Annual report pursuant to Section 13 and 15(d)

Stock Options, Common Stock and Warrants

v3.3.1.900
Stock Options, Common Stock and Warrants
 12 Months Ended
Dec. 31, 2015
Equity [Abstract]  
Stock Options, Common Stock and Warrants
Stock Options, Common Stock and Warrants

Common Stock

During the year ended December 31, 2015, 257,058 of Row 44 warrants were exchanged for 93,161 shares of common stock.

During the year ended December 31, 2015, the Company issued 1,337,760 shares of common stock in exchange for the surrender of public warrants exercisable, that were originally issued by GEAC and have an exercisable price of $11.50 per share (the “Warrants”), for 3,957,280 shares of the Company's common stock.

On September 11, 2014, the Company completed an offer to all holders of the Company’s outstanding public warrants exercisable for shares of the Company’s common stock, to receive 0.3333 shares of common stock in exchange for every warrant tendered by the holders thereof (approximately one share for every three warrants tendered), up to a maximum of 15,000,000 warrants. On September 11, 2014, the Company issued 4,227,187 shares of common stock in exchange for 12,682,755 warrants and recognized a gain on the exchange of approximately $0.8 million included in change in fair value of financial instruments in the consolidated statements of operations for the year ended December 31, 2014.

In August 2014, the Company issued 28,161 shares of common stock as a working capital settlement to Row 44 former stockholders with an aggregate fair value of $0.3 million. The entire value was expensed during the year ended December 31, 2014 and included in other income in other income (expense), net on the consolidated statements of operations.

On June 17, 2014, PAR Investment Partners, L.P. (“PAR”) converted 19,118,233 shares of non-voting common stock of the Company into an equal number of shares of the Company’s common stock, par value $0.0001 per share, in accordance with the terms of the non-voting common stock set forth in the Company’s Second Amended and Restated Certificate of Incorporation. The conversion was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 3 (a)(9) thereof. No commission or other remuneration was paid or given directly or indirectly for soliciting the conversion.

In December 2013, the Company issued 103,977 fully vested common shares of the Company's common stock to the former CEO of AIA.
 
In December 2013, the Company also issued and sold 13,340,000 shares of common stock at an issuance price of $14.25 per share in a public offering. A total of approximately $190.1 million in gross proceeds were raised from the offering.

During the year ended December 31, 2013, the Company issued 898,082 shares as a result of the exchange of 2,921,450 GEAC public warrants.

In October 2013, and in connection with the IFE Services acquisition, the Company issued and sold Putnam Equity Spectrum Fund 2,453,472 shares of the Company’s common stock in exchange for aggregate gross proceeds (before expenses) of approximately $21.0 million.

During the year ended December 31, 2013, the Company acquired PMG assets in exchange for approximately $10.6 million, 431,734 shares of common stock and the assumption of approximately $3.3 million in debt. 151,420 of the shares are amounts held in escrow amounting to $1.6 million.

In addition, during the year ended December 31, 2013, the Company also repurchased and retired approximately 103,000 shares of common stock to settle certain employee tax withholding obligations associated with the Business Combination in January 31, 2013.

On January 31, 2013 and in connection with the Recapitalization as a result of the merger with ROW 44, the Company issued a total of 20,123,000 shares of the Company's common stock, including 4,750,000 shares of non-voting common stock. In addition, in connection with the acquisition of 86% ownership of AIA, the Company also issued 14,368,000 shares of Company's non-voting common stock.
 
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 option, 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. As of December 31, 2015, there were 1,783,665 stock-based awards available for future grant under the Plan. Employee stock option grants have 5-year terms and employee stock options 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 were determined on the grant date using the Black-Scholes model and the following level 3 assumptions for the years ended December 31, 2015, 2014 and 2013, respectively:

 
2015
 
2014
 
2013
Common stock price on grant date
$
12.91

 
$
11.53

 
$
10.57

Expected life
3.8 years

 
4.0 years

 
3.9 years

Risk-free interest rate
1.28
%
 
1.52
%
 
1.13
%
Expected stock volatility
43
%
 
58
%
 
57
%
Expected dividend yield
0
%
 
0
%
 
0
%
Fair value of stock options granted
$
4.41

 
$
5.14

 
$
4.65



The expected life of stock options granted represents the weighted average period that the stock options are expected to remain outstanding. The Company determines the expected life assumption based on the employee's expected exercise behavior including combined with estimates of the post-vesting holding period. Expected volatility is based on historical volatility of peer companies in the Company's industry that have similar vesting and contractual terms. The risk free interest rate is based on the implied yield currently available on U.S. Treasury issues with terms approximately equal to the expected life of the option. The Company currently has no history or expectation of paying cash dividends on its common stock.

Stock option activity for year ended December 31, 2015 is as follows (in thousands except per share and contractual term data):

Global Eagle Stock Option Plan
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in years)
 
Aggregate Intrinsic Value
Outstanding at January 1, 2015
5,771

 
$
10.64

 

 

Granted
1,443

 
$
12.91

 

 


Exercised
(588
)
 
$
9.79

 

 

Forfeited
(1,001
)
 
$
11.25

 

 

Outstanding at December 31, 2015
5,625

 
$
11.20

 
3.18
 
$
204

Exercisable at December 31, 2015
2,555

 
$
10.67

 
2.75
 
$
99

Vested and expected to vest after December 31, 2015
5,095

 
$
11.13

 
3.12
 
$
191



The following is a summary of the Company's stock options outstanding at December 31, 2015 (in thousands except per share data):

Range of Exercise Price
Number Outstanding
 
Weighted Average Remaining Contractual Term
 
Weighted Average Exercise Price
 
Number Exercisable
 
Weighted Average Exercise Price
$13.15 - $16.70
855

 
4.03
 
$
13.68

 
298

 
$
13.86

$11.44 - $13.14
1,148

 
4.04
 
$
12.72

 
149

 
$
12.81

$10.57 - $11.43
1,151

 
3.44
 
$
10.73

 
441

 
$
10.71

$9.88 - $10.56
1,424

 
2.35
 
$
10.00

 
1,064

 
$
10.00

$8.88 - $9.87
1,047

 
2.40
 
$
9.68

 
603

 
$
9.71

 
5,625

 
3.18
 
$
11.20

 
2,555

 
$
10.67



Restricted stock units

During the year ended December 31, 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 year ended December 31, 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 401,000 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 year ended December 31, 2015:

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

 
$
12.90

 
 
Granted
430

 
$
12.74

 
 
Vested
(49
)
 
$
12.90

 
 
Forfeited
(32
)
 
$
13.21

 
 
Balance nonvested at December 31, 2015
408

 
$
12.71

 
$
4,026

Vested and expected to vest at December 31, 2015
308

 
$
12.73

 
$
3,042



Stock-based Compensation Expense

Stock-based compensation expense related to all employee and non-employee stock-based awards was as follows for the years ended December 31, 2015, 2014 and 2013 (in thousands):

 
Year ended December 31,
Stock-based compensation expense:
2015
 
2014
 
2013
Cost of sales
$
322

 
$
36

 
$
—

Sales and marketing expenses
701

 
46

 
—

Product development
1,020

 
268

 
—

General and administrative
6,192

 
7,717

 
4,536

Total stock-based compensation expense
$
8,235

 
$
8,067

 
$
4,536


As of December 31, 2015, the Company had approximately $14.1 million of unrecognized employee related stock-based compensation, net of estimated forfeitures, which it expects to recognize over a weighted average period of approximately 2.67 years.
 
Warrants

Row 44 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 December 31, 2015:

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

 
690

 
1.22
Series C Preferred stock warrants
$
8.74

 
477

 
1.43


Global Eagle Warrants

The following is a summary of Global Eagle warrants for the year ended December 31, 2015:

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

 

Granted
—

 
—

 
 
Exercised
(19
)
 
11.50

 
 
Purchased
—

 
—

 
 
Exchanged for Global Eagle common stock
(3,957
)
 
11.50

 
 
Forfeited
—

 
—

 
 
Outstanding and exercisable at December 31, 2015
6,173

 
$
11.50

 
2.09


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 December 31, 2015, $16.7 million was available for warrant 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. During 2015, the Company issued 1,337,760 shares of common stock in exchange for the surrender of public warrants exercisable for 3,957,280 shares of the Company's common stock.

On September 11, 2014, the Company completed an offer to all holders of the Company’s outstanding warrants exercisable for shares of the Company’s common stock, that were originally issued by GEAC and which have an exercise price of $11.50 per share (the “Warrants”), to receive 0.3333 Shares in exchange for every Warrant tendered by the holders thereof (approximately one share for every three Warrants tendered), up to a maximum of 15,000,000 Warrants. On September 11, 2014, the Company issued 4,227,187 Shares in exchange for 12,682,755 Warrants and recognized a gain on the exchange of approximately $0.8 million included in change in fair value of financial instruction instruments in the consolidated statements of operations for the year ended December 31, 2015.

During the year ended December 31, 2014, the Company also repurchased 403,054 Global Eagle Public Warrants for total cash consideration of $1.4 million. As of December 31, 2015, these repurchased warrants were not retired and were held by the Company.

During the year ended December 31, 2013, the Company purchased and retired 500,000 Global Eagle Public Warrants for a total of $0.8 million. In addition and during the year ended December 31, 2014, the Company exchanged 2.9 million Global Eagle Public Warrants for 0.9 million shares of Global Eagle common stock, at a weighted average price per common share of $14.74 per share, for total value of $13.3 million. The total value of the warrant exchange included a discount of approximately $0.6 million that was recorded as an expense in the consolidated statements of operations in the same period.

The Company accounts for its 6,173,228 and 10,148,508 public warrants as derivative liabilities at December 31, 2015 and 2014. During the years ended December 31, 2015 and 2014, the Company recorded approximately $11.9 million and $7.0 million in expense in the consolidated statements of operations as a result of the remeasurement of these warrants at the respective balance sheet dates 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 days, the Company can call the 6,173,228 public warrants and force the holders to exercise their warrants at $11.50 per share, with estimated proceeds of approximately $71.0 million.

On March 29, 2013, Global Eagle Acquisition, LLC ("Sponsor") executed a waiver relating to 7,333,334 of the sponsor warrants. The waiver relates to a specific provision of the warrant agreement that provides for a reduction of exercise price of the warrants. This provision originally triggered liability accounting as discussed above and the warrants were recorded as derivative liabilities. The Company valued the warrants as of the waiver date and recorded the change in fair value of the warrants in earnings and reclassified the portion of the warrant liability of $9.9 million represented by these sponsor warrants to equity. As a result of the waiver, these sponsor warrants became equity warrants as of March 29, 2013. As of December 31, 2015, all of the outstanding Sponsor's warrants classified in equity were exchanged into the Company's common stock.