UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
AEMETIS, INC.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction | (I.R.S. Employer |
| of incorporation or organization) | Identification No.) |
(Address of Principal Executive Offices, including zip code)
(
(Registrant’s telephone number, including area code)
| Title of each class of registered securities | Trading Symbol | Name of each exchange on which registered | ||
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
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
The number of shares outstanding of the registrant’s Common Stock on October 31, 2023 was
FORM 10-Q
Quarterly Period Ended September 30, 2023
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 extend or refinance our senior debt on terms reasonably acceptable to us or at all; our ability to continue to fund operations and our future sources of liquidity and capital resources; our ability to fund, develop, build, maintain and operate digesters, facilities and pipelines for our California Dairy Renewable Natural Gas segment; our ability to fund, develop and operate our carbon capture sequestration projects, including obtaining required permits; our ability to receive awarded grants by meeting all of the required conditions, including meeting the minimum contributions; 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 generate and sell or utilize various credits, including LCFS and IRS 45Q tax credits; our ability to improve margins; and our ability to raise additional capital. Words or phrases such as “anticipates,” “may,” “will,” “should,” “could,” “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 markets 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
(Unaudited, In thousands except for par value)
| September 30, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents ($ and $ respectively from VIE) | $ | $ | ||||||
| Accounts receivable ($ and $ respectively from VIE) | ||||||||
| Inventories, net of allowance for excess and obsolete inventory of $as of September 30, 2023, and December 31, 2022, respectively | ||||||||
| Tax Credit Sales receivable ($and $respectively from VIE) | ||||||||
| Prepaid expenses ($and $respectively from VIE) | ||||||||
| Other current assets ($and $respectively from VIE) | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net ($and $respectively from VIE) | ||||||||
| Operating lease right-of-use assets ($and $respectively from VIE) | ||||||||
| Other assets ($and $respectively from VIE) | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders' deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable ($and $respectively from VIE) | $ | $ | ||||||
| Current portion of long term debt | ||||||||
| Short term borrowings ($and $respectively from VIE) | ||||||||
| Mandatorily redeemable Series B convertible preferred stock | ||||||||
| Accrued property taxes | ||||||||
| Current portion of operating lease liability ($and $ respectively from VIE) | ||||||||
| Other current liabilities ($and $respectively from VIE) | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities: | ||||||||
| Senior secured notes and revolving notes | ||||||||
| EB-5 notes | ||||||||
| Other long term debt ($and $respectively from VIE) | ||||||||
| Series A preferred units ($and $respectively from VIE) | ||||||||
| Operating lease liability ($and $respectively from VIE) | ||||||||
| Other long term liabilities | ||||||||
| Total long term liabilities | ||||||||
| Stockholders' deficit: | ||||||||
| Series B convertible preferred stock, $par value; authorized; and shares issued and outstanding each period, respectively (aggregate liquidation preference of $and $respectively) | ||||||||
| Common stock, $par value; authorized; and shares issued and outstanding each period, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' deficit | $ | $ | ||||||
The accompanying notes are an integral part of the financial statements.
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited, in thousands except for loss per share)
| For the three months ended September 30, |
For the nine months ended September 30, |
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| 2023 |
2022 |
2023 |
2022 |
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| Revenues |
$ | $ | $ | $ | ||||||||||||
| Cost of goods sold |
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| Gross profit (loss) |
( |
) | ( |
) | ||||||||||||
| Research and development expenses |
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| Selling, general and administrative expenses |
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| Operating loss |
( |
) | ( |
) | ( |
) | ( |
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| Other expense (income): |
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| Interest expense |
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| Interest rate expense |
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| Debt related fees and amortization expense |
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| Accretion and other expenses of Series A preferred units |
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| Loss on debt extinguishment |
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| Gain on litigation |
( |
) | ||||||||||||||
| Other income |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense (benefit) |
( |
) | ( |
) | ||||||||||||
| Net income (loss) |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Other comprehensive income (loss) |
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| Foreign currency translation loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Comprehensive income (loss) |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Net income (loss) per common share |
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| Basic |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Diluted |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Weighted average shares outstanding |
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| Basic |
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| Diluted |
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The accompanying notes are an integral part of the financial statements.
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| For the nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Share-based compensation | ||||||||
| Depreciation | ||||||||
| Debt related fees and amortization expense | ||||||||
| Intangibles and other amortization expense | ||||||||
| Accretion and other expenses of Series A preferred units | ||||||||
| Loss on asset disposals | ||||||||
| Loss (gain) on debt extinguishment | ||||||||
| Warrants issued for working capital agreement | ||||||||
| Gain on litigation | ( | ) | ||||||
| Loss on lease termination | ||||||||
| Deferred tax expense | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses | ||||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accrued interest expense and fees | ||||||||
| Other liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Grant proceeds and other reimbursements received for capital expenditures | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Proceeds from borrowings | ||||||||
| Repayments of borrowings | ( | ) | ( | ) | ||||
| Lender debt renewal and waiver fee payments | ( | ) | ( | ) | ||||
| Payments on finance leases | ( | ) | ( | ) | ||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ||||||
| Net change in cash and cash equivalents for period | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information, cash paid: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Income taxes paid | ||||||||
| Supplemental disclosures of cash flow information, non-cash transactions: | ||||||||
| Subordinated debt extension fees added to debt | ||||||||
| Debt fees added to revolving lines | ||||||||
| Fair value of warrants issued to subordinated debt holders | ||||||||
| Fair value of stock issued to a related party for guarantee fees | ||||||||
| Fair value of warrants issued to lender for debt issuance costs | ||||||||
| Fair value of stock issued to lender | ||||||||
| Lender debt extension, waiver, and other fees added to debt | ||||||||
| Cumulative capital expenditures in accounts payable, including net increase of $and $, respectively | ||||||||
| Payment of debt added to revolving lines | ||||||||
| Financing lease liabilities arising from obtaining right of use assets | ||||||||
| Capital expenditures purchased on financing | ||||||||
The accompanying notes are an integral part of the financial statements.
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in thousands)
| For the nine months ended September 30, 2023 | ||||||||||||||||||||||||||||||||
| Series B Preferred Stock | Common Stock | Additional | Accumulated Other | Total | ||||||||||||||||||||||||||||
| Paid-in | Accumulated | Comprehensive | Stockholders' | |||||||||||||||||||||||||||||
| Description | Shares | Dollars | Shares | Dollars | Capital | Deficit | Gain (Loss) | deficit | ||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Issuance and exercise of warrants | ||||||||||||||||||||||||||||||||
| Foreign currency translation gain | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||||||||||
| Series B conversion to common stock | ( | ) | ||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Issuance and exercise of warrants | ||||||||||||||||||||||||||||||||
| Foreign currency translation gain | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||
| Issuance and exercise of warrants | ||||||||||||||||||||||||||||||||
| Foreign currency translation loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| For the nine months ended September 30, 2022 |
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| Series B Preferred Stock |
Common Stock |
Additional |
Accumulated Other |
Total |
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| Paid-in |
Accumulated |
Comprehensive |
Stockholders' |
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| Description |
Shares |
Dollars |
Shares |
Dollars |
Capital |
Deficit |
Loss |
deficit |
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| Balance at December 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
| Issuance of common stock |
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| Series B conversion to common stock |
( |
) | ||||||||||||||||||||||||||||||
| Stock options exercised |
||||||||||||||||||||||||||||||||
| Stock-based compensation |
- | - | ||||||||||||||||||||||||||||||
| Issuance and exercise of warrants |
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| Foreign currency translation loss |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Net loss |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance at March 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
| Issuance of common stock |
||||||||||||||||||||||||||||||||
| Stock options exercised |
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| Stock-based compensation |
- | - | ||||||||||||||||||||||||||||||
| Foreign currency translation loss |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Net loss |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance at June 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
| Issuance of common stock |
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| Stock options exercised |
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| Stock-based compensation |
- | - | ||||||||||||||||||||||||||||||
| Issuance and exercise of warrants |
||||||||||||||||||||||||||||||||
| Foreign currency translation loss |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Net loss |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance at September 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
1. Nature of Activities and Summary of Significant Accounting Policies
Nature of Activities. Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis referred to herein as “Aemetis,” the “Company,” “we,” “our” or “us”) is an international renewable natural gas and renewable fuels company focused on the acquisition, development and commercialization of innovative low and negative carbon intensity products and technologies that replace traditional petroleum-based products. We operate in three reportable segments consisting of “California Ethanol,” “California Dairy Renewable Natural Gas,” and “India Biodiesel.” We have other operating segments determined not to be reportable segments and are collectively represented by the “All Other” category. At Aemetis, our mission is to generate sustainable and innovative renewable fuel solutions that benefit communities and restore our environment. We do this by building a local circular bioeconomy using agricultural waste to produce low carbon, advanced renewable fuels that reduce greenhouse gas ("GHG") emissions and improve air quality by replacing traditional petroleum-based products.
Our California Ethanol segment consists of a 65 million gallon per year capacity ethanol production facility located in Keyes, California (the “Keyes Plant”) that we own and operate. In addition to low carbon renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), Carbon Dioxide (“CO₂”) and Condensed Distillers Solubles (“CDS”), all of which are sold as animal feed to local dairies and feedlots, with CO₂ sold to food, beverage, and industrial customers. We have several energy efficiency initiatives at the Keyes Plant focused on significantly lowering the carbon intensity of our fuels. During the last two weeks of December 2022, we undertook an extended maintenance cycle and accelerated the implementation of several important ethanol plant energy efficiency upgrades. Our decision was partly driven by the high natural gas prices in California during the period. Furthermore, after monitoring natural gas pricing and margin profitability, we decided to extended the maintenance cycle into the first and second quarters of 2023 and restarted the plant near the end of the second quarter.
Our California Dairy Renewable Natural Gas segment, which consists of our subsidiary Aemetis Biogas LLC and its subsidiaries, ("Aemetis Biogas" or "ABGL"), constructs and operates bio-methane anaerobic digesters at local dairies near the Keyes Plant (many of whom also purchase WDG produced by the Keyes Plant as animal feed); transports the biogas via pipeline to the Keyes Plant site; and converts the biogas to Renewable Natural Gas (“RNG”) which is then delivered to customers through the PG&E natural gas pipeline.
Our India Biodiesel segment owns and operates a plant in Kakinada, India (“Kakinada Plant”) with a nameplate capacity of 150 thousand metric tons per year, or about
Our All Other segment consists of: the development of our Carbon Zero biofuels production plant to produce renewable diesel and sustainable aviation fuel; the development of Carbon Capture and Sequestration compression system and injection wells; operation of the Riverbank Industrial Complex; a research and development facility in Minneapolis Minnesota; and our corporate offices in Cupertino, California.
Our Carbon Zero biofuels production plants are designed to produce low or negative carbon intensity sustainable aviation fuel (“SAF”) and renewable diesel fuel (“RD”) using low carbon hydroelectric electricity, renewable hydrogen and non-edible renewable oils from existing Aemetis biofuels plants and other sources. The first Carbon Zero plant is scheduled to be built in Riverbank, California at the 125-acre former Riverbank Army ammunition plant.
Our Carbon Capture subsidiary was established to build Carbon Capture and Sequestration (“CCS”) projects that generate LCFS and IRS 45Q tax credits by compressing and injecting CO₂ into deep wells that are monitored for emissions to ensure the long-term sequestration of carbon underground.
Basis of Presentation and Consolidation. These consolidated financial statements include the accounts of Aemetis, Inc. and its subsidiaries. We consolidate all entities in which we have a controlling financial interest. A controlling financial interest is usually obtained through ownership of a majority of the voting interests. However, 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. ABGL was assessed to be a VIE and through the Company’s ownership interest in all of the outstanding common stock, the Company has been determined to be the primary beneficiary and accordingly, the assets, liabilities, and operations of ABGL are consolidated in these financial statements.
All intercompany balances and transactions have been eliminated in consolidation.
The accompanying consolidated condensed balance sheet as of September 30, 2023, the consolidated condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022, the consolidated condensed statements of cash flows for the nine months ended September 30, 2023 and 2022, and the consolidated condensed statements of stockholders’ deficit for the three and nine months ended September 30, 2023 and 2022 are unaudited. The consolidated condensed balance sheet as of December 31, 2022, was derived from the 2022 audited consolidated financial statements and notes thereto. The consolidated condensed financial statements in this report should be read in conjunction with the 2022 audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2022. 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 and footnote 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 Company’s management, the unaudited interim consolidated condensed financial statements as of and for the three and nine months ended September 30, 2023 and 2022 have been prepared on the same basis as the audited consolidated statements as of and for the year ended December 31, 2022 and reflect all adjustments, consisting primarily of normal recurring adjustments, necessary for the fair presentation of its statement of financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2023 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 California, renewable natural gas and related environmental attributes in California, and biodiesel and refined glycerin in India pursuant to supply agreements and purchase order contracts. We assessed the following criteria under the Accounting Standards Codification (“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.
California Ethanol Revenues: On May 13, 2020, we entered into an amendment to the Corn Procurement and Working Capital Agreement with J.D. Heiskell (the “Corn Procurement and Working Capital”), pursuant to which we buy all corn from J.D. Heiskell and sell all WDG and corn oil we produce to J.D. Heiskell. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC (“Murex”), pursuant to which we sold all our ethanol to Murex through individual sales transactions. On May 25, 2023, we entered into the second amendment to the Aemetis Keyes Grain Procurement and Working Capital Agreement with J.D. Heiskell, the second amendment to the Corn Procurement and Working Capital Agreement with J.D. Heiskell, and the second amendment to the Keyes Ethanol and Corn Tank Lease with J.D. Heiskell. The amendments provide that (i) the Keyes Plant will receive a temporary increase to its working capital credit limit by an amount equal to four days of grain payables repayable in equal daily installments over 120 days, (ii) that J.D. Heiskell will buy all Ethanol, WDG, CDS, and Corn Oil produced by the Keyes Plant, sell all ethanol to certain designated purchasers and pay us the same price as it received from such sales, and (iii) J.D. Heiskell will lease certain ethanol product storage tanks from the Keyes Plant. Given the similarity of the individual sales transactions with J.D. Heiskell, we have assessed them as a portfolio of similar contracts. Prior to May 25, 2023, the performance obligation was satisfied by delivery of the physical product from our finished goods tank to our customer’s contracted trucks. Effective on May 25, 2023, the performance obligation is satisfied by delivery of the physical product to the finished goods tank leased by J.D. Heiskell. Upon delivery, 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 for ethanol and by our marketing partner A.L. Gilbert Company (“A.L. Gilbert”) for WDG. The transaction price is allocated to one performance obligation.
The following table shows sales in our California Ethanol segment by product category:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Ethanol sales | $ | $ | $ | $ | ||||||||||||
| Wet distillers grains sales | ||||||||||||||||
| Other sales | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
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.
We also assessed principal versus agent criteria as we buy our feedstock from our customer and process and sell finished goods to that same customer. Specifically, we buy corn as feedstock in producing ethanol from our working capital partner J.D. Heiskell and we sell all ethanol, WDG, CDO, and CDS produced to J.D. Heiskell. Our ethanol finished goods tank is leased to J.D. Heiskell and legal title to the product is transferred upon transfer of our finished ethanol to this location. We consider the purchase of corn as a cost of goods sold and consider the sale of ethanol as revenue upon transfer to the finished goods tank and consider the sale of WDG, CDO, and CDS as revenue, upon trucks leaving the Keyes Plant with the product, 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 ethanol, WDG, CDO, and CDS is set independently. Revenues from ethanol and WDG 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. We have 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 California Ethanol segment where our customer and vendor may be the same.
California Dairy Renewable Natural Gas Revenues: Since 2018, we have used our relationships with California’s Central Valley dairy farmers to sign leases and raise funds to construct dairy digesters, a 40-mile RNG collection pipeline, a centralized biogas upgrading hub, and a renewable natural gas interconnection with PG&E’s natural gas pipeline. As of September 30, 2023, we have seven operating dairy digesters that produce biomethane, five additional digesters under construction, and contracts with additional dairies planned for future construction of digesters. Our RNG upgrading hub converts the biomethane produced by the digesters into utility-grade RNG that is transported by PG&E’s pipeline to California customers for use as transportation fuel. Our revenue development strategy for the Dairy Renewable Natural Gas segment relies upon continuing to build new dairy digesters and extending the collection pipeline. We have been storing some of our RNG production and postponing the dispensing of RNG for transportation use in order to increase the quantity and value of LCFS credits. As of September 30, 2023, we have
India Biodiesel Revenues: We sell products pursuant to purchase orders or by contract with governmental or international parties, in which performance 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 daily based on reference market prices for biodiesel, refined glycerin, and PFAD, net of taxes. Transaction price is allocated to one performance obligation.
The following table shows our sales in our India Biodiesel segment by product category:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Biodiesel sales | $ | $ | $ | $ | ||||||||||||
| Other sales | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
In India, we also assessed principal versus agent criteria as in some cases we buy feedstock from our customers and process and sell finished goods to those same customers. 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 when we enter into 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.
Shipping and Handling Costs. Shipping and handling costs are classified as a component of cost of goods sold in the accompanying consolidated statements of operations.
Research and Development. Research and development costs are expensed as incurred, unless they have alternative future uses to the Company.
Cash, Cash Equivalents, and Restricted Cash. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances at various financial institutions domestically and abroad. The Federal Deposit Insurance Corporation insures domestic cash accounts. The Company’s accounts at these institutions may at times exceed federally insured limits. The Company has not experienced any losses in such accounts. Amounts included in restricted cash represent those required to be set aside by the Construction Loan Agreement with Greater Nevada Credit Union ("GNCU") for financing reserves and construction contingencies and will be released upon approval by GNCU. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheet to the total of the same such amounts shown in the statement of cash flows.
| As of | ||||||||
| September 30, 2023 | December 31, 2022 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash included in other current assets | ||||||||
| Restricted cash included in other assets | ||||||||
| Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | $ | ||||||
Accounts Receivable. The Company sells ethanol and WDG through third-party marketing arrangements generally without requiring collateral directly to customers on a variety of terms including advanced payment terms, based on the size and creditworthiness of the customer. DCO is marketed and sold to A.L. Gilbert and other customers under the J.D. Heiskell Purchasing Agreement. The Company sells CDS directly to customers on standard 30-day payment terms. 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 is presented at original invoice amount, net of any allowance for credit losses. We did not reserve any balance for allowances for credit losses as of September 30, 2023 and December 31, 2022.
Inventories. Finished goods, raw materials, and work-in-process inventories are valued using methods which approximate 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.
Variable Interest Entities. We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests in is considered a variable interest entity (“VIE”). We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether any changes in our interest or relationship with the entity affects our determination of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable U.S. GAAP.
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 plant and buildings, furniture, machinery, equipment, land, and biogas dairy digesters. Capital expenses for in-process projects are capitalized as construction in progress and will be depreciated once the capital projects are finished and are in service. The Company’s plant in Goodland, Kansas (the "Goodland Plant") is partially completed and is not ready for operation. 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. The Company has not recorded any impairment during the three and nine months ended September 30, 2023 and 2022.
California Energy Commission Low-Carbon Fuel Production Program. The Company was awarded $
CDFA Dairy Digester Research and Development program. In October 2020, the Company was awarded $
California Energy Commission Low Carbon Advanced Ethanol Grant Program. In May 2019, the Company was awarded the right to receive reimbursements from the California Energy Commission Community-Scale and Commercial-Scale Advanced Biofuels Production Facilities grant under the Alternative and Renewable Fuel and Vehicle Technology Program in an amount up to $
U.S. Department of Food and Agriculture Forest Service Grant. Aemetis Advanced Products Keyes (“AAPK”) has been awarded $
California Energy Commission Grant for Solar Microgrid, DSC and Battery Backup System. Aemetis Advanced Fuels Keyes (“AAFK”) has been awarded an $
California Department of Forestry and Fire Protection Grant. AAPK has been awarded $
California Department of Forestry and Fire Protection Grant. AAPK was awarded $
U.S Forest Service Community Wood Grant. Aemetis Advanced Products Riverbank (“AAPR”) was awarded $
California Energy Commission Grant for Mechanical Vapor Recompression System. Aemetis Advanced Fuels Keyes (“AAFK”) has been awarded a $
Pacific Gas and Electric SEM Manufacturer’s Incentive Program. During the fourth quarter of 2022, AAFK received $
California Energy Commission PG&E A2313 Pipeline Interconnection Grant. The Company has received $
Investment Tax Credit. In the third quarter of 2023, the Company sold to a third-party purchaser certain transferrable Investment Tax Credits (ITCs) that had been generated by the Company from its investments in the California Dairy Renewable Natural Gas segment. The Company accounted for the ITC sale in accordance with ASC 740 by electing the flow-through method. The net value of tax credits sale of $
Basic and Diluted Net (Loss) per Share. Basic income (loss) per share is computed by dividing income or loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted income/(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 income for the three months ended September 30, 2023, potentially dilutive securities have been included in the diluted net income per share computations and any potentially anti-dilutive shares have been excluded and are shown in the second table below. As the Company incurred net losses for the three months ended September 30, 2022 and nine months ended September 30, 2023 and 2022, potentially dilutive securities have been excluded from the diluted net loss per share computations as their effect would be anti-dilutive.
| For the three months ended September 30, | For the nine months ended September 30, | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| Net income (loss) |
|
|
|
| ||||
| Shares: | ||||||||
| Weighted average shares outstanding—basic |
|
|
|
| ||||
| Weighted average dilutive share equivalents from preferred shares |
| - | - | - | ||||
| Weighted average dilutive share equivalents from stock options |
| - | - | - | ||||
| Weighted average dilutive share equivalents from common warrants | 26 | - | - | - | ||||
| Weighted average shares outstanding—diluted |
|
|
|
| ||||
| Income (loss) per share—basic |
|
|
|
| ||||
| Income (loss) per share—diluted |
|
|
|
| ||||
The following table shows the number of potentially dilutive shares excluded from the diluted net loss per share calculation as of September 30, 2023 and 2022:
| As of | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Series B preferred (post split basis) | ||||||||
| Common stock options and warrants | ||||||||
| Debt with conversion feature at $per share of common stock | ||||||||
| Total number of potentially dilutive shares | ||||||||
Comprehensive Income (Loss). ASC 220 Comprehensive Income (Loss) 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 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. The investment in this subsidiary is considered indefinitely invested overseas, and as a result, deferred income taxes are not recorded related to the currency translation adjustments.
Foreign Currency Translation/Transactions. Assets and liabilities of the Company’s non-U.S. subsidiary that operates in a local currency environment, where that local currency is the functional currency, are translated into U.S. dollars at exchange rates in effect at the balance sheet date and 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 during the year. Transactional gains and losses from foreign currency transactions are recorded in other income.
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, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company further evaluates its operating segments to determine its reportable segments. Aemetis recognizes three reportable segments “California Ethanol”, “California Dairy Renewable Natural Gas”, and “India Biodiesel.”
The “California Ethanol” reportable segment includes the Company’s 65 million gallon per year Keyes Plant and the adjacent land leased for the production of CO₂.
The “California Dairy Renewable Natural Gas” reportable segment includes the dairy digesters, pipeline and gas condition hub for the production of renewable natural gas from dairies near Keyes, California.
The “India Biodiesel” reportable segment includes the Company’s 50 million gallon per year nameplate capacity biodiesel manufacturing Kakinada Plant, and associate administrative offices in Hyderabad, India.
The Company has additional operating segments that were determined not to be reportable segments, including the development of a Carbon Zero biofuels production plant to produce renewable diesel and sustainable aviation fuel; the development of Carbon Capture and Sequestration projects; a research and development facility in Minneapolis, Minnesota; and our corporate offices in Cupertino, California.
Fair Value of Financial Instruments. Financial instruments include accounts receivable, accounts payable, accrued liabilities, current and non-current portion of subordinated debt, notes receivable, notes payable, Series A preferred units, 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 determined using level 3 inputs, of all other current financial instruments is estimated 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 related to the estimated fair value of the Company’s share-based compensation awards calculated as of the date the awards are granted.
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.
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.
Debt Modification Accounting. The Company evaluates amendments to its debt in accordance with ASC 470-60 Troubled Debt Restructuring and ASC 470-50 Debt–Modification and Extinguishments for modification and extinguishment accounting. The evaluation for troubled debt restructuring includes assessing qualitative and quantitative factors such as whether the creditor granted a concession and if the Company is experiencing financial difficulties. The quantitative analysis includes the calculation of the post-restructuring effective interest rate by projecting cash flows on the new terms and comparing this calculation to the terms of prior amendments. If the post restructuring effective interest rate is less than the prior terms effective interest rate, we assess this as having been granted a concession. The troubled debt restructuring accounting would be applied to any debt which meets the qualitative factors and quantitative factor of concession granted. If the debt would not fall into Troubled Debt Restructuring then we apply ASC 470-50 Debt-Modification and Extinguishment. 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.
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, 2022 and 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2023.
2. Inventories
Inventories consist of the following:
| As of | ||||||||
| September 30, 2023 | December 31, 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-progress | ||||||||
| Finished goods | ||||||||
| Total inventories | $ | $ | ||||||
3. Property, Plant and Equipment
Property, plant and equipment consist of the following:
| As of | ||||||||
| September 30, 2023 | December 31, 2022 | |||||||
| Land | $ | $ | ||||||
| Plant and buildings | ||||||||
| Furniture and fixtures | ||||||||
| Machinery and equipment | ||||||||
| Construction in progress | ||||||||
| Property held for development | ||||||||
| Finance lease right of use assets | ||||||||
| Total gross property, plant & equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Total net property, plant & equipment | $ | $ | ||||||
For the three months ended September 30, 2023 and 2022, interest capitalized in property, plant, and equipment was $
Construction in progress includes costs for the biogas construction projects (dairy digesters and pipeline), Riverbank projects (sustainable aviation fuel and renewable diesel plant as well as carbon capture characterization well), and energy efficiency projects at the Keyes Plant. 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 | ||||
| Machinery and equipment | ||||
| Furniture and fixtures | ||||
4. Debt
Debt consists of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Third Eye Capital term notes | $ | $ | ||||||
| Third Eye Capital revolving credit facility | ||||||||
| Third Eye Capital revolving notes Series B | ||||||||
| Third Eye Capital revenue participation term notes | ||||||||
| Third Eye Capital acquisition term notes | ||||||||
| Third Eye Capital Fuels Revolving Line | ||||||||
| Third Eye Capital Carbon Revolving Line | ||||||||
| Construction Loan | ||||||||
| Cilion shareholder seller notes payable | ||||||||
| Subordinated notes | ||||||||
| EB-5 promissory notes | ||||||||
| Term loans on capital expenditures | ||||||||
| Total debt | ||||||||
| Less current portion of debt | ||||||||
| Total long term debt | $ | $ | ||||||
Third Eye Capital Note Purchase Agreement
On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (“AAFK”), entered into an Amended and Restated Note Purchase Agreement (the “Note Purchase Agreement”) with Third Eye Capital Corporation (“Third Eye Capital”). 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 $
On March 8, 2022, Third Eye Capital agreed to the Limited Waiver and Amendment No. 22 to the Note Purchase Agreement (“Amendment No. 22”) to: (i) provide a waiver for the Blocked Account Agreement Violation in which the Borrowers failed to deliver Blocked Account Control Agreements by December 31, 2021, (ii) provide for a waiver for the Subordinated Debt Violation, in which the Company made a repayment to a Subordinated Debt lender, and (iii) provide for a waiver of the consolidated unfunded capital expenditures covenant for the quarters through December 31, 2021. As consideration for such waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $
On May 11, 2022, Third Eye Capital agreed to the Limited Waiver and Amendment No. 23 to the Note Purchase Agreement (“Amendment No. 23”) to: (i) provide a waiver for the Blocked Account Agreement Violation in which the Borrowers failed to deliver Blocked Account Control Agreements by March 31, 2022, (ii) provide for a waiver of the ratio of note indebtedness covenant for the quarter ended March 31, 2023 and (iii) provide for a waiver of the unfunded capital expenditures covenant for the quarter ended March 31, 2022 in which the Company exceeded the $
On August 8th, 2022, Third Eye Capital agreed to Limited Waiver and Amendment No. 24 to the Note Purchase Agreement ("Amendment No. 24") to: (i) provide that the maturity date of the Third Eye Capital Notes may be further extended at our election to April 1, 2024 in exchange for an extension fee equal to
On March 6, 2023, Third Eye Capital agreed to the Limited Waiver and Amendment No. 25 to the Note Purchase Agreement (“Amendment No. 25”) to: provide a waiver for the Keyes Plant Minimum Quarterly Production violation for the quarter ended March 31, 2023, in which the Borrowers will not meet the minimum production of 10 million gallons requirement. As consideration for such waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $
On May 4, 2023, Third Eye Capital agreed to the Limited Waiver and Amendment No. 26 to the Note Purchase Agreement (“Amendment No. 26”) to: provide a waiver for (i) the Keyes Plant Minimum Quarterly Production violation for the quarter ended June 30, 2023, in which the Borrowers will not meet the minimum production of
On May 16, 2023, Third Eye Capital agreed to the Limited Waiver and Amendment No. 27 to the Note Purchase Agreement (“Amendment No. 27”) to: (i) provide that the maturity date of the Third Eye Capital Notes may be further extended at our election to April 1, 2025 in exchange for an extension fee equal to
According to ASC 470-10-45 Debt–Other Presentation Matters, 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. To assess this guidance, the Company performed ratio and cash flow analysis using its cash flow forecast and debt levels for plant to debt ratio covenant and obtained waivers for the minimum ethanol production covenant for Q1’23 and Q2'23 in Amendments No. 25 and No. 26. The Company forecasted sufficient cash flows over the next 12 months to reduce debt levels of Third Eye Capital and meet the operations of the Company. Based on this analysis, the Company believes that it is reasonably possible that through a combination of cash flows from operations, sales from EB-5 investments, and proceeds from the sale of common stock, it will be able to meet the ratio of the note indebtedness covenant over the next 12 months. As such, the notes are classified as long-term debt.
On March 6, 2020, we entered into a one-year reserve liquidity facility governed by a promissory note, payable to Third Eye Capital, in the principal amount of $
Terms of Third Eye Capital Notes
| A. | Term Notes. As of September 30, 2023, the Company had $ |
| B. | Revolving Credit Facility. The Revolving Credit Facility accrues interest at the prime rate plus |
| C. | Revolving Notes Series B. The Revolving Notes Series B accrues interest at the prime rate plus |
| D. | Revenue Participation Term Notes. The Revenue Participation Term Note bears interest at |
| E. | Acquisition Term Notes. The Acquisition Term Notes accrue interest at the prime rate plus |
| F. | Reserve Liquidity Notes. The Reserve Liquidity Notes, with available borrowing capacity in the amount of $ |
The note maturity dates marked with an "*" can be extended by the Company to April 2025. As a condition to any such extension, the Company would be required to pay a fee of
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 on the Company, such as any change in the business, operations, or financial condition. The Company has evaluated the likelihood of such an acceleration event and determined such an event to not be probable in the next twelve months. The terms of the notes allow interest to be capitalized.
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 the Company’s North American subsidiaries. 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 $
Third Eye Capital Revolving Credit Facility for Fuels and Carbon Lines. On March 2, 2022, GAFI and Aemetis Carbon Capture, Inc. (“ACCI”) entered into an Amended and Restated Credit Agreement (“Credit Agreement”) with Third Eye Capital , as administrative agent and collateral agent, and the lender party thereto (the “New Credit Facility”). The New Credit Facility provides for two credit facilities with aggregate availability of up to $
On August 1, 2023, Third Eye Capital agreed to the Amendment and Waiver No. 2 to Credit Agreement ("Amendment No. 2") to: (i) approve a special advance of $
On October 16, 2023, Third Eye Capital acknowledged receipt of $
As of September 30, 2023, GAFI had principal and interest outstanding of $
Cilion shareholder seller notes payable. In connection with the Company’s merger with Cilion, Inc. (“Cilion”), on July 6, 2012, the Company issued $
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 $
On July 1, 2023, the maturity on two Subordinated Notes’ was extended until the earlier of (i) December 31, 2023; (ii) after the occurrence of an Event of Default, including failure to pay interest or principal when due and breaches of note covenants. A $
The Company evaluated the January 1, 2023 and July 1, 2023 amendments and the refinancing terms of the notes and applied modification accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
At September 30, 2023 and December 31, 2022, the Company had, in aggregate, the amount of $
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 $
The Company has sold an aggregate principal amount of $
On October 16, 2016, the Company launched its EB-5 Phase II funding (the “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 Goodland Advanced Fuels Inc., (“GAFI”). On November 21, 2019, the minimum investment was raised from $
The Company has sold an aggregate principal amount of $
Working capital loans. On July 26, 2022, the Company entered into a short-term loan with Secunderabad Oils Limited in an amount not to exceed $
Secured loans. In the first quarter of 2023, the Company entered into several short-term loans with IndusInd Bank and HDFC Bank. The loans are secured by fixed deposits made by the Company. The loans bear interest at rates that range from
Construction Loan Agreement. On October 4, 2022, the Company entered into a Construction Loan Agreement (“Loan Agreement”) with Greater Nevada Credit Union (“GNCU”). Pursuant to the Loan Agreement, the lender has made available an aggregate principal amount not to exceed $
On July 28, 2023, the Company entered into a second Construction and Term Loan Agreement (“Loan Agreement 2") with Magnolia Bank, Incorporated. Pursuant to the Loan Agreement 2, the lender has made available an aggregate principal amount not to exceed $
Financing Agreement for capital expenditures. The Company entered into an agreement with Mitsubishi Chemical America, Inc. (“Mitsubishi”) to purchase ZEBREXTM membrane dehydration equipment to conserve energy and improve operating efficiencies at the Keyes Plant. The Company also entered into a financing agreement with Mitsubishi for $
Scheduled debt repayments for the Company’s loan obligations by year are as follows:
| Twelve Months ended September 30, | Debt Repayments | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total debt | ||||
| Debt issuance costs | ( | ) | ||
| Total debt, net of debt issuance costs | $ | |||
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 and classified these 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 years to 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 measure lease liabilities and right-of-use (“ROU”) assets. The incremental borrowing rate used by the Company was based on weighted average baseline rates commensurate with the Company’s secured borrowing rate over a similar term. At each reporting period, when there is a new lease initiated, the rates established for that quarter will be used.
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 lease commenced on April 1, 2022. 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 were as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating lease cost | ||||||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||||||
| Short term lease expense | ||||||||||||||||
| Variable lease expense | ||||||||||||||||
| Total operating lease cost | $ | $ | $ | $ | ||||||||||||
| Finance lease cost | ||||||||||||||||
| Amortization of right-of-use assets | $ | $ | $ | $ | ||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Total finance lease cost | $ | $ | $ | $ | ||||||||||||
Cash paid for amounts included in the measurement of lease liabilities:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating cash flows used in operating leases | $ | $ | $ | $ | ||||||||||||
| Operating cash flows used in finance leases | ||||||||||||||||
| Financing cash flows used in finance leases | $ | $ | $ | $ | ||||||||||||
Supplemental non-cash flow information related to ROU asset and lease liabilities was as follows for the three and nine months ended September 30, 2023 and 2022:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Operating leases | ||||||||||||||||
| Accretion of the lease liability | $ | $ | $ | $ | ||||||||||||
| Amortization of right-of-use assets | ||||||||||||||||
| The weighted average remaining lease term and weighted average discount rate as of September 30, 2023 are as follows: | ||||||||||||||||
| Weighted Average Remaining Lease Term | ||||||||||||||||
| Operating leases (in years) | ||||||||||||||||
| Finance leases (in years) | ||||||||||||||||
| Weighted Average Discount Rate | ||||||||||||||||
| Operating leases | % | |||||||||||||||
| Finance leases | % | |||||||||||||||
Supplemental balance sheet information related to leases was as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| Operating leases | ||||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Current portion of operating lease liability | ||||||||
| Long term operating lease liability | ||||||||
| Total operating lease liabilities | ||||||||
| Finance leases | ||||||||
| Property and equipment, at cost | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | ||||||||
| Other current liability | ||||||||
| Other long term liabilities | ||||||||
| Total finance lease liabilities | ||||||||
Maturities of operating lease liabilities were as follows:
| Twelve months ended September 30, | Operating leases | Finance leases | ||||||
| 2024 | $ | $ | ||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Less imputed interest | ( | ) | ( | ) | ||||
| Total lease liability | $ | $ | ||||||
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. This was recorded in the Selling, general and administrative expense section of the Consolidated Statements of Operations and Comprehensive Loss.
The components of lease income were as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Lease income | $ | $ | $ | $ | ||||||||||||
Future lease commitments to be received by the Company as of September 30, 2023 were as follows:
| Twelve months ended September 30, | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total future lease commitments | $ |
Legal Proceedings
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. The Company's view of the matters not listed may change in the future as the litigation and events related thereto unfold.
6. Aemetis Biogas LLC – Series A Preferred Financing and Variable Interest Entity
On December 20, 2018, ABGL entered into a Series A Preferred Unit Purchase Agreement for the sale of Series A Preferred Units to Protair-X Americas, Inc., with Third Eye Capital acting as an agent.
ABGL is authorized to issue
The Preferred Unit Agreement includes (i) preference payments of $
Triggering events occur upon ABGL’s failure to redeem units, comply with covenants, any other defaults or cross defaults, or to perform representations or warranties. Upon a triggering event: (i) the obligation of the Purchaser to purchase additional Series A Preferred Units is terminated, (ii) cash flow payments for redemption payments increases from
From inception of the agreement to date, ABGL issued
On August 8, 2022, ABGL, Protair-X America, Inc. (“Protair”), and Third Eye Capital entered into a Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Amendment") which amends that certain Series A Preferred Unit Purchase Agreement (“PUPA”) dated as of December 20, 2018. The PUPA Amendment provides for: (i) a waiver of certain covenants prohibiting the internal reorganization of ABGL subsidiaries and the incurrence of indebtedness by ABGL and its subsidiaries pursuant to a USDA loan, provided that, among other things, Third Eye Capital shall have received a repayment of at least $
On January 1, 2023, ABGL entered into the Second Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Second Amendment") providing for: (i) a waiver for not redeeming all Series A Preferred Units by December 31, 2022, and (ii) the right by ABGL to redeem all of the outstanding Series A Preferred Units by May 31, 2023 for an aggregate redemption price of $
On May 31, 2023, ABGL entered into the Third Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Third Amendment") providing: (i) a waiver to ABGL for not redeeming all Series A Preferred Units by May 31, 2023 and (ii) the right by ABGL to redeem all of the outstanding Series A Preferred Units by August 31, 2023, for an aggregate redemption price of $
On November 8, 2023, ABGL entered into a Fourth Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Fourth Amendment") with Third Eye Capital Corporation and Protair-X Americas, Inc. providing for: (i) extending the deadline to redeem Series A Preferred Units from August 31, 2023 to December 31, 2023 and (ii) setting the price to redeem all outstanding Series A Preferred Units at $
The Company recorded Series A Preferred Unit liabilities, net of debt discounts pursuant to these agreements, classified as long-term Series A Preferred Units, of $
Variable interest entity assessment
After consideration of ABGL’s operations and the above agreement, we concluded that ABGL did not have enough equity to finance its activities without additional subordinated financial support. ABGL is capitalized with Series A Preferred Units that are recorded as liabilities under U.S. GAAP. Hence, we concluded that ABGL is a VIE. Through the Company's ownership interest in all of the outstanding common stock, its current ability to control the board of directors, the management fee paid to Aemetis and control of subordinated financing decisions, Aemetis has been determined to be the primary beneficiary and accordingly, the assets, liabilities, and operations of ABGL are consolidated into those of the Company. Total assets, before intercompany eliminations, of ABGL as of September 30, 2023 were $
7. Stock-Based Compensation
2019 Stock Plan
The Aemetis Amended and Restated 2019 Stock Plan (the “2019 Stock Plan”) allows the Company to grant Incentive Stock Options, Non-Statutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Company’s Board may determine in its discretion. Option grants made under the Second Amended and Restated 2007 Stock Plan prior to the adoption of the 2019 Stock Plan remain in place according to their terms. The number of shares authorized for issuance under the 2019 Stock Plan increases on January 1 of each year according to the terms of the plan. In addition, shares associated with stock options that expire or are forfeited without being exercised become available again for issuance.
The following table summarizes activity under the 2019 Stock Plan and prior plan during the nine-month period ending September 30, 2023:
| Shares Available for Grant | Number of Shares Outstanding | Weighted-Average Exercise Price | ||||||||||
| Balance as of December 31, 2022 | * | $ | ||||||||||
| Authorized | - | - | ||||||||||
| Options Granted | ( | ) | ||||||||||
| RSAs Granted | ( | ) | - | - | ||||||||
| Exercised | - | ( | ) | |||||||||
| Forfeited/expired | ( | ) | ||||||||||
| Balance as of September 30, 2023 | $ | |||||||||||
The number of outstanding option shares as of September 30, 2023, includes
*The 2015 Employment Inducement Stock Plan (the “2015 Inducement Plan”) authorizes issuance of options for
Valuation and Expense Recorded for Stock Option Issuances
Stock-based compensation is accounted for in accordance with the provisions of ASC 718 Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.
All issuances of stock options or other issuances of equity instruments to employees as the consideration for services received by us are accounted for based on the fair value of the equity instrument issued. The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock based compensation expense requires us to make assumptions and judgments about the variables used in the calculation, including the fair value of our common stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of our common stock, a risk-free interest rate, and expected dividends. Under ASU 2016-09 Improvements to Employee Share-Based Payments Accounting, we have elected to recognize forfeitures as they occur. We use the simplified calculation of expected life described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, and volatility is based on an average of the historical volatilities of the common stock of four entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. We use an expected dividend yield of zero, as we do not anticipate paying any dividends in the foreseeable future. Expected forfeitures are assumed to be zero due to the small number of plan participants.
The weighted average fair value calculations for the options granted during the nine months ended 2023 and 2022 are based on the following assumptions:
| For the nine months ended September 30, | ||||||||
| Description | 2023 | 2022 | ||||||
| Dividend-yield | ||||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life (years) | ||||||||
| Market value per share on grant date | $ | $ | ||||||
| Fair value per option on grant date | $ | $ | ||||||
During the nine months ended September 30, 2023 and 2022, the Company granted 3,850 and
As of September 30, 2023, the Company had $
8. Warrants
During the three months ending September 30, 2023, the Company granted warrants to subordinated lenders in connection with debt extensions. The warrants were exercisable for
The weighted average fair value calculations for issued warrants are based on the following weighted average factors:
| For the nine months ended September 30, | ||||||||
| Description | 2023 | 2022 | ||||||
| Dividend-yield | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life (years) | ||||||||
| Exercise price per warrant | $ | $ | ||||||
| Market value per share on grant date | $ | $ | ||||||
| Fair value per warrant on grant date | $ | $ | ||||||
The following table summarizes warrant activity during the nine months ending September 30, 2023:
| Warrants Outstanding & Exercisable | Weighted - Average Exercise Price | Average Remaining Term in Years | ||||||||||
| Outstanding December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Outstanding September 30, 2023 | $ | |||||||||||
The warrants outstanding as of September 30, 2023 are vested and exercisable as of September 30,2023. As of September 30, 2023 and 2022, the Company had no unrecognized compensation expense related to warrants, respectively.
9. Agreements
Working Capital Arrangement. Pursuant to a Corn Procurement and Working Capital Agreement with J.D. Heiskell, the Company agreed to procure whole yellow corn and grain sorghum, primarily from J.D. Heiskell. The Company has the ability to obtain grain from other sources subject to certain conditions; however, in the past all the Company’s grain purchases have been from J.D. Heiskell. Title and risk of loss of the corn pass to the Company when the corn is deposited into the Keyes Plant weigh bin. The term of the Corn Procurement and Working Capital Agreement expires on December 31, 2023, and the term can be automatically renewed for additional one-year terms. J.D. Heiskell further agreed to sell all ethanol to Murex or other marketing purchasers, all WDG and corn oil to A.L Gilbert, and DCO to other customers under the J.D. Heiskell Purchase Agreement. The Company’s relationships with J.D. Heiskell, and A.L. Gilbert are well established, and the Company believes that the relationships are beneficial to all parties involved in utilizing the distribution logistics, reaching out to widespread customer base, managing inventory, and building working capital relationships. These Agreements are ordinary purchase and sale agency agreements for the Keyes Plant. On May 25, 2023, we entered into the second amendment to the Aemetis Keyes Grain Procurement and Working Capital agreement with J.D. Heiskell, the second amendment to the Corn Procurement and Working Capital Agreement with J.D. Heiskell, and the second amendment to the Keyes Ethanol and Corn Tank Lease with J.D. Heiskell. The amendments provide that (i) the Keyes Plant will receive a temporary increase in the credit limit equivalent to four days of grain payables repayable in equal daily installments over 120 days, (ii) that J.D. Heiskell agrees to buy all Ethanol, WDGS, CDS, and Corn Oil produced by the Keyes Plant, sell all ethanol to certain designated purchasers and pay us the same price as it received from such sales, and (iii) J.D. Heiskell would lease certain ethanol product storage tanks from the Keyes Plant.
As of September 30, 2023 and December 31, 2022, Aemetis made prepayments to J.D. Heiskell of and $
The J.D. Heiskell sales and purchases activity associated with the J.D. Heiskell Purchase Agreement and J.D. Heiskell Procurement Agreement during the three and nine months ended September 30, 2023 and 2022 were as follows:
| As of and for the three months ended September 30, | As of and for the nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Ethanol Sales | $ | $ | $ | $ | ||||||||||||
| Wet distiller's grains sales | ||||||||||||||||
| Corn oil sales | ||||||||||||||||
| CDS Sales | ||||||||||||||||
| Corn purchases | ||||||||||||||||
| Accounts receivable | ||||||||||||||||
| Accounts Payable | ||||||||||||||||
| Working Capital | ||||||||||||||||
Ethanol and Wet Distillers Grains Marketing Arrangement. The Company entered into a Fuel Ethanol Purchase and Sale Agreement with Murex, which matures on October 31, 2023, with automatic one-year renewals thereafter. On May 30, 2023 the Company entered into Amendment No. 1 to the Fuel Ethanol Purchase and Sale Agreement that provides (i) the Company temporarily suspend the agreement for the duration of the Company's Working Capital Agreement with J.D. Heiskell, and (ii) the initial term shall be automatically renewed beginning on October 1, 2023 and ending on March 31, 2025. The Company also entered into a Wet Distillers Grains Marketing Agreement with A.L. Gilbert, which matures on December 31, 2023, with automatic one-year renewals thereafter.
Accounts receivable associated with our marketing partners was
For the three months ended September 30, 2023 and 2022, the Company expensed marketing costs of $
Supply Trade Agreement. On July 1, 2022, 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 a supply of feedstock up to a credit limit of $
As of September 30, 2023 and 2022, the Company has
10. Segment Information
Aemetis recognizes reportable segments: “California Ethanol”, “California Dairy Renewable Natural Gas”, and “India Biodiesel.”
The “California Ethanol” reportable segment includes the Company’s
The “California Dairy Renewable Natural Gas” reportable segment includes dairy digesters, biogas pipeline, gas conditioning unit for the production of renewable natural gas, and interconnection facility to PG&E’s pipeline.
The “India Biodiesel” reportable segment includes the Company’s
The Company has additional operating segments that were determined not to be reportable segments, including the development of the Carbon Zero facility in Riverbank, and development of Carbon Capture and Sequestration projects in California. Additionally, the corporate offices, Riverbank Industrial Complex, Goodland Plant in Kansas, and the research and development facility in Minnesota are included in the “All Other” category.
Summarized financial information by reportable segment for the three months ended September 30, 2023 and 2022 follows:
| For the three months ended September 30, 2023 | ||||||||||||||||||||
| California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All other | Total | ||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||||||
| Interest expense including amortization of debt fees | ||||||||||||||||||||
| Accretion and other expenses of Series A preferred units | ||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
| For the three months ended September 30, 2022 | ||||||||||||||||||||
| California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All other | Total | ||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Intersegment revenues | ||||||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Interest expense including amortization of debt fees | ||||||||||||||||||||
| Accretion and other expenses of Series A preferred units | ||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
A reconciliation of reportable segment revenues to total consolidated revenue for the three months ended September 30, 2023 and 2022 follows:
| 2023 | 2022 | |||||||
| Total revenues for reportable segments | $ | $ | ||||||
| Elimination of intersegment revenues | ( | ) | ||||||
| Total consolidated revenues | $ | $ | ||||||
Summarized financial information by reportable segment for the nine months ended September 30, 2023 and 2022 follows:
| For the nine months ended September 30, 2023 | ||||||||||||||||||||
| California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All other | Total | ||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||||||
| Interest expense including amortization of debt fees | ||||||||||||||||||||
| Accretion and other expenses of Series A preferred units | ||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
| For the nine months ended September 30, 2022 | ||||||||||||||||||||
| California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All other | Total | ||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Intersegment revenues | ||||||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Interest expense including amortization of debt fees | ||||||||||||||||||||
| Accretion and other expenses of Series A preferred units | ||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||
| Depreciation | ||||||||||||||||||||
A reconciliation of reportable segment revenues to total consolidated revenue for the nine months ended September 30, 2023 and 2022 follows:
| 2023 | 2022 | |||||||
| Total revenues for reportable segments | $ | $ | ||||||
| Elimination of intersegment revenues | ( | ) | ||||||
| Total consolidated revenues | $ | $ | ||||||
Total assets by reportable segments as of September 30, 2023 and December 31, 2022 follows:
| September 30, 2023 | December 31, 2022 | |||||||
| California Ethanol | $ | $ | ||||||
| California Dairy Renewable Natural Gas | ||||||||
| India Biodiesel | ||||||||
| All other | ||||||||
| Total consolidated assets | $ | $ | ||||||
California Ethanol: The Company amended the Corn Procurement and Working Capital Agreement and the J.D. Heiskell Purchasing Agreement to procure corn from J.D. Heiskell and sell all WDG and corn oil the Company produces to J.D. Heiskell. Sales of ethanol to customer accounted for
California Dairy Renewable Natural Gas: Our California Dairy Renewable Natural Gas segment revenues during the three and nine months ended September 30, 2023 were from sales of biogas to customer and sales of D3 RINs to a separate customer. For the three and nine months ended September 30, 2022, all sales were from sale of biogas to the Keyes Plant as fuel in boilers, which allowed qualification of carbon credits for the ethanol produced in the Keyes Plant.
India Biodiesel: Three biodiesel customers accounted for
11. Related Party Transactions
The Company owes Eric McAfee, the Company’s Chairman and CEO, and McAfee Capital LLC (“McAfee Capital”), owned by Eric McAfee, $
In the first quarter of 2023, the Audit Committee of the Company approved a one-time guarantee fee of $
The Company owes various members of the Board amounts totaling $
12. Subsequent Events
On October 6, 2023, the Company received the $
On November 8, 2023, ABGL entered into a Fourth Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Fourth Amendment") with Third Eye Capital Corporation and Protair-X Americas, Inc. providing for: (i) extending the deadline to redeem Series A Preferred Units from August 31, 2023 to December 31, 2023 and (ii) setting the price to redeem all outstanding Series A Preferred Units at $
13. Management's Plan
The accompanying financial statements have been prepared contemplating the realization of assets and satisfaction of liabilities in the normal course of business. As a result of negative capital, negative market conditions resulting in prolonged idling of the Keyes Plant, negative operating results, and collateralization of substantially all of the company assets, the Company has been reliant on its senior secured lender to provide additional funding and has been required to remit substantially all excess cash from operations to the senior secured lender. In order to meet its obligations during the next twelve months, the Company will need to either refinance the Company’s debt or receive the continued cooperation of its senior lender. This dependence on the senior lender raises substantial doubt about the Company’s ability to continue as a going concern. The Company plans to pursue the following strategies to improve the course of the business.
For the Keyes Plant, we restarted the plant during the second quarter after completing an extended maintenance cycle and accelerating the implementation of several important ethanol plant energy efficiency upgrades. We plan to operate the plant and continue to improve its financial performance by completing the existing upgrades and adopting new technologies or process changes that allow for energy efficiency, cost reduction or revenue enhancements, as well as, executing upon awarded grants that improve energy and operational efficiencies resulting in lower cost, lower carbon demands and overall margin improvement.
For Aemetis Biogas we plan to operate the biogas digesters to capture and monetize biogas as well as continue to build new dairy digesters and extend the existing pipeline in order to capture the carbon credits available in California. Funding for continued construction is based upon obtaining government guaranteed loans and executing on existing and new state grant programs.
For the Kakinada Plant, we plan to continue to develop sales channels for domestic products as the costs of feedstock normalize against the price of diesel, as recently announced governmental incentives take effect to promote the blending of biodiesel, and as feedstocks such as refined animal tallow are used domestically and exported. Additionally, we are in the process of obtaining approval to export refined animal tallow and biodiesel produced using animal tallow into international markets as the use of refined animal tallow received approval from the Pollution Control Board of India for production of biodiesel. The repatriation of funds from India to the parent company in the U.S. is reliant on favorable governmental approvals.
For the Riverbank project, we plan to continue project development and raise the funds necessary to construct and operate the Carbon Zero plant in Riverbank, California to produce renewable diesel and sustainable aviation fuel for transportation use as well as generate federal and state carbon credits available for the production and sale of low carbon fuels.
For all facilities in the United States, we plan to utilize the provision of the Inflation Reduction Act of 2022 by qualifying for tax credits in the form of an Investment Tax Credits, Production Tax Credits, and other credits, and to monetize the credits using the provisions of this congressional act.
In addition to the above we plan to continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling bonds in the taxable and tax-exempt markets, selling equity through the ATM and otherwise, selling the current EB-5 Phase II offering, or by vendor financing arrangements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated condensed financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
| ● |
Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A. |
| ● |
Results of Operations. An analysis of our financial results comparing the three and nine months ended September 30, 2023 and 2022. |
| ● |
Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition. |
| ● |
Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. |
The following discussion should be read in conjunction with our consolidated condensed financial statements and accompanying notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, particularly under “Part II, Item 1A. Risk Factors,” and in other reports we file with the SEC. All references to years relate to the calendar year ended December 31 of the particular year.
Overview
Founded in 2006 and headquartered in Cupertino, California, Aemetis is an international renewable natural gas and renewable fuels company focused on the acquisition, development and commercialization of innovative low and negative carbon intensity products and technologies that replace traditional petroleum-based products. Our mission is to generate sustainable and innovative renewable fuel solutions that benefit communities and restore our environment. We do this by building a local circular bioeconomy utilizing agricultural and waste to produce low and negative carbon, advanced renewable fuels that reduce greenhouse gas (“GHG”) emissions by replacing traditional petroleum-based products.
Our California Ethanol segment consists of a 65 million gallon per year capacity ethanol production facility located in Keyes, California (the “Keyes Plant”) that we own and operate. In addition to low carbon renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), Carbon Dioxide (“CO2”) and Condensed Distillers Solubles (“CDS”), all of which are sold as animal feed to more than 80 local dairies and feedlots, with CO₂ sold to food, beverage, and industrial customers. We are implementing several energy efficiency initiatives focused on significantly lowering the carbon intensity of our ethanol, primarily by decreasing use of natural gas at the Keyes plant. These energy efficiency projects include high efficiency heat exchangers; a two-megawatt solar microgrid with battery storage; an Allen Bradley Decision Control System (DCS) to manage and optimize energy use and other plant operations; and a Mechanical Vapor Recompression (MVR) system to reuse steam. These projects are expected to reduce natural gas use by converting key processes to use electricity rather than natural gas and by using low-carbon-intensity hydroelectric electricity or electricity produced onsite from solar panels. This will reduce GHG emissions and decrease the carbon intensity (CI) of fuel produced at the Keyes Plant. The lower CI of ethanol produced at the Keyes Plant will allow us to realize a higher price for the ethanol produced and sold at the Keyes Plant. During the last two weeks of December 2022, we undertook an extended maintenance cycle and accelerated the implementation of the ethanol plant energy efficiency upgrades noted above. Our decision was partly driven by the high natural gas prices in California during the period. Furthermore, after monitoring natural gas pricing and margin profitability, we decided to extend the maintenance cycle into the second quarter of 2023. With natural gas pricing in a reasonable range and the maintenance turn-around complete, we restarted the plant in the second quarter of 2023.
Our California Dairy Renewable Natural gas segment built, operates, and is actively expanding a network of anaerobic digesters at local dairies near the Keyes Plant (many of whom also purchase WDG produced by the Keyes Plant as animal feed); transports biogas by pipeline to an upgrading up located at the Keyes Plant site; converts the biogas to Renewable Natural Gas (“RNG”); and delivers the RNG to customers through the PG&E natural gas pipeline.
Our India Biodiesel segment owns and operates a plant in Kakinada, India (“Kakinada Plant”) with a nameplate capacity of 150 thousand metric tons per year, or about 50 million gallons per year, producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. We believe the Kakinada Plant is one of the largest biodiesel production facilities in India on a nameplate capacity basis. The Kakinada Plant is capable of processing a variety of vegetable oils and animal fat waste feedstocks into biodiesel that meets international product standards. Our Kakinada Plant can also distill the crude glycerin byproduct from the biodiesel refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive, and other industries.
Our All Other segment consists of: the development of our Carbon Zero biofuels production plant to produce renewable diesel and sustainable aviation fuel; the development of our Carbon Capture and Sequestration compression system and injection wells; operation of the Riverbank Industrial Complex; a research and development facility in Minneapolis, Minnesota; and our corporate offices in Cupertino, California.
Our Carbon Zero biofuels production plant is designed to produce low carbon intensity sustainable aviation fuel (“SAF”) and renewable diesel fuel (“RD”) using low carbon hydroelectric electricity, renewable hydrogen and non-edible renewable oils sourced from existing Aemetis biofuels plants and other sources. Our first Carbon Zero plant is scheduled to be built in Riverbank, California at the 125-acre former Riverbank Army ammunition plant. The Riverbank plant is expected to utilize zero carbon hydroelectric power to produce 90 million gallons per year of SAF and RD. The plant is expected to supply the aviation and truck markets with low carbon renewable fuels to reduce GHG emissions and other pollutants associated with conventional petroleum-based fuels. By producing low carbon renewable fuels, the Company will generate Renewable Identification Numbers (“RINs”) under the federal Renewable Fuel Standard (“RFS”), generate California Low Carbon Fuel Standard (“LCFS”) credits, and produce Inflation Reduction Act tax credits.
Our Carbon Capture subsidiary was established to build Carbon Capture and Sequestration (“CCS”) projects that generate LCFS and IRS 45Q tax credits by compressing and injecting CO₂ into deep wells that are monitored to ensure the long-term sequestration of carbon underground. California’s Central Valley has been identified as one of the world’s most favorable regions for large-scale CO₂ injection projects due to the subsurface geologic formation that absorbs and retains CO₂ gas. The two initial Aemetis CCS injection projects are expected to capture and sequester more than two million metric tons per year of CO₂ at the Aemetis biofuels plant sites in Keyes and Riverbank, California. In July 2022, Aemetis purchased 24 acres located at the Riverbank Industrial Complex site in Riverbank, California to develop a CCS injection well with more than 1 million metric tons per year of CO₂ sequestration capacity. We plan to construct a characterization well at each site to characterize the geology to provide information for permitting and planning the projects.
Our Minneapolis, Minnesota research and development laboratory develops efficient conversion technologies using low carbon intensity and waste feedstocks to produce low or below zero carbon intensity biofuels and biochemicals. We are focused on processes that extract sugar from cellulosic feedstocks and then utilize the remaining biomass to produce low carbon renewable hydrogen for the production of sustainable aviation fuel, renewable diesel and potential sale of renewable hydrogen to third parties as transportation fuel.
California Ethanol Revenue
Revenue generation for our California Ethanol segment relies upon supplying ethanol into the transportation fuel market in California and supplying feed products to dairy and other animal feed operations in California. We are actively implementing plans that will bring higher value for our fuel ethanol in an effort to improve our overall margins and to add incremental income to the California Ethanol segment, including, the implementation of the Solar Microgrid System, the installation of mechanical vapor recompression, and other energy efficiency technologies. The energy efficiency upgrades to the Keyes Plant will result in higher LCFS value through the reduction of the carbon intensity of the fuel ethanol produced at the plant.
We sell all ethanol, WDG, CDO, and CDS produced in this process to J.D. Heiskell. Our ethanol finished goods tank is leased by J.D. Heiskell and legal title to the product is transferred upon transfer of our finished ethanol to this location. The CO₂ produced by the Keyes Plant is sold to Messer Gas.
California Ethanol revenue is dependent on the price of ethanol, WDG, CDS, CO₂, and DCO. Ethanol pricing is influenced by local and national production and inventory levels, imported ethanol, corn prices, and gasoline demand, and is determined pursuant to a marketing agreement with a single fuel marketing customer and is generally based on daily and monthly pricing for ethanol delivered to the San Francisco Bay Area, California, as published by Oil Price Information Service (“OPIS”), as well as quarterly contracts negotiated by our marketing company with local fuel blenders. The price for WDG is influenced by the price of corn, the supply and price of distillers dried grains, and demand from the local dairy and feed markets and determined monthly pursuant to a marketing agreement with A.L. Gilbert and is generally determined in reference to the local price of dried distillers’ grains and other comparable feed products. Our revenue is further influenced by the price of natural gas, and our decision to operate the Keyes Plant at various capacity levels, conduct required maintenance, and respond to biological processes affecting output.
California Dairy Renewable Natural Gas Revenue
Since December 2018, we have utilized our relationships with California’s Central Valley dairy farmers by signing leases and raising funds to construct dairy digesters, a 40-mile pipeline, and a biogas-to-RNG upgrading facility that delivers RNG to a utility gas pipeline. We are currently producing RNG from seven digesters connected by our pipeline and have five additional dairy digesters under construction. We have a total of approximately 34 agreements with dairies to construct dairy digesters. Our revenue development strategy for the Dairy Renewable Natural Gas segment relies upon continuing to collect bio-methane gas from the existing dairy digesters, continuing to build out the network of dairy digesters, extending the pipeline to grow the supply of RNG available for sale, and utilizing the biogas-to-RNG upgrade unit to distribute utility-grade RNG to customers statewide.
Inflation Reduction Act of 2022
For all facilities in the United States, we plan to continue to use the provisions of the Inflation Reduction Act of 2022 by qualifying for renewable energy credits in the form of an Investment Tax Credits, Production Tax Credit, and other credits, and to monetize the credits using the provisions of this congressional act.
India Biodiesel Revenue
Our revenue strategy in India is based on continuing to sell biodiesel to our bulk fuel customers, fuel station customers, mining customers, industrial customers and tender offers placed by Government-owned Oil Marketing Companies (“OMCs”) for bulk purchases of fuels. During the first quarter, the government of India updated the national biofuels policy and adopted a new tax on diesel fuel to promote biodiesel blending. As a result, the OMCs are pricing the tenders at economically viable levels, allowing for biodiesel producers in India to begin production.
During the third quarter of 2023, we fulfilled an OMC tender offer for 17,066 metric tons of which 1596 metric tons of biodiesel revenue was in transit as of September 30, 2023 and would be recognized as revenue during the fourth quarter.
Results of Operations
Three Months Ended September 30, 2023, Compared to Three Months Ended September 30, 2022
Revenues
Our revenues are derived primarily from sales of ethanol and WDG for our California Ethanol segment, renewable natural gas for our Dairy Renewable Natural Gas segment, and biodiesel for our India Biodiesel segment.
| 2023 |
2022 |
Inc/(dec) |
% change |
|||||||||||||
| California Ethanol |
$ | 47,439 | $ | 60,908 | $ | (13,469 | ) | (22.1 | )% | |||||||
| California Dairy Renewable Natural Gas |
1,107 | 308 | 799 | 259.4 | % | |||||||||||
| India Biodiesel |
20,144 | 10,923 | 9,221 | 84.4 | % | |||||||||||
| Eliminations |
- | (308 | ) | 308 | (100.0 | )% | ||||||||||
| Total |
$ | 68,690 | $ | 71,831 | $ | (3,141 | ) | (4.4 | )% | |||||||
California Ethanol. For the three months ended September 30, 2023, the Company sold 13.8 million gallons of ethanol at an average price of $2.64 per gallon and 98 thousand tons of WDG at a price of $96 per ton. For the three months ended September 30, 2022, the Company sold 15.7 gallons of ethanol at an average price of $2.85 per gallon and 102 thousand tons of WDG at a price of $127 per ton. The decrease in revenue was attributable to decrease in sales volume by 12% coupled with decrease in average price by 7%.
California Dairy Renewable Natural Gas. During the three months ended September 30, 2023, we produced and sold 66.6 thousand MMBtu of renewable natural gas to an external party, at an average price of $2.13 per MMBtu and we also sold 271 thousand D3 RINs at average price of $2.97 per RIN. During the three months ended September 30, 2022, we produced 16.8 thousand MMBtus of dairy biogas that we used at the Keyes plant.
India Biodiesel. For the three months ended September 30, 2023, we generated 96% of our revenues from the sale of biodiesel, and 4% of our sales from other sales compared to 99% of our sales from biodiesel, and 1% of our sale from other sales for the three months ended September 30, 2022. The increase in revenues was primarily attributable to obtaining the tender offers from India's Oil Market Companies, making the production of biodiesel commercially viable for the Company. Biodiesel sales volume increased to 15.5 thousand metric tons in the three months ended September 30, 2023 compared to 7.0 thousand metric tons in the three months ended September 30, 2022 while price per ton decreased by 27%.
Cost of Goods Sold
| 2023 |
2022 |
Inc/(dec) |
% change |
|||||||||||||
| California Ethanol |
$ | 48,912 | $ | 64,671 | $ | (15,759 | ) | (24.4 | )% | |||||||
| California Dairy Renewable Natural Gas |
1,914 | 487 | 1,427 | 293.0 | % | |||||||||||
| India Biodiesel |
17,372 | 8,082 | 9,290 | 114.9 | % | |||||||||||
| All other |
- | 3 | (3 | ) | (100.0 | )% | ||||||||||
| Eliminations |
- | (308 | ) | 308 | (100.0 | )% | ||||||||||
| Total |
$ | 68,198 | $ | 72,935 | $ | (4,737 | ) | (6.5 | )% | |||||||
California Ethanol. For the three months ended September 30, 2023, we ground 5.0 million bushels of corn at $7.48 per bushel and incurred $1.9 million in chemicals and denaturant costs, $2.2 million in natural gas costs, and $2.2 million in transportation costs. For the three months ended September 30, 2022, we ground 5.5 million bushels of corn at $9.59 per bushel and incurred $1.7 million in chemicals and denaturant costs, $3.8 million in natural gas costs, and $2.5 million in transportation costs.
California Dairy Renewable Natural Gas. Cost of Goods Sold expenses relate to dairy manure payments, maintenance on the dairy digesters, and depreciation. Cost of Goods Sold increased with seven operating dairies as of September 30, 2023, compared to two operating dairies in the three months ended September 30, 2022.
India Biodiesel. The increase in costs of goods sold was attributable to the increase in production of biodiesel. In the three months ended September 30, 2023 we consumed 15.6 thousand metric tons of feedstock, compared to 9.4 thousand metric tons of feedstock in the same period in 2022. During the three months ended September 30, 2023 the average price of biodiesel feedstock was $752 per metric ton compared to $889 per metric ton in the same period as in 2022.
Gross profit (loss)
| 2023 |
2022 |
Inc/(dec) |
% change |
|||||||||||||
| California Ethanol |
$ | (1,473 | ) | $ | (3,763 | ) | $ | 2,290 | (60.9 | )% | ||||||
| California Dairy Renewable Natural Gas |
(807 | ) | (179 | ) | (628 | ) | 350.8 | % | ||||||||
| India Biodiesel |
2,772 | 2,841 | (69 | ) | (2.4 | )% | ||||||||||
| All other |
- | (3 | ) | 3 | (100.0 | )% | ||||||||||
| Total |
$ | 492 | $ | (1,104 | ) | $ | 1,596 | (144.6 | )% | |||||||
California Ethanol. The decrease in gross loss was attributable to lower corn prices and natural gas prices in 2023 compared to higher corn prices and natural gas prices in the 2022.
California Dairy Renewable Natural Gas. The increase in gross loss in the three months ended September 30, 2023 relates to an increase in manure and maintenance costs associated with having seven dairies producing biogas, compared to two dairies in the same period ended September 30, 2022.
India Biodiesel. The slight decrease in gross profit was attributable to decrease in the average sales price of biodiesel by 27% and refined glycerin by 33% offset by decrease of feedstock price by 15%.
Operating (income)/expense and non-operating (income)/expense
Substantially all of our research and development expenses were related to research and development activities in Minnesota.
Selling, general, and administrative (“SG&A”) expenses consist primarily of salaries and related expenses for employees, marketing expenses related to sales of ethanol and WDG in California Ethanol and biodiesel and other products in India Biodiesel, as well as professional fees, insurance, other corporate expenses, and related facilities expenses. Also included was of sublease rental income which was included as an offset to the SG&A expenses.
Other expense (income) expense consists primarily of interest and amortization expense attributable to our debt facilities and accretion of Series A preferred units. The debt facilities sometimes include stock or warrants issued as fees. The fair value of stock and warrants are amortized as amortization expense, except when the extinguishment accounting method is applied, in which case refinanced debt costs are recorded as extinguishment expense.
| 2023 |
2022 |
Inc/(dec) |
% change |
|||||||||||||
| Research and development expenses |
$ | 36 | $ | 52 | $ | (16 | ) | (30.8 | )% | |||||||
| Selling, general and administrative expenses |
8,985 | 6,439 | 2,546 | 39.5 | % | |||||||||||
| Other expense (income): |
||||||||||||||||
| Interest expense |
||||||||||||||||
| Interest rate expense |
$ | 8,749 | $ | 5,456 | $ | 3,293 | 60.4 | % | ||||||||
| Debt related fees and amortization expense |
1,433 | 1,633 | (200 | ) | (12.2 | )% | ||||||||||
| Accretion and other expenses of Series A preferred units |
7,739 | 2,774 | 4,965 | 179.0 | % | |||||||||||
| Gain on debt extinguishment |
- | 49,386 | (49,386 | ) | (100.0 | )% | ||||||||||
| Other (income) expense |
(1,853 | ) | (2 | ) | (1,851 | ) | 92550.0 | % | ||||||||
The increase in SG&A expenses for the three months ended September 30, 2023 was due to increases in (i) stock compensation, salaries and wages of $0.4 million, (ii) professional fees of $1.8 million and (iii) miscellaneous expense of $0.6 million due to reclassifying cost of goods sold depreciation, maintenance costs and plant services to SG&A during the extended maintenance cycle and the accelerated implementation of several important ethanol plant energy efficiency upgrades to the Keyes Plant.
Interest expense increased in the three months ended September 30, 2023 due to Construction Loan debt, additional borrowings under the Revolving Loans and Revolving Credit Facilities, and the impact of rising interest rates on our variable interest rate debt compared to the same period in the prior year. The increase in accretion and other expenses of the Series A Preferred Units was due to provisions of the PUPA Amendments.
Nine Months Ended September 30, 2023, Compared to Nine Months Ended September 30, 2022
Revenues
| 2023 |
2022 |
Inc/(dec) |
% change |
|||||||||||||
| California Ethanol |
$ | 59,246 | $ | 178,840 | $ | (119,594 | ) | (66.9 | )% | |||||||
| California Dairy Renewable Natural Gas |
1,523 | 940 | 583 | 62.0 | % | |||||||||||
| India Biodiesel |
55,184 | 10,941 | 44,243 | 404.4 | % | |||||||||||
| All other |
- | - | - | 0.0 | % | |||||||||||
| Eliminations |
- | (940 | ) | 940 | (100.0 | )% | ||||||||||
| Total |
$ | 115,953 | $ | 189,781 | $ | (73,828 | ) | (38.9 | )% | |||||||
California Ethanol. For the nine months ended September 30, 2023, the Company sold 16.7 million gallons of ethanol at a price of $2.72 per gallon and 122 thousand tons of WDG at a price of $98 per ton. The decrease in revenues was due to an extended maintenance cycle and accelerated the implementation of several important ethanol plant energy efficiency upgrades to the Keyes Plant during the first five months of 2023 coupled with decrease in average price of ethanol by 5% and WDG by 24%.
California Dairy Renewable Natural Gas. During the nine months ended September 30, 2023, we produced and sold 142 thousand MMBtu of physical molecules to an external party, at an average price of $5.06 per MMBtu. Also, we started selling D3 RINs during the quarter and we sold 271 thousand D3 RINS at an average price of $2.97 per RIN. During the nine months ended September 30, 2022, we produced and sold dairy biogas of $940 thousand to an intercompany party.
India Biodiesel. For the nine months ended September 30, 2023, we generated 97% of our revenues from the sale of biodiesel, and 3% of our sales from other sales compared to 100% of our sales from other sales for the nine months ended September 30, 2022. The increase in revenues was primarily attributable to receiving the tender offer from the India Oil Marketing Companies, which made the production of biodiesel commercially viable for the Company. Biodiesel sales volume increased to 43.7 thousand metric tons in the nine months ended September 30, 2023 compared to 7.0 thousand metric tons in the nine months ended September 30, 2022, while price per ton decreased to $1,219 per metric ton from $1,550 per metric ton.
Cost of Goods Sold
| 2023 |
2022 |
Inc/(dec) |
% change |
|||||||||||||
| California Ethanol |
$ | 63,053 | $ | 185,635 | $ | (122,582 | ) | (66.0 | )% | |||||||
| California Dairy Renewable Natural Gas |
4,167 | 1,394 | 2,773 | 198.9 | % | |||||||||||
| India Biodiesel |
47,580 | 8,082 | 39,498 | 100.0 | % | |||||||||||
| All other |
- | 13 | (13 | ) | (100.0 | )% | ||||||||||
| Eliminations |
- | (940 | ) | 940 | (100.0 | )% | ||||||||||
| Total |
$ | 114,800 | $ | 194,184 | $ | (79,384 | ) | (40.9 | )% | |||||||
California Ethanol. For the nine months ended September 30, 2023, we ground 6.4 million bushels of corn at $7.34 per bushel. This decrease from the same period in 2022 was due to an extended maintenance period at the Keyes Plant. As a result of the Keyes Plant shutdown, our corn costs decreased by $105.0 million, natural gas costs decreased by $8.0 million, chemical and denaturant costs decreased by $2.5 million, and transportation costs decreased by $3.9 million compared to the same period in 2022.
California Dairy Renewable Natural Gas. Cost of Goods Sold expenses relate to dairy manure payments, maintenance on the dairy digesters, and depreciation. Cost of goods sold will continue to increase as we expand the business.
India Biodiesel. The increase in costs of goods sold was attributable to increased production. In the nine months ended September 30, 2023 biodiesel feedstock volume was 43.7 thousand metric tons, compared to 9.4 thousand metric tons in the same period as in 2022. During the nine months ended September 30, 2023 the average price of biodiesel feedstock was $797 per metric ton compared to $889 per metric ton in the same period as in 2022.
Gross profit (loss)
| 2023 |
2022 |
Inc/(dec) |
% change |
|||||||||||||
| California Ethanol |
$ | (3,807 | ) | $ | (6,795 | ) | $ | 2,988 | (44.0 | )% | ||||||
| California Dairy Renewable Natural Gas |
(2,644 | ) | (454 | ) | (2,190 | ) | 482.4 | % | ||||||||
| India Biodiesel |
7,604 | 2,859 | 4,745 | 166.0 | % | |||||||||||
| All other |
- | (13 | ) | 13 | (100.0 | )% | ||||||||||
| Total |
$ | 1,153 | $ | (4,403 | ) | $ | 5,556 | (126.2 | )% | |||||||
California Ethanol. The decrease in gross loss was attributable to an extended maintenance cycle for first five months of 2023 coupled with decrease in corn price by 23% and natural gas prices by 52%.
California Dairy Renewable Natural Gas. The increase in gross loss in the nine months ended September 30, 2023 relates to an increase in manure and maintenance costs associated with having seven dairies producing biogas, compared to two dairies in the same period ended September 30, 2022.
India Biodiesel. The increase in gross profit was attributable to the increase in production and sales of biodiesel to meet the government of India's tender offer as the tender offer was received at the start of the first quarter.
Operating (income)/expense and non-operating (income)/expense
| 2023 |
2022 |
Inc/(dec) |
% change |
|||||||||||||
| Research and development expenses |
$ | 115 | $ | 139 | $ | (24 | ) | (17.3 | )% | |||||||
| Selling, general and administrative expenses |
29,480 | 21,166 | 8,314 | 39.3 | % | |||||||||||
| Other expense (income): |
||||||||||||||||
| Interest expense |
||||||||||||||||
| Interest rate expense |
$ | 24,126 | $ | 14,819 | $ | 9,307 | 62.8 | % | ||||||||
| Debt related fees and amortization expense |
4,732 | 5,199 | (467 | ) | (9.0 | )% | ||||||||||
| Accretion and other expenses of Series A preferred units |
20,188 | 5,920 | 14,268 | 241.0 | % | |||||||||||
| Loss on debt extinguishment |
- | 49,386 | (49,386 | ) | (100.0 | )% | ||||||||||
| Gain on litigation |
- | (1,400 | ) | 1,400 | (100.0 | )% | ||||||||||
| Other expense (income) |
(2,020 | ) | (14,297 | ) | 12,277 | (85.9 | )% | |||||||||
The increase in SG&A expenses for the nine months ended September 30, 2023 was due to increases in (i) stock compensation, salaries and wages of $2.8 million due to issuing a grant of RSAs, (ii) Depreciation and Amortization of $1.7 million due to reclassifying cost of goods sold depreciation to SG&A depreciation, (iii) Taxes, Insurances, Rent and Utilities increase of $1.1 million, (iv) supplies, other services and professional fees of $2.3 million and (v) Miscellaneous expense increase of $1.8 million as we reclassified cost of goods sold to SG&A as we were not operating the Keyes Plant until the end of May.
Interest expense increased in the nine months ended September 30, 2023 additional Construction Loan debt, additional borrowings under the Revolving Loans and Revolving Credit Facilities, and the impact of rising interest rates on our variable interest rate debt compared to the same period in the prior year. The increase in accretion and other expenses of the Series A Preferred Units was due to provisions of the recent PUPA Amendments.
Liquidity and Capital Resources
Cash and Cash Equivalents
Cash and cash equivalents were$3.9 million at September 30, 2023, of which $0.8 million was held in North America and the rest was held at our Indian subsidiary. Our current ratio at September 30, 2023 was 0.21 which stayed same as at December 31, 2022. We expect that our future available liquidity resources will consist primarily of cash generated from operations, remaining cash balances, borrowings available, if any, under our senior debt facilities and our subordinated debt facilities, and any additional funds raised through sales of equity. The use of proceeds from all equity raises and debt financings are subject to approval by our senior lender.
Liquidity
Cash and cash equivalents, current assets, current liabilities and debt at the end of each period were as follows:
| As of |
||||||||
| September 30, 2023 |
December 31, 2022 |
|||||||
| Cash and cash equivalents |
$ | 3,899 | $ | 4,313 | ||||
| Current assets (including cash, cash equivalents, and deposits) |
78,491 | 18,136 | ||||||
| Current and long-term liabilities (excluding all debt) |
190,897 | 162,728 | ||||||
| Current & long-term debt |
286,534 | 246,240 | ||||||
Our principal sources of liquidity have been cash provided by the sale of equity, operations, and borrowings under various debt arrangements.
Our principal uses of cash have been to refinance indebtedness, fund operations, and for capital expenditures. We anticipate these uses will continue to be our principal uses of cash in the future. Global financial and credit markets have been volatile in recent years, and future adverse conditions of these markets could negatively affect our ability to secure funds or raise capital at a reasonable cost, or at all.
We operate in a volatile market in which we have limited control over the major components of input costs and product revenues and are making investments in future facilities and facility upgrades that improve the overall margin while lessening the impact of these volatile markets. As such, we expect cash provided by operating activities to fluctuate in future periods primarily because of changes in the prices for corn, ethanol, WDG, DCO, CDS, biodiesel, waste fats and oils, glycerin, non-refined palm oil, natural gas federal RINs and LCFS credits. To the extent that we experience periods in which the spread between ethanol prices, and corn and energy costs narrow or the spread between biodiesel prices and waste fats and oils or palm oil and energy costs narrow, we may require additional working capital to fund operations.
As a result of negative capital, negative market conditions, negative operating results, and collateralization of substantially all of the company assets, the Company has been reliant on its senior secured lender to provide additional funding and has been required to remit substantially all excess cash from operations to the senior secured lender. In order to meet its obligations during the next twelve months, the Company will need to either refinance the Company’s debt or receive the continued cooperation of its senior lender. This dependence on the senior lender raises substantial doubt about the Company’s ability to continue as a going concern. The Company plans to pursue the following strategies to improve the course of the business.
For the Keyes Plant, we restarted the plant during the second quarter after completing an extended maintenance cycle and accelerating the implementation of several important ethanol plant energy efficiency upgrades. We plan to operate the plant and continue to improve its financial performance by completing the existing upgrades and adopting new technologies and process changes that allow for energy efficiency, cost reduction or revenue enhancements, as well as, executing upon awarded grants that improve energy and operational efficiencies resulting in lower cost, lower carbon demands and overall margin improvement.
For Aemetis Biogas, we plan to operate the biogas digesters to capture and monetize biogas as well as continue to build new dairy digesters and extend the existing pipeline in order to capture the carbon credits available in California. Funding for continued construction is based upon obtaining government guaranteed loans and executing on existing and new state grant programs.
For the Kakinada Plant, we plan to continue to develop sales channels for domestic products as the costs of feedstock normalize against the price of diesel, as recently announced governmental incentives take effect to promote the blending of biodiesel, and as feedstocks such as refined animal tallow are used domestically and exported. Additionally, we are in the process of obtaining approval to export refined animal tallow and biodiesel produced using animal tallow into international markets as the use of refined animal tallow received approval from the Pollution Control Board of India for production of biodiesel. The repatriation of funds from India to the parent company in the U.S. is reliant on favorable governmental approvals.
For the Riverbank project, we plan to continue project development and raise the funds necessary to construct and operate the Carbon Zero plant in Riverbank, California to produce renewable diesel and sustainable aviation fuel for transportation use as well as generate federal and state carbon credits available for the production and sale of low carbon fuels.
For all facilities in the United States, we plan to utilize the provision of the Inflation Reduction Act of 2022 by qualifying for tax credits in the form of an Investment Tax Credits, Production Tax Credits, and other credits, and to monetize the credits using the provisions of this congressional act.
In addition to the above we plan to continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling bonds in the taxable and tax-exempt markets, selling equity through the ATM and otherwise, selling the current EB-5 Phase II offering, and by vendor financing arrangements.
At September 30, 2023, the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes equaled $182 million. The maturity dates for the Third Eye Capital financing arrangements are August 31, 2023, for $11.5 million which was paid off subsequently, April 1, 2025, for $125.8 million, March 1, 2025, for $25.0 million and March 1, 2026, for $24.9 million.
As of the date of this report, the Company has $50.0 million additional borrowing capacity to fund future cash flow requirements under the Reserve Liquidity Notes with a maturity date April 1, 2024.
Change in Working Capital and Cash Flows
The following table (in thousands) describes the changes in current and long-term debt during the nine months ended September 30, 2023:
| Increases to debt: |
||||||||
| Accrued interest |
$ | 24,619 | ||||||
| Maturity date extension fee and other fees added to senior debt |
2,330 | |||||||
| Sub debt extension fees |
680 | |||||||
| Revolving Notes Series B draw |
800 | |||||||
| Fuels Revolving Line draw |
6,598 | |||||||
| Construction Loan draw |
13,598 | |||||||
| Working capital loan draw |
22,427 | |||||||
| Total increases to debt |
$ | 71,052 | ||||||
| Decreases to debt: |
||||||||
| Principal, fees, and interest payments to senior lender |
$ | (5,445 | ) | |||||
| Principal and interest payments to EB-5 investors |
(148 | ) | ||||||
| Change in debt issuance costs, net of amortization |
(1,254 | ) | ||||||
| Term loan payments |
(7 | ) | ||||||
| Construction Loan Payments |
(1,228 | ) | ||||||
| Working capital loan payments |
(22,676 | ) | ||||||
| Total decreases to debt |
$ | (30,758 | ) | |||||
| Change in total debt |
$ | 40,294 |
Working capital changes resulted in (i) a $3.5 million increase in inventories due to the Keyes Plant restarting operations and built up of inventory for production for winter months in India (ii) a $3.3 million increase in accounts receivable due to UBPL fulfilling a government tender in the third quarter of 2023, and (iii) a slight increase in other current assets of $0.2 million due to receipt of the restricted cash from the Construction loan. This was partially offset by (i) a $1.4 million decrease in prepaid expenses mainly due to the use of a J.D. Heiskell pre-payment, and (iii) a $0.4 million decrease in cash.
Net cash used in operating activities during the nine months ended September 30, 2023, was $19.2 million, consisting of non-cash charges of $36.7 million, net cash used by operating assets and liabilities of $34.8 million, and net loss of $21.0 million. The non-cash charges consisted of: (i) $4.8 million in amortization of debt issuance costs and other intangible assets, (ii) $5.2 million in depreciation expenses, (iii) $6.2 million in stock-based compensation expense and a warrant grant to our working capital partner, (iv) $20.2 million in preferred unit accretion and other expenses of Series A preferred units. Net changes in operating assets and liabilities consisted primarily of (i) an increase in accrued interest of $18.5 million, (ii) an increase in accounts payable of $4.7 million, (iii) an increase in other liabilities of $3.3 million, and (iv) a decrease in prepaid expenses of $2.4 million. This was partially offset by an increase in other assets of $56.8 million, (ii) an increase in inventories of $3.6 million and (iii) an increase in accounts receivable of $3.3 million.
Cash used by investing activities was $10.9 million, of which $18.6 million were used by capital projects, partially offset by grant proceeds and other reimbursements of $7.7 million.
Cash provided by financing activities was $30.6 million, consisting of $14.8 million from issuance of common stock and $41.4 million from proceeds from borrowings, partially offset by repayments of borrowings of $22.6 million, payment of debt renewal and waiver fees of $1.7 million and payments on finance leases of $1.4 million.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. We believe that of our most significant accounting policies and estimates, defined as those policies and estimates that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain are: revenue recognition; recoverability of long-lived assets, Series A Preferred unit liability, and debt modification and extinguishment accounting. These significant accounting principles are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2022.
Recently Issued Accounting Pronouncements
None reported beyond those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
Off Balance Sheet Arrangements
We had no off-balance sheet arrangements during the three months ended September 30, 2023.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
Management (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our CEO and CFO concluded that, although remediation plans were initiated to address the material weaknesses over financial reporting as identified in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, the disclosure controls and procedures along with the related internal controls over financial reporting were not effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and is compiled and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
As discussed in greater detail under Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the year ended December 31, 2022, we initiated a remediation plan to address the material weakness in our internal control related to information technology general controls and information technology systems.
For a more comprehensive discussion of the material weaknesses in internal control over financial reporting identified by management as of December 31, 2022, and the remedial measures undertaken to address these material weaknesses, investors are encouraged to review Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the year ended December 31, 2022.
The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. For additional information regarding such matters, see “Part I, Item 1. Financial Statements – Note 5. Commitments and Contingencies - Legal Proceedings.”
There has been no change in risk factors since the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 9, 2023. We urge you to read the risk factors contained therein.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the third quarter of 2023, we issued two-year warrants to purchase 113 thousand shares of our common stock to subordinated lenders in connection with a extension of their debt, and we also issued 113 thousand shares of common stock in connection with their exercise of the warrants. These issuances were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as issuances of securities not involving any public offering.
Item 3. Defaults Upon Senior Securities.
No unresolved defaults on senior securities occurred during the nine months ended September 30, 2023.
Item 4. Mine Safety Disclosures.
None.
None.
| 10.1 | Fourth Waiver and Amendment to Series A Preferred Unit Purchase Agreement, dated as of November 8, 2023, by and among Aemetis Biogas LLC, Protair-X Americas, Inc. and Third Eye Capital Corporation. |
| 31.1 | Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 |
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| 32.1 |
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| 32.2 |
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| 101.INS * |
Inline XBRL Instance Document |
| 101.SCH * |
Inline XBRL Taxonomy Extension Schema |
| 101.CAL * |
Inline XBRL Taxonomy Extension Calculation Linkbase |
| 101.DEF * |
Inline XBRL Taxonomy Extension Definition Linkbase |
| 101.LAB * |
Inline XBRL Taxonomy Extension Label Linkbase |
| 101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase |
| 104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| AEMETIS, INC. |
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| Date: November 9, 2023 | By: |
/s/ Eric A. McAfee |
| Eric A. McAfee Chief Executive Officer (Principal Executive Officer) |
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| Date: November 9, 2023 | By: |
/s/ Todd Waltz |
| Todd Waltz Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
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