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6. Variable Interest Entity | 12 Months Ended
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Dec. 31, 2017
Variable Interest Entity |
Variable Interest Entity | Goodland Advanced Fuels, Inc., (GAFI) was formed to acquire the partially completed Goodland ethanol plant in Goodland, Kansas. GAFI entered into a Note Purchase Agreement with Third Eye Capital Corporation to acquire the plant. GAFI, the Company and its subsidiary AAPK also entered into separate Intercompany Revolving Notes, pursuant to which GAFI may, from time to time, lend a portion of the proceeds of the Revolving Loan incurred under the Note Purchase Agreement. Aemetis, Inc. and AAPK (Guarantors) also agreed to enter into certain Limited Guaranty. Pursuant to the Limited Guaranty, the Guarantors guarantee the prompt payment and performance of all unpaid principal and interest on the Loans and all other obligations and liabilities of GAFI to Noteholders in connection with the Note Purchase Agreement. The obligations of the Guarantors pursuant to the Limited Guaranty are secured by a first priority lien over all assets of the Guarantors pursuant to separate general security agreements entered into by each Guarantor. The aggregate obligations and liabilities of each Guarantor is limited to the sum of (i) the aggregate amount advanced by GAFI to such Guarantor under and in accordance with the Intercompany Revolving Notes and (ii) the obligation of the Guarantor pursuant to its indemnity and expense obligations under the Limited Guaranty prior to the date on which the Option is exercised. Additionally, on July 10, 2017, the Company entered into an Option Agreement by and between GAFI and the sole shareholder of GAFI, pursuant to which Aemetis was granted an irrevocable option to purchase all, but not less than all, of the capital stock of GAFI for an aggregate purchase price equal to $0.01 per share (total purchase price of $10.00). This Option provides for automatic triggering in the event of certain default circumstances. After the automatic exercise upon default, the Limited Guaranty no longer applies and the Guarantors are responsible for the outstanding balances of the GAFI term and revolving loan. Additionally, Third Eye Capital was granted a warrant for the purchase of 250 shares, representing 20% of the outstanding shares of GAFI, for a period of 10 years at an exercise price of $0.01 per share. In consideration for signing the Option, the sole shareholder of GAFI subscribed to the 100,000 common stock of the Aemetis, Inc. On July 10, 2017, the Company issued the 100,000 shares and recognized $0.1 million related stock compensation during the year ended December 31, 2017. After consideration of the above agreements, we concluded that GAFI did not have enough equity to finance its activities without additional subordinated financial support. Additionally, GAFI’s shareholder did not have a controlling financial interest in the entity. Hence, we concluded that GAFI is a VIE. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly affect the economic performance of the VIE and the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. In determining whether Aemetis is the primary beneficiary, a number of factors are considered, including the structure of the entity, contractual provisions that grant any additional rights to influence or control the economic performance of the VIE, and obligation to absorb significant losses. Through providing Limited Guaranty and signing the Option Agreement, the Company took the risks related to operations, financing the Goodland plant, and agreed to meet the financial covenants for GAFI to be in existence. Based upon this assessment, Aemetis has the power to direct the activities of GAFI and has been determined to be the primary beneficiary of GAFI and accordingly, the assets, liabilities, and operations of GAFI are consolidated into those of the Company. The assets and liabilities were initially recognized at fair value. The following are the Balance Sheet and Statement of Operations of GAFI:
|  | As of |
|  | December 31, 2017 |
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents |  | $ | 184 |
Prepaid expenses |  |  | 1,581 |
Total current assets |  |  | 1,765 |
Property, plant and equipment, net |  |  | 15,408 |
Promissory note receivable from Aemetis |  |  | 5,709 |
Total assets |  | $ | 22,882 |
Liabilities and stockholders' deficit |  |  |  |
Secured and Revolving notes |  | $ | 24,351 |
Total liabilities |  | $ | 24,351 |
Accumulated deficit |  |  | (1,469 | )
Total liabilities and stockholders' deficit |  | $ | 22,882 |
|  | From July 10, 2017 to |
|  | December 31, 2017 |
Selling, general and administrative expenses |  | $ | 260 |
Operating loss |  | $ | (260 | )
Interest expense |  |  |  |
Interest rate expense |  | $ | 1,249 |
Amortization expense |  |  | 250 |
Other (income) expense |  |  | (290 | )
Net loss |  | $ | (1,469 | )
As of December 31, 2017, the Company borrowed $5.7 million under the Intercompany Revolving Notes to pay off agent advances and pay costs associated with the testing of cellulosic ethanol production. Aemetis paid GAFI fees of $1.0 million associated with entry into the Note purchase agreement with TEC, and accordingly holds an account receivable from GAFI. In the consolidation process, these intercompany borrowings were eliminated.

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
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