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, Suite 300
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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
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o
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Accelerated filer
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þ
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Non-accelerated filer
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o
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Smaller reporting company
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o
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(Class)
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(Outstanding as of November 4, 2016)
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COMMON STOCK, $0.0001 PAR VALUE
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85,309,744
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SHARES*
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Item No.
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Description
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Page
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PART I — Financial Information
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II — Other Information
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||||
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2016
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2015
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2016
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2015
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||||||||
Revenue
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$
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146,909
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$
|
110,114
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$
|
372,991
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$
|
312,795
|
|
Operating expenses:
|
|
|
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|
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||||||||
Cost of sales
|
103,348
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71,456
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255,202
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206,965
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||||
Sales and marketing expenses
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8,390
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4,819
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19,553
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13,058
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||||
Product development
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7,916
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7,766
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25,078
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21,447
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||||
General and administrative
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44,728
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18,602
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82,395
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54,297
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||||
Provision for legal settlements
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1,545
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3,500
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41,688
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4,250
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Amortization of intangible assets
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9,166
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7,286
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24,055
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19,274
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||||
Restructuring charges
|
—
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66
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—
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368
|
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||||
Total operating expenses
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175,093
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113,495
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447,971
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319,659
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Loss from operations
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(28,184
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)
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(3,381
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)
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(74,980
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)
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(6,864
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)
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Other income (expense):
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||||||||
Interest expense, net
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(6,412
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)
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(803
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)
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(7,829
|
)
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(1,631
|
)
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||||
Income from equity method investments
|
2,065
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—
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2,065
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—
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||||
Change in fair value of derivatives
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1,191
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(1,877
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)
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17,982
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|
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13,866
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||||
Other income (expense), net, including related party loan impairment
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631
|
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(576
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)
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(4,623
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)
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(1,815
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)
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(Loss) income before income taxes
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(30,709
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)
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(6,637
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)
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(67,385
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)
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3,556
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Income tax benefit (expense)
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50,063
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(235
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)
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46,167
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(872
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)
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Net income (loss)
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$
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19,354
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$
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(6,872
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)
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$
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(21,218
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)
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$
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2,684
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||||||||
Net income (loss) per common share – basic
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$
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0.23
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$
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(0.09
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)
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$
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(0.27
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)
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$
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0.03
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Net income (loss) per common share – diluted
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$
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0.23
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$
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(0.09
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)
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$
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(0.27
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)
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$
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(0.14
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)
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Weighted average common shares – basic
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82,874
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77,753
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79,892
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77,249
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Weighted average common shares – diluted
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85,081
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77,753
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79,892
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78,449
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2016
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2015
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2016
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2015
|
||||||||
Net income (loss)
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$
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19,354
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$
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(6,872
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)
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$
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(21,218
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)
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|
$
|
2,684
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Other comprehensive gain (loss):
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Unrealized foreign currency translation gains (losses)
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174
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(78
|
)
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16
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(267
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)
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Other comprehensive gain (loss)
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174
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(78
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)
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16
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(267
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)
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Comprehensive income (loss)
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$
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19,528
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$
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(6,950
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)
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$
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(21,202
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)
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$
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2,417
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Common Stock
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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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||||||||||||||||||||
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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
|
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Comprehensive Loss
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Stockholders' Equity
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||||||||||||||||
Balance at December 31, 2015
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81,676
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$
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8
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|
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(3,054
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)
|
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$
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(30,659
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)
|
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$
|
688,696
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|
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$
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(528
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)
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$
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(303,457
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)
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$
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(299
|
)
|
|
$
|
353,761
|
|
Issuance of common stock for Emerging Markets Communication Acquisition
|
5,467
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|
1
|
|
|
—
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|
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—
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|
40,606
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|
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—
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—
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|
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—
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|
|
40,607
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|||||||
Issuance of common stock for legal settlements
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1,751
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|
|
—
|
|
|
—
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|
|
—
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|
|
13,705
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—
|
|
|
—
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|
|
—
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|
|
13,705
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|
|||||||
Repurchase and retirement of common stock
|
(614
|
)
|
|
—
|
|
|
—
|
|
|
—
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|
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(5,219
|
)
|
|
—
|
|
|
—
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|
|
—
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|
|
(5,219
|
)
|
|||||||
Exercise of stock options
|
26
|
|
|
—
|
|
|
—
|
|
|
—
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|
|
254
|
|
|
—
|
|
|
—
|
|
|
—
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|
|
254
|
|
|||||||
Restricted stock units vested and distributed, net of tax
|
58
|
|
|
—
|
|
|
—
|
|
|
—
|
|
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(242
|
)
|
|
—
|
|
|
—
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|
|
—
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|
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(242
|
)
|
|||||||
Purchase of subsidiary shares from non-controlling interests
|
—
|
|
|
—
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|
|
—
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|
|
—
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|
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(876
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
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(876
|
)
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,061
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,061
|
|
|||||||
Interest income on subscription receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
16
|
|
|
16
|
|
|||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,218
|
)
|
|
—
|
|
|
(21,218
|
)
|
|||||||
Balance at September 30, 2016
|
88,364
|
|
|
$
|
9
|
|
|
(3,054
|
)
|
|
$
|
(30,659
|
)
|
|
$
|
744,985
|
|
|
$
|
(547
|
)
|
|
$
|
(324,675
|
)
|
|
$
|
(283
|
)
|
|
$
|
388,830
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net (loss) income
|
$
|
(21,218
|
)
|
|
$
|
2,684
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
36,937
|
|
|
25,857
|
|
||
Non-cash interest expense, net
|
1,239
|
|
|
440
|
|
||
Change in fair value of derivative financial instrument
|
(17,982
|
)
|
|
(13,866
|
)
|
||
Stock-based compensation
|
8,061
|
|
|
6,248
|
|
||
Issuance of shares for legal settlements
|
13,705
|
|
|
—
|
|
||
Impairment of related party loan
|
4,516
|
|
|
—
|
|
||
(Earnings) losses on equity method investments
|
(2,065
|
)
|
|
—
|
|
||
Deferred income taxes
|
(58,352
|
)
|
|
(4,921
|
)
|
||
Other
|
795
|
|
|
555
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(634
|
)
|
|
(6,077
|
)
|
||
Inventory
|
(2,792
|
)
|
|
(4,245
|
)
|
||
Content library
|
(2,303
|
)
|
|
(426
|
)
|
||
Prepaid expenses and other assets
|
14,036
|
|
|
(335
|
)
|
||
Deposits and other assets
|
(2,931
|
)
|
|
1,820
|
|
||
Accounts payable and accrued expenses
|
686
|
|
|
671
|
|
||
Deferred revenue
|
(5,734
|
)
|
|
212
|
|
||
Other liabilities
|
(1,937
|
)
|
|
3,393
|
|
||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
(35,973
|
)
|
|
12,010
|
|
||
|
|
|
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Purchases of property and equipment
|
(29,484
|
)
|
|
(14,710
|
)
|
||
Acquisitions, net of cash acquired
|
(91,626
|
)
|
|
(55,242
|
)
|
||
Payment of deferred acquisition contingency
|
—
|
|
|
(5,000
|
)
|
||
Issuance of loan to related party
|
(4,400
|
)
|
|
—
|
|
||
Purchase of investments
|
(12,975
|
)
|
|
(2,324
|
)
|
||
Net proceeds from sale of available for sale securities
|
13,023
|
|
|
580
|
|
||
NET CASH USED IN INVESTING ACTIVITIES
|
(125,462
|
)
|
|
(76,696
|
)
|
||
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Proceeds from issuance of notes payable
|
1,339
|
|
|
|
|||
Proceeds from issuance of convertible senior notes
|
—
|
|
|
81,250
|
|
||
Repayments of notes payable
|
(2,272
|
)
|
|
(636
|
)
|
||
Net proceeds from share-based payments
|
12
|
|
|
5,472
|
|
||
Purchase of common stock
|
(5,219
|
)
|
|
—
|
|
||
Convertible senior note issuance fees
|
—
|
|
|
(831
|
)
|
||
Other financing activities, net
|
—
|
|
|
(476
|
)
|
||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
|
(6,140
|
)
|
|
84,779
|
|
||
Effects of exchange rate movements on cash and cash equivalents
|
178
|
|
|
313
|
|
||
Net (decrease) increase in cash and cash equivalents
|
(167,397
|
)
|
|
20,406
|
|
||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
223,552
|
|
|
197,648
|
|
||
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
$
|
56,155
|
|
|
$
|
218,054
|
|
SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
||||
Issuance of common stock for Emerging Markets Communications
|
$
|
40,607
|
|
|
$
|
—
|
|
Issuance of common stock for legal settlements
|
13,705
|
|
|
—
|
|
||
Issuance of common stock in exchange for warrants
|
—
|
|
|
12,608
|
|
•
|
Connectivity—EMC provides global satellite bandwidth (C-Band, Ku-Band, Ka-Band), terrestrial broadband network, cellular and 3G services, remote fiber network and fully meshed MPLS interconnected teleports;
|
•
|
Access—EMC provides access to live television worldwide, video (on demand and subscription), 3G cellular services, Internet, voice, data, high-definition video conferencing and universal portals, including through its proprietary SpeedNet product; and
|
•
|
Support—EMC has field support centers worldwide, each of which has a spare parts inventory, a 24 hour/7 days network operations center, certified technicians, system integration and project management.
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||
|
Content
|
|
Connectivity
|
|
Consolidated
|
|
Content
|
|
Connectivity
|
|
Consolidated
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Licensing and services
|
$
|
79,014
|
|
|
$
|
59,231
|
|
|
$
|
138,245
|
|
|
$
|
81,574
|
|
|
$
|
24,838
|
|
|
$
|
106,412
|
|
Equipment
|
—
|
|
|
8,664
|
|
|
8,664
|
|
|
—
|
|
|
3,702
|
|
|
3,702
|
|
||||||
Total revenue
|
79,014
|
|
|
67,895
|
|
|
146,909
|
|
|
81,574
|
|
|
28,540
|
|
|
110,114
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Licensing and services
|
53,132
|
|
|
42,428
|
|
|
95,560
|
|
|
53,995
|
|
|
14,654
|
|
|
68,649
|
|
||||||
Equipment
|
—
|
|
|
7,788
|
|
|
7,788
|
|
|
—
|
|
|
2,807
|
|
|
2,807
|
|
||||||
Total cost of sales
|
53,132
|
|
|
50,216
|
|
|
103,348
|
|
|
53,995
|
|
|
17,461
|
|
|
71,456
|
|
||||||
Contribution profit
|
25,882
|
|
|
17,679
|
|
|
43,561
|
|
|
27,579
|
|
|
11,079
|
|
|
38,658
|
|
||||||
Other Operating Expenses
|
|
|
|
|
71,745
|
|
|
|
|
|
|
42,039
|
|
||||||||||
(Loss) from Operations
|
|
|
|
|
$
|
(28,184
|
)
|
|
|
|
|
|
$
|
(3,381
|
)
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||
|
Content
|
|
Connectivity
|
|
Consolidated
|
|
Content
|
|
Connectivity
|
|
Consolidated
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Licensing and services
|
$
|
241,330
|
|
|
$
|
110,625
|
|
|
$
|
351,955
|
|
|
$
|
227,037
|
|
|
$
|
71,602
|
|
|
$
|
298,639
|
|
Equipment
|
—
|
|
|
21,036
|
|
|
21,036
|
|
|
—
|
|
|
14,156
|
|
|
14,156
|
|
||||||
Total revenue
|
241,330
|
|
|
131,661
|
|
|
372,991
|
|
|
227,037
|
|
|
85,758
|
|
|
312,795
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Licensing and services
|
161,708
|
|
|
75,381
|
|
|
237,089
|
|
|
152,044
|
|
|
42,730
|
|
|
194,774
|
|
||||||
Equipment
|
—
|
|
|
18,113
|
|
|
18,113
|
|
|
—
|
|
|
12,191
|
|
|
12,191
|
|
||||||
Total Cost of sales
|
161,708
|
|
|
93,494
|
|
|
255,202
|
|
|
152,044
|
|
|
54,921
|
|
|
206,965
|
|
||||||
Contribution profit
|
79,622
|
|
|
38,167
|
|
|
117,789
|
|
|
74,993
|
|
|
30,837
|
|
|
105,830
|
|
||||||
Other operating expenses
|
|
|
|
|
192,769
|
|
|
|
|
|
|
112,694
|
|
||||||||||
Loss from operations
|
|
|
|
|
$
|
(74,980
|
)
|
|
|
|
|
|
$
|
(6,864
|
)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income (loss) (numerator):
|
|
|
|
|
|
|
|
||||||||
Net income (loss) for basic EPS
|
$
|
19,354
|
|
|
$
|
(6,872
|
)
|
|
$
|
(21,218
|
)
|
|
$
|
2,684
|
|
|
|
|
|
|
|
|
|
||||||||
Less: adjustment for change in fair value on warrants liability for diluted EPS after assumed exercise of warrants liability
|
—
|
|
|
—
|
|
|
—
|
|
|
13,866
|
|
||||
Net income (loss) for dilutive EPS
|
$
|
19,354
|
|
|
$
|
(6,872
|
)
|
|
$
|
(21,218
|
)
|
|
$
|
(11,182
|
)
|
|
|
|
|
|
|
|
|
||||||||
Shares (denominator):
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares for basic EPS
|
82,874
|
|
|
77,753
|
|
|
79,892
|
|
|
77,249
|
|
||||
Effect of dilutive securities
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Effect of assumed exercise of liability contracts settleable in stock
|
2,119
|
|
|
—
|
|
|
—
|
|
|
1,200
|
|
||||
Adjusted weighted-average share for diluted EPS
|
85,081
|
|
|
77,753
|
|
|
79,892
|
|
|
78,449
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic income (loss) income per share
|
$
|
0.23
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
0.03
|
|
Diluted income (loss) per share
|
$
|
0.23
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.14
|
)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
|
|
|
|
|
|
|
|
||||
Employee stock options
|
6,600
|
|
|
3,545
|
|
|
6,076
|
|
|
3,004
|
|
Restricted stock units
|
147
|
|
|
190
|
|
|
253
|
|
|
44
|
|
Non-employee stock options
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Equity warrants
(1)
|
1,163
|
|
|
392
|
|
|
1,163
|
|
|
475
|
|
Liability warrants
(2)
|
6,173
|
|
|
411
|
|
|
6,173
|
|
|
—
|
|
Convertible notes
|
4,447
|
|
|
4,447
|
|
|
4,447
|
|
|
3,663
|
|
EMC deferred consideration
(3)
|
—
|
|
|
—
|
|
|
503
|
|
|
—
|
|
Contingently issuable shares
(4)
|
509
|
|
|
—
|
|
|
171
|
|
|
—
|
|
(1)
|
Legacy Row 44 warrants originally issuable for Row 44 common stock and Row 44 Series C preferred stock, and now issuable for our Common Stock.
|
(2)
|
Warrants issued in our initial public offering to non-sponsor shareholders ("Public SPAC Warrants").
|
(3)
|
In connection with the EMC Acquisition, the Company is obligated to pay
$25.0 million
in cash or stock, at the Company's option, on July 27, 2017.
|
(4)
|
In connection with the settlement of the sound recording litigation, the Company is obligated to issue up to an aggregate of
900,000
shares of its common stock at such time the share price exceeds designated thresholds.
|
•
|
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 the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models, and similar techniques.
|
|
September 30, 2016
|
|
Quotes Prices in Active Markets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Other Unobservable Inputs (Level 3)
|
||||||||
Earn-out liability
(1)
|
$
|
4,162
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,162
|
|
Public SPAC Warrants
(2)
|
6,235
|
|
|
6,235
|
|
|
—
|
|
|
—
|
|
||||
Contingently issuable shares
(3)
|
6,276
|
|
|
—
|
|
|
—
|
|
|
6,276
|
|
||||
Total financial liabilities
|
$
|
16,673
|
|
|
$
|
6,235
|
|
|
$
|
—
|
|
|
$
|
10,438
|
|
|
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 SPAC Warrants
(2)
|
24,076
|
|
|
24,076
|
|
|
—
|
|
|
—
|
|
||||
Total financial liabilities
|
$
|
33,728
|
|
|
$
|
24,076
|
|
|
$
|
—
|
|
|
$
|
9,652
|
|
(1)
|
Includes
$4.2 million
and
$9.7 million
as of
September 30, 2016
and
December 31, 2015
, respectively, of earn-out liability for the Company's acquisitions of Western Outdoor Interactive Pvt. Ltd. ("WOI"), certain assets of RMG Networks Holding Corporation (the "RMG Assets"), navAero AB ("navAero") and Marks Systems, Inc. (doing business as masFlight ("masFlight")) assumed in business combinations for the year ended
December 31, 2015
.
|
(2)
|
Includes
6,173,228
warrants issued in our initial public offering to non-sponsor shareholders.
|
(3)
|
In connection with the settlement of the sound recording litigation, the Company is obligated to issue up to an aggregate of
900,000
shares of its common stock at such time the share price exceeds designated thresholds. Based on conditions of the award, such contingently issuable shares are classified as liabilities and are remeasured to fair value each reporting period.
|
|
Earn-Out Liability
|
|
Contingently Issuable Shares
|
||||
Balance as of December 31, 2015
|
$
|
9,652
|
|
|
$
|
—
|
|
Fair value of contingently issuable shares associated with sound recording litigation settlement
|
—
|
|
|
6,417
|
|
||
Change in value
|
(5,490
|
)
|
|
(141
|
)
|
||
Balance as of September 30, 2016
|
$
|
4,162
|
|
|
$
|
6,276
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
Convertible senior notes
(1)
|
$
|
68,851
|
|
|
$
|
68,941
|
|
|
$
|
68,335
|
|
|
$
|
78,557
|
|
Term loans with banks
|
371,857
|
|
|
370,588
|
|
|
886
|
|
|
886
|
|
||||
Other debt
|
816
|
|
|
816
|
|
|
1,343
|
|
|
1,343
|
|
(1)
|
The fair value of the convertible senior notes is exclusive of the conversion feature, which was originally allocated for reporting purposes at
$13.0 million
, and is included in the condensed consolidated balance sheets within "Additional paid-in capital" (seeNote 11).
|
Cash consideration paid to seller (a)
|
$
|
100,658
|
|
5,466,886 Company common shares multiplied by the $8.03 closing share price per share of on July 27, 2016, less a 7.5% discount for restrictions on transferability (b)
|
40,607
|
|
|
Deferred consideration
|
25,000
|
|
|
Settlement of pre-existing relationship
|
228
|
|
|
Estimated consideration
|
$
|
166,493
|
|
(a)
|
The cash consideration includes: (i) the minimum cash payment of
$30.0 million
; (ii) the change of control restructuring bonus plan payout of
$4.5 million
; (iii) a payment of
$1.0 million
that was due in 2016 for deferred purchase price for a prior EMC acquisition; (iv) seller’s transaction expenses of
$5.8 million
; (v) the indemnity escrow amount of approximately
$2.7 million
; (vi) the adjustment escrow amount of
$1.5 million
and (vii)
$55.1 million
to redeem shares held by the preferred stock shareholders.
|
(b)
|
A discount was applied to the GEE shares issued in connection with the EMC Acquisition as the shares issued were not registered with the U.S. Securities and Exchange Commission. Although a registration statement for these shares is now effective, the shares are subject to sale restrictions under the registration statement during blackout periods until such time the restriction is lifted or lapses.
|
|
Amounts Recognized and Reported as of EMC Acquisition Date
|
||
Cash and cash equivalents
|
$
|
9,032
|
|
Restricted cash
|
17,802
|
|
|
Other current assets
|
58,220
|
|
|
Property, plant and equipment
|
94,321
|
|
|
Equity method investments (a)
|
102,719
|
|
|
Intangible assets (b)
|
134,900
|
|
|
Other non-current assets
|
1,074
|
|
|
Accounts payable and accrued liabilities
|
(47,067
|
)
|
|
Deferred revenue
|
(6,652
|
)
|
|
Debt, including current
|
(370,845
|
)
|
|
Deferred tax liabilities, net
|
(74,082
|
)
|
|
Deferred revenue, non-current
|
(2,278
|
)
|
|
Other non-current liabilities
|
(22,170
|
)
|
|
Estimated fair value of net assets acquired
|
$
|
(105,026
|
)
|
Consideration transferred
|
166,493
|
|
|
Estimated goodwill
|
$
|
271,519
|
|
(a)
|
Represents
49%
joint ventures in Wireless Maritime Services, LLC (“WMS Joint Venture”) and Santander Teleport (“Santander Joint Venture”).
|
(b)
|
The intangible assets are comprised of the following (dollars in thousands):
|
|
Weighted Average Useful Life (Years)
|
|
Fair Value
|
||
Completed technology
|
6.0
|
|
$
|
21,800
|
|
Customer relationships
|
19.0
|
|
19,100
|
|
|
Favorable vendor agreements
|
9.0
|
|
91,800
|
|
|
Trademarks
|
5.0
|
|
2,200
|
|
|
Total value of intangible assets
|
|
|
$
|
134,900
|
|
|
Nine Months Ended
September 30, 2016 |
|
Year Ended
December 31, 2015 |
||||
Professional and consulting expenses
|
$
|
7,975
|
|
|
$
|
1,785
|
|
Banking fees
|
10,564
|
|
|
—
|
|
||
|
$
|
18,539
|
|
|
$
|
1,785
|
|
|
Nine Months Ended
September 30, 2016 |
|
Nine Months Ended
September 30, 2015 |
||||
Total revenue
|
$
|
478,496
|
|
|
$
|
583,603
|
|
Net loss
|
(89,034
|
)
|
|
21,818
|
|
|
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
|
|
|
(11,047
|
)
|
|
—
|
|
|
(11,047
|
)
|
|||
Accrued expenses
|
|
|
(4,379
|
)
|
|
—
|
|
|
(4,379
|
)
|
|||
Other liabilities assumed, net of assets acquired
|
|
|
(1,669
|
)
|
|
812
|
|
|
(857
|
)
|
|||
Total consideration transferred
|
|
|
$
|
68,331
|
|
|
$
|
—
|
|
|
$
|
68,331
|
|
|
Connectivity
|
|
Content
|
|
Total
|
||||||
Balance as of December 31, 2015
|
$
|
19,273
|
|
|
$
|
74,523
|
|
|
$
|
93,796
|
|
Adjustment to RMG goodwill
|
—
|
|
|
(812
|
)
|
|
(812
|
)
|
|||
Added with EMC acquisition
|
271,519
|
|
|
—
|
|
|
271,519
|
|
|||
Currency translation adjustment
|
—
|
|
|
40
|
|
|
40
|
|
|||
Balance as of September 30, 2016
|
$
|
290,792
|
|
|
$
|
73,751
|
|
|
$
|
364,543
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Leasehold improvements
|
$
|
6,347
|
|
|
$
|
3,886
|
|
Furniture and fixtures
|
3,150
|
|
|
2,154
|
|
||
Equipment
|
62,565
|
|
|
21,043
|
|
||
Computer equipment
|
12,515
|
|
|
6,967
|
|
||
Computer software
|
16,515
|
|
|
8,677
|
|
||
Automobiles
|
354
|
|
|
255
|
|
||
Buildings
|
7,039
|
|
|
2,649
|
|
||
Albatross (aircraft)
|
425
|
|
|
425
|
|
||
Satellite transponder
|
66,358
|
|
|
6,700
|
|
||
Construction in-progress
|
6,015
|
|
|
6,319
|
|
||
Total property, plant and equipment
|
$
|
181,283
|
|
|
$
|
59,075
|
|
Accumulated depreciation
|
(31,663
|
)
|
|
(20,009
|
)
|
||
Property, plant and equipment, net
|
$
|
149,620
|
|
|
$
|
39,066
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Depreciation expense:
|
|
|
|
|
|
|
|
||||||||
Cost of sales
|
$
|
3,125
|
|
|
$
|
648
|
|
|
$
|
5,523
|
|
|
$
|
1,985
|
|
Sales and marketing
|
420
|
|
|
219
|
|
|
1,133
|
|
|
622
|
|
||||
Product development
|
399
|
|
|
353
|
|
|
1,453
|
|
|
1,021
|
|
||||
General and administrative
|
2,231
|
|
|
1,007
|
|
|
4,773
|
|
|
2,805
|
|
||||
Total depreciation expense
|
$
|
6,175
|
|
|
$
|
2,227
|
|
|
$
|
12,882
|
|
|
$
|
6,433
|
|
|
Weighted Average Useful Lives (Years)
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
Intangible assets:
|
|
|
|
|
|
|
|
||||||
Definite life:
|
|
|
|
|
|
|
|
||||||
Existing technology - software
|
7.0
|
|
$
|
46,275
|
|
|
$
|
6,856
|
|
|
$
|
39,419
|
|
Existing technology - games
|
5.0
|
|
12,331
|
|
|
9,042
|
|
|
3,289
|
|
|||
Developed technology
|
8.0
|
|
7,317
|
|
|
2,745
|
|
|
4,572
|
|
|||
Customer relationships
|
9.0
|
|
152,721
|
|
|
65,463
|
|
|
87,258
|
|
|||
Vendor agreements
|
9.0
|
|
91,800
|
|
|
1,701
|
|
|
90,099
|
|
|||
Other
|
4.0
|
|
9,612
|
|
|
5,916
|
|
|
3,696
|
|
|||
Content library (acquired in Business Combination)
|
1.5
|
(1)
|
14,298
|
|
|
14,298
|
|
|
—
|
|
|||
Total intangible assets
|
|
|
$
|
334,354
|
|
|
$
|
106,021
|
|
|
$
|
228,333
|
|
|
Weighted Average Useful Lives (Years)
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
Intangible assets:
|
|
|
|
|
|
|
|
||||||
Definite life:
|
|
|
|
|
|
|
|
||||||
Existing technology - software
|
5.8
|
|
$
|
24,474
|
|
|
$
|
2,978
|
|
|
$
|
21,496
|
|
Existing technology - games
|
5.0
|
|
12,331
|
|
|
7,193
|
|
|
5,138
|
|
|||
Developed technology
|
8.0
|
|
7,317
|
|
|
2,058
|
|
|
5,259
|
|
|||
Customer relationships
|
7.5
|
|
133,566
|
|
|
50,184
|
|
|
83,382
|
|
|||
Other
|
3.7
|
|
7,399
|
|
|
4,990
|
|
|
2,409
|
|
|||
Content library (acquired in Business Combination)
|
1.5
|
|
14,298
|
|
|
14,298
|
|
|
—
|
|
|||
Total intangible assets
|
|
|
$
|
199,385
|
|
|
$
|
81,701
|
|
|
$
|
117,684
|
|
(1)
|
Useful estimate based upon the content library acquired in the business combination in which the Company acquired Row 44, Inc. ("Row 44") and
86%
of the shares of Advanced Inflight Alliance AG ("AIA"), which approximates historical experience.
|
Year ending December 31,
|
Amount
|
||
2016 (remaining three months)
|
$
|
10,418
|
|
2017
|
41,204
|
|
|
2018
|
36,803
|
|
|
2019
|
31,113
|
|
|
2020
|
29,641
|
|
|
Thereafter
|
79,154
|
|
|
Total
|
$
|
228,333
|
|
|
September 30, 2016
|
||
Current assets
|
$
|
30,283
|
|
Non-current assets
|
20,906
|
|
|
Current liabilities
|
25,370
|
|
|
Non-current liabilities
|
1,448
|
|
|
Equity of equity method investments
|
$
|
24,371
|
|
|
Three Months Ended
September 30, 2016 |
||
Revenue
|
$
|
29,586
|
|
Net income
|
6,227
|
|
Years Ending December 31,
|
Amount
|
||
2016 (remaining three months)
|
$
|
1,650
|
|
2017
|
5,464
|
|
|
2018
|
3,109
|
|
|
2019
|
2,181
|
|
|
2020
|
2,064
|
|
|
Thereafter
|
6,036
|
|
|
Total
|
$
|
20,504
|
|
Years Ending December 31,
|
Amount
|
||
2016 (remaining three months)
|
$
|
19,814
|
|
2017
|
85,575
|
|
|
2018
|
70,182
|
|
|
2019
|
64,107
|
|
|
2020
|
53,924
|
|
|
Thereafter
|
54,624
|
|
|
Total
|
$
|
348,226
|
|
|
Nine Months Ended September 30,
|
||||
|
2016
|
|
2015
|
||
Common stock price on grant date
|
$8.31
|
|
$12.9
|
||
Expected life (in years)
|
3.8
|
|
|
3.8
|
|
Risk-free interest rate
|
1.12
|
%
|
|
1.3
|
%
|
Expected stock volatility
|
44.0
|
%
|
|
43.0
|
%
|
Expected dividend yield
|
—
|
%
|
|
—
|
%
|
Fair value of stock options granted
|
$2.88
|
|
$4.41
|
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
|
1,680
|
|
|
$
|
8.31
|
|
|
|
|
|
||
Exercised
|
(26
|
)
|
|
$
|
9.87
|
|
|
|
|
|
||
Forfeited
|
(562
|
)
|
|
$
|
11.42
|
|
|
|
|
|
||
Outstanding at September 30, 2016
|
6,717
|
|
|
$
|
10.46
|
|
|
2.78
|
|
$
|
580
|
|
Vested and expected to vest at September 30, 2016
|
6,041
|
|
|
$
|
10.54
|
|
|
2.79
|
|
$
|
415
|
|
Exercisable at September 30, 2016
|
3,562
|
|
|
$
|
10.82
|
|
|
2.04
|
|
$
|
—
|
|
|
Units (in thousands)
|
|
Weighted Average Grant Date Fair Value
|
|
Aggregate Intrinsic Value (in thousands)
|
|||||
Outstanding at January 1, 2016
|
408
|
|
|
$
|
12.71
|
|
|
|
||
Granted
|
1,359
|
|
|
$
|
8.01
|
|
|
|
||
Vested
|
(87
|
)
|
|
$
|
12.79
|
|
|
|
||
Forfeited
|
(93
|
)
|
|
$
|
11.62
|
|
|
|
||
Balance nonvested at September 30, 2016
|
1,587
|
|
|
$
|
8.74
|
|
|
$
|
13,180
|
|
Vested and expected to vest at September 30, 2016
|
980
|
|
|
$
|
8.74
|
|
|
$
|
7,938
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Stock-based compensation expense:
|
|
|
|
|
|
|
|
||||||||
Cost of services
|
$
|
75
|
|
|
$
|
81
|
|
|
$
|
225
|
|
|
$
|
246
|
|
Sales and marketing expenses
|
150
|
|
|
177
|
|
|
429
|
|
|
540
|
|
||||
Product development
|
250
|
|
|
262
|
|
|
743
|
|
|
771
|
|
||||
General and administrative
|
3,324
|
|
|
1,627
|
|
|
6,664
|
|
|
4,691
|
|
||||
Total stock-based compensation expense
|
$
|
3,799
|
|
|
$
|
2,147
|
|
|
$
|
8,061
|
|
|
$
|
6,248
|
|
|
Weighted Average Exercise Price per Warrant
|
|
Number of Warrants (as converted) (in thousands)
|
|
Weighted Average Remaining Life
(in years)
|
|||
Legacy Row 44 Warrants
(1)
|
$
|
8.79
|
|
|
690
|
|
|
0.00
|
Legacy Row 44 Warrants
(2)
|
$
|
8.62
|
|
|
477
|
|
|
0.00
|
(1)
|
Originally issuable for Row 44 common stock, and now issuable for Company common stock.
|
(2)
|
Originally issuable for Row 44’s Series C preferred stock, and now issuable for Company common stock.
|
Public SPAC Warrants
|
Number of Warrants (in thousands)
|
|
Weighted Average Exercise price
|
|
Weighted Average Remaining Contractual Term (in years)
|
|||
Outstanding and exercisable at September 30, 2016
|
6,173
|
|
|
$
|
11.50
|
|
|
0.00
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Current:
|
|
|
|
||||
Bank term loans
|
$
|
275
|
|
|
$
|
690
|
|
Other debt
|
112
|
|
|
59
|
|
||
|
$
|
387
|
|
|
$
|
749
|
|
Non-current:
|
|
|
|
||||
Convertible subordinated notes
|
$
|
68,851
|
|
|
$
|
68,335
|
|
Revolver and bank term loans
|
371,582
|
|
|
653
|
|
||
Other debt
|
704
|
|
|
827
|
|
||
|
$
|
441,137
|
|
|
$
|
69,815
|
|
Years Ending December 31,
|
Amount
|
||
2016 (remaining three months)
|
$
|
760
|
|
2017
|
2,740
|
|
|
2018
|
2,740
|
|
|
2019
|
2,736
|
|
|
2020
|
2,732
|
|
|
Thereafter
|
457,597
|
|
|
Total
|
$
|
469,305
|
|
|
Nine Months Ended September 30,
|
||||
|
2016
|
|
2015
|
||
Southwest Airlines as a percentage of total revenue
|
22
|
%
|
|
24
|
%
|
Southwest Airlines as a percentage of Connectivity revenue
|
63
|
%
|
|
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.
|
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
Termination benefits
|
$
|
—
|
|
|
$
|
238
|
|
Leases and other contractual obligations
|
—
|
|
|
64
|
|
||
Other
|
—
|
|
|
66
|
|
||
Total Restructuring charges
|
$
|
—
|
|
|
$
|
368
|
|
|
Termination Costs
|
|
Leases and other contractual obligations
|
|
Other
|
|
Total
|
||||||||
Restructuring reserves as of January 1, 2015
|
$
|
809
|
|
|
$
|
39
|
|
|
$
|
1,076
|
|
|
$
|
1,924
|
|
|
|
|
|
|
|
|
|
||||||||
Expense
|
238
|
|
|
64
|
|
|
66
|
|
|
368
|
|
||||
Payments
|
(1,047
|
)
|
|
(103
|
)
|
|
(1,142
|
)
|
|
(2,292
|
)
|
||||
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
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenue
|
$
|
146,909
|
|
|
$
|
110,114
|
|
|
$
|
372,991
|
|
|
$
|
312,795
|
|
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of sales
|
103,348
|
|
|
71,456
|
|
|
255,202
|
|
|
206,965
|
|
||||
Sales and marketing expenses
|
8,390
|
|
|
4,819
|
|
|
19,553
|
|
|
13,058
|
|
||||
Product development
|
7,916
|
|
|
7,766
|
|
|
25,078
|
|
|
21,447
|
|
||||
General and administrative
|
44,728
|
|
|
18,602
|
|
|
82,395
|
|
|
54,297
|
|
||||
Provision for legal settlements
|
1,545
|
|
|
3,500
|
|
|
41,688
|
|
|
4,250
|
|
||||
Amortization of intangible assets
|
9,166
|
|
|
7,286
|
|
|
24,055
|
|
|
19,274
|
|
||||
Restructuring charges
|
—
|
|
|
66
|
|
|
—
|
|
|
368
|
|
||||
Total operating expenses
|
175,093
|
|
|
113,495
|
|
|
447,971
|
|
|
319,659
|
|
||||
Loss from operations
|
(28,184
|
)
|
|
(3,381
|
)
|
|
(74,980
|
)
|
|
(6,864
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
(6,412
|
)
|
|
(803
|
)
|
|
(7,829
|
)
|
|
(1,631
|
)
|
||||
Income from equity method investments
|
2,065
|
|
|
—
|
|
|
2,065
|
|
|
—
|
|
||||
Change in fair value of derivatives
|
1,191
|
|
|
(1,877
|
)
|
|
17,982
|
|
|
13,866
|
|
||||
Other income (expense), net
|
631
|
|
|
(576
|
)
|
|
(4,623
|
)
|
|
(1,815
|
)
|
||||
(Loss) income before income taxes
|
(30,709
|
)
|
|
(6,637
|
)
|
|
(67,385
|
)
|
|
3,556
|
|
||||
Income tax benefit (expense)
|
50,063
|
|
|
(235
|
)
|
|
46,167
|
|
|
(872
|
)
|
||||
Net income (loss)
|
$
|
19,354
|
|
|
$
|
(6,872
|
)
|
|
$
|
(21,218
|
)
|
|
$
|
2,684
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) income per common share - basic
|
$
|
0.23
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
0.03
|
|
Net income (loss) per common share - diluted
|
$
|
0.23
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.14
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares - basic
|
82,874
|
|
|
77,753
|
|
|
79,892
|
|
|
77,249
|
|
||||
Weighted average common shares - diluted
|
85,081
|
|
|
77,753
|
|
|
79,892
|
|
|
78,449
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Cost of sales
|
$
|
3,125
|
|
|
$
|
648
|
|
|
$
|
5,523
|
|
|
$
|
1,985
|
|
Sales and marketing
|
420
|
|
|
219
|
|
|
1,133
|
|
|
622
|
|
||||
Product development
|
399
|
|
|
353
|
|
|
1,453
|
|
|
1,021
|
|
||||
General and administrative
|
2,231
|
|
|
1,007
|
|
|
4,773
|
|
|
2,805
|
|
||||
Total depreciation expense
|
$
|
6,175
|
|
|
$
|
2,227
|
|
|
$
|
12,882
|
|
|
$
|
6,433
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
Stock-based compensation expense:
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Cost of sales
|
$
|
75
|
|
|
$
|
81
|
|
|
$
|
225
|
|
|
$
|
246
|
|
Sales and marketing expenses
|
150
|
|
|
177
|
|
|
429
|
|
|
540
|
|
||||
Product development
|
250
|
|
|
262
|
|
|
743
|
|
|
771
|
|
||||
General and administrative
|
3,324
|
|
|
1,627
|
|
|
6,664
|
|
|
4,691
|
|
||||
Total stock-based compensation expense
|
$
|
3,799
|
|
|
$
|
2,147
|
|
|
$
|
8,061
|
|
|
$
|
6,248
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
||||
Cost of sales
|
70
|
%
|
|
65
|
%
|
|
68
|
%
|
|
66
|
%
|
Sales and marketing expenses
|
6
|
%
|
|
4
|
%
|
|
5
|
%
|
|
4
|
%
|
Product development
|
5
|
%
|
|
7
|
%
|
|
7
|
%
|
|
7
|
%
|
General and administrative
|
30
|
%
|
|
17
|
%
|
|
22
|
%
|
|
17
|
%
|
Provision for legal settlements
|
1
|
%
|
|
3
|
%
|
|
11
|
%
|
|
1
|
%
|
Amortization of intangible assets
|
6
|
%
|
|
7
|
%
|
|
6
|
%
|
|
6
|
%
|
Restructuring charges
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Total operating expenses
|
119
|
%
|
|
103
|
%
|
|
120
|
%
|
|
102
|
%
|
Loss from operations
|
(19
|
)%
|
|
(3
|
)%
|
|
(20
|
)%
|
|
(2
|
)%
|
Other (expense) income , net
|
(2
|
)%
|
|
(3
|
)%
|
|
2
|
%
|
|
3
|
%
|
(Loss) income before income taxes
|
(21
|
)%
|
|
(6
|
)%
|
|
(18
|
)%
|
|
1
|
%
|
Income tax benefit (expense)
|
34
|
%
|
|
—
|
%
|
|
12
|
%
|
|
—
|
%
|
Net income (loss) attributable to common stockholders
|
13
|
%
|
|
(6
|
)%
|
|
(6
|
)%
|
|
1
|
%
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||
|
Content
|
|
Connectivity
|
|
Consolidated
|
|
Content
|
|
Connectivity
|
|
Consolidated
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Licensing and services
|
$
|
79,014
|
|
|
$
|
59,231
|
|
|
$
|
138,245
|
|
|
$
|
81,574
|
|
|
$
|
24,838
|
|
|
$
|
106,412
|
|
Equipment
|
—
|
|
|
8,664
|
|
|
8,664
|
|
|
—
|
|
|
3,702
|
|
|
3,702
|
|
||||||
Total revenue
|
79,014
|
|
|
67,895
|
|
|
146,909
|
|
|
81,574
|
|
|
28,540
|
|
|
110,114
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales
|
53,132
|
|
|
50,216
|
|
|
103,348
|
|
|
53,995
|
|
|
17,461
|
|
|
71,456
|
|
||||||
Contribution profit
|
25,882
|
|
|
17,679
|
|
|
43,561
|
|
|
27,579
|
|
|
11,079
|
|
|
38,658
|
|
||||||
Other operating expenses
|
|
|
|
|
71,745
|
|
|
|
|
|
|
42,039
|
|
||||||||||
Loss from operations
|
|
|
|
|
$
|
(28,184
|
)
|
|
|
|
|
|
$
|
(3,381
|
)
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Services
|
$
|
59,231
|
|
|
$
|
24,838
|
|
|
138
|
%
|
Equipment revenue
|
8,664
|
|
|
3,702
|
|
|
134
|
%
|
||
Total revenue Connectivity segment
|
$
|
67,895
|
|
|
$
|
28,540
|
|
|
138
|
%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Licensing revenue
|
$
|
79,014
|
|
|
$
|
81,574
|
|
|
(3
|
)%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Service cost of sales
|
$
|
42,428
|
|
|
$
|
14,654
|
|
|
190
|
%
|
Equipment cost of sales
|
7,788
|
|
|
2,807
|
|
|
177
|
%
|
||
Total Connectivity cost of sales
|
$
|
50,216
|
|
|
$
|
17,461
|
|
|
188
|
%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Content cost of sales
|
$
|
53,132
|
|
|
$
|
53,995
|
|
|
(2
|
)%
|
|
Three Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Sales and marketing expenses
|
$
|
8,390
|
|
|
$
|
4,819
|
|
|
74
|
%
|
Product development
|
7,916
|
|
|
7,766
|
|
|
2
|
%
|
||
General and administrative
|
44,728
|
|
|
18,602
|
|
|
140
|
%
|
||
Provision for legal settlements
|
1,545
|
|
|
3,500
|
|
|
(56
|
)%
|
||
Amortization of intangible assets
|
9,166
|
|
|
7,286
|
|
|
26
|
%
|
||
Restructuring charges
|
—
|
|
|
66
|
|
|
—
|
%
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
2016
|
|
2015
|
||||||||||||||||||||
|
Content
|
|
Connectivity
|
|
Consolidated
|
|
Content
|
|
Connectivity
|
|
Consolidated
|
||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Licensing & Service
|
$
|
241,330
|
|
|
$
|
110,625
|
|
|
$
|
351,955
|
|
|
$
|
227,037
|
|
|
$
|
71,602
|
|
|
$
|
298,639
|
|
Equipment
|
—
|
|
|
21,036
|
|
|
21,036
|
|
|
—
|
|
|
14,156
|
|
|
14,156
|
|
||||||
Total revenue
|
241,330
|
|
|
131,661
|
|
|
372,991
|
|
|
227,037
|
|
|
85,758
|
|
|
312,795
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales
|
161,708
|
|
|
93,494
|
|
|
255,202
|
|
|
152,044
|
|
|
54,921
|
|
|
206,965
|
|
||||||
Contribution profit
|
79,622
|
|
|
38,167
|
|
|
117,789
|
|
|
74,993
|
|
|
30,837
|
|
|
105,830
|
|
||||||
Other operating expenses
|
|
|
|
|
192,769
|
|
|
|
|
|
|
112,694
|
|
||||||||||
Loss from operations
|
|
|
|
|
$
|
(74,980
|
)
|
|
|
|
|
|
$
|
(6,864
|
)
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Services
|
$
|
110,625
|
|
|
$
|
71,602
|
|
|
54
|
%
|
Equipment revenue
|
21,036
|
|
|
14,156
|
|
|
49
|
%
|
||
Total revenue Connectivity segment
|
$
|
131,661
|
|
|
$
|
85,758
|
|
|
54
|
%
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Licensing revenue
|
$
|
241,330
|
|
|
$
|
227,037
|
|
|
6
|
%
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Service cost of sales
|
$
|
75,381
|
|
|
$
|
42,730
|
|
|
76
|
%
|
Equipment cost of sales
|
18,113
|
|
|
12,191
|
|
|
49
|
%
|
||
Total Connectivity cost of sales
|
$
|
93,494
|
|
|
$
|
54,921
|
|
|
70
|
%
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Content cost of sales
|
$
|
161,708
|
|
|
$
|
152,044
|
|
|
6
|
%
|
|
Nine Months Ended September 30,
|
|
% Change
|
|||||||
|
2016
|
|
2015
|
|
2016 to 2015
|
|||||
Sales and marketing expenses
|
$
|
19,553
|
|
|
$
|
13,058
|
|
|
50
|
%
|
Product development
|
25,078
|
|
|
21,447
|
|
|
17
|
%
|
||
General and administrative
|
82,395
|
|
|
54,297
|
|
|
52
|
%
|
||
Provision for legal settlements
|
41,688
|
|
|
4,250
|
|
|
881
|
%
|
||
Amortization of intangible assets
|
24,055
|
|
|
19,274
|
|
|
25
|
%
|
||
Restructuring charges
|
—
|
|
|
368
|
|
|
(100
|
)%
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Revolver and bank term loans
|
$
|
371,857
|
|
|
$
|
1,343
|
|
Convertible senior notes
|
68,851
|
|
|
68,335
|
|
||
Other debt
|
816
|
|
|
885
|
|
||
|
$
|
441,524
|
|
|
$
|
70,563
|
|
Years Ending December 31,
|
Amount
|
||
2016 (remaining three months)
|
$
|
760
|
|
2017
|
2,740
|
|
|
2018
|
2,740
|
|
|
2019
|
2,736
|
|
|
2020
|
2,732
|
|
|
Thereafter
|
457,597
|
|
|
Total
|
$
|
469,305
|
|
|
Nine months ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Net cash (used in) provided by operating activities
|
$
|
(35,973
|
)
|
|
$
|
12,010
|
|
Net cash used in investing activities
|
$
|
(125,462
|
)
|
|
$
|
(76,696
|
)
|
Net cash (used in) provided by financing activities
|
$
|
(6,140
|
)
|
|
$
|
84,779
|
|
|
Nine Months Ended September 30,
|
||||
|
2016
|
|
2015
|
||
Southwest Airlines
|
22
|
%
|
|
24
|
%
|
•
|
Performing a comprehensive review of the Company’s accounting processes at all locations including controls to ensure the processes and controls are adequately designed, clearly documented and appropriately communicated to enhance control ownership throughout the finance organization.
|
•
|
Reviewing and updating accounting policies to ensure they address the Company’s current environment.
|
•
|
Reviewing the accounting and finance organization to ensure an appropriate organization and skills to sustain the remedial actions. This includes hiring of additional skilled resources, as appropriate.
|
•
|
Evaluating and designing of controls to address the completeness and accuracy of data used to support key estimations, accounting transactions and disclosures, primarily associated with spreadsheets and other key reports.
|
•
|
Implementing new systems and tools to automate manual processes, to document and monitor adherence to standardized processes and controls.
|
•
|
Establish training and education programs for all financial and relevant operational personnel responsible for internal controls.
|
•
|
Implementing additional internal reporting procedures, including those designed to add depth to our review processes and improve our segregation of duties.
|
•
|
Enhancing the Company’s internal control over financial reporting monitoring program.
|
|
GLOBAL EAGLE ENTERTAINMENT INC.
|
|
|
|
By:
|
/s/ Tom Severson
|
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
|
(principal financial officer and duly authorized officer)
|
|
Exhibit No.
|
|
Description
|
|
|
|
3.1
|
|
Amended and Restated Bylaws (previously filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 001-35176), filed with the SEC on September 23, 2016 and incorporated herein by reference)
|
|
|
|
4.5
|
|
Settlement Agreement, dated August 9, 2016, between the Company and UMG Recordings, Inc., Capitol Records, LLC, Universal Music Corp. and entities affiliated therewith (previously filed as Exhibit 4.5 to the Company’s Registration Statement on Form S-3 (File No. 333-214065) filed on October 11, 2016 and incorporated herein by reference).
|
|
|
|
4.6
|
|
Registration Rights Agreement, dated August 9, 2016, between the Company and UMG Recordings, Inc. (previously filed as Exhibit B to Exhibit 4.5 to the Company’s Registration Statement on Form S-3 (File No. 333-214065) filed on October 11, 2016 and incorporated herein by reference).
|
|
|
|
10.1
|
|
Form of Performance-Based Restricted Stock Unit Grant Notice and Award Agreement (TSR-Indexed) (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-35176) filed on October 17, 2016 and incorporated herein by reference).
|
|
|
|
10.2
|
|
Employment Agreement, dated August 25, 2016, between the Company and Thomas Severson (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-35176) filed on August 26, 2016 and incorporated herein by reference).
|
|
|
|
10.3
|
|
Special Change of Control Bonus Plan, dated as of June 13, 2016 (previously filed as Attachment C to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-35176) filed on August 26, 2016 and incorporated herein by reference).
|
|
|
|
10.4
|
|
Release and Transition Services Agreement, dated August 25, 2016, between the Company and Michael Zemetra (previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-35176) filed on August 26, 2016 and incorporated herein by reference).
|
|
|
|
10.5
|
|
Form of Restricted Stock Unit Grant Notice and Award Agreement (Employee Time Vesting).
|
|
|
|
10.6
|
|
Form of Non-Statutory Stock Option Grant Notice and Award Agreement (Employee Time Vesting).
|
|
|
|
10.7
|
|
Employment Letter Agreement, dated October 17, 2016, between the Company and Frank Mullen (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-35176) filed on November 3, 2016 and incorporated herein by reference).
|
|
|
|
10.8
|
|
Form Indemnity Agreement (for Directors and Executive Officers).
|
|
|
|
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 September 30, 2016 formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015; (ii) Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015; (iii) Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2016 and 2015; (iv) Unaudited Condensed Consolidated Statement of Stockholders' Equity for the nine months ended September 30, 2016; (v) Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015; and (vi) Notes to Unaudited Condensed Consolidated Financial Statements.
|
ATTACHMENTS:
|
I. Restricted Stock Unit Award Agreement
|
|
II. Global Eagle Entertainment Inc. Amended and Restated 2013 Equity Incentive Plan
|
|
|
|
1
NTD: If this award is made as part of the annual grant process, the Vesting Commencement Date should be the same as the Grant Date (and should be the same for all Participants).
|
|
|
|
|
Award Recipient
|
|
|
|
|
|
Date
|
ATTACHMENTS:
|
I. Restricted Stock Unit Award Agreement
|
|
|
II. Global Eagle Entertainment Inc. Amended and Restated 2013 Equity Incentive Plan
|
|
|
|
1
NTD: If this award is made as part of the annual grant process, the Vesting Commencement Date should be the same as the Grant Date (and should be the same for all such Optionees).
|
||
2
NTD: The Exercise Price will be the closing price of the Company’s stock on Nasdaq on the Grant Date.
|
|
|
|
|
Award Recipient
|
|
|
|
|
|
Date
|
2.
|
DEFINITIONS
. As used in this Agreement:
|
(e)
|
“
Delaware Court
” shall mean the Court of Chancery of the State of Delaware.
|
(h)
|
“
Exchange Act
” shall mean the Securities Exchange Act of 1934, as amended.
|
8.
|
CONTRIBUTION IN THE EVENT OF JOINT LIABILITY.
|
10.
|
ADVANCES OF EXPENSES; DEFENSE OF CLAIM.
|
(b)
|
The Company will be entitled to participate in the Proceeding at its own expense.
|
12.
|
PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.
|
13.
|
PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
|
14.
|
REMEDIES OF INDEMNITEE.
|
19.
|
ENFORCEMENT AND BINDING EFFECT.
|
(b)
|
If to the Company, to:
|
|
GLOBAL EAGLE ENTERTAINMENT INC.
|
|
|
|
|
|
|
|
|
By:
|
|
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Name:
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Stephen Ballas
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Title:
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General Counsel
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INDEMNITEE
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By:
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Name:
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[
NAME
]
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Title:
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[
TITLE
]
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Date:
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November 9, 2016
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/s/ David M. Davis
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David M. Davis
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Chief Executive Officer
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(principal executive officer)
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Date:
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November 9, 2016
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/s/ Tom Severson
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Chief Financial Officer
|
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(principal financial officer and duly authorized officer)
|
Date:
|
November 9, 2016
|
/s/ David M. Davis
|
|
|
David M. Davis
|
|
|
Chief Executive Officer
|
|
|
(principal executive officer)
|
Date:
|
November 9, 2016
|
/s/ Tom Severson
|
|
|
|
|
|
Chief Financial Officer
|
|
|
(principal financial officer and duly authorized officer)
|