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Note 5 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Text Block]

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 one year to 14 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 Facility. The Company evaluated the lease in accordance with ASC 842 – Lease Accounting and classified the lease as a finance lease.

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

	*Twelve Months Ended December 31,*
	*2022*		*2021*
Operating lease cost
Operating lease expense	$	673	$	812
Short term lease expense		176		207
Variable lease expense		91		107
Total operating lease cost	$	940	$	1,126

Finance lease cost
Amortization of right-of-use assets	$	179	$	230
Interest on lease liabilities		310		81
Total finance lease cost	$	489	$	311

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

	*Twelve Months Ended December 31,*
	*2022*		*2021*
Operating cash flows used in operating leases	$	766	$	698
Operating cash flows used in finance leases		310		81
Financing cash flows used in finance leases		481		505

Supplemental non-cash flow information related to the operating ROU asset and lease liabilities was as follows for the year ended December 31, 2022 and 2021:

	*Twelve Months Ended December 31,*
	*2022*			*2021*
Operating leases
Accretion of the lease liability	$	340		$	378
Amortization of right-of-use assets		333			434

Weighted Average Remaining Lease Term
Operating leases (in years)		5.2
Finance leases (in years)		14.0

Weighted Average Discount Rate
Operating leases		14.2	%
Finance leases		13.2	%

Supplemental balance sheet information related to leases was as follows:

	*As of*
	*December 31, 2022*			*December 31, 2021*
Operating leases
Operating lease right-of-use assets	$	2,449		$	2,462

Current portion of operating lease liability		338			260
Long term operating lease liability		2,189			2,318
Total operating lease liabilities		2,527			2,578

Finance leases
Property and equipment, at cost	$	3,045		$	2,317
Accumulated depreciation		(112	)		(376	)
Property and equipment, net		2,933			1,941

Other current liability		71			550
Other long term liabilities		2,911			720
Total finance lease liabilities		2,982			1,270

Maturities of operating lease liabilities were as follows:

Year Ended December 31,	*Operating leases*			*Finance leases*

2023	$	667		$	429
2024		682			179
2025		681			168
2026		626			145
2027		645			145
There after		274			11,000
Total lease payments		3,575			12,066
Less imputed interest		(1,048	)		(9,084	)
Total lease liability	$	2,527		$	2,982

The Company acts as sublessor in certain leasing arrangements, primarily related to land and buildings. Fixed sublease payments received are recognized on a straight-line basis over the sublease term. Sublease income and head lease expense for these transactions are recognized on a gross basis on the consolidated financial statements. Sublease income was recorded in the other operating income section of the Consolidated Statements of Operations and Comprehensive Loss.

The components of lease income for the years ended December 31, 2022 and 2021 were as follows:

		*December 31, 2022*				*December 31, 2021*
Lease income		$	1,255			$	-

Future lease commitments to be received by the Company as of December 31, 2022 were as follows:

Year ended December 31,
2023		$ 841
2024		572
2025		501
2026		474
2027		474
There after		1,066
Total future lease commitments		$ 3,928

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. 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 and the Company recorded these fees based on the court order. On May 6, 2022 the parties settled the dispute for $4.8 million by entering into a settlement agreement. The settlement was paid and a gain on litigation of $1.4 million was recognized on the income statement in the second quarter of 2022.

The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. While the ultimate outcome of these matters is not presently determinable, it is in the opinion of management that the resolution of outstanding claims will not have a material adverse effect on the financial position or results of operations of the Company. Due to the uncertainties in the settlement process, it is at least reasonably possible that management's view of outcomes will change in the near term.