UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2014

or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35958

 

DIGITAL TURBINE, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

22-2267658

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

1300 Guadalupe Street Suite # 302, Austin TX

 

78701

(Address of Principal Executive Offices)

 

(Zip Code)

(512) 387-7717

(Issuer’s Telephone Number, Including Area Code)

 

2811 Cahuenga Boulevard West, Los Angeles, CA, 90068

(former name, former address and former fiscal year if changed since last report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of a “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

 

Large Accelerated Filer

¨

 

  

Accelerated Filer

 

¨

 

 

 

 

Non-accelerated Filer

¨

(do not check if smaller reporting company)

  

Smaller Reporting Company

 

x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of February 5, 2014, the Company had 37,824,011 shares of its common stock, $0.0001 par value per share, outstanding.

 

 

 


 

 

DIGITAL TURBINE, INC.

FORM 10-Q QUARTERLY REPORT FOR THE QUARTER ENDED DECEMBER 31, 2014

Table of Contents

 

 

 

 

  

Page

 

 

PART I – FINANCIAL INFORMATION

  

 

Item 1.

 

Consolidated Financial Statements

  

1

 

 

Consolidated Balance Sheets as of December 31, 2014 (Unaudited) and March 31, 2014

  

1

 

 

Consolidated Statements of Operations and Comprehensive Loss (Unaudited) For the Nine Month Period Ended December 31, 2014 and 2013

  

2

 

 

Consolidated Statements of Stockholders’ Equity (Unaudited) for the Nine Month Period Ended December 31, 2014 and 2013

  

3

 

 

Consolidated Statements of Cash Flows (Unaudited) For the Nine Month Period Ended December 31, 2014 and 2013

  

4

 

 

Notes to the Unaudited Consolidated Financial Statements

  

6

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

25

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

  

35

Item 4

 

Controls and Procedures

  

35

 

 

PART II – OTHER INFORMATION

  

 

Item 1.

 

Legal Proceedings

  

37

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

  

37

Item 3.

 

Defaults

  

37

Item 4.

 

Mine Safety Disclosures

  

37

Item 5.

 

Other Information

  

37

Item 6.

 

Exhibits

  

38

Signatures

  

40

 

 

 

 


PART I – FINANCIAL INFORMATION

 

kITEM 1 – FINANCIAL STATEMENTS

Digital Turbine, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

 

 

(unaudited)

 

 

 

 

 

 

December 31,

 

 

March 31,

 

 

2014

 

 

2014

 

ASSETS

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

11,384

 

 

$

21,805

 

Restricted cash

 

200

 

 

 

200

 

Accounts receivable, net of allowances of $0 and $0, respectively

 

5,545

 

 

 

5,102

 

Deposits

 

96

 

 

 

24

 

Prepaid expenses and other current assets

 

366

 

 

 

350

 

Total current assets

 

17,592

 

 

 

27,481

 

Property and equipment, net

 

414

 

 

 

465

 

Deferred tax assets

 

28

 

 

 

3,238

 

Intangible assets, net

 

8,004

 

 

 

9,074

 

Goodwill

 

7,309

 

 

 

4,837

 

TOTAL ASSETS

$

33,346

 

 

$

45,095

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

$

3,756

 

 

$

2,943

 

Accrued license fees and revenue share

 

3,902

 

 

 

3,395

 

Accrued compensation

 

1,883

 

 

 

1,681

 

Deferred tax liabilities

 

28

 

 

 

2,987

 

Other current liabilities

 

2,111

 

 

 

900

 

Total current liabilities

 

11,680

 

 

 

11,906

 

Long term contingent liability, less discount of $0 and $762, respectively

 

-

 

 

 

238

 

Total liabilities

$

11,680

 

 

$

12,144

 

Stockholders' equity

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

 

Series A convertible preferred stock at $0.0001 par value;

     200,000 shares authorized, 100,000 issued and outstanding

     (liquidation preference of $1,000,000)

 

100

 

 

 

100

 

Common stock, $0.0001 par value: 200,000,000 shares authorized;

     38,606,885 issued and 37,852,285 outstanding at December 31, 2014;

     38,143,028 issued and 37,388,429 outstanding at March 31, 2014;

 

7

 

 

 

7

 

Additional paid-in capital

 

197,330

 

 

 

193,422

 

Treasury Stock (754,599 shares at December 31, 2014 and March 31, 2014)

 

(71

)

 

 

(71

)

Accumulated other comprehensive loss

 

(97

)

 

 

(199

)

Accumulated deficit

 

(175,603

)

 

 

(160,308

)

Total stockholders' equity

 

21,666

 

 

 

32,951

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

33,346

 

 

$

45,095

 

 

 

 

1


Digital Turbine, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(In thousands, except per share amounts)

 

 

 

3 Months Ended

 

 

3 Months Ended

 

 

9 Months Ended

 

 

9 Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

December 31,

 

 

December 31,

 

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Net revenues

 

$

7,006

 

 

$

6,809

 

 

$

18,023

 

 

$

18,352

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License fees and revenue share

 

 

4,609

 

 

 

4,421

 

 

 

11,720

 

 

 

11,054

 

Other direct cost of revenues

 

 

413

 

 

 

455

 

 

 

1,102

 

 

 

1,314

 

Total cost of revenues

 

 

5,023

 

 

 

4,876

 

 

 

12,823

 

 

 

12,368

 

Gross profit

 

 

1,983

 

 

 

1,933

 

 

 

5,200

 

 

 

5,984

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product development

 

 

1,718

 

 

 

2,039

 

 

 

5,832

 

 

 

6,034

 

Sales and marketing

 

 

485

 

 

 

472

 

 

 

1,989

 

 

 

1,381

 

General and administrative

 

 

5,171

 

 

 

3,110

 

 

 

12,094

 

 

 

10,202

 

Total operating expenses

 

 

7,375

 

 

 

5,621

 

 

 

19,915

 

 

 

17,617

 

Loss from operations

 

 

(5,391

)

 

 

(3,688

)

 

 

(14,714

)

 

 

(11,633

)

Interest and other income / (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest  income / (expense)

 

 

5

 

 

 

(4

)

 

 

(122

)

 

 

(1,637

)

Foreign exchange transaction gain

 

 

39

 

 

 

5

 

 

 

32

 

 

 

61

 

Change in fair value of warrant derivative liabilities loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(811

)

Loss on extinguishment of debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(442

)

Gain / (loss) on settlement of debt

 

 

1

 

 

 

27

 

 

 

(9

)

 

 

60

 

Gain/ (loss) on disposal of fixed assets

 

 

-

 

 

 

(1

)

 

 

2

 

 

 

1

 

Gain on change on valuation of long term contingent liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

603

 

Other expense

 

 

(25

)

 

 

-

 

 

 

(13

)

 

 

-

 

Total interest and other income / (expense)

 

 

21

 

 

 

27

 

 

 

(110

)

 

 

(2,165

)

Loss from operations before income taxes

 

 

(5,369

)

 

 

(3,661

)

 

 

(14,825

)

 

 

(13,798

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

 

114

 

 

 

7

 

 

 

469

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations, net of taxes

 

 

(5,484

)

 

 

(3,668

)

 

 

(15,294

)

 

 

(13,807

)

Loss from operations of discontinued component

 

 

-

 

 

 

(508

)

 

 

-

 

 

 

(2,277

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)

 

$

(5,484

)

 

$

(4,176

)

 

$

(15,294

)

 

$

(16,084

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income / (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

$

32

 

 

$

(63

)

 

$

102

 

 

$

375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

$

(5,452

)

 

$

(4,239

)

 

$

(15,192

)

 

$

(15,709

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

 

$

(0.15

)

 

$

(0.13

)

 

$

(0.41

)

 

$

(0.63

)

Continuing operations

 

$

(0.15

)

 

$

(0.12

)

 

$

(0.41

)

 

$

(0.54

)

Discontinued operations

 

$

-

 

 

$

(0.01

)

 

$

-

 

 

$

(0.09

)

Net loss

 

$

(0.15

)

 

$

(0.13

)

 

$

(0.41

)

 

$

(0.63

)

Weighted average common shares outstanding, basic and diluted

 

 

37,799

 

 

 

31,329

 

 

 

37,576

 

 

 

25,544

 

 

2


Digital Turbine, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

Preferred Stock

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income/(Loss)

 

 

Deficit

 

 

Total

 

Balance at March 31, 2014

 

37,388,429

 

 

$

7

 

 

 

100,000

 

 

$

100

 

 

 

754,600

 

 

$

(71

)

 

$

193,422

 

 

$

(199

)

 

$

(160,308

)

 

$

32,951

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,610

)

 

 

(4,610

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

38

 

Vesting of shares issued to employee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

 

 

 

100

 

Vesting of options issued to employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

718

 

 

 

 

 

 

 

 

 

718

 

Vesting of restricted stock for services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76

 

 

 

 

 

 

 

 

 

76

 

Shares issued as settlement of debt

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

188

 

 

 

 

 

 

 

 

 

188

 

Balance at June 30, 2014

 

37,438,429

 

 

 

7

 

 

 

100,000

 

 

 

100

 

 

 

754,600

 

 

 

(71

)

 

 

194,504

 

 

 

(161

)

 

 

(164,918

)

 

 

29,461

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,201

)

 

 

(5,201

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

 

 

 

 

32

 

Vesting of shares issued to employee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

 

 

 

100

 

Vesting of options issued to employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

889

 

 

 

 

 

 

 

 

 

889

 

Vesting of restricted stock for services

 

45,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

172

 

 

 

 

 

 

 

 

 

172

 

Warrant exercised

 

300,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

375

 

 

 

 

 

 

 

 

 

375

 

Balance at September 30, 2014

 

37,783,804

 

 

 

7

 

 

 

100,000

 

 

 

100

 

 

 

754,600

 

 

 

(71

)

 

 

196,040

 

 

 

(129

)

 

 

(170,119

)

 

 

25,828

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,484

)

 

 

(5,484

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

 

 

 

 

32

 

Vesting of shares issued to employee

 

55,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

178

 

 

 

 

 

 

 

 

 

178

 

Vesting of options issued to employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,068

 

 

 

 

 

 

 

 

 

1,068

 

Vesting of restricted stock for services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44

 

 

 

 

 

 

 

 

 

44

 

for services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjust treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant exercised

 

13,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2014

 

37,852,285

 

 

$

7

 

 

 

100,000

 

 

$

100

 

 

 

754,599

 

 

$

(71

)

 

$

197,330

 

 

$

(97

)

 

$

(175,603

)

 

$

21,666

 

 

 

3


Digital Turbine, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

(In thousands)  

 

9 Months Ended

 

 

9 Months Ended

 

 

December 31,

 

 

December 31,

 

 

2014

 

 

2013

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net (loss)/income

$

(15,294

)

 

$

(16,084

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on disposal of discontinued operations, net of taxes

 

-

 

 

 

1,634

 

Depreciation and amortization

 

1,168

 

 

 

1,584

 

Amortization of debt discount

 

-

 

 

 

186

 

Interest and PIK interest accrued

 

-

 

 

 

101

 

Finance costs

 

-

 

 

 

1,724

 

Stock and stock option compensation

 

2,975

 

 

 

1,354

 

Stock issued for services

 

369

 

 

 

2,173

 

Warrants issued for services

 

-

 

 

 

406

 

Stock issued as settlement of debt with a supplier

 

-

 

 

 

51

 

Settlement of debt with a supplier

 

-

 

 

 

182

 

Revaluation of contingent liability

 

-

 

 

 

(603

)

Increase in fair value of derivative liabilities

 

-

 

 

 

811

 

(Increase) / decrease in assets, net of effect of disposal of subsidiary:

 

 

 

 

 

 

 

Accounts receivable

 

(443

)

 

 

(1,506

)

Deposits

 

(73

)

 

 

439

 

Deferred tax assets

 

3,210

 

 

 

-

 

Prepaid expenses and other current assets

 

(16

)

 

 

346

 

Increase / (decrease) in liabilities, net of effect of disposal of subsidiary:

 

 

 

 

 

 

 

Accounts payable

 

438

 

 

 

(443

)

Accrued license fees and revenue share

 

507

 

 

 

3,011

 

Accrued compensation

 

202

 

 

 

229

 

Other liabilities and other items

 

(1,748

)

 

 

(2,501

)

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

(8,705

)

 

 

(6,906

)

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchase and disposal of property and equipment, net

 

67

 

 

 

(61

)

Settlement of contingent liability

 

(49

)

 

 

-

 

Cash used in acquisition of assets

 

(2,125

)

 

 

 

 

Cash used in acquisition of subsidiary

 

-

 

 

 

(1,287

)

Cash acquired with acquisition of subsidiary

 

-

 

 

 

513

 

Net cash used in investing activities

 

(2,107

)

 

 

(835

)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Repayment of debt obligations

 

-

 

 

 

(3,657

)

Issuance of shares for cash

 

-

 

 

 

14,924

 

Warrant exercised

 

375

 

 

 

-

 

Net cash provided by financing activities

 

375

 

 

 

11,267

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

16

 

 

 

(19

)

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(10,421

)

 

 

3,507

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of period

 

21,805

 

 

 

1,149

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

$

11,384

 

 

$

4,656

 

4


Supplemental disclosure of cash flow information: