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8. Stock-Based Compensation | 6 Months Ended
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Jun. 30, 2019
Share-based Payment Arrangement, Noncash Expense [Abstract] |
8. Stock Based Compensation | Plan Stock Options 2019 Plan On April 29, 2019, the Aemetis 2019 Stock Plan (the “2019 Stock Plan”) was approved by stockholders of the Company. This plan permits the grant of Incentive Stock Options, Non-Statutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine in its discretion. The 2019 Stock Plan’s term is 10 years and supersedes all prior plans. The 2019 Stock Plan authorized the issuance of 200,000 shares of common stock for the 2019 calendar year, in addition to permitting transferring and granting any available and unissued or expired options under the Amended and Restated 2007 Stock Plan in an amount equal to 177,246 options. On June, 6, 2019, 374,000 option grants were issued to employees and directors under the 2019 Stock Plan. These options expire ten years from the date of grant. Employee grants have a general vesting term of 1/12th every three months and are exercisable at any time after vesting subject to continuation of employment. Option grants for directors had immediate vesting with 10-year term expiration. With the approval of the 2019 Stock Plan, the Zymetis 2006 Stock Plan and Amended and Restated 2007 Stock Plan (the “Terminated Stock Plans” and together with the 2019 Stock Plan, the “Company Stock Plans”) are terminated for granting any options under either plan. However, any options granted before approval will remain outstanding and can be exercised, and any expired options will be available to grant under the 2019 Stock Plan. On January 8, 2019, 707,000 stock option grants were issued for employees and directors under the Amended and Restated 2007 Stock Plan. On February 21, 2019, 10,000 stock option grants were issued to a consultant by the Company. As of June 30, 2019, 3.8 million options are outstanding under the Company Stock Plans. Inducement Equity Plan Options In March 2016, the Board of Directors of the Company (the “Board”) approved an Inducement Equity Plan authorizing the issuance of 100,000 non-statutory stock options to purchase common stock. On June 6, 2019, 25,000 option grants were made under the Inducement Equity Plan to employees. As of June 30, 2019, 25,000 options were outstanding. Common Stock Reserved for Issuance The following is a summary of options granted under the Company Stock Plans:
|  | Shares Available for Grant |  |  | Number of Shares Outstanding |  |  | Weighted-Average Exercise Price |
Balance as of December 31, 2018 |  |  | 149 |  |  |  | 2,889 |  |  | $ | 1.80 |
Authorized |  |  | 855 |  |  |  | - |  |  |  | - |
Granted |  |  | (1,116 | ) |  |  | 1,116 |  |  |  | 0.78 |
Forfeited/expired |  |  | 190 |  |  |  | (190 | ) |  |  | 3.11 |
Balance as of June 30, 2019 |  |  | 78 |  |  |  | 3,815 |  |  | $ | 1.50 |
As of June 30, 2019, there were 2.4 million options vested under all the Company Stock Plans. 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 three months ended June 30, 2019 and 2018, the Company recorded stock compensation expense in the amount of $196 thousand and $317 thousand, respectively. For the six months ended June 30, 2019 and 2018, the Company recorded stock compensation expense in the amount of $486 thousand and $581 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 our estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. Compensation cost is recorded only for vested options. 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. During the three months ended June 30, 2019 and 2018, 399,000 and 423,000 options were granted respectively. The weighted average fair value calculations for options granted during the three months ended June 30, 2019 and 2018 are based on the following assumptions:
|  | For the three months ended June 30, |
Description |  | 2019 |  |  | 2018 |
Dividend-yield |  |  | 0 | % |  |  | 0 | %
Risk-free interest rate |  |  | 2.00 | % |  |  | 3.04 | %
Expected volatility |  |  | 88.58 | % |  |  | 85.6 | %
Expected life (years) |  |  | 6.81 |  |  |  | 6.48 |
Market value per share on grant date |  | $ | 0.92 |  |  | $ | 1.71 |
Fair value per share on grant date |  | $ | 0.71 |  |  | $ | 1.28 |
As of June 30, 2019, the Company had $1.0 million of total unrecognized compensation expense for employees, which the Company will amortize over the 2.1 years weighted average remaining term. 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 the 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: stock price on the measurement date, the volatility of our common stock for the period remaining, and a risk-free interest rate for the period remaining. Based on the valuation of issuance date, 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 measured at June 30, 2019 and December 31, 2018 using the following assumptions:
Description |  | June 30, 2019 |  |  | December 31, 2018 |
Risk-free interest rate |  |  | 2.20 | % |  |  | 2.60 | %
Expected volatility |  |  | 101 | % |  |  | 125 | %
Market value per share |  | $ | 0.85 |  |  | $ | 0.61 |
Fair value per share on grant date |  | $ | 1.14 |  |  | $ | 1.08 |
The Company considers the stock appreciation rights to be level 3 of the fair value hierarchy based upon the applicable guidance. The following table reflects the activity for liabilities measured at fair value using Level 3 inputs from December 31, 2018 to June 30, 2019:
| SARs Liability Balance
Balance as of December 31, 2018 |  | $ | 1,132 |
Related change in fair value |  |  | 35 |
Balance as of March 31, 2019 |  | $ | 1,167 |
Related change in fair value |  |  | 25 |
Balance as of June 30, 2019 |  | $ | 1,192 |

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + 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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