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Aemetis, Inc (AMTX) SEC Filing 10-Q Quarterly report for the period ending Sunday, June 30, 2019

Aemetis, Inc

CIK: 738214 Ticker: AMTX
  Exhibits 99.1
External Investor Relations Contact:
Kirin Smith
PCG Advisory Group
(646) 863-6519
ksmith@pcgadvisory.com
 
 
Company Investor Relations/
Media Contact:
Todd Waltz
 (408) 213-0940
investors@aemetis.com
 
 
 
Aemetis, Inc. Reports First Quarter 2019 Financial Results
 
CUPERTINO, Calif. – May 9, 2019 -
Aemetis, Inc. (NASDAQ: AMTX), an advanced renewable fuels and biochemicals company, today announced its financial results for the three months ended March 31, 2019.
 
Aemetis’ first quarter of 2019 included significant announcements such as the entry into the biomethane business with a project in the Central Valley of California, expansion of the India plant pretreatment capacity to 50 million gallons, and the opening of a new customer base in India. Aemetis also announced the completion of several significant funding milestones for its ultra-low carbon California cellulosic ethanol biorefinery, which is expected to add approximately $80 million of high margin revenues. Utilizing thousands of tons of waste wood from California’s Central Valley, the Aemetis cellulosic ethanol biorefinery is expected to produce the state’s lowest carbon ethanol fuel, reducing greenhouse gas emissions in the process.
 
Key milestones during Q1 2019 included:
 
Dairy Biomethane Digester project in Central California and $30 million of funding was announced and began the permitting and construction phase of its multi dairy renewable biomethane digester cluster.
Cellulosic ethanol biorefinery project received a USDA Conditional Commitment for $125 million of financing, a $12 million state tax waiver, and a $5 million state grant.
India plant completed pretreatment capacity expansion to 50 million gallons per year of biodiesel from low cost, high free fatty acid feedstock
Approval for $50 million of low cost EB-5 funding by the USCIS for the Aemetis Cellulosic Ethanol project.
India plant expands customer base with sales of biodiesel to retail fuel stations and government-owned oil companies.
 
Today, Aemetis will host an earnings review call at 11:00 am Pacific (PT). For details on the call, visit: http://www.aemetis.com/investors/conference-calls/.
 
Financial Results for the Three Months Ended March 31, 2019
 
Revenues during the first quarter of 2019 were $41.9 million, compared to $43.0 million for the first quarter of 2018. North America increased the volume of ethanol sold from 16.1 million gallons to 16.2 million gallons, which was offset by a softening price from $1.76 per gallon to $1.68 per gallon, while India's biodiesel price was $851 per metric ton compared to $839 per metric ton with tons sold at 5,286 tons compared to 5,182 tons.
 
Gross profit for the first quarter of 2019 decreased by $2.2 million to a $0.4 million loss, compared to gross profit of $1.9 million during the first quarter of 2018.
 
Selling, general and administrative expenses were $4.2 million during the first quarter of 2019, compared to $3.8 million in the first quarter of 2018, primarily driven by an increase in professional fees.
 
Operating loss was $4.6 million for the first quarter of 2019, compared to operating loss of $2.0 million for the same period in 2018.
 
Interest expense, excluding accretion of Series A preferred units in the Aemetis Biogas LLC subsidiary, decreased to $6.2 million during the first quarter of 2019 compared to $9.0 million during the first quarter of 2018. Included in interest expense during the first quarter of 2018 was a one-time loan fee charge of $3.6 million. Additionally, our Aemetis Biogas initiative recognized $449 thousand of accretion of the preference payments on its preferred stock.
 
Net loss decreased to $10.7 million for the first quarter of 2019, compared to net loss of $11.1 million for the first quarter of 2018.
 
Cash at the end of the first quarter of 2019 was $43 thousand compared to $1.2 million at the close of the fourth quarter of 2018.
 
 
1
 
 
About Aemetis
 
Headquartered in Cupertino, California, Aemetis is an advanced renewable fuels and biochemicals company focused on the acquisition, development and commercialization of innovative technologies that replace traditional petroleum-based products by the conversion of ethanol and biodiesel plants into advanced biorefineries. Founded in 2006, Aemetis owns and operates a 60 million gallons per year ethanol production facility in California’s Central Valley, near Modesto. Aemetis also owns and operates a 50 million gallons per year renewable chemical and advanced fuel production facility on the East Coast of India producing high quality distilled biodiesel and refined glycerin for customers in India, the US and Europe. Aemetis operates a research and development laboratory, and holds a portfolio of patents and related technology licenses for the production of renewable fuels and biochemicals. For additional information about Aemetis, please visit www.aemetis.com.
 
NON-GAAP FINANCIAL INFORMATION
 
We have provided non-GAAP measures as a supplement to financial results based on GAAP. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in the accompanying supplemental data. Adjusted EBITDA is defined as net income/(loss) attributable to Aemetis, Inc. plus (to the extent deducted in calculating such net income) interest expense, loss on extinguishment, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense and share-based compensation expense.
 
Adjusted EBITDA is not calculated in accordance with GAAP and should not be considered as an alternative to net income/(loss), operating income or any other performance measures derived in accordance with GAAP or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EBITDA is presented solely as a supplemental disclosure because management believes that it is a useful performance measure that is widely used within the industry in which we operate. In addition, management uses Adjusted EBITDA for reviewing financial results and for budgeting and planning purposes. EBITDA measures are not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison.
 
Safe Harbor Statement
 
This news release contains forward-looking statements, including statements regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events or other statements that are not historical facts. Forward-looking statements in this news release include, without limitation, expectations for growth in India, the impact that the development of the Dairy Biomethane Digester project and the Cellulosic Ethanol Biorefinery project will have on our business, expected margins at the Cellulosic Ethanol Biorefinery project under development, expectations for uses of EB-5 funding and expectations for receipt of additional EB-5 funding.  Words or phrases such as “anticipates,” “may,” “will,” “should,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “showing signs,” “targets,” “will likely result,” “will continue” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on current assumptions and predictions and are subject to numerous risks and uncertainties. Actual results or events could differ materially from those set forth or implied by such forward-looking statements and related assumptions due to certain factors, including, without limitation, competition in the ethanol, biodiesel and other industries in which we operate, commodity market risks including those that may result from current weather conditions, financial market risks, customer adoption, counter-party risks, risks associated with changes to federal policy or regulation, and other risks detailed in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2018, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 and in our subsequent filings with the SEC. We are not obligated, and do not intend, to update any of these forward-looking statements at any time unless an update is required by applicable securities laws.
 
 
(Tables follow)
 
 
 
2
 
 
 
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited, in thousands except per share data)
 
 
 
Three months ended
 
 
 
March 31,
2019
 
 
March 31,
2018
 
 
 
 
 
 
 
 
Revenues
 $41,888 
 $43,018 
Cost of goods sold
  42,239 
  41,152 
Gross profit/(loss)
  (351)
  1,866 
 
    
    
Research and development expenses
  33 
  62 
Selling, general and administrative expenses
  4,241 
  3,807 
 
    
    
Operating loss
  (4,625)
  (2,003)
 
    
    
Other expense/(income)
    
    
Interest rate expense
  4,986 
  4,271 
Amortization expense
  1,223 
  4,757 
Accretion of Series A preferred units
  449 
  - 
Other expense
  (623)
  68 
 
    
    
Loss before income taxes
  (10,660)
  (11,099)
 
    
    
Income tax expense
  7 
  6 
 
    
    
Net loss
 $(10,667)
 $(11,105)
 
    
    
Less: Net loss attributable to non-controlling interest
  (938)
  (737)
Net loss attributable to Aemetis, Inc.
 $(9,729)
 $(10,368)
 
    
    
Net income/(loss) per common share
    
    
Basic
 $(0.48)
 $(0.51)
Diluted
 $(0.48)
 $(0.51)
 
    
    
Weighted average shares outstanding
    
    
Basic
  20,367 
  20,184 
Diluted
  20,367 
  20,184 
 
 
 
3
 
 
AEMETIS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited, in thousands)
 
 
 
March 31,
2019
 
 
December 31,
2018
 
Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $43 
 $1,188 
Accounts receivable
  2,075 
  1,096 
Inventories
  6,322 
  6,129 
Prepaid and other current assets
  1,872 
  1,898 
Total current assets
  10,312 
  10,311 
 
    
    
  Property, plant and equipment, net
  77,994 
  78,492 
Other assets
  4,072 
  3,018 
Total assets
 $92,378 
 $91,821 
 
    
    
Liabilities and stockholders' deficit
    
    
Current liabilities:
    
    
Accounts payable
 $16,195 
 $13,500 
Current portion of long term debt
  4,643 
  2,396 
Short term borrowings
  16,959 
  14,902 
Mandatorily redeemable Series B stock
  3,073 
  3,048 
Accrued property taxes and other liabilities
  9,015 
  8,733 
Total current liabilities
  49,885 
  42,579 
 
    
    
Total long term liabilities
  168,327 
  164,824 
 
    
    
Total stockholders' deficit:
    
    
 
    
    
Series B convertible preferred stock
  1 
  1 
    Common stock
  20 
  20 
    Additional paid-in capital
  86,274 
  85,917 
    Accumulated deficit
  (202,933)
  (193,204)
    Accumulated other comprehensive loss
  (3,518)
  (3,576)
Total stockholders' deficit attributable to Aemetis, Inc.
  (120,156)
  (110,842)
Non-controlling interests
  (5,678)
  (4,740)
Total liabilities and stockholders' deficit
 $92,378 
 $91,821 
 
    
    
 
 
4
 
 
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME/(LOSS)
(unaudited, in thousands)
 
 
 
 
 
Three months ended
 
 
 
March 31,
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Net loss attributable to Aemetis, Inc.
 $(9,729)
 $(10,368)
Adjustments:
    
    
Interest expense
  5,214 
  8,225 
Depreciation expense
  1,138
  1,150 
Accretion of Series A stock
  449 
  - 
Share-based compensation
  290
  286
Intangibles and other amortization expense
  12 
  35 
Income tax expense
  7 
  6 
Total adjustments
  7,110
  9,702
Adjusted EBITDA
 $(2,619)
 $(666)
 
 
PRODUCTION AND PRICE PERFORMANCE
(unaudited)
 
 
Three months ended
March 31,
 
 
 
2019
 
 
2018
 
Ethanol
 
 
 
 
 
 
Gallons sold (in millions)
  16.2 
  16.1 
Average sales price/gallon
 $1.68 
 $1.76 
 
    
    
WDG
    
    
Tons sold (in thousands)
  106.9 
  102.6 
Average sales price/ton
 $80 
 $76 
 
    
    
Delivered Cost of Corn
    
    
Bushels ground (in millions)
  5.6 
  5.6 
Average delivered cost / bushel
 $5.20 
 $4.94 
 
    
    
Biodiesel
    
    
Metric tons sold (in thousands)
  5.2 
  5.3 
Average Sales Price/Metric ton
 $839
 $851 
 
    
    
Refined glycerin
    
    
Metric tons sold (in thousands)
  1.4 
  1.2 
Average Sales Price/Metric ton
 $644 
 $1,120 
 
 
5

The following information was filed by Aemetis, Inc (AMTX) on Thursday, May 9, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
 
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
———————
FORM 10-Q
———————
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2019
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from              to             
Commission File Number: 001-36475
———————
AEMETIS, INC.
 (Exact name of registrant as specified in its charter)
———————
Nevada
26-1407544
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
Identification No.)
20400 Stevens Creek Blvd., Suite 700
Cupertino, CA 95014
 (Address of Principal Executive Offices, including zip code)
(408) 213-0940
 (Registrant’s telephone number, including area code)
 
Title of each class of registered securities
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, $0.001 par value
 
AMTX
 
NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  ☑ No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  Accelerated filer       Non-accelerated filer  Smaller reporting company 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
 
The number of shares outstanding of the registrant’s Common Stock on July 31, 2019 was 20,570,187 shares.
 
 

 
 
 
 
 
AEMETIS, INC.
 
FORM 10-Q
 
Quarterly Period Ended June 30, 2019
 
INDEX
 
 
 
 

 
  
SPECIAL NOTE REGARDING FORWARD—LOOKING STATEMENTS
 
On one or more occasions, we may make forward-looking statements in this Quarterly Report on Form 10-Q, including statements regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events or other statements that are not historical facts. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements regarding management’s plans; trends in market conditions with respect to prices for inputs for our products versus prices for our products; our ability to leverage approved feedstock pathways; our ability to leverage our location and infrastructure; our ability to incorporate lower-cost, non-food advanced biofuels feedstock at the Keyes plant; our ability to adopt value-add by-product processing systems; our ability to expand into alternative markets for biodiesel and its by-products, including continuing to expand our sales into international markets; our ability to maintain and expand strategic relationships with suppliers; our ability to continue to develop new, and to maintain and protect new and existing, intellectual property rights; our ability to adopt, develop and commercialize new technologies; our ability to refinance our senior debt on more commercial terms or at all; our ability to continue to fund operations and our future sources of liquidity and capital resources; our ability to sell additional notes under our EB-5 note program and our expectations regarding the release of funds from escrow under our EB-5 note program; our ability to improve margins; and our ability to raise additional capital. Words or phrases such as “anticipates,” “may,” “will,” “should,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will continue” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on current assumptions and predictions and are subject to numerous risks and uncertainties. Actual results or events could differ materially from those set forth or implied by such forward-looking statements and related assumptions due to certain factors, including, without limitation, the risks set forth under the caption “Risk Factors” below, which are incorporated herein by reference as well as those business risks and factors described elsewhere in this report and in our other filings with the Securities and Exchange Commission (the “SEC”), including without limitation, our most recent Annual Report on Form 10-K.
 
 
 

 
 
PART I - FINANCIAL INFORMATION
 
Item 1 - Financial Statements.
 
AEMETIS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except for par value)
 
 
 
June 30, 2019
 
 
December 31, 2018
 
Assets
 
(unaudited)
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $350 
 $1,188 
Accounts receivable
  3,838 
  1,096 
Inventories
  4,093 
  6,129 
Prepaid expenses
  591 
  942 
Other current assets
  1,355 
  956 
Total current assets
  10,227 
  10,311 
 
    
    
Property, plant and equipment, net
  78,507 
  78,492 
Operating lease right-of-use assets
  894 
  - 
Other assets
  2,707 
  3,018 
Total assets
 $92,335 
 $91,821 
 
    
    
Liabilities and stockholders' deficit
    
    
Current liabilities:
    
    
Accounts payable
 $17,193 
 $13,500 
Current portion of lease liability
  596 
  - 
Current portion of long term debt
  4,805 
  2,396 
Short term borrowings
  16,551 
  14,902 
Mandatorily redeemable Series B convertible preferred stock
  3,098 
  3,048 
Accrued property taxes
  3,909 
  3,337 
Accrued contingent litigation fees
  6,200 
  - 
Other current liabilities
  5,203 
  5,396 
Total current liabilities
  57,555 
  42,579 
Long term liabilities:
    
    
Senior secured notes
  97,998 
  89,884 
EB-5 notes
  35,500 
  36,500 
GAFI secured and revolving notes
  26,222 
  25,461 
Long term subordinated debt
  6,048 
  5,974 
Series A preferred units
  8,175 
  7,005 
Long term lease liability
  348 
  - 
Total long term liabilities
  174,291 
  164,824 
 
    
    
 
    
    
Stockholders' deficit:
    
    
Series B convertible preferred stock, $0.001 par value; 7,235 authorized; 1,323 shares issued and outstanding each period, respectively (aggregate liquidation preference of $3,969 for each period respectively)
  1 
  1 
Common stock, $0.001 par value; 40,000 authorized; 20,375 and 20,345 shares issued and outstanding each period, respectively
  20 
  20 
Additional paid-in capital
  86,470 
  85,917 
Accumulated deficit
  (215,869)
  (193,204)
Accumulated other comprehensive loss
  (3,461)
  (3,576)
Total stockholders' deficit attributable to Aemetis, Inc.
  (132,839)
  (110,842)
Non-controlling interest - GAFI
  (6,672)
  (4,740)
Total stockholders' deficit
  (139,511)
  (115,582)
Total liabilities and stockholders' deficit
 $92,335 
 $91,821 
 
    
    
 
The accompanying notes are an integral part of the financial statements.
 
 
4
 
 
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
(Unaudited, in thousands except for earnings per share)
 
 
 
For the three months ended June 30,
 
 
For the six months ended June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Revenues
 $50,619 
 $45,028 
 $92,507 
 $88,046 
 
    
    
    
    
Cost of goods sold
  47,346 
  42,260 
  89,585 
  83,412 
Gross profit
  3,273 
  2,768 
  2,922 
  4,634 
 
    
    
    
    
Research and development expenses
  90 
  55 
  123 
  117 
Selling, general and administrative expenses
  3,945 
  3,589 
  8,186 
  7,396 
Operating loss
  (762)
  (876)
  (5,387)
  (2,879)
 
    
    
    
    
Other (income) expense:
    
    
    
    
 
    
    
    
    
Interest expense
    
    
    
    
Interest rate expense
  5,190 
  4,432 
  10,176 
  8,703 
Debt related fees and amortization expense
  1,396 
  919 
  2,619 
  5,676 
Accretion of Series A preferred units
  471 
  - 
  920 
  - 
Loss contingency on litigation
  6,200 
  - 
  6,200 
  - 
Other (income) expense
  (89)
  (5)
  (712)
  63 
Loss before income taxes
  (13,930)
  (6,222)
  (24,590)
  (17,321)
 
    
    
    
    
Income tax expense
  - 
  - 
  7 
  6 
 
    
    
    
    
Net loss
 $(13,930)
 $(6,222)
 $(24,597)
 $(17,327)
 
    
    
    
    
Less: Net loss attributable to non-controlling interest
  (994)
  (857)
  (1,932)
  (1,594)
 
    
    
    
    
Net loss attributable to Aemetis, Inc.
 $(12,936)
 $(5,365)
 $(22,665)
 $(15,733)
 
    
    
    
    
Other comprehensive income (loss)
    
    
    
    
Foreign currency translation gain (loss)
  57 
  (394)
  115 
  (544)
Comprehensive loss
 $(13,873)
 $(6,616)
 $(24,482)
 $(17,871)
 
    
    
    
    
 
Net loss per common share attributable to Aemetis, Inc.
 
    
    
    
Basic
 $(0.63)
 $(0.27)
 $(1.11)
 $(0.78)
Diluted
 $(0.63)
 $(0.27)
 $(1.11)
 $(0.78)
 
    
    
    
    
Weighted average shares outstanding
    
    
    
    
Basic
  20,375 
  20,223 
  20,371 
  20,203 
Diluted
  20,375 
  20,223 
  20,371 
  20,203 
 
The accompanying notes are an integral part of the financial statements.
 
 
5
 

AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited, in thousands)
 
 
 
For the six months ended June 30,
 
 
 
2019
 
 
2018
 
Operating activities:
 
 
 
 
 
 
Net loss
 $(24,597)
 $(17,327)
Adjustments to reconcile net loss to net cash used in operating activities:
    
    
Share-based compensation
  486 
  581 
Stock issued for services
  - 
  22 
Depreciation
  2,234 
  2,299 
Debt related fees and amortization expense
  2,619 
  5,676 
Intangibles and other amortization expense
  24 
  70 
Accretion of Sereis A preferred units
  920 
  - 
Change in fair value of SARs
  60 
  - 
Changes in operating assets and liabilities:
    
    
Accounts receivable
  (2,708)
  579 
Inventories
  2,042 
  (1,264)
Prepaid expenses
  351 
  1,053 
Other assets
  561 
  (134)
Accounts payable
  2,704 
  2,128 
Accrued interest expense and fees
  8,301 
  5,457 
Other liabilities
  5,772 
  (745)
Net cash used in operating activities
  (1,231)
  (1,605)
 
    
    
Investing activities:
    
    
Capital expenditures
  (1,038)
  (1,771)
 
    
    
Net cash used in investing activities
  (1,038)
  (1,771)
 
    
    
Financing activities:
    
    
Proceeds from borrowings
  15,716 
  12,415 
Repayments of borrowings
  (13,901)
  (8,381)
GAFI proceeds from borrowings
  24 
  - 
GAFI repayments of borrowings
  (164)
  - 
GAFI renewal fee payment
  (500)
  - 
Proceeds from Series A preferred units financing
  250 
  - 
Net cash provided by financing activities
  1,425 
  4,034 
 
    
    
Effect of exchange rate changes on cash and cash equivalents
  6 
  (17)
Net change in cash and cash equivalents for period
  (838)
  641 
Cash and cash equivalents at beginning of period
  1,188 
  428 
Cash and cash equivalents at end of period
 $350 
 $1,069 
 
    
    
Supplemental disclosures of cash flow information, cash paid:
    
    
Cash paid for interest, net of capitalized interest of $147 and $0 for the six months ended June 30, 2019 and 2018, respectively
 $1,699 
 $3,213 
Income taxes paid
  - 
  6 
Supplemental disclosures of cash flow information, non-cash transactions:
    
    
Subordinated debt extension fees added to debt
  340 
  340 
Fair value of warrants issued to subordinated debt holders
  67 
  65 
TEC debt extension, waiver fees, promissory notes fees added to debt
  1,102 
  4,005 
Capital expenditures in accounts payable
  1,882 
  - 
Operating lease laibilities arising from obtaining right-of-use assets
  1,181 
  - 
 
The accompanying notes are an integral part of the financial statements.
 
 
6
 
 
 
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in thousands)
 
 For the three and six months ended June 30, 2019
 
 
  Series B Preferred Stock  
 
 
  Common Stock  
 
 
 
 
 
 
 
 

 
 

 
 

 
Description
 
  Shares
 
 
  Dollars
 
 
  Shares
 
 
  Dollars
 
 
Additional  Paid-in Capital
 
 
Accumulated  Deficit
 
 
Accumulated Other  Comprehensive  Income/(Loss)
 
 
Noncontrolling  Interest
 
 
Total Stockholders' deficit
 
Balance at December 31, 2018
  1,323 
 $1 
  20,345 
 $20 
 $85,917 
 $(193,204)
 $(3,576)
 $(4,740)
  (115,582)
 
    
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  - 
  - 
  290 
  - 
  - 
  - 
  290 
Issuance and exercise of warrants
  - 
  - 
  30 
  - 
  67 
  - 
  - 
  - 
  67 
Foreign currency translation gain
  - 
  - 
  - 
  - 
  - 
  - 
  58 
  - 
  58 
Net loss
  - 
  - 
  - 
  - 
  - 
  (9,729)
  - 
  (938)
  (10,667)
 
    
    
    
    
    
    
    
    
    
Balance at March 31, 2019
  1,323 
 $1 
  20,375 
 $20 
 $86,274 
 $(202,933)
 $(3,518)
 $(5,678)
 $(125,834)
 
    
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  - 
  - 
  196 
  - 
  - 
  - 
  196 
Foreign currency translation gain
  - 
  - 
  - 
  - 
  - 
  - 
  57 
  - 
  57 
Net loss
  - 
  - 
  - 
  - 
  - 
  (12,936)
  - 
  (994)
  (13,930)
 
    
    
    
    
    
    
    
    
    
Balance at June 30, 2019
  1,323 
 $1 
  20,375 
 $20 
 $86,470 
 $(215,869)
 $(3,461)
 $(6,672)
 $(139,511)
 
 
For the three and six months ended June 30, 2018
 
 
Series B Preferred Stock  
 
 
Common Stock 
 
 

 
 

 
 

 


Description 
Shares 
Dollars
Shares 
Dollars 
 
Additional
Paid-in Capital
 Accumulated
Deficit 
 Comprehensive
Income/(Loss) 
 
Noncontrolling
Interes
 
Total Stockholders'
deficit
Balance at December 31, 2017
  1,323 
 $1 
  20,088 
 $20 
 $84,679 
 $(160,188)
 $(2,904)
 $(1,469)
  (79,861)
Options exercised
  - 
  - 
  2 
  - 
  - 
  - 
  - 
  - 
  - 
Stock-based compensation
  - 
  - 
  - 
  - 
  264 
  - 
  - 
  - 
  264 
Issuance and exercise of warrants
  - 
  - 
  113 
  - 
  65 
  - 
  - 
  - 
  65 
Shares issued to consultants and other services
  - 
  - 
  20 
  - 
  22 
  - 
  - 
  - 
  22 
Foreign currency translation loss
  - 
  - 
  - 
  - 
  - 
  - 
  (150)
  - 
  (150)
Net loss
  - 
  - 
  - 
  - 
  - 
  (10,368)
  - 
  (737)
  (11,105)
 
    
    
    
    
    
    
    
    
    
Balance at March 31, 2018
  1,323 
 $1 
  20,223 
 $20 
 $85,030 
 $(170,556)
 $(3,054)
 $(2,206)
 $(90,765)
 
  - 
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  - 
  - 
  317 
  - 
  - 
  - 
  317 
Foreign currency translation loss
  - 
  - 
  - 
  - 
  - 
  - 
  (394)
  - 
  (394)
Net loss
  - 
  - 
  - 
  - 
  - 
  (5,365)
  - 
  (857)
  (6,222)
 
    
    
    
    
    
    
    
    
    
Balance at June 30, 2018
  1,323 
 $1 
  20,223 
 $20 
 $85,347 
 $(175,921)
 $(3,448)
 $(3,063)
 $(97,064)
 
    
    
    
    
    
    
    
    
    
 
7
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
1.          
Nature of Activities and Summary of Significant Accounting Policies
 
Nature of Activities. Headquartered in Cupertino, California, Aemetis is an advanced renewable fuels and biochemicals company focused on the acquisition, development and commercialization of innovative technologies that replace traditional petroleum-based products through the conversion of second-generation ethanol and biodiesel plants into advanced biorefineries.  Founded in 2006, we own and operate a 60 million gallon per year ethanol facility (“Keyes Plant”) in the California Central Valley near Modesto where we manufacture and produce ethanol, wet distillers’ grains (“WDG”), condensed distillers solubles (“CDS”), and distillers’ corn oil (“DCO”). We also own and operate a 50 million gallon per year renewable chemical and advanced fuel production facility (“Kakinada Plant”) on the East Coast of India producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. We operate a research and development laboratory to develop efficient conversion technologies using waste feedstocks to produce biofuels and biochemicals. Additionally, we have the option to own a partially completed plant in Goodland, Kansas (the “Goodland Plant”) through a variable interest entity (VIE) Goodland Advanced Fuels, Inc., (GAFI), which was formed to acquire the Goodland Plant. Upon exercise of the option, we plan to deploy a cellulosic ethanol technology to the Goodland Plant.
 
We also lease a site in Riverbank, California, near the Keyes Plant, where we plan to utilize biomass-to-fuel technology that we have licensed from LanzaTech Technology (“LanzaTech”) and InEnTec Technology (“InEnTec”) to build a cellulosic ethanol production facility (the “Riverbank Cellulosic Ethanol Facility”) capable of converting local California surplus biomass – principally agricultural waste – into ultra-low carbon renewable cellulosic ethanol. By producing ultra-low carbon renewable cellulosic ethanol, we expect to capture higher value D3 cellulosic renewable identification numbers (RINs) and California’s Low Carbon Fuel Standard (“LCFS”) credits.
 
In December 2018, we acquired a 5.2-acre parcel of land for the construction of a facility by Linde LLC industrial gas company to sell CO2 produced at the Keyes Plant, which will add incremental income for the North America segment.
 
During 2018, Aemetis Biogas LLC (“ABGL”) was formed to construct bio methane digesters at local dairies near the Keyes Plant, many of whom are already customers of the distillers’ grain produced by the Keyes Plant. The digesters are connected by pipeline to a gas cleanup and compression facility to produce Renewable Natural Gas (“RNG”). ABGL currently has 13 signed participation agreements and three fully executed leases with nearby dairies at the Keyes Plant in order to capture their methane, which would otherwise be released into the atmosphere, primarily from their wastewater lagoons. We plan to capture biogas from multiple dairies and pipe the gas to a centralized location at our Keyes Plant where we will clean the biogas into bio-methane. The bio-methane can be used in our Keyes Plant to displace petroleum natural gas, or can be sold at retail to trucking companies or injected into the utility natural gas pipeline to be utilized in the transportation sector to displace diesel in trucks.
 
Basis of Presentation and Consolidation. These consolidated financial statements include the accounts of Aemetis, Inc., a Nevada corporation, and its wholly owned subsidiaries (collectively, Aemetis or the Company). Additionally, we consolidate all entities in which we have a controlling financial interest either directly or by option to acquire the interest. A controlling financial interest is usually obtained through ownership of a majority of the voting interests. An enterprise must consolidate a variable interest entity (VIE) if the enterprise is the primary beneficiary of the VIE, even if the enterprise does not own a majority of the voting interests. The primary beneficiary is the party that has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
 
 
8
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
The accompanying consolidated condensed balance sheet as of June 30, 2019, the consolidated condensed statements of operations and comprehensive loss for the three and six months ended June 30, 2019 and 2018, the consolidated condensed statements of cash flows for the six months ended June 30, 2019 and 2018, and the consolidated condensed statements of stockholders’ deficit for the three and six months ended June 30, 2019 and 2018 are unaudited. The consolidated condensed balance sheet as of December 31, 2018 was derived from the 2018 audited consolidated financial statements and notes thereto. The consolidated condensed financial statements in this report should be read in conjunction with the 2018 audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2018. The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and pursuant to the rules and regulations of the SEC. Certain information, footnotes, and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
 
In the opinion of management, the unaudited interim consolidated condensed financial statements for the three and six months ended June 30, 2019 and 2018 have been prepared on the same basis as the audited consolidated statements as of December 31, 2018 and reflect all adjustments, consisting primarily of normal recurring adjustments, necessary for the fair presentation of its statement of financial position, results of operations, statement of cash flows, and statement of stockholders’ deficit. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year or any future periods.
 
Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, revenues, and expenses during the reporting period. To the extent there are material differences between these estimates and actual results, the Company’s consolidated financial statements will be affected.
 
Revenue Recognition. We derive revenue primarily from sales of ethanol and related co-products in North America, and biodiesel and refined glycerin in India based on the supply agreements and purchase order contracts. We assessed the following criteria under the ASC 606 guidance: (i) identify the contracts with customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when the entity satisfies the performance obligations.
 
We have elected to adopt the practical expedient that allows for ignoring the significant financing component of a contract when estimating the transaction price when the transfer of promised goods to the customer and customer payment for such goods are expected to be within one year of contract inception. Further, we have elected to adopt the practical expedient in which incremental costs of obtaining a contract are expensed when the amortization period would otherwise be less than one year.
 
North America
 
In North America, we sell the majority of our production to one customer under a supply contract, with individual sales transactions occurring under this contract. Given the similarity of these transactions, we have assessed them as a portfolio of similar contracts. The performance obligation is satisfied by delivery of the physical product to the tank of J.D. Heiskell or to one of their contracted trucking companies. At this point in time, the customer has the ability to direct the use of the product and receive substantially all of its benefits. The transaction price is determined based on daily market prices negotiated by Kinergy for ethanol and by A.L. Gilbert on WDG and DCO. There is no transaction price allocation needed.
 
 
 
9
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
The below table shows our sales in North America by product category:
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 For the three months ended June 30,
 
 
 For the six months ended June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Ethanol sales
 $29,808 
 $30,129 
 $56,997 
 $58,341 
Wet distiller's grains sales
  8,733 
  8,499 
  17,336 
  16,327 
Other sales
  945 
  1,000 
  1,789 
  2,136 
 
 $39,486 
 $39,628 
 $76,122 
 $76,804 
  
We also assessed principal versus agent criteria as we buy our feedstock from our customers and process and sell finished goods to those customers in some contractual agreements.
 
In North America, we buy corn as feedstock in producing ethanol from our working capital partner J.D. Heiskell and we sell all ethanol, WDG, and corn oil produced in this process to J.D. Heiskell. Our finished goods tank is leased by J.D. Heiskell and they require us to transfer legal title to the product upon transfer of our finished ethanol to this location. We consider the purchase of corn as a cost of goods sold and the sale of ethanol upon transfer to the finished goods tank as revenue on the basis that (i) we control and bear the risk of gain or loss on the processing of corn which is purchased at market prices into ethanol and (ii) we have legal title to the goods during the processing time. The pricing for both corn and ethanol is set independently. Revenues from sales of ethanol and its co-products are billed net of the related transportation and marketing charges. The transportation component is accounted for in cost of goods sold and the marketing component is accounted for in sales, general and administrative expense. Transportation and marketing charges are known within days of the transaction and are recorded at the actual amounts. The Company has elected an accounting policy under which these charges have been treated as fulfillment activities provided after control has transferred. As a result, these charges are recognized in cost of goods sold and selling, general and administrative expenses, respectively, when revenue is recognized. Revenues are recorded at the gross invoiced amount. Hence, we are the principal in North America sales scenarios where our customer and vendor may be the same.
 
We have a contract liability of $0.6 million as of June 30, 2019, in connection with a contract with a customer to sell LCFS credits produced from January 1, 2019 to March 31, 2019. However, the credits were not transferred to the customer until July 2, 2019 while we received cash in advance.
 
 
10
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
India
 
In India where we sell products on purchase orders (written or verbal) or by contract with governmental or international parties, the performance obligation is satisfied by delivery and acceptance of the physical product. Given that the contracts are sufficiently similar in nature, we have assessed these contracts as a portfolio of similar contracts as allowed under the practical expedient. Doing so does not result in a materially different outcome compared to individually accounting for each contract. All domestic and international deliveries are subject to certain specifications as identified in contracts. The transaction price is determined based on reference market prices for biodiesel and refined glycerin every day net of taxes. There is no transaction price allocation needed.
 
The below table shows our sales in India by product category:
 
 
 
 For the three months
ended June 30,
 
 
 For the six months
ended June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Biodiesel sales
 $10,797 
 $3,841 
 $15,144 
 $8,342 
Refined Glycerin sales
  336 
  1,559 
  1,235 
  2,900 
Other sales
  - 
  - 
  6 
  - 
 
 $11,133 
 $5,400 
 $16,385 
 $11,242 
 
We also assessed principal versus agent criteria as we buy our feedstock from our customers and process and sell finished goods to those customers in some contractual agreements.
 
In India, we occasionally enter into contracts where we purchase feedstock from the customer, process the feedstock into biodiesel, and sell to the same customer. In those cases, we receive the legal title to feedstock from our customers once it is on our premises. We control the processing and production of biodiesel based on contract terms and specifications. The pricing for both feedstock and biodiesel is set independently. We hold the title and risk to biodiesel according to agreements we enter into in these situations. Hence, we are the principal in India sales scenarios where our customer and vendor may be the same.
 
Cost of Goods Sold. Cost of goods sold includes those costs directly associated with the production of revenues, such as raw material consumed, factory overhead and other direct production costs. During periods of idle plant capacity, costs otherwise charged to cost of goods sold are reclassified to selling, general and administrative expense.
 
Accounts Receivable. The Company sells ethanol, WDG, CDS, and DCO through third-party marketing arrangements generally without requiring collateral. The Company sells biodiesel, glycerin, and processed natural oils to a variety of customers and may require advanced payment based on the size and creditworthiness of the customer. Usually, invoices are due within 30 days on net terms. Accounts receivables consist of product sales made to large creditworthy customers. Trade accounts receivable are presented at original invoice amount, net of any allowance for doubtful accounts.
 
 
11
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
The Company maintains an allowance for doubtful accounts for balances that appear to have specific collection issues. The collection process is based on the age of the invoice and it requires attempted contacts with the customer at specified intervals. If, after a specified number of days, the Company has been unsuccessful in its collection efforts, a bad debt allowance is recorded for the balance in question. Delinquent accounts receivable are charged against the allowance for doubtful accounts once un-collectability has been determined. The factors considered in reaching this determination are the apparent financial condition of the customer and the Company’s success in contacting and negotiating with the customer. If the financial condition of the Company’s customers were to deteriorate, additional allowances may be required. We did not reserve any balance for allowances for doubtful accounts as of June 30, 2019 and December 31, 2018.
 
Inventories. Finished goods, raw materials, and work-in-process inventories are valued at the lower of cost (first-in, first-out) or net realizable value (NRV). Distillers’ grains and related products are stated at NRV. In the valuation of inventories, NRV is determined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
 
Property, Plant and Equipment. Property, plant and equipment are carried at cost less accumulated depreciation after assets are placed in service and are comprised primarily of buildings, furniture, machinery, equipment, land, the Keyes Plant, Goodland Plant and Kakinada Plant. The Goodland Plant is partially completed and is not ready for operation; hence, we are not depreciating these assets yet. Otherwise, it is the Company’s policy to depreciate capital assets over their estimated useful lives using the straight-line method.
 
The Company evaluates the recoverability of long-lived assets with finite lives in accordance with ASC Subtopic 360-10-35 Property Plant and Equipment – Subsequent Measurements, which requires recognition of impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable, based on estimated undiscounted cash flows, the impairment loss would be measured as the difference between the carrying amount of the assets and its estimated fair value.
 
California Energy Commission Technology Demonstration Grant. The Company has been awarded an $825 thousand matching grant from the California Energy Commission (“CEC”) Natural Resources Agency to optimize and demonstrate the effectiveness of technologies to break down biomass to produce cellulosic ethanol. The Company will receive the grant proceeds as a subcontractor to the Lawrence Berkeley National Laboratory. The project will focus on the deconstruction and conversion of sugars liberated from California-relevant feedstocks and then converting the sugars to ethanol. The Company receives these funds as reimbursement for actual expenses incurred. Due to the uncertainty associated with the expense approval process under the grant program, the Company recognizes the grant as a reduction of the expenses in the period when approval is received.
 
California Department of Food and Agriculture Dairy Digester Research and Development Grant. The Company has been awarded $3.2 million in matching grants from the California Department of Food and Agriculture (“CDFA”) Dairy Digester Research and Development program. The CDFA grant reimburses the Company for expenses required to permit and construct two of the Company’s biogas capture systems under contract with central California dairies. The Company receives these funds as reimbursement for actual expenses incurred. Due to the uncertainty associated with the expense approval process under the grant program, the Company recognizes the grant as a reduction of the expenses in the period when approval is received.
 
 
12
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
Basic and Diluted Net Loss per Share. Basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share reflects the dilution of common stock equivalents such as options, convertible preferred stock, debt, and warrants to the extent the impact is dilutive. As the Company incurred net losses for the three and six months ended June 30, 2019 and 2018, potentially dilutive securities have been excluded from the diluted net loss per share computations as their effect would be anti-dilutive. The following table shows the number of potentially dilutive shares excluded from the diluted net loss per share calculation as of June 30, 2019 and 2018:
 
 
 
As of
 
 
 
June 30, 2019
 
 
June 30, 2018
 
 
 
 
 
 
 
 
Series B preferred (post split basis)
  132 
  132 
Common stock options and warrants
  3,994 
  3,206 
Debt with conversion feature at $30 per share of common stock
  1,247 
  1,222 
SARs conversion if stock issued at $1.02 per share to cover $2.1 million
  2,062 
  - 
Total number of potentially dilutive shares excluded from the diluted net loss per share calculation
  7,435 
  4,560 
 
    
    
 
Comprehensive Loss. ASC 220 Comprehensive Income requires that an enterprise report, by major components and as a single total, the change in its net assets from non-owner sources. The Company’s other comprehensive income (loss) and accumulated other comprehensive loss consists solely of cumulative currency translation adjustments resulting from the translation of the financial statements of its foreign subsidiary.
 
Foreign Currency Translation/Transactions. Assets and liabilities of the Company’s non-U.S. subsidiary operate in a local currency environment, where that local currency is the functional currency, and is translated into U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at average exchange rates. Gains and losses from other foreign currency transactions are recorded in other income (expense).
 
Operating Segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Aemetis recognized two reportable geographic segments: “North America” and “India.”
 
The “North America” operating segment includes the Company’s 60 million gallons per year capacity Keyes Plant in California, the cellulosic ethanol facility in Riverbank, the cluster of biogas digesters on dairies near the Keyes Plant, the Goodland Plant in Kansas and the research and development facility in Minnesota.
 
 
13
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
The “India” operating segment encompasses the Company’s 50 million gallon per year capacity Kakinada Plant in India, the administrative offices in Hyderabad, India, and the holding companies in Nevada and Mauritius.
 
Fair Value of Financial Instruments. Financial instruments include accounts receivable, accounts payable, accrued liabilities, current and non-current portion of subordinated debt, SARs liability, notes payable, and long term debt.  Due to the unique terms of our notes payable and long term debt and the financial condition of the Company, the fair value of the debt is not readily determinable. The fair value of all other current financial instruments is estimated using level 3 inputs to approximate carrying value due to the short-term nature of these instruments.
 
Share-Based Compensation. The Company recognizes share-based compensation expense in accordance with ASC 718 Stock Compensation requiring the Company to recognize expenses of the estimated fair value of the Company’s share-based compensation awards calculated at the grant date over the vesting period, adjusted to reflect only those shares that are expected to vest.
 
Leases. In February 2016, the FASB issued guidance that amended the existing accounting standards for leases. Consistent with existing guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification. Under the new guidance, a lessee is required to recognize right-of-use assets and lease liabilities on the balance sheet. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new guidance was effective for us beginning January 1, 2019, and for interim periods within that year. We were required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. On July 30, 2018, the FASB issued ASU 2018-11 amendments to ASC 842, which included the optional transition relief approach in which entities may elect not to recast the comparative periods presented when transitioning to ASC 842 and lessors may not select to separate lease and non-lease components when certain conditions are met.
 
We assessed all leases, equipment rentals, and supply agreements under this guidance. We adopted the standard as of January 1, 2019 using the optional transition relief approach. We elected the practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carryforward the historical lease classification. We made an accounting policy election to keep leases with a term of 12 months or less off of the balance sheet. We recognized those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term. Please refer to Note 7 for additional information regarding the Company’s adoption of ASC 842 and outstanding leases.
 
Commitments and Contingencies. The Company records and/or discloses commitments and contingencies in accordance with ASC 450 Contingencies. ASC 450 applies to an existing condition, situation or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.
 
The Company entered into a payment plan with Stanislaus County for unpaid property taxes on June 28, 2018 by paying $1.5 million as a first payment. Under the annual payment plan, the Company is 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. This payment was not made on April 10, 2019. The full tax amount is now due and the property is subject to a process that ranges from the collection of all past due taxes to the potential sale of the asset. As of June 30, 2019, the balance in property tax accrual was $3.9 million.
 
 
 
14
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
The Company has pending litigation with EdenIQ, Inc. (“EdenIQ”) related to wrongful termination of a merger agreement, filed in Santa Clara County Superior Court.   The Company and EdenIQ filed motions for attorney’s fees and costs. On July 24, 2019, the court granted $6.2 million of attorney’s fees and costs to EdenIQ. The Company has assessed this matter in accordance with ASC 855 as subsequent event type 1. As a result, a $6.2 million loss on contingency was recorded within the Company’s consolidated financial statements as of June 30, 2019.
 
Debt Modification Accounting. The Company evaluates amendments to its debt in accordance with ASC 470-50 Debt – Modification and Extinguishments for modification and extinguishment accounting. This evaluation includes comparing the net present value of cash flows of the new debt to the old debt to determine if changes greater than 10 percent occurred. In instances where the net present value of future cash flows changed more than 10 percent, the Company applies extinguishment accounting and determines the fair value of its debt based on factors available to the Company.
 
Convertible Instruments. The Company evaluates the impacts of convertible instruments based on the underlying conversion features. Convertible instruments are evaluated for treatment as derivatives that could be bifurcated and recorded separately. Any beneficial conversion feature is recorded based on the intrinsic value difference at the commitment date.
 
Recently Issued Accounting Pronouncements.
 
For a complete summary of the Company’s significant accounting policies, please refer to the Company’s audited financial statements and notes thereto for the years ended December 31, 2018 and 2017, filed with the Securities and Exchange Commission on March 15, 2019. There were no new accounting pronouncements issued applicable to the Company during the six months ended June 30, 2019.
 
2.            
Inventories
 
Inventories consist of the following:
 
 
 
June 30, 2019
 
 
December 31, 2018
 
Raw materials
 $1,405 
 $3,647 
Work-in-progress
  1,599 
  1,327 
Finished goods
  1,089 
  1,155 
Total inventories
 $4,093 
 $6,129 
 
As of June 30, 2019 and December 31, 2018, the Company recognized a lower of cost or net realizable value impairment of $38 thousand and $0.2 million respectively, related to inventory.
 
 
15
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
3.          
Property, Plant and Equipment
 
Property, plant and equipment consist of the following:
 
 
 
June 30, 2019
 
 
December 31, 2018
 
Land
 $4,121 
 $4,116 
Plant and buildings
  83,126 
  82,445 
Furniture and fixtures
  1,063 
  1,056 
Machinery and equipment
  4,227 
  3,928 
Construction in progress
  4,889 
  3,581 
GAFI property, plant & equipment
  15,408 
  15,408 
Total gross property, plant & equipment
  112,834 
  110,534 
Less accumulated depreciation
  (34,327)
  (32,042)
Total net property, plant & equipment
 $78,507 
 $78,492 
 
    
    
 
During the six months ended June 30, 2019 and for the year ended December 31, 2018, interest capitalized in property, plant, and equipment was $147 thousand and $135 thousand, respectively.
 
Depreciation on the components of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:
 
 
 
Years
 
Plant and Buildings
  20-30 
Machinery & Equipment
  5-7 
Furniture & Fixtures
  3-5 
 
For the three months ended June 30, 2019 and 2018, the Company recorded depreciation expense of $1.1 million for each period. For the six months ended June 30, 2019 and 2018, the Company recorded depreciation expense of $2.2 million and $2.3 million respectively.
 
Management is required to evaluate these long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Management determined there was no impairment on the long-lived assets during the three and six months ended June 30, 2019 and 2018.
 
 
16
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
  
4.          
Debt
 
Debt consists of the notes from our senior lender, Third Eye Capital, other working capital lenders and subordinated lenders as follows:

 
 
June 30, 2019
 
 
December 31, 2018
 
Third Eye Capital term notes
 $7,022 
 $7,024 
Third Eye Capital revolving credit facility
  54,702 
  47,225 
Third Eye Capital revenue participation term notes
  11,792 
  11,794 
Third Eye Capital acquisition term notes
  24,482 
  23,841 
Third Eye Capital promissory note
  2,156 
  - 
Cilion shareholder seller notes payable
  6,048 
  5,974 
Subordinated notes
  10,779 
  10,080 
EB-5 promissory notes
  39,944 
  38,536 
Unsecured working capital loans
  3,616 
  4,822 
GAFI Term and Revolving loans
  26,583 
  25,821 
Total debt
  187,124 
  175,117 
Less current portion of debt
  21,356 
  17,298 
Total long term debt
 $165,768 
 $157,819 
 
    
    

On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (“AAFK”), entered into an Amended and Restated Note Purchase Agreement with Third Eye Capital (the “Note Purchase Agreement”). Pursuant to the Note Purchase Agreement, Third Eye Capital extended credit in the form of (i) senior secured term loans in an aggregate principal amount of approximately $7.2 million to replace existing notes held by Third Eye Capital (the “Term Notes”); (ii) senior secured revolving loans in an aggregate principal amount of $18.0 million (the “Revolving Credit Facility”); (iii) senior secured term loans in the principal amount of $10.0 million to convert the prior revenue participation agreement to a note (the “Revenue Participation Term Notes”); and (iv) senior secured term loans in an aggregate principal amount of $15.0 million (the “Acquisition Term Notes”) used to fund the cash portion of the acquisition of Cilion, Inc. (the Term Notes, Revolving Credit Facility, Revenue Participation Term Notes and Acquisition Term Notes are referred to herein collectively as the “Original Third Eye Capital Notes”).
 
On March 27, 2018, Third Eye Capital agreed to Limited Waiver and Amendment No. 14 to the Note Purchase Agreement, or Amendment No. 14, to: (i) extend the maturity date of the Third Eye Capital Notes by two years to April 1, 2020 in exchange for an amendment fee consisting of 6% (3% per year) of the outstanding note balance in the form of an increase in the fee payable in the event of a redemption of the Third Eye Capital Notes (as defined in the Note Purchase Agreement); (ii) provide that the maturity date may be further extended at our election to April 1, 2021 in exchange for an extension fee of 5%; (iii) provide for an optional waiver of the ratio of note indebtedness covenant until January 1, 2019 with the payment of a waiver fee of $0.25 million; and (iv) remove the redemption fee described in (i) above from the calculation of the ratio of note indebtedness covenant. In addition to the fee discussed in (i), as consideration for such amendment and waiver, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.5 million to be added to the outstanding principal balance of the Revolving Credit Facility.
 
 
17
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
We evaluated Amendment No. 14 in accordance with ASC 470-60 Troubled Debt Restructuring. According to guidance, we considered Amendment No. 14 to be a troubled debt restructuring. We assessed all the terms to confirm if there is a concession granted by the creditor. The maturity date of the Third Eye Capital Notes was extended to April 1, 2020 for a 6% fee, which was lower on an annual basis than the extension fee of 5% provided by Amendment No. 13 for a one-year extension. No interest is accrued on these fees and there were no other settlements in Amendment No. 14 on these Notes. In order to assess whether the creditor granted a concession, we calculated the post-restructuring effective interest rate by projecting cash flows on the new terms and solved for a discount rate equal to the carrying amount of pre-restructuring of debt, and by comparing this calculation to the terms of Amendment No. 13, we determined that Third Eye Capital provided a concession in accordance with the provisions of ASC 470-60 Troubled Debt Restructuring and thus applied troubled debt restructuring accounting. The extension fee, due at maturity, was discounted at the effective interest rate of the Third Eye Capital Notes, and an immediate charge was taken to recognize the fees into amortization expense on the income statement related to the trouble debt restructuring of $3.1 million and amendment fees of $0.5 million. Using the effective interest method of amortization, the remaining extension fee of $1.4 million will be amortized over the stated remaining life of the Third Eye Capital Notes.
 
On March 27, 2018, Third Eye Capital also agreed to a one-year reserve liquidity facility governed by a promissory note, payable in the principal amount of up to $6 million. Borrowings under the facility are available from March 27, 2018 until maturity on April 1, 2019. Interest on borrowed amounts accrues at a rate of 30% per annum, paid monthly in arrears, or 40% if an event of default has occurred and continues. The outstanding principal balance of the indebtedness evidenced by the promissory note, plus any accrued but unpaid interest and any other sums due thereunder, shall be due and payable in full at the earlier to occur of (a) the closing of any new debt or equity financing, refinancing or other similar transaction between Third Eye Capital or any fund or entity arranged by them and the Company or its affiliates, (b) receipt by the Company or its affiliates of proceeds from any sale, merger, equity or debt financing, refinancing or other similar transaction from any third party and (c) April 1, 2019. The promissory note is secured by liens and security interests upon the property and assets of the Company. If any amounts are drawn under the facility, the Company will pay a non-refundable fee in the amount of $200 thousand payable from the proceeds of the first drawing under the facility. We did not draw any amounts under the facility and no balance was outstanding as of December 31, 2018 under this facility. On March 11, 2019, Third Eye Capital agreed to increase the amount available under the reserve liquidity facility up to $8.0 million and extend the maturity date to April 1, 2020 with the same terms as above.
 
Based on the terms of Amendment No. 14, the Company intends to extend the maturity to April 1, 2021 for a fee of 5% on the outstanding debt which can be paid or added to the outstanding balance of the revolving notes.
 
On March 11, 2019, Third Eye Capital agreed to Limited Waiver and Amendment No. 15 to the Note Purchase Agreement (“Amendment No. 15”), to waive the ratio of note indebtedness covenant until January 1, 2020. As a consideration for this amendment, the Company also agreed to pay Third Eye Capital an amendment fee of $1.0 million to be added to the redemption fee which is due upon redemption of the Notes.
 
 
18
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 

Based on the Amendment No. 15, the ratio of note indebtedness covenant is waived for the quarters ended March 31, 2019, June 30, 2019, September 30, 2019 and December 31, 2019. According to ASC 470-10-45 debt covenant classification guidance, if it is probable that the Company will not be able to cure the default at measurement dates within the next 12 months, the related debt needs to be classified as current. As the Amendment No. 15 waived the ratio of the note indebtedness covenant over the next two quarters, we needed to assess if the Company can meet this covenant for the quarters ended March 31, 2020 and June 30, 2020. To assess this guidance, the Company performed ratio and cash flow analysis using the forecast and debt levels. The Company will need approximately $42.4 million of cash flows from operations and other forms of subordinated debt over the next 12 months to reduce debt to levels that allow for compliance with Third Eye Capital financial covenants and to meet operations of the Company. Based on this analysis, the Company believes that it is reasonably possible that through a combination of cash flow from operations, new projects that provide additional liquidity, and obtaining other low cost subordinated debt, it will be able to meet the ratio of the note indebtedness covenant over the next 12 months, hence the notes are classified as long term debt.
 
On February 27, 2019, a Promissory Note (the “February 2019 Note”, together with the Original Third Eye Capital Notes, the Third Eye Capital Notes) for $2.1 million was advanced by Third Eye Capital to Aemetis, Inc., as a short-term credit facility for working capital and other general corporate purposes with an interest rate of 14% per annum maturing on the earlier of (a) receipt of proceeds from any financing, refinancing, or other similar transaction, (b) extension of credit by payee, as lender or as agent on behalf of certain lenders, to the Company or its affiliates, or (c) April 30, 2019. In consideration of the February 2019 Note, $0.1 million of the total proceeds were paid to Third Eye Capital as financing charges. On April 30, 2019, the February 2019 Note was modified to remove the stated maturity date and instead will be due on demand by Third Eye Capital. As of June 30, 2019, the outstanding balance of principal and interest on the February 2019 note was $2.2 million.
 
Terms of Third Eye Capital Notes
 
A. 
Term Notes. As of June 30, 2019, the Company had $7.0 million in principal and interest outstanding under the Term Notes. The Term Notes accrue interest at 14% per annum and mature on April 1, 2020*.
 
B 
Revolving Credit Facility. The Revolving Credit Facility accrues interest at the prime rate plus 13.75% (19.25% as of June 30, 2019), payable monthly in arrears. The Revolving Credit Facility matures on April 1, 2020*. As of June 30, 2019, AAFK had $54.7 million in principal and interest and waiver fees outstanding under the Revolving Credit Facility net of $0.3 million unamortized discount issuance costs.
 
C. 
Revenue Participation Term Notes. The Revenue Participation Term Note bears interest at 5% per annum and matures on April 1, 2020*. As of June 30, 2019, AAFK had $11.8 million in principal and interest outstanding on the Revenue Participation Term Notes.
 
D. 
Acquisition Term Notes. The Acquisition Term Notes accrue interest at the prime rate plus 10.75% (16.25% per annum as of June 30, 2019) and mature on April 1, 2020*. As of June 30, 2019, Aemetis Facility Keyes, Inc. had $24.5 million in principal and interest and redemption fees outstanding net of unamortized discount issuances costs of $1.3 million. The outstanding principal balance includes a total of $7.0 million in redemption fees, including $4.5 million which was added to the Acquisition Term Notes on March 27, 2018 as part of Amendment No. 14 and $1.0 million covenant waiver fees as part of Amendment No. 15.
 
E. 
Reserve Liquidity Notes. The Reserve Liquidity Notes, with available borrowing capacity in the amount of $8.0 million, accrue interest at the rate of 30% per annum and are due and payable upon the earlier of: i) the closing of new debt or equity financings, ii) receipt from any sale, merger, debt or equity financing, or iii) April 1, 2020*. We have no borrowings outstanding under the Reserve Liquidity Notes as of June 30, 2019.
 
 
19
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
The Third Eye Capital Notes contain various covenants, including but not limited to, debt to plant value ratio, minimum production requirements, and restrictions on capital expenditures. The terms of the Third Eye Capital Notes allow the lender to accelerate the maturity in the occurrence of any event that could reasonably be expected to have a material adverse effect, such as any change in the business, operations, or financial condition.
 
The Third Eye Capital Notes are secured by first priority liens on all real and personal property of, and assignment of proceeds from all government grants and guarantees from Aemetis, Inc. The Third Eye Capital Notes all contain cross-collateral and cross-default provisions. McAfee Capital, LLC (McAfee Capital), owned by Eric McAfee, the Company’s Chairman and CEO, provided a guaranty of payment and performance secured by all of its Company shares. In addition, Eric McAfee provided a blanket lien on substantially all of his personal assets, and McAfee Capital provided a guarantee in the amount of $8.0 million.
 
* The note maturity date can be extended by the Company to April 2021. As a condition to any such extension, the Company would be required to pay a fee of 5% of the carrying value of the debt which can be paid in cash or added to the outstanding debt. As a result of this ability to extend the maturity at the Company’s will, the Third Eye Capital Notes are classified as non-current debt.

Cilion shareholder seller notes payable. In connection with the Company’s merger with Cilion, Inc., ("Cilion") on July 6, 2012, the Company issued $5.0 million in notes payable to Cilion shareholders as merger compensation subordinated to the senior secured Third Eye Capital Notes. The liability bears interest at 3% per annum and is due and payable after the Third Eye Capital Notes have been paid in full. As of June 30, 2019, Aemetis Facility Keyes, Inc. had $6.0 million in principal and interest outstanding under the Cilion shareholder seller notes payable.
 
Subordinated Notes. On January 6 and January 9, 2012, AAFK entered into Note and Warrant Purchase Agreements with two accredited investors pursuant to which it issued $0.9 million and $2.5 million in original notes to the investors (the “Subordinated Notes”). The Subordinated Notes mature every six months. Upon maturity, the Subordinated Notes are generally extended with a fee of 10% added to the balance outstanding plus issuance of warrants exercisable at $0.01 with a two-year term. Interest accrues at 10% and is due at maturity. Neither AAFK nor Aemetis may make any principal payments under the Subordinated Notes until all loans made by Third Eye Capital to AAFK are paid in full.
 
On July 1, 2019, the Subordinated Notes were amended to extend the maturity date until the earlier of (i) December 31, 2019; (ii) completion of an equity financing by AAFK or Aemetis in an amount of not less than $25.0 million; or (iii) after the occurrence of an Event of Default, including failure to pay interest or principal when due and breaches of note covenants. A 10% cash extension fee was paid by adding the fee to the balance of the new note and warrants to purchase 113 thousand shares of common stock were granted with a term of two years and an exercise price of $0.01 per share. We will evaluate the July 1, 2019 amendment and the refinancing terms of the Subordinated Notes in accordance with ASC 470-50 Debt – Modification and Extinguishment.
 
As of June 30, 2019, there were 83,000 warrants outstanding that were issued in connection with the extension of the Subordinated Notes pursuant to the January 1, 2019 amendment.
 
At June 30, 2019 and December 31, 2018, the Company had, in aggregate, $10.8 million and $10.1 million in principal and interest outstanding respectively, under the Subordinated Notes.
 
 
20
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
EB-5 promissory notes. EB-5 is a U.S. government program authorized by the Immigration and Nationality Act designed to foster employment-based visa preference for immigrant investors to encourage the flow of capital into the U.S. economy and to promote employment of U.S. workers. The Company entered into a Note Purchase Agreement dated March 4, 2011 (as further amended on January 19, 2012 and July 24, 2012) with Advanced BioEnergy, LP, a California limited partnership authorized as a Regional Center to receive EB-5 investments, for the issuance of up to 72 subordinated convertible promissory notes (the “EB-5 Notes”) bearing interest at 2-3%. Each note was issued in the principal amount of $0.5 million and due and payable four years from the date of each note, for a total aggregate principal amount of up to $36.0 million (the “EB-5 Phase I funding”). The original maturity date on the promissory notes can be extended automatically for a one or two-year period initially and is eligible for further one-year automatic extensions as long as there is no notice of non-extension from investors and the investors’ immigration processes are in progress. On February 27, 2019, Advanced BioEnergy, LP, and the Company entered into an Amendment to the EB-5 Notes which restated the original maturity date on the promissory notes with automatic six-month extensions as long as the investors’ immigration processes are in progress. Except for four early investor EB-5 Notes, the Company was granted 12 months from the date of the completion of immigration process to redeem these EB-5 Notes. Accordingly, the notes have been recognized as long term while the four early investor notes have been classified as current debt. The EB-5 Notes are convertible into Company’s common stock after three years at a conversion price of $30 per share.
 
Advanced BioEnergy, LP arranges investments with foreign investors, who each make loans to the Keyes Plant in increments of $0.5 million. The Company has sold an aggregate principal amount of $36.0 million of EB-5 Notes under the EB-5 Phase I funding since 2012 to the date of this filing. As of June 30, 2019, $35.0 million has been released from the escrow amount to the Company, with $0.5 million remaining in escrow and $0.5 million to be funded to escrow. As of June 30, 2019, $35.0 million in principal and $2.4 million in accrued interest was outstanding on the EB-5 Phase I Notes.
 
On October 16, 2016, the Company launched its EB-5 Phase II funding, with plans to issue $50.0 million in additional EB-5 Notes on substantially similar terms and conditions as those issued under the Company’s EB-5 Phase I funding to refinance indebtedness and capital expenditures of Aemetis, Inc. and GAFI. The Company entered into a Note Purchase Agreement dated with Advanced BioEnergy II, LP, a California limited partnership authorized as a Regional Center to receive EB-5 Phase II investments, for the issuance of up to 100 EB-5 Notes bearing interest at 3%. Each note will be issued in the principal amount of $0.5 million and due and payable five years from the date of each note, for a total aggregate principal amount of up to $50.0 million (the “EB-5 Phase II funding”).
 
Advanced BioEnergy II, LP arranges investments with foreign investors, who each make loans to the Riverbank Cellulosic Ethanol Facility in increments of $0.5 million. The Company has sold an aggregate principal amount of $2.5 million of EB-5 Notes under the EB-5 Phase II funding since 2016 to the date of this filing. As of June 30, 2019, $2.5 million was released from escrow to the Company and $47.5 million remains to be funded to escrow. As of June 30, 2019, $2.5 million in principal and interest was outstanding on the EB-5 Phase II Notes.
 
Unsecured working capital loans. On April 16, 2017, the Company entered into an operating agreement with Gemini Edibles and Fats India Private Limited (“Gemini”). Under this agreement, Gemini agreed to provide the Company with working capital, on an as needed basis, to fund the purchase of feedstock and other raw materials for the Kakinada Plant. Working capital advances bear interest at 12%. In return, the Company agreed to pay Gemini an amount equal to 30% of the plant’s monthly net operating profit and recognized these as operational support charges in the financials. In the event that the Company’s biodiesel facility operates at a loss, Gemini owes the Company 30% of the losses as operational support charges. Either party can terminate the agreement at any time without penalty. Additionally, Gemini received a first priority lien on the assets of the Kakinada Plant. During the six months ended June 30, 2019 and 2018, the Company made principal and interest payments to Gemini of approximately $13.7 million and $5.4 million, respectively. As of June 30, 2019 and December 31, 2018, the Company had approximately $3.0 million and $4.6 million outstanding under this agreement, respectively.
 
 
21
AEMETIS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, tabular data in thousands except par value and per share data)
 
 
 
In November 2008, the Company entered into an operating agreement with Secunderabad Oils Limited (“Secunderabad Oils”). The 2008 agreement provided the working capital and had the first priority lien on assets in return for 30% of the plant’s monthly net operating profit. These expenses were recognized as selling, general, and administrative expenses by the Company in the financials. All terms of the 2008 agreement with Secunderabad Oils were terminated to amend the agreement as below. On July 15, 2017, the agreement with Secunderabad Oils was amended to provide the working capital funds for British Petroleum business operations only in the form of inter-corporate deposit for an amount of approximately $2.3 million over a 95 days period at the rate of 14.75% per annum interest rate. The term of the agreement continues until the either party terminates it. Secunderabad Oils has a second priority lien on the assets of the Company’s Kakinada Plant after this agreement. On April 15, 2018, the agreement was amended to purchase the raw material for business operations at 12% per annum interest rate. During the six months ended June 30, 2019 and 2018, the Company made principal and interest payments to Secunderabad Oils of approximately $0.5 million and $2.7 million, respectively. As of June 30, 2019 and December 31, 2018, the Company had $0.7 million and $0.3 million outstanding under this agreement, respectively.
 
Variable Interest Entity (GAFI) Term loan and Revolving loan
 
On July 10, 2017, GAFI entered into a Note Purchase Agreement (the “GAFI Note Purchase Agreement”) with Third Eye Capital (the “Noteholders”). See further discussion regarding GAFI in Note 5. Pursuant to the GAFI Note Purchase Agreement, the Noteholders agreed, subject to the terms and conditions of the GAFI Note Purchase Agreement and relying on each of the representations and warranties set forth therein, to make (i) a single term loan to GAFI in an aggregate amount of $15 million (the “GAFI Term Loan”) and (ii) revolving advances not to exceed $10 million in the aggregate (the “GAFI Revolving Loan”). The interest rate per annum applicable to the GAFI Term Loan is equal to ten percent (10%). The interest rate per annum applicable to the GAFI Revolving Loans is the greater of Prime Rate plus seven and three quarters percent (7.75%) and twelve percent (12.00%). The applicable interest rate as of June 30, 2019 was 13.25%. The maturity date of the loans (“Maturity Date”) is July 10, 2019, provided that the Maturity Date may be extended at the option of GAFI for up to two additional one-year periods upon prior written notice and upon satisfaction of certain conditions and the payment of a renewal fee for such extension. On June 10, 2019, notice was given to renew the maturity date of GAFI notes to July 10, 2020 by following extension terms in the GAFI Note Purchase Agreement in exchange for a fee of $0.5 million. An initial advance under the GAFI Revolving Loan was made for $2.2 million as a prepayment of interest on the GAFI Term Loan for the first eighteen months of interest payments. In addition, a fee of $1.0 million was paid in consideration to the Noteholders.
 
On June 28, 2018, GAFI entered into Amendment No. 1 to the GAFI Term Loan with Third Eye Capital for an additional amount of $1.5 million with a fee of $75 thousand added to the loan from Third Eye Capital at a 10% interest rate. The fee of $75 thousand was recognized as expense on the Amendment date. Pursuant to Amendment No. 1, Aemetis, Inc. entered into a Stock Appreciation Rights Agreement to issue 1,050,000 Stock Appreciation Rights (SARs) to Third Eye Capital on August 23, 2018, with an exercise date of one year from the issuance date with a call option for the Company at $2.00 per share during the first 11 months of the agreement either to pay $2.1 million in cash or issue common stock worth of $2.1 million based on 30-day weighted average price of the stock on the call date, and a put option for Third Eye Capital at $1.00 per share during the 11th month of the agreement where the Company can redeem the SARs for $1.1 million in cash. In the event that none of the above options is exercised, the SARs will be automatically exercised one year from the issuance date based upon the 30-day weighted average stock price and paid in cash and cash equivalents. We used an outside valuation expert to value the SARs using the Monte Carlo method, and recorded the fair value of the SARs of $1.3 million as fees on Amendment No. 1 and will be amortized over the term of the loan according to ASC 470-50 Debt – Modification and Extinguishment. The Company also recorded a liability for the fair value of $1.3 million which is re-measured at every quarter end until the SARs are exercised. As of June 30, 2019, none of the options was exercised on SARs. On December 20, 2018, $1.6 million from Amendment No. 1 was paid.
 
 
22