Quarterly report pursuant to Section 13 or 15(d)

STOCK OPTIONS AND WARRANTS

v3.23.1
STOCK OPTIONS AND WARRANTS
 3 Months Ended
Mar. 31, 2023
Disclosure Text Block [Abstract]  
STOCK OPTIONS AND WARRANTS
NOTE H – STOCK OPTIONS AND WARRANTS
 
2020 Equity Incentive Plan
 
In April 2020, the Company’s Board of Directors adopted the Global Clean Energy Holdings, Inc. 2020 Equity Incentive Plan (the “2020 Plan”) wherein 2,000,000 shares of the Company’s common stock were reserved for issuance thereunder. Options and awards granted to new or existing officers, directors, employees, and non-employees vest ratably over a period as individually approved by the Board of Directors generally over three years, but not in all cases. In June 2022, the 2020 Plan was amended and approved by the Company's stockholders to add an additional 5,000,000 shares of the Company's common stock. The 2020 Plan provides for a three-month exercise period of vested options upon termination of service. The exercise price of options granted under the 2020 Plan is equal to the fair market value of the Company’s common stock on the date of grant. Options issued under the 2020 Plan have a maximum term of ten years for exercise and may be exercised with cash consideration or through a cashless exercise in which the holder forfeits a portion of the award in exchange for shares of common stock of the remaining portion of the award. As of March 31, 2023, there were 2,034,584 shares available for future option grants under the 2020 Plan.
 
During the three months ended March 31, 2023, the Company granted stock options for the purchase of a total of 125,000 shares of Common Stock under the 2020 Plan to employees. The options have a five-year term, and an exercise price of $1.39 per share and will vest over varying periods.

For the three months ended March 31, 2023 and March 31, 2022, the Company recognized stock compensation expenses related to stock option awards of $613,000 and $312,000, respectively. The Company recognizes all stock-based compensation in general and administrative expenses in the accompanying condensed consolidated statements of operations. As of March 31, 2023, there was approximately $972,620 of unrecognized compensation cost related to service-based option awards that will be recognized over the remaining service period of approximately 2.0 years, and there was approximately $847,000 of unrecognized compensation cost related to market-based stock option awards that will be recognized over the remaining derived service period of 1.6 years.
 
The Company previously granted stock options that were not issued under the 2010 Equity Incentive Plan or 2020 Plan. All of such options that were issued outside of the 2010 and 2020 Plans are fully vested, and 16 million options that were awarded to two of GCEH’s executive officers had a market capitalization vesting arrangement, 500,000 options were issued to a consultant that had a transaction success arrangement, and 1,175,714 options were awarded to an executive officer that had a merit arrangement and 200,000 options were issued to two directors that were time based. Option awards outstanding at March 31, 2023 includes 50,000, 17,845,714 and 4,713,618 options under the 2010 Equity Incentive Plan, the non-plan and the 2020 Plan, respectively:
 
The
 
following tables shows options award activity for service based options for the three months ended March 31, 2023 and March 31, 2022:

 
 
Shares Under
Option
 
 
Weighted Average
Exercise Price
 
 
Weighted Average
Remaining
Contractual Life
(Years)
 
 
Aggregate
Intrinsic Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at December 31, 2022
 
 
21,551,576
 
 
$
0.63
 
 
 
1.45
 
 
$
17,347,879
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
 
125,000
 
 
 
1.39
 
 
 
 
 
 
 
-
 
Exercised
 
 
(5,200
 )
 
 
0.88
 
 
 
 
 
 
 
2,835
 
Forfeited
 
 
(152,283
 )
 
 
2.38
 
 
 
 
 
 
 
-
 
Expired
 
 
(18,761
 )
 
 
1.64
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at March 31, 2023
 
 
21,500,332
 
 
$
0.62
 
 
 
1.18
 
 
$
10,251,576
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested and expected to vest at March 31, 2023
 
 
19,806,010
 
 
$
0.42
 
 
 
0.92
 
 
$
10,251,278
 
 
 
 
Shares Under
Option
 
 
Weighted Average
Exercise Price
 
 
Weighted Average
Remaining
Contractual Life
(Years)
 
 
Aggregate
Intrinsic Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at December 31, 2021
 
 
19,547,520
 
 
$
0.36
 
 
 
2.11
 
 
$
87,636,744
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
 
285,000
 
 
 
4.21
 
 
 
 
 
 
 
-
 
Exercised
 
 
(210,500
)
 
 
0.37
 
 
 
 
 
 
 
915,850
 
Forfeited
 
 
(1,000
)
 
 
4.60
 
 
 
 
 
 
 
-
 
Expired
 
 
-
 
 
 
-
 
 
 
 
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at March 31, 2022
 
 
19,621,020
 
 
$
0.42
 
 
 
1.90
 
 
$
72,953,650
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested and expected to vest at March 31, 2022
 
 
 
18,755,261
 
 
$
0.27
 
 
 
1.80
 
 
$
71,871,914
 
 
The following table
s
 shows the status of the Company’s non-vested stock options for the 
three months
ended March 31, 2023 and March 31, 2022:
 
 
 
Shares Under
Option
 
 
Weighted Average
Grant Date Fair Value
 
 
 
 
 
 
    
Non-vested at December 31, 2022
 
 
1,989,945
 
 
$
1.78
 
 
 
 
 
 
 
 
    
Granted
 
 
125,000
 
 
 
3.24
 
Vested
 
 
(268,340
)
 
 
1.70
 
Forfeited
 
 
(152,283
)
 
 
1.47
 
 
 
 
 
 
 
 
    
Non-vested at March 31, 202
3
 
 
1,694,322
 
 
$
2.95
 
 
 
 
Shares
Under Option
 
 
Weighted Average
Grant Date Fair Value
 
 
 
 
 
 
 
 
Non-vested at December 31, 2021
 
 
518,764
 
 
$
4.21
 
 
 
 
 
 
 
 
Granted
 
 
285,000
 
 
 
4.21
 
Vested
 
 
(167,218
)
 
 
4.60
 
Forfeited
 
 
(1,000
)
 
 
2.95
 
 
 
 
 
 
 
 
    
Non-vested at March 31, 202
2
 
 
635,546
 
 
$
4.54
 

The following table shows options award activity for market based options for the three months ended March 31,2023:
 
 
 
Shares
Under Option
 
 
Weighted Average
Exercise Price
 
 
Weighted Average
Remaining
Contractual Life
(Years)
 
 
Aggregate
Intrinsic Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at December 31, 2022
 
 
600,000
 
 
$
2.14
 
 
 
 
 
$
1,286,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
 
-
 
 
 
-
 
 
 
 
 
 
-
 
Exercised
 
 
-
 
 
 
-
 
 
 
 
 
 
-
 
Forfeited
 
 
-
 
 
 
-
 
 
 
 
 
 
-
 
Expired
 
 
-
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at March 31, 2023
 
 
600,000
 
 
$
2.14
 
 
 
2.01
 
 
$
1,286,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested and expected to vest at March 31, 2023
 
 
-
 
 
$
-
 
 
 
-
 
 
$
-
 

The fair value of stock option grants with only continued service conditions for vesting is estimated on the grant date using a Black-Scholes option pricing model. The following table illustrates the assumptions used in estimating the fair value of options granted during the three months ended March 31, 2023
 and March 31, 2022:
 
 

 
 
March 31, 2023

 
 
March 31, 2022
 
Expected Term (in Years)
 
 
3.8
 
 
 
 
 
3.0
 
Volatility
 
 
85.42
%
 
 
87.71
%
Risk Free Rate
 
 
4.32
%
 
 
1.41
%
Dividend Yield
 
 
0
 
 
 
 
 
0
 
Aggregate Grant Date Fair Value
 
$
0.87
 
 
 
$
2.41
 

The fair value of stock option grants with market based conditions for vesting is estimated on the grant date using a Monte-Carlo simulation under a risk-neutral framework and using the average value over 100,000 model iterations. The following table illustrates the assumptions used in estimating the fair value of options
 granted during the year ended December 31, 2022:
 
Expected Term (in Years)
 
 
2.0
 
Volatility
 
 
88.00
%
Risk Free Rate
 
 
2.80
%
Dividend Yield
 
 
0
 
Aggregate Grant Date Fair Value
 
$
2.14
 
 
Stock Purchase Warrants and Call Option
 
On December 20, 2021, the Company executed Amendment No. 6 to the Senior Credit Agreement whereby the Company agreed to issue warrants covering 5,017,008 shares of common stock of GCEH at an exercise price to be determined based on a market pricing mechanism, which was $2.25 per share, upon the completion of the Series C Preferred Stock financing (“Series C Financing”) for a term of
five years
from that date (the “Warrant Commitment Liability”) (See Note B). The Warrant Commitment Liability was in consideration for (i) the 1%, or $4.1 million, consent premium payable from an earlier amendment to the Senior and Mezzanine Credit Facilities, (ii) the Bridge Loan, and (iii) as additional creditor fees for forbearance to the Senior Lenders and Mezzanine Lenders. Such creditor fees were recorded as additional debt discount.
The Company recognized a Warrant Commitment Liability as a freestanding instrument that is classified as a liability under ASC 480, “
Distinguishing Liabilities From Equity”
, as the commitment to issue the warrants represents a variable share settlement where the warrants to be issued to the Senior Lenders vary based on occurrence of the February 23, 2022 issuance of Series C Preferred and GCEH Warrants (see Note B).
This Warrant Commitment Liability was initially recognized at fair value and was measured at fair value at each reporting date until it was settled with changes in fair value recognized in earnings in other income (expense).
 
On February 23, 202
2
, the Company issued five-year warrants to our Senior Lenders and investors in our Series C Preferred for an aggregate of 18,547,731 shares of our common stock at an exercise price of $2.25 per share until February 22, 2027, of which warrants to 5,017,008 shares of the Company's common stock settled the Warrant Commitment Liability.
 
In August 2022, the exercise date was amended to December 28, 2028. If these warrants are exercised, the Company will receive additional proceeds of $41.7 million. Separately the Company issued the GCEH Tranche II Warrant (which allows for the purchase of up to 6.5 million shares of our common stock at an exercise price of $3.75 per share until February 22, 2028) and a warrant to purchase 33% (19,701,493 shares) of our SusOils subsidiary for an exercise price of $1.675 per share until February 27, 2027.
 
In August 2022, the GCEH Tranche II Warrant was amended to an exercise price of $2.25 per share and the SusOils warrant exercise price was reduced to $0.05076 per share, and the terms for both warrants were extended to December 28, 2028. If these warrants are exercised for cash, the Company will receive an additional $14.6 million and $1 million, respectively. There were new warrants issued in August. The Senior Lenders received warrants to purchase 7,468,929 shares of common stock, exercisable until December 23, 2028 at an exercise price of $2.25. ExxonMobil Renewables received 2,489,643 warrants on the same terms. If these warrants are exercised for cash, the Company will receive an additional $22.4 million.
 
As a result of issuing new immediately-vested warrants and modifying existing outstanding warrants to ExxonMobil in exchange for increasing the committed volumes of renewable diesel and extending the term of the agreement by an additional six months under the existing Product Offtake Agreement on August 5, 2022, the Company concluded these warrants represent consideration payable to a customer in accordance with ASC 606,
Revenue from Contracts with Customers
. The Company valued this consideration in accordance with ASC 718,
Compensation – Stock Compensation
, using the Black-Scholes option pricing model with the following assumptions:
 
Expected Term (in Years)
 
 
6.4
 
GCEH Warrant Volatility
 
 
115
%
SusOils Warrant Volatility
 
 
65
%
Risk Free Rate
 
 
2.89
%
Dividend Yield
 
 
0
%
 
This amount was determined to be $15.6 million and is reflected initially as a Contract asset - related party on the condensed consolidated balance sheets and will be amortized over the term of the underlying contract as the Company satisfies its performance obligations. There was no amortization for the three months ended March 31, 2023.

In January 2023, under Amendment No. 10 of the Senior Credit Agreement, we agreed to issue warrants to our Senior Lenders to purchase up to 15,000,000 shares of the Company’s common stock, exercisable until December 23, 2028 at an exercise price of $0.075 per share. During the three months ended March 31, 2023, the Company issued 8,250,000 warrants for funds drawn under Amendment No. 10. If these warrants are exercised for cash, the Company will receive an additional $0.6 million. As of May 15, 2023, the Company has issued an additional 5,625,000 warrants under the same terms for additional funds drawn under Amendment No. 10. for a total 13,875,000 warrants issued under amendment No. 10. If these additional warrants are exercised for cash, the Company will receive an additional $0.4 million. T
he Company valued this consideration, using the Black-Scholes option pricing model with the following assumptions:
 
Expected Term (in
Years)
 
 
5.9
 
GCEH Warrant Volatility
 
 
120
%
Risk Free Rate
 
 
3.59
%
Dividend Yield
 
 
0
%