NOTE

—

EQUITY

December 31, 2016,

Ramaco Development, LLC had

8,000,000

common units and

4,538,836

preferred units issued and outstanding. On

February 8, 2017,

in connection with the Company’s IPO, a corporate reorganization was completed and each unit of Ramaco Development, LLC was converted into approximately

2.81

shares of common stock. As a result, the Company issued

35,262,576

shares of common stock. The Company issued an additional

3,800,000

shares of common stock in the IPO.

After the corporate reorganization and the completion of the IPO discussed above, the Company is authorized to issue up to a total of

260,000,000

shares of its common stock with a par value of

$0.01

per share, and

50,000,000

shares of its preferred stock with a par value of

$0.01

per share. Holders of our common stock are entitled to

one

vote for each share held of record on all matters submitted to a vote of stockholders and to receive ratably in proportion to the shares of common stock held by them any dividends declared from time to time by the board of directors. Our common stock has

preferences or rights of conversion, exchange, pre-exemption or other subscription rights.

Stock

-Based Compensation

We have a stock-based compensation plan under which stock options, restricted stock, performance-based stock awards and other stock-based awards

may

be granted. At

December

31,

2018,

5.9

million shares were available under the current plan for future awards.

Total compensation costs recognized for all equity-based compensation totaled

$2.6

million,

$2.8

million and

$0.3

million for

2018,

2017

and

2016,

respectively.

tock

Options

–

August 31, 2016,

Ramaco Development, LLC granted

two

executives an aggregate of

333,334

options for the purchase of common units at an exercise price of

$15

per unit. The options have a

ten

-year term from the grant date. The options to purchase common units were converted into

937,424

options to purchase shares of the Company’s common stock for

$5.34

each in the Reorganization. Vesting of these options was accelerated in our IPO pursuant to their terms. Equity-based compensation expense totaling

$0.3

million was recognized in

2016

for these awards. The remaining

$2.1

million of equity-based compensation expense associated with these awards was recognized during

2017.

The fair value of the options was estimated using a Black-Scholes option pricing model using the following key assumptions:

●

Expected term of

years

. We used the “simplified method” for estimating the expected term of options, which is the average of the weighted-average vesting period and contractual term of the option.

●

Expected volatility of

51%

. There was

public market for the Company’s common units before its IPO. Volatility was determined based on an analysis of a peer group of publicly-traded companies.

●

Risk-free interest rate of

1.32%

. The risk-free interest rate was based on the yield in effect at the time of the grant for

zero

-coupon U.S. Treasury notes with remaining terms similar to the expected term of the options.

●

Dividend rate of

. The Company assumed the expected dividend to be zero.

●

Fair value of common units

. Given the absence of a public trading market for its common units at the time, the Company exercised reasonable judgment and considered several objective and subjective factors to determine the best estimate of the fair value of its common units, including its stage of development; contemporaneous issuances of our equity; the rights, preferences and privileges of the convertible preferred units relative to those of the common units; the Company’s results of operations and financial condition, including levels of available capital resources; equity market conditions affecting comparable public companies; general U.S. market conditions and the lack of marketability of the Company’s common units; and valuations based on sales of the Series A preferred units to unrelated parties.

The options remain outstanding and unexercised at

December 31, 2018

and were

not

in-the-money at

December 31, 2018.

Restricted S

tock Awards

—

We grant restricted stock to certain senior executive employees and directors. The shares vest over

one

three

years from the date of grant. During the vesting period, the participants have voting rights and

may

receive dividends, but the shares

may

not

be sold, assigned, transferred, pledged or otherwise encumbered. Additionally, granted but unvested shares are forfeited upon termination of employment, unless an employee enters into another written arrangement with the Company. The fair value of the restricted shares on the date of the grant is amortized ratably over the service period. We recorded compensation expense of

$2.6

million and

$0.7

million related to these awards in

2018

and

2017,

respectively. As of

December

31,

2018,

there was

$3.8

million of total unrecognized compensation cost related to unvested restricted stock to be recognized over a weighted average period of

1.4

years.

The following table summarizes restricted awards outstanding as of

December

31,

2018

as well as activity during the year:

	Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2017		471,017		$	5.87
Granted		528,683			8.03
Vested		(27,984	)		8.04
Forfeited		(5,582	)		6.27
Outstanding at December 31, 2018		966,134		$	6.99

The total fair value of awards vested during the year ended

December

31,

2018

was

$0.2

million.