Digital Turbine, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

12 Months Ended

Mar. 31, 2019

Fair Value, Liabilities Measured on Recurring and Nonrecurring Basis

As of March 31, 2019, and 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 (in thousands):



	Level 1		Level 2		Level 3		Balance as of March 31, 2019
Financial Liabilities
Convertible note embedded derivative liability	$	—	$	—	$	—	$	—
Warrant liability	—		—		8,013		8,013
Total	$	—	$	—	$	8,013	$	8,013



	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 as of September 28, 2016
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	1,008
De-recognition on extinguishment or conversion	(5,684		)
Balance at March 31, 2019	$	—

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	4,875
De-recognition on extinguishment or conversion	(842		)
Balance at March 31, 2019	$	8,013

Fair Value of Options Granted Using the Black-Scholes Option-Pricing Model

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



	March 31, 2019
Stock price volatility	60	%
Probability of change in control	1.75	%
Stock price (per share)	$3.50
Expected term	1.50 years
Risk-free rate (1)	2.31	%
Assumed early conversion/exercise price (per share)	$2.73

^{(1) The Monte Carlo simulation assumes the continuously compounded equivalent (CCE) interest rate of}^2.31%^{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 amounts in the following amounts:



	March 31, 2019
Stock price volatility	60	%
Probability of change in control	1.75	%
Stock price (per share)	$3.50
Expected term	1.50 years
Risk-free rate (1)	2.31	%
Assumed early conversion/exercise price (per share)	$2.73

The assumptions utilized in this model during fiscal 2019, 2018, and 2017 are presented below.



	Year ended March 31,
	2019	2018	2017
Risk-free interest rate	2.38% to 2.96%	1.77% to 2.73%	1.34% to 2.38%
Expected life of the options	5.52 to 9.19 years	5.65 to 9.84 years	5.69 to 9.84 years
Expected volatility	66%	66% to 73%	73% to 130%
Expected dividend yield	—%	—%	—%
Expected forfeitures	29%	28% to 29%	10% to 35%