STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE

Common Stock

Shares of Common Stock, Class B Common Stock, Class C Common Stock, and Class D Common Stock share proportionately in our earnings and losses attributable to common shareholders. There are no shares of the Class D common stock outstanding as of September 30, 2016 or December 31, 2015.

In addition, at September 30, 2016 and December 31, 2015, the Company had reserved the following number of shares of its authorized but unissued common stock for possible future issuance in connection with the following (in thousands):



	September 30, 2016	December 31, 2015
Exercise and future grants of stock options	2,700	2,700
Exercise of stock warrants	2,000	2,000
Conversion of preferred stock	8,200	8,200
Approved but unissued restricted common stock	1,266	1,565
Total authorized but unissued shares	14,166	14,465

Preferred Stock

In 2014, the Company issued a total of 8.2 million shares of its Series B-1 and B-2 Cumulative Convertible Preferred Stock (“Series B Preferred Stock”) to certain investor groups (collectively, the “Series B Investors”) in exchange for $26.4 million (the “Preferred Investment”). Except for certain voting rights, the rights and obligations of the Series B-1 Preferred Stock and Series B-2 Preferred Stock are substantially the same.

The Certificate of Designation contains numerous provisions relating to dividend preferences, redemption rights, liquidation preferences and requirements, conversion rights, voting rights, investment committee participation and other restrictive covenants with respect to the Series B Preferred Stock. Other than the following items, there were no material changes to the descriptions of the foregoing contained in our Form 10-K for the year ended December 31, 2015.


•	Dividends. Dividends on the Series B Preferred Stock are cumulative and accrue from the issue date and compound quarterly at the rate of 8% of the issue price per year, payable quarterly in arrears. During the three and nine months ended September 30, 2016 and 2015, we incurred cash dividends on the Series B Preferred Stock of $0.5 million and $1.6 million for each period, respectively.

•

Redemption upon Demand. At any time after July 24, 2019, each holder of Series B Preferred Stock may require the Company to redeem, out of legally available funds, the shares of Series B Preferred Stock held by such holder at the a price (the “Redemption Price”) equal to the greater of (i) 150% of the sum of the original price per share of the Series B Preferred Stock plus all accrued and unpaid dividends or (ii) the sum of the tangible book value of the Company per share of voting Common Stock plus all accrued and unpaid dividends, as of the date of redemption. Based on the initial investment of $26.4 million, the Redemption Price would presently be $39.6 million, resulting in a redemption premium of $13.2 million. In accordance with applicable accounting standards, Series B Preferred Stock is classified as temporary equity on the balance sheet and we have elected to amortize the redemption premium using the effective interest method as an imputed dividend over the five year holding term of the Series B Preferred Stock. During the three months ended September 30, 2016 and 2015, we recorded amortization of the redemption premium of $0.6 million for each period as a deemed dividend. During the nine months ended September 30, 2016 and 2015, we recorded amortization for the redemption premium of $1.9 million and $1.7 million, respectively.

Share-Based Compensation

During the nine months ended September 30, 2016, we issued options to our employees to purchase an aggregate of 324,500 shares of our common stock under our First Amended and Restated 2010 Employee Stock Incentive Plan (“2010 Stock Incentive Plan”). During the nine months ended September 30, 2016, options to purchase 60,000 shares of our common stock were forfeited in connection with the termination of certain employees. During the three months ended September 30, 2016, the Company’s board approved the issuance of 86,207 shares of restricted common stock under our 2010 Stock Incentive Plan. During the nine months ended September 30, 2016, options to purchase 75,000 shares of our common stock were forfeited in connection with the termination of certain employees. During the nine months ended September 30, 2016, 69,590 unvested restricted stock grants were forfeited upon termination of certain employees. As of September 30, 2016, there were (i) fully vested stock options to purchase 686,667 shares of our common stock, (ii) fully vested warrants to purchase 2,000,000 shares of common stock, and (iii) unvested restricted stock grants for 929,542 shares of common stock. Net stock-based compensation expense relating to our restricted stock and option grants was $0.2 million and $0.6 million for the three and nine months ended September 30, 2016, respectively, and $0.3 million and $0.6 million for the three and nine months ended September 30, 2015, respectively. We did not receive any cash from option or warrant exercises during the three and nine months ended September 30, 2016 or 2015. As of September 30, 2016, there was $1.1 million of unrecognized compensation cost related to the time-based restricted stock and stock options that is expected to be recognized as a charge to earnings over the remaining weighted-average vesting period of 1.65 years.

Net Loss Per Common Share

The Company has adopted the two-class computation method, and thus includes all participating securities in the computation of basic shares for the periods in which the Company has net income available to common shareholders. A participating security is defined as an unvested share-based payment award containing non-forfeitable rights to dividends regardless of whether or not the awards ultimately vest or expire. Net losses are not allocated to participating securities unless the holder has a contractual obligation to share in the losses.

The following table presents a reconciliation of net loss from continuing operations to net loss attributable to common shareholders used in the basic and diluted loss per share calculations for the three and nine months ended September 30, 2016 and 2015 (amounts in thousands, except for share and per share data):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Earnings allocable to common shares:
Numerator - Loss Attributable to Common Shareholders:
Net loss from continuing operations	$	(4,930	)	$	(6,006	)	$	(14,222	)	$	(3,237	)
Net (income) loss attributable to noncontrolling interest	19			—			92			(586		)
Preferred dividends (cash and deemed)	(1,171		)	(1,123		)	(3,465		)	(3,315		)
Net loss attributable to common shareholders	$	(6,082	)	$	(7,129	)	$	(17,595	)	$	(7,138	)
Denominator - Weighted average shares:
Weighted average common shares outstanding for basic and diluted loss per common share	15,922,321			15,279,062			15,914,283			15,269,703
Basic and Diluted loss per common share:
Net loss attributable to common shareholders per share	$	(0.38	)	$	(0.47	)	$	(1.11	)	$	(0.47	)

The following weighted average securities were not included in the computation of diluted net loss per share as their effect would have been anti-dilutive (in thousands):



	Three Months Ended September 30,		Nine Months Ended September 30,
	2016	2015	2016	2015
Options to purchase common stock	961	702	957	726
Restricted stock	929	1,551	890	1,427
Warrants to purchase common stock	2,000	2,000	2,000	2,000
Convertible preferred stock	8,200	8,200	8,200	8,200
Total	12,090	12,453	12,047	12,353