Related Party Transactions
|9 Months Ended|
Sep. 30, 2018
|Related Party Transactions [Abstract]|
|Related Party Transactions||
Related Party Transactions
Due from WMS
In connection with the EMC Acquisition, the Company acquired a 49% equity interest in WMS. The Company accounts for its interest in WMS using the equity method and includes the Company’s share of WMS’s profits or losses in Income from equity method investments in the condensed consolidated statements of operations. During the three and nine months ended September 30, 2018, sales to WMS (for the Company’s services provided to WMS for WMS’s onboard cellular equipment) were approximately $0.2 million and $0.7 million, respectively, under the terms of the WMS operating agreement and an associated master services agreement with WMS. During the three and nine months ended September 30, 2017, sales to WMS were approximately $0.2 million and $0.9 million, respectively. These sales are included in Revenue in the condensed consolidated statements of operations. As of September 30, 2018 and December 31, 2017, we had a balance due from WMS of $0.1 million and $0.1 million, respectively, included in Accounts receivable, net in the condensed consolidated balance sheets.
Note Payable to WMS
In December 2017, the Company entered into a demand promissory note with WMS (as an advance against future dividends that WMS may pay the Company) for approximately $6.4 million and concurrently signed an agreement to waive future dividends or other such distributions by WMS to the Company until such time as the outstanding principal on the demand promissory note has been repaid in full. The outstanding demand promissory note will be reduced dollar-for-dollar by any such dividend or distribution amounts waived. The Company may prepay the demand promissory note at any time without prepayment penalty. The unpaid principal of the demand promissory note bears interest at 2.64% per annum from and after the date of the demand promissory note. Interest under the demand promissory note is due and payable only upon the occurrence of an “event of default,” which includes, for example, the Company’s breach of the demand promissory note or the WMS operating agreement, Company insolvency events and material judgments against the Company. The entire principal balance of the demand promissory note together with all accrued but unpaid interest shall be due on the earliest to occur of (i) demand by the holder, (ii) December 31, 2019 and (iii) the date of acceleration of the demand promissory note as a result of the occurrence of an event of default. During the nine months ended September 30, 2018, WMS declared dividends of $10.0 million in the aggregate, of which our 49% proportion (equal to $4.9 million) has been applied against the outstanding principal amount of the demand promissory note. The principal amount of the outstanding demand promissory note was $1.5 million as of September 30, 2018 and has been included within current portion of long-term debt in the condensed consolidated balance sheet as of September 30, 2018.
Due to Santander
Also in connection with the EMC Acquisition, the Company acquired a 49% equity interest in Santander. The Company accounts for its interest in Santander using the equity method and includes our share of Santander’s profits or losses in Income from equity method investments in the condensed consolidated statements of operations. During the three and nine months ended September 30, 2018 the Company purchased approximately $1.1 million and $2.9 million, respectively, from Santander for their Teleport services and related network operations support services. During the three and nine months ended September 30, 2017 the Company purchased approximately $0.6 million and $2.0 million, respectively, of network operations support services from Santander. As of September 30, 2018 and December 31, 2017 the Company owed Santander approximately $0.9 million and $0.9 million, respectively, as remaining payments for these services, which is included in Accounts payable and accrued liabilities in the condensed consolidated balance sheets for their teleport services and related network operations support services.
Subscription Receivable with Former Employee
A former employee is party to a Secured Promissory Note dated July 15, 2011, pursuant to which the former employee agreed to pay the Company (as successor to Row 44, Inc., which is a Company subsidiary) a principal sum of approximately $0.4 million, plus interest thereon at a rate of 6% per annum. The former employee granted the Company a security interest in shares of Row 44 held by him (which Row 44 shares were subsequently converted into 223,893 shares of the Company’s common stock) to secure his obligations to repay the loan. As of September 30, 2018 and December 31, 2017, the balance of the note (with interest) was approximately $0.6 million, which is presented as a subscription receivable. We recognize interest income on the note when earned (using the simple interest method) but have not collected any interest payments since the origination of the note. Interest income recognized by the Company during the nine months ended September 30, 2018 and September 30, 2017 was not material. The Company makes ongoing assessments regarding the collectability of this note and the subscription receivable balance, and is currently in litigation with the former employee to recover the loan and to address the former employee’s allegations that we breached related settlement agreements with him in 2014 and 2015.
Registration Rights Agreement
When we consummated our business combination in January 2013 with Row 44 and AIA, we entered into an amended and restated registration rights agreement with Par Investment Partners, L.P. (“PAR”), entities affiliated with Putnam Investments, Global Eagle Acquisition LLC (the “Sponsor”) and our then and current Board members Harry E. Sloan and Jeff Sagansky, who were affiliated with the Sponsor. Under that agreement, we agreed to register the resale of securities held by them (the “registrable securities”) and to sell those registrable securities pursuant to an effective registration statement in a variety of manners, including in underwritten offerings. We also agreed to pay the security holders’ expenses in connection with their exercise of their registration rights.
During 2017, Putnam Investments was a beneficial owner of more than 5% of our outstanding common stock. According to a Schedule 13G/A filed on February 7, 2018, Putnam Investments no longer holds more than 5% of our outstanding common stock, and as such has ceased to be a related party. PAR and Messrs. Sloan and Sagansky continue to be related parties.
The amended and restated registration rights agreement restricts our ability to grant registration rights to a third party on parity with or senior to those held by the “holders” (as defined under that agreement) without the consent of holders of at least a majority of the “registrable securities” under that agreement. In April 2018, we entered into a consent to the amended and restated registration rights agreement with PAR whereby PAR (as a holder of a majority of registrable securities thereunder) consented to the registration rights that we provided to Searchlight as part of its investment in us.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef