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5. Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract] |
5. Commitments and Contingencies | Leases We have identified assets as the corporate office, warehouse, monitoring equipment and laboratory facilities over which we have control and obtain economic benefits fully. We classified these identified assets as operating leases after assessing the terms under classification guidance. We have entered into several leases for trailers and carbon units with purchase option at the end of the term. We have concluded that it is reasonably certain that we would exercise the purchase option at the end of the term, hence the leases were classified as finance leases. All of our leases have remaining term of less than a year to 8 years. 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 measure lease liabilities and right-of-use (“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. The components of lease expense and sublease income follow:
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Operating lease cost |  |  |  |  |  |  |  |  |  |  |  |
Operating lease expense |  | $ | 201 |  |  | $ | 219 |  |  | $ | 561 |  |  | $ | 543 |
Short term lease expense |  |  | 75 |  |  |  | 18 |  |  |  | 104 |  |  |  | 71 |
Variable lease expense |  |  | 29 |  |  |  | 31 |  |  |  | 89 |  |  |  | 80 |
Sub lease income |  |  | - |  |  |  | (50 | ) |  |  | - |  |  |  | (118 | )
Total operating lease cost |  | $ | 305 |  |  | $ | 218 |  |  | $ | 754 |  |  | $ | 576 |
Finance lease cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortization of right-of-use assets |  | $ | 94 |  |  | $ | - |  |  | $ | 155 |  |  | $ | - |
Interest on lease liabilities |  |  | 26 |  |  |  | - |  |  |  | 44 |  |  |  | - |
Total finance lease cost |  | $ | 120 |  |  | $ | - |  |  | $ | 199 |  |  | $ | - |
Cash paid for amounts included in the measurement of lease liabilities:
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Operating cash flows used in operating leases |  | $ | 131 |  |  |  | 185 |  |  | $ | 448 |  |  | $ | 517 |
Operating cash flows used in finance leases |  |  | 26 |  |  |  | - |  |  |  | 44 |  |  |  | - |
Financing cash flows used in finance leases |  |  | 435 |  |  |  | - |  |  | $ | 1,137 |  |  |  | - |
Supplemental non-cash flow information related to the operating ROU asset and lease liabilities was as follows for the three and nine months ended September 30, 2020 and 2019:
|  | Three months ended September 30, |  |  | Nine months ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Operating leases |  |  |  |  |  |  |  |  |  |  |  |
Accretion of the lease liability |  | $ | 101 |  |  | $ | 31 |  |  | $ | 160 |  |  | $ | 107 |
Amortization of right-of-use assets |  |  | 100 |  |  |  | 151 |  |  |  | 402 |  |  |  | 438 |
Weighted Average Remaining Lease Term |  |  |
Operating leases |  | 7.1 years |
Finance leases |  | 3.2 years |
Weighted Average Discount Rate |  |  |
Operating leases |  |  | 13.9 | %
Finance leases |  |  | 5.2 | %
Supplemental balance sheet information related to leases was as follows:
|  | As of |
|  | September 30, 2020 |  |  | December 31, 2019 |
Operating leases |  |  |  |  |  |
Operating lease right-of-use assets |  | $ | 2,843 |  |  | $ | 557 |
Current portion of operating lease liability |  |  | 286 |  |  |  | 377 |
Long term operating lease liability |  |  | 2,662 |  |  |  | 200 |
Total operating lease liabilities |  | $ | 2,948 |  |  | $ | 577 |
Finance leases |  |  |  |  |  |  |  |
Property and equipment, at cost |  | $ | 2,988 |  |  | $ | - |
Accumulated depreciation |  |  | (155 | ) |  |  | - |
Property and equipment, net |  | $ | 2,833 |  |  | $ | - |
Other current liability |  |  | 621 |  |  |  | - |
Long term other liability |  |  | 1,270 |  |  |  | - |
Total finance lease liabilities |  | $ | 1,891 |  |  | $ | - |
Maturities of operating and finance lease liabilities were as follows:
Twelve months ended September 30, |  | Operating leases |  |  | Finance leases |
2021 |  | $ | 666 |  |  | $ | 704 |
2022 |  |  | 613 |  |  |  | 577 |
2023 |  |  | 569 |  |  |  | 494 |
2024 |  |  | 586 |  |  |  | 290 |
2025 |  |  | 603 |  |  |  | - |
Thereafter |  |  | 1,698 |  |  |  | - |
Total lease payments |  |  | 4,735 |  |  |  | 2,065 |
Less imputed interest |  |  | (1,787 | ) |  |  | (174 | )
Total lease liability |  | $ | 2,948 |  |  | $ | 1,891 |
Other Commitments The Company entered into an agreement with Mitsubishi Chemical America, Inc. to purchase certain equipment to save energy used in the Keyes Plant. We also entered into a financing agreement with the seller for $5.7 million for this equipment. Payments pursuant to the financing transaction will commence after the installation date and interest will be charged based on the certain performance metrics after operation of the equipment. The equipment was delivered in March 2020; however the installation has been delayed due to the COVID-19 pandemic. Hence, we recorded the asset in construction in progress and related liability in the short and long term debt of $0.7 million and $5 million, respectively as of September 30, 2020. 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 September 30, 2020 and December 31, 2019, the balance in property tax accrual was $5.4 million and $4.1 million, respectively. Stanislaus County agreed not to enforce collection actions and we are now in discussions with Stanislaus County regarding a payment plan. 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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