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10. Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2018
Share-based Compensation [Abstract] |
Stock-Based Compensation | Plan Stock Options Aemetis authorized the issuance of 3.2 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. On January 18, 2018 and May 17, 2018, 725 and 423 thousand stock option grants were issued to employees and directors under the Company Stock Plans respectively. As of December 31, 2018, 2.9 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, 2018, 12 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 | ) |  |  | 7.32 |
Balance as of December 31, 2017 |  |  | 196 |  |  |  | 2,189 |  |  | $ | 2.70 |
Authorized |  |  | 655 |  |  |  | - |  |  |  | - |
Granted |  |  | (1,148 | ) |  |  | 1,148 |  |  |  | 1.07 |
Exercised |  |  | - |  |  |  | (2 | ) |  |  | 0.67 |
Forfeited/expired |  |  | 446 |  |  |  | (446 | ) |  |  | 4.35 |
Balance as of December 31, 2018 |  |  | 149 |  |  |  | 2,889 |  |  | $ | 1.80 |
Vested and unvested awards outstanding as of December 31, 2018 and 2017 follow:
|  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Remaining Contractual Term (In Years) |  |  | Average Intrinsic Value1 |
2018 |  |  |  |  |  |  |  |  |  |  |  |
Vested and Exercisable |  |  | 1,923 |  |  | $ | 2.01 |  |  |  | 7.34 |  |  | $ | - |
Unvested |  |  | 966 |  |  |  | 1.38 |  |  |  | 8.81 |  |  |  | - |
Total |  |  | 2,889 |  |  | $ | 1.80 |  |  |  | 7.80 |  |  | $ | - |
2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Vested and Exercisable |  |  | 1,515 |  |  | $ | 2.94 |  |  |  | 5.83 |  |  | $ | - |
Unvested |  |  | 674 |  |  |  | 2.16 |  |  |  | 8.62 |  |  |  | - |
Total |  |  | 2,189 |  |  | $ | 2.70 |  |  |  | 6.68 |  |  | $ | - |
——————— (1) Intrinsic value based on the $0.61 and $0.55 closing price of Aemetis stock on December 31, 2018 and 2017 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, 2018 and 2017 the Company recorded option expense in the amount of $1.0 million and $1.1 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. 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 zero due to the small number of plan participants. The weighted average fair value calculations for options granted during years ended December 31, 2018 and 2017 are based on the following assumptions:
Description |  | For the year ended December 31, |
|  | 2018 |  |  | 2017 |
Dividend-yield |  |  | 0 | % |  |  | 0 | %
Risk-free interest rate |  |  | 2.71 | % |  |  | 2.22 | %
Expected volatility |  |  | 82.99 | % |  |  | 76.96 | %
Expected life (years) |  |  | 6.48 |  |  |  | 6.42 |
Market value per share on grant date |  | $ | 1.07 |  |  | $ | 1.41 |
Fair value per share on grant date |  | $ | 0.79 |  |  | $ | 0.99 |
As of December 31, 2018, the Company had $0.8 million of total unrecognized compensation expense for employees which the Company will amortize over the weighted remaining term of 1.7 years. In addition, the Company issued 100 thousand shares of 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, the Company issued 165 thousand shares of 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. The Company entered into a Stock Appreciation Rights Agreement to issue 1,050,000 Stock Appreciation Rights (SARs) to Third Eye Capital on August 23, 2018 as part of Amendment No.1 to GAFI Note Purchase Agreement with an exercise date of one year from the issuance date. The SARs Agreement contains a call option for the Company at $2.00 per share during the first 11 months of the agreement either pay $2.1 million in cash or issue common stock worth of $2.1 million based on 30-day weighted average price of the stock on the call date, and a put option for the Third Eye Capital at $1.00 per share during the 11th month of the agreement where Third Eye Capital can redeem the SARs for $1.1 million in cash and cash equivalents. If none of the above options is exercised, SARs are automatically exercised and paid for in cash and cash equivalents one year from the date of the issuance date based upon the 30-day weighted average price of the Company’s stock price. We used an outside valuation expert to value the SARs using the Monte Carlo method. This valuation model requires us to make assumptions and judgments about the variables used in the calculation, such assumptions include the following: the fair value of our common stock, which was at $1.28. On August 23, 2018, the volatility of our common stock for a year at 127%, and a risk-free interest rate for one year at 2.43%. Based on this valuation, we recorded a fair value of the SARs of $1.28 million as fees on Amendment No. 1 to the GAFI term loan and these fees are amortized over the term of the loan according to ASC 470-50 Debt – Modification and Extinguishment. The Company also recorded a liability for the fair value of $1.28 million in other liabilities which will be re-measured at every quarter end using the Monte Carlo valuation method until the SARs are exercised. The SARs were re-measured at December 31, 2018 using the following assumptions:
Description |  | At December 31, 2018 |
Risk-free interest rate |  |  | 2.60 | %
Expected volatility |  |  | 125 | %
Market value per share on grant date |  | $ | 0.61 |
Fair value per share on grant date |  | $ | 1.08 |
The Company considers the stock appreciation rights to be level 3 of the fair value hierarchy based upon the applicable guidance.
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
2018 |  |  |  |  |  |  |  |  |  |  |  |
SARs liability |  | $ | 1,132 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,132 |
The following table reflects the activity for liabilities measured at fair value using Level 3 inputs from August 23, 2018 to December 31, 2018:
|  | SARs Liability Balance |
Balance on August 23, 2018 |  | $ | 1,277 |
Related change in fair value |  |  | (145 | )
Balance as of December 31, 2018 |  | $ | 1,132 |

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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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