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5. Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Leases In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard was effective for us on January 1, 2019. We adopted the new standard on its effective date. A modified retrospective transition approach was required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We adopted the new standard on January 1, 2019 and used the effective date as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. We elected the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We did not elect the practical expedient pertaining to land easements. We made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. We will recognize those lease payments in the Consolidated Statements of Operations as we incur the expenses. This standard had a material effect on our consolidated balance sheet due to the recognition of right-of-use assets and lease liabilities. However, it did not have a material impact on the Consolidated Statement of Operations. After assessment of this standard on our Company wide agreements and arrangements, we have identified assets as the corporate office, warehouse, monitoring equipment and laboratory facilities which we have control over these identified assets and obtain economic benefits fully. We classified these identified assets as operating leases after assessing the terms under classification guidance. Our leases have remaining lease terms of 1 year to 3 years. We have only one lease that has option to extend, we have concluded that it is not reasonably certain that we would exercise the option to extend the lease. Therefore, as of the lease commencement date, our lease terms generally did not include these options. We include options to extend the lease when it is reasonably certain that we will exercise that option. We have an equipment lease with extension options which the Company likely to extend, however, the equipment is billed based on the hours it is used in the period. According to the guidance, the variable payments based on other than index or rate, are to be expensed in the period incurred. The equipment cost is recognized as it is incurred. The corporate office had a sublease agreement for seven months in which we were a sub lessor. We did not have any separate lease components in any of the leases and the property taxes and insurance charges are based on a variable rate in our real estate leases, hence we did not include them in the lease payments as in substance fixed payments. When discount rates implicit in leases cannot be readily determined, the Company uses the applicable incremental borrowing rate at lease commencement to perform lease classification tests on lease components and to measure lease liabilities and ROU assets. The incremental borrowing rate used by the Company was based on weighted average baseline rates commensurate with the Company’s secured borrowing rate, over a similar term. At each reporting period when there is a new lease initiated, the rates established for that quarter will be used. Upon adoption of the standard, we recognized additional operating liabilities of $1.2 million, with corresponding ROU assets of the same amount based on the present value of the remaining minimum lease payments for existing operating leases. The components of lease expense and sublease income was as follows:
|  | Year ended December 31, 2019 |
Operating lease expense |  | $ | 712 |
Short term lease expense |  |  | 85 |
Variable lease expense |  |  | 102 |
Sub lease income |  |  | (117 | )
Total lease cost |  | $ | 782 |
Supplemental non-cash flow information related to right-of-use asset and lease liabilities was as follows for the year ended December 31, 2019:
|  | Year ended December 31, 2019 |
Accretion of the lease liability |  | $ | 124 |
Amortization of right-of-use assets |  | $ | 587 |
Weighted Average Remaining Lease Term Operating Leases |  |  | 1.5 years |
Weighted Average Discount Rate Operating Leases |  |  | 14.8 | %
Supplemental balance sheet information related to leases was as follows:
As of |  |  |
December 31, 2019 |  |  |
Operating lease right-of-use assets |  | $ | 557 |
Operating lease liabilities: |  |  |  |
Short term lease liability |  | $ | 377 |
Long term lease liability |  | $ | 200 |
Maturities of operating lease liabilities were as follows:
Year ended December 31, |  | Operating leases |
2020 |  | $ | 423 |
2021 |  |  | 185 |
2022 |  |  | 30 |
Total lease payments |  | $ | 638 |
Less imputed interest |  |  | (61 | )
Total operating lease liability |  | $ | 577 |
Property taxes The Company entered into a payment plan with Stanislaus County for unpaid property taxes for the Keyes Plant site on June 28, 2018 by paying $1.5 million as a first payment. Under the annual payment plan, the Company was set to pay 20% of the outstanding redemption amount, in addition to the current year property taxes and any interest incurred on the unpaid balance to date annually, on or before April 10 starting in 2019. After making one payment, Company defaulted on the payment plan and as of December 31, 2019, the balance in property tax accrual was $4.1 million. The Company is in the renegotiation of the payment plan with County as of December 31, 2019. Legal Proceedings On August 31, 2016, the Company filed a lawsuit in Santa Clara County Superior Court against defendant EdenIQ, Inc. (“EdenIQ”). The lawsuit was based on EdenIQ’s wrongful termination of a merger agreement that would have effectuated the merger of EdenIQ into a new entity that would be primarily owned by Aemetis. The lawsuit asserted that EdenIQ had fraudulently induced the Company into assisting EdenIQ to obtain EPA approval for a new technology that the Company would not have done but for the Company’s belief that the merger would occur. The relief sought included EdenIQ’s specific performance of the merger, monetary damages, as well as punitive damages, attorneys’ fees, and costs. In response to the lawsuit, EdenIQ filed a cross-complaint asserting causes of action relating to the Company’s alleged inability to consummate the merger, the Company’s interactions with EdenIQ’s business partners, and the Company’s use of EdenIQ’s name and trademark in association with publicity surrounding the merger. Further, EdenIQ named Third Eye Capital Corporation (“TEC”) as a defendant in a second amended cross-complaint alleging that TEC had failed to disclose that its financial commitment to fund the merger included terms that were not disclosed. Finally, EdenIQ claimed that TEC and the Company concealed material information surrounding the financing of the merger. By way of its cross-complaint, EdenIQ sought monetary damages, punitive damages, injunctive relief, attorneys’ fees and costs. In November 2018, the claims asserted by the Company were dismissed on summary judgment and the Company filed a motion to amend its claims, which remains pending. In December 2018, EdenIQ dismissed all of its claims prior to trial. In February 2019, the Company and EdenIQ each filed motions seeking reimbursement of attorney fees and costs associated with the litigation. On July 24, 2019, the court awarded EdenIQ a portion of the fees and costs it had sought in the amount of approximately $6.2 million. The Company recorded the $6.2 million as loss contingency on litigation during the year ended December 31, 2019. The Company’s ability to amend its claims and present its claims to the court or a jury could materially affect the court’s decision to award EdenIQ its fees and costs. In addition to further legal motions and a potential appeal of the Court’s summary judgment order, the Company plans to appeal the court’s award of EdenIQ’s fees and costs. The Company intends to continue to vigorously pursue its legal claims and defenses against EdenIQ.

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- Definition The entire disclosure for significant arrangements with third parties, which includes operating lease arrangements and arrangements in which the entity has agreed to expend funds to procure goods or services, or has agreed to commit resources to supply goods or services, and operating lease arrangements. Descriptions may include identification of the specific goods and services, period of time covered, minimum quantities and amounts, and cancellation rights. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -URI http://asc.fasb.org/topic&trid=2144648 + Details
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