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 Class D Common Stock outstanding as of June 30, 2019 or December 31, 2018.

Preferred Stock

In July 2014, the Company issued a total of 8.2 million shares of the Company’s Series B-1 and B-2 Cumulative Convertible Preferred Stock to certain investor groups in exchange for $26.4 million. Except for certain voting and transfer rights, the rights and obligations of the Series B-1 Preferred Stock and Series B-2 Preferred Stock are substantially the same. On April 11, 2017, Chase Funding, an affiliate of JPMorgan Chase & Co., purchased all of the Company’s outstanding Series B-2 Preferred Shares directly from the initial purchaser of such shares.

On February 9, 2018, Chase Funding purchased 2,352,941 shares of the Company’s Series B-3 Cumulative Convertible Preferred Stock (“Series B-3 Preferred Stock,” and collectively with the Series B-1 Preferred Stock and Series B-2 Preferred Stock, the “Series B Preferred Stock”), for a total purchase price of $8.0 million. The Series B-3 Preferred Stock contains redemption features similar in all material respects to those of all Series B-1 and B-2 Cumulative Convertible Preferred, which are disclosed in IMH’s annual 10-K for the year ended December 31, 2018.

On July 23, 2019 with an effective date of April 1, 2019, we entered into a Deferral and Consent agreement with the holders of our Series B Preferred Stock pursuant to which they agreed to extend the redemption date for one (1) year. A cash payment in the aggregate amount of $2.6 million is due and payable to the holders of the Series B-1 and B-2 Preferred Stock on July 24, 2020 whether or not a redemption is requested.

Concurrent with Chase Funding’s purchase of our Series B-3 Cumulative Convertible Preferred Stock, the Company issued to Chase Funding a warrant to acquire up to 600,000 shares of the Company’s common stock (the “JPM Warrant”). The JPM Warrant is exercisable at any time on or after February 9, 2021 for a two (2) year period, and has an exercise price of $2.25 per share. The JPM Warrant provides for certain adjustments that may be made to the exercise price and the number of shares issuable upon exercise due to customary anti-dilution provisions based on future corporate events. The JPM Warrant is exercisable in cash, and subject to certain conditions may also be exercised on a cashless basis. The warrant is classified in stockholders’ equity under the applicable guidance and were recorded at relative fair value at issuance.

Series A Redeemable Preferred Stock Issuance

On May 31, 2018, Chase Funding purchased 22,000 shares of the Company’s Series A Senior Redeemable Preferred Stock (the “Series A Preferred Stock”) at a purchase price of $1,000 per share, for a total purchase price of $22.0 million.

The Series A Preferred Stock ranks senior with respect to dividend and redemption rights and rights upon liquidation, dissolution or winding up of the Company to all other classes or series of shares of the Company’s preferred and common stock and to all other equity securities issued by the Company from time to time. The Series A Preferred Stock is non-voting stock. Holders of the Series A Preferred Stock are entitled to receive a liquidation preference equal to the sum of the initial purchase price of the Series A Preferred Stock plus all accrued and unpaid dividends. Dividends on the Series A Preferred Stock are cumulative and accrue from the issue date at the rate of 7.5% of the issue price per year, payable quarterly in arrears on or before the last day of each calendar quarter. The Company has certain call rights with respect to the Series A Preferred Stock and the holders of Series A Preferred Stock have certain put rights which includes an acceleration of the put right if the Company is required to redeem any shares of junior securities in the event of certain non-compliance events as described in the Company’s Series B Preferred Certificate of Designation.

Our Series B Preferred Stock and Series A Preferred Stock are classified as mezzanine equity in the accompanying condensed consolidated balance sheets.

Treasury Stock

On January 11, 2019, the Company concluded a tender offer to purchase up to 477,170 shares of Class B Common Stock and 22,830 shares of Class C common stock for $2.00 per share. The tender offer was over-subscribed and the 500,000 shares were purchased on a pro rata basis among the participating shareholders. The repurchase of these shares was treated as a treasury stock repurchase as reflected in the condensed consolidated balance sheet.

Share-Based Compensation

During the six months ended June 30, 2019, the Company issued 167,984 shares of common stock pursuant to previous restricted stock awards. The Company did not grant shares of restricted stock or stock options during the three and six months ended June 30, 2019, nor were any stock options or warrants exercised or forfeited during that period.

As of June 30, 2019, there were (i) 1,102,627 stock options outstanding, of which 983,429 shares were fully vested, (ii) 2,600,000 fully-vested stock warrants outstanding; and (iii) 172,800 shares of unvested restricted stock grants outstanding. Vested restricted stock grants have been issued and are included in outstanding common stock.

Net stock-based compensation expense relating to the stock-based awards was $0.1 million for each of the three months ended June 30, 2019 and 2018, and $0.2 million for each of the six months ended June 30, 2019 and 2018. We did not receive any cash from option or warrant exercises during the three or six months ended June 30, 2019 or 2018. As of June 30, 2019, there was $0.4 million of unrecognized compensation cost related to the time-based restricted stock that is expected to be recognized as a charge to earnings over a weighted-average vesting period of 1.63 years.

Net Income (Loss) Per 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 to net loss attributable to common shareholders used in the basic and diluted earnings per share calculations for the three and six months ended June 30, 2019 and 2018 (amounts in thousands, except for per share data):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Earnings allocable to common shares:
Numerator - Loss Attributable to Common Shareholders:
Net loss	$	(4,070	)	$	(2,497	)	$	(9,083	)	$	(6,291	)
Net (income) loss attributable to non-controlling interest	(318		)	25			(441		)	115
Preferred dividends	(2,019		)	(1,704		)	(4,007		)	(3,112		)
Net loss attributable to common shareholders	$	(6,407	)	$	(4,176	)	$	(13,531	)	$	(9,288	)

Denominator - Weighted average shares:
Weighted average common shares outstanding for basic and diluted earnings per common share	16,375,649			16,696,684			16,383,921			16,680,988

Basic and diluted earnings per common share:
Net loss per common share	$	(0.27	)	$	(0.15	)	$	(0.58	)	$	(0.37	)
Preferred dividends per share	(0.12		)	(0.10		)	(0.24		)	(0.19		)
Net loss attributable to common shareholder per share	$	(0.39	)	$	(0.25	)	$	(0.83	)	$	(0.56	)

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



	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Options to purchase common stock	1,085,497	1,062,807	1,085,497	1,066,465
Restricted stock	249,486	372,815	230,134	382,638
Warrants to purchase common stock	2,600,000	2,600,000	2,600,000	2,470,718
Convertible preferred stock	10,552,941	10,552,941	10,552,941	10,045,954
Total	14,487,924	14,588,563	14,468,572	13,965,775