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9. Stock-Based Compensation

12 Months Ended

Dec. 31, 2017

Stockholders' deficit:

Stock-Based Compensation

Plan Stock Options

Aemetis authorized the issuance of 2.6 million shares of common stock under its Zymetis 2006 Stock Plan and Amended and Restated 2007 Stock Plan (together, the “Company Stock Plans”), which include both incentive and non-statutory stock options. These options generally expire five to ten years from the date of grant with a general vesting term of 1/12th every three months and are exercisable at any time after vesting subject to continuation of employment.

637 thousand stock option grants were issued on January 19, 2017 for employees and Directors under the Company Stock Plans. 262 thousand stock options were issued on November 16, 2017 under the Company Stock Plans. As of December 31, 2017, 2.2 million options are outstanding under the Company Stock Plans.

Inducement Equity Plan Options

In March 2015, the Directors of the Company approved an Inducement Equity Plan authorizing the issuance of 100,000 non-statutory options to purchase common stock. As of December 31, 2017, 37 thousand options were outstanding.

Common Stock Reserved for Issuance

The following is a summary of awards granted under the above Plans:

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

Balance as of December 31, 2016			98				1,632			$	4.37
Authorized			655				-				-
Granted			(899	)			899				1.41
Forfeited/expired			342				(342	)			-
Balance as of December 31, 2017			196				2,189			$	2.70

Vested and unvested awards outstanding as of December 31, 2017 and 2016 follow:

		Number of Shares				Weighted Average Exercise Price				Remaining Contractual Term (In Years)				Average Intrinsic Value (1)
2017
Vested and Exercisable			1,515			$	2.94				5.83			$	-
Unvested			674				2.16				8.62				-
Total			2,189			$	2.70				6.68			$	-

2016
Vested and Exercisable			977			$	5.45				3.28			$	-
Unvested			655				2.76				8.66				-
Total			1,632			$	4.37				5.44			$	-

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(1) Intrinsic value based on the $0.55 and $1.39 closing price of Aemetis stock on December 31, 2017 and 2016 respectively, as reported on the NASDAQ Exchange.

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 years ended December 31, 2017 and 2016 the Company recorded option expense in the amount of $1.1 million and $0.7 million, 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. Under ASU 2016-09, we have elected to recognize forfeitures as they occur. 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.

The weighted average fair value calculations for options granted during years ended December 31, 2017 and 2016 are based on the following assumptions:

		For the years ended December 31,
Description		2017				2016
Dividend-yield			0	%			0	%
Risk-free interest rate			2.22	%			1.66	%
Expected volatility			76.96	%			77.69	%
Expected life (years)			6.42				6.99
Market value per share on grant date		$	1.41			$	2.52
Fair value per share on grant date		$	0.99			$	1.79

As of December 31, 2017, the Company had $0.9 million of total unrecognized compensation expense for employees which the Company will amortize over the weighted remaining term of 1.6 years.

In addition, the Company issued 100 thousand shares in the Company’s restricted common stock on July 10, 2017 to the GAFI sole shareholder in consideration for Option agreement at the subscription grant price of $1.18. In addition, Company issued 165 thousand shares in the Company’s restricted common stock to promissory note holder on December 12, 2017 at the subscription grant price of $0.80 per share to pay off a promissory note. Stock-based compensation awards issued to non-employees are recorded in expense and additional paid-in capital in stockholders’ deficit over the applicable service periods based on the fair value of the awards or consideration received at the vesting date.