17. Common Stock and Warrants

Common Stock

On December 14, 2012, we issued 5,575,671 shares of our common stock to the former IDE stockholders. We have withheld 750,000 of these shares on behalf of the former IDE stockholders to satisfy any indemnification claims we have under the Merger Agreement. Depending on the amount of the indemnification claims that we may make, we will distribute the remaining 750,000 additional shares to the former IDE stockholders. In addition, if the trading price of our common stock exceeds certain thresholds before December 14, 2017, we will distribute up to 5,250,000 shares to the former IDE stockholders. Specifically:

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If, before December 14, 2017, (a) the trading price of our common stock exceeds $12.00 per share for any 20 trading days within any period of 30 consecutive trading days or (b) a Change of Control Transaction (as defined in the Merger Agreement) occurs that values each share of our common stock at more than $12.00 per share, we will issue to the former IDE stockholders 1,312,500 shares of our common stock.

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If, before December 14, 2017, (a) the trading price of our common stock exceeds $13.50 per share for any 20 trading days within any period of 30 consecutive trading days or (b) a Change of Control Transaction occurs that values each share of our common stock at more than $13.50 per share, we will issue to the former IDE stockholders an additional 1,312,500 shares of our common stock.

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If, before December 14, 2017, (a) the trading price of our common stock exceeds $15.00 per share for any 20 trading days within any period of 30 consecutive trading days or (b) a Change of Control Transaction occurs that values each share of our common stock at more than $15.00 per share, we will issue to the former IDE stockholders an additional 1,312,500 shares of our common stock.

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If, before December 14, 2017, (a) the trading price of our common stock exceeds $17.00 per share for any 20 trading days within any period of 30 consecutive trading days or (b) a Change of Control Transaction occurs that values each share of our common stock at more than $17.00 per share, we will issue to the former IDE stockholders an additional 1,312,500 shares of our common stock.

The issuance of shares to the former IDE stockholders was exempt from registration pursuant to Section 4(a)(2) of the Securities Act because the transaction did not involve a public offering.

On October 31, 2013, the Company issued 124,217 shares of common stock to TerraNova Capital Partners Inc. and its related parties to satisfy a $1.2 million obligation for financial advisory services provided to the Company in connection with the December 14, 2012 merger with Empeiria Acquisition Corp.

Common Stock Warrants

In connection with the $20.0 million Term Facility entered into on December 14, 2012, the Company issued Elm Park warrants to purchase 142,484 shares of the Company’s common stock at an exercise price of $0.01 per share. The warrants are exercisable upon issuance and expire ten years from the issuance date. As of the issuance date the fair value of these warrants was estimated to be $1.5 million and has been recorded as deferred financing costs. The deferred financing costs are being amortized to expense over the term of the loan. The warrants were valued on the issuance date using the following assumptions: a risk-free interest rate of 1%, expected volatility of 50%, no expected dividend yield and a term of ten years. Based upon the terms of the Elm Park warrants, they have been classified as a liability at fair value and are adjusted for changes in fair value at each reporting date. All of the warrants issued in connection with the Term Facility were still outstanding as of December 31, 2014.

As part of the units sold in our initial public offering, the Company issued warrants to purchase up to 6,000,000 shares of our common stock (the “Public Warrants”). The Public Warrants have an exercise price of $11.50 per share and if unexercised, expire on December 14, 2017. We may redeem the outstanding Public Warrants at any time after they become exercisable, in whole and not in part, at a price of $0.01 per warrant, if the last sales price of our shares of common stock equals or exceeds $17.50 per share for any 20 trading days within a 30 trading day period ending three business days before we send the notice of redemption. All of the Public Warrants issued in connection with our IPO were still outstanding as of December 31, 2014.

Unit Purchase Option

In connection with our IPO, we sold to the representative of the underwriters, for $100.00, an option to purchase up to 600,000 units at $15.00 per unit (the “Purchase Option”). The units issuable upon exercise of the Purchase Option consist of one share of common stock and one warrant to purchase one share of common stock at an exercise price of $11.50. This option is currently exercisable on a cashless basis, in whole or in part, and will expire on June 15, 2016. All of the Purchase Options issued in connection with our IPO were still outstanding as of December 31, 2014.

On June 15, 2011, we completed a private placement of 390,000 units to our Sponsor (the “Placement Units”) for proceeds to us of $3.9 million. Each Placement Unit consisted of one share of common stock and one warrant to purchase one share of common stock at $11.50 per share (the “Placement Warrants”). On February 25, 2013, we entered into a Placement Warrant Exchange Agreement with our Sponsor and exchanged our Sponsor’s Placement Warrants for 39,000 shares of common stock.

17. Common Stock and Warrants

Common Stock

Common Stock Warrants

Unit Purchase Option

Sponsor Placement Units

Integrated Drilling Equipment Holdings Corp 10-K