Common Stock, Share-based Awards and Warrants
|9 Months Ended|
Sep. 30, 2018
|Common Stock, Share-based Awards and Warrants||
Common Stock, Share-Based Awards and Warrants
Issuance of Common Stock
The Company issued approximately 5.5 million shares of its common stock to the EMC seller on July 27, 2016 in connection with the EMC Acquisition. On the first anniversary of the EMC Acquisition, on July 27, 2017, the Company issued to the EMC seller an additional approximately 5.0 million shares of the Company’s common stock. Pursuant to the EMC purchase agreement, 50% of the newly issued shares was valued at $8.40 per share, and 50% was valued at the volume-weighted average price of a share of Company common stock measured two days prior the first anniversary date.
Furthermore, in August 2016, the Company issued approximately 1.8 million shares of its common stock as partial consideration for the Sound-Recording Settlements discussed in Note 9. Commitments and Contingencies. The Company is obligated to issue an additional 500,000 shares of its common stock to UMG in connection with the litigation when and if the share price of the Company’s common stock exceeds $10.00 per share and an additional 400,000 shares of its common stock when and if the closing price exceeds $12.00 per share (together, the “Supplemental Shares”) at any time in the future if the share price reaches these price thresholds. In lieu of issuing the Supplemental Shares of the Company’s common stock upon exceeding the respective share price thresholds, the Company may pay the equivalent in cash at its sole discretion. If the Company were to experience a liquidation event, as defined in the settlement documentation, and if the equivalent liquidation price per share at that time exceeds one or both of the share price thresholds, the Company is obligated to pay the equivalent liquidation price per share in cash in lieu of issuing the Supplemental Shares. See Note 9. Commitments and Contingencies for a further description of the Sound-Recording Settlements.
2013 Equity Plan
Under our 2013 Amended and Restated Equity Incentive Plan (as amended, the “2013 Equity Plan”), the Administrator of the Plan, which is the Compensation Committee of our Board, was able to grant up to 11,000,000 shares (through stock options, restricted stock, restricted stock units (“RSUs”)) (including both time-vesting and performance-based RSUs) and other incentive awards) to employees, officers, non-employee directors, and consultants. We ceased using the 2013 Equity Plan for new equity issuances in December 2017 upon receiving stockholder approval of our 2017 Omnibus Long-Term Incentive Plan, although we continue to have outstanding previously granted equity awards issued under the 2013 Equity Plan. See “2017 Equity Plan” immediately below.
2017 Equity Plan
On December 21, 2017, our stockholders approved a 2017 Omnibus Long-Term Incentive Plan (the “2017 Equity Plan”). We transferred the 2,337,466 shares remaining available for grant under the 2013 Equity Plan at that time into the 2017 Equity Plan and those shares became available for grant under the 2017 Equity Plan. The 2017 Equity Plan separately made available 6,500,000 shares of our common stock for new issuance thereunder, in addition to the shares transferred from the 2013 Equity Plan. The Compensation Committee of our Board (as administrator of the 2017 Equity Plan) may grant share awards thereunder (through stock options, cash-settled stock options, restricted stock, RSUs (including both time-vesting and performance-based RSUs) and other incentive awards) to employees, officers, non-employee directors, and consultants.
On June 25, 2018, our stockholders approved an amendment and restatement of the 2017 Equity Plan that increased by 2,000,000 the number of shares of our common stock authorized for issuance thereunder.
Stock Repurchase Program
In March 2016, the Board authorized a stock repurchase program under which we may repurchase up to $50.0 million of our common stock. Under the stock repurchase program, we 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 we repurchase our 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. We measure all potential buybacks against other potential uses of capital that may arise from time to time. The repurchase program does not obligate us to repurchase any specific number of shares, and may be suspended or discontinued at any time. We expect to finance any purchases with existing cash on hand, cash from operations and potential additional borrowings. We did not repurchase any shares of our common stock during the nine months ended September 30, 2018 and 2017. As of September 30, 2018 the remaining authorization under the stock repurchase plan was $44.8 million.
Stock-Based Compensation Expense
Stock-based compensation expense related to our directors and other personnel for the three and nine months ended September 30, 2018 and 2017 was as follows (in thousands):
The above table includes $1.2 million of expense related to the Company’s cash-settled phantom stock options for the three and nine months ended September 30, 2018. These are accounted for as liability awards and are re-measured at fair value each reporting period. Compensation expense is recognized over the requisite service period.
Warrants Issued in Connection with Second Lien Notes
The Company’s Warrants issued in connection with the Searchlight investment qualify for classification in stockholders’ equity, as they are indexed to the Company’s own stock and meet all additional criteria to be classified in stockholders’ equity. They are considered freestanding, equity-classified instruments that are initially measured at fair value and recorded at their allocated value, with no remeasurement required as long as the contract continues to be classified in equity.
The following is a summary of the Warrants outstanding as of September 30, 2018:
Public SPAC Warrants
The following is a summary of Public SPAC Warrants (which were exercisable for shares of our common stock) for the periods presented, with the “Number of Warrants” in the table below indicating the shares of our common stock underlying the Public SPAC Warrants:
The Public SPAC Warrants expired on January 31, 2018. Prior to their expiration, the Company accounted for its 6,173,228 Public SPAC Warrants as derivative liabilities. During the three months ended September 30, 2017, the Company recorded income of $0.1 million in the condensed consolidated statement of operations as a result of the marked to fair value adjustment of these warrants at each balance sheet date. No income or expense was recorded during the three months ended September 30, 2018. During the nine months ended September 30, 2018 and 2017, the Company recorded income of less than $0.1 million and expense of $0.3 million, respectively. The fair value of Public SPAC Warrants issued by the Company was estimated using the Black-Scholes option pricing model.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef