Quarterly report pursuant to Section 13 or 15(d)

13. Equity Transactions

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13. Equity Transactions
3 Months Ended
Mar. 31, 2017
Notes to Financial Statements  
13. Equity Transactions

Common Stock

 

Fusion is authorized to issue 90,000,000 shares of its common stock. As of March 31, 2017 and December 31, 2016, 22,412,403 and 20,642,028 shares of its common stock, respectively, were issued and outstanding.

 

Effective as of March 31, 2017, the Company entered into exchange agreements with certain holders of Fusion’s outstanding warrants whereby the outstanding warrants were exchanged for new warrants (the “2017 Warrants”), which warrants permitted the holders to exercise and purchase, for a limited period of 60 days, unregistered shares of Fusion’s common stock at a discount of up to 10% below the closing bid price of the common stock at the time of exercise but in no event at a price of less than $1.30 per share. In connection with these exchange agreements, the warrant holders exercised warrants to purchase 561,834 shares of common stock on March 31, 2017 at an exercise price of $1.39 per share. The Company received proceeds from the exercise of the 2017 Warrants in the amount of $0.8 million, which will be used for general corporate purposes. All of the 2017 Warrants were immediately exercised and none remained outstanding as of March 31, 2017. As a result of the exchange, the Company recorded a preferred stock dividend in the amount of $0.3 million for the difference in fair value of the warrants that were exchanged (see note 4).

 

On February 23, 2017, Fusion issued 115,000 shares of its common stock valued at approximately $0.2 million for services rendered. During the three months ended March 31, 2017, Fusion’s Board of Directors declared a dividend on the Series B-2 Preferred Stock that was paid in the form of 106,876 shares of Fusion common stock (see note 4).

 

Preferred Stock

 

Fusion is authorized to issue up to 10,000,000 shares of preferred stock. As of March 31, 2017 and December 31, 2016 there were 5,045 shares of Series A Preferred Stock issued and outstanding. In addition, there were 9,296 and 12,254 shares of Series B-2 Preferred Stock issued and outstanding as of March 31, 2017 and December 31, 2016, respectively.

 

On March 31, 2017, the Company agreed with certain holders of its Series B-2 Preferred Stock to convert their shares of Series B-2 Preferred Stock into shares of Fusion common stock at a conversion price of $3.00 per share (the conversion price for such preferred stock otherwise being $5.00 per share). As a result, 2,958 shares of Series B-2 Preferred Stock were converted into a total of 986,665 shares of common stock, and the Company recorded a preferred stock dividend of $0.6 million for the value of the incremental number of common shares issued in connection with the reduction in the Series B-2 conversion price (see note 4).

 

The holders of the Series A Preferred Stock are entitled to receive cumulative dividends of 8% per annum payable in arrears, when and if declared by the Fusion’s Board, on January 1 of each year. As of March 31, 2017, no dividend had been declared with respect to the Series A Preferred Stock (see note 4). The holders of the Series B-2 Preferred Stock are entitled to receive a cumulative 6% annual dividend payable quarterly in arrears when and if declared by the Fusion Board, in cash or shares of Fusion common stock, at the option of the Company (see note 4).

 

Stock Options

 

Fusion's 2016 Equity Incentive Plan reserves a number of shares of common stock equal to 10% of Fusion’s shares outstanding from time to time on a fully diluted basis, adjusted upward for the number of shares not granted under Fusion’s 2009 Stock Option plan and for shares covered by options granted thereunder that expire without being exercised. The 2016 Equity Incentive Plan provides for the grant of incentive stock options, stock appreciation rights, restricted stock, restricted stock units, stock grants, stock units, performance shares and performance share units to employees, officers, non-employee directors of, and consultants to the Company. Options issued under the various Fusion plans typically vest in annual increments over a three or four year period, expire ten years from the date of grant and are issued at exercise prices no less than 100% of the fair market value at the time of grant.

 

The following assumptions were used to determine the fair value of the stock options granted under Fusion’s stock-based compensation plans using the Black-Scholes option-pricing model:

 

    Three Months Ended March 31,  
    2017     2016  
Dividend yield     0.0 %     0.0 %
Expected volatility     92.40 %     96.70 %
Average Risk-free interest rate (%)     2.27       1.78  
Expected life of stock option term (years)     8.00       8.00  

 

The Company recognized compensation expense of $0.2 million for the three months ended March 31, 2017 and 2016. These amounts are included in selling, general and administrative expenses in the condensed consolidated interim statements of operations.

 

The following table summarizes stock option activity for the three months ended March 31, 2017:

 

    Number of Options     Weighted Average Exercise Price   Weighted Average Remaining Contract Term
Outstanding at December 31, 2016     2,183,723     $ 2.56   8.56 years
Granted     14,000       1.48    
Exercised     -       -    
Forfeited     ( 33,700 )     1.73    
Expired     ( 12,950 )     33.72    
Outstanding at March 31, 2017     2,151,073       2.38   8.33 years
Exercisable at March 31, 2017     698,821       3.97   6.66 years

 

As of March 31, 2017, the Company had approximately $1.6 million of unrecognized compensation expense, net of estimated forfeitures, related to stock options granted under the Company’s stock-based compensation plans, which is expected to be recognized over a weighted-average period of 2.1 years.