þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM __________ TO ________
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Delaware
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27-4757800
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification Number)
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4553 Glencoe Avenue
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Los Angeles, California
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90292
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
o
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Accelerated filer
þ
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Non-accelerated filer
o
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Smaller reporting company
o
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(Class)
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(Outstanding as of May 6, 2016)
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||
COMMON STOCK, $0.0001 PAR VALUE
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78,057,929
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SHARES*
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Item No.
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Description
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Page
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PART I — Financial Information
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II — Other Information
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Item 1.
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||
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Three Months Ended
March 31, |
||||||
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2016
|
|
2015
|
||||
Revenue
|
|
$
|
113,817
|
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|
$
|
100,305
|
|
Operating expenses:
|
|
|
|
|
||||
Cost of sales
|
|
76,768
|
|
|
69,426
|
|
||
Sales and marketing expenses
|
|
4,672
|
|
|
3,275
|
|
||
Product development
|
|
8,746
|
|
|
7,230
|
|
||
General and administrative
|
|
21,221
|
|
|
18,119
|
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||
Amortization of intangible assets
|
|
7,403
|
|
|
5,983
|
|
||
Restructuring charges
|
|
—
|
|
|
302
|
|
||
Total operating expenses
|
|
118,810
|
|
|
104,335
|
|
||
Loss from operations
|
|
(4,993
|
)
|
|
(4,030
|
)
|
||
Other income (expense):
|
|
|
|
|
||||
Interest expense, net
|
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(804
|
)
|
|
(245
|
)
|
||
Change in fair value of derivatives
|
|
5,865
|
|
|
954
|
|
||
Other income (expense), net
|
|
680
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|
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(796
|
)
|
||
Income (loss) before income taxes
|
|
748
|
|
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(4,117
|
)
|
||
Income tax expense (benefit)
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3,160
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|
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(686
|
)
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||
Net loss
|
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$
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(2,412
|
)
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$
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(3,431
|
)
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|
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||||
Net loss per common share – basic
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$
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(0.03
|
)
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$
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(0.04
|
)
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Net loss per common share – diluted
|
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$
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(0.03
|
)
|
|
$
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(0.06
|
)
|
|
|
|
|
|
||||
Weighted average common shares – basic
|
|
78,643
|
|
|
76,874
|
|
||
Weighted average common shares – diluted
|
|
78,643
|
|
|
78,725
|
|
|
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Three Months Ended
March 31, |
||||||
|
|
2016
|
|
2015
|
||||
Net loss
|
|
$
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(2,412
|
)
|
|
$
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(3,431
|
)
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Other comprehensive loss:
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|
|
|
|
||||
Unrealized foreign currency translation losses
|
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(84
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)
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(228
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)
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||
Other comprehensive loss
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(84
|
)
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(228
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)
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Comprehensive loss
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$
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(2,496
|
)
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|
$
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(3,659
|
)
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Common Stock
|
Treasury Stock
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Additional
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Subscriptions
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Accumulated
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Accumulated Other
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Total
|
||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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Paid-in Capital
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Receivable
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Deficit
|
Comprehensive Income (Loss)
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Stockholders' Equity
|
||||||||||||||||
Balance at December 31, 2015
|
81,676
|
|
$
|
8
|
|
(3,054
|
)
|
$
|
(30,659
|
)
|
$
|
688,696
|
|
$
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(528
|
)
|
$
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(303,457
|
)
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$
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(299
|
)
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$
|
353,761
|
|
Exercise of stock options
|
26
|
|
—
|
|
—
|
|
—
|
|
254
|
|
—
|
|
—
|
|
—
|
|
254
|
|
|||||||
Restricted stock units vested and distributed, net of tax
|
22
|
|
—
|
|
—
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|
—
|
|
(83
|
)
|
—
|
|
—
|
|
—
|
|
(83
|
)
|
|||||||
Purchase of subsidiary shares from non-controlling interests
|
—
|
|
—
|
|
—
|
|
—
|
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(876
|
)
|
—
|
|
—
|
|
—
|
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(876
|
)
|
|||||||
Stock-based compensation
|
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|
—
|
|
—
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|
—
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|
2,069
|
|
—
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|
—
|
|
—
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|
2,069
|
|
|||||||
Interest income on subscription receivable
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(6
|
)
|
—
|
|
—
|
|
(6
|
)
|
|||||||
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(84
|
)
|
(84
|
)
|
|||||||
Net loss
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,412
|
)
|
—
|
|
(2,412
|
)
|
|||||||
Balance at March 31, 2016
|
81,724
|
|
$
|
8
|
|
(3,054
|
)
|
$
|
(30,659
|
)
|
$
|
690,060
|
|
$
|
(534
|
)
|
$
|
(305,869
|
)
|
$
|
(383
|
)
|
$
|
352,623
|
|
|
Three Months Ended March 31,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net loss
|
$
|
(2,412
|
)
|
|
$
|
(3,431
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
10,549
|
|
|
8,165
|
|
||
Non-cash interest expense, net
|
256
|
|
|
97
|
|
||
Change in fair value of derivative financial instrument
|
(5,865
|
)
|
|
(954
|
)
|
||
Stock-based compensation
|
2,069
|
|
|
2,550
|
|
||
Gain on sale of available for sale securities
|
(40
|
)
|
|
—
|
|
||
Deferred income taxes
|
(1,317
|
)
|
|
(3,748
|
)
|
||
Other
|
363
|
|
|
170
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
4,490
|
|
|
(6,733
|
)
|
||
Inventory and content library
|
(6,124
|
)
|
|
1,205
|
|
||
Prepaid expenses and other assets
|
(3,527
|
)
|
|
(1,841
|
)
|
||
Accounts payable and accrued expenses
|
3,889
|
|
|
44
|
|
||
Deferred revenue
|
(639
|
)
|
|
(393
|
)
|
||
Other liabilities
|
(91
|
)
|
|
1,115
|
|
||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
1,601
|
|
|
(3,754
|
)
|
||
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Purchases of property and equipment
|
(3,336
|
)
|
|
(2,651
|
)
|
||
Issuance of loan to related party
|
(2,500
|
)
|
|
—
|
|
||
Purchase of investments
|
(3,702
|
)
|
|
—
|
|
||
Net proceeds from sale of available for sale securities
|
3,742
|
|
|
—
|
|
||
NET CASH USED IN INVESTING ACTIVITIES
|
(5,796
|
)
|
|
(2,651
|
)
|
||
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Proceeds from issuance of convertible senior notes
|
—
|
|
|
81,250
|
|
||
Repayments of notes payable
|
(212
|
)
|
|
(282
|
)
|
||
Proceeds from the exercise of common stock options
|
170
|
|
|
4,963
|
|
||
Other financing activities, net
|
—
|
|
|
(105
|
)
|
||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
|
(42
|
)
|
|
85,826
|
|
||
Effects of exchange rate movements on cash and cash equivalents
|
(133
|
)
|
|
221
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(4,370
|
)
|
|
79,642
|
|
||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
223,552
|
|
|
197,648
|
|
||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
219,182
|
|
|
$
|
277,290
|
|
Significant non-cash operating and investing activities:
|
|
|
|
||||
Accrued payable for transponder equipment purchase
|
$
|
4,900
|
|
|
$
|
—
|
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||
|
Content
|
|
Connectivity
|
|
Consolidated
|
|
Content
|
|
Connectivity
|
|
Consolidated
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Licensing and services
|
$
|
83,606
|
|
|
$
|
24,225
|
|
|
$
|
107,831
|
|
|
$
|
71,650
|
|
|
$
|
22,200
|
|
|
$
|
93,850
|
|
Equipment
|
—
|
|
|
5,986
|
|
|
5,986
|
|
|
—
|
|
|
6,455
|
|
|
6,455
|
|
||||||
Total revenue
|
83,606
|
|
|
30,211
|
|
|
113,817
|
|
|
71,650
|
|
|
28,655
|
|
|
100,305
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Licensing and services
|
55,637
|
|
|
15,757
|
|
|
71,394
|
|
|
50,002
|
|
|
13,698
|
|
|
63,700
|
|
||||||
Equipment
|
—
|
|
|
5,374
|
|
|
5,374
|
|
|
—
|
|
|
5,726
|
|
|
5,726
|
|
||||||
Total Cost of sales
|
55,637
|
|
|
21,131
|
|
|
76,768
|
|
|
50,002
|
|
|
19,424
|
|
|
69,426
|
|
||||||
Contribution profit
|
27,969
|
|
|
9,080
|
|
|
37,049
|
|
|
21,648
|
|
|
9,231
|
|
|
30,879
|
|
||||||
Other operating expenses
|
|
|
|
|
42,042
|
|
|
|
|
|
|
34,909
|
|
||||||||||
Loss from operations
|
|
|
|
|
$
|
(4,993
|
)
|
|
|
|
|
|
$
|
(4,030
|
)
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Net loss (numerator):
|
|
|
|
|
||||
Net loss for basic EPS
|
|
$
|
(2,412
|
)
|
|
$
|
(3,431
|
)
|
|
|
|
|
|
||||
Less: adjustment for change in fair value on warrants liability for diluted EPS after assumed exercise of warrants liability
|
|
—
|
|
|
954
|
|
||
Net loss for dilutive EPS
|
|
$
|
(2,412
|
)
|
|
$
|
(4,385
|
)
|
|
|
|
|
|
||||
Shares (denominator):
|
|
|
|
|
||||
Weighted-average shares for basic EPS
|
|
78,643
|
|
|
76,874
|
|
||
Effect of assumed exercise of warrants liability
|
|
—
|
|
|
1,851
|
|
||
Adjusted weighted-average share for diluted EPS
|
|
78,643
|
|
|
78,725
|
|
||
|
|
|
|
|
||||
Basic loss per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
Diluted loss per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.06
|
)
|
|
|
Three Months Ended
March 31, |
||||
|
|
2016
|
|
2015
|
||
|
|
|
|
|
||
Stock options
|
|
5,550
|
|
|
2,708
|
|
Restricted stock units
|
|
242
|
|
|
25
|
|
Non-employee stock options
|
|
—
|
|
|
3
|
|
Equity warrants
|
|
88
|
|
|
537
|
|
Liability warrants
|
|
6,173
|
|
|
—
|
|
Convertible notes
|
|
4,447
|
|
|
2,026
|
|
•
|
Level 2: Observable quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
|
•
|
Level 3: Model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing
|
|
March 31, 2016
|
|
Quotes Prices in Active Markets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Other Unobservable Inputs (Level 3)
|
||||||||
Earn-out liability
(1)
|
$
|
9,073
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,073
|
|
Public warrants
(2)
|
18,211
|
|
|
18,211
|
|
|
—
|
|
|
—
|
|
||||
Total financial liabilities
|
$
|
27,284
|
|
|
$
|
18,211
|
|
|
$
|
—
|
|
|
$
|
9,073
|
|
|
December 31, 2015
|
|
Quotes Prices in Active Markets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Other Unobservable Inputs (Level 3)
|
||||||||
Earn-out liability
(1)
|
$
|
9,652
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,652
|
|
Public warrants
(2)
|
24,076
|
|
|
24,076
|
|
|
—
|
|
|
—
|
|
||||
Total financial liabilities
|
$
|
33,728
|
|
|
$
|
24,076
|
|
|
$
|
—
|
|
|
$
|
9,652
|
|
|
Earn-Out Liability
|
||
Balance, December 31, 2015
|
$
|
9,652
|
|
Change in value
|
(579
|
)
|
|
Balance, March 31, 2016
|
$
|
9,073
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||||||||||
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
Convertible senior notes
(1)
|
$
|
68,507
|
|
|
$
|
62,700
|
|
|
$
|
68,335
|
|
|
$
|
78,557
|
|
Notes payable
|
$
|
2,018
|
|
|
$
|
2,018
|
|
|
$
|
2,229
|
|
|
$
|
2,229
|
|
|
As presented December 31, 2015
|
|
Reclassifications
|
|
As adjusted December 31, 2015
|
||||||
Other non-current assets
|
$
|
13,702
|
|
|
$
|
(1,678
|
)
|
|
$
|
12,024
|
|
Notes payable and accrued interest, non-current
|
71,493
|
|
|
(1,678
|
)
|
|
69,815
|
|
|
Weighted Average Useful Life (Years)
|
|
Amounts at December 31, 2015 (Preliminary)
|
|
Adjustments
|
|
Purchase Price Allocation, as Adjusted
|
||||||
Goodwill
|
|
|
$
|
41,093
|
|
|
$
|
(812
|
)
|
|
$
|
40,281
|
|
Customer relationships
|
7.6
|
|
14,000
|
|
|
—
|
|
|
14,000
|
|
|||
Developed technology
|
5.7
|
|
21,900
|
|
|
—
|
|
|
21,900
|
|
|||
Trade name
|
5.0
|
|
200
|
|
|
—
|
|
|
200
|
|
|||
Accounts receivable
|
|
|
6,450
|
|
|
—
|
|
|
6,450
|
|
|||
Property and equipment
|
|
|
1,783
|
|
|
—
|
|
|
1,783
|
|
|||
Deferred tax liability
(preliminary)
|
|
|
(11,047
|
)
|
|
—
|
|
|
(11,047
|
)
|
|||
Accrued expenses
|
|
|
(4,379
|
)
|
|
—
|
|
|
(4,379
|
)
|
|||
Other liabilities assumed, net of assets acquired
(preliminary)
|
|
|
(1,669
|
)
|
|
812
|
|
|
(857
|
)
|
|||
Total consideration transferred
|
|
|
$
|
68,331
|
|
|
$
|
—
|
|
|
$
|
68,331
|
|
Balance at December 31, 2015
|
$
|
93,796
|
|
Adjustment to RMG goodwill
|
(812
|
)
|
|
Currency translation adjustment
|
67
|
|
|
Balance at March 31, 2016
|
$
|
93,051
|
|
|
|
|
March 31, 2016
|
||||||||
|
Weighted Average Useful Lives
|
|
Gross Carrying Value
|
Accumulated Amortization
|
Net Carrying Value
|
||||||
Intangible assets:
|
|
|
|
|
|
||||||
Definite life:
|
|
|
|
|
|
||||||
Existing technology - software
|
5.8 years
|
|
$
|
24,475
|
|
$
|
4,034
|
|
$
|
20,441
|
|
Existing technology - games
|
5 years
|
|
12,331
|
|
7,809
|
|
4,522
|
|
|||
Developed technology
|
8 years
|
|
7,317
|
|
2,287
|
|
5,030
|
|
|||
Customer relationships
|
7.5 years
|
|
133,653
|
|
55,533
|
|
78,120
|
|
|||
Other
|
3.7 years
|
|
7,416
|
|
5,293
|
|
2,123
|
|
|||
Content library (acquired in Business Combination)
|
1.5 years
|
(1)
|
14,298
|
|
14,298
|
|
—
|
|
|||
Content library (acquired post Business Combination)
|
1.5 years
|
|
54,780
|
|
35,334
|
|
19,446
|
|
|||
Total intangible assets
|
|
|
$
|
254,270
|
|
$
|
124,588
|
|
$
|
129,682
|
|
|
|
|
December 31, 2015
|
||||||||
|
Weighted Average Useful Lives
|
|
Gross Carrying Value
|
Accumulated Amortization
|
Net Carrying Value
|
||||||
Intangible assets:
|
|
|
|
|
|
||||||
Definite life:
|
|
|
|
|
|
||||||
Existing technology - software
|
5.8 years
|
|
$
|
24,474
|
|
$
|
2,978
|
|
$
|
21,496
|
|
Existing technology - games
|
5.0 years
|
|
12,331
|
|
7,193
|
|
5,138
|
|
|||
Developed technology
|
8.0 years
|
|
7,317
|
|
2,058
|
|
5,259
|
|
|||
Customer relationships
|
7.5 years
|
|
133,566
|
|
50,184
|
|
83,382
|
|
|||
Other
|
3.7 years
|
|
7,399
|
|
4,991
|
|
2,408
|
|
|||
Content library (acquired in Business Combination)
|
1.5 years
|
|
14,298
|
|
14,298
|
|
—
|
|
|||
Content library (acquired post Business Combination)
|
1.5 years
|
(1)
|
49,599
|
|
33,515
|
|
16,084
|
|
|||
Total intangible assets
|
|
|
$
|
248,984
|
|
$
|
115,217
|
|
$
|
133,767
|
|
Year ending December 31,
|
Amount
|
||
2016 (remaining nine months)
|
$
|
33,802
|
|
2017
|
32,409
|
|
|
2018
|
21,524
|
|
|
2019
|
15,834
|
|
|
2020
|
14,363
|
|
|
Thereafter
|
11,750
|
|
|
Total
|
$
|
129,682
|
|
|
Three Months Ended March 31,
|
||||
|
2016
|
|
2015
|
||
Common stock price on grant date
|
$9.22
|
|
$13.14
|
||
Expected life (in years)
|
3.8
|
|
|
4.0
|
|
Risk-free interest rate
|
1.24
|
%
|
|
1.31
|
%
|
Expected stock volatility
|
44.6
|
%
|
|
50
|
%
|
Expected dividend yield
|
—
|
%
|
|
—
|
%
|
Fair value of stock options granted
|
$3.23
|
|
$5.37
|
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
|
599
|
|
|
$
|
9.22
|
|
|
|
|
|
||
Exercised
|
(26
|
)
|
|
$
|
9.87
|
|
|
|
|
|
||
Forfeited
|
(81
|
)
|
|
$
|
12.34
|
|
|
|
|
|
||
Outstanding at March 31, 2016
|
6,117
|
|
|
$
|
11.00
|
|
|
3.17
|
|
$
|
2
|
|
Vested and expected to vest at March 31, 2016
|
5,544
|
|
|
$
|
10.97
|
|
|
3.09
|
|
$
|
1
|
|
Exercisable at March 31, 2016
|
2,898
|
|
|
$
|
10.77
|
|
|
2.64
|
|
$
|
—
|
|
|
Units (in thousands)
|
|
Weighted Average Grant Date Fair Value
|
|
Aggregate Intrinsic Value (in thousands)
|
|||||
Outstanding at January 1, 2016
|
408
|
|
|
$
|
12.71
|
|
|
|
||
Granted
|
269
|
|
|
$
|
9.18
|
|
|
|
||
Vested
|
(32
|
)
|
|
$
|
13.14
|
|
|
|
||
Forfeited
|
(15
|
)
|
|
$
|
11.98
|
|
|
|
||
Balance nonvested at March 31, 2016
|
630
|
|
|
$
|
11.20
|
|
|
$
|
5,368
|
|
Vested and expected to vest at March 31, 2016
|
468
|
|
|
$
|
11.27
|
|
|
$
|
3,990
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Stock-based compensation expense:
|
|
|
|
|
||||
Cost of services
|
|
$
|
75
|
|
|
$
|
41
|
|
Sales and marketing expenses
|
|
168
|
|
|
26
|
|
||
Product development
|
|
248
|
|
|
313
|
|
||
General and administrative
|
|
1,578
|
|
|
2,170
|
|
||
Total stock-based compensation expense
|
|
$
|
2,069
|
|
|
$
|
2,550
|
|
|
Weighted Average Exercise Price per Warrant
|
|
Number of Warrants (as converted) (in thousands)
|
|
Weighted Average Remaining Life
(in years)
|
|||
Common stock warrants
|
$
|
8.79
|
|
|
690
|
|
|
0.97
|
Series C Preferred stock warrants
|
$
|
8.74
|
|
|
477
|
|
|
1.19
|
Public Warrants
|
|
Number of Warrants (in thousands)
|
|
Weighted Average Exercise price
|
|
Weighted Average Remaining Contractual Term (in years)
|
|||
Outstanding and exercisable at March 31, 2016
|
|
6,173
|
|
|
$
|
11.50
|
|
|
1.84
|
Years Ending December 31,
|
Amount
|
||
2016 (remaining nine months)
|
$
|
639
|
|
2017
|
816
|
|
|
2018
|
53
|
|
|
2019
|
55
|
|
|
2020
|
46
|
|
|
Thereafter
|
83,140
|
|
|
Total
|
$
|
84,749
|
|
|
Three Months Ended March 31,
|
||||
|
2016
|
|
2015
|
||
Southwest Airlines as a percentage of total revenue
|
23
|
%
|
|
25
|
%
|
Southwest Airlines as a percentage of Connectivity revenue
|
85
|
%
|
|
89
|
%
|
(1)
|
$2.7 million
total expenses relating to employee termination benefits, which primarily included severance and transitional-related expenses.
|
(2)
|
In connection with the closure of its German operations pursuant to the Restructuring Plan, the Company disposed of approximately
11,000
square feet of leased facilities in Duisburg and Munich, Germany, representing approximately
6%
of its global facilities square footage. The Company incurred an aggregate of approximately
$0.4 million
of facilities disposal charges pursuant to the Restructuring Plan.
|
(3)
|
$1.6 million
of legal and professional fees associated with the execution of the Restructuring Plan.
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2016
|
|
2015
|
||||
Termination benefits
|
|
$
|
—
|
|
|
$
|
238
|
|
Leases and other contractual obligations
|
|
—
|
|
|
64
|
|
||
Other
|
|
—
|
|
|
—
|
|
||
Total Restructuring charges
|
|
$
|
—
|
|
|
$
|
302
|
|
|
|
Termination Costs
|
|
Leases and other contractual obligations
|
|
Other
|
|
Total
|
||||||||
Restructuring reserves as of January 1, 2015
|
|
$
|
809
|
|
|
$
|
39
|
|
|
$
|
1,076
|
|
|
$
|
1,924
|
|
|
|
|
|
|
|
|
|
|
||||||||
Expense
|
|
238
|
|
|
107
|
|
|
66
|
|
|
411
|
|
||||
Payments
|
|
(1,047
|
)
|
|
(146
|
)
|
|
(1,142
|
)
|
|
(2,335
|
)
|
||||
Restructuring reserves as of December 31, 2015
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
$2.7 million
total expenses relating to employee termination benefits, which primarily included severance and transitional-related expenses.
|
(2)
|
In connection with the closure of its German operations pursuant to the Restructuring Plan, the Company disposed of approximately
11,000
square feet of leased facilities in Duisburg and Munich, Germany, representing approximately
6%
of its global facilities square footage. The Company incurred an aggregate of approximately
$0.4 million
of facilities disposal charges pursuant to the Restructuring Plan.
|
(3)
|
$1.6 million
of legal and professional fees associated with the execution of the Restructuring Plan.
|
|
Three Months Ended March 31,
|
||||||
|
2016
|
|
2015
|
||||
Revenue
|
$
|
113,817
|
|
|
$
|
100,305
|
|
Operating expenses:
|
|
|
|
||||
Cost of sales
|
76,768
|
|
|
69,426
|
|
||
Sales and marketing expenses
|
4,672
|
|
|
3,275
|
|
||
Product development
|
8,746
|
|
|
7,230
|
|
||
General and administrative
|
21,221
|
|
|
18,119
|
|
||
Amortization of intangible assets
|
7,403
|
|
|
5,983
|
|
||
Restructuring charges
|
—
|
|
|
302
|
|
||
Total operating expenses
|
118,810
|
|
|
104,335
|
|
||
Loss from operations
|
(4,993
|
)
|
|
(4,030
|
)
|
||
Other income (expense):
|
|
|
|
||||
Interest expense, net
|
(804
|
)
|
|
(245
|
)
|
||
Change in fair value of derivatives
|
5,865
|
|
|
954
|
|
||
Other income (expense), net
|
680
|
|
|
(796
|
)
|
||
Income (loss) before income taxes
|
748
|
|
|
(4,117
|
)
|
||
Income tax expense (benefit)
|
3,160
|
|
|
(686
|
)
|
||
Net loss
|
$
|
(2,412
|
)
|
|
$
|
(3,431
|
)
|
|
|
|
|
||||
Net loss per common share - basic
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
Net loss per common share - diluted
|
$
|
(0.03
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
||||
Weighted average common shares - basic
|
78,643
|
|
|
76,874
|
|
||
Weighted average common shares - diluted
|
78,643
|
|
|
78,725
|
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2016
|
|
2015
|
||||
Cost of sales
|
|
$
|
1,183
|
|
|
$
|
667
|
|
Sales and marketing
|
|
265
|
|
|
155
|
|
||
Product development
|
|
495
|
|
|
341
|
|
||
General and administrative
|
|
1,202
|
|
|
869
|
|
||
Total depreciation expense
|
|
$
|
3,145
|
|
|
$
|
2,032
|
|
|
|
Three Months Ended
March 31, |
||||||
Stock-based compensation expense:
|
|
2016
|
|
2015
|
||||
Cost of sales
|
|
$
|
75
|
|
|
$
|
41
|
|
Sales and marketing expenses
|
|
168
|
|
|
26
|
|
||
Product development
|
|
248
|
|
|
313
|
|
||
General and administrative
|
|
1,578
|
|
|
2,170
|
|
||
Total stock-based compensation expense
|
|
$
|
2,069
|
|
|
$
|
2,550
|
|
|
|
Three Months Ended
March 31, |
||||
|
|
2016
|
|
2015
|
||
Revenue
|
|
100
|
%
|
|
100
|
%
|
Operating expenses:
|
|
|
|
|
||
Cost of sales
|
|
67
|
%
|
|
69
|
%
|
Sales and marketing expenses
|
|
4
|
%
|
|
3
|
%
|
Product development
|
|
8
|
%
|
|
7
|
%
|
General and administrative
|
|
19
|
%
|
|
18
|
%
|
Amortization of intangible assets
|
|
7
|
%
|
|
6
|
%
|
Restructuring charges
|
|
—
|
%
|
|
—
|
%
|
Total operating expenses
|
|
104
|
%
|
|
104
|
%
|
Loss from operations
|
|
(4
|
)%
|
|
(4
|
)%
|
Other income (expense), net
|
|
5
|
%
|
|
—
|
%
|
Income (loss) before income taxes
|
|
1
|
%
|
|
(4
|
)%
|
Income tax expense (benefit)
|
|
3
|
%
|
|
(1
|
)%
|
Net loss attributable to common stockholders
|
|
(2
|
)%
|
|
(3
|
)%
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||
|
Content
|
|
Connectivity
|
|
Consolidated
|
|
Content
|
|
Connectivity
|
|
Consolidated
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Licensing and services
|
$
|
83,606
|
|
|
$
|
24,225
|
|
|
$
|
107,831
|
|
|
$
|
71,650
|
|
|
$
|
22,200
|
|
|
$
|
93,850
|
|
Equipment
|
—
|
|
|
5,986
|
|
|
5,986
|
|
|
—
|
|
|
6,455
|
|
|
6,455
|
|
||||||
Total revenue
|
83,606
|
|
|
30,211
|
|
|
113,817
|
|
|
71,650
|
|
|
28,655
|
|
|
100,305
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales
|
55,637
|
|
|
21,131
|
|
|
76,768
|
|
|
50,002
|
|
|
19,424
|
|
|
69,426
|
|
||||||
Contribution profit
|
27,969
|
|
|
9,080
|
|
|
37,049
|
|
|
21,648
|
|
|
9,231
|
|
|
30,879
|
|
||||||
Other operating expenses
|
|
|
|
|
42,042
|
|
|
|
|
|
|
34,909
|
|
||||||||||
Loss from operations
|
|
|
|
|
$
|
(4,993
|
)
|
|
|
|
|
|
$
|
(4,030
|
)
|
|
Three Months Ended March 31,
|
% Change
|
|||||||
|
2016
|
|
2015
|
2016 to 2015
|
|||||
Services
|
$
|
24,225
|
|
|
$
|
22,200
|
|
9
|
%
|
Equipment revenue
|
5,986
|
|
|
6,455
|
|
(7
|
)%
|
||
Total revenue Connectivity segment
|
$
|
30,211
|
|
|
$
|
28,655
|
|
5
|
%
|
|
Three Months Ended March 31,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Licensing revenue
|
$
|
83,606
|
|
|
$
|
71,650
|
|
|
17
|
%
|
|
Three Months Ended March 31,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Service cost of sales
|
$
|
15,757
|
|
|
$
|
13,698
|
|
|
15
|
%
|
Equipment cost of sales
|
5,374
|
|
|
5,726
|
|
|
(6
|
)%
|
||
Total Connectivity cost of sales
|
$
|
21,131
|
|
|
$
|
19,424
|
|
|
9
|
%
|
|
Three Months Ended March 31,
|
% Change
|
|||||||
|
2016
|
|
2015
|
2016 to 2015
|
|||||
Content cost of sales
|
$
|
55,637
|
|
|
$
|
50,002
|
|
11
|
%
|
|
Three Months Ended March 31,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Sales and marketing expenses
|
$
|
4,672
|
|
|
$
|
3,275
|
|
|
43
|
%
|
Product development
|
8,746
|
|
|
7,230
|
|
|
21
|
%
|
||
General and administrative
|
21,221
|
|
|
18,119
|
|
|
17
|
%
|
||
Amortization of intangible assets
|
7,403
|
|
|
5,983
|
|
|
24
|
%
|
||
Restructuring charges
|
—
|
|
|
302
|
|
|
—
|
%
|
|
March 31,
2016 |
|
December 31,
2015 |
||||
Bank Loans
|
$
|
1,171
|
|
|
$
|
1,374
|
|
Bank Debt
|
$
|
848
|
|
|
$
|
855
|
|
Convertible Senior Notes
|
$
|
68,506
|
|
|
$
|
68,335
|
|
Years Ending December 31,
|
Amount
|
||
2016 (remaining nine months)
|
$
|
639
|
|
2017
|
816
|
|
|
2018
|
53
|
|
|
2019
|
55
|
|
|
2020
|
46
|
|
|
Thereafter
|
83,140
|
|
|
Total
|
$
|
84,749
|
|
|
Three months ended March 31,
|
||||||
|
2016
|
|
2015
|
||||
Net cash provided by (used in) operating activities
|
$
|
1,601
|
|
|
$
|
(3,754
|
)
|
Net cash used in investing activities
|
$
|
(5,796
|
)
|
|
$
|
(2,651
|
)
|
Net cash (used in) provided by financing activities
|
$
|
(42
|
)
|
|
$
|
85,826
|
|
|
Three Months Ended March 31,
|
||||
|
2016
|
|
2015
|
||
Southwest Airlines
|
23
|
%
|
|
25
|
%
|
•
|
The closing of the acquisition is subject to closing conditions, including obtaining necessary regulatory approvals. If the closing conditions are not satisfied or waived, either timely or at all, the acquisition will be delayed or will not be completed, which could cause us not to realize some or all of the anticipated benefits of the acquisition.
|
•
|
The market price of our common stock may reflect an assumption that the pending acquisition will occur and on a timely basis, and the failure to do so may result in a decline in the market price of our common stock.
|
•
|
Combining the two companies may prove to be more difficult, costly and time consuming than expected, which could cause us not to realize some or all of the anticipated benefits and synergies of the acquisition.
|
•
|
In connection with the acquisition, we will assume certain of EMC’s outstanding indebtedness, which could adversely affect us, including by lowering our credit ratings, increasing our interest expense and decreasing our business flexibility, particularly if we are not able to realize some or all of the anticipated benefits and synergies of the acquisition.
|
•
|
We may issue shares of preferred stock to consummate the acquisition, which may significantly dilute the equity interest of existing holders of common stock, may rank ahead of our common stock in terms of dividends, liquidation rights or voting rights and may adversely affect the market price of our common stock.
|
•
|
The acquisition will involve substantial non-recurring costs, including significant transaction costs, regulatory costs and integration costs, such as facilities, systems and employment-related costs, and we may incur additional unanticipated costs or unknown liabilities which may be significant. Although we expect the elimination of duplicative costs and other cost synergies from operational and functional efficiencies following integration of the two companies to exceed integration costs over time, we may not be able to achieve this result as quickly as anticipated or at all, particularly if we are not able to realize some or all of the anticipated benefits and cost savings from the acquisition.
|
•
|
Sales of our common stock by shareholders of EMC who receive shares of our common stock as part of the acquisition consideration may result in a decline in the market price of our common stock.
|
•
|
Uncertainties associated with the acquisition may adversely affect our and EMC’s respective abilities to attract and retain management and other key employees during the pendency of the acquisition and the integration period, which could
|
•
|
The acquisition may disrupt our or EMC’s businesses, which may harm our respective businesses and impact our respective abilities to retain customers.
|
•
|
Uncertainties associated with the manner in which the combined company following the acquisition will fare in the global economic environment.
|
•
|
The acquisition of EMC and the operation of its business can lead us to incur unknown or new types of costs and liabilities, subject us to new regulatory and compliance frameworks both domestic and foreign, new market risks, involve operations in new geographies and challenging labor, regulatory and tax regimes as well as the execution and compliance costs and risks associated with such activities.
|
•
|
A significant anticipated benefit of the acquisition of EMC lies in the acquisition of EMC’s intellectual property rights. If we are unable to protect such intellectual property rights or if our protection efforts are unsuccessful, we may not be able to realize some or all of the anticipated benefits from the acquisition.
|
GLOBAL EAGLE ENTERTAINMENT INC.
|
|
By:
|
/s/ Michael Zemetra
|
|
Michael Zemetra
|
|
Chief Financial Officer and Treasurer
|
|
(principal financial officer, principal accounting officer and duly authorized officer)
|
Exhibit
|
|
Description
|
10.1
|
|
Separation Agreement and Mutual General Release, dated as of April 30, 2016, between the Company and Jay Itzkowitz.
|
|
|
|
10.2
|
|
Employment Agreement, dated March 11, 2016, by and between the Company and Stephen Ballas.
|
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|
|
|
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|
|
|
|
32.1
|
|
Section 1350 Certification of Chief Executive Officer
|
|
|
|
32.2
|
|
Section 1350 Certification of Chief Financial Officer
|
|
|
|
101.1
|
|
The following financial information from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of March 31, 2016 (Unaudited) and December 31, 2015; (ii) Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2016 and 2015; (iii) Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2016 and 2015; (iv) Unaudited Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2016; (v) Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.
|
•
|
Following the effective date of this Agreement (as described below), Employee shall be paid twelve (12) months of base salary (for a total amount of $310,000.00), which amount shall be paid over the twelve (12) month period following the effective date of this Agreement (as described below) on the Company’s normal payroll dates and by direct deposit to the same account as currently used, less applicable withholdings and payroll taxes.
|
•
|
Following the effective date of this Agreement (as described below), Employee shall be provided with up to twelve (12) months of subsidized COBRA benefits coverage should Employee elect to enroll in this benefit.
|
•
|
Following the effective date of this Agreement (as described below) Employee shall be provided with one (1) month of outplacement services by Knightsbridge or another third party selected by the Company.
|
•
|
Following the effective date of this Agreement (as described below), the exercise period upon termination of employment for employee’s currently vested stock options currently set at three (3) months from the date of such termination shall be extended to a period of twelve (12) months
|
|
EMPLOYEE
Jay Itzkowitz
By:
/s/ Jay Itzkowitz
|
|
COMPANY
Global Eagle Entertainment Inc.
By:
/s/ Zant Chapelo
Name: Zant Chapelo
Title: SVP Human Resources and Org Development
|
|
|
(a)
|
Communicate to Global Eagle any facts known by me respecting said Global Eagle Inventions;
|
(b)
|
do all lawful acts, including the execution and delivery of all papers and proper oaths and the giving of testimony deemed necessary or desirable by Global Eagle or Global Eagle Representatives, with regard to said Global Eagle Inventions, for protecting, obtaining, securing rights in, maintaining and enforcing any and all copyrights, patents, mask work rights or other intellectual property rights in the United States and throughout the world for said Global Eagle Inventions, and for perfecting, affirming, recording and maintaining in Global Eagle and Global Eagle Representatives sole and exclusive right, title and interest in and to the Global Eagle Inventions, and any copyrights, Patents, mask work rights or other intellectual property rights relating thereto; and
|
(c)
|
generally cooperate to the fullest extent in all matters pertaining to said Global Eagle Inventions, original works of authorship, concepts, trade secrets, improvements, developments and discoveries, any and all applications, specifications, oaths, assignments and all other instruments which Global Eagle shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to Global Eagle, its successors, assigns and nominees the sole and exclusive rights, title and interest in and to such Global Eagle Inventions, and any copyrights, patents, mask work rights or other intellectual property rights relating thereto.
|
(a)
|
was developed entirely on my own time without using Global Eagle equipment, supplies, facilities, or trade secret information;
|
(b)
|
does not relate at the time of conception or reduction to practice of the invention to Global Eagle business, or to its actual or demonstrably anticipated research or development; and
|
(c)
|
does not result from any work performed by me for Global Eagle.
|
A.
|
This Agreement will be governed by the laws of the State of California.
|
B.
|
This Agreement sets forth the entire agreement and understanding between Global Eagle and me relating to the subject matter herein and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver or any rights under this Agreement, will be effective unless in writing signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.
|
C.
|
Nothing contained herein shall be construed to require the commission of any act contrary to law. Should there be any conflict between any provisions hereof and any present or future statute, law, ordinance, regulation, or other pronouncement having the force of law, the latter shall prevail, but the provision of this Agreement affected thereby shall be curtailed and limited only to the extent necessary to bring it within the requirement of the law, and the remaining provisions of this Agreement shall remain in full force and effect.
|
D.
|
This Agreement may not be assigned by me without the prior written consent of Global Eagle. Subject to the foregoing sentence, this Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of Global Eagle, its successors, and its assigns.
|
E.
|
The provisions of this Agreement are severable, and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions or parts thereof shall nevertheless be binding and enforceable. In the event that any provision of this Agreement is deemed unenforceable, Global Eagle and I agree that a court or an arbitrator chosen pursuant to the terms hereof shall reform such provision to the extent necessary to cause it to be enforceable to the maximum extent permitted by law. Global Eagle and I agree that each desires the court or arbitrator to reform such provision, and therefore agree that the court or arbitrator will have jurisdiction to do so and that each will abide by the determination of the court or arbitrator.
|
Date:
|
May 9, 2016
|
/s/ David M. Davis
|
|
|
David M. Davis
|
|
|
Chief Executive Officer
|
|
|
(principal executive officer)
|
Date:
|
May 9, 2016
|
/s/ Michael Zemetra
|
|
|
Michael Zemetra
|
|
|
Chief Financial Officer and Treasurer
|
|
|
(principal financial officer and principal accounting officer)
|
Date:
|
May 9, 2016
|
/s/ David M. Davis
|
|
|
David M. Davis
|
|
|
Chief Executive Officer
|
|
|
(principal executive officer)
|
Date:
|
May 9, 2016
|
/s/ Michael Zemetra
|
|
|
Michael Zemetra
|
|
|
Chief Financial Officer and Treasurer
|
|
|
(principal financial officer and principal accounting officer)
|