NOTE G – STOCK OPTIONS AND WARRANTS

2010 Stock Plan

In 2010, the Company’s Board of Directors adopted the Global Clean Energy Holdings, Inc. 2010 Equity Incentive Plan (the “2010 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 four years, but not in all cases. The 2010 Plan provides for a three-month exercise period of vested options upon termination of service. The exercise price of options granted under the 2010 Plan is equal to the fair market value of the Company’s common stock on the date of grant. Options issued under the 2010 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, 2019, there were no shares available for future option grants under the 2010 Plan. The 2010 Plan expired in April 2020 and was replaced with the 2020 Equity Incentive Plan.

The Company’s Board of Directors has granted stock options to certain officers, directors, employees, and non-employees, which options were not part of the 2010 Plan or any other formal equity incentive plan.

2020 Stock 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. 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, 2020, there were 965,500 shares available for future option grants under the 2020 Plan.

During the fiscal years ended December 31, 2019 and 2020, the Company granted the following stock options under the 2020 Plan and outside of the 2020 Plan:

2019:

On January 15, 2019, the Company granted its Executive Vice President a five-year non-qualified stock option to purchase 5 million shares of Common Stock at an exercise price of $0.20, subject to the Company’s achievement of certain market capitalization goals.

On June 21, 2019 the Company entered into a Board Advisor Agreement with a prospective Board member (who subsequently became a member of the Board of Directors). As compensation for his services under the Board Advisor Agreement, the Board granted to this Director a non-qualified stock option to purchase up to 50,000 shares of the Company’s common stock, which option has an exercise price of $0.80 (based on the closing market price), a five year term, and the following vesting schedule: (i) Options to purchase 12,500 shares vested immediately as of the date grant, and (ii) options to purchase 12,500 additional shares vested on each of September 20, 2019, December 20, 2019 and March 20, 2020. The Board also granted to this prospective Director a second non-qualified stock option to purchase up to 50,000 shares of the Company’s common stock, which option has an exercise price of $0.80, a five-year term, and would vest if/when this prospective Director joins the Board of Directors of the Company, provided that this prospective Director is appointed to the Board during the term of the Board Advisor Agreement. This appointment occurred in May 2020.

On June 21, 2019, the Company granted its Executive Vice President a five-year non-qualified stock option to purchase 950,000 shares and a five-year incentive stock option for 50,000 shares both at an exercise price of $0.165.  The options vests at 25% at issuance and the balance over 36 months.

On July 1, 2019, the Company granted its Chairman of the Board a five-year non-qualified stock option to purchase 50,000 shares of Common Stock at an exercise price of $0.65. The options vest monthly over one year beginning on the grant date. On July 5, 2019 the Company granted to a consultant a five-year non-qualified stock option to purchase 500,000 shares of Common Stock at an exercise price of $0.90.  The option vesting is conditional upon the Company consummating its contemplated acquisition by March 31, 2020 and upon such acquisition will vest at one-third upon closing and one-third each on the first and second anniversary of closing.

2020:

On April 24, 2020, the Company granted a non-qualified stock option to purchase 500,000 shares of Common Stock to a consultant at an exercise price of $0.90. The option has a five-year term and vests at one-third at the closing of the Bakersfield Biorefinery, one-third at ninety days after closing and the remaining one-third on January 5, 2021.

On May 4, 2020, the Company granted a non-qualified stock option to purchase 150,000 shares of Common Stock to a consultant at an exercise price of $0.41. The option has a five-year term and vests at one-seventh at the closing of each month in 2020 beginning on June 30, 2020.

On May 7, 2020, the Company granted non-qualified stock options to purchase a) 87,500 shares of Common Stock to three different consultants and b) 100,000 shares of Common Stock to two Directors. The options have a five-year term and an exercise price of $0.66. The options to Directors vested immediately and 75,000 of the options to consultants vested immediately and the remaining 12,500 options which vest quarterly over three years beginning on June 30, 2020. The Company also granted 565,500 incentive stock options to employees at an exercise price of $.66 with 35,500 shares vesting quarterly over two years beginning on June 30, 2020 and 530,000 shares vesting quarterly over three years beginning on June 30, 2020.

On May 18, 2020, the Company granted an incentive stock option to purchase 100,000 shares of Common Stock to the Company’s Chief Financial Officer at an exercise price of $0.932. The option has a five-year term and vests quarterly over three years beginning on June 30, 2020.

On July 9, 2020, the Company granted incentive stock options to employees to purchase 39,000 shares of Common Stock at an exercise price of $0.833. The option has a five year term and vests quarterly over three years beginning on September 30, 2020.

On October 15, 2020, the Company granted an incentive stock option to employees to purchase 5,000 shares of Common Stock at an exercise price of $1.373. The option has a five-year term and vests quarterly over three years beginning on December 31, 2020.

On October 29, 2020, the Company granted incentive stock options to employees to purchase 7,500 shares of Common Stock at an exercise price of $1.75. The option has a five-year term and vests quarterly over three years beginning on December 31, 2020.

A summary of the option award activity and awards outstanding at December 31, 2020 is as follows:

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 Company estimates the fair value of stock options that have both service and market conditions on the grant date using a lattice model. The following table illustrates the assumptions used in estimating the fair value of options granted during the periods presented: 

During the years ended December 31, 2020 and 2019 the Company granted 200,000 and 6.1 million options, respectively, to related parties that have both, or either, requisite service conditions and market conditions. The 2020 share option grants were awarded 100,000 (50,000 each) to its two independent directors and 100,000 to the Company’s CFO. The 2019 share option awards includes 100,000 (50,000 each) to its two independent directors, and a 1 million award to its EVP. The requisite service period for the market condition options of 5 million shares granted to its EVP during 2019 was three years and the options vest in three tranches: 28% of the award vests when the market cap exceeds $7 million for a thirty-day period; 33% of the award vests when the market cap exceeds $15 million for a thirty-day period; and 40% of the award vests when the market cap exceeds $25 million for a thirty-day period. As of May 31, 2019, all of the outstanding market condition awards issued during 2019 were fully vested. As of December 31, 2020, 125,000 of the options granted in 2020 were vested and 5,787,000 of the options granted in 2019 were vested.

For the years ended December 31, 2020, and 2019 the Company recognized stock compensation expenses related to stock option awards of $326,486 and $577,645, respectively. The Company recognizes all stock-based compensation in general and administrative expenses in the accompanying consolidated statements of operations. As of December 31, 2020, there was approximately $312,000 of unrecognized compensation cost related to option awards that will be recognized over the remaining service period of approximately 3.0 years.

Stock Purchase Warrants and Option Rights

As of December 31, 2020 and 2019 there were no outstanding warrants to purchase shares of Global Clean Energy Holdings, Inc.

In 2020, the Company issued, to a party interested in Camelina development, a non-transferable warrant for an 8% interest in its subsidiary, Sustainable Oils, Inc. The warrant’s aggregate exercise price is $20 million and the warrant expires on June 1, 2021. At the time of issuance, the fair value of the warrant was deemed to be immaterial.

Concurrently with the closing of the Bakersfield Biorefinery, GCEH, through its subsidiary, GCE Acquisitions, issued an option right to the seller of the refinery to purchase up to 33 1/3% of the membership interests of GCE Acquisitions. The fair value of the option right on the date of issuance was $5.5 million and expires at ninety days after the refinery meets certain operational criteria.