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~~2022



¨☐			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~~“emerging growth ~~company"~~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,~~February 5, 2023, the Company had ~~75,143,354~~99,197,058 shares of its common stock, $0.0001 par value per share, outstanding.

~~Digital Turbine, Inc.~~DIGITAL TURBINE, INC.

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

FOR THE QUARTER ENDED December 31, ~~2017~~2022

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			24

~~Item 1 (A).~~	~~Risk Factors~~ITEM 3.	49QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			33

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~ITEM 4.	49CONTROLS AND PROCEDURES			34

~~Item 3.~~	~~Defaults~~PART II	49OTHER INFORMATION			36

~~Item 4.~~	~~Mine Safety Disclosures~~ITEM 1.	49LEGAL PROCEEDINGS			36

~~Item 5.~~	~~Other Information~~ITEM 1A.	49RISK FACTORS			36

	~~Exhibits~~ITEM 2.	50UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			36
ITEM 3.			DEFAULTS UPON SENIOR SECURITIES			36
			~~Signatures~~ITEM 4.	51MINE SAFETY DISCLOSURES			36
ITEM 5.			OTHER INFORMATION			36
ITEM 6.			EXHIBITS			37
			SIGNATURES			37

PART I - FINANCIAL INFORMATION

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

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)


	December 31, 2017			March 31, 2017				December 31, 2022		March 31, 2022
	(Unaudited)							(Unaudited)
ASSETS							ASSETS
Current assets							Current assets
Cash	$	6,883		$	6,149		Cash	$	79,307	$	126,768
Restricted cash	331			331			Restricted cash	554		394
Accounts receivable, net of allowances of $841 and $597, respectively	32,494			16,554
Deposits	155			121
Accounts receivable, net							Accounts receivable, net	231,001		263,139
Prepaid expenses and other current assets	551			510			Prepaid expenses and other current assets	31,912		20,570
Total current assets	40,414			23,665			Total current assets	342,774		410,871
Property and equipment, net	2,693			2,377			Property and equipment, net	38,759		31,086
Deferred tax assets	593			352
Right-of-use assets							Right-of-use assets	10,973		15,439
Intangible assets, net	2,844			4,565			Intangible assets, net	395,181		440,589
Goodwill	76,621			76,621			Goodwill	560,340		559,792

Other non-current assets							Other non-current assets	4,648		732
TOTAL ASSETS	$	123,165		$	107,580		TOTAL ASSETS	$	1,352,675	$	1,458,509
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	$	154,320	$	167,858
Accrued license fees and revenue share	12,857			8,529			Accrued license fees and revenue share	75,380		95,170
Accrued compensation	3,456			1,073			Accrued compensation	16,206		28,775
Short-term debt, net of debt issuance costs of $247 and $0, respectively	1,653			—
Acquisition purchase price liabilities							Acquisition purchase price liabilities	—		50,000
Current portion of debt							Current portion of debt	—		12,500
Other current liabilities	1,844			1,304			Other current liabilities	43,460		30,960
Total current liabilities	48,214			30,774			Total current liabilities	289,366		385,263
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	422,310		520,785
Deferred tax liabilities, net							Deferred tax liabilities, net	18,786		19,976
Other non-current liabilities	51			782			Other non-current liabilities	14,586		16,270
Total liabilities	63,514			45,535			Total liabilities	745,048		942,294
Stockholders' equity
Commitments and contingencies (Note 13)							Commitments and contingencies (Note 13)
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; 99,901,328 issued and 99,143,203 outstanding at December 31, 2022; 97,921,826 issued and 97,163,701 outstanding at March 31, 2022							$0.0001 par value: 200,000,000 shares authorized; 99,901,328 issued and 99,143,203 outstanding at December 31, 2022; 97,921,826 issued and 97,163,701 outstanding at March 31, 2022	10		10
Additional paid-in capital	311,621			299,580			Additional paid-in capital	810,994		745,661
Treasury stock (754,599 shares at December 31, 2017 and March 31, 2017)	(71		)	(71		)
Treasury stock (758,125 shares at December 31, 2022, and March 31, 2022)							Treasury stock (758,125 shares at December 31, 2022, and March 31, 2022)	(71)		(71)
Accumulated other comprehensive loss	(326		)	(321		)	Accumulated other comprehensive loss	(44,201)		(39,341)
Accumulated deficit	(251,683		)	(237,251		)	Accumulated deficit	(161,183)		(191,788)
Total stockholders' equity	59,651			62,045
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	123,165		$	107,580
Total stockholders’ equity							Total stockholders’ equity	605,649		514,571
Non-controlling interest							Non-controlling interest	1,978		1,644
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY							TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,352,675	$	1,458,509

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,
	2022		2021		2022		2021
Net revenue	$	162,310	$	216,818	$	525,802	$	563,461
Costs of revenue and operating expenses
License fees and revenue share	73,370		109,053		237,618		284,369
Other direct costs of revenue	9,324		9,090		27,438		21,385
Product development	14,218		13,755		43,087		40,594
Sales and marketing	16,469		15,857		48,017		47,072
General and administrative	39,132		39,924		114,328		105,225
Total costs of revenue and operating expenses	152,513		187,679		470,488		498,645
Income from operations	9,797		29,139		55,314		64,816
Interest and other income / (expense), net
Change in fair value of contingent consideration	—		(18,200)		—		(40,287)
Interest expense, net	(6,913)		(2,195)		(16,224)		(5,307)
Foreign exchange transaction gain / (loss)	17		2,122		(595)		1,603

Other income / (expense), net	8		(86)		392		(598)
Total interest and other income / (expense), net	(6,888)		(18,359)		(16,427)		(44,589)
Income before income taxes	2,909		10,780		38,887		20,227
Income tax provision / (benefit)	(1,153)		3,718		8,164		4,799
Net income	4,062		7,062		30,723		15,428
Less: net income / (loss) attributable to non-controlling interest	43		48		118		(18)
Net income attributable to Digital Turbine, Inc.	4,019		7,014		30,605		15,446
Other comprehensive loss
Foreign currency translation adjustment	10,144		(8,389)		(4,644)		(45,062)
Comprehensive income / (loss)	14,206		(1,327)		26,079		(29,634)
Less: comprehensive income / (loss) attributable to non-controlling interest	59		(11)		334		(932)
Comprehensive income / (loss) attributable to Digital Turbine, Inc.	$	14,147	$	(1,316)	$	25,745	$	(28,702)
Net income per common share
Basic	$	0.04	$	0.07	$	0.31	$	0.16
Diluted	$	0.04	$	0.07	$	0.30	$	0.15
Weighted-average common shares outstanding
Basic	99,108		96,548		98,623		94,620
Diluted	103,348		103,287		103,674		101,346

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 two significant acquisitions. Please refer to Note 3, “Acquisitions,” 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,
	2022		2021
Cash flows from operating activities
Net income	$	30,723	$	15,428
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	60,147		40,946
Non-cash interest expense	619		500

Stock-based compensation expense	19,643		15,369
Foreign exchange transaction (gain) / loss	581		(1,603)
Change in fair value of contingent consideration	—		40,287

Right-of-use asset	4,868		3,270
Deferred income taxes	(2,494)		4,799
(Increase) / decrease in assets:
Accounts receivable, gross	32,816		(104,535)
Allowance for credit losses	3,009		412
Prepaid expenses and other current assets	(11,397)		(5,760)
Other non-current assets	100		74
Increase / (decrease) in liabilities:
Accounts payable	(14,113)		38,467
Accrued license fees and revenue share	(20,324)		29,377
Accrued compensation	(13,131)		(33,506)
Other current liabilities	11,784		1,114
Other non-current liabilities	(5,317)		(1,177)


Net cash provided by operating activities	97,514		43,462

Cash flows from investing activities
Equity investments	(4,000)		—
Business acquisitions, net of cash acquired	(2,708)		(148,192)
Capital expenditures	(18,598)		(15,692)
Net cash used in investing activities	(25,306)		(163,884)

Cash flows from financing activities

Proceeds from borrowings	18,000		369,913
Payment of debt issuance costs	(94)		(4,044)
Payment of deferred business acquisition consideration	—		(98,175)
Options and warrants exercised	1,095		2,814
Payment of withholding taxes for net share settlement of equity awards	(6,202)		(7,587)
Repayment of debt obligations	(129,500)		(52,623)
Net cash provided by / (used in) financing activities	(116,701)		210,298

Effect of exchange rate changes on cash and cash equivalents and restricted cash	(2,808)		(5,554)

Net change in cash and cash equivalents and restricted cash	(47,301)		84,322

Cash and cash equivalents and restricted cash, beginning of period	127,162		31,118

Cash and cash equivalents and restricted cash, end of period	$	79,861	$	115,440

Supplemental disclosure of cash flow information
Interest paid	$	12,912	$	3,882
Income taxes paid	$	3,917	$	954

Supplemental disclosure of non-cash activities
Common stock issued for the acquisition of Fyber	$	50,000	$	356,686
Unpaid cash consideration for the acquisition of Fyber Minority Interest	$	2,578	$	3,106

Fair value of unpaid contingent consideration in connection with business acquisitions	$	2,738	$	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 two significant acquisitions. Please refer to Note 3, “Acquisitions,” 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, 2022	97,163,701	$	10	100,000	$	100	758,125	$	(71)	$	745,661	$	(39,341)	$	(191,788)	$	1,644	$	516,215
Net income	—	—		—	—		—	—		—		—		14,922		36		14,958
Foreign currency translation	—	—		—	—		—	—		—		(5,749)		—		207		(5,542)
Stock-based compensation expense	—	—		—	—		—	—		6,463		—		—		—		6,463
Shares issued:
Exercise of stock options	380,176	—		—	—		—	—		296		—		—		—		296
Issuance of restricted shares and vesting of restricted units	7,763	—		—	—		—	—		—		—		—		—		—
Shares for acquisition of Fyber	1,205,982	—		—	—		—	—		50,000		—		—		—		50,000



Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(4,357)		—		—		—		(4,357)
Balance at June 30, 2022	98,757,622	$	10	100,000	$	100	758,125	$	(71)	$	798,063	$	(45,090)	$	(176,866)	$	1,887	$	578,033
Net income	—	—		—	—		—	—		—		—		11,664		39		11,703
Foreign currency translation	—	—		—	—		—	—		—		(9,239)		—		(7)		(9,246)
Stock-based compensation expense	—	—		—	—		—	—		6,142		—		—		—		6,142
Shares issued:
Exercise of stock options	198,778	—		—	—		—	—		643		—		—		—		643
Issuance of restricted shares and vesting of restricted units	29,035	—		—	—		—	—		—		—		—		—		—




Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(1,572)		—		—		—		(1,572)
Balance at September 30, 2022	98,985,435	$	10	100,000	$	100	758,125	$	(71)	$	803,276	$	(54,329)	$	(165,202)	$	1,919	$	585,703
Net income	—	—		—	—		—	—		—		—		4,019		43		4,062
Foreign currency translation	—	—		—	—		—	—		—		10,128		—		16		10,144
Stock-based compensation expense	—	—		—	—		—	—		7,835		—		—		—		7,835
Shares issued:
Exercise of stock options	84,594	—		—	—		—	—		156		—		—		—		156
Issuance of restricted shares and vesting of restricted units	73,174	—		—	—		—	—		—		—		—		—		—




Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(273)		—		—		—		(273)
Balance at December 31, 2022	99,143,203	$	10	100,000	$	100	758,125	$	(71)	$	810,994	$	(44,201)	$	(161,183)	$	1,978	$	607,627

1In the fiscal quarter ended June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 3, “Acquisitions,” 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, 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	—	—		—	—		—	—		3,705		—		—		—		3,705
Shares issued:
Exercise of stock options	178,127	—		—	—		—	—		695		—		—		—		695
Vesting of restricted and performance stock units	207,758	—		—	—		—	—		—		—		—		—		—
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 loss	—	—		—	—		—	—		—		—		(5,852)		(35)		(5,887)
Foreign currency translation	—	—		—	—		—	—		—		(15,799)		—		(93)		(15,892)
Stock-based compensation expense	—	—		—	—		—	—		5,925		—		—		—		5,925
Shares issued:
Exercise of stock options	480,422	—		—	—		—	—		1,460		—		—		—		1,460
Issuance of restricted shares and vesting of restricted units	28,477	—		—	—		—	—		—		—		—		—		—
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
Issuance of restricted shares and vesting of restricted 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

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~~2022

(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~~“Company”), is a leading, independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and ~~mobile communications, delivering~~device original equipment manufacturers (“OEMs”). The Company offers end-to-end products and solutions ~~for~~leveraging proprietary technology to all participants in the mobile ~~operators,~~ application ~~advertisers, device original equipment manufacturers ("OEMs")~~ecosystem, enabling brand discovery and other third parties to enable them to effectively monetize mobile content and generate higher value user acquisition. The Company operates its business in two reportable segments – Advertising and Content.

~~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~~advertising, user acquisition ~~network which is comprised of~~and engagement, and operational efficiency for advertisers. In addition, the ~~Syndicated network service.~~Company’s products and solutions provide monetization opportunities for OEMs, carriers, and application (“app” or “apps”) publishers and developers.

~~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~~2022.

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~~2022, 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, 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.

Management considered the impacts of global inflation, conflict in Ukraine, as well as the continued effects of 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 global inflation or 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 2, “Basis of Presentation and Summary of Significant Accounting Policies,” of the notes to the condensed consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2022, other than the “Recent Accounting Pronouncements” disclosed below and changes to the Company’s segment reporting disclosed in Note 4, “Segment Information.”

Accounting Pronouncements Adopted During the Period

ASU 2020-04

In March 2020, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to amendments to contracts, hedging relationships, and other contractual transactions impacted by the discontinuation of the London Inter-Bank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities through December 31, 2022 and can be adopted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020. The Company adopted the update as of the quarter ended September 30, 2022 and the impact of the adoption was not material to the Company’s condensed consolidated financial statements.

3. Acquisitions

Acquisition of In App Video Services UK LTD.

On November 1, 2022, the Company completed the acquisition of all of the outstanding ownership interests of In App Video Services UK LTD. (“In App”) pursuant to a Stock Purchase Agreement (the “In App Acquisition”). Prior to the Acquisition, In App acted as a third-party representative of the Company’s App Growth Platform (“AGP”) segment’s products and services in the United Kingdom (“UK”). The acquisition of In App is part of the Company’s strategy to make investments that provide opportunities to grow market share and increase revenues in important markets and geographies like the UK.

The Company acquired In App for total, estimated consideration in the range of $2,250 to $5,500, paid as follows: (1) $2,708 paid in cash at closing, including a working capital adjustment of approximately $460, with $1,000 of that amount held in escrow for one-year and (2) potential annual earn-out payments based on meeting annual revenue targets for the calendar years ended December 31, 2022, 2023, 2024 and 2025. The annual earn out payments are up to $250 for the year ended December 31, 2022 and $1,000 for each of the calendar years ended December 31, 2023, 2024 and 2025. Also, an incremental earn-out payment will be made for each of the calendar years ended 2023, 2024 and 2025 in an amount equal to 25% of revenue that is more than 150% of that calendar year’s revenue target.

The Company recorded the preliminary fair values of the assets acquired and liabilities assumed in the In App Acquisition, which resulted in the recognition of: (1) current assets, net of cash acquired, of $836, (2) current liabilities of $401, (3) acquisition purchase price liability of $2,738, (4) and goodwill of $5,008.

The Company recognized costs related to the In App Acquisition of $162 and $207, respectively, for the three and nine months ended December 31, 2022, in operating expenses on the condensed consolidated statements of operations and comprehensive income / (loss).

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 the Company’s 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 revenue (revenue 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 March 31, 2022, the Company had recognized the acquisition purchase price liability of $50,000. The Company settled the obligation through the issuance of 1,205,982 shares of the Company’s common stock effective May 19, 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 year ended March 31, 2022, the Company purchased an additional $18,341 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.5% as of December 31, 2022. The Company expects to complete the purchase of the remaining outstanding Fyber shares during fiscal year 2023.

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 the Fyber Acquisition are presented as follows1:


	May 25, 2021		Measurement Period Adjustments		May 25, 2021 (adjusted)
Assets acquired
Cash	$	71,489	$	—	$	71,489
Accounts receivable	64,877		166		65,043
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		(2,572)		300,443
Other non-current assets	851		—		851
Total assets acquired	$	723,737	$	(2,027)	$	721,710

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		(1,739)		10,534
Current portion of debt	25,789		—		25,789
Deferred tax liability, net	25,213		3,627		28,840
Other non-current liabilities	15,386		—		15,386
Total liabilities assumed	$	215,609	$	387	$	215,996
Total purchase price	$	508,128	$	(2,414)	$	505,714

During the measurement period ended May 25, 2022, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $2,572, 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 App Growth Platform (“AGP”) 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.

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 €1.00 to $1.22.

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

The Company recognized costs related to the Fyber Acquisition of $441 and $1,444, respectively, for the three and nine months ended December 31, 2022, and $5,183 and $16,898, respectively, for the three and nine months ended December 31, 2021, in operating expenses on the condensed consolidated statements of operations and comprehensive income / (loss).

Acquisition of 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 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 revenue, 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 revenue (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 revenue (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 expanded 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 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 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.

On January 15, 2022, the Company paid the AdColony Acquisition earn-out consideration of $204,500 with available cash-on-hand and an additional $179,000 of borrowings under the New Credit Agreement. See Note 9, “Debt,” for additional information regarding the New Credit Agreement.

The fair values of the assets acquired and liabilities assumed at the date of the AdColony Acquisition are presented 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 measurement period ended April 29, 2022, 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 AGP 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 costs related to the AdColony Acquisition of $214 for the nine months ended December 31, 2022, and $486 and $3,977, respectively, for the three and nine months ended December 31, 2021, in operating expenses on the condensed consolidated statements of operations and comprehensive income / (loss). There were no such costs for the three months ended December 31, 2022.

Pro Forma Financial Information (Unaudited)

The pro forma information below gives effect to the Fyber Acquisition and the AdColony 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, based on available information and to give effect to the financing for the Acquisitions. The prior period year-to-date pro forma information is presented below. Adjustments for the Acquisitions were not a component in prior period quarter-to-date information and therefore does not differ from amounts presented on the condensed consolidated statements of operations and comprehensive income / (loss).


	Nine months ended December 31,
		2021
		Unaudited
		(in thousands, except per share amounts)
Net revenue		$	585,858
Net loss attributable to controlling interest		$	(17,255)
Basic net loss attributable to controlling interest per common share		$	(0.18)
Diluted net loss attributable to controlling interest per common share		$	(0.18)

4. Segment Information

Operating segments are identified as components of an enterprise for 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 is the CODM.

As of March 31, 2022, the Company operated through three operating segments, each of which was a reportable segment. The three segments were On Device Media (“ODM”), In-App Media - AdColony (“IAM-A”), and In-App Media-Fyber (“IAM-F”). Effective April 1, 2022, the Company made certain changes to its organizational and management structure that resulted in the following: (1) the renaming of the On Device Media segment to On Device Solutions and (2) the integration of IAM-A and IAM-F into a single segment. The integration of IAM-A and IAM-F was completed to drive operating efficiencies and revenue synergies. As a result of the integration of IAM-A and IAM-F, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2022, the Company reports its results of operations through the following two segments, each of which represents an operating and reportable segment, as follows:

•On Device Solutions (“ODS”) - The Company re-named the ODM segment On Device Solutions to better reflect the nature of the segment's product offerings. This segment generates revenue from the delivery of mobile application media or content to end users. This segment provides focused 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 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.

•App Growth Platform (“AGP”) - This segment consists of the previously reported IAM-A and IAM-F segments. AGP customers are primarily advertisers and publishers and the segment provides platforms that allow mobile app publishers and developers to monetize their monthly active users via display, native, and video advertising. The AGP platforms allow demand side platforms, advertisers, agencies, and publishers to buy and sell digital ad impressions, primarily through programmatic, real-time bidding auctions and, in some cases, through direct-bought/sold advertiser budgets. The segment also provides brand and performance advertising products to advertisers and agencies.

The Company’s CODM evaluates segment performance and makes resource allocation decisions primarily based on segment net revenue and segment profit, as shown in the segment information summary table below. The Company’s CODM does not allocate other direct costs of revenue, 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, 2022
	ODS		AGP		Eliminations		Consolidated
Net revenue	$	96,316	$	67,407	$	(1,413)	$	162,310
License fees and revenue share	57,555		17,228		(1,413)		73,370
Segment profit	$	38,761	$	50,179	$	—	$	88,940


	Three months ended December 31, 2021
	ODS		AGP		Eliminations		Consolidated
Net revenue	$	133,594	$	89,113	$	(5,889)	$	216,818
License fees and revenue share	86,504		28,438		(5,889)		109,053
Segment profit	$	47,090	$	60,675	$	—	$	107,765


	Nine months ended December 31, 2022
	ODS		AGP		Eliminations		Consolidated
Net revenue	$	323,419	$	208,029	$	(5,646)	$	525,802
License fees and revenue share	185,791		57,473		(5,646)		237,618
Segment profit	$	137,628	$	150,556	$	—	$	288,184


	Nine months ended December 31, 2021
	ODS		AGP		Eliminations		Consolidated
Net revenue	$	383,426	$	192,764	$	(12,729)	$	563,461
License fees and revenue share	232,122		64,976		(12,729)		284,369
Segment profit	$	151,304	$	127,788	$	—	$	279,092

Geographic Area Information

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


	December 31, 2022		March 31, 2022
United States and Canada	$	27,029	$	25,946
Europe, Middle East, and Africa	11,709		5,086
Asia Pacific and China	21		54
Mexico, Central America, and South America	—		—
Consolidated property and equipment, net	$	38,759	$	31,086

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, 2022
	ODS		AGP		Total
United States and Canada	$	38,949	$	29,911	$	68,860
Europe, Middle East, and Africa	42,321		26,449		68,770
Asia Pacific and China	12,975		10,564		23,539
Mexico, Central America, and South America	2,071		483		2,554
Elimination	—		—		(1,413)
Consolidated net revenue	$	96,316	$	67,407	$	162,310


	Three months ended December 31, 2021
	ODS		AGP		Total
United States and Canada	$	74,431	$	45,238	$	119,669
Europe, Middle East, and Africa	35,667		34,297		69,964
Asia Pacific and China	19,877		8,547		28,424
Mexico, Central America, and South America	3,619		1,031		4,650
Elimination	—		—		(5,889)
Consolidated net revenue	$	133,594	$	89,113	$	216,818


	Nine months ended December 31, 2022
	ODS		AGP		Total
United States and Canada	$	152,890	$	115,957	$	268,847
Europe, Middle East, and Africa	125,463		68,118		193,581
Asia Pacific and China	39,989		22,837		62,826
Mexico, Central America, and South America	5,077		1,117		6,194
Elimination	—		—		(5,646)
Consolidated net revenue	$	323,419	$	208,029	$	525,802


	Nine months ended December 31, 2021
	ODS		AGP		Total
United States and Canada	$	220,662	$	96,110	$	316,772
Europe, Middle East, and Africa	96,318		74,257		170,575
Asia Pacific and China	54,636		20,090		74,726
Mexico, Central America, and South America	11,810		2,307		14,117
Elimination	—		—		(12,729)
Consolidated net revenue	$	383,426	$	192,764	$	563,461

5. Goodwill and Intangible Assets

Goodwill

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


	ODS		AGP		Total





Goodwill as of March 31, 2022	$	80,176	$	479,616	$	559,792
Purchase of In App Video	—		5,008		5,008


Foreign currency translation and other	—		(4,460)		(4,460)
Goodwill as of December 31, 2022	$	80,176	$	480,164	$	560,340

Intangible Assets

The components of intangible assets as of December 31, 2022, and March 31, 2022, were as follows:


	As of December 31, 2022

	Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
Customer relationships	12.11 years	$	170,030	$	(34,935)	$	135,095
Developed technology	5.53 years	146,419		(33,601)		112,818
Trade names	2.58 years	69,922		(22,503)		47,419
Publisher relationships	18.07 years	108,821		(8,972)		99,849
Total		$	495,192	$	(100,011)	$	395,181


	As of March 31, 2022
	Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
Customer relationships	12.01 years	$	171,060	$	(19,636)	$	151,424
Developed technology	6.26 years	144,581		(18,103)		126,478
Trade names	3.33 years	69,205		(8,523)		60,682
Publisher relationships	18.77 years	106,514		(4,509)		102,005
Total		$	491,360	$	(50,771)	$	440,589

The Company recorded amortization expense of $16,120 and $48,422, respectively, during the three and nine months ended December 31, 2022, and $13,773 and $34,873, respectively, during the three and nine months ended December 31, 2021, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss). As of March 31, 2022, the Company changed the useful lives of all its trade names intangible assets to approximately 3.33 years due to the planned rebranding of the Company’s recent acquisitions, which began during the three months ended June 30, 2022.

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


Fiscal year 2023	$	16,090
Fiscal year 2024	64,361
Fiscal year 2025	55,740
Fiscal year 2026	41,491
Fiscal year 2027	35,372
Thereafter	182,127
Total	$	395,181

6. Accounts Receivable


	December 31, 2017			March 31, 2017				December 31, 2022		March 31, 2022
	(Unaudited)
Billed	$	19,236		$	9,367		Billed	$	180,491	$	189,208
Unbilled	14,099			7,784			Unbilled	60,424		82,324
Allowance for doubtful accounts	(841		)	(597		)
Allowance for credit losses							Allowance for credit losses	(9,914)		(8,393)
Accounts receivable, net	$	32,494		$	16,554		Accounts receivable, net	$	231,001	$	263,139

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~~represents revenue recognized but billed after ~~period end.~~period-end. All unbilled receivables as of December 31, ~~2017~~2022 and March 31, ~~2017~~2022, 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~~$683 and ~~$256~~$2,932 of bad debt expense during the three and nine months ended December 31, ~~2017, respectively. The Company recorded $123~~2022, respectively, and ~~$528~~$512 and $693 of bad debt expense during the three and nine months ended December 31, ~~2016, respectively.~~2021, respectively, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss).

5.7. Property and Equipment


	December 31, 2022		March 31, 2022

Computer-related equipment	$	3,469	$	2,855
Developed software	59,045		41,011
Furniture and fixtures	1,947		1,836
Leasehold improvements	3,637		3,687
Property and equipment, gross	68,098		49,389
Accumulated depreciation	(29,339)		(18,303)
Property and equipment, net	$	38,759	$	31,086

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 $4,014 and $11,722 for the three and nine months ended December 31, 2022, respectively, and $2,192 and $6,073 for the three and nine months ended December 31, 2021, respectively. Depreciation expense for the three and nine months ended December 31, ~~2017 was $350~~2022, includes $2,394 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,$7,139, respectively, related to ~~internal use assets~~internal-use software included in ~~General~~general and ~~Administrative Expense~~administrative expense and ~~$89~~$1,620 and ~~$184,~~$4,583, 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,~~2021, includes $1,316 and $3,137, respectively, related to internal-use software included in general and ~~$725~~administrative expense and ~~$2,029~~$1,510 and $2,936, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of ~~total interest expense for the three and nine months ended December 31, 2016, respectively.~~revenue.

8. ~~Fair Value Measurements~~Leases

The ~~inputs to the valuation techniques used to measure fair value are classified~~Company has entered into ~~the following categories:~~

~~Level 1: Quoted market prices in active markets~~various non-cancellable operating lease agreements for ~~identical assets or liabilities.~~

~~Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.~~

~~Level 3: Unobservable inputs that are not corroborated by market data.~~

The Company’s financial liabilities as of the issuance date of the convertible notes on the initial measurement date of September 28, 2016 are presented below at fair value and were classified within the fair value hierarchy as follows:

Level 1 Level 2 Level 3 Balance at Inception
Financial Liabilities
Convertible note embedded derivative liability $ —
$ —
$ 3,693
$ 3,693
Warrant liability —
—
1,223
1,223
Total $ —
$ —
$ 4,916
$ 4,916

The Company’s assessment of the significance 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,~~offices as well as assumed various leases through its recent acquisitions. These leases currently have lease periods expiring between fiscal years 2023 and 2029. The lease agreements may include one or more options to renew. Renewals were not assumed in the ~~down round conversion price adjustment or conversion rate adjustment provisions~~Company’s determination of the ~~convertible notes. There is no current observable market for these types~~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 ~~derivatives~~lease costs, weighted-average lease term, 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 notesdiscount rates 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.~~detailed below.

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

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, offsetSchedule, 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~~maturities 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:~~

lease liabilities as of:


		December 31, 2022

Fiscal year 2023	~~December 31, 2017~~	$	1,052
~~Stock price volatility~~Fiscal year 2024	70	%3,958
~~Probability of change in control~~Fiscal year 2025	~~1.75~~	%2,120
~~Stock price (per share)~~Fiscal year 2026	~~$1.79~~	1,641
~~Expected term~~Fiscal year 2027	~~2.75 years~~	1,319
~~Risk-free rate (1)~~Thereafter	~~1.94~~	%1,519
~~Assumed early conversion/exercise price (per share)~~Total undiscounted cash flows		11,609
(Less imputed interest)		(841)
Present value of lease liabilities		$~~2.73~~	10,768

^{(1) 18}

The ~~Monte Carlo simulation assumes~~current portion of the ~~continuously compounded equivalent (CCE)~~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 $10,973 as of December 31, 2022, 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 3.99 years.

9. Debt

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


	December 31, 2022
	Balance		Interest Rate		Unused Line Fee
BoA Revolver (subject to variable rate)	$	425,134	6.12	%	0.20	%

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


	December 31, 2022		March 31, 2022

Revolver	$	425,134	$	524,134
Less: Debt issuance costs	(2,824)		(3,349)
Debt assumed through Fyber Acquisition	—		12,500
Total debt, net	422,310		533,285
Less: Current portion of debt	—		(12,500)
Long-term debt, net of debt issuance costs	$	422,310	$	520,785

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.

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 $600,000, including the accordion feature mentioned above. The First Amendment made no other changes to the terms or interest rates of the New Credit Agreement.

On October 26, 2022, the Company amended the New Credit Agreement (the “Second Amendment”) to replace LIBOR with the Term Secured Overnight Financing Rate (“SOFR”). As a result, borrowings under the New Credit Agreement where the applicable rate was LIBOR will accrue interest at an annual rate equal to SOFR plus between 1.50% and 2.25% beginning on October 26, 2022. The Second Amendment made no other changes in the terms of ^1.0%^{the New Credit Agreement. As of December 31, 2022, of the total amount outstanding, $239,000 remains subject to LIBOR-based interest rates.}

The Company incurred debt issuance costs of $4,064 for the New Credit Agreement, inclusive of costs incurred for the First Amendment. The Company had $425,134 drawn against the New Credit Agreement, classified as long-term debt on the condensed consolidated balance sheet, with remaining unamortized debt issuance costs of $2,824 as of December 31, 2022. 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.

As of December 31, 2022, amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to, at the Company’s election, (i) SOFR plus between 1.50% and 2.25%, based on the ~~average~~Company’s consolidated leverage ratio, or (ii) a base rate based upon the highest of (a) the ~~3-year~~federal funds rate plus 0.50%, (b) BoA’s prime rate, or (c) SOFR plus 1.00% plus between 0.50% and ~~5-year U.S. Treasury securities as of the valuation date.~~

~~Changes in valuation assumptions can have a significant impact~~1.25%, based on the ~~valuation~~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 ~~convertible note embedded derivative liability. For example, all other things being equal, a decrease/increase in our stock price, probability~~Company’s consolidated leverage ratio. As of ~~change~~December 31, 2022, the interest rate was 6.12% and the unused line 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~~credit fee was 0.20%.

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 ~~issued detachable warrants~~acquires any real property assets with ~~the convertible notes issued on September 28, 2016. The Company accounts for its warrants issued~~a fair market value in ~~accordance with US GAAP accounting guidance under ASC 815 applicable~~excess of $5,000, it is required to ~~derivative instruments, which requires every derivative instrument within its scope~~grant a security interest in such real property as well. All such security interests are required to be ~~recorded~~first priority security interests, subject to certain permitted liens.

As of December 31, 2022, the Company had $174,866 available to draw on the ~~balance sheet as either an asset or liability measured at its fair value,~~revolving line of credit under the New Credit Agreement and was in compliance 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.all covenants. 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~~Company’s outstanding debt approximates its carrying value.

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 ~~change in price of the underlying common stock of the Company and is reflected in our~~condensed consolidated statements of operations and comprehensive income / (loss), as ~~“Change in fair value of warrant liability.”~~follows:

~~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):~~


	Three months ended December 31,				Nine months ended December 31,
	2022		2021		2022		2021
Interest income / (expense), net	$	(6,671)	$	(1,940)	$	(15,538)	$	(4,565)
Amortization of debt issuance costs	(211)		(190)		(619)		(500)
Unused line of credit fees and other	(31)		(65)		(67)		(242)
Total interest income / (expense), net	$	(6,913)	$	(2,195)	$	(16,224)	$	(5,307)

10. Stock-Based Compensation

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~~

^{(1) The Monte Carlo simulation assumes the continuously compounded equivalent (CCE) interest rate of}^1.0%^{based on the average of the 3-year and 5-year U.S. Treasury securities as of the valuation date.}

Changes in valuation assumptions can have a significant impact on the valuation of the warrant liability. For example, all other things being equal, a decrease/increase in our stock price, probability of change of control, or stock price volatility decreases/increases the valuation of the liabilities, whereas a decrease/increase in risk-free interest rates increases/decreases the valuation of the liabilities.

~~9. Description of Stock~~Stock-Based Award Plans

~~Employee Stock~~On September 15, 2020, the Company’s stockholders approved the 2020 Equity Incentive Plan

~~The Company is currently issuing stock awards under the Amended and Restated~~ of Digital Turbine, Inc. ~~2011 Equity Incentive Plan~~ (the ~~“2011~~“2020 Plan”), which was approved and adopted by our stockholders by written consent on May 23, 2012. No future grants will be made under the previous plan, the 2007 Employee, Director and Consultant Stock Plan (the “2007 Plan”). The 2011 Plan and 2007 Plan are collectively referredpursuant to ~~as "Digital Turbine's Incentive Plans." In the year ended March 31, 2015, in connection with the acquisition of Appia,~~which the Company ~~assumed the Appia, Inc. 2008 Stock Incentive Plan (the “Appia Plan”). Digital Turbine’s Incentive Plans and the Appia Plan are all collectively referred to as the “Stock Plans.”~~

~~The 2011 Plan provides for grants of stock-based~~may grant equity incentive awards to ~~our~~directors, employees and ~~our subsidiaries’ officers, employees, non-employee directors, and consultants. Awards issued~~other eligible participants. A total of 12,000,000 shares of common stock were reserved for grant under the ~~2011~~2020 Plan. The types of awards that may be granted under the 2020 Plan ~~can~~ include incentive and non-qualified stock options, stock appreciation rights, ~~(“SARs”),~~ restricted stock, and restricted stock ~~units (sometimes referred to individually or collectively as “Awards”).~~units. The 2020 Plan became effective on September 15, 2020, and has a term of ten years. Stock options may be either ~~“incentive~~incentive stock ~~options” (“ISOs”),~~options, 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~~options. 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~~2022, 8,857,557 shares of common stock were available for issuance as future awards under the Company’s 2020 Plan.

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, 2022	7,123,300	$	9.33	6.11	$	262,419
Granted	1,323,986	29.98
Exercised	(895,450)	2.19
Forfeited / Expired	(322,512)	47.21
Options outstanding as of December 31, 2022	7,229,324	$	12.50	6.20	$	64,889

Exercisable as of December 31, 2022	5,659,738	$	7.34	5.44	$	62,310

At December 31, 2022, total unrecognized stock-based compensation expense related to unvested stock options, net of ~~1,338,778, 972,299, and 265,138, respectively.~~estimated forfeitures, was $26,721, with an expected remaining weighted-average recognition period of 2.16 years.

Restricted Stock ~~Option Agreements~~

~~Stock options granted under Digital Turbine's Stock Plans typically vest over a three-to-four year period. These options, which~~Awards of restricted stock units (“RSUs”) may be either grants of time-based restricted units or performance-based restricted units that are ~~granted with option exercise prices equal~~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 ~~grant, generally expire up~~the grant. No capital transaction occurs until the units vest, at which time they are converted 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.restricted or unrestricted stock. Compensation expense for ~~all stock options~~RSUs with a time condition is recognized on a straight-line basis over the requisite service period.

~~Stock Option Activity~~

~~The following table summarizes stock option activity~~ Compensation expense 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 priceRSUs with a performance condition are recognized 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 changesa straight-line basis 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 volatilitylikely attainment scenario, which 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 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~~re-evaluated each period.

From ~~time to time,~~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,~~one year, depending on the terms of the RSA. As reported in ~~our~~the Company’s Current Reports on ~~Form~~Forms 8-K filed with the SEC on February ~~12,~~19, 2014, and June 25, 2014, the Company adopted a Board Member Equity Ownership and Retention 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.

The following table summarizes RSU and RSA activity:


	Number of Shares	Weighted-Average Grant Date Fair Value




Unvested restricted shares outstanding as of March 31, 2022	373,301	$	35.82
Granted	1,604,925	23.08
Vested	(214,789)	27.51
Forfeited	(41,463)	40.73
Unvested restricted shares outstanding as of December 31, 2022	1,721,974	$	24.87

~~Service~~At December 31, 2022, total unrecognized stock-based compensation expense related to RSUs and ~~Time Condition~~ RSAs was $34,390, with an expected remaining weighted-average recognition period of 2.32 years.

~~Awards of restricted stock are grants of restricted stock that are issued at no cost to~~

Stock-Based Compensation Expense

Stock-based compensation expense for the ~~recipient. The cost of these awards is determined using the fair market value of the Company’s common stock~~three and nine months ended December 31, 2022, was $7,620 and $19,643, respectively, and was recorded within general and administrative expenses on the ~~date~~condensed consolidated statements of ~~the grant. Compensation~~operations and comprehensive income / (loss). Stock-based 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,~~2021, was $5,739 and ~~$92~~$15,369, respectively, and ~~$258 during three~~was recorded within general and ~~nine months ended December 31, 2016, respectively.~~

~~The following is a summary~~administrative expenses on the condensed consolidated statements of ~~restricted stock awards~~operations and ~~activities for all vesting conditions for the nine months ended December 31, 2017:~~comprehensive income / (loss).

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~~Earnings 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~~period.

Stock options totaling 1,477,381 and 1,462,517 for the three and nine months ended December 31, ~~2017~~2022, respectively, and ~~2016, all potentially dilutive shares of common stock~~296,254 and 448,121 for the three and nine months ended December 31, 2021, respectively, were ~~determined to be anti-dilutive, and accordingly, were~~outstanding but not included in the calculation of diluted ~~net loss~~earnings per ~~share.~~share because inclusion of the options in the calculation would be antidilutive due to their exercise prices exceeding the average market price of the common shares during the periods.

The following table sets forth the computation of basic and diluted net ~~loss~~income / (loss) per share of common stock (in thousands, except per share amounts):


	Three months ended December 31,				Nine months ended December 31,
	2022		2021		2022		2021
Net income	4,062		7,062		30,723		15,428
Less: net income / (loss) attributable to non-controlling interest	43		48		118		(18)
Net income attributable to Digital Turbine, Inc.	$	4,019	$	7,014	$	30,605	$	15,446
Weighted-average common shares outstanding, basic	99,108		96,548		98,623		94,620
Basic net income per common share attributable to Digital Turbine, Inc.	$	0.04	$	0.07	$	0.31	$	0.16
Weighted-average common shares outstanding, diluted	103,348		103,287		103,674		101,346
Diluted net income per common share attributable to Digital Turbine, Inc.	$	0.04	$	0.07	$	0.30	$	0.15

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~~the Company’s forecasted effective tax rate.

During the three and nine months ended December 31, ~~2017,~~2022, a tax benefit and provision of ~~$84~~$1,153 and ~~$937,~~$8,164, respectively, resulted in an effective tax rate of ~~2.2%~~(39.6)% and ~~6.1%~~21.0%, respectively. Differences inbetween the effective tax ~~provision~~rate and

the statutory tax rate ~~are~~ primarily ~~due~~relate to ~~changes in the valuation allowance. The tax benefit reported~~return to provision true-ups filed in the current ~~year is largely due to the true up of an estimate resulting from the finalization of a transfer pricing study.~~period.

During the three and nine months ended December 31, ~~2016,~~2021, a tax ~~expense~~provision of ~~$300~~$3,718 and ~~$159, respectively,~~$4,799 resulted in an effective tax rate of ~~(13.1)%~~34.5% and ~~(0.9)%~~23.7%, respectively. Differences inbetween 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~~effective tax rate and the ~~related remeasurement of U.S. federal deferred~~statutory tax ~~assets and liabilities had no impact on the Company’s third quarter~~rate primarily relate to state 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~~taxes, nontaxable adjustments to the ~~U.S.~~AdColony and ~~pay a repatriation~~Fyber earn-outs, and tax deductions for stock compensation that exceed 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.book expense.

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

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. The Company’s minimum purchase commitments under these hosting agreements total approximately $181,603 over the next 4.00 years.

Legal Matters

The Company may be involved in various claims, suits, assessments, investigations, and legal proceedings that arise from time to time in the ordinary course of its business, including any that are identified below, and, unlrss otherwise stated below, we do not believe that these proceedings and claims would reasonably be expected to have a material adverse effect on our financial position, results of operations or cash flows.business. The Company accrues a liability when it is both probable ~~that~~ a liability has been incurred and the amount of the loss can be reasonably estimated. The Company reviews these accruals at least quarterly and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and the ~~Company's~~Company’s views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in the ~~Company's~~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

On June 6, 2022 and July 21, 2022, shareholders of the ~~amount~~Company filed class action complaints against the Company and certain of ~~loss~~the Company’s officers in the Western District of Texas related to Digital Turbine, Inc.’s announcement in May 2022 that it would restate some of its financial results. The claims allege violations of certain federal securities laws. In addition, in September and October of 2022, shareholders of the Company filed derivative complaints against the Company and the Company’s directors in the Western District of Texas, Delaware state courts, and Texas state courts alleging breaches of fiduciary duties relating to the allegations made in the class action complaints. The federal derivative cases are consolidated, and the Texas derivative case has been dismissed and re-filed in Delaware federal court and the Delaware derivative cases are now consolidated, and all such derivative cases are stayed under a court order, pending a ruling on any motion to dismiss the federal class action that is later filed. The Company and individual defendants deny any allegations of wrongdoing and the Company plans to vigorously defend against the claims asserted in these complaints. Due to the early stages of these cases, management is unable to assess a likely outcome 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~~potential liability 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 consolidated amounts.~~

~~The following consolidated financial information includes:~~

(1) Consolidated balance sheets as of December 31, 2017 and March 31, 2017; consolidated statements of operations for the three and nine months ended December 31, 2017 and 2016; and consolidated statements of cash flows for the nine months ended December 31, 2017 and 2016 of (a) Digital Turbine, Inc. as the parent, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries, and (d) Digital Turbine, Inc. on a consolidated basis; and

~~(2) Elimination entries necessary to consolidate Digital Turbine, Inc., as the parent, with its guarantor and non-guarantor subsidiaries.~~

Digital Turbine, Inc. owns 100% of all of the guarantor subsidiaries, and as a result, in accordance with Rule 3-10(d) of Regulation S-X promulgated by the SEC, no separate financial statements are required for these subsidiaries as of and for the three and nine months ended December 31, 2017 or 2016.

~~Consolidated Balance Sheet~~

~~as of December 31, 2017 (Unaudited)~~

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

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

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

~~Consolidated Balance Sheet~~

~~as of March 31, 2017 (Unaudited)~~

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

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

~~Consolidated Statement of Operations and Comprehensive Loss~~

~~for the three months ended December 31, 2017 (Unaudited)~~

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

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

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

~~Consolidated Statement of Operations and Comprehensive Loss~~

~~for the nine months ended December 31, 2017 (Unaudited)~~

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

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

~~Consolidated Statement of Operations and Comprehensive Loss~~

~~for the three months ended December 31, 2016 (Unaudited)~~

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

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

~~Consolidated Statement of Operations and Comprehensive Loss~~

~~for the nine months ended December 31, 2016 (Unaudited)~~

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

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

~~Consolidated Statement of Cash Flows~~

~~for the nine months ended December 31, 2017 (Unaudited)~~

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

Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidated Total
Cash flows from operating activities
Net loss $ (19,620 ) $ 5,890
$ (702 ) $ (14,432 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization —
2,093
614
2,707
Change in allowance for doubtful accounts —
252
(8 ) 244
Amortization of debt discount and debt issuance costs 875
—
—
875
Accrued interest 165
—
—
165
Stock-based compensation 2,296
—
—
2,296
Stock-based compensation for services rendered
224
—
—
224
Change in fair value of convertible note embedded derivative liability 6,310
—
—
6,310
Change in fair value of warrant liability 2,526
—
—
2,526
Loss on extinguishment of debt 1,166
—
—
1,166
(Increase) / decrease in assets:
Accounts receivable —
(16,370 ) 186
(16,184 )
Deposits (34 ) 4
(4 ) (34 )
Deferred tax assets (241 ) —
—
(241 )
Prepaid expenses and other current assets (54 ) 24
(11 ) (41 )
Increase / (decrease) in liabilities:
Accounts payable (232 ) 8,611
157
8,536
Accrued license fees and revenue share —
4,055
273
4,328
Accrued compensation 2,024
353
6
2,383
Other current liabilities 3,666
(2,831 ) (450 ) 385
Other non-current liabilities (692 ) (39 ) —
(731 )
Intercompany movement of cash (16 ) 18
(2 ) —
Net cash provided by (used in) operating activities (1,637 ) 2,060
59
482

Cash flows from investing activities
Capital expenditures (13 ) (1,294 ) (5 ) (1,312 )
Net cash used in investing activities (13 ) (1,294 ) (5 ) (1,312 )

Cash flows from financing activities
Proceeds from short-term borrowings 2,500
—
—
2,500
Payment of debt issuance costs (346 ) —
—
(346 )
Options exercised 261
—
—
261
Stock issued for cash in stock offering, net (847 ) —
—
(847 )
Net cash provided by financing activities 1,568
—
—
1,568

Effect of exchange rate changes on cash —
(5 ) 1
(4 )

Net change in cash (82 ) 761
55
734

Cash, beginning of period 258
5,333
558
6,149

Cash, end of period $ 176
$ 6,094
$ 613
$ 6,883

~~Consolidated Statement of Cash Flows~~

~~for the nine months ended December 31, 2016 (Unaudited)~~

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

Parent Guarantor Subsidiaries Non-Guarantor Subsidiaries Consolidated Total
Cash flows from operating activities
Net loss $ (7,605 ) $ (9,795 ) $ 61
$ (17,339 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 9
5,518
798
6,325
Change in allowance for doubtful accounts —
130
—
130
Amortization of debt discount and debt issuance costs 287
682
—
969
Accrued interest 388
(91 ) —
297
Stock-based compensation 3,335
—
—
3,335
Stock-based compensation for services rendered
276
—
—
276
Change in fair value of convertible note embedded derivative liability (2,423 ) —
—
(2,423 )
Change in fair value of warrant liability (797 ) —
—
(797 )
Loss on extinguishment of debt 293
—
—
293
(Increase) / decrease in assets:
Restricted cash transferred from operating cash —
(323 ) —
(323 )
Accounts receivable 19
(976 ) (920 ) (1,877 )
Deposits —
(34 ) 117
83
Deferred tax assets 212
—
—
212
Prepaid expenses and other current assets (86 ) 104
12
30
Increase / (decrease) in liabilities:
Accounts payable 340
4,003
166
4,509
Accrued license fees and revenue share —
(830 ) 118
(712 )
Accrued compensation 576
(720 ) (97 ) (241 )
Other current liabilities (34 ) (862 ) 78
(818 )
Other non-current liabilities 1,927
(1,370 ) (274 ) 283
Net cash provided by (used in) operating activities (3,283 ) (4,564 ) 59
(7,788 )

Cash flows from investing activities
Capital expenditures (3 ) (1,358 ) (20 ) (1,381 )
Net cash proceeds from cost method investment in Sift —
999
—
999
Net cash used in investing activities (3 ) (359 ) (20 ) (382 )

Cash flows from financing activities
Cash received from issuance of convertible notes —
16,000
—
16,000
Proceeds from short-term borrowings —
(11,000 ) —
(11,000 )
Payment of debt issuance costs (1,912 ) (407 ) —
(2,319 )
Options exercised 11
—
—
11
Net cash provided by financing activities (1,901 ) 4,593
—
2,692

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

Net change in cash (5,235 ) (330 ) 39
(5,526 )

Cash, beginning of period 6,712
4,466
53
11,231

Cash, end of period $ 1,477
$ 4,136
$ 92
$ 5,705

~~16. Subsequent Events~~

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


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with, and is qualified in its entirety by, the ~~Financial Statements~~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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements involve substantial risks and uncertainties. When used in this Report, the words “anticipate,” “believe,” “estimate,” “expect,” “will,” “seeks,” “should,” “could,” “would,” ~~“may”~~“may,” and similar expressions, as they relate to our management or us, are intended to identify such forward-looking statements. Our actual results, performance, or achievements could differ materially from those expressed in or implied by these forward-looking statements as a result of a variety of factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017~~2022, 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, through its subsidiaries, operates at~~We are a leading, independent mobile growth platform that levels up the ~~convergence of media~~landscape for advertisers, publishers, carriers, and ~~mobile communications, delivering~~device original equipment manufacturers (“OEMs”). We offer end-to-end products and solutions leveraging proprietary technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. In addition, our products and solutions provide monetization opportunities for OEMs, carriers, and application (“app” or “apps”) publishers and developers.

Recent Developments

Credit Agreement

On October 26, 2022, we amended the New Credit Agreement (the “Second Amendment”) to replace the London Interbank Offered Rate (“LIBOR”) with the Term Secured Overnight Financing Rate (“SOFR”). As a result, amounts outstanding under the New Credit Agreement where the applicable rate was LIBOR will accrue interest at an annual rate equal to SOFR plus between 1.50% and 2.25%. The Second Amendment made no other changes in the terms of the New Credit Agreement. As of December 31, 2022, of the total amount outstanding, $239,000 remains subject to LIBOR based interest rates.

As of December 31, 2022, we had $425,134 drawn against the revolving line of credit under the New Credit Agreement. The proceeds from the borrowings were used to finance the purchases of various acquisitions. As of December 31, 2022, the interest rate was 6.12% and the unused line of credit fee was 0.20%, and we were in compliance with the consolidated leverage ratio, interest coverage ratio, and other covenants under the New Credit Agreement.

Segment Reporting

As of March 31, 2022, we operated through three segments, each of which was a reportable segment. The three segments were On Device Media (“ODM”), In-App Media - AdColony (“IAM-A”), and In-App Media-Fyber (“IAM-F”). Effective April 1, 2022, we made certain changes to our organizational and management structure that resulted in the following: (1) the renaming of the On Device Media segment to On Device Solutions and (2) the integration of IAM-A and IAM-F into a single segment. The integration of IAM-A and IAM-F was completed to drive operating efficiencies and revenue synergies. As a result of the integration of IAM-A and IAM-F, we reassessed our operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2022, we report our results of operations through the following two segments, each of which represents an operating and reportable segment, as follows:

•On Device Solutions (“ODS”) - We re-named the ODM segment On Device Solutions to better reflect the nature of the segment’s product offerings. This segment generates revenue from the delivery of mobile ~~operators,~~ application ~~advertisers,~~media or content to end users. This segment provides focused 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 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.

Operating segments are identified as components of an enterprise for 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. We have determined that our Chief Executive Officer is the CODM.

Impact of Economic Conditions, Geopolitical Developments, and COVID-19

Our results of operations are affected by macroeconomic conditions and geopolitical developments, including but not limited to levels of business and consumer confidence, actions taken by governments to counter inflation, Russia’s invasion of Ukraine, and the COVID-19 pandemic.

Inflation, rising interest rates, supply chain disruptions, and reduced business and consumer confidence have caused and may continue to cause a global slowdown of economic activity, which has caused and may continue to cause a decrease in demand for a broad variety of goods and services, including those provided by our clients.

Like other ~~third parties~~advertising technology companies, we have seen a slowdown in digital advertising spending, which we believe is driven by the impact of inflation and recession fears and their potential impacts on consumers. These negative macroeconomic trends have resulted, and may continue to ~~enable them~~result in, a decrease or delay of advertising budgets and spending. While the slowdown in digital advertising spending is varied and depends on the geography, advertising type, operating system, and business vertical, the current economic environment is likely to ~~effectively monetize mobile content~~continue to impact our business, financial condition, and ~~generate higher value user acquisition. The Company operates its business in two reportable segments – Advertising and Content.~~results of operations, the full impact of which remains uncertain at this time.

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

~~O&O, an advertiser solution for unique and exclusive carrier 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~~extent of the ~~Syndicated network.~~

~~The Company's Content business~~impact of these macroeconomic factors on our operational and financial performance is ~~comprised of services including:~~

~~Marketplace, an application and content store, and~~

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

~~Advertising~~

~~O&O Business~~

The Company's O&O business is an advertiser solution for unique and exclusive carrier and OEM inventory, which is comprised of Ignite and other professional services directly related to 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. Ignite allows mobile operators to personalize the app activation experience for customers and monetizealso dependent on 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. There are several different delivery methods available to operators and OEMsimpact 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 operatorscarriers 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, as well as the impact on application developers and in-app advertisers. If negative macroeconomic factors or geopolitical developments continue to materially impact our partners over ~~one billion application preloads.~~a prolonged period, our results of operations and financial condition could also be adversely impacted, the size and duration of which we cannot accurately predict at this time.

~~A&P Business~~We continue to actively monitor these factors and we may take further actions that alter our business operations, as required, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders. In addition to monitoring the developments described above, the Company also considers the impact such factors may have on our accounting estimates and potential impairments of our non-current assets, which primarily consist of goodwill and finite-lived intangible assets.

The ~~Company's A&P business, formerly Appia Core,~~process of evaluating the potential impairment of goodwill 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 publisherssubjective and requires significant judgment, including ~~direct developer relationships, mobile websites, mobile carriers,~~qualitative and mediated relationships. The A&P business also accesses mobile ad inventory by purchasing inventory through exchanges using RTB. The advertising revenue generated by A&P platform is shared with publishers according to contractual rates in the case of direct or mediated relationships. When inventory is accessed using RTB, A&P buys inventory at a rate determined by the marketplace.

~~Content~~

Pay is an Application Programming Interface ("API") that integrates billing infrastructure between mobile operators and content publishers to facilitate mobile commerce. Increasingly, mobile content publishers want to go directly to consumers to sell their content rather than sell through traditional distributorsquantitative factors such as ~~Google Play~~the identification of reporting units, identification and allocation of assets and liabilities to reporting units, and determinations of fair value. In estimating the fair value of our reporting units when performing our annual impairment test, or when an indicator of impairment is present, we make estimates and significant judgments about the ~~Apple Application Store, which~~future cash flows of those reporting units and other estimates including appropriate discount rates. Discount rates can fluctuate based on various economic conditions including our capital allocation and interest rates, including the interest rates on U.S. treasury bonds. Changes in judgments on these assumptions and estimates could result in goodwill impairment charges.

Finite-lived intangible assets and property, plant, and equipment are ~~not as prominent in select countries. Pay allows publishers~~amortized or depreciated over their estimated useful lives on a straight-line basis. We monitor conditions related to these assets to determine whether events and ~~carriers to monetize those applications by allowing the content to be billed directly~~circumstances warrant a revision to the ~~consumer via carrier billing. Pay has been launched~~remaining amortization or depreciation period or an impairment. We test these assets for potential impairment whenever we conclude events or changes in ~~Australia, Philippines, India,~~circumstances indicate carrying amounts may not be recoverable.

As of December 31, 2022, we considered the developments discussed above, our current operating results, and ~~Singapore.~~our estimates of future operating results. We concluded there were no triggering events that indicated it was more likely than not that the fair values of our reporting units were less than their respective carrying values or that our finite-lived intangible assets were impaired. We will continue to closely monitor macroeconomic conditions and their impacts on our business, financial condition, and results of operations.

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 revenue

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,
	2022		2021		% of Change		2022		2021		% of Change
Net revenue
On Device Solutions	$	96,316	$	133,594	(27.9)	%	$	323,419	$	383,426	(15.7)	%
App Growth Platform	67,407		89,113		(24.4)	%	208,029		192,764		7.9	%
Elimination	(1,413)		(5,889)		(76.0)	%	(5,646)		(12,729)		(55.6)	%
Total net revenue	$	162,310	$	216,818	(25.1)	%	$	525,802	$	563,461	(6.7)	%

Comparison of the three and nine months ended December 31, ~~2017~~2022 and ~~2016~~2021

~~Revenues~~Over the three-month comparative periods, net revenue decreased by $54,508 or 25.1%, and over the nine-month comparative periods, net revenue decreased by $37,659 or 6.7%. See the segment discussion below for further details regarding net revenue.

On Device Solutions

ODS revenue for the three months ended December 31, 2022, decreased by $37,278 or 27.9% compared to the three months ended December 31, 2021. Revenue from content media declined by approximately $23,840 million, primarily due to the ending of a carrier partnership that resulted in lower daily active users (“DAU”) on prepaid devices. In addition, weak demand, due in part to lower new device volume in the United States and overall advertising spending reductions, resulted in a decline in application media revenue of approximately $13,466.

ODS revenue for the nine months ended December 31, 2022, decreased by $60,007 or 15.7% compared to the nine months ended December 31, 2021. Revenue from content media declined by approximately $57,140 for the same reason as noted above for the three months ended December 31, 2022. In addition, application media revenue declined by approximately $2,866 for the nine months ended December 31, 2022. This decrease was primarily due to the same reason as noted for the three months ended December 31, 2022, partially offset by revenue of $13,700 for two contract amendments during the nine months ended December 31, 2022.

App Growth Platform

AGP revenue for the three months ended December 31, 2022, decreased by $21,706 or 24.4% compared to the three months ended December 31, 2021. The decrease was primarily due to weak demand during the three months ended December 31, 2022, as compared to the prior year comparative period. The fiscal third quarter historically sees an uptick in advertising spending due to the holiday shopping season, which did not occur in the current fiscal year. In addition, we experienced a decline in performance advertising, largely due to broader weakness in the advertising markets.

AGP revenue for the nine months ended December 31, 2022, increased by $15,265 or 7.9% compared to the nine months ended December 31, 2021. The increase was primarily due to the impact of a full nine months of operations resulting from the AdColony Acquisition and Fyber Acquisition. See Note 3, “Acquisitions,” for further information.

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 %

~~During~~Costs of revenue and operating expenses


	Three months ended December 31,						Nine months ended December 31,
	2022		2021		% of Change		2022		2021		% of Change
Costs of revenue and operating expenses
License fees and revenue share	$	73,370	$	109,053	(32.7)	%	$	237,618	$	284,369	(16.4)	%
Other direct costs of revenue	9,324		9,090		2.6	%	27,438		21,385		28.3	%
Product development	14,218		13,755		3.4	%	43,087		40,594		6.1	%
Sales and marketing	16,469		15,857		3.9	%	48,017		47,072		2.0	%
General and administrative	39,132		39,924		(2.0)	%	114,328		105,225		8.7	%
Total costs of revenue and operating expenses	$	152,513	$	187,679	(18.7)	%	$	470,488	$	498,645	(5.6)	%

Comparison of the three and nine months ended December 31, ~~2017 there was an approximately $15,746~~2022 and ~~$22,886~~2021

Over the three and nine months ended December 31, 2022, total costs of revenue and operating expenses decreased by $35,166 or ~~70.7%~~18.7% and ~~33.1% increase, in overall revenue, as~~$28,157 or 5.6%, respectively, compared to the three and nine months ended December 31, ~~2016, respectively. This~~2021. The decrease in total costs of revenue and operating expenses over the three and nine month comparative periods is primarily due to ~~growth in Advertising~~lower license fees and revenue ~~driven by increased O&O~~share, which is the result of lower revenue ~~from Advertising partners across existing~~over the same comparative periods. Costs of revenue and operating expenses included transaction costs of $1,297 and $3,880, respectively, for the three and nine months ended December 31, 2022, compared to $6,167 and $23,671, respectively, for the three and nine months ended December 31, 2021.

License fees and revenue share

License fees and revenue share are reflective of amounts paid to our carrier ~~distribution~~and OEM partners, as well as ~~expansion with multiple new carrier distribution partners,~~app publishers and developers, and are recorded as a cost of revenue.

License fees and revenue share decreased by $35,683 or 32.7% to $73,370 for the three months ended December 31, 2022, and was 45.2% as a percentage of total net revenue compared to $109,053, or 50.3% of total net revenue, for the three months ended December 31, 2021.

License fees and revenue share decreased by $46,751 or 16.4% to $237,618 for the nine months ended December 31, 2022, and was 45.2% as a percentage of total net revenue compared to $284,369, or 50.5% of total net revenue, for the nine months ended December 31, 2021.

The decrease in license fees and revenue share as a percentage of total net revenue for the three months ended December 31, 2022, compared to the prior year comparative period, was primarily due to revenue mix changes. The decrease in license fees and revenue share as a percentage of total net revenue for the nine months ended December 31, 2022, compared to the prior year comparative period, was primarily due to revenue mix changes partially offset by the two contract amendments discussed above.

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 was relatively unchanged, increasing $234 or 2.6% to $9,324 for the three months ended December 31, 2022, and was 5.7% as a ~~decline in traditional A&P revenue. A&P~~percentage of total net revenue ~~declined~~compared to $9,090, or 4.2% of total net revenue, for the three months ended December 31, 2021. The increase as a percentage of total net revenue was due to the decrease in ~~demand from advertising partners~~total net revenue for the three months ended December 31, 2022.

Other direct costs of revenue increased by $6,053 or 28.3% to $27,438 for the nine months ended December 31, 2022, and was 5.2% as a ~~decline in publisher distribution partners, reflecting a trend we expect~~percentage of total net revenue compared to ~~continue as~~$21,385, or 3.8% of total net revenue, for the ~~market shifts away from non-automated syndicated networks such as our current A&P business towards more programmatic advertising.~~nine months ended December 31, 2021. The increase in ~~the Content business was driven primarily by growth in Pay from overall increased demand~~other direct costs of revenue for the nine months ended December 31, 2022, compared to the prior year comparative period, was due to higher hosting costs of approximately $4,406 and higher depreciation expense for developed technology assets of approximately $1,647 due in part to the impact of a full nine months of operations resulting from the AdColony Acquisition and Fyber Acquisition. Please see Note 3, “Acquisitions,” for further information. The increase as a percentage of total net revenue compared to the prior year comparative period was due to both higher costs as well as the decrease in total net revenue for the nine months ended December 31, 2022.

Product development

Product development expenses include the development and maintenance of the Company’s product ~~with customers~~suite. Expenses in ~~Australia,~~this area are primarily a function of personnel.

Product development expenses increased by $463 or 3.4% to $14,218 for the three months ended December 31, 2022, compared to $13,755 for the three months ended December 31, 2021. Product development expenses included acquisition-related costs of $542 and severance costs of $323 for the ~~continued increase~~three months ended December 31, 2022. Product development expenses included acquisition-related costs of ~~Pay revenue from other Asia-Pacific markets.~~$454 for the three months ended December 31, 2021. Excluding acquisition-related costs and severance costs, product development expenses were relatively unchanged for the three months ended December 31, 2022. Lower employee-related costs, primarily due to reduced incentive compensation, was mostly offset by third-party development costs to support increased development activities.

Product development expenses increased by $2,493 or 6.1% to $43,087 for the nine months ended December 31, 2022, compared to $40,594 for the nine months ended December 31, 2021. Product development expenses included acquisition-related costs of $1,627 and severance costs of $323 for the nine months ended December 31, 2022. Product development expenses included acquisition-related costs of $2,364 for the nine months ended December 31, 2021. Excluding acquisition-related and severance costs, product development expenses increased by $2,930 for the nine months ended December 31, 2022. The increase in ~~the Pay business~~product development expenses, after excluding acquisition-related costs and severance costs, was primarily due to higher third-party development costs to support increased development activities of $6,628, partially offset by lower employee-related costs of approximately $3,698, primarily due to the capitalization of employee-related costs for development activities and lower incentive compensation. The increases were due in part to the impact of a ~~continued decline in Marketplace. For more details on~~full nine months of operations resulting from the ~~Company's services included in the Advertising~~AdColony Acquisition and ~~Content segments,~~Fyber Acquisition. Please see ~~PART I Item 2 – Management’s Discussion~~Note 3, “Acquisitions,” for further information.

Product development expenses, excluding acquisition-related costs and ~~Analysis~~severance costs, increased to 8.2% and 7.8% 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 net revenue for the three and nine months ended December 31, ~~2017. A reduction or delay in the collective operating activity from these customers, or a delay or default in payment by these customers could potentially harm the Company’s business~~2022, respectively, compared to 6.1% 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~~6.8% of ~~Operations.~~

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%~~ for the three and nine months ended December 31, 2017, respectively, versus approximately $3,368 and $9,456 or 15.1% and 13.7% for the three and nine months ended December 31, 2016, respectively. Overall gross margin increased as growth in higher gross margin Advertising revenue was coupled with lower amortization of intangibles.

Advertising gross margin, inclusive of the impact of other direct cost of revenues (including amortization of intangibles), was approximately $8,120 and $20,149 or 33.6% and 33.3% for the three and nine months ended December 31, 2017, respectively, versus approximately $2,890 and $7,008 or 17.8% and 15.8% for the three and nine months ended December 31, 2016,2021, respectively. The increase in ~~Advertising gross margin dollars and~~product development expenses as a 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~~total net revenue was 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~~higher costs and ~~Analysis of Financial Condition~~lower revenues.

Sales 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 the comparative periods was primarily a function of recently hired incremental personnel offset by efficiencies in data hosting realized by the Company leading to cost savings.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 $612 or 3.9% to $16,469 for the three ~~and nine~~ months ended December 31, ~~2017,~~2022, and ~~2016 were approximately $2,042 and $5,288; and $1,683 and $4,655, respectively, an increase~~was 10.1% as a percentage of ~~approximately $359 and$633~~total net revenue compared to $15,857, or ~~21.3% and 13.6%, respectively, over~~7.3% of total net revenue, for the ~~comparative periods.~~three months ended December 31, 2021. The increase in sales and marketing expenses ~~over the comparative three and nine month periods~~ was primarily ~~attributable~~due to ~~increased~~an increase in travel ~~expense related~~and sales-related events of approximately $1,388 due to the ~~Company's continued expansion~~easing of ~~its global footprint~~COVID restrictions and ~~increased commissions associated with~~severance costs of approximately $652, primarily for Nordic region employees due to the termination of a reseller partnership in the region. These increases were offset by a decrease of approximately $1,428 for employee-related costs, primarily due to lower headcount and incentive compensation.

Sales and marketing expenses were relatively unchanged, increasing by $945 or 2.0% to $48,017 for the nine months ended December 31, 2022, and was 9.1% as a percentage of total net revenue compared to $47,072, or 8.4% of total net revenue, for the nine months ended December 31, 2021. The increase in sales ~~team generating more revenue through new~~ and ~~existing advertising relationships.~~marketing expenses was primarily due to an increase in travel and sales-related events of approximately $2,468 due to the easing of COVID restrictions and severance costs of approximately $652, primarily for Nordic region employees due to the termination of a reseller partnership in the region. These increases were offset by a decrease of approximately $2,175, primarily for employee-related costs due to lower headcount and incentive compensation.

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 decreased by $792 or 2.0% to $39,132 for the three months ended December 31, 2022, compared to $39,924 for the three months ended December 31, 2021. The three months ended December 31, 2022, included acquisition-related costs and severance costs of $700 and $135, respectively. The three months ended December 31, 2021 included acquisition-related costs of $5,676. Excluding acquisition-related costs and severance costs, general and administrative expenses increased $4,048.

General and administrative expenses increased by $9,103 or 8.7% to $114,328 for the nine months ended December 31, 2022, compared to $105,225 for the nine months ended December 31, 2021. The nine months ended December 31, 2022, included acquisition-related costs and severance costs of $2,091 and $135, respectively. The nine months ended December 31, 2021, included acquisition-related costs $20,866. Excluding acquisition-related costs and severance costs, general and administrative expenses increased $27,744.

The increase in general and administrative expenses after excluding acquisition-related costs and severance costs was primarily due to: (1) higher depreciation expense of approximately $17,870 for developed technology assets and amortization of acquired intangible assets, (2) an increase of approximately $4,435 for employee-related costs due to higher wages and stock-based compensation costs, partially offset by lower incentive compensation, (3) an increase in bad debt expense of approximately $2,149, and (4) an increase in other categories, primarily professional services, software, and facilities of $3,289. The increases were due in part to the impact of a full nine months of operations resulting from the AdColony Acquisition and Fyber Acquisition. Please see Note 3, “Acquisitions,” for further information.

Interest and other income / (expense), net


	Three months ended December 31,						Nine months ended December 31,
	2022		2021		% of Change		2022		2021		% of Change
Interest and other income / (expense), net
Change in fair value of contingent consideration	$	—	$	(18,200)	100.0	%	$	—	$	(40,287)	100.0	%
Interest expense, net	(6,913)		(2,195)		214.9	%	(16,224)		(5,307)		205.7	%
Foreign exchange transaction gain / (loss)	17		2,122		(99.2)	%	(595)		1,603		(137.1)	%
Other income / (expense), net	8		(86)		109.3	%	392		(598)		165.6	%
Total interest and other income / (expense), net	$	(6,888)	$	(18,359)	(62.5)	%	$	(16,427)	$	(44,589)	(63.2)	%

Comparison of the three and nine months ended December 31, 2022 and 2021

Change in fair value of contingent consideration

For the three and nine months ended December 31, 2021, the Company recorded charges for changes in fair value of contingent consideration in connection with the AdColony Acquisition and Fyber Acquisition of $18,200 and $40,287, respectively. There were no such charges recorded for the three and nine months ended December 31, 2017, 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 in general and administrative expenses over the comparative three month periods is primarily attributable to a company wide bonus accrual of $1,525 in the current three month period based on the attainment of certain financial performance goals, compared to no bonus accrual in the prior three month period partially offset by lower stock option expense due to stock option grants issued over the comparative periods being issued at lower fair values, which has the impact of lower expense being recorded. The decrease over the comparative nine month periods is primarily attributable to lower legal, accounting, professional consulting costs; 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.2022.

Interest ~~and Other Income / (Expense)~~expense, net

Three Months Ended December 31, Nine Months Ended December 31,
2017 2016 % of Change 2017 2016 % of Change
(in thousands) (in thousands)
Interest expense, net $ (446 ) $ (725 ) (38.5 )% $ (1,815 ) $ (2,029 ) (10.5 )%
Foreign exchange transaction gain / (loss) 35
(9 ) (488.9 )% (182 ) (13 ) 1,300.0 %
Change in fair value of convertible note embedded derivative liability (1,658 ) 2,853
(158.1 )% (6,310 ) 2,423
(360.4 )%
Change in fair value of warrant liability (898 ) 937
(195.8 )% (2,526 ) 797
(416.9 )%
Loss on extinguishment of debt (284 ) —
100.0 % (1,166 ) (293 ) 298.0 %
Other income / (expense) (36 ) 68
(152.9 )% —
101
(100.0 )%
Total interest and other expense, net $ (3,287 ) $ 3,124
(205.2 )% $ (11,999 ) $ 986
(1,316.9 )%

~~Total interest and other income / (expense), net, for~~For the three and nine months ended December 31, 2017, 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 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.

~~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 total2022, 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, 2016increased by $4,718 or 214.9% and the Western Alliance Bank Credit Agreement, the Company recorded $195 and $875, and $288 and $969 of aggregate debt discount and debt issuance cost amortization during the three and nine months ended December 31, 2017, 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, the Company recorded $251 and $940 of interest expense during the three and nine months ended December 31, 2017,$10,917 or 205.7%, respectively, and $437 and $1,060 for the three and nine months ended December 31, 2016, respectively. In total, the Company recorded $446 and $1,815 of interest expense for the three and nine months ended December 31, 2017, respectively, and $725 and $2,029 of interest expense for the three and nine months ended December 31, 2016, respectively.

~~Foreign Exchange Transaction Loss~~

Foreign exchange transaction gain/(loss) for the three and nine months ended December 31, 2017, and 2016 consists of foreign exchange gains and losses, 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~~2021, primarily due to an increase in ~~Ignite net revenue was attributable to increased demand for the Ignite service, driven primarily by increased CPI~~interest rates of 371 basis points and ~~CPP revenue from advertising partners across existing commercial deployments~~228 basis points, respectively, and higher average outstanding borrowings of ~~Ignite with carrier partners as well as expanded distribution with new carrier partners.~~

The Company's A&P business, is a worldwide mobile user acquisition network. Its mobile user acquisition platform is a demand side platform, or DSP. This platform allows mobile advertisers to engage with the right customers for their applications at the right time to gain them as customers. The A&P business, through its Syndicated network service, accesses mobile ad inventory through publishers including direct developer relationships, mobile websites, mobile carriers$129,167 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~~$229,952, respectively, 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.periods.

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, and debt. The Company may raise additional capital through future equity raises or, subject to restrictions contained in~~are our Indenture and Credit Agreement, debt financing to provide for greater flexibility for the Company to complete acquisitions, fund new investments in under-capitalized opportunities, or invest in organic opportunities. Additional financing may not be available on acceptable terms or at all. If the Company issues additional equity or equity linked securities to raise funds, the ownership percentage of its existing stockholders would be reduced. New investors may demand rights, preferences, or privileges senior to those of existing holders of common stock. The Company believes that it has sufficient cash and ~~capital resources to operate its business for at least the next twelve months~~cash equivalents, cash from ~~the issuance date of this Report. See Note 2 - Liquidity for more discussion.~~

operations, and borrowings under our New Credit Agreement. As of December 31, ~~2017,~~2022, we had unrestricted cash of approximately $79,307 and $174,866 available to draw under the New Credit Agreement with BoA. The maturity date of the New Credit Agreement is April 29, 2026, and the outstanding balance of $425,134 is classified as long-term debt, net of debt issuance costs of $2,824, on our ~~total contractual~~condensed consolidated balance sheet as of December 31, 2022. We generated $97,514 in cash ~~obligations were as follows:~~

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 to such date.~~

~~(b) Consists of~~flows from operating ~~leases~~activities for ~~our office facilities.~~

~~(c) Consists of various employment agreements and severance agreements.~~

(d) We have approximately $921 in additional liabilities associated with uncertain tax positions that are not expected to be liquidated within the next twelve months. We are unable to reliably estimate the expected payment dates for these additional non-current liabilities.

~~Cash Flow Summary~~

Nine Months Ended December 31,
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~~2022.

Our ability to meet our debt service obligations and ~~2016,~~to fund working capital, capital expenditures, and investments in our business will depend upon our future performance, which will be subject to availability of borrowing capacity under our credit facility and our ability to access the ~~Company's~~capital markets as well as financial, business, and other factors affecting our operations, many of which are beyond our control. For example, these factors include general and regional economic, financial, competitive, legislative, regulatory, and other factors such as health epidemics including COVID-19, economic and macro-economic factors like labor shortages, supply chain disruptions, and inflation, and geopolitical developments, including the conflict in Ukraine. We cannot guarantee that we will generate sufficient 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 debt or to fund our other liquidity needs. We could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional indebtedness or equity capital, or restructure or refinance our indebtedness. We may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.

We believe we will generate sufficient cash flow from operations and has the liquidity and capital resources to meet our business requirements for at least twelve months from the filing date of this Quarterly Report on Form 10-Q.

Hosting Agreements

We enter into hosting agreements with service providers and in some cases, those agreements include minimum commitments that require us 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 $181,603 over the next 4 years.

Outstanding Secured Indebtedness

Our outstanding secured indebtedness under the New Credit Agreement is $425,134 as of December 31, 2022. See “Recent Developments - Credit Agreement” for additional information on the New Credit Agreement. Our ability to borrow additional amounts under the New Credit Agreement could have significant negative consequences, including:

•increasing our vulnerability to general adverse economic and industry conditions;

•limiting our ability to obtain additional financing;

•violating a financial covenant, potentially resulting in the indebtedness to be paid back immediately and thus negatively impacting our 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 flow from operations to service indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures;

•limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which it competes, including by virtue of the requirement that we remain in compliance with certain negative operating covenants included in the credit arrangements under which we will be obligated as well as meeting certain reporting requirements; and

•placing us at a possible competitive disadvantage to less leveraged competitors that are 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 no assurance we will continue to satisfy these ratio covenants. If we fail to satisfy these covenants, the lender may declare a default, which could lead to acceleration of the debt maturity. Any such default would have a material adverse effect on us.

The collateral pledged to secure our secured debt, consisting of substantially all of our and our 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 our ability to service our secured debt could result in an event of default, cross default, and foreclosure or forced sale. Depending on the value of the assets, there could be little, if any, assets available for common stockholders in any foreclosure or forced sale.

Cash Flow Summary


	Nine months ended December 31,
	2022		2021		% of Change
	(in thousands)
Consolidated statements of cash flows data:
Net cash provided by operating activities	$	97,514	$	43,462	124.4	%
Equity investments	(4,000)		—		(100.0)	%
Business acquisitions, net of cash acquired	(2,708)		(148,192)		98.2	%
Capital expenditures	(18,598)		(15,692)		(18.5)	%
Net cash used in investing activities	$	(25,306)	$	(163,884)	84.6	%

Proceeds from borrowings	18,000		369,913		(95.1)	%
Payment of debt issuance costs	(94)		(4,044)		97.7	%
Payment of deferred business acquisition consideration	—		(98,175)		100.0	%
Options and warrants exercised	1,095		2,814		(61.1)	%
Payment of withholding taxes for net share settlement of equity awards	(6,202)		(7,587)		(18.3)	%
Repayment of debt obligations	(129,500)		(52,623)		(146.1)	%
Net cash provided by / (used in) financing activities	$	(116,701)	$	210,298	155.5	%

Operating Activities

Our cash ~~provided by / (used in)~~flows from operating activities ~~was $482~~are primarily driven by revenues generated from advertising activity, offset by the cash costs of operations, and ~~$(7,788), respectively, a positive change~~are significantly influenced by the timing of ~~$8,270 or 106.2%. The~~and fluctuations in receipts from buyers and related payments to sellers. Our future cash flows will be diminished if we cannot increase ~~in net cash~~our revenue levels and manage costs appropriately. Cash provided by operating activities was ~~primarily attributable to the change in working capital accounts over the comparative periods.~~

~~During~~$97,514 for the nine months ended December 31, ~~2017, net cash provided by operating activities~~2022, compared to $43,462 for the nine months ended December 31, 2021. The increase of $54,052 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 in~~due to the ~~allowance for doubtful accounts, amortization of debt discount and debt issuance costs, accrued interest, stock option expense, stock-based compensation related~~following:

•$58,961 increase due to vesting of restricted stock for services, change in fair value 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 usedchanges in operating ~~activities~~assets and liabilities, primarily due to lower net working capital for the nine months ended December 31, 2022;

•$15,295 increase in net income; and

•$20,204 decrease due to lower non-cash charges during the nine months ended December 31, ~~2017 was also impacted by~~2022, including the ~~change in net working capital accounts as~~impact 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), offset 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 liabilities was driven primarily by the increase in accounts payable and accrued license fees and revenue share of $12,864, mostly due to the timing of payments to our carrier partners. The net increase in working capital assets was driven primarily by the increase in accounts receivable of $16,184, mostly due to the timing of payments from our advertising and content customers.

During the nine months ended December 31, 2016, 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 related to vesting of restricted stock for services, amortization of debt discount, amortization of debt issuance costs, an decrease in the allowance for doubtful accounts, change in fair value of convertible note embedded derivative liability, change in fair value of warrant liability, loss on extinguishment of debt, and an increase in accrued interest of approximately $6,325, $3,335, $276, $450, $519, $130, $(2,423), $(797), $293, and $297, respectively. Net cash used in operating activitiescontingent consideration during the nine months ended December 31, ~~2016~~2021. This impact was ~~impacted~~partially offset by accelerated amortization of trade name intangible assets amidst rebranding and a larger employee base receiving stock-based compensation for the ~~change in net working capital accounts as of~~nine months ended December 31, 2016 compared to March 31, 2016, with a net increase in current liabilities of approximately $2,738 (inclusive only of accounts payable, accrued license fees and revenue share, accrued compensation, and other liabilities), offset by a net increase in current assets of approximately $1,875 (inclusive only of restricted cash, accounts receivable, deposits, and prepaid expenses and other current assets) over the comparative periods. The net increase in working capital account liabilities was driven primarily by the increase in accounts payable of $4,509, mostly due to the timing of payments to our carrier partners. Net cash used in operating activities was further impacted by an increase in other non-current liabilities of $283, related entirely to changes in non-current uncertain tax liabilities over the comparative periods.2022.

Investing Activities

Our primary investing activities have consisted of acquisitions of businesses, purchases of property and equipment, and capital expenditures in support of creating and enhancing our technology infrastructure. For the nine months ended December 31, ~~2017~~2022, net cash used in investing activities decreased by $138,578 to approximately $25,306. Current period cash used in investing activities was comprised of capital expenditures related mostly to internally-developed software of $18,598, an equity investment of $4,000 in one of the largest independent Android app stores, and ~~2016,~~cash expenditures for business acquisitions, net of cash acquired, of $2,708 related to our acquisition of In App Video Services UK LTD. For the nine months ended December 31, 2021, net cash used in investing activities was approximately ~~$1,312 and $382, respectively, which is~~$163,884, comprised of ~~capital~~cash expenditures for business acquisitions, net of cash acquired, of $148,192 related ~~mostly~~ to ~~internally developed software in the current fiscal year,~~our acquisitions of AdColony and Fyber and capital expenditures related mostly to ~~internally developed~~internally-developed software of ~~$1,381 offset by proceeds from the sale~~$15,692. The $2,906 increase in capital expenditures was due to incremental investments in product development efforts and is also reflective of a ~~cost method investment~~larger product portfolio due to the acquisitions of ~~$999 in the prior fiscal year.~~AdColony and Fyber.

Financing Activities

Our financing activities consisted of borrowings and repayment of amounts borrowed under our New Credit Agreement and transactions related to our equity plans. For the nine months ended December 31, ~~2017,~~2022, net cash used in financing activities was approximately $116,701, which was comprised of the repayment of debt obligations of $129,500 and payment of withholding taxes for net share settlement of equity awards of $6,202, partially offset by proceeds from borrowings of $18,000 and stock option exercises of $1,095. For the nine months ended December 31, 2021, net cash provided by financing activities was approximately ~~$1,568, inclusive~~$210,298, which was comprised of ~~$2,500 in~~ proceeds from ~~our Credit Agreement,~~borrowings of $369,913 and ~~$261 in proceeds from the exercise~~stock option exercises of ~~stock options;~~$2,814, partially offset by ~~cash paid for the settlement of debt of $847, and~~ the payment of ~~capitalized debt issuance cots~~deferred business acquisition consideration of $346. For the nine months ended December 31, 2016, cash used in financing activities was approximately $2,692, primarily due to proceeds from the issuance of debt of $16,000 and proceeds from the exercise of stock options of $11, offset by the$98,175, repayment of debt obligations of ~~$11,000~~$52,623, payment of withholding taxes for net share settlement of equity awards of $7,587, and ~~$2,319 in~~payment of debt issuance costs ~~payments.~~of $4,044.

~~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 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~~2022, 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, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~We have~~The Company has operations both within the United States and internationally and ~~we are~~is 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~~the Company’s investment activities is to preserve principal while maximizing income without significantly increasing risk. ~~Our~~The Company’s cash and cash equivalents consist of cash and deposits, which are ~~not insensitive~~sensitive to interest rate changes.

The Company’s borrowings under its credit facility are subject to variable interest rates and thus expose the Company to interest rate fluctuations, depending on the extent to which the Company utilizes its credit facility. If market interest rates materially increase, the Company’s results of operations could be adversely affected. A hypothetical increase in market interest rates of 100 basis points would result in an increase in interest expense of $10 per year for every $1,000 of outstanding debt under the credit facility. The Company has not used any derivative financial instruments to manage its interest rate risk exposure.

Foreign Currency Exchange Risk

~~We have foreign~~Foreign currency ~~risks related to our revenue and operating expenses~~exchange risk is the risk that the Company’s results of operations and/or financial condition could be affected by changes in exchange rates. The Company has transactions denominated in currencies other than the U.S. dollar, principally the euro, Turkish lira, and British pound, that expose the Company’s operations to risk from the effects of exchange rate movements. Such movements may impact future revenues, expenses, and cash flows. In certain of the Company’s foreign operations, the Company transacts primarily in the ~~Australian dollar. While a portion of our sales are denominated in~~U.S. dollar, including for net revenue, license fees and revenue share, and employee-related compensation costs, which reduces the Company’s exposure to foreign currencies and then translated into U.S. dollars, the vast majority of our media costs are billed in U.S. dollars, causing both our revenue and, disproportionately, our operating loss and net loss to be impacted by fluctuations incurrency exchange ~~rates.~~risk. 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~~also impact ~~our~~ net ~~income/(loss).~~income. As ~~our~~the Company’s foreign operations expand, ~~our~~ results may be ~~more~~ impacted further by fluctuations in the exchange rates of the currencies in which ~~we do~~the Company’s does business. The Company has not used any derivative financial instruments to manage its foreign currency exchange risk exposure.

ITEM 4. CONTROLS AND PROCEDURES

This Report includes the certifications of ~~our~~the Company’s 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 Quarterly Report on Form 10-Q. 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 controls and procedures, ~~(as~~as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange ~~Act)~~Act, are controls and other procedures designed to ensure ~~that~~ information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in ~~SEC~~the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer, who is the principal executive officer, and the Company’s Chief Financial Officer, who is the principal financial officer, as appropriate, to allow timely decisions regarding required ~~disclosures.~~disclosure.

~~In connection with~~As previously disclosed in Item 9A, Disclosure Controls and Procedures, of the ~~preparation of this~~Company’s Annual Report ~~Digital Turbine's~~on Form 10-K for the fiscal year ended March 31, 2022, management, ~~under the supervision of and~~ with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, ~~conducted an evaluation of~~evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation and the identification of certain material weaknesses in internal controls over financial reporting, which we view as an integral part of ourits disclosure controls and procedures ~~our~~as of March 31, 2022. Based on this evaluation, management concluded as of such date, the Company’s disclosure controls and procedures were not effective due to the existence of the material weakness in its internal control over financial reporting therein described.

Management concluded the Company’s internal control for business combinations did not include a control adequately designed to ensure acquiree accounting policies, as they relate to presentation and classification, were conformed to those of the Company and GAAP.

With the participation of the Company’s Chief Executive Officer and Chief Financial Officer, ~~have~~management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2022. Based on this evaluation and as a result of the identification of the material weakness described above, management concluded ~~that our~~the Company’s disclosure controls and procedures were not effective as of December 31, ~~2017. Nevertheless, based on~~2022.

Remediation Plans for Material Weakness in Internal Control over Financial Reporting

Prior to the identification of the material weakness, management, with oversight from the Company’s Audit Committee, completed a ~~number~~review of ~~factors,~~the recently acquired business’ product lines with the consultation of a large, third-party accounting firm as part of the financial close and reporting process. This included a review, at the acquired businesses, of representative customer contracts and agreements, supply/publisher agreements, and each product line’s business model and operations with key operations personnel. Further, management took several other actions to strengthen the Company’s control environment, including hiring a new Chief Accounting Officer and creating and hiring for other key positions including a Senior Manager of Internal Audit/ICFR and Director of Global Tax.

The Company is continuing to make progress in implementing improvements to its policies and procedures by:

•Strengthening the ~~performance~~Company’s procedures for reviewing the accounting policies of ~~additional procedures by management designed~~material acquired companies, including their accounting for revenue, through initial reviews during the due diligence period and ensuring alignment of accounting policies prior to the first post-acquisition interim reporting date;

•Standardizing customer and publisher contract review processes to ensure consistent accounting and reporting of revenue transactions; and

•Formalizing the approval process for making changes to the global chart of accounts and accounting systems to ensure the ~~reliability~~accurate classification 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.~~amounts, including changes resulting from material acquisitions.

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~~Management believes these additional steps will be effective 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~~remediating the material weakness ~~has been eliminated until~~described above and may take additional measures to address the ~~controls have been successfully operated~~material weakness or modify the remediation plan described above, if deemed necessary. Management continues to make progress implementing the remediation steps discussed above and ~~tested. We, along with our Audit Committee,~~ will continue to ~~monitor and evaluate~~test the ~~effectiveness~~enhanced control environment in the Company’s fiscal fourth quarter. If the results of ~~these remedial actions and make further changes~~remaining controls testing progress as ~~deemed appropriate. Management, with the oversight of our Audit Committee, has devoted considerable effort~~planned, management expects sufficient evidence will be available to ~~remediate~~conclude the material weakness ~~identified~~described 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~~no longer exists as 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.

March 31, 2023.

Changes in Internal ~~Controls~~Control Over Financial Reporting

~~There~~Other than the revenue recognition review process and ongoing remediation steps described above, there were no changes in ~~our~~the Company’s internal ~~controls~~control over financial reporting during the three months ended December 31, ~~2017~~2022, that materially affected, or are reasonably likely to materially affect, ~~our~~the Company’s internal ~~controls~~control over financial reporting.

PART II - OTHER INFORMATION

~~Item~~ITEM 1.~~Legal Proceedings~~ LEGAL PROCEEDINGS

~~See Note 13 “Commitments~~The Company may be involved in various claims, suits, assessments, investigations, and ~~Contingencies - Legal Matters”~~legal proceedings that arise from time to time in the ordinary course of ~~our Notes~~its business.

On June 6, 2022 and July 21, 2022, shareholders of the Company filed class action complaints against the Company and certain of its officers in the Western District of Texas related to ~~Consolidated Financial Statements, which~~Digital Turbine, Inc.’s announcement in May 2022 that the Company would restate some of its financial results. The claims allege violations of certain federal securities laws. In addition, in September and October of 2022, shareholders of the Company filed derivative complaints against the Company and its directors in the Western District of Texas, Delaware state courts, and Texas state courts alleging breaches of fiduciary duties relating to the allegations made in the class action complaints. The federal derivative cases are consolidated, and the Texas derivative case has been dismissed and re-filed in Delaware federal court and the Delaware derivative cases are now consolidated, and all such derivative cases are stayed under a court order, pending a ruling on any motion to dismiss the federal class action that is ~~incorporated herein by reference.~~later filed. The Company and individual defendants deny any allegations of wrongdoing and plan to vigorously defend against the claims asserted in these complaints. Due to the early stages of these cases, management is unable to assess a likely outcome or potential liability at this time.

~~Item 1 (A). Risk Factors~~ITEM 1A. RISK FACTORS

~~Registrant~~The Company is not aware of any material changes to the risk factors ~~since those~~ set forth under Part I, Item 1A, “Risk ~~Factors”~~Factors,” in its Annual Report inon Form 10-K ~~as amended,~~ for the fiscal year ended March 31, ~~2017.~~2022, filed with the Securities and Exchange Commission on June 6, 2022.

~~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


Exhibit No.			Description

















































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.~~906 of the Sarbanes-Oxley Act of 2002. +

32.2		Certification of Barrett Garrison, Principal Financial Officer, pursuant to ~~U.S.C.~~ Section ~~1350.~~906 of the Sarbanes-Oxley Act of 2002. +
101
~~101~~	INS XBRL Instance Document. *
101
~~101~~	SCH XBRL Schema Document. *
101
~~101~~	CAL XBRL Taxonomy Extension Calculation Linkbase Document. *
101
~~101~~	DEF XBRL Taxonomy Extension Definition Linkbase Document. *
101
~~101~~	LAB XBRL Taxonomy Extension Label Linkbase Document. *
101
~~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) of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this ~~report~~Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Digital Turbine, Inc.

~~Digital Turbine, Inc.~~

Dated: February ~~7, 2018~~8, 2023

By:

~~By:~~

/s/ William Gordon Stone III

William Gordon Stone III

Chief Executive Officer

(Principal Executive Officer)

Digital Turbine, Inc.

Dated: February ~~7, 2018~~8, 2023

By:

/s/ James Barrett Garrison

~~By:~~

~~/s/~~James Barrett Garrison

~~Barrett Garrison~~

Chief Financial Officer

(Principal Financial Officer)



	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