12. Stockholders’ Equity and Stock Based Compensation

Common Stock Issuances

On December 22, 2016, the Company completed the 2016 Common Stock Offering of 13.8 million shares of its Class A common stock at a price of $5.75 per share, for proceeds of approximately $71.8 million, net of offering costs. The Company used the net proceeds from the stock offering to repay borrowings under its Senior Secured Credit Facility, Second Lien Notes and to repay the debt owed under the Facilitation Agreement with Seaport Global.

On August 2, 2016, the Company entered into a purchase and sale agreement with Juneau Energy, LLC (“Juneau”) whereby the Company obtained an undivided 50% of Juneau’s interest in two producing wells and each well’s respective oil and gas leases covering approximately 1,300 net mineral acres located in Brazos County, Texas. The total consideration paid by the Company was $5,500,000 payable in 500,227 shares of the Company’s Class A common stock.

In July 2016, the Company issued 2,500 shares of Class B non-voting common stock to Butterfly Flaps, Ltd., a Company in which Dr. Christopher Rowland (a director of the Company) owns an interest. The shares were issued for services to be performed by Butterfly Flaps, Ltd. in 2017.

Determining Fair Value of Stock Options

In determining the fair value of stock option grants, the Company utilized the following assumptions:

Valuation and Amortization Method. The Company estimates the fair value of stock option awards on the date of grant using the Black-Scholes-Merton valuation model. The fair value of all awards is expensed using the “graded-vesting method.”

Expected Life. The expected life of stock options granted represents the period of time that stock options are expected, on average, to be outstanding. The Company determined the expected life to be 3.5 years, for all stock options issued with three-year vesting periods and four-year grant expirations.

Expected Volatility. Using the Black-Scholes-Merton valuation model, the Company estimates the volatility of Predecessor’s common shares at the beginning of the quarter in which the stock option is granted. The volatility of 58.6% is based on weighted average historical movements of Predecessor’s common share price on the ASX over a period that approximates the expected life.

Risk-Free Interest Rate. The Company utilizes a risk-free interest rate equal to the rate of U.S. Treasury zero-coupon issues as of the date of grant with a term equivalent to the stock option’s expected life.

Expected Dividend Yield. The Predecessor and the Successor have not paid any cash dividends on its common shares, and the Successor does not anticipate paying any cash dividends in the foreseeable future. Consequently, a dividend yield of zero is utilized in the Black-Scholes-Merton valuation model.

Expected Forfeitures. The Company has experienced limited forfeitures and therefore has not discounted expenses for forfeitures at the reporting date.

Stock Option Activity

For the year ended December 31, 2016, no stock options were exercised. The following tables summarize certain information related to outstanding stock options under the Lonestar Resources Limited 2012 Employee Share Option Plan and the Lonestar Resources US Inc. 2016 Incentive Plan, which replaced the Lonestar Resources Limited 2012 Employee Share Option Plan following the Reorganization:

	Shares			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)
Outstanding at December 31, 2015		849,936		$	15.50		1.0
Options vested and exercisable at December 31, 2015		807,686			15.50		1.0
Granted		35,000			15.00		2.0
Exercised		—			—		—
Canceled/Expired		(693,186	)		18.00		—
Forfeited		—			—		—
Outstanding at December 31, 2016		191,750		$	15.00		0.5
Options vested and exercisable at December 31, 2016		191,750		$	15.00		0.5

	Shares			Weighted Average Fair Value per Share		Weighted Average Exercise Price per share		Weighted Average Remaining Contractual Term (in years)
Outstanding non-vested options at December 31, 2015		42,250		$	9.00	$	15.50		1.0

Granted		35,000			1.90		15.00		2.0
Vested		(77,250	)		8.00		15.00		1.0
Forfeited		—			—		—		—
Outstanding non-vested options at December 31, 2016		—		$	—	$	—		—

Stock-Based Compensation Expense

For the years ended December 31, 2016 and 2015, the Company recorded stock-based compensation expense for stock options granted using the fair-value method of approximately $448,000 and $2,585,000, respectively. As all outstanding options have fully vested, no unrecognized compensation cost existed at December 31, 2016.