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

Quarterly report pursuant to Section 13 or 15(d)

Acquisitions and Disposals

Acquisitions and Disposals

3 Months Ended

Jun. 30, 2014

3.	Acquisitions and Disposals

DT APAC

On April 12, 2013, Mandalay Digital, through its indirect wholly owned subsidiary DT APAC, acquired all of the issued and outstanding stock of MIAH. MIAH owns directly or indirectly subsidiaries Mirror Image Access (Australia) Pty Ltd (MIA), MIA Technology Australia Pty Ltd (MIATA) and MIA Technology IP Pty Ltd.

The purpose of the DT APAC acquisition was an effort to not only build on the Company’s current distribution network, but to enhance its mobile content infrastructure with the IP acquired in the purchase.

The acquisition of DT APAC was capitalized through a combination of intercompany debt and the issuance of equity.

The purchase consideration for the transaction was comprised of cash, a note, and common stock of the Company, as follows:

(1)

At closing AUD 1,220 in cash, translated to $1,287 for US GAAP reporting purposes;

(2)

Convertible Note payable of AUD 2,280, translated to $2,404;

(3)

Shares of common stock of the Company (the “Closing Shares”) equivalent to AUD 3,500, translated to $3,691 and under the agreement, converted to shares at $3.65 per share, or 1,011,164 shares of the common stock of the Company. The closing price of the stock on that day was $4.40 per share, for a total value of $4,449.

The Closing Shares are subject to a Registration Rights Agreement that provides for piggyback rights for 3 years and inclusion on the Company’s Form S-3 filed August 30, 2013, and subsequently made effective on October 31, 2013.

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the date of acquisition.


	Unaudited
Cash	$	513
Accounts receivable		2,809
Prepaid expenses and other assets		896
Property, plant and equipment		300
Customer relationships		1,600
Developed technology		3,400
Trade names / trademarks		54
Library		300
Goodwill		2,654
Accounts payable		(1,151	)
Accrued liabilities		(2,890	)
Accrued compensation		(345	)

Purchase price	$	8,140

In addition to the value assigned to the acquired workforce, the Company recorded the excess of the purchase price over the estimated fair value of the assets acquired as an increase in goodwill. This goodwill arises because the purchase price reflects the strategic fit and resulting synergies that the acquired business brings to the Company’s existing operations. In the fiscal year ended March 31, 2014, the Company recorded an impairment charge of $54 to write down trade names pursuant to its decision to rename and rebrand DT APAC. In the period ended June 30, 2014, the Company finalized the purchase price allocation of DT APAC, which resulted in an adjustment from intangibles to goodwill of $1,472.

The amortization period for the intangible assets acquired in the MIA transaction is as follows:


	Remaining Useful Life
Customer relationships		14 years
Developed technology		5 years
Trade names / Trademarks		5 years
Library		5 years
Goodwill		Indefinite

The pro forma financial information of the Company’s consolidated operations if the acquisition of DT APAC had occurred as of April 1, 2012 is presented below.


	Unaudited
	Three Months Ended June 30,
	2013
Revenues	$	5,617
Cost of goods sold		3,640
Gross profit		1,977
Operating expenses		6,215
Loss from operations		(4,238	)
Non-operating expense		1,600
Loss before provision for income taxes		(5,838	)
Provision for income taxes		(135	)
Net loss	$	(5,703	)
Basic and diluted loss per share	$	(0.30	)