Global Clean Energy Holdings, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

STOCK OPTIONS AND WARRANTS

STOCK OPTIONS AND WARRANTS

12 Months Ended

Dec. 31, 2023

Equity [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE I - STOCK OPTIONS AND WARRANTS

Amended and Restated 2020 Equity Incentive Plan

In April 2020, the Company’s Board of Directors adopted the Global Clean Energy Holdings, Inc. 2020 Equity Incentive Plan (as amended and restated, the “2020 Plan”) wherein 2,000,000 shares of the Company’s common stock were initially 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 and again in November 2023, the 2020 Plan was amended and approved by the Company's stockholders to add an additional 5,000,000 shares and 10,000,000 shares, respectively, 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 December 31, 2023, there were 603,931 shares available for future option grants under the 2020 Plan.

During the years ended December 31, 2023 and 2022, the Company granted stock options for the purchase of a total of 2,883,625 and 3,091,203 shares of common Stock under the 2020 Plan, respectively. The options issued in the twelve months ended December 31, 2023 have a five years term, and an exercise price ranging from $0.75 to $1.39 and will vest over varying periods. The options issued in the twelve months ended December 31, 2022 have a five years term, and an exercise price ranging from $1.29 to $4.70 and will vest over varying periods.

For the years ended December 31, 2023 and December 31, 2022, the Company recognized stock compensation expenses related to stock option awards of $2.9 million and $2.4 million, respectively. The Company recognizes all stock-based compensation in general and administrative expenses in the accompanying consolidated statements of operations. As of December 31, 2023, there was approximately $2.3 million of unrecognized compensation cost related to service-based option awards that will be recognized over the remaining service period of approximately 1.8 years, and there was approximately $0.3 million of unrecognized compensation cost related to market-based stock option awards that will be recognized over the remaining derived service period of 1.0 year.

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 as of December 31, 2023. Option awards outstanding at December 31, 2023 totaled 12,550,122, which includes 50,000, 6,570,000 and 5,930,122 options under the 2010 Equity Incentive Plan, the non-plan and the 2020 Plan, respectively. The Company has granted stock option awards that have service-based, market-based and performance-based requirements for vesting. There have been no awards outside the 2020 Equity Incentive Plan since the inception of the 2020 Equity Incentive Plan in April 2020.

On October 12, 2023, the compensation committee (“Compensation Committee”) of the Board of Directors of the Company approved amendments to certain non-plan performance-based stock options that had been granted to Richard Palmer, the Company’s former Chief Executive Officer, and Noah Verleun, the Company’s interim Chief Executive Officer, pursuant to their respective employment agreements. Pursuant to the amendments, options previously granted to Mr. Palmer to purchase up to 11.0 million shares of the Company’s common stock were amended to increase the exercise price from $0.154 per share to $0.97 per share (being the closing price of the Company’s stock on October 13, 2023), following which the exercise date for these options were extended for a period of five years until October 14, 2028. In addition, options previously granted to Mr. Verleun to purchase an aggregate of up to 6.0 million shares of the Company’s common stock were each amended to increase the exercise price to $0.97 per share (from exercise prices of $0.20 per share and $0.165 per share), and then to extend the exercise date for a period of five years, until January 14, 2029, and June 20, 2029, respectively. All other terms of Mr. Palmer’s and Mr. Verleun’s options remain unchanged. The effectiveness of each of these amendments to Mr. Palmer’s and Mr. Verleun’s options are subject to certain conditions precedent, including receipt of stockholder approval at the Company’s 2024 annual meeting of stockholders’.

The following tables show option award activity for service- and performance-based options for the years ended December 31, 2023 and December 31, 2022:


(in thousands, except for share amounts)	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	$	17,348

Granted	2,883,625	0.90
Exercised	(235,349)	0.71			49
Forfeited	(757,197)	1.61
Expired	(11,492,533)	0.20

Outstanding at December 31, 2023	11,950,122	$	1.05	1.80	$	4,589

Vested at December 31, 2023 and expected to vest	10,592,673	$	0.98	1.46	$	4,483
Vested and exercisable at December 31, 2023	9,846,519	$	0.90	1.25	$	4,438

(1) The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding options.


(in thousands, except for share amounts)	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	$	87,637

Granted	2,491,203	2.88			-
Exercised	(317,166)	0.42			1,207
Forfeited	(155,553)	2.61			-
Expired	(14,428)	5.05

Outstanding at December 31, 2022	21,551,576	$	0.63	1.45	$	17,348

Vested at December 31, 2022 and expected to vest	20,180,698	$	0.47	1.27	$	17,334
Vested and exercisable at December 31, 2022	19,561,631	$	0.39	1.16	$	17,323

1) The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total outstanding options.

The following tables show the status of the Company’s non-vested stock options for the years ended December 31, 2023 and December 31, 2022:


	Shares Under Option	Weighted Average Grant Date Fair Value

Non-vested at December 31, 2021	803,978	$	3.00

Granted	2,491,203	1.72
Vested	(1,155,099)	1.82
Forfeited	(150,137)	1.61

Non-vested at December 31, 2022	1,989,945	$	3.00

Granted	2,883,625	0.49
Vested	(2,013,644)	1.11
Forfeited	(756,323)	1.61

Non-vested at December 31, 2023	2,103,603	$	4.36

The following tables show options award activity for market-based options for the years ended December 31, 2023 and December 31, 2022:


(in thousands, except for share amounts)	Shares Under Option	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value

Outstanding at December 31, 2022	600,000	$	3.60	4.32	$	—

Granted	—	—			—
Exercised	—	—			—
Forfeited	—	—			—
Expired	—	—			—

Outstanding at December 31, 2023	600,000	$	3.60	3.32	$	—

Vested at December 31, 2023 and expected to vest	600,000	$	3.60	3.32	$	—
Vested and exercisable at December 31, 2023	—	$	—	—	$	—


	Shares Under Option	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value

Outstanding at December 31, 2021	—	$	—		$	—

Granted	600,000	3.60			—
Exercised	—	—			—
Forfeited	—	—			—
Expired	—	—			—

Outstanding at December 31, 2022	600,000	$	3.60	4.32	$	—

Vested at December 31, 2022 and expected to vest	600,000	$	3.60	4.32	$	—
Vested and exercisable at December 31, 2022	—	$	—	0.00	$	—

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 years ended:


	December 31, 2023			December 31, 2022
Expected Term (in Years)	3.2			3.2
Volatility	87.67		%	86.89		%
Risk Free Rate	3.83		%	2.84		%
Dividend Yield	0		%	0		%
Aggregate Grant Date Fair Value	$	0.51		$	1.72

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. No market based awards were issued during the year ended December 31, 2023:


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 February 23, 2022, the Company issued five-year warrants to certain Senior Lenders and ExxonMobil Renewables of 5,017,008 and 13,530,723, respectively, of our common stock at an exercise price of $2.25 per share until February 22, 2027. 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. Additionally, in August 2022, certain 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 of December 31, 2022, the Company had issued warrants to purchase 16,020,366 and 12,485,937 shares of our common stock, exercisable until December 23, 2028, at an exercise price of $2.25 to ExxonMobil Renewables and certain Senior Lenders, respectively. If these warrants are exercised for cash, the Company will receive an additional $36.0 million and $28.1 million, respectively, from ExxonMobil Renewables and certain Senior Lenders, respectively.

Separately the Company had 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 $1.0 million, respectively.

As a result of issuing immediately-vested warrants and modifying existing outstanding warrants to ExxonMobil Renewables 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 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, and 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 consolidated balance sheet as of December 31, 2022 that was expected to be amortized over the term of the underlying contract as the Company satisfies its performance obligations under the Company’s Offtake Agreement. However, EMOC subsequently notified the Company that the Offtake Agreement was terminated on the basis that the Start Date under the Offtake Agreement of June 30, 2023 was not achieved. While the Company disputes this purported termination, such purported termination of the POA has created a condition that raises an uncertainty as to the POA and renewable diesel revenues to be received pursuant to the POA. Consequently, management evaluated the recoverability of the contract asset and determined it to be fully impaired as of December 31, 2023 in accordance with ASC 340-40 impairment considerations as management reevaluated the amount of consideration that is expected from the POA and the TPA contracts within the context of ASC 606-10 as the Company explores all its options, including alternative offtake arrangements. .

In January 2023, under Amendment No. 10 of the Senior Credit Agreement, we agreed to issue warrants to certain Senior Lenders to purchase up to 15.0 million shares of the Company’s common stock, exercisable until December 23, 2028, at an exercise price of $0.075 per share. As of July 2023, the Company entered into Amendment No. 13 of the Senior Credit Agreement whereby the previously issued warrants to certain Senior Lenders were cancelled and reissued as new warrants to purchase up to 10,875,000 shares of the Company’s common stock, exercisable until December 23, 2028. Total warrants issued as of December 31, 2023 related to Amendments No. 10, 11, 12 and 13 were 32,672,941. Each new warrant is issued commensurate with each cash draw from the Senior Credit Agreement. Therefore, the fair value of these warrants are determined on the date of the draw. If these warrants are exercised for cash, the Company will receive $2.5 million. The newly issued warrants have the same terms as the previously issued warrants under Amendments No. 10, 11 and 12 of the Senior Credit Agreement.

The following table is a summary of the ranges used in the inputs of the Black-Scholes option pricing model assumptions:


Expected Term (in Years)	5.01 - 5.90
GCEH Warrant Volatility	80% - 125%
Risk Free Rate	3.59% - 4.71%
Dividend Yield	—	%