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)

9 Months Ended

Dec. 31, 2018

Schedule of Financial Assets and Liabilities Measured at Fair Value

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

As of December 31, 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 December 31, 2018
							(Unaudited)
Financial Liabilities
Convertible note embedded derivative liability	$	—	$	—	$	3,113	$	3,113
Warrant liability	—		—		3,135		3,135
Total	$	—	$	—	$	6,248	$	6,248



	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

Reconciliation of Financial Liabilities Measured at Fair Value

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	(845		)
Balance at December 31, 2018	$	3,135

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	(1,096		)
Derecognition on extinguishment or conversion	(467		)
Balance at December 31, 2018	$	3,113

Schedule of Market-based Assumptions

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



	December 31, 2018
Stock price volatility	60	%
Probability of change in control	1.75	%
Stock price (per share)	$1.83
Expected term	1.75 years
Risk-free rate (1)	2.49	%
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 1-year and 2-year U.S. Treasury securities as of the valuation date.}

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



	December 31, 2018
Stock price volatility	60	%
Probability of change in control	1.75	%
Stock price (per share)	$1.83
Expected term	1.75 years
Risk-free rate (1)	2.49	%
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 assumptions utilized in this model for options granted during the nine months ended December 31, 2018 are presented below.



		December 31, 2018
Risk-free interest rate		2.67% to 2.94%
Expected life of the options		5.62 to 9.44 years
Expected volatility		66%
Expected dividend yield		—%
Expected forfeitures		29%