Quarterly report pursuant to Section 13 or 15(d)

Stock Options and Warrants

v3.3.0.814
Stock Options and Warrants
 9 Months Ended
Sep. 30, 2015
Equity [Abstract]  
Stock Options and Warrants
Stock Options and Warrants    

Stock Options

In conjunction with the Business Combination, the Company adopted its 2013 Equity Incentive Plan, which was subsequently amended and restated (as so amended and restated, the "Plan"). Under the Plan, the Administrator of the Plan, which is the compensation committee of the Company's board of directors, may grant up to 9,000,000 stock options, restricted stock, restricted stock units and other incentive awards to employees, officers, non-employee directors, and consultants, and such options or awards may be designated as incentive or non-qualified stock options at the discretion of the Administrator. Employee stock option grants made prior to 2015 have 5-year terms and vest 1/4th on the anniversary of the vesting commencement date and 1/36th monthly thereafter, over a 3-year period. During the nine months ended September 30, 2015, employee stock options were granted to the Company’s named executive officers that have 5-year terms and vest 1/4th on each anniversary date over a 4-year period. Stock options granted to the Board of Directors prior to 2015 have 5-year terms and vest monthly over two years from the vesting commencement date. During the nine months ended September 30, 2015, stock options with 5-year terms were granted to the Board of Directors for services performed in 2014 and to be performed in 2015. The grants made for 2014 services vested immediately and the grants made for 2015 services vest 1/4th quarterly through December 31, 2015. Certain stock option awards have accelerated vesting provisions in the event of a change in control and/or termination without cause.

Fair values of the stock options at September 30, 2015 and 2014 were determined using the Black-Scholes model and the following weighted average assumptions:
 
Nine Months Ended September 30,
 
2015
 
2014
Common stock price on grant date
$12.90
 
$11.42
Expected life (in years)
3.8

 
4.0

Risk-free interest rate
1.30
%
 
1.54
%
Expected stock volatility
43
%
 
59
%
Expected dividend yield
—
%
 
—
%
Fair value of stock options granted
$4.41
 
$5.15


Stock option activity for the nine months ended September 30, 2015 is as follows:

 
Shares (in thousands)
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in years)
 
Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2015
5,771

 
$
10.64

 

 


Granted
1,443

 
12.94

 

 
 
Exercised
(557
)
 
9.82

 

 
 
Forfeited
(867
)
 
11.13

 

 
 
Outstanding at September 30, 2015
5,790

 
$
11.22

 
4.01
 
$
4,998

Vested and expected to vest at September 30, 2015
5,126

 
$
11.13

 
3.87
 
$
4,685

Exercisable at September 30, 2015
2,259

 
$
10.60

 
3.08
 
$
2,740



Restricted stock units

During the three months ended September 30, 2014, the Company granted certain employees performance units in the form of RSUs. A performance unit gives the recipient the right to receive common stock that is contingent upon achievement of a specified predetermined performance target for fiscal 2014 and the continuation of employment for a period of one year from the grant date. The grant date fair value of an RSU equals the closing price of the Company's common stock on the grant date. The number of shares issued totaled 77,687 shares of the Company’s common stock. During the nine months ended September 30, 2015, the Company granted 29,000 RSUs to the Board of Directors that fully vest on the 13-month anniversary of the grant date. The Company also granted 379,000 RSUs to certain employees that vest 1/4th on the grant anniversary date over a 4-year term.

The following summarizes select information regarding our RSUs during the nine months ended September 30, 2015:

 
Units (in thousands)
 
Weighted Average Grant Date Fair Value
 
Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2015
59

 
$
12.90

 
 
Granted
408

 
12.88

 
 
Vested
(48
)
 
12.90

 
 
Forfeited
(13
)
 
12.98

 
 
Balance nonvested at September 30, 2015
406

 
12.88

 
$
4,658

Vested and expected to vest at September 30, 2015
295

 
$
12.89

 
$
3,391



Stock-Based Compensation Expense

Stock-based compensation expense related to all employee and non-employee stock-based awards for the three and nine months ended September 30, 2015 and 2014 was as follow, (in thousands):

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Cost of services
$
81

 
$
6

 
$
246

 
$
6

Sales and marketing expenses
177

 
14

 
540

 
14

Product development
262

 
53

 
771

 
53

General and administrative
1,627

 
1,823

 
4,691

 
6,412

Total stock-based compensation expense
$
2,147

 
$
1,896

 
$
6,248

 
$
6,485


 
Warrants

The following is a summary of non-public warrants outstanding as of September 30, 2015 that the Company assumed in the Business Combination:


Weighted Average Exercise Price per Warrant
 
Number of Warrants (as converted) (in thousands)
 
Weighted Average Remaining Life
(in years)
Common stock warrants
$
8.79

 
690

 
1.47
Series C Preferred stock warrants
8.74

 
734

 
1.68


Public warrants activity for the nine months ended September 30, 2015 is as follows:
Global Eagle Warrants
 
Number of Warrants (in thousands)
 
Weighted Average Exercise price
 
Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2015
 
10,149

 
$
11.50

 
 
Exercises and exchanges
 
(3,065
)
 
11.50

 
 
Outstanding and exercisable at September 30, 2015
 
7,084

 
$
11.50

 
2.34


The Company accounts for 7,083,978 of Global Eagle's warrants as derivative liabilities at September 30, 2015. During the three and nine months ended September 30, 2015, the Company recorded approximately $1.9 million of expense and $13.9 million of income, respectively, in the condensed consolidated statements of operations as a result of the remeasurement of these warrants at balance sheet date until exercised. During the three and nine months ended September 30, 2014, the Company recorded approximately $5.3 million of expenses and $0.6 million of income, respectively, of income in the consolidated statements of operations as a result of the remeasurement of these warrants at balance sheet date until exercised. The fair value of warrants issued by the Company has been estimated using the warrants' quoted public market price. In the event the Company’s closing stock price is at or above $17.50 for twenty of thirty consecutive trading days, the Company can call the 7,083,978 public warrants and force the holders to exercise their warrants at $11.50 per share, with estimated proceeds of approximately $81.5 million.

During the year ended December 31, 2014, the Company's Board of Directors (the “Board”) authorized the Company to repurchase GEE's public warrants for an aggregate purchase price, payable in cash and/or shares of common stock, of up to  $25.0 million (inclusive of certain prior warrant purchases).  In August 2015, the Board increased this amount by an additional $20.0 million.   As of September 30, 2015, $20.5 million was available for warrants repurchases under this authorization.  The amount the Company spends and the number of warrants repurchased varies based on a variety of factors including the warrant price. On July 31, 2015, the Company issued 1,015,176 shares of common stock in exchange for the surrender of public warrants exercisable for 3,045,530 shares of the Company's common stock.