Tesla 2015 Annual Report Download - page 53

The term of the 2012 CEO Grant is ten years, so any tranches that remain unvested at the expiration of the 2012 CEO Grant will be
forfeited. In addition, unvested options will be forfeited if our CEO is no longer in that role, whether for cause or otherwise.
We measured the fair value of the 2012 CEO Grant using a Monte Carlo simulation approach with the following assumptions: risk-free
interest rate of 1.65%, expected term of ten years, expected volatility of 55% and dividend yield of 0%.
Stock-based compensation expense associated with the 2012 CEO Grant is recognized for each pair of performance and market
conditions over the longer of the expected achievement period of the performance and market conditions, beginning at the point in time that the
relevant performance condition is considered probable of being met.
As of December 31, 2014, the market conditions for six vesting tranches and the following performance milestone were achieved and
approved by our Board of Directors:
As of December 31, 2014, the following performance milestone was achieved and subject to our Board of Directors’ approval at the upcoming
board meeting:
As of December 31, 2014 the following three performance milestones were considered probable of achievement:
As the above three performance milestones were considered probable of achievement, we recorded stock-based compensation expense of
$25.0 million, $14.5 million and $1.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Additionally, no cash compensation has ever been received by our CEO for his services to the Company.
Income Taxes
We record our provision for income taxes in our consolidated statements of operations by estimating our taxes in each of the jurisdictions
in which we operate. We estimate our actual current tax exposure together with assessing temporary differences arising from differing treatment
of items recognized for financial reporting versus tax return purposes. In general, deferred tax assets represent future tax benefits to be received
when certain expenses previously recognized in our consolidated statements of operations become deductible expenses under applicable income
tax laws, or loss or credit carryforwards are utilized. Valuation allowances are recorded when necessary to reduce deferred tax assets to the
amount expected to be realized.
Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any
valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments about our future taxable income that
are based on assumptions that are consistent with our future plans. As of December 31, 2014, we had recorded a full valuation allowance on our
net U.S. deferred tax assets because we expect that it is more likely than not that our U.S. deferred tax assets will not be realized in the
foreseeable future. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted.
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• Completion of the first Model 3 Production Vehicle;
• Gross margin of 30% or more for four consecutive quarters;
• Aggregate vehicle production of 100,000 vehicles;
• Aggregate vehicle production of 200,000 vehicles; and
• Aggregate vehicle production of 300,000 vehicles.
• Successful completion of the Model X Alpha Prototype.
• Successful completion of the Model X Beta Prototype;
• Completion of the first Model X Production Vehicle;
• Successful completion of the Model 3 Alpha Prototype; and
• Aggregate vehicle production of 100,000 vehicles.