Quarterly report pursuant to Section 13 or 15(d)

Guarantor and Non-Guarantor Financial Statements (Notes)

v3.7.0.1
Guarantor and Non-Guarantor Financial Statements (Notes)
3 Months Ended
Jun. 30, 2017
Condensed Financial Information of Parent Company Only Disclosure [Abstract]  
Guarantor and Non-Guarantor Financial Statements
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, between Digital Turbine, Inc., US Bank National Association, as trustee, and certain wholly-owned subsidiaries of the Company, specifically Digital Turbine, Inc. as the parent Company, DT USA, DT Media, 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, condensed 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 and condensed consolidated financial information include:
(1) Condensed consolidated balance sheets as of June 30, 2017 and March 31, 2017; consolidated statements of operations for the three months ended June 30, 2017 and 2016; and condensed consolidated statements of cash flows for the three months ended June 30, 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 months ended June 30, 2017 or 2016.
Condensed Consolidated Balance Sheet
as of June 30, 2017 (Unaudited)
(in thousands, except par value and share amounts)
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Consolidated Total
ASSETS
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
Cash
 
$
254

 
$
5,962

 
$
86

 
$
6,302

Restricted cash
 
156

 
175

 

 
331

Accounts receivable, net of allowance of $671
 

 
19,121

 
1,015

 
20,136

Deposits
 

 
121

 

 
121

Prepaid expenses and other current assets
 
333

 
245

 
4

 
582

Total current assets
 
743

 
25,624

 
1,105

 
27,472

Property and equipment, net
 
58

 
2,378

 
17

 
2,453

Deferred tax assets
 
352

 

 

 
352

Intangible assets, net
 

 
2,270

 
1,705

 
3,975

Goodwill
 

 
70,377

 
6,244

 
76,621

TOTAL ASSETS
 
$
1,153

 
$
100,649

 
$
9,071

 
$
110,873

INTERCOMPANY
 
 
 
 
 
 
 
 
Intercompany payable/receivable, net
 
124,468

 
(108,411
)
 
(16,057
)
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,259

 
$
18,770

 
$
234

 
$
20,263

Accrued license fees and revenue share
 

 
9,761

 
191

 
9,952

Accrued compensation
 
34

 
1,233

 

 
1,267

Short-term debt, net of debt issuance costs and discounts of $307
 
1,943

 

 

 
1,943

Other current liabilities
 
1,248

 
525

 

 
1,773

Total current liabilities
 
4,484

 
30,289

 
425

 
35,198

Convertible notes, net of debt issuance costs and discounts of $5,975
 
10,025

 

 

 
10,025

Convertible note embedded derivative liability
 
4,526

 

 

 
4,526

Warrant liability
 
1,540

 

 

 
1,540

Other non-current liabilities
 
770

 
79

 

 
849

Total liabilities
 
21,345

 
30,368

 
425

 
52,138

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; 67,342,084 issued and 66,607,628 outstanding at June 30, 2017.
 
(28
)
 

 
36

 
8

Additional paid-in capital
 
300,453

 

 

 
300,453

Treasury stock (754,599 shares at June 30, 2017)
 
(71
)
 

 

 
(71
)
Accumulated other comprehensive loss
 

 
(1,709
)
 
1,380

 
(329
)
Accumulated deficit
 
(196,099
)
 
(37,347
)
 
(7,980
)
 
(241,426
)
Total stockholders' equity
 
104,355

 
(39,056
)
 
(6,564
)
 
58,735

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
125,700

 
$
(8,688
)
 
$
(6,139
)
 
$
110,873

Condensed 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 June 30, 2017 (Unaudited)
(in thousands, except par value and share amounts)
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Elimination
 
Consolidated Total
Net revenues
 
$

 
$
37,937

 
$
347

 
$
(12,164
)
 
$
26,120

Cost of revenues
 
 
 
 
 
 
 
 
 
 
License fees and revenue share
 

 
30,869

 
176

 
(12,164
)
 
18,881

Other direct cost of revenues
 

 
409

 
214

 

 
623

Total cost of revenues
 

 
31,278

 
390

 
(12,164
)
 
19,504

Gross profit
 

 
6,659

 
(43
)
 

 
6,616

Operating expenses
 
 
 
 
 
 
 
 
 
 
Product development
 
5

 
2,741

 
12

 

 
2,758

Sales and marketing
 
102

 
1,403

 
53

 

 
1,558

General and administrative
 
2,325

 
1,425

 
74

 

 
3,824

Total operating expenses
 
2,432

 
5,569

 
139

 

 
8,140

Income / (loss) from operations
 
(2,432
)
 
1,090

 
(182
)
 

 
(1,524
)
Interest and other income / (expense), net
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 
(710
)
 
3

 

 

 
(707
)
Foreign exchange transaction loss
 

 
(144
)
 

 

 
(144
)
Change in fair value of convertible note embedded derivative liability
 
(1,308
)
 

 

 

 
(1,308
)
Change in fair value of warrant liability
 
(464
)
 

 

 

 
(464
)
Other income
 
3

 

 

 

 
3

Total interest and other income / (expense), net
 
(2,479
)
 
(141
)
 

 

 
(2,620
)
Income / (loss) from operations before income taxes
 
(4,911
)
 
949

 
(182
)
 

 
(4,144
)
Income tax provision
 
31

 

 

 

 
31

Net income / (loss)
 
$
(4,942
)
 
$
949

 
$
(182
)
 
$

 
$
(4,175
)
Other comprehensive income / (loss)
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 

 
(224
)
 
216

 

 
(8
)
Comprehensive income / (loss)
 
$
(4,942
)
 
$
725

 
$
34

 
$

 
$
(4,183
)

Consolidated Statement of Operations and Comprehensive Loss
for the three months ended June 30, 2016 (Unaudited)
(in thousands, except par value and share amounts)
 
 
Parent
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Elimination
 
Consolidated Total
Net revenues
 
$

 
$
29,604

 
$
118

 
$
(5,683
)
 
$
24,039

Cost of revenues
 
 
 
 
 
 
 
 
 
 
License fees and revenue share
 

 
24,877

 
30

 
(5,683
)
 
19,224

Other direct cost of revenues
 

 
1,805

 
75

 

 
1,880

Total cost of revenues
 

 
26,682

 
105

 
(5,683
)
 
21,104

Gross profit
 

 
2,922

 
13

 

 
2,935

Operating expenses
 
 
 
 
 
 
 
 
 
 
Product development
 

 
2,809

 
26

 

 
2,835

Sales and marketing
 
41

 
1,429

 
(26
)
 

 
1,444

General and administrative
 
4,012

 
1,395

 
(302
)
 

 
5,105

Total operating expenses
 
4,053

 
5,633

 
(302
)
 

 
9,384

Loss from operations
 
(4,053
)
 
(2,711
)
 
315

 

 
(6,449
)
Interest and other income / (expense), net
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 

 
(682
)
 

 

 
(682
)
Foreign exchange transaction loss
 

 
(2
)
 
(1
)
 

 
(3
)
Other income
 
18

 

 

 

 
18

Total interest and other income / (expense), net
 
18

 
(684
)
 
(1
)
 

 
(667
)
Income / (loss) from operations before income taxes
 
(4,035
)
 
(3,395
)
 
314

 

 
(7,116
)
Income tax provision
 
296

 

 

 

 
296

Net income / (loss)
 
$
(4,331
)
 
$
(3,395
)
 
$
314

 
$

 
$
(7,412
)
Other comprehensive income / (loss)
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 

 
27

 

 

 
27

Comprehensive income / (loss)
 
$
(4,331
)
 
$
(3,368
)
 
$
314

 
$

 
$
(7,385
)

Condensed Consolidated Statement of Cash Flows
for the three months ended June 30, 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
 
$
(4,942
)
 
$
949

 
$
(182
)
 
$
(4,175
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
34

 
667

 
187

 
888

Change in allowance for doubtful accounts
 

 
75

 

 
75

Amortization of debt discount and debt issuance costs
 
353

 

 

 
353

Accrued interest
 
344

 

 

 
344

Stock-based compensation
 
788

 

 

 
788

Restricted shares and warrants compensation for services rendered
 
76

 

 

 
76

Change in fair value of convertible note embedded derivative liability
 
1,308

 

 

 
1,308

Change in fair value of warrant liability
 
464

 

 

 
464

(Increase) / decrease in assets:
 
 
 
 
 
 
 
 
Accounts receivable
 

 
(3,456
)
 
(200
)
 
(3,656
)
Prepaid expenses and other current assets
 
(52
)
 
(18
)
 
(2
)
 
(72
)
Increase / (decrease) in liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
236

 
73

 
86

 
395

Accrued license fees and revenue share
 

 
1,449

 
(26
)
 
1,423

Accrued compensation
 

 
194

 

 
194

Other current liabilities
 
110

 
17

 
(3
)
 
124

Other non-current liabilities
 
67

 

 

 
67

Intercompany movement of cash
 
(729
)
 
1,061

 
(332
)
 

Net cash used in operating activities
 
(1,943
)
 
1,011

 
(472
)
 
(1,404
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
Capital expenditures
 

 
(374
)
 

 
(374
)
Net cash used in investing activities
 

 
(374
)
 

 
(374
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
Proceeds from short-term borrowings
 
2,250

 

 

 
2,250

Payment of debt issuance costs
 
(320
)
 

 

 
(320
)
Options exercised
 
9

 

 

 
9

Net cash provided by (used in) financing activities
 
1,939

 

 

 
1,939

Effect of exchange rate changes on cash
 

 
(8
)
 

 
(8
)
Net change in cash
 
(4
)
 
629

 
(472
)
 
153

Cash, beginning of period
 
258

 
5,333

 
558

 
6,149

Cash, end of period
 
$
254

 
$
5,962

 
$
86

 
$
6,302

Condensed Consolidated Statement of Cash Flows
for the three months ended June 30, 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
 
$
(4,331
)
 
$
(3,395
)
 
$
314

 
$
(7,412
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
2

 
1,802

 
290

 
2,094

Change in allowance for doubtful accounts
 

 
(82
)
 
(27
)
 
(109
)
Amortization of debt discount and debt issuance costs
 

 
342

 

 
342

Accrued interest
 

 
1

 

 
1

Stock-based compensation
 
1,223

 

 

 
1,223

Restricted shares and warrants compensation for services rendered
 
80

 

 

 
80

(Increase) / decrease in assets:
 
 
 
 
 
 
 
 
Accounts receivable
 
22

 
1,952

 
6

 
1,980

Deposits
 

 
69

 
(3
)
 
66

Prepaid expenses and other current assets
 
16

 
68

 
5

 
89

Increase / (decrease) in liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
(190
)
 
37

 
(16
)
 
(169
)
Accrued license fees and revenue share
 

 
401

 
18

 
419

Accrued compensation
 
699

 
(674
)
 
(97
)
 
(72
)
Other current liabilities
 
109

 
718

 
(455
)
 
372

Intercompany movement of cash
 
1,286

 
(1,351
)
 
65

 

Net cash used in operating activities
 
(1,084
)
 
(112
)
 
100

 
(1,096
)
Cash flows from investing activities
 
 
 
 
 
 
 
 
Capital expenditures
 

 
(472
)
 

 
(472
)
Net cash used in investing activities
 

 
(472
)
 

 
(472
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
Payment of debt issuance costs
 

 
(280
)
 

 
(280
)
Options exercised
 
2

 

 

 
2

Net cash provided by (used in) financing activities
 
2

 
(280
)
 

 
(278
)
Effect of exchange rate changes on cash
 

 
27

 

 
27

Net change in cash
 
(1,082
)
 
(837
)
 
100

 
(1,819
)
Cash, beginning of period
 
6,712

 
4,470

 
49

 
11,231

Cash, end of period
 
$
5,630

 
$
3,633

 
$
149

 
$
9,412