ended December 31,						Nine months ended December 31,
	2021		2020		% of Change		2021		2020		% of Change
Interest and other income / (expense), net
Change in fair value of contingent consideration	$	(18,200)	$	(4,662)	(290.4)	%	$	(40,287)	$	(15,419)	(161.3)	%
Interest expense, net	$	(2,195)	$	(266)	(725.2)	%	$	(5,307)	$	(859)	(517.8)	%
Foreign exchange transaction gain	2,122		—		100.0	%	1,603		—		100.0	%
Other expense, net	(86)		(13)		(561.5)	%	(598)		(51)		(1,072.5)	%
Total interest and other income / (expense), net	$	(18,359)	$	(4,941)	(271.6)	%	$	(44,589)	$	(16,329)	(173.1)	%

Comparison of the three and nine months ended December 31, ~~2017,~~2021 and 2016 were approximately $(3,287) and $(11,999); and $3,124 and $986, respectively, an increase in net expenses of approximately $6,411 and $12,985 or 205.2% and 1,316.9%, respectively, over the comparative periods. The increase in expense over the comparative three and nine month periods is primarily attributable to the change2020

Change in fair value of convertible note embedded derivative liability, the change in fair value of warrant liability, and loss on extinguishment of debt associated with the conversion of the Notes. Interest and other income / (expense), net, includes net interest expense, foreign exchange transaction loss, change in fair value of convertible note embedded derivative liability, change in fair value of warrant liability, and other ancillary income / (expense) earned or incurred by the Company.contingent consideration

~~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 of interest income earned on our cash and cash equivalents. The decrease in total interest 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 duringFor the three and nine months ended December 31, 2017, and 2016, respectively. 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,2021, the Company recorded ~~$251~~charges for changes in fair value of contingent consideration of $18,200 and ~~$940~~$40,287, respectively. The changes in fair value of ~~interest expense during~~contingent consideration were due to changes in the fair value of the contingent earn-out payment obligations for the Fyber and AdColony acquisitions.

For the three and nine months ended December 31, ~~2017, respectively,~~2020, the Company recorded charges for changes in fair value of contingent consideration of $4,662 and ~~$437 and $1,060 for~~$15,419, respectively. The changes in fair value of contingent consideration were due to Mobile Posse's performance during the quarter.

Interest expense, net

Over the three and nine months ended December 31, ~~2016, respectively. In total, the Company recorded $446 and $1,815 of~~2021, interest expense, ~~for the three~~net, increased by $1,929 and ~~nine months ended December 31, 2017,~~$4,448, 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, based 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~~2020. The increases were primarily due to ~~increased demand for~~borrowings under the ~~Ignite service, driven primarily by increased CPI~~New Credit Agreement with Bank of America and ~~CPP revenue from advertising partners across existing commercial deployments~~interest on the loans we assumed through our acquisition of ~~Ignite with carrier partners as well as expanded distribution with new carrier partners.~~Fyber. Interest expense also includes the amortization of debt issuance costs related to our New Credit Agreement.

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.

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. As of December 31, 2021, we had total cash of approximately $115,440 and $179,866 available to draw under the New Credit Agreement with Bank of America. The maturity date of the New Credit Agreement is April 29, 2026, and the outstanding balance of $345,134 is classified as long-term debt on our condensed consolidated balance sheet as of December 31, 2021. Subsequent to December 31, 2021, the Company ~~may raise~~drew an additional $179,000 against the New Credit Agreement. The proceeds, combined with available cash-on-hand, were used to satisfy the AdColony Acquisition earn-out payment of $204,500, which was made on January 15, 2022.

Our ability to meet our debt service obligations and to fund working capital, ~~through~~capital expenditures, and investments in our business will depend upon our future ~~equity raises or,~~performance, which will be subject to ~~restrictions contained~~financial, business, and other factors affecting our operations, many of which are beyond our control, availability of borrowing capacity under our credit facility, and our ability to access the capital markets. For example, these factors could include general and regional economic, financial, competitive, legislative, regulatory, and other factors. We cannot ensure that we will generate cash flow from operations, or that future borrowings or the capital markets will be available, in an amount sufficient to enable us to pay our ~~Indenture~~debt or to fund our other liquidity needs. We could face substantial liquidity problems and ~~Credit Agreement, debt financing~~could be forced to ~~provide for greater flexibility for the Company~~reduce or delay investments and capital expenditures or to ~~complete acquisitions, fund new investments in under-capitalized opportunities,~~dispose of material assets or ~~invest in organic opportunities. Additional financing~~operations, seek additional indebtedness or equity capital, or restructure or refinance our indebtedness. We may not be ~~available~~able to effect any such alternative measures on ~~acceptable~~commercially reasonable terms or at ~~all. If the Company issues additional equity or equity linked securities~~all and, even if successful, those alternative actions may not allow us 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.~~ meet our scheduled debt service obligations.

The Company believes ~~that~~ it ~~has~~will generate sufficient cash flow from operations and has the liquidity and capital resources to ~~operate~~meet its business requirements for at least ~~the next~~ twelve months from the ~~issuance~~filing date of this ~~Report. See Note 2 - Liquidity for more discussion.~~Quarterly Report on Form 10-Q.

AsAcquisition Purchase Price Liability

The Company has recognized acquisition purchase price liabilities of $253,700 on its condensed consolidated balance sheet as of December 31, ~~2017,~~2021, comprised of the following components:

•$204,500 of earn-out consideration for the AdColony Acquisition

•$49,200 of contingent earn-out consideration for the Fyber Acquisition

The Company intends to pay this consideration with a combination of available cash-on-hand, borrowings under the Company’s New Credit Agreement, including utilizing the accordion feature of the senior credit facility, if necessary, and proceeds from future capital financings.

Hosting Agreements

Outstanding Secured Indebtedness

The Company’s outstanding secured indebtedness under the New Credit Agreement is $345,134 as of December 31, 2021. See "Recent Developments - Credit Agreement" for additional information on the New Credit Agreement. The Company's ability to borrow additional amounts under its New Credit Agreement could have significant negative consequences, including:

•increasing the Company’s vulnerability to general adverse economic and industry conditions;

•limiting the Company’s ability to obtain additional financing;

•violating a financial covenant, potentially resulting in the indebtedness to be paid back immediately and thus negatively impacting our ~~total contractual~~liquidity;

•requiring additional financial covenant measurement consents or default waivers without enhanced financial performance in the short term;

•requiring the use of a substantial portion of any cash ~~obligations were~~flow from operations to service indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures;

•limiting the Company’s flexibility in planning for, or reacting to, changes in the Company’s business and the industry in which it competes, including by virtue of the requirement that the Company remain in compliance with certain negative operating covenants included in the credit arrangements under which the Company will be obligated as ~~follows:~~

well as meeting certain reporting requirements; and

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

~~(a) convertible notes maturing on September 23, 2020 (the “Notes”), unless converted, repurchased or redeemed in accordance with their terms prior~~•placing the Company at a possible competitive disadvantage 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~~less leveraged competitors that are ~~not expected~~larger and may have better access to capital resources.

Our credit facility also contains a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. There can be ~~liquidated within~~no assurance we will continue to satisfy these ratio covenants. If we fail to satisfy these covenants, the ~~next twelve months. We are unable~~lender may declare a default, which could lead to ~~reliably estimate~~acceleration of the ~~expected payment dates for these additional non-current liabilities.~~debt maturity. Any such default would have a material adverse effect on the Company.

~~Cash Flow Summary~~

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, 2017~~The collateral pledged to secure our secured debt, consisting of substantially all of our and 2016, the Company's net cash provided by / (used in) operating activities was $482 and $(7,788), respectively, a positive change of $8,270 or 106.2%. The increase in net cash provided by operating activities was primarily attributableour U.S. subsidiaries’ assets, would be available to the secured creditor in a foreclosure, in addition to many other remedies. Accordingly, any adverse change in ~~working capital accounts over~~our ability to service our secured debt could result in an event of default, cross default, and foreclosure or forced sale. Depending on the ~~comparative periods.~~value of the assets, there could be little, if any, assets available for common stockholders in any foreclosure or forced sale.

~~During~~Debt Assumed Through Fyber Acquisition

As a part of the nine months ended December 31, 2017, net cash provided by operating activities was $482, resulting from a net loss of $14,432 offset by net non-cash expenses of $16,513, which included depreciation and amortization expense, change inFyber Acquisition, the ~~allowance for doubtful accounts, amortization~~Company assumed $25,789 of debt ~~discount and~~previously held by Fyber. This debt ~~issuance costs, accrued interest, stock option expense, stock-based compensation related to vesting~~was comprised of ~~restricted stock for services, change~~amounts drawn against three separate revolving lines of credit. The Company settled two of the three revolving lines of credit, resulting in ~~fair value~~payments of convertible note embedded derivative liability, change in fair value of warrant liability, and loss on extinguishment of debt of approximately $2,707, $244, $875, $165, $2,296, $224, $6,310, $2,526, and $1,166, respectively. Net cash used in operating activities$13,288, during the nine months ended December 31, ~~2017 was also impacted by~~2021. Details for the ~~change~~remaining line of credit can be found in ~~net working capital accounts~~Note 9, "Debt," of the condensed consolidated financial statements. The remaining revolving line of credit from Bank Leumi matures on January 30, 2022. The balance of this line of credit is classified as short-term debt on the condensed consolidated balance sheet as of December 31, 2017 compared to March 31, 2017, with a net increase in current liabilities of approximately $14,901 (inclusive of accounts payable, accrued license fees and revenue share, accrued compensation, and other liabilities), offset2021.

Cash Flow Summary


	Nine months ended December 31,
	2021		2020		% of Change
	(in thousands)
Consolidated statements of cash flows data:
Net cash provided by operating activities	$	43,462	$	48,612	(10.6)	%
Business acquisitions, net of cash acquired	(148,192)		(7,968)		(1,759.8)	%
Capital expenditures	(15,692)		(6,545)		(139.8)	%
Net cash used in investing activities	(163,884)		(14,513)		(1,029.2)	%
Payment of contingent consideration	—		(16,957)		100.0	%
Proceeds from borrowings	369,913		—		100.0	%
Payment of debt issuance costs	(4,044)		—		(100.0)	%
Payment of deferred business acquisition consideration	(98,175)		—		(100.0)	%
Options and warrants exercised	2,814		5,927		(52.5)	%
Payment of withholding taxes for net share settlement of equity awards	(7,587)		—		(100.0)	%
Repayment of debt obligations	(52,623)		(750)		(6,916.4)	%
Net cash provided by / (used in) financing activities	$	210,298	$	(11,780)	1,885.2	%

Operating Activities

Cash provided by a net increase in current assets of approximately $16,500 (inclusive of accounts receivable, deposits, and prepaid expenses and other current assets) over the comparative periods. The net increase in working capital account liabilitiesoperating activities 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~~$43,462 for the nine months ended December 31, 2016, net cash used in operating activities was $7,788, resulting from a net loss of $17,339 offset by net non-cash expenses of $8,405, which included depreciation and amortization, stock option expense, stock-based compensation related2021, compared to ~~vesting of restricted stock~~$48,612 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, ~~2016~~2020. The decrease of $5,150 was ~~impacted by~~due to the ~~change~~following:

•$80,094 decrease for changes in operating assets and liabilities, primarily due to higher net working capital ~~accounts as~~to support the Company's growth, and the payout 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 related to the AdColony and ~~other liabilities), offset by a net~~Fyber acquisitions and the Company's annual incentive plan, and

•$74,335 increase due to higher non-cash charges, primarily for depreciation and amortization, change in ~~current assets~~fair value of ~~approximately $1,875 (inclusive only of restricted cash, accounts receivable, deposits,~~contingent consideration, and ~~prepaid expenses and other current assets) over the comparative periods. The net increase in working capital account liabilities was driven~~stock-based compensation expense. These increases were primarily ~~by the increase in accounts payable of $4,509, mostly~~ due to the ~~timing~~impact of ~~payments to our carrier partners. Net cash used in~~the AdColony and Fyber acquisitions on operating activities ~~was further impacted by an increase in other non-current liabilities of $283, related entirely to changes in non-current uncertain tax liabilities over the comparative periods.~~post-acquisition.

Investing Activities

For the nine months ended December 31, ~~2017 and 2016,~~2021, net cash used in investing activities was approximately ~~$1,312 and $382, respectively, which is~~$163,884, comprised of ~~capital~~cash expenditures ~~related mostly to internally developed software in the current fiscal year,~~for business acquisitions, net of cash acquired, of $148,192 and capital expenditures related mostly to ~~internally developed~~internally-developed software of ~~$1,381 offset by proceeds from~~$15,692. For the ~~sale~~nine months ended December 31, 2020, net cash used in investing activities was approximately $14,513, comprised of cash expenditures for business acquisitions, net of cash acquired, of $7,968 and capital expenditures related mostly to internally-developed software of $6,545. The $140,224 increase in cash expenditures for business acquisitions was due to our acquisitions of AdColony and Fyber during the nine months ended December 31, 2021, as compared to our acquisition of Mobile Posse, Inc., during the nine months ended December 31, 2020. The $9,147 increase in capital expenditures was due to a ~~cost method investment~~combination of ~~$999~~continued investments in ~~the prior fiscal year.~~product development across all of our segments, including In App Media - AdColony and In App Media - Fyber.

Financing Activities

For the nine months ended December 31, ~~2017,~~2021, net cash provided by financing activities was approximately ~~$1,568, inclusive~~$210,298, comprised of ~~$2,500 in~~ proceeds from ~~our Credit Agreement,~~borrowings of $369,913 primarily used for the acquisitions of AdColony and ~~$261 in proceeds from the exercise~~Fyber, and options exercised of ~~stock options;~~$2,814, partially offset by ~~cash paid~~payment of deferred business acquisition consideration of $98,175, repayment of debt obligations of $52,623, payment of withholding taxes for ~~the~~net share settlement of ~~debt~~equity awards of ~~$847,~~$7,587, and ~~the~~ payment of ~~capitalized~~ debt issuance ~~cots~~costs of ~~$346.~~$4,044. For the nine months ended December 31, ~~2016,~~2020, net cash used in financing activities was approximately ~~$2,692, primarily due~~$11,780, comprised of payment of contingent consideration of $16,957 related to ~~proceeds from~~ the ~~issuance~~Mobile Posse acquisition and repayment of debt obligations of ~~$16,000 and~~$750, offset by proceeds from the exercise of stock options of ~~$11, offset by the repayment of debt of $11,000 and $2,319 in debt issuance costs payments.~~$5,927.

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 ~~could~~would arise if we ~~had~~ engaged in such relationships.

Critical Accounting Policies and ~~Judgments~~Estimates

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 ~~the~~management's selection and application 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 policies and estimates, ~~and policies,~~please see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations-Critical~~Operations - Critical Accounting Policies, ~~and Judgments”~~” of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017, as amended~~2021, and Note 2, "Basis of Presentation and Summary of Significant Accounting Policies," of this Quarterly Report on Form 10-Q for our fiscal third quarter ended December 31, 2021.

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 insensitive~~sensitive 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.

Foreign Currency Exchange Risk

We have foreign currency risks related to our ~~revenue~~revenues 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~~revenues and ~~disproportionately,~~ our ~~operating loss~~income from operations and net ~~loss~~income to be impacted by fluctuations in exchange rates. In addition, ~~gains/~~gains / (losses) related to translating certain cash balances, trade accounts receivable and payable balances, and ~~inter-company~~intercompany balances ~~that are denominated in these currencies~~ impact our net ~~income/(loss).~~income. 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.

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

~~Disclosure~~Under 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 defined~~as 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 ~~filed~~that it files or ~~submitted~~submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in ~~SEC~~the 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 Officer~~its principal executive and ~~the Chief Financial Officer,~~principal financial officers, as appropriate to allow timely decisions regarding required disclosures.

~~In connection with~~ 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 ~~preparation~~cost-benefit relationship of ~~this Report, Digital Turbine's management, under~~possible controls and procedures. Based on 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 disclosure controls and ~~procedures. Based on that evaluation and~~procedures as of the ~~identification~~end of ~~certain material weaknesses in internal controls over financial reporting, which we view as an integral part of our disclosure controls and procedures,~~the period covered by this Report, our Chief Executive Officer and Chief Financial Officer ~~have~~ 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 ~~Controls~~Control Over Financial Reporting

An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to determine whether any change in our internal control over financial reporting occurred during the fiscal third quarter ended December 31, 2021 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. On May 25, 2021, we completed the acquisition of Fyber N.V., and on April 29, 2021, we completed the acquisition of AdColony Holdings, AS, and we are completing the integration of these acquisitions into our internal control over financial reporting. There ~~were~~have been no other changes in our internal ~~controls~~control over financial reporting that occurred during the ~~three months~~fiscal third quarter ended December 31, ~~2017~~2021 that materially affected, or are reasonably likely to materially affect, our internal ~~controls~~control over financial reporting.

PART II - OTHER INFORMATION

~~Item~~ITEM 1.~~Legal Proceedings~~ 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). Risk Factors~~ITEM 1A. RISK FACTORS

~~Registrant~~The Company is not aware of any material changes from the risk factors ~~since those~~ set forth under Part II, Item 1A, “Risk ~~Factors”~~Factors,” in its ~~Annual~~Quarterly Report inon Form ~~10-K, as amended,~~10-Q for the ~~year~~fiscal quarter ended ~~March 31, 2017.~~June 30, 2021, filed with the Securities and Exchange Commission on August 9, 2021.

~~Item~~ITEM 2.~~Unregistered Sales of Equity Securities and Use of Proceeds~~ UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

~~Item~~ITEM 3.~~Defaults~~ DEFAULTS UPON SENIOR SECURITIES

Not applicable.

~~Item~~ITEM 4.~~Mine Safety Disclosures~~ MINE SAFETY DISCLOSURES

Not applicable.

~~Item~~ITEM 5.~~Other Information~~ OTHER INFORMATION

None.

ITEM 6. EXHIBITS


10.1						First Amendment, dated as of December 29, 2021, by and among Digital Turbine, Inc., Digital Turbine Media, Inc., Digital Turbine USA, Inc., Mobile Posse Inc., AdColony, Inc., AdColony Holdings US, Inc. and Bank of America, N.A. as administrative agent and a lender, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on January 3, 2022).

31.1						Certification of William Stone, Principal Executive Officer.*

31.2						Certification of Barrett Garrison, Principal Financial Officer.*

32.1						Certification of William Stone, Principal Executive Officer pursuant to U.S.C. Section 1350.+

32.2						Certification of Barrett Garrison, Principal Financial Officer pursuant to U.S.C. Section 1350.+

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 this Quarterly Report on Form 10-Q or as a separate disclosure document, and are not being incorporated by reference into any Securities Act registration statement.

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, 2018~~8, 2022

By:

~~By:~~

/s/ William Stone

William Stone

Chief Executive Officer

(Principal Executive Officer)

Digital Turbine, Inc.

Dated: February ~~7, 2018~~8, 2022

By:

~~By:~~

/s/ Barrett Garrison

Barrett Garrison

Chief Financial Officer

(Principal Financial Officer)

5142



	Three Months Ended December 31,						Nine Months Ended December 31,
	2017			2016			2017			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



	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



Year Ending March 31,	Amortization Expense
2018	$	549
2019	1,375
2020	114
2021	114
2022	114
Thereafter	578
Total	$	2,844



	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



	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



	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



	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



	December 31,
	2017		2016
Total fair value of options vested	$	2,750	$	2,250
Total intrinsic value of options exercised (a)	$	101	$	8



	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



	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



	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		)



	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



(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	)



			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