Digital Turbine, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Description of Stock Plans

Description of Stock Plans

6 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Stock Plan

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

The 2011 Plan provides for grants of stock-based incentive awards to our and our subsidiaries’ officers, employees, non-employee directors, and consultants. Awards issued under the 2011 Plan can include stock options, stock appreciation rights (“SARs”), restricted stock, and restricted stock units (sometimes referred to individually or collectively as “Awards”). Stock options may be either “incentive stock options” (“ISOs”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or non-qualified stock options (“NQSOs”).

The 2011 Plan reserves 20,000,000 shares for issuance, of which 9,285,919 and 9,665,123 remained available for future grants as of September 30, 2017 and March 31, 2017, respectively. The change over the comparative period represents stock option grants, stock option forfeitures/cancellations, and restricted shares of common stock of 872,000, 757,934, and 265,138, respectively.

Stock Option Agreements

Stock options granted under Digital Turbine's Stock Plans typically vest over a three-to-four year period. These options, which are granted with option exercise prices equal to the fair market value of the Company’s common stock on the date of grant, generally expire up to ten years from the date of grant. In the year ended March 31, 2015, in connection with the Appia acquisition, the Company exchanged stock options previously granted under the Appia Plan for options to purchase shares of the Company’s common stock under the 2011 Plan. These assumed Appia options typically vest over a period of four years and generally expire within ten years from the date of grant. Compensation expense for all stock options is recognized on a straight-line basis over the requisite service period.

Stock Option Activity

The following table summarizes stock option activity for the Stock Plans for the periods or as of the dates indicated:



	Number of Shares		Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Options Outstanding, March 31, 2017	9,735,778		$	2.56	7.95	$	801
Granted	872,000		1.06
Forfeited / Cancelled	(757,934	)	2.19
Exercised	(24,211	)	0.71
Options Outstanding, September 30, 2017	9,825,633		2.46		7.71	3,320
Vested and expected to vest (net of estimated forfeitures) at September 30, 2017 (a)	8,753,144		2.64		7.53	2,727
Exercisable, September 30, 2017	4,162,328		$	4.23	6.10	$	536

(a) For options vested and expected to vest, options exercisable, and options outstanding, the aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Digital Turbine's closing stock price on September 30, 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 September 30, 2017. The intrinsic value changes based on changes in the price of the Company's common stock.

Information about options outstanding and exercisable at September 30, 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	2.48	7,652	$	0.24
$0.51 - 1.00	3,359,407	$	0.73	9.04	438,141	$	0.69
$1.01 - 1.50	2,892,564	$	1.28	8.70	635,671	$	1.24
$1.51 - 2.00	206,333	$	1.51	7.88	114,973	$	1.51
$2.01 - 2.50	253,779	$	2.43	3.33	220,445	$	2.42
$2.51 - 3.00	891,532	$	2.62	6.73	773,778	$	2.63
$3.51 - 4.00	840,300	$	3.96	7.02	732,385	$	3.96
$4.01 - 4.50	844,066	$	4.14	5.82	721,369	$	4.14
$4.51 - 5.00	60,000	$	4.65	5.49	60,000	$	4.65
$5.01 and over	470,000	$	16.32	1.26	457,914	$	16.60
	9,825,633				4,162,328

Other information pertaining to stock options for the Stock Plans for the six months ended September 30, 2017 and 2016, as stated in the table below, is as follows:



	September 30,
	2017		2016
Total fair value of options vested	$	1,461	$	2,452
Total intrinsic value of options exercised (a)	$	9	$	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 six months ended September 30, 2017 and 2016.

During the six months ended September 30, 2017 and 2016, the Company granted options to purchase 872,000 and 1,037,000 shares of its common stock, respectively, to employees with weighted-average grant-date fair values of $1.06 and $0.82, respectively.

At September 30, 2017 and 2016, there was $3,254 and $6,731 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 2.02 and 2.31 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 three and six months ended September 30, 2017 are presented below.



		September 30, 2017
Risk-free interest rate		1.8% to 2.3%
Expected life of the options		5.69 to 9.93 years
Expected volatility		73%
Expected dividend yield		—%
Expected forfeitures		20%

Expected volatility is based on a blend of implied and historical volatility of the Company's common stock over the most recent period commensurate with the estimated expected term of the Company’s stock options. The Company uses this blend of implied and historical volatility, as well as other economic data, because management believes such volatility is more representative of prospective trends. The expected term of an award is based on historical experience and on the terms and conditions of the stock awards granted to employees.

Total stock compensation expense for the Company’s Stock Plans for the three and six months ended September 30, 2017 and 2016, which includes both stock options and restricted stock, was $765 and $1,629, respectively, and $1,173 and $2,476, respectively. Please refer to Note 10. "Capital Stock Transactions" regarding restricted stock.