|12 Months Ended|
Mar. 31, 2020
|Debt Disclosure [Abstract]|
On September 28, 2016, the Company sold to 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. 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 recorded these costs as a direct reduction to the face value of the Notes and amortized 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 remainder of fiscal 2017, the Company further incurred $234 in costs directly associated with the issuance of the Notes, for the preparation and filing of the 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. The convertible notes remained 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. As of March 31, 2019, all of the Notes have been extinguished, the underlying indenture relieved, and all derivative liabilities related to the Notes settled.
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 were immediately exercisable on the date of issuance at an initial exercise price of $1.364 per share and will expire on September 23, 2020. 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.
During the year ended March 31, 2019, 484,900 of the warrants were exercised. During the year ended March 31, 2020, 3,614,100 of the warrants were exercised. No outstanding warrants related to the Warrant Agreement remained outstanding at March 31, 2020.
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.
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.
On May 22, 2019, the Company entered into an amendment to the Credit Agreement that extends the agreement through May 23, 2021 and provided for up to a $20,000 total facility, subject to draw limitations derived from current levels of eligible domestic receivables.The amounts advanced under the Credit Agreement, as amended, mature in two years, or May 22, 2021, and accrue interest at prime plus 0.50% subject to a 6.00% floor, with the prime rate defined as the greater of prime rate published in the Wall Street Journal or 5.50%. The Credit Agreement, as amended, also carried an annual facility fee of 0.20% of our available credit limit, and an unused line fee of 0.10% per annum.
On February 28, 2020, the Company entered into a new credit agreement (the "New Credit Agreement") with the Bank, which provides for (1) a term loan of $20,000, the proceeds of which the Company used to pay a portion of the closing cash purchase price for the Acquisition, and (2) a revolving line of credit of $5,000 to be used for working capital purposes. DT Media and DT USA are additional co-borrowers under the New Credit Agreement.
The term loan must be repaid on a quarterly basis, beginning in July 2020, until the term loan maturity date of February 28, 2025, at which time the remaining unpaid principal balance must be repaid. The quarterly principal payment amounts increase from $250 to $1,250 over the term of the term loan. In addition, the Company must, following each fiscal year-end, make principal repayments equal to a percentage of its excess cash flow (as defined under the New Credit Agreement) for the fiscal year, which percentage is determined based on the Company’s total funded debt to consolidated adjusted EBITDA ratio. A description of this ratio is provided in Exhibit 10.9, incorporated by reference to this Form 10-K.
The revolving line of credit matures on February 28, 2025.
Amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to LIBOR (or, if necessary, a broadly-adopted replacement index), subject to a 1.75% floor, plus 3.75%. The obligations under the New Credit Agreement are secured by a perfected first-priority security interest in all the assets of the Company and its subsidiaries. The New Credit Agreement contains customary covenants, representations and events of default, and also requires the Company to comply with a fixed charge coverage ratio and total funded debt to consolidated adjusted EBITDA ratio.
The description of the New Credit Agreement provided herein is qualified by reference to the New Credit Agreement, which is incorporated by reference to this Form 10-K.
The New Credit Agreement contains representations and warranties by each of the parties to the New Credit Agreement, which were made only for purposes of the New Credit Agreement and as of specified dates. The representations, warranties and covenants in the New Credit Agreement were made solely for the benefit of the parties to the New Credit Agreement, are subject to limitations agreed upon by such parties, including being qualified by schedules, may have been made for the purposes of allocating contractual risk between the parties instead of establishing these matters as facts, and are subject to standards of materiality applicable to the parties that may differ from those applicable to others. Others should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the New Credit Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
In connection with the Company entering into the New Credit Agreement with the Bank, on February 28, 2020, the Company and the Bank terminated the existing Credit Agreement, dated as of May 23, 2017, between the Company, DT Media, DT USA and the Bank (and the amendments thereto), which was the previous revolving credit facility of the Company.
At March 31, 2020, there was $20,000 outstanding principal on the New Credit Agreement and the Company had $5,000 available to draw.
Inclusive of the Notes issued on September 28, 2016 and the Credit Agreement entered into on May 23, 2017 in prior years, and the New Credit Agreement in the current year, the Company recorded $101, $322, and $1,049 of interest expense during the years ended March 31, 2020, 2019, and 2018 respectively.
Additionally, aggregate debt discount and debt issuance cost amortization related to the Notes in the prior years, detailed in the paragraph above, and debt issuance cost amortization related to the New Credit Agreement in the current year, is reflected on the Consolidated Statement of Operations as interest expense. Inclusive of this amortization of $6 recorded during the year ended March 31, 2020, $798 recorded during the year ended March 31, 2019, and $1,018 recorded during March 31, 2018, the Company recorded $107, $1,120, and $2,067 of total interest expense for the years ended March 31, 2020, 2019, and 2018 respectively.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef