Item 1.01. Entry into a Material Definitive Agreement
On September 28, 2016, Digital
Turbine, Inc. (“Digital Turbine,” “we” or the “Company”) closed the previously announced
private placement of $16 million aggregate principal amount of its 8.75% Convertible Senior Notes due 2020 (the
“Notes”). BTIG, LLC was the initial purchaser under the Initial Purchase Agreement described below. The net
proceeds of the offering, after deducting the initial purchaser's discounts and commissions and the estimated offering
expenses payable by Digital Turbine, were approximately $14.3 million. The net proceeds from the private placement were used
to repay approximately $11 million of secured indebtedness, consisting of approximately $3 million to Silicon Valley Bank and
$8 million to North Atlantic Capital, retiring both such debts in their entirety, and will otherwise be used for general
corporate purposes.
Initial Purchaser Agreement
The offer and sale of the Notes and the
accompanying warrants (as detailed below) were made pursuant to an Initial Purchaser Agreement, dated September 23, 2016, among
the Company, certain subsidiary guarantors of the Company and BTIG, LLC, as initial purchaser. The Initial Purchaser Agreement
includes customary representations, warranties and covenants by Digital Turbine and such subsidiary guarantors.
The Company sold the Notes to the initial
purchaser at a purchase price of 92.75% of the principal amount thereof. The initial purchaser also received an additional 250,000
warrants on the same terms as the warrants issued with the Notes (as detailed below under “Warrant Agreement”) and
has the right to receive 2.5% of any cash consideration received by the Company in connection with a future exercise of any of
the warrants issued with the Notes.
The Company understands that the initial
purchaser will offer the Notes at a price equal to 100% of the principal amount thereof and the accompanying warrants to qualified
institutional buyers pursuant to Rule 144A under the Securities Act, as amended (the "Securities Act"), and to a limited
number of institutional accredited investors within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities
Act.
Indenture
The Notes were issued under an Indenture,
dated as of September 28, 2016, between Digital Turbine, Inc., certain Guarantors and US Bank National Association, as trustee.
The Notes are senior unsecured obligations of the Company, and bear interest at a rate of 8.75% per year, payable semiannually
in arrears on September 15th and March 15th of each year, beginning on March 15, 2017. The Notes are unconditionally guaranteed
by certain of the Company’s wholly-owned domestic and foreign subsidiaries, and will mature on September 23, 2020, unless
converted, repurchased or redeemed in accordance with their terms prior to such date.
The Notes are convertible by the holders
at their option at any time prior to the close of business on the business day immediately preceding the stated maturity date,
and upon conversion, the holders will receive shares of the Company’s common stock. The initial conversion rate for the Notes
is 733.14 shares per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of $1.364 per share of
common stock. The conversion rate and the conversion price is subject to adjustment in certain events as outlined in the Indenture.
With respect to any conversion prior to
September 23, 2019, in addition to the shares deliverable upon conversion, holders of the Notes will be entitled to receive a payment
equal to the remaining scheduled payments of interest that would have been made on the notes being converted from the date of conversion
until September 23, 2019 (an “Early Conversion Payment”). We may pay the Early Conversion Payment in cash or, subject
to certain equity-related conditions set forth in the Indenture, in shares of our common stock.
We may redeem the notes, for cash, in whole
or in part, at any time after September 23, 2018, at a redemption price equal to $1,000 per $1,000 principal amount of the notes
to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the date of redemption, plus an additional payment
(payable in cash or stock) equivalent to the amount of, and subject to equivalent terms and conditions applicable for, an Early
Conversion Payment had the notes been converted on the date of redemption, if (1) the closing price of our common shares on the
NASDAQ Capital Market has exceeded 200% of the conversion price then in effect (but disregarding the effect on such price from
certain anti-dilution adjustments) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading
day period (including the last trading day of such period) ending within the five trading days immediately preceding the date on
which we provide the redemption notice, (2) for the 15 consecutive trading days following the last trading day on which the closing
price of our common shares was equal to or greater than 200% of the conversion price in effect (but disregarding the effect on
such price from certain anti-dilution adjustments) on such trading day for the purpose of the foregoing clause, the closing price
of our common shares remains equal to or greater than 150% of the conversion price in effect (but disregarding the effect on such
price from certain anti-dilution adjustments) on the given trading day and (3) we are in compliance with certain other equity-related
conditions as set forth in the Indenture.
If we undergo a fundamental change, as
described in the Indenture, holders may require us to purchase the Notes in whole or in part for cash at a price equal to 120%
of the principal amount of the Notes to be purchased plus any accrued and unpaid interest, including additional interest, if any,
to, but excluding, the repurchase date. Conversions that occur in connection with a fundamental changes may entitle the holder
to receive an increased number of shares of common stock issuable upon such conversion, depending on the date of such fundamental
change and the valuation of the Company’s common stock related thereto.
Subject to limited exceptions, the Indenture
prohibits us from incurring additional indebtedness at any time while the Notes remain outstanding.
The Company has also agreed to hold a special
or annual meeting of its stockholders not later than January 15, 2017 to consider resolutions approving the issuance of the shares
of common stock underlying the Notes and the warrants such that such future issuances shall not be subject to any issuance limitation
cap required by The Nasdaq Capital Market in the absence of such stockholder approval. We are required to hold additional meetings
if such approval is not obtained.
Warrant Agreement
Each purchaser of the Notes
also received warrants to purchase 256.60 shares of the Company's common stock for each $1,000 in Notes purchased, or up
to 4,105,600 warrants in aggregate, in addition to the 250,000 warrants issued to the initial purchaser, as described above. The
warrants were issued under a Warrant Agreement, dated as of September 28, 2016, between Digital Turbine, Inc. and US Bank
National Association, as warrant agent.
The warrants are immediately exercisable
on the date of issuance at an initial exercise price of $1.364 per share and will expire on September 23, 2020. The exercise price
is subject to adjustment in certain events as outlined in the Warrant Agreement.
In the event of a fundamental change, as
set forth in the Warrant Agreements, the holders can elect to exercise their warrants or to receive an amount of cash under a Black-Scholes
calculation of the value of such warrants.
Registration Rights Agreement
In connection with the private placement,
the Company has agreed to file a registration statement covering the resale of the notes, the warrants, the shares of our common
stock issuable upon exercise of the warrants or upon conversion of the notes, and any shares of our common stock issued in connection
with an Early Conversion Payment.
The Notes, accompanying warrants, and shares
of the Company's common stock issuable upon conversion of the Notes or issuable upon exercise of the warrants are not registered
under the Securities Act or the securities laws of any state or other jurisdiction's securities laws and may not be offered or
sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act
and applicable state or other jurisdictions' securities laws.
On September 23, 2016, the Company issued
a press release announcing the pricing of the private placement. A copy of the press is filed as Exhibit 99.1 hereto and is incorporated
herein by reference.
In connection with the private placement,
the Company provided investors in the private placement with an offering memorandum which included risk factors relating to the
Company, its business and the industries in which it operates, and risks to consider with respect to an investment in the Company’s
common stock, the Notes and the warrants. A copy of such updated risk factors is filed as Exhibit 99.2 hereto and is incorporated
herein by reference.
The foregoing summaries of the Indenture,
the Warrant Agreement, the Registration Rights Agreement and the Initial Purchaser Agreement, are subject to, and qualified in
their entirety by, such documents attached hereto as Exhibits 4.1, 4.2, 4.3 and 10.1, which are incorporated herein by reference.
Certain of these documents contain representations and warranties and other statements (including statements that were negotiated
for risk allocation purposes among the parties thereto) which are not for the benefit of any party other than the parties to such
document or agreement and are not intended as a document for investors (to the extent they are not a party to such agreement)
or the public generally to obtain factual information about us or our subsidiaries.