# Digital Turbine, Inc.: Form 10-Q/A for the period ended Dec 31, 2008

- Company: [Digital Turbine, Inc.](/companies/apps.md) (CIK 317788)
- Form: 10-Q/A
- Filed: 2009-12-04
- Accepted by EDGAR: Dec 4, 2009, 01:32 ET
- Period: 2008-12-31
- Accession: 0001144204-09-063077
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/317788/000114420409063077/v163163_10qa.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/317788/000114420409063077/

## Management's discussion and analysis

As filed, 10,418 characters.

The following discussion should be read in conjunction with, and is qualified in its entirety by, the Financial Statements and the Notes thereto included in this report. This discussion contains certain forward-looking statements that involve substantial risks and uncertainties. When used in this Quarterly Report on Form 10-Q, the words “anticipate,” “believe,” “estimate,” “expect” and similar expressions, as they relate to our management or us, are intended to identify such forward-looking statements. Our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements as a result of a variety of factors including those set forth under “Risk Factors” in our Transitional Report on Form 10-KT for the Transition Period ended March 31, 2008. Historical operating results are not necessarily indicative of the trends in operating results for any future period.

Unless the context otherwise indicates, the use of the terms “we,” “our” “us” or the “Company” refer to the business and operations of Mandalay Media, Inc. (“Mandalay”) through its operating and wholly-owned subsidiaries, Twistbox Entertainment, Inc. (“Twistbox”) and AMV Holding Limited, a United Kingdom private limited company (“AMV”).

This discussion is included to compare the financial results of our successor to the financial results of our predecessor.

### Comparison of the Three Months Ended December 31, 2008 and 2007

### Revenues

*(In thousands)*

| Revenues by type: | Successor Three Months Ended December 31, 2008 | Predecessor 2007 |
| --- | ---: | ---: |
| Games | $1,245 | $1,011 |
| Other content | 9,760 | 3,008 |
| Total | $11,005 | 4,019 |

Games revenue includes both licensed and internally developed games for use on mobile phones. The growth in games revenue largely reflects additional revenue associated with the rollout of the Company’s Play for Prizes platform, and higher sell through of other games product in the quarter. Other content includes a broad range of primarily licensed product delivered in the form of WAP, Video, Wallpaper and Mobile TV. The increase in revenues in the three months ended December 31, 2008 over the prior year relates to the additional revenues resulting from the acquisition of AMV.

### Cost of Revenues

*(In thousands)*

| Cost of Revenues: | Successor Three Months Ended December 31, 2008 | Predecessor 2007 |
| --- | ---: | ---: |
| License Fees | $1,670 | $1,330 |
| Other direct cost of revenues | 2,264 | - |
| Total Cost of Revenues | $3,934 | $1,330 |
| Revenues | 11,005 | $4,019 |
| Gross Margin | 64.3% | 66.9% |

License fees represents costs payable to content providers for use of their intellectual property in products sold. The increase in expenses is proportionate to the increase in the related revenue. Other direct cost of revenues in the current quarter includes costs to deliver products, and amortization of the intangibles identified as part of the purchase price accounting and attributed to cost of revenues. The increase in other direct costs is largely attributable to AMV cost of revenues. The increase in margin is the result of the addition of higher margin revenue streams, particularly platform management and licensing.

### Operating Expenses

*(In thousands)*

|  | Successor Three Months Ended December 31, 2008 | Predecessor 2007 |
| --- | ---: | ---: |
| Product Development Expenses | $1,563 | $1,761 |
| Sales and Marketing Expenses | 4,243 | 987 |
| General and Administrative Expenses | 2,173 | 1,036 |
| Amortization of Intangible Assets | 177 | 30 |

Product Development expenses include the costs to develop, edit and make content ready for consumption on a mobile phone. The decrease in expenses compared to the third quarter of the prior year, are primarily the result of restructuring during the year which resulted in a reduction in employees, particularly in the product development areas.

Sales and Marketing Expenses represent the costs of sales and marketing personnel, and advertising and marketing campaigns – advertising has increased significantly with the AMV Acquisition in October 2008 due to the “direct to consumer” nature of that business, with a significant element of direct marketing required to stimulate revenues. In addition, a significant portion of AMV’s employee base is classified as sales and marketing employees.

General and administrative expenses represent management and support personnel costs in both Mandalay Media and Twistbox, and related expenses, as well as professional and consulting costs incurred, and other costs such as stock based compensation, depreciation and bad debt expenses. The increase in expense over the first quarter in the prior year is largely the result of stock option expense of $0.6 million, and additional legal and management expenses at the holding company level.

Amortization of intangibles in the current quarter represents amortization of the intangibles identified as part of the purchase price accounting related to the Twistbox acquisition and attributed to operating expenses. Amortization expenses in the first quarter of the prior year represents the amortization predecessor intangible assets related to prior acquisitions by Twistbox.

### Other Expenses

*(In thousands)*

|  | Successor Three Months Ended December 31, 2008 | Predecessor 2007 |
| --- | ---: | ---: |
| Interest and other income/(expense) | $(1,138) | $(157) |

Interest and other income/(expense) includes interest income on invested funds, interest expense related the Twistbox’s senior secured note, foreign exchange transaction gains and losses, and depreciation expense. The higher expense compared to the third quarter of the prior year relates to foreign exchange losses incurred in the current period, versus gains in the prior period.

### Comparison of the Nine Months Ended December 31, 2008 and 2007

### Revenues

*(In thousands)*

| Revenues by type: | Successor Nine Months Ended December 31, 2008 | Predecessor 2007 |
| --- | ---: | ---: |
| Games | $3,738 | $2,929 |
| Other content | 17,616 | 8,124 |
| Total | $21,354 | 11,083 |

Games revenue includes both licensed and internally developed games for use on mobile phones. The growth in games revenue largely reflects incremental revenue related to the rollout of the Play for Prizes platform, and additional games development projects. . Other content includes a broad range of primarily licensed product delivered in the form of WAP, Video, Wallpaper and Mobile TV. The increase in other content revenues over the the same period of the prior year is primarily due to the inclusion of revenues from AMV Holding which was acquired in the third quarter of fiscal 2009.

### Cost of Revenues

*(In thousands)*

| Cost of Revenues: | Successor Nine Months Ended December 31, 2008 | Predecessor 2007 |
| --- | ---: | ---: |
| License Fees | $5,604 | $4,548 |
| Other direct cost of revenues | 2,468 | 269 |
| Total Cost of Revenues | $8,072 | $4,817 |
| Revenues | 21,354 | $11,083 |
| Gross Margin | 62.2% | 56.5% |

License fees represents costs payable to content providers for use of their intellectual property in products sold. The increase in expenses is proportionate to the increase in the related revenue. Other direct cost of revenues in the current period includes costs to deliver products, and amortization of the intangibles identified as part of the purchase price accounting and attributed to cost of revenues. The increase in other direct costs is largely attributable to AMV cost of revenues. The increase in margin is the result of the addition of higher margin revenue streams, particularly platform management and licensing.

### Operating Expenses

*(In thousands)*

|  | Successor Nine Months Ended December 31, 2008 | Predecessor 2007 |
| --- | ---: | ---: |
| Product Development Expenses | $5,130 | $6,553 |
| Sales and Marketing Expenses | 6,527 | 3,541 |
| General and Administrative Expenses | 7,545 | 3,356 |
| Amortization of Intangible Assets | 451 | 120 |

Product Development expenses include the costs to develop, edit and make content ready for consumption on a mobile phone. The decrease in expenses compared to the first nine months of the prior year, are primarily the result of restructuring during the year which resulted in a reduction in employees, particularly in the product development areas.

Sales and Marketing Expenses represent the costs of sales and marketing personnel, and advertising and marketing campaigns – advertising has increased significantly with the AMV Acquisition in October 2008 due to the “direct to consumer” nature of that business, with a significant element of direct marketing required to stimulate revenues. In addition, a significant portion of AMV’s employee base is classified as sales and marketing employees.

General and administrative expenses represent management and support personnel costs in both Mandalay Media and Twistbox, and related expenses, as well as professional and consulting costs incurred, and other costs such as stock based compensation, depreciation and bad debt expenses. The increase in expense over the first quarter in the prior year is largely the result of stock option expense of $2.6 million, and additional legal and management expenses at the holding company level.

Amortization of intangibles in the current quarter represents amortization of the intangibles identified as part of the purchase price accounting related to the Twistbox acquisition and attributed to operating expenses. Amortization expenses in the first nine months of the prior year represents the amortization predecessor intangible assets related to prior acquisitions by Twistbox.

### Other Expenses

*(In thousands)*

|  | Successor Nine Months Ended December 31, 2008 | Predecessor 2007 |
| --- | ---: | ---: |
| Interest and other income/(expense) | $(2,084) | $(531) |

Interest and other income/(expense) includes interest income on invested funds, interest expense related the Twistbox’s senior secured note, foreign exchange transaction gains and losses, and depreciation expense. The higher expense compared to the nine months ended December 31, 2007 relates to foreign exchange losses incurred in the current period, versus gains in the prior period, and the result of an additional four months of interest expense, since the secured note was initiated in July 2007.

Filed Dec 4, 2009.
Source: SEC EDGAR, the filing index for accession 0001144204-09-063077. Last ingested by Listed: Nov 10, 2026, 03:21 ET. No prices; not investment advice.