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11. Stock-Based Compensation

12 Months Ended

Dec. 31, 2014

Common Stock Reserved for Issuance

Aemetis authorized the issuance of 1.1 million shares under its 2006 and 2007 Plans and 0.1 million outside the plans, which includes both incentive and non-statutory stock options. These options generally expire five years from the date of grant with general vesting term of 1/12th every three months and are exercisable at any time after vesting subject to continuation of employment.

The following is a summary of options granted under the employee stock plans:

	Shares Available for Grant			Number of Shares Outstanding			Weighted-Average Exercise Price

Balance as of December 31, 2012		161			752		$	5.90
Authorized		100			—			—
Granted		(288	)		288			5.80
Exercised		—			(26	)		3.30
Forfeited/expired		101			(101	)		15.31
Balance as of December 31, 2013		74			913		$	4.90
Authorized		100			—			—
Granted		(247	)		247			4.38
Exercised		—			(156	)		1.69
Forfeited/expired		78			(78)			2.71
Balance as of December 31, 2014		5			926		$	5.52

During 2014, the 156 thousand shares of common stock issued upon exercise of options under from the Company’s stock plans had an intrinsic value of $712 thousand at time of exercise. The weighted average strike price for the shares exercised was $1.69 per share and the weighted average closing market price at time of exercise was $6.24.

Vested and unvested options outstanding under the Aemetis Stock Option Plans as of December 31, 2014 and 2013 follow:

	Number of Shares		Weighted Average Exercise Price		Remaining Contractual Term (In Years)		Average Intrinsic Value1
2014
Vested		559	$	5.89		2.41	$	772
Unvested		367		4.95		3.87		356
Total		926	$	5.52		2.99	$	1,128

2013
Vested		516	$	4.40		1.77	$	523
Unvested		397		5.70		4.11		9
Total		913	$	4.90		2.79	$	532

(1) Intrinsic value calculation based on the $5.79 and $3.20 closing price of Aemetis stock on December 31, 2014 and 2013, as reported on the NASDAQ exchange and Over the Counter Bulletin Board respectively.

Non-Plan Stock Options

In November 2012 the Company issued 98 thousand stock options to board members and consultants outside of any Company stock option plan. None of the non-plan options have been exercised. As of December 31, 2014, all options vested at remaining contractual term of 2.9 years. 9 thousand options were exercised at a weighted average exercise price of $5.50 and 89 thousand options were outstanding as of December 31, 2014.

Outside Company Stock Plan

See following for summary of options granted outside the Company stock plans:

	Number of Shares		Weighted Average Exercise Price		Remaining Contractual Term (In Years)		Average Intrinsic Value2
2014
Vested		89	$	5.50		2.85	$	26
Unvested		-		-		-		-
Total		89	$	5.50		2.85	$	-

2013
Vested		69	$	5.50		3.85	$	-
Unvested		29		5.50		3.85		-
Total		98	$	5.50		3.85	$	-

(2) Intrinsic value based on the $5.79 and $3.20 closing price of Aemetis stock on December 31, 2014 and 2013 respectively, as reported on the NASDAQ Exchange and Over the Counter Bulletin Board respectively.

Stock-based compensation for employees

Stock-based compensation is accounted for in accordance with the provisions of ASC 718, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.

For the year ended December 31, 2014, 2013, and 2012, the Company recorded option expense in the amount of $605 thousand, $512 thousand, and $206 thousand, respectively.

Valuation and Expense Information

All issuances of stock options or other issuances of equity instruments to employees as the consideration for services received by us are accounted for based on the fair value of the equity instrument issued. The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock based compensation expense requires us to make assumptions and judgments about the variables used in the calculation, including the fair value of our common stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of our common stock, a risk-free interest rate, and expected dividends. We also estimate forfeitures of unvested stock options. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest. We use the simplified calculation of expected life described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, and volatility is based on an average of the historical volatilities of the common stock of four entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. We use an expected dividend yield of zero, as we do not anticipate paying any dividends in the foreseeable future. Expected forfeitures are assumed to be zero due to the small number of plan participants and the plan.

The weighted-average fair value calculations for options granted to employees within the period are based on the following weighted average assumptions:

	For the year ended December 31
	2014			2013			2012
Dividend-yield		0	%		0	%		0	%
Risk-free interest rate		0. 74 - 1.10	%		0.42 - 0.63	%		0.28 - 0.38	%
Expected volatility		77.00 - 78.43	%		73.20 - 75.55	%		79.08	%
Expected life (years)		3			3			2 - 3
Market value per share on grant date	$	4.20 - $ 4.66		$	4.00 to $6.50		$	5.50
Weighted average fair value per share on grant date	$	2.14 - $2.35		$	1.92 - $3.19		$	2.34 - $2.80

As of December 31, 2014, the Company had $750 thousand of total unrecognized compensation expense for employees which the Company will amortize over the 2.99 years of weighted remaining term.

Company granted 500 options, 7,600 options, and 11,500 options in the year ended December 31, 2014, 2013, and 2012, respectively to non-employees under the Stock plans and Non-Plan stock options. We account for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity Based Payments to Non-Employees. Under ASC 505-50, we determine the fair value of the options using Black Scholes option pricing model on the grant date and we re-measure the fair value of these options to recognize expense for the vested options for every quarter. We recognized the total expense on these non-employee options of $19 thousand, $10 thousand, $49 thousand for the year ended December 31, 2014, 2013, and 2012, respectively. As of December 31, 2014, the Company had $6 thousand of total unrecognized compensation expense for non-employees which the Company will amortize over the 2.99 years of weighted remaining term.

In addition, Company issued 200 thousand shares in the Company’s restricted common stock for services provided by outside consulting firms at an exercise price of $4.20 to $5.00. We determine the fair value of the these awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Stock-based compensation awards issued to non-employees are recorded in expense and additional paid-in capital in stockholders’ equity (deficit) over the applicable service periods based on the fair value of the awards or consideration received at the vesting date.