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

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

3 Months Ended

Jun. 30, 2018

Fair Value, Liabilities Measured on Recurring and Nonrecurring Basis

As of June 30, 2018 and March 31, 2018, 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 June 30, 2018
							(Unaudited)
Financial Liabilities
Convertible note embedded derivative liability	$	—	$	—	$	3,056	$	3,056
Warrant liability	—		—		2,410		2,410
Total	$	—	$	—	$	5,466	$	5,466



	Level 1		Level 2		Level 3		Balance as of March 31, 2018
Financial Liabilities
Convertible note embedded derivative liability	$	—	$	—	$	4,676	$	4,676
Warrant liability	—		—		3,980		3,980
Total	$	—	$	—	$	8,656	$	8,656

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

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

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, 2018	$	4,676
Change in fair value of convertible note embedded derivative liability	(1,620		)
Balance at June 30, 2018	$	3,056

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):



	Level 3
Balance at March 31, 2018	$	3,980
Change in fair value of warrant liability	(1,570		)
Balance at June 30, 2018	$	2,410

Fair Value Inputs, Liabilities, Quantitative Information

The market-based assumptions and estimates used in valuing the convertible note embedded derivative liability include amounts in the following amounts:



	June 30, 2018
Stock price volatility	65	%
Probability of change in control	1.75	%
Stock price (per share)	$1.51
Expected term	2.25 years
Risk-free rate (1)	2.51	%
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 2-year and 3-year U.S. Treasury securities as of the valuation date.}

The market-based assumptions and estimates used in valuing the warrant liability include amounts in the following amounts:



	June 30, 2018
Stock price volatility	65	%
Probability of change in control	1.75	%
Stock price (per share)	$1.51
Expected term	2.25 years
Risk-free rate (1)	2.51	%
Assumed early conversion/exercise price (per share)	$2.73

The assumptions utilized in this model for options granted during the three months ended June 30, 2018 are presented below.



		June 30, 2018
Risk-free interest rate		2.79% to 2.85%
Expected life of the options		5.65 to 9.94 years
Expected volatility		66%
Expected dividend yield		—%
Expected forfeitures		29%