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

9 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Employee Stock Plan

On September 15, 2020, the Company’s stockholders approved the 2020 Equity Incentive Plan of Digital Turbine, Inc. (the “2020 Plan”), pursuant to which the Company may grant equity incentive awards to directors, employees and other eligible participants. A total of 12,000,000 shares of common stock are reserved for grant under the 2020 Plan. The types of awards that may be granted under the 2020 Plan include incentive and non-qualified stock options, stock appreciation rights, restricted stock, and restricted stock units. The 2020 Plan became effective on September 15, 2020 and has a term of ten years. 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”).

Previous to the approval of the Plan, stock awards were issued 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. The 2011 Plan provided 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, restricted stock, and restricted stock units. Stock options may be either ISOs, as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or NQSOs.

The 2011 Plan and 2020 Plan are collectively referred to as "Digital Turbine's Incentive Plans."

The 2011 Plan reserved 20,000,000 shares for issuance, of which zero and 6,366,088 remained available as of December 31, 2020 and March 31, 2020, respectively. No future grants will be issued pursuant to the 2011 Plan. At the point when the 2011 Plan was retired, 4,452,064 remained unissued. All future awards will be issued under the 2020 Plan.

The 2020 Plan reserves 12,000,000 shares for issuance, of which 11,965,342 remained available for issuance as of December 31, 2020. The change over the period represents stock option grants, stock option forfeitures/cancellations, and restricted shares/units of common stock of 34,658 shares, zero shares, and zero shares, respectively.

Restricted Stock Units

Awards of restricted stock units ("RSUs") may be either grants of time-based restricted units or performance-based restricted units that are issued at no cost to the recipient. The cost of these awards is determined using the fair market value of the Company’s common stock on the date of the grant. No capital transaction occurs until the units vest, at which time they are converted to unrestricted stock. Compensation expense for RSUs with a time condition is recognized on a straight-line basis over the requisite service period. Compensation expense for RSUs with a performance condition are recognized on a straight-line basis based on the most likely attainment scenario, which is re-evaluated each reporting period.

In June 2018, the Company issued 232,558 RSUs to its Chief Executive Officer and Chief Financial Officer. The shares vest over three years. The fair value of the shares on the date of issuance was $400.

In May 2019, the Company issued 109,416 RSUs to its Chief Executive Officer and Chief Financial Officer. The shares vest over three years. The fair value of the shares on the date of issuance was $413.

In May 2020, the Company issued 109,034 RSUs to its Chief Executive Officer and Chief Financial Officer. The shares vest over three years. The fair value of the shares on the date of issuance was $700.

With respect to RSUs, the Company expensed $126 and $339 during the three and nine months ended December 31, 2020, respectively, and $68 and $152 during the three and nine months ended December 31, 2019, respectively. Remaining unamortized expense, with respect to RSUs, of $815 is expected to be recognized over a weighted-average period of approximately 2.42 years.


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested restricted units outstanding as of March 31, 2020	293,525	$	2.48
Granted	109,034	6.42
Vested	(77,321)	2.49
Cancelled	—	—
Unvested restricted units outstanding as of December 31, 2020	325,238	$	3.91

Stock Option Agreements

Stock options granted under Digital Turbine's Incentive 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. 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 Digital Turbine's Incentive 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, 2020	8,984,430	$	2.75	7.17	$	16,517
Granted	1,937,462	6.47
Forfeited / Cancelled	(282,840)	5.58
Exercised	(1,979,387)	2.99
Options Outstanding, December 31, 2020	8,659,665	3.44		7.11	460,038
Vested and expected to vest (net of estimated forfeitures) at December 31, 2020 (a)	7,784,550	3.14		6.90	415,871
Exercisable, December 31, 2020	4,870,289	$	2.43	6.10	$	263,634

(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 December 31, 2020 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 December 31, 2020. The intrinsic value changes based on changes in the price of the Company's common stock.

Information about options outstanding and exercisable at December 31, 2020 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 - 5.00	6,008,608	$	2.09	6.22	4,417,792	$	2.08
$5.01 - 10.00	2,458,446	$	5.67	9.10	446,846	$	5.65
$10.01 - 15.00	126,272	$	13.43	9.52	—	$	—
$15.01 - 20.00	31,681	$	15.54	9.53	3,734	$	15.54


$30.01 - and over	34,658	$	30.03	9.83	1,917	$	30.03
	8,659,665	3.44		7.11	4,870,289	2.43

Other information pertaining to stock options for Digital Turbine's Incentive Plans for the nine months ended December 31, 2020 and 2019, as stated in the table below, is as follows:


	December 31,
	2020		2019
Total fair value of options vested	$	3,340	$	2,028
Total intrinsic value of options exercised (a)	$	52,657	$	10,364

(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 nine months ended December 31, 2020 and 2019.

During the nine months ended December 31, 2020 and 2019, the Company granted options to purchase 1,937,462 and 1,738,750 shares of its common stock, respectively, to employees with weighted-average grant-date fair values of $6.47 and $4.34, respectively.

At December 31, 2020 and 2019, there was $6,495 and $3,518 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 2.12 and 2.16 years, respectively.

Valuation of Awards

For stock options granted under Digital Turbine's Incentive 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 nine months ended December 31, 2020 are presented below.


						December 31, 2020
Risk-free interest rate						0.21% to 0.36%
Expected life of the options						5.02 to 5.23 years
Expected volatility						64% to 69%
Expected dividend yield						—%
Expected forfeitures						28% to 29%

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 Digital Turbine's Incentive Plans for the three and nine months ended December 31, 2020, which includes both stock options and restricted stock, was $160 and $4,126, respectively, inclusive of an adjustment during the three months ended December 31, 2020 of $(1,397) as a true-up related to the Company's adoption of ASU 2018-07. Although this is an out-of-period adjustment, the Company determined that the adjustment was not material to the consolidated financial statements for any previously reported annual or interim period, nor to the three and nine months ended December 31, 2020. Therefore, we recorded the adjustment in the third quarter of fiscal year 2021 rather than revising prior periods presented. Total stock compensation expense for Digital Turbine's Incentive Plans for the three and nine months ended December 31, 2019, which includes both stock options and restricted stock, was $915 and $1,597, respectively. Please refer to Note "Capital Stock Transactions" regarding restricted stock.