Quarterly report pursuant to Section 13 or 15(d)

Stock Options and Warrants

v2.4.0.8
Stock Options and Warrants
 3 Months Ended
Mar. 31, 2014
Equity [Abstract]  
Stock Options and Warrants
Stock Options and Warrants

Stock Options

In conjunction with the Business Combination, the Company created its 2013 Equity Incentive Plan (the "Plan"), and as amended in December 2013, the Administrator of the Plan, which is the compensation committee of the Company's board of directors, may grant up to 7,500,000 stock option, restricted stock, restricted stock unit 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 have 5-year terms and vest 1/4th on the anniversary of the vesting commencement date and 1/48th monthly thereafter, over a 4-year period. Stock options granted to our Board of Directors have 5-year terms and vest monthly over two years from the vesting commencement date. Certain stock option awards have accelerated vesting provisions in the event of a change in control or termination without cause.
Fair values of the stock options at March 31, 2014 and 2013 were determined using the Black-Scholes model and the following weighted average level 3 assumptions:

 
Three Months Ended March 31,
 
2014
 
2013
Common stock price on grant date
$16.88
 
$9.98
Expected life (in years)
4.00

 
4.87

Risk-free interest rate
1.75
%
 
0.77
%
Expected stock volatility
65
%
 
50
%
Expected dividend yield
—
%
 
—
%
Fair value of stock options granted
$8.48
 
$3.82


Stock option activity for three months ended March 31, 2014 is as follows:

Global Eagle Stock Option Plan
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in years)
 
Aggregate Intrinsic Value
Outstanding at January 1, 2014
5,285,000

 
$
10.86

 

 


Granted
25,000

 
16.88

 

 
 
Exercised
(50,000
)
 
8.88

 

 
 
Forfeited (as restated)
(177,083
)
 
9.79

 

 
 
Outstanding at March 31, 2014 (as restated)
5,082,917

 
10.94

 
4.32
 
 
Expected to vest at March 31, 2014
3,288,167

 
11.05

 
4.23
 
4.77

Exercisable at March 31, 2014
972,708

 
$
10.51

 
3.68
 
$
5.27



Stock-based Compensation Expense

Stock-based compensation expense related to all employee and non-employee stock-based awards for the three months ended March 31, 2014 and 2013 were as follow, (in thousands):


 
Three Months Ended 
 March 31,
 
2014
 
2013
Stock-based compensation expense:
 
 
 
Cost of services
$
—

 
$
—

Sales and marketing expenses
—

 
—

Product development
—

 
—

General and administrative
2,616

 
496

Total stock-based compensation expense
$
2,616

 
$
496


 
Warrants

In conjunction with the Business Combination and on January 31, 2013, the Company converted 21,062,500 Row 44 warrants to warrants to purchase up to 721,897 shares of Global Eagle common stock. The following is a summary of all Row 44 warrants converted to warrants to purchase GEE common stock (exercise price per warrant and number of warrants presented using the conversion ratio to Global Eagle common stock used in the Row 44 Merger) outstanding at March 31, 2014:


Weighted Average Exercise Price per Warrant
 
Number of Warrants (as converted)
 
Weighted Average Remaining Life
(in years)
Common stock warrants
$
9.45

 
721,897

 
2.87
Series C Preferred stock warrants
$
8.74

 
734,451

 
3.19


The following is a summary of warrants originally issued by GEAC, including public and privately placed warrants, for the three months ended March 31, 2014:

Global Eagle Warrants
 
Number of Warrants
 
Weighted Average Exercise price
 
Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2014
 
23,237,717

 
$
11.5

 
 
Granted
 
—

 
—

 
 
Exercised
 
(3,400
)
 
11.5

 
 
Purchased
 
—

 
—

 
 
Forfeited
 
—

 
—

 
 
Outstanding and exercisable at March 31, 2014
 
23,234,317

 
$
11.5

 
3.83


The Company accounts for 15,900,983 of GEAC's warrants as derivative liabilities at March 31, 2014. During the three months ended March 31, 2014, the Company recorded approximately $15.5 million in expense 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 15,567,650 public warrants and force the holders to exercise their warrants at $11.50 per share, with estimated proceeds of approximately $179.0 million.