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13. Acquisitions, Divestitures and Material Agreements | 12 Months Ended
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Dec. 31, 2012
Notes to Financial Statements |
13. Acquisitions, Divestitures and Material Agreements | 13. Acquisitions, Divestitures and Material Agreements Technology Company Acquisition. On July 1, 2011, the Company completed the acquisition of Zymetis, Inc., a Delaware corporation in exchange for 6,673,557 shares of Aemetis common stock. The acquisition was made as a strategic purchase related to the research and development work that Zymetis was performing. The purchase price was determined based on an arms-length negotiated value, which resulted in the recognition of goodwill. See following for Zymetis merger Purchase Price Allocation and Goodwill Reconciliation:
|  | 2011 |
Issuance of Stock as merger consideration |  | $ | 1,801,860 |
Fair Value of stock options attributable to the pre-combination service |  |  | 88,275 |
Consideration paid |  | $ | 1,890,135 |
Working capital assets |  | $ | 11,201 |
Property, Plant & Equipment |  |  | 65,493 |
Working capital liabilities |  |  | (509,078 | )
Debt assumed |  |  | (346,995 | )
Deferred Taxes |  |  | (98,479 | )
Intangibles |  |  | 1,800,000 |
Net Assets Acquired |  | $ | 922,141 |
Goodwill |  | $ | 967,994 |
Post-merger the Zymetis subsidiary was renamed Aemetis Technologies, Inc. and continued its R&D development work. The proforma adjustments for this acquisition are not material. For the year ending December 31, 2011, Aemetis Technologies generated $1,750 in consulting income and $174,488 in losses. Working Capital Arrangement. In March 2011, we entered into a Corn Procurement and Working Capital Agreement with J.D. Heiskell. Pursuant to the agreement we agreed to procure whole yellow corn from J.D. Heiskell. We have the ability to obtain corn from other sources subject to certain conditions, however, in 2012, all of our corn requirements were purchased from Heiskell. Title to the corn and risk of loss passes to us when the corn is deposited in the weigh bin. The initial term of the Agreement expired on December 31, 2012 and is automatically renewed for additional one-year terms, currently to December 31, 2013. Heiskell further agrees to sell all ethanol to Kinergy Marketing or other marketing purchaser designated by the Company and all WDG and syrup to A.L. Gilbert. These agreements are ordinary purchase and sale agency agreements for an ethanol plant. See following for J.D. Heiskell & Company sales, net of transportation costs and marketing fees, purchases and accounts receivable as of and for the years ended 2012 and 2011.
J.D. Heiskell & Company: |  |  |  |  |  |
|  | 2012 |  |  | 2011 |
Sales |  |  |  |  |  |
Ethanol |  | $ | 128,830,630 |  |  | $ | 105,447,012 |
Distillers Grains |  |  | 35,468,559 |  |  |  | 20,558,034 |
Corn Oil |  |  | 2,582,858 |  |  |  | — |
Total Sales |  |  | 166,882,047 |  |  |  | 126,005,046 |
Corn Purchases |  |  | 156,984,918 |  |  |  | 106,194,420 |
Accounts Receivable |  | $ | 394,784 |  |  | $ | 841,729 |
Ethanol and Wet Distillers Grains Marketing Arrangement. The Company entered into an Ethanol Marketing Agreement with Kinergy Marketing and a Wet Distillers Grains marketing agreement with A. L Gilbert. Under the terms of the agreements, subject to certain conditions, the agreements mature on August 31, 2013 with automatic one-year renewals thereafter. For the years ended December 31, 2012 and 2011, the Company in total expensed $2,394,194 and $2,022,679, respectively, under the terms of both ethanol and wet distillers grains agreements. Acquisition of Cilion. On July 6, 2012, the Company acquired 100% of Cilion, Inc. through a merger. The Company had been leasing the property owned by Cilion. The Company’s primary lender supported the financing of the acquisition in anticipation the merger will be accretive to earnings in the long term. Acquiring the real property and assets associated with the ethanol plant provides assets beneficial to the Company in securing additional financing and much needed flexibility not available under the lease in the development, testing, and commercialization of next generation biofuels technologies owed by the Company. At the effective time of the Merger, each issued and outstanding share of Cilion Preferred Stock was automatically converted into the right to receive an aggregate of (a) $16,500,000 cash and (b) 20,000,000 shares of Aemetis common stock and (c) the right to receive an additional cash amount of $5,000,000 plus interest at the rate of 3% per annum, which is payable upon the satisfaction by the Company of certain conditions set forth in the merger agreement. The Seller Note was recorded at its estimated fair value based on an expected term of 2 years and a 22% discount rate. Acquisition transaction costs funded during the merger included $15,000 in appraisal fees to Natwick & Associates, $185,065 in legal fees paid to DLA Piper, and $135,126 in mergers and acquisitions fees paid to UBS Securities LLC, all of which were recorded as selling, general and administrative expenses. Subsequent to the year end, UBS negotiated a settlement with Aemetis to be paid $2,250,000 in mergers and acquisition fees over time for their involvement in the transaction, which has been accrued for in 2012 and recognized in general and administrative expense. The fair value of the future consideration was determined by discounting the anticipated cash flow stream at an estimated market rate of interest based on potential payment timing. The merger agreement is the basis for determining the amount of the payment. The $5,000,000 future consideration is payable when the TEC loans have been satisfied. The Company anticipates the future consideration will be redeemed after satisfaction of amounts owed under senior secured debt arrangements with TEC. Management projects full satisfaction of the TEC obligations will occur within two to three years from the acquisition. The purchase price for Cilion, Inc. is recapped below based on the trading value of the stock at the time of the acquisition and the expected fair value of the future consideration (in thousands):
Cash |  | $ | 16,500 |
Fair value of shares issued |  |  | 12,511 |
Seller note payable |  |  | 3,584 |
|  | $ | 32,595 |
The provisional acquisition date fair value was allocated to Cilion’s net tangible and identifiable intangible assets based on their estimated fair values as of July 6, 2012 as set forth below (in thousands).
Tangible Assets: |  |  |
Accounts receivable |  | $ | 3,114 |
Prepaid assets |  |  | 5 |
Equipment held for resale |  |  | 1,367 |
Property, plant and equipment |  |  | 70,464 |
Other assets |  |  | 1,073 |
Total Tangible Assets Acquired |  |  | 76,023 |
Liabilities Assumed |  |  |  |
Accounts payable |  |  | (6 | )
Deferred tax liability |  |  | (1,086 | )
Total Enterprise Value |  | $ | 74,931 |
The Company recognized a bargain purchase gain of $42,335,876. The Company believes the Cilion shareholders valued the equity component of the consideration higher than the current quoted market price. The Company believes the lower market share price is due to the lack of information available to the market and the Cilion shareholders valued Aemetis common stock at value higher than the trading price on the OTC market at the time of the transaction, giving rise to the gain on bargain purchase accounting treatment. As of December 31, 2012 the purchase price allocation for deferred income tax and gain on acquisition bargain purchase were provisional and had not yet been finalized due to certain final tax information not being available yet. The amounts and final allocations will be completed in 2013. The unaudited pro forma financial information below presents the combined revenue and net income for Cilion and the Company for the years ending December 31, 2011 and 2012, as if the acquisition occurred as of January 1, 2011 (in thousands):
|  |  | Unaudited Proforma |
2011 |  |  |  |
| Revenue |  | $ | 141,858 |
| Net loss |  |  | 15,864 |
2012 |  |  |  |  |
| Revenue |  | $ | 189,048 |
| Net loss |  |  | (49,851 | )

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