Quarterly report pursuant to Section 13 or 15(d)

Equity Transactions

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Equity Transactions
9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Equity Transactions

Private Placements of Common Stock

 

Immediately prior to the closing of the Birch Merger, Fusion entered into three separate common stock purchase agreements and simultaneously consummated the sale of shares of Fusion common stock thereunder. Specifically, Fusion issued and sold (i) 952,382 shares of its common stock, for an aggregate purchase price of approximately $5.0 million, to North Haven Credit Partners II L.P., one of the Second Lien Lenders, which is managed by Morgan Stanley Credit Partners; (ii) 380,953 shares of its common stock, for an aggregate purchase price of approximately $2.0 million, to Aetna Life Insurance Company; and (iii) 190,477 shares of its common stock, for an aggregate purchase price of approximately $1.0 million to Backcast Credit Opportunities Fund I, L.P. In connection with these private placements, Fusion paid approximately $0.5 million of fees.

 

Private Placement of Series D Preferred Stock

 

Immediately prior to the closing of the Birch Merger, Fusion entered into a preferred stock purchase agreement with Holcombe T. Green, Jr. pursuant to which it issued and sold to Mr. Green 15,000 shares of its Series D Cumulative Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”), for an aggregate purchase price of $14.7 million, and Fusion paid a $200,000 closing fee to Mr. Green. The Series D Preferred Stock has a stated value of $15.0 million. The Series D Preferred Stock accrues dividends when, as and if declared by the Company’s board at an annual rate of 12% per annum, payable monthly in arrears on a cumulative basis. From the Birch Closing Date through September 30, 2018, undeclared dividends were $0.8 million.

 

Stock Options

 

The Company’s 2016 equity incentive plan reserves a number of shares of Fusion common stock equal to 10% of its common stock outstanding from time to time on a fully diluted basis, adjusted upward for the number of shares available for grant under its 2009 stock option plan plus a number of shares covered by options granted under the 2009 plan that expire without being exercised. The Company’s 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 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 Company recognized compensation expense of $0.2 million and $0.3 million for the three and nine months ended September 30, 2018, respectively. This amount is included in SG&A in the unaudited condensed consolidated statements of operations.

 

The following table summarizes stock option activity for the nine months ended September 30, 2018 (number of options in thousands):

 

    Number of Options     Weighted Average Exercise Price     Weighted Average Remaining Contract Term  
Outstanding at December 31, 2017     -     $ -       -  
Acquired in reverse acquisition     1,996       3.48       -  
Granted     -       -       -  
Exercised     (52 )     2.67       -  
Forfeited     (26 )     2.15       -  
Expired     (15 )     4.28       -  
Outstanding at September 30, 2018     1,903       3.50       7.58  
Exercisable at September 30, 2018     1,428       3.99       7.44  

 

As of September 30, 2018, the Company had approximately $0.5 million of unrecognized compensation expense related to stock options granted under its stock-based compensation plans. This amount is expected to be recognized over a weighted-average period of 16 months.