Quarterly report pursuant to Section 13 or 15(d)

Common Stock, Stock Options and Warrants

v3.5.0.2
Common Stock, Stock Options and Warrants
 6 Months Ended
Jun. 30, 2016
Equity [Abstract]  
Common Stock, Stock Options and Warrants
Common Stock, Stock Options and Warrants    

Stock Repurchase Program

In March 2016, the Company's Board of Directors (the "Board") authorized a stock repurchase program under which the Company may repurchase up to $50.0 million of its common stock. Under the stock repurchase program, the Company may repurchase shares from time to time using a variety of methods, which may include open-market purchases and privately negotiated transactions. The extent to which the Company repurchases its shares, and the timing and manner of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by management. The Company measures all potential buybacks against other potential uses of capital which may arise from time to time. The repurchase program does not obligate the Company to repurchase any specific number of shares, and may be suspended or discontinued at any time. The Company expects to finance any purchases with existing cash on hand, cash from operations and potential additional borrowings. During the three months ended June 30, 2016, the Company repurchased 0.6 million shares of its common stock for consideration of $5.2 million in the aggregate. As of June 30, 2016, the remaining authorization under the stock repurchase plan was $44.8 million.

Warrants Repurchase Program

During the year ended December 31, 2014, the Board authorized a warrant repurchase program under which the Company may repurchase GEE's Public SPAC 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 authorized an additional $20.0 million for this repurchase program. As of June 30, 2016 and December 31, 2015, $16.7 million was available to repurchase GEE's Public SPAC Warrants 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.

Stock Options

Under the Company's 2013 Amended and Restated Equity Incentive Plan, (as amended, the "Plan"), the Administrator of the Plan, which is the compensation committee of the Company's Board of Directors, may grant up to 11,000,000 stock options, restricted stock, restricted stock units (RSUs) 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. The exercise price of stock option awards granted is equal to the per share closing price of the common stock on the date the options were granted. Stock option awards generally vest over one to four years, expire five to seven years from the date of grant and certain stock option and RSU awards have accelerated vesting provisions in the event of a change in control and certain termination provisions.

Fair values of the stock options at June 30, 2016 and 2015 were determined using the Black-Scholes model and the following weighted average assumptions:

 
Six Months Ended June 30,
 
2016
 
2015
Common stock price on grant date
$8.45
 
$13.14
Expected life (in years)
3.9

 
4.0

Risk-free interest rate
1.12
%
 
1.31
%
Expected stock volatility
45.0
%
 
50.0
%
Expected dividend yield
—
%
 
—
%
Fair value of stock options granted
$2.97
 
$5.37


Stock option activity for the six months ended June 30, 2016 is as follows:

Global Eagle Stock Option Plan
Shares (in thousands)
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in years)
 
Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2016
5,625

 
$
11.20

 

 


Granted
937

 
$
8.45

 

 
 
Exercised
(26
)
 
$
9.87

 

 
 
Forfeited
(246
)
 
$
11.51

 

 
 
Outstanding at June 30, 2016
6,290

 
$
10.78

 
2.99
 
$
2

Vested and expected to vest at June 30, 2016
5,665

 
$
10.77

 
2.89
 
$
1

Exercisable at June 30, 2016
3,220

 
$
10.79

 
2.33
 
$
—



Restricted Stock Units
    
Under the Plan, RSU awards that can be granted to employees, officers and consultants vest annually on each anniversary of the grant date and generally over a 4-year term. RSUs granted to non-employee directors in 2016 and 2015 cliff-vest on the 13 month anniversary 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 following summarizes select information regarding our RSUs during the six months ended June 30, 2016:

 
Units (in thousands)
 
Weighted Average Grant Date Fair Value
 
Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2016
408

 
$
12.71

 
 
Granted
532

 
$
7.90

 
 
Vested
(43
)
 
$
13.23

 
 
Forfeited
(42
)
 
$
12.15

 
 
Balance nonvested at June 30, 2016
855

 
$
9.72

 
$
5,677

Vested and expected to vest at June, 2016
587

 
$
9.78

 
$
3,732



Stock-Based Compensation Expense

Stock-based compensation expense related to all employee and non-employee stock-based awards for the three and six months ended June 30, 2016 and 2015 was as follows (in thousands):

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Stock-based compensation expense:
 
 
 
 
 
 
 
Cost of services
$
74

 
$
124

 
$
150

 
$
165

Sales and marketing expenses
112

 
338

 
279

 
364

Product development
246

 
196

 
494

 
509

General and administrative
1,761

 
894

 
3,339

 
3,064

Total stock-based compensation expense
$
2,193

 
$
1,552

 
$
4,262

 
$
4,102


 
Warrants

The following is a summary of the "Legacy Row 44 Warrants" outstanding as of June 30, 2016. Our Legacy Row 44 Warrants are warrants issued by a legacy entity purchased as part of the Business Combination. The Legacy Row 44 Warrants were originally exercisable for shares of Row 44, but as a result of the Business Combination became exercisable for Company common stock.


Weighted Average Exercise Price per Warrant
 
Number of Warrants (as converted) (in thousands)
 
Weighted Average Remaining Life
(in years)
Legacy Row 44 Warrants (1)
$
8.79

 
690

 
0.72
Legacy Row 44 Warrants (2)
$
8.62

 
477

 
0.94

(1) Originally issuable for Row 44 common stock.
(2) Originally issuable for Row 44’s Series C preferred stock.
    
The following is a summary of Public SPAC Warrants outstanding as of June 30, 2016. There was no activity for the three months ended June 30, 2016.

Public SPAC Warrants
Number of Warrants (in thousands)
 
Weighted Average Exercise price
 
Weighted Average Remaining Contractual Term (in years)
Outstanding and exercisable at June 30, 2016
6,173

 
$
11.50

 
1.59


The Company accounts for its 6.2 million Public SPAC Warrants as derivative liabilities at June 30, 2016. During the three and six months ended June 30, 2016 and June 30, 2015, the Company recorded income of approximately $10.9 million and $16.8 million, respectively, and $14.8 million and $15.7 million, respectively, in the condensed consolidated statements of operations as a result of the remeasurement of these warrants. The fair value of warrants issued by the Company has been estimated using the warrants' quoted public market price. In the event the closing price of the Company's common stock is at or above $17.50 for twenty of thirty consecutive trading days, the Company can redeem the 6.2 million Public SPAC Warrants for $0.01 per warrant following a 30-day notice period, during which period holders may exercise their warrants at $11.50 per share, with estimated proceeds of approximately $71.0 million, unless we decide, at our option, to make them exercisable on a cashless basis.