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Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies

5. Commitments and Contingencies

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 7 years.

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.

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.

On December 14, 2021, we entered into a real estate purchase agreements and lease disposition and development agreement with the City of Riverbank. We plan to utilize the purchased and leased properties, located at 5300 Claus Road in the city of Riverbank, California, for the construction of the Carbon Zero 1 Facility. The lease commences in 2022 and the Company will evaluate and assess the lease upon commencement.

The components of lease expense and sublease income was as follows:

		Twelve Months ended December 31,
		2021				2020				2019
Operating lease cost
Operating lease expense		$	812			$	566			$	712
Short term lease expense			207				118				85
Variable lease expense			107				105				102
Sub lease income			-				-				(117	)
Total operating lease cost		$	1,126			$	789			$	782

Finance lease cost
Amortization of right-of-use assets		$	230			$	249			$	-
Interest on lease liabilities			81				68				-
Total finance lease cost		$	311			$	317			$	-

Cash paid for amounts included in the measurement of lease liabilities:

		Twelve Months ended December 31,
		2021				2020				2019
Operating cash flows used in operating leases		$	698			$	616			$	571
Operating cash flows used in finance leases			81				68				-
Financing cash flows used in finance leases		$	506				1,471				-

Supplemental non-cash flow information related to the operating ROU asset and lease liabilities was as follows for the year ended December 31, 2021 and 2020:

		Twelve Months ended December 31,
		2021				2020				2019
Operating leases
Accretion of the lease liability		$	378			$	258			$	125
Amortization of right-of-use assets			434				308				587

Weighted Average Remaining Lease Term
Operating leases		6.3 years
Finance leases		2.3 years

Weighted Average Discount Rate
Operating leases		14.0%
Finance leases		6.1%

Supplemental balance sheet information related to leases was as follows:

		As of
		December 31, 2021				December 31, 2020				December 31, 2019
Operating leases
Operating lease right-of-use assets		$	2,462			$	2,889			$	557

Current portion of operating lease liability			260				316				377
Long term operating lease liability			2,318				2,578				200
Total operating lease liabilities			2,578				2,894				577

Finance leases
Property and equipment, at cost		$	2,317			$	2,308			$	-
Accumulated depreciation			(376	)			(249	)			-
Property and equipment, net			1,941				2,059				-

Other current liability			550				417				-
Other long term liabilities			720				1,164				-
Total finance lease liabilities			1,270				1,581				-

Maturities of operating lease liabilities were as follows:

Year ended December 31,		Operating leases				Finance leases

2022		$	597			$	611
2023			573				528
2024			590				201
2025			608				23
2026			626				-
There after			918				-
Total lease payments			3,912				1,363
Less imputed interest			(1,334	)			(93	)
Total lease liability		$	2,578			$	1,270

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, the Company defaulted on the payment plan and as of December 31, 2021 and December 31, 2020, the balance in property tax accrual was $6.8 million and $5.7 million, respectively. On March 3, 2022, the company paid $6.1 million to Stanislaus County.

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 has retained appellate counsel to appeal the award. If the appeal is successful, the award may be reduced or eliminated. If the appeal is not successful, the award for this judgement will be increased by approximately $1.8 million to $2.1 million. The parties may also enter into settlement discussions while the appeal is pending and settle the dispute.