AEMETIS, INC
10-Ks and 10-Qs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
———————
FORM 10-Q
———————
☑
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended:
March 31,
2020
OR
☐
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number:
001-36475
———————
AEMETIS, INC.
(Exact name of registrant as specified in its
charter)
———————
|
Nevada
|
26-1407544
|
|
(State or other jurisdiction
|
(I.R.S. Employer
|
|
of incorporation or organization)
|
Identification No.)
|
20400 Stevens Creek Blvd., Suite 700
Cupertino, CA 95014
(Address of Principal Executive Offices, including zip
code)
(408) 213-0940
(
Registrant’s
telephone number, including area code)
|
Title of each class of registered securities
|
|
Trading Symbol
|
|
Name of each exchange on which registered
|
|
Common Stock, $0.001 par value
|
|
AMTX
|
|
NASDAQ
|
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ☑
No ☐
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
☑
No
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer ☐ Accelerated filer
☐ Non-accelerated filer ☐ Smaller
reporting company ☑
Emerging
growth company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
☑
The
number of shares outstanding of the registrant’s Common Stock
on April 30, 2020 was 20,683,562 shares.
AEMETIS, INC.
FORM 10-Q
Quarterly Period Ended March 31, 2020
INDEX
PART I--FINANCIAL INFORMATION
|
Item 1
|
Financial Statements.
|
4
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
|
32
|
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market
Risk.
|
44
|
|
Item 4.
|
Controls and Procedures.
|
44
|
PART II--OTHER INFORMATION
|
Item 1.
|
Legal Proceedings
|
45
|
|
Item 1A.
|
Risk Factors.
|
45
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of
Proceeds.
|
46
|
|
Item 3.
|
Defaults Upon Senior Securities.
|
46
|
|
Item 4.
|
Mine Safety Disclosures.
|
46
|
|
Item 5.
|
Other Information.
|
46
|
|
Item 6.
|
Exhibits.
|
47
|
|
SIGNATURES
|
|
48
|
2
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, maintain and protect
new and existing intellectual property rights; our ability to
adopt, develop and commercialize new technologies; our ability to
refinance our senior debt on more commercial terms or at all; our
ability to continue to fund operations and our future sources of
liquidity and capital resources; our ability to sell additional
notes under our EB-5 note program and our expectations regarding
the release of funds from escrow under our EB-5 note program; our
ability to improve margins; and our ability to raise additional
capital. Words or phrases such as “anticipates,”
“may,” “will,” “should,”
“believes,” “estimates,”
“expects,” “intends,” “plans,”
“predicts,” “projects,”
“targets,” “will likely result,”
“will continue” or similar expressions are intended to
identify forward-looking statements. These forward-looking
statements are based on current assumptions and predictions and are
subject to numerous risks and uncertainties. Actual results or
events could differ materially from those set forth or implied by
such forward-looking statements and related assumptions due to
certain factors, including, without limitation, the risks set forth
in Part II, Item 1A. Risk Factors of this Quarterly Report on Form
10-Q, 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.
3
PART I - FINANCIAL INFORMATION
AEMETIS, INC.
CONSOLIDATED
CONDENSED BALANCE SHEETS
(In thousands except for par value)
|
|
March 31,
2020
|
December 31,
2019
|
|
Assets
|
(unaudited)
|
|
|
Current
assets:
|
|
|
|
Cash
and cash equivalents
|
$
303
|
$
656
|
|
Accounts
receivable
|
1,584
|
2,036
|
|
Inventories
|
5,246
|
6,518
|
|
Prepaid
expenses
|
910
|
794
|
|
Other
current assets
|
1,810
|
2,572
|
|
Total
current assets
|
9,853
|
12,576
|
|
|
|
|
|
Property,
plant and equipment, net
|
90,628
|
84,226
|
|
Operating
lease right-of-use assets
|
397
|
557
|
|
Other
assets
|
2,937
|
2,537
|
|
Total
assets
|
$
103,815
|
$
99,896
|
|
|
|
|
|
Liabilities and stockholders' deficit
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
16,904
|
$
15,968
|
|
Current
portion of long term debt
|
6,036
|
5,792
|
|
Short
term borrowings
|
17,327
|
16,948
|
|
Mandatorily
redeemable Series B convertible preferred stock
|
3,175
|
3,149
|
|
Accrued
property taxes
|
4,378
|
4,095
|
|
Accrued
contingent litigation fees
|
6,200
|
6,200
|
|
Other
current liabilities
|
6,935
|
5,667
|
|
Total
current liabilities
|
60,955
|
57,819
|
|
Long
term liabilities:
|
|
|
|
Senior
secured notes
|
112,177
|
107,205
|
|
EB-5
notes
|
36,500
|
36,500
|
|
GAFI
secured and revolving notes
|
30,847
|
29,856
|
|
Long
term subordinated debt
|
6,161
|
6,124
|
|
Series
A preferred units
|
16,322
|
14,077
|
|
Other
long term liabilities
|
7,542
|
2,687
|
|
Total
long term liabilities
|
209,549
|
196,449
|
|
|
|
|
|
Stockholders'
deficit:
|
|
|
|
Series
B convertible preferred stock, $0.001 par value; 7,235 authorized;
1,323 shares issued and outstanding each period, respectively
(aggregate liquidation preference of $3,969 for each period
respectively)
|
1
|
1
|
|
Common
stock, $0.001 par value; 40,000 authorized; 20,683 and 20,570
shares issued and outstanding each period,
respectively
|
21
|
21
|
|
Additional
paid-in capital
|
87,255
|
86,852
|
|
Accumulated
deficit
|
(249,473
)
|
(237,421
)
|
|
Accumulated
other comprehensive loss
|
(4,493
)
|
(3,825
)
|
|
Total
stockholders' deficit
|
(166,689
)
|
(154,372
)
|
|
Total
liabilities and stockholders' deficit
|
$
103,815
|
$
99,896
|
The accompanying notes are an integral part of the financial
statements.
4
AEMETIS, INC.
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
(Unaudited, in thousands except for earnings per
share)
|
|
For the three months ended March 31,
|
|
|
|
2020
|
2019
|
|
Revenues
|
$
39,480
|
$
41,888
|
|
|
|
|
|
Cost
of goods sold
|
39,913
|
42,239
|
|
|
|
|
|
Gross
loss
|
(433
)
|
(351
)
|
|
|
|
|
|
Research
and development expenses
|
117
|
33
|
|
Selling,
general and administrative expenses
|
3,936
|
4,241
|
|
Operating
loss
|
(4,486
)
|
(4,625
)
|
|
|
|
|
|
Other
(income) expense:
|
|
|
|
Interest
expense
|
|
|
|
Interest
rate expense
|
5,586
|
4,986
|
|
Debt
related fees and amortization expense
|
1,290
|
1,223
|
|
Accretion
of Series A preferred units
|
960
|
449
|
|
Other
(income) expense
|
(63
)
|
(623
)
|
|
Loss
before income taxes
|
(12,259
)
|
(10,660
)
|
|
Income
tax expense (benefit)
|
(207
)
|
7
|
|
Net
loss
|
$
(12,052
)
|
$
(10,667
)
|
|
|
|
|
|
Less:
Net loss attributable to non-controlling interest
|
-
|
(938
)
|
|
Net
loss attributable to Aemetis, Inc.
|
$
(12,052
)
|
$
(9,729
)
|
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
Foreign
currency translation gain (loss)
|
(668
)
|
58
|
|
Comprehensive
loss
|
$
(12,720
)
|
$
(10,609
)
|
|
|
|
|
|
Net loss per common share attributable to Aemetis,
Inc.
|
|
|
|
Basic
|
$
(0.58
)
|
$
(0.48
)
|
|
Diluted
|
$
(0.58
)
|
$
(0.48
)
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
|
Basic
|
20,651
|
20,367
|
|
Diluted
|
20,651
|
20,367
|
The accompanying notes are an integral part of the financial
statements.
5
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
|
For the three months ended March 31,
|
|
|
|
2020
|
2019
|
|
Operating activities:
|
|
|
|
Net
loss
|
$
(12,052
)
|
$
(10,667
)
|
|
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
|
|
|
|
Share-based
compensation
|
310
|
290
|
|
Depreciation
|
1,090
|
1,138
|
|
Debt
related fees and amortization expense
|
1,290
|
1,223
|
|
Intangibles
and other amortization expense
|
12
|
12
|
|
Accretion
of Series A preferred units
|
960
|
449
|
|
Deferred
tax benefit
|
(215
)
|
-
|
|
Change
in fair value of stock appreciation rights
|
-
|
35
|
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
384
|
(973
)
|
|
Inventories
|
1,075
|
(173
)
|
|
Prepaid
expenses
|
(117
)
|
373
|
|
Other
assets
|
428
|
(220
)
|
|
Accounts
payable
|
1,074
|
2,755
|
|
Accrued
interest expense and fees
|
5,440
|
4,201
|
|
Other
liabilities
|
931
|
(550
)
|
|
Net
cash provided by (used in) operating activities
|
610
|
(2,107
)
|
|
|
|
|
|
Investing activities:
|
|
|
|
Capital
expenditures
|
(2,372
)
|
(598
)
|
|
Net
cash used in investing activities
|
(2,372
)
|
(598
)
|
|
|
|
|
|
Financing activities:
|
|
|
|
Proceeds
from borrowings
|
3,780
|
7,349
|
|
Repayments
of borrowings
|
(3,645
)
|
(5,759
)
|
|
GAFI
proceeds from borrowing
|
-
|
24
|
|
GAFI
repayments of borrowings
|
-
|
(55
)
|
|
Proceeds
from Series A preferred units financing
|
1,285
|
-
|
|
Net
cash provided by financing activities
|
1,420
|
1,559
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
(11
)
|
1
|
|
Net
change in cash and cash equivalents for period
|
(353
)
|
(1,145
)
|
|
Cash
and cash equivalents at beginning of period
|
656
|
1,188
|
|
Cash
and cash equivalents at end of period
|
$
303
|
$
43
|
|
|
|
|
|
Supplemental
disclosures of cash flow information, cash paid:
|
|
|
|
Cash
paid for interest, net of capitalized interest of $88 and $64 for
the three months ended March 31, 2020 and 2019,
respectively
|
$
54
|
$
721
|
|
Income
taxes paid
|
8
|
-
|
|
Supplemental
disclosures of cash flow information, non-cash
transactions:
|
|
|
|
Subordinated
debt extension fees added to debt
|
340
|
340
|
|
Fair
value of warrants issued to subordinated debt holders
|
93
|
67
|
|
TEC
debt extension, waiver fees, promissory notes fees added to
debt
|
29
|
1,102
|
|
Capital
expenditures in accounts payable
|
2,289
|
839
|
|
Operating
lease liabilities arising from obtaining right of use
assets
|
-
|
1,181
|
|
Capital
expenditures purchased on financing
|
5,652
|
-
|
The accompanying
notes are an integral part of the financial
statements
.
6
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in thousands)
|
For the
three months ended March 31, 2020
|
||||||||
|
|
|
|
|
Accumulated Other
|
Total
|
|||
|
|
Series B
Preferred Stock
|
Common
Stock
|
Additional
|
Accumulated
|
Comprehensive
|
Stockholders'
|
||
|
|
Shares
|
Dollars
|
Shares
|
Dollars
|
Paid-in
Capital
|
Deficit
|
Income/(Loss)
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2019
|
1,323
|
$
1
|
20,570
|
$
21
|
$
86,852
|
$
(237,421
)
|
$
(3,825
)
|
$
(154,372
)
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
310
|
-
|
-
|
310
|
|
Issuance
and exercise of warrants
|
-
|
-
|
113
|
-
|
93
|
-
|
-
|
93
|
|
Foreign
currency translation loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(668
)
|
(668
)
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(12,052
)
|
-
|
(12,052
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2020
|
1,323
|
$
1
|
20,683
|
$
21
|
$
87,255
|
$
(249,473
)
|
$
(4,493
)
|
$
(166,689
)
|
|
For the three months ended March 31, 2019
|
|||||||||
|
|
|
|
|
|
Accumulated Other
|
|
Total
|
||
|
|
Series
B Preferred Stock
|
Common
Stock
|
Additional
|
Accumulated
|
Comprehensive
|
Noncontrolling
|
Stockholders'
|
||
|
Description
|
Shares
|
Dollars
|
Shares
|
Dollars
|
Paid-in Capital
|
Deficit
|
Income/(Loss)
|
Interest
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2018
|
1,323
|
$
1
|
20,345
|
$
20
|
$
85,917
|
$
(193,204
)
|
$
(3,576
)
|
$
(4,740
)
|
$
(115,582
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
290
|
-
|
-
|
-
|
290
|
|
Issuance
and exercise of warrants
|
-
|
-
|
30
|
-
|
67
|
-
|
-
|
-
|
67
|
|
Foreign
currency translation gain
|
-
|
-
|
-
|
-
|
-
|
-
|
58
|
-
|
58
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(9,729
)
|
-
|
(938
)
|
(10,667
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2019
|
1,323
|
$
1
|
20,375
|
$
20
|
$
86,274
|
$
(202,933
)
|
$
(3,518
)
|
$
(5,678
)
|
$
(125,834
)
|
The accompanying
notes are an integral part of the financial
statements
.
7
1.
Nature of Activities and Summary of Significant Accounting
Policies
Nature of Activities
.
Headquartered in Cupertino, California, Aemetis, Inc. (collectively
with its subsidiaries on a consolidated basis,
“Aemetis,” the “Company,” “we,”
“our” or “us”) is an advanced renewable
fuels and biochemicals company focused on the acquisition,
development and commercialization of innovative technologies that
replace traditional petroleum-based products through the conversion
of second-generation ethanol and biodiesel plants into advanced
biorefineries. Founded in 2006, we own and operate a 60
million gallon per year ethanol facility (“Keyes
Plant”) in the California Central Valley near Modesto where
we manufacture and produce ethanol, high proof alcohol, wet
distillers’ grains (“WDG”), condensed distillers
solubles (“CDS”), and distillers’ corn oil
(“DCO”). We also own and operate a 50 million
gallon per year renewable chemical and advanced fuel production
facility (“Kakinada Plant”) on the East Coast of India
producing high quality distilled biodiesel and refined glycerin for
customers in India and Europe. We operate a research and
development laboratory to develop efficient conversion technologies
using waste feedstocks to produce biofuels and biochemicals.
Additionally, we own a partially completed plant in Goodland,
Kansas (the “Goodland Plant”) through our subsidiary
Goodland Advanced Fuels, Inc., (“GAFI”), which was
formed to acquire the Goodland Plant. On December 31, 2019 we
exercised an option to acquire all capital stock of GAFI for $10
and consolidated assets, liabilities, and equity of GAFI as a
wholly-owned subsidiary from December 31, 2019. Prior to December
31, 2019, GAFI activity is shown as non-controlling interest in the
consolidated statements of operations.
We also lease a site in Riverbank, California, near the Keyes
Plant, where we plan to utilize biomass-to-fuel technology that we
have licensed from LanzaTech Technology (“LanzaTech”)
and InEnTec Technology (“InEnTec”) to build a
cellulosic ethanol production facility in Riverbank, California
(the “Riverbank Cellulosic Ethanol Facility”) capable
of converting local California surplus biomass – principally
agricultural waste – into ultra-low carbon renewable
cellulosic ethanol (the “Riverbank Project”). By
producing ultra-low carbon renewable cellulosic ethanol, we expect
to capture higher value D3 cellulosic renewable identification
numbers (“RINs”) and California’s Low Carbon Fuel
Standard (“LCFS”) credits.
In December 2018, we acquired a 5.2-acre parcel of land for the
construction of a facility by Messer to sell carbon dioxide
(“CO
2
”)
produced at the Keyes Plant (the “CO
2
Project”). The Aemetis section
of the CO
2
Project construction was completed in
January 2020 and Messer completed construction on their section in
April 2020. We commenced operations and expect revenue from this
project in the second quarter of 2020.
In 2018, we formed Aemetis Biogas, LLC (“ABGL”) to
construct biogas digesters at local dairies near the Keyes Plant
(the “Biogas Project”), many of whom are already
customers of the distillers’ grain produced at the Keyes
Plant. Construction has been underway on the first two digesters,
which will connect by pipeline to a gas cleanup and compression
facility to produce Renewable Natural Gas
(“RNG”). ABGL currently has signed participation
agreements with over a dozen local dairies and three fully executed
leases with dairies near the Keyes Plant in order to capture
methane from such dairies, which would otherwise be released into
the atmosphere, primarily from manure wastewater lagoons. We plan
to capture biogas from multiple dairies and pipe the gas to a
centralized location at our Keyes Plant where we will remove the
impurities of the methane and clean it into bio-methane for
injection into the local utility pipeline or to a renewable
compressed natural gas (“RCNG”) truck loading station
that will service local trucking fleets to displace diesel
fuel. The biogas can also be used in our Keyes Plant to
displace petroleum-based natural gas. We believe the environmental
benefits of the Biogas Project are potentially significant because
dairy biogas has a negative carbon intensity (“CI”)
under the California LCFS. The biogas produced by ABGL is expected
to also receive D3 RINs under the federal Renewable Fuel Standard
(“RFS”).
Basis of Presentation and Consolidation
. These consolidated financial statements include
the accounts of Aemetis. Additionally, we consolidate all entities
in which we have a controlling financial interest either directly
or by option to acquire the interest. A controlling financial
interest is usually obtained through ownership of a majority of the
voting interests. 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. Prior to December 31, 2019, GAFI was consolidated into
the financial statements as a VIE and GAFI activity was shown as
non-controlling interest in the consolidated statements of
operations. On December 31, 2019, we exercised an option to acquire
all capital stock of GAFI for $10 and consolidated assets,
liabilities, and equity of GAFI as a wholly-owned subsidiary on
December 31, 2019 forward.
8
The accompanying consolidated condensed balance sheet as of March
31, 2020, the consolidated condensed statements of operations and
comprehensive loss for the three months ended March 31, 2020 and
2019, the consolidated condensed statements of cash flows for the
three months ended March 31, 2020 and 2019, and the consolidated
condensed statements of stockholders’ deficit for the three
months ended March 31, 2020 and 2019 are unaudited. The
consolidated condensed balance sheet as of December 31, 2019 was
derived from the 2019 audited consolidated financial statements and
notes thereto. The consolidated condensed financial statements in
this report should be read in conjunction with the 2019 audited
consolidated financial statements and notes thereto included in the
Company’s annual report on Form 10-K for the year ended
December 31, 2019. 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 for the three months
ended March 31, 2020 and 2019 have been prepared on the same basis
as the audited consolidated statements as of December 31, 2019 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 months ended March 31, 2020 are
not necessarily indicative of the operating results for any
subsequent quarter, for the full fiscal year or any future
periods.
Use of Estimates
. The
preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements, revenues, and expenses during the reporting period. To
the extent there are material differences between these estimates
and actual results, the Company’s consolidated financial
statements will be affected.
Revenue Recognition
. We derive
revenue primarily from sales of ethanol and related co-products in
North America, and biodiesel and refined glycerin in India pursuant
to supply agreements and purchase order contracts. We assessed the
following criteria under the ASC 606 guidance: (i) identify the
contracts with customer, (ii) identify the performance obligations
in the contract, (iii) determine the transaction price, (iv)
allocate the transaction price to the performance obligations, and
(v) recognize revenue when the entity satisfies the performance
obligations.
North America:
In North America, we sell the majority
of our production to one customer, J.D. Heiskell & Co.
(“J.D. Heiskell”), under a supply contract, with
individual sales transactions occurring under this contract. Given
the similarity of these transactions, we have assessed them as a
portfolio of similar contracts. The performance obligation is
satisfied by delivery of the physical product to the tank of J.D.
Heiskell or to one of their contracted trucking companies. At this
point in time, the customer has the ability to direct the use of
the product and receive substantially all of its benefits. The
transaction price is determined based on daily market prices
negotiated by Kinergy Marketing (“Kinergy”) for ethanol
and by A.L. Gilbert Company (“A.L. Gilbert”) on WDG and
DCO. There is no transaction price allocation
needed.
During the first quarter of 2020, certain Tobacco and Alcohol Tax
and Trade Bureau (“TTB”) prohibitions were lifted,
allowing for the sale of high proof alcohol by ethanol producers.
Accordingly, during the last week of March 2020, Aemetis obtained
the necessary permits and began selling high proof alcohol for
industrial and commercial applications directly to customers in the
West Coast on prepayment terms. The agreements and terms were
evaluated according to ASC 606 guidance and revenue was recognized
upon satisfaction of the performance obligation by delivery of the
product based on the terms of the agreement. Sales of high proof
alcohol represented less than 3% of quarterly revenue, and as such
aggregated with ethanol sales.
9
The below table shows our sales in North America by product
category:
|
North America (in thousands)
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
|
|
2020
|
2019
|
|
Ethanol
sales
|
$
25,322
|
$
27,189
|
|
Wet
distillers' grains sales
|
8,374
|
8,603
|
|
Other
sales
|
2,176
|
844
|
|
|
$
35,872
|
$
36,636
|
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 customers and process and sell finished goods to
those customers in certain contractual agreements.
In North America, we assessed principal versus agent criteria as we
buy corn as feedstock in producing ethanol from our working capital
partner J.D. Heiskell and sell all ethanol, WDG, and corn oil
produced in this process to J.D. Heiskell. Our finished goods tank
is leased by J.D. Heiskell and they require us to transfer legal
title to the product upon transfer of our finished ethanol to this
location. We consider the purchase of corn as a cost of goods sold
and the sale of ethanol upon transfer to the finished goods tank as
revenue on the basis that (i) we control and bear the risk of gain
or loss on the processing of corn which is purchased at market
prices into ethanol and (ii) we have legal title to the goods
during the processing time. The pricing for both corn and ethanol
is set independently. Revenues from sales of ethanol and its
co-products are billed net of the related transportation and
marketing charges. Transportation charges are accounted for in cost
of goods sold and marketing charges are accounted for in sales,
general and administrative expense. Transportation and marketing
charges are known within days of the transaction and are recorded
at the actual amounts. The Company has elected to adopt an
accounting policy under which these charges have been treated as
fulfillment activities provided after control has transferred. As a
result, these charges are recognized in cost of goods sold and
selling, general and administrative expenses, respectively, when
revenue is recognized. Revenues are recorded at the gross invoiced
amount. Hence, we are the principal in North America sales
scenarios where our customer and vendor may be the
same.
We have a contract liability of $0.3 million as of March 31, 2020,
in connection with a contract with a customer to sell LCFS credits.
However, the control of the LCFS credits was not transferred to the
customer until April 2, 2020 while we received cash in
advance.
We
have a contract liability of $1.9 million as of March 31, 2020, in
connection with shipments to several customers for which we
received cash in advance while shipments were fulfilled in April
2020.
10
India:
In India, we sell products pursuant to
purchase orders (written or verbal) 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 Palm Fatty Acid
Distillers (“PFAD”) net of taxes. There is no
transaction price allocation needed.
The below table shows our sales in India by product
category:
|
India (in thousands)
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
|
|
2020
|
2019
|
|
Biodiesel
sales
|
$
2,793
|
$
4,347
|
|
Refined
Glycerin sales
|
90
|
899
|
|
PFAD
sales
|
712
|
-
|
|
Other
sales
|
13
|
6
|
|
|
$
3,608
|
$
5,252
|
|
|
|
|
In India, we also assessed principal versus agent criteria as we
buy our feedstock from our customers and process and sell finished
goods to those same customers in certain contractual agreements. In
those cases, we receive the legal title to feedstock from our
customers once it is on our premises. We control the processing and
production of biodiesel based on contract terms and specifications.
The pricing for both feedstock and biodiesel is set independently.
We hold the title and risk to biodiesel according to agreements we
enter into in these situations. Hence, we are the principal in
India sales scenarios where our customer and vendor may be the
same.
Cost of Goods Sold
. Cost of
goods sold includes those costs directly associated with the
production of revenues, such as raw material consumed, factory
overhead and other direct production costs. During periods of idle
plant capacity, costs otherwise charged to cost of goods sold are
reclassified to selling, general and administrative
expense.
Accounts Receivable.
The
Company sells ethanol, WDG, CDS, and DCO through third-party
marketing arrangements generally without requiring collateral and
high proof alcohol directly to customers generally on advanced
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 are presented at original
invoice amount, net of any allowance for doubtful
accounts.
11
The Company maintains an allowance for doubtful accounts for
balances that appear to have specific collection issues. The
collection process is based on the age of the invoice and requires
attempted contacts with the customer at specified intervals. If,
after a specified number of days, the Company has been unsuccessful
in its collection efforts, a bad debt allowance is recorded for the
balance in question. Delinquent accounts receivables are charged
against the allowance for doubtful accounts once un-collectability
has been determined. The factors considered in reaching this
determination are the apparent financial condition of the customer
and the Company’s success in contacting and negotiating with
the customer. If the financial condition of the Company’s
customers were to deteriorate, additional allowances may be
required. We did not reserve any balance for allowances for
doubtful accounts as of March 31, 2020 and December 31,
2019.
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.
Property, Plant and Equipment
.
Property, plant and equipment are carried at cost less accumulated
depreciation after assets are placed in service and are comprised
primarily of buildings, furniture, machinery, equipment, land, and
the Keyes Plant, Goodland Plant and Kakinada Plant. The Goodland
Plant is partially completed and is not ready for operation and the
Riverbank Project and Biogas Project are being constructed and are
not in operations, hence we are not depreciating these assets yet.
CO2 Project was completed and commenced operations in the second
quarter of 2020 and any assets under the CO2 Project are
capitalized and will be depreciated from the second quarter of
2020. Otherwise, it is the Company’s policy to depreciate
capital assets over their estimated useful lives using the
straight-line method.
The Company evaluates the recoverability of long-lived assets with
finite lives in accordance with ASC Subtopic 360-10-35
Property Plant and
Equipment—Subsequent Measurements,
which requires recognition of impairment of
long-lived assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. When events or changes in circumstances indicate that
the carrying amount of an asset 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. Additionally, the impact of
the COVID-19 pandemic was assessed, and based upon this assessment,
the Company determined that the positive effects outweigh the
negative impacts. Thus, no further impairment analysis was
considered necessary.
California Energy Commission Technology Demonstration
Grant
. The Company has been
awarded and substantially completed the demonstration project
associated with the $825 thousand matching grant program from the
California Energy Commission (“CEC”) Natural Resources
Agency to optimize the effectiveness of technologies to break down
biomass to produce cellulosic ethanol. The Company has received
$778 thousand in grant proceeds as of March 31, 2020. The
project focused on the deconstruction and conversion of sugars
liberated from California-relevant feedstocks and then converting
the sugars to ethanol. The Company receives these funds as
reimbursement for actual expenses incurred. Due to the uncertainty
associated with the expense approval process under the grant
program, the Company recognizes the grant as a reduction of the
expenses in the period when approval is
received.
California Department of Food and Agriculture Dairy Digester
Research and Development Grant
.
The Company has been awarded $3.2 million in matching grants from
the California Department of Food and Agriculture
(“CDFA”) Dairy Digester Research and Development
program. The CDFA grant reimburses the Company for expenses
required to permit and construct two of the Company’s biogas
capture systems under contract with central California dairies. The
Company received $1.9 million as of March 31, 2020 as reimbursement
for actual expenses incurred. Due to the uncertainty associated
with the expense approval process under the grant program, the
Company recognizes the grant as a reduction of the expenses in the
period when approval is received.
12
California Energy Commission Low Carbon Advanced Ethanol Grant
Program
.
In May 2019, the Company was awarded
the right to receive reimbursements from the CEC in an amount up to
$5.0 million (the “CEC Reimbursement Program”) in
connection with the Company’s expenditures toward the
development of the Riverbank Cellulosic Ethanol Facility. To comply
with the guidelines of the CEC Reimbursement Program, the Company
must make a minimum of $7.9 million in matching contributions to
the Riverbank Project. The Company receives the CEC funds under the
CEC Reimbursement Program for actual expenses incurred up to $5.0
million as long as the Company makes the minimum matching
contribution. Given that the Company has not made the minimum
matching contribution, the grant of $1.36 million received for
capital expenditures during the third quarter of 2019 was recorded
as other long term liabilities as of March 31, 2020 and December
31, 2019.
Basic and Diluted Net Loss per Share.
Basic net loss per share is computed by dividing
net loss attributable to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted
net loss per share reflects the dilution of common stock
equivalents such as options, convertible preferred stock, debt, and
warrants to the extent the impact is dilutive. As the Company
incurred net losses for the three months ended March 31, 2020 and
2019, potentially dilutive securities have been excluded from the
diluted net loss per share computations as their effect would be
anti-dilutive.
The following table shows the number of potentially dilutive shares
excluded from the diluted net loss per share calculation as of
March 31, 2020 and 2019:
|
|
As of
|
|
|
|
March 31,
2020
|
March 31,
2019
|
|
|
|
|
|
Series
B preferred (post split basis)
|
132
|
132
|
|
Common
stock options and warrants
|
5,688
|
3,640
|
|
Debt
with conversion feature at $30 per share of common
stock
|
1,269
|
1,242
|
|
SARs
conversion if stock issued at $0.91 per share to cover $2.1
million
|
-
|
2,298
|
|
Total
number of potentially dilutive shares excluded from the diluted net
loss per share calculation
|
7,089
|
7,312
|
Comprehensive Loss.
ASC
220
Comprehensive Income
requires that an enterprise report, by
major components and as a single total, the change in its net
assets from non-owner sources. The Company’s other
comprehensive income (loss) and accumulated other comprehensive
loss consists solely of cumulative currency translation adjustments
resulting from the translation of the financial statements of its
foreign subsidiary.
Foreign Currency Translation/Transactions.
Assets and liabilities of the Company’s
non-U.S. subsidiary 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) loss, net.
13
Operating Segments.
Operating
segments are defined as components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision-making
group, in deciding how to allocate resources and in assessing
performance. Aemetis recognized two reportable geographic segments:
“North America” and
“India.”
The “North America” operating segment includes the
Keyes Plant, the Riverbank Cellulosic Ethanol Facility, the Biogas
Project, the Goodland Plant and the research and development
facility in Minnesota.
The “India” operating segment includes the
Company’s 50 million gallon per year capacity Kakinada Plant
in India, the administrative offices in Hyderabad, India, and the
holding companies in Nevada and Mauritius.
Fair Value of Financial Instruments.
Financial instruments
include accounts receivable, accounts payable, accrued liabilities,
current and non-current portion of subordinated debt, notes
payable, and long-term debt. Due to the unique terms of our
notes payable and long-term debt and the financial condition of the
Company, the fair value of the debt is not readily
determinable. The fair value, 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 at the time the awards are granted,
adjusted to reflect only those shares that are expected to
vest.
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.
Debt Modification Accounting
.
The Company evaluates amendments to its debt in accordance with ASC
470-50
Debt–Modification and
Extinguishments
for
modification and extinguishment accounting. This evaluation
includes comparing the net present value of cash flows of the new
debt to the old debt to determine if changes greater than 10
percent occurred. In instances where the net present value of
future cash flows changed more than 10 percent, the Company applies
extinguishment accounting and determines the fair value of its debt
based on factors available to the Company.
Convertible Instruments
. The
Company evaluates the impacts of convertible instruments based on
the underlying conversion features. Convertible instruments are
evaluated for treatment as derivatives that could be bifurcated and
recorded separately. Any beneficial conversion feature is recorded
based on the intrinsic value difference at the commitment
date.
Recently Issued Accounting Pronouncements
.
For a complete summary of the Company’s significant
accounting policies, please refer to the Company’s audited
financial statements and notes thereto for the years ended December
31, 2019 and 2018 included in the Company’s Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 12, 2020. There were no new accounting pronouncements issued
applicable to the Company during the three months ended March 31,
2020.
14
2.
Inventories
Inventories consist of the following:
|
|
As of
|
|
|
|
March 31,
2020
|
December 31,
2019
|
|
Raw
materials
|
$
2,394
|
$
2,566
|
|
Work-in-progress
|
1,367
|
1,455
|
|
Finished
goods
|
1,485
|
2,497
|
|
Total
inventories
|
$
5,246
|
$
6,518
|
As of March 31, 2020 and December 31, 2019, the Company recognized
a lower of cost or market impairment of $0.2 million and $0.1
million respectively, related to inventory.
3.
Property, Plant and Equipment
Property, plant and equipment consist of the
following:
|
|
As of
|
|
|
|
March 31,
2020
|
December 31,
2019
|
|
Land
|
$
4,077
|
$
4,104
|
|
Plant
and buildings
|
83,799
|
83,139
|
|
Furniture
and fixtures
|
1,095
|
1,094
|
|
Machinery
and equipment
|
4,169
|
4,252
|
|
Construction
in progress
|
19,206
|
12,571
|
|
Property held for development
|
15,408
|
15,408
|
|
Total gross property, plant & equipment
|
127,754
|
120,568
|
|
Less accumulated depreciation
|
(37,126
)
|
(36,342
)
|
|
Total
net property, plant & equipment
|
$
90,628
|
$
84,226
|
15
Construction in progress contains incurred costs for the Biogas
Project, CO
2
Project, Riverbank Project, and Zebrex
equipment installed at the Keyes Plant. In the second quarter of
2020, CO
2
Project commenced operations and was
placed in service at that time. Depreciation on the components of
property, plant and equipment is calculated using the straight-line
method over their estimated useful lives as
follows:
|
|
Years
|
|
Plant
and buildings
|
20 - 30
|
|
Machinery
& equipment
|
5 - 7
|
|
Furniture
& fixtures
|
3 - 5
|
For the three months ended March 31, 2020 and 2019, the Company
recorded depreciation expense of $1.1 million for each
period.
Management is required to evaluate these long-lived assets for
impairment whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable. Management
determined there was no impairment on the long-lived assets during
the three months ended March 31, 2020 and 2019.
4.
Debt
Debt consists of the following:
|
|
March 31,
2020
|
December 31,
2019
|
|
Third
Eye Capital term notes
|
$
7,024
|
$
7,024
|
|
Third
Eye Capital revolving credit facility
|
67,077
|
62,869
|
|
Third
Eye Capital revenue participation term notes
|
11,794
|
11,794
|
|
Third
Eye Capital acquisition term notes
|
26,282
|
25,518
|
|
Third
Eye Capital promissory note
|
3,434
|
2,815
|
|
Cilion
shareholder seller notes payable
|
6,161
|
6,124
|
|
Subordinated
notes
|
11,816
|
11,502
|
|
EB-5
promissory notes
|
42,176
|
41,932
|
|
Unsecured
working capital loans
|
2,077
|
2,631
|
|
GAFI
Term and Revolving loans
|
31,207
|
30,216
|
|
Total debt
|
209,048
|
202,425
|
|
Less
current portion of debt
|
23,363
|
22,740
|
|
Total long term debt
|
$
185,685
|
$
179,685
|
16
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 with Third Eye Capital (the “Note
Purchase Agreement”). Pursuant to the Note Purchase
Agreement, Third Eye Capital extended credit in the form of (i)
senior secured term loans in an aggregate principal amount of
approximately $7.2 million to replace existing notes held by Third
Eye Capital (the “Term Notes”); (ii) senior secured
revolving loans in an aggregate principal amount of $18.0 million
(the “Revolving Credit Facility”); (iii) senior secured
term loans in the principal amount of $10.0 million to convert the
prior revenue participation agreement to a note (the “Revenue
Participation Term Notes”); and (iv) senior secured term
loans in an aggregate principal amount of $15.0 million (the
“Acquisition Term Notes”) used to fund the cash portion
of the acquisition of Cilion, Inc. (the Term Notes, Revolving
Credit Facility, Revenue Participation Term Notes and Acquisition
Term Notes are referred to herein collectively as the
“Original Third Eye Capital Notes”).
On March 27, 2018, Third Eye Capital agreed to Limited Waiver and
Amendment No. 14 to the Note Purchase Agreement (“Amendment
No. 14”) to: (i) extend the maturity date of the Third Eye
Capital Notes by two years to April 1, 2020 in exchange for an
amendment fee consisting of 6% (3% per year) of the outstanding
note balance in the form of an increase in the fee payable in the
event of a redemption of the Third Eye Capital Notes (as defined in
the Note Purchase Agreement); (ii) provide that the maturity date
may be further extended at our election to April 1, 2021 in
exchange for an extension fee of 5%; (iii) provide for an optional
waiver of the ratio of note indebtedness covenant until January 1,
2019 with the payment of a waiver fee of $0.25 million; and (iv)
remove the redemption fee described in (i) above from the
calculation of the ratio of note indebtedness covenant. In addition
to the fee discussed in (i), as consideration for such amendment
and waiver, the borrowers also agreed to pay Third Eye Capital an
amendment and waiver fee of $0.5 million to be added to the
outstanding principal balance of the Revolving Credit
Facility.
Based on the terms of Amendment No. 14, on April 1, 2020, the
Company exercised option to extend the maturity to April 1, 2021
for a reduced fee of 1% on the outstanding debt which will be added
to the outstanding balance of the notes on April 1,
2020.
On March 11, 2019, Third Eye Capital agreed to Limited Waiver and
Amendment No. 15 to the Note Purchase Agreement (“Amendment
No. 15”), to waive the ratio of note indebtedness covenant
through December 31, 2019. As a consideration for this amendment,
the Company also agreed to pay Third Eye Capital an amendment fee
of $1.0 million to be added to the redemption fee which is due upon
redemption of the Notes.
On November 11, 2019, Third Eye Capital agreed to Limited Waiver
and Amendment No. 16 to the Note Purchase Agreement
(“Amendment No. 16”), to waive the ratio of note
indebtedness covenant for the quarters ended March 31, 2020, June
30, 2020, September 30, 2020 and December 31, 2020. As a
consideration for this amendment, the Company also agreed to pay
Third Eye Capital an amendment fee of $0.5 million to be added to
the redemption fee which is due upon redemption of the
Notes.
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. The Company forecasted sufficient cash flows over the next
12 months to reduce debt levels of Third Eye Capital and meet
operations of the Company. Based on this analysis, the Company
believes that it is reasonably possible that through a combination
of cash flow from operations, new projects that provide additional
liquidity, and sales of EB-5 investments, 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 February 27, 2019, a Promissory Note (the “February 2019
Note”, together with the Original Third Eye Capital Notes,
the “Third Eye Capital Notes”) for $2.1 million was
advanced by Third Eye Capital to Aemetis, Inc., as a short-term
credit facility for working capital and other general corporate
purposes with an interest rate of 14% per annum maturing on the
earlier of (a) receipt of proceeds from any financing, refinancing,
or other similar transaction, (b) extension of credit by payee, as
lender or as agent on behalf of certain lenders, to the Company or
its affiliates, or (c) April 30, 2019. In consideration of the
February 2019 Note, $0.1 million of the total proceeds were paid to
Third Eye Capital as financing charges. On April 30, 2019, the
February 2019 Note was modified to remove the stated maturity date
and instead will be due on demand by Third Eye Capital. In third
quarter of 2019, the February 2019 Note was modified to include
additional borrowings of $0.7 million. In first quarter of 2020,
the February 2019 Note was modified to include additional
borrowings of $0.6 million. As of March 31, 2020, the outstanding
balance of principal and interest on the February 2019 Note was
$3.4 million. As of March 31, 2020, there was a covenant violation
that was subsequently waived by Third Eye Capital in the 8th
amendment to the February 2019 Note.
17
Terms of Third Eye Capital Notes
A.
Term
Notes
.
As of March 31, 2020, the Company had $7.0 million
in principal and interest outstanding under the Term Notes. The
Term Notes accrue interest at 14% per annum. The Term Notes mature
on April 1, 2021.
B
Revolving
Credit Facility
.
The Revolving Credit Facility accrues interest at
the prime rate plus 13.75% (17.00% as of March 31, 2020) payable
monthly in arrears. The Revolving Credit Facility matures on April
1, 2021. As of March 31, 2020, AAFK had $67.1 million in principal
and interest and waiver fees outstanding under the Revolving Credit
Facility.
C.
Revenue
Participation Term Notes
.
The Revenue Participation Term Note bears interest
at 5% per annum and matures on April 1, 2021. As of March 31, 2020,
AAFK had $11.8 million in principal and interest outstanding on the
Revenue Participation Term Notes.
D.
Acquisition
Term Notes
.
The Acquisition Term Notes accrue interest at the
prime rate plus 10.75% (14.00% per annum as of March 31, 2020) and
mature on April 1, 2021. As of March 31, 2020, Aemetis Facility
Keyes, Inc. had $26.3 million in principal and interest and
redemption fees outstanding. The outstanding principal balance
includes a total of $7.5 million in redemption fees, including $4.5
million which was added to the Acquisition Term Notes as part of
Amendment No. 14, $1.0 million of covenant waiver fees added in
connection with Amendment No.15, and $0.5 million of covenant
waiver fees added in connection with Amendment No.
16.
E.
Reserve
Liquidity Notes
.
The Reserve Liquidity Notes, with available
borrowing capacity in the amount of $18.0 million, accrue interest
at the rate of 30% per annum and are due and payable upon the
earlier of: (i) the closing of new debt or equity financings, (ii)
receipt from any sale, merger, debt or equity financing, or (iii)
April 1, 2021. We have no borrowings outstanding under the Reserve
Liquidity Notes as of March 31, 2020.
The Third Eye Capital Notes contain various covenants, including
but not limited to, debt to plant value ratio, minimum production
requirements, and restrictions on capital expenditures. The terms
of the Third Eye Capital Notes allow the lender to accelerate the
maturity in the occurrence of any event that could reasonably be
expected to have a material adverse effect, such as any change in
the business, operations, or financial condition. The 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 Aemetis, Inc. The Third
Eye Capital Notes all contain cross-collateral and cross-default
provisions. McAfee Capital, LLC (“McAfee Capital”),
owned by Eric McAfee, the Company’s Chairman and CEO,
provided a guaranty of payment and performance secured by all of
its Company shares. In addition, Eric McAfee provided a blanket
lien on substantially all of his personal assets, and McAfee
Capital provided a guarantee in the amount of $8.0
million.
Cilion shareholder seller notes payable
. In connection with the Company’s merger
with Cilion, Inc., (“Cilion”) on July 6, 2012, the
Company issued $5.0 million in notes payable to Cilion shareholders
as merger compensation subordinated to the senior secured Third Eye
Capital Notes. The liability bears interest at 3% per annum and is
due and payable after the Third Eye Capital Notes have been paid in
full. As of March 31, 2020, Aemetis Facility Keyes, Inc. had $6.2
million in principal and interest outstanding under the Cilion
shareholder seller notes payable.
18
Subordinated Notes
. On January
6 and January 9, 2012, AAFK entered into Note and Warrant Purchase
Agreements with two accredited investors pursuant to which it
issued $0.9 million and $2.5 million in original notes to the
investors (“Subordinated Notes”). The Subordinated
Notes mature every six months. Upon maturity, the Subordinated
Notes are generally extended with a fee of 10% added to the balance
outstanding plus issuance of warrants exercisable at $0.01 with a
two-year term. Interest accrues at 10% and is due at maturity.
Neither AAFK nor Aemetis may make any principal payments under the
Subordinated Notes until all loans made by Third Eye Capital to
AAFK are paid in full.
On January 1, 2020, the Subordinated Notes were amended to extend
the maturity date until the earliest of (i) June 30, 2020; (ii)
completion of an equity financing by AAFK or Aemetis in an amount
of not less than $25.0 million; or (iii) after the occurrence of an
Event of Default, including failure to pay interest or principal
when due and breaches of note covenants. A 10% cash extension fee
was paid by adding the fee to the balance of the new note and
warrants to purchase 113 thousand shares of common stock were
granted with a term of two years and an exercise price of $0.01 per
share. We evaluated the January 1, 2020 amendment and the
refinancing terms of the Subordinated Notes and applied
modification accounting treatment in accordance with ASC
470-50
Debt
– Modification and Extinguishment
.
At March 31, 2020 and December 31, 2019, the Company had, in
aggregate, $11.8 million and $11.5 million in principal and
interest outstanding net of discount issuance costs of $0.2 million
and none, respectively, under the Subordinated Notes.
EB-5 promissory notes
. EB-5 is
a U.S. government program authorized by the Immigration and
Nationality Act designed to foster employment-based visa preference
for immigrant investors to encourage the flow of capital into the
U.S. economy and to promote employment of U.S. workers. The Company
entered into a Note Purchase Agreement dated March 4, 2011 (as
further amended on January 19, 2012 and July 24, 2012) with
Advanced BioEnergy, LP, a California limited partnership authorized
as a Regional Center to receive EB-5 investments, for the issuance
of up to 72 subordinated convertible promissory notes (the
“EB-5 Notes”) bearing interest at 2-3%. Each note was
issued in the principal amount of $0.5 million and due and payable
four years from the date of each note, for a total aggregate
principal amount of up to $36.0 million (the “EB-5 Phase I
funding”). The original maturity date on the promissory notes
can be extended automatically for a one or two-year period
initially and is eligible for further one-year automatic extensions
as long as there is no notice of non-extension from investors and
the investors’ immigration process is in progress. On
February 27, 2019, Advanced BioEnergy, LP, and the Company entered
into an Amendment to the EB-5 Notes which restated the original
maturity date on the promissory notes with automatic six-month
extensions as long as the investors’ immigration processes
are in progress. Except for five early investor EB-5 Notes, the
Company was granted 12 months from the date of the completion of
immigration process to redeem these EB-5 Notes. Accordingly, the
notes have been recognized as long-term debt while the five early
investor notes have been classified as current debt. The EB-5 Notes
are convertible after three years at a conversion price of $30 per
share.
Advanced BioEnergy, LP arranges investments with foreign investors,
who each make loans to the Keyes Plant in increments of $0.5
million. The Company has sold an aggregate principal amount of
$36.0 million of EB-5 Notes under the EB-5 Phase I funding since
2012 to the date of this filing. As of March 31, 2020, $35.0
million has been released from the escrow amount to the Company,
with $0.5 million remaining in escrow and $0.5 million to be funded
to escrow. As of March 31, 2020, $35.0 million in principal and
$3.1 million in accrued interest was outstanding on the EB-5 Notes
sold under the EB-5 Phase I funding.
On October 16, 2016, the Company launched its EB-5 Phase II
funding, with plans to issue $50.0 million in additional EB-5 Notes
on substantially similar terms and conditions as those issued under
the Company’s EB-5 Phase I funding, to refinance indebtedness
and capital expenditures of Aemetis, Inc. and GAFI (the “EB-5
Phase II funding”). On November 21, 2019, the minimum
investment was raised from $500,000 per investor to $900,000 per
investor. The Company entered into a Note Purchase Agreement dated
with Advanced BioEnergy II, LP, a California limited partnership
authorized as a Regional Center to receive EB-5 Phase II
investments, for the issuance of up to 100 EB-5 Notes bearing
interest at 3%. Each note will be issued in the principal amount of
$0.9 million and due and payable five years from the date of each
note, for a total aggregate principal amount of up to $50.0
million.
Advanced BioEnergy II, LP arranges investments with foreign
investors, who each make loans to the Riverbank Cellulosic Ethanol
Facility in increments of $0.9 million after November 21, 2019. The
Company has sold an aggregate principal amount of $4.0 million of
EB-5 Notes under the EB-5 Phase II funding since 2016 to the date
of this filing. As of March 31, 2020, $4.0 million was released
from escrow to the Company and $46.0 million remains to be funded
to escrow. As of March 31, 2020, $4.1 million in principal and
interest was outstanding on the EB-5 Notes under the EB-5 Phase II
funding.
19
Unsecured working capital loans
. On April 16, 2017, the Company entered into an
operating agreement with Gemini Edibles and Fats India Private
Limited (“Gemini”). Under this agreement, Gemini agreed
to provide the Company with working capital, on an as needed basis,
to fund the purchase of feedstock and other raw materials for the
Kakinada Plant. Working capital cash advances bear interest at 12%
and working capital can be induced through trading of feedstock or
finished goods by Gemini which does not have any interest accrual.
In return, the Company agreed to pay Gemini an amount equal to 30%
of the plant’s monthly net operating profit and recognized
these as operational support charges in the financials. In the
event that the Company’s biodiesel facility operates at a
loss, Gemini owes the Company 30% of the losses as operational
support charges. Either party can terminate the agreement at any
time without penalty. Additionally, Gemini received a first
priority lien on the assets of the Kakinada Plant. During the three
months ended March 31, 2020, we have accrued no interest on Gemini
balance as the investment was for feedstock purchase and finished
goods trade. During the three months ended March 31, 2020 and 2019,
the Company made principal payments to Gemini of approximately $3.6
million and $5.6 million, respectively. As of March 31, 2020 and
December 31, 2019, the Company had approximately $1.5 million and
$2.0 million outstanding under this agreement,
respectively.
In November 2008, the Company entered into an operating agreement
with Secunderabad Oils Limited (“Secunderabad Oils”).
On July 15, 2017, the agreement with Secunderabad Oils was amended
to provide the working capital funds for British Petroleum business
operations only in the form of inter-corporate deposit for an
amount of approximately $2.3 million over a 95 days period at the
rate of 14.75% per annum interest rate. The term of the agreement
continues until either party terminates it. Secunderabad Oils has a
second priority lien on the assets of the Company’s Kakinada
Plant after this agreement. On April 15, 2018, the agreement was
amended to purchase the raw material for business operations at 12%
per annum interest rate. During the three months ended March 31,
2020 and 2019, the Company made principal and interest payments to
Secunderabad Oils of approximately $34 thousand and $0.3 million,
respectively. As of March 31, 2020 and December 31, 2019, the
Company had $0.6 million for each period outstanding under this
agreement.
GAFI Term loan and Revolving loan.
On July 10, 2017, GAFI entered into a Note
Purchase Agreement (“GAFI Note Purchase Agreement”)
with Third Eye Capital (“Noteholders”). Pursuant to the
GAFI Note Purchase Agreement, the Noteholders agreed, subject to
the terms and conditions of the GAFI Note Purchase Agreement and
relying on each of the representations and warranties set forth
therein, to make (i) a single term loan to GAFI in an aggregate
amount of $15 million (“GAFI Term Loan”) and (ii)
revolving advances not to exceed ten million dollars in the
aggregate (“GAFI Revolving Loan”). The interest rate
per annum applicable to the GAFI Term Loan is equal to ten percent
(10%). The interest rate per annum applicable to the GAFI Revolving
Loans is the greater of Prime Rate plus seven and three quarters
percent (7.75%) and twelve percent (12.00%). The applicable
interest rate as of March 31, 2020 was 12.00%. The maturity date of
the GAFI Term Loan and GAFI Revolving Loan (“GAFI Loan
Maturity Date”) is July 10, 2020, provided that the GAFI Loan
Maturity Date may be extended at the option of Aemetis for up to
one-year period upon prior written notice and upon satisfaction of
certain conditions and the payment of a renewal fee for such
extension. An initial advance under the GAFI Revolving Loan was
made for $2.2 million as a prepayment of interest on the GAFI Term
Loan for the first eighteen months of interest payments. In
addition, a fee of $1.0 million was paid in consideration to
Noteholders.
On June 28, 2018, GAFI entered into Amendment No. 1 to the GAFI
Term Loan with Third Eye Capital for an additional amount of $1.5
million with a fee of $75 thousand added to the loan from Third Eye
Capital at a 10% interest rate. On December 20, 2018, $1.6 million
from Amendment No. 1 was repaid. Pursuant to Amendment No. 1,
Aemetis, Inc. entered into a Stock Appreciation Rights Agreement to
issue 1,050,000 Stock Appreciation Rights (“SARs”) to
Third Eye Capital on August 23, 2018, with an exercise date of one
year from the issuance date with a call option for the Company at
$2.00 per share during the first 11 months of the agreement either
to pay $2.1 million in cash or issue common stock worth $2.1
million based on the 30-day weighted average price of the stock on
the call date, and a put option for Third Eye Capital at $1.00 per
share during the 11
th
month of the agreement where the
Company can redeem the SARs for $1.1 million in cash. In the event
that none of the above options is exercised, the SARs will be
automatically exercised one year from the issuance date based upon
the 30-day weighted average stock price and paid in cash and cash
equivalents. On July 22, 2019, Third Eye Capital exercised the put
option at $1.00 per share for $1.1 million. The exercise value of
the SARs of $1.1 million was added to the GAFI Term Loan and the
SARs fair value liability was released.
On December 3, 2018, GAFI entered into Amendment No. 2 to the GAFI
Term Loan with Third Eye Capital for an additional amount of $3.5
million from Third Eye Capital at a 10% interest rate. GAFI
borrowed $1.8 million against this Amendment No. 2 with a $175
thousand fee added to the loan and $0.2 million was withheld from
the $1.8 million for interest payments. $1.5 million is available
to draw under GAFI Amendment No. 2 for the CO
2
Project (“CO
2
Term Loan”). Among other
requirements, the Company is also required to make the following
mandatory repayments of the CO
2
Term Loan: (i) on a monthly basis, an
amount equal to 75% of any payments received by the Company for
CO
2
produced by Linde LLC, (ii) an amount
equal to 100% of each monthly payment received by the Company for
land use by Linde for CO
2
plant, (iii) on a monthly basis, an
amount equal to the product of: $0.01 multiplied by the number of
bushels of corn grain used in the ethanol production at the Keyes
Plant. Based on the mandatory payments, an amount of $0.4 million
is estimated to be paid in the next 12 months and is classified as
current debt as of March 31, 2020.
As of March 31, 2020, GAFI had $20.4 million net of debt issuance
costs of $0.2 million outstanding on the GAFI Term Loan and $10.8
million on the GAFI Revolving Loan respectively.
20
Scheduled debt repayments for the Company’s loan obligations
follow:
|
Twelve months ended March 31,
|
Debt Repayments
|
|
2021
|
$
23,363
|
|
2022
|
152,436
|
|
2023
|
27,500
|
|
2024
|
3,411
|
|
2025
|
2,500
|
|
Total
debt
|
209,210
|
|
Debt
issuance costs
|
(162
)
|
|
Total
debt, net of debt issuance costs
|
$
209,048
|
5. Commitments and Contingencies
Leases
We adopted the ASC 842
Lease
accounting
standard on January 1, 2019. The new
standard establishes a right-of-use (“ROU”) model that
requires a lessee to recognize a ROU asset and lease liability on
the balance sheet for all leases. Leases will be classified as
finance or operating, with classification affecting the pattern and
classification of expense recognition in the income statement. 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.
After assessment of this standard on our company-wide agreements
and arrangements, we have identified assets as the corporate
office, warehouse, monitoring equipment and laboratory facilities
over which we have control and obtain economic benefits fully. We
classified these identified assets as operating leases after
assessing the terms under classification guidance. Our leases have
remaining lease terms of 1 year to 3 years, of which only one lease
has option to extend the lease. We have concluded that it is not
reasonably certain that we would exercise such option. Therefore,
as of the lease commencement date, our lease terms generally did
not include options to extend the lease. We include options to
extend the lease when it is reasonably certain that we will
exercise that option. We have an equipment lease with extension
options which the Company is likely to extend; however, the
equipment is billed based on the hours it is used in the period.
According to the guidance, the variable payments based on other
than index or rate, are to be expensed in the period incurred. As
such, the equipment cost is recognized as it is incurred. The
corporate office had a sublease agreement for seven months in which
we were a sub lessor. We did not have any separate lease components
in any of the leases and the property taxes and insurance charges
are based on a variable rate in our real estate leases, hence we
did not include them in the lease payments as in substance fixed
payments.
21
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 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.
Upon adoption of the standard, we recognized additional operating
liabilities of $1.2 million, with corresponding ROU assets of the
same amount based on the present value of the remaining minimum
lease payments for existing operating leases.
The components of lease expense and sublease income was as
follows:
|
|
Three months ended March 31,
|
|
|
|
2020
|
2019
|
|
Operating
lease expense
|
$
177
|
$
181
|
|
Short
term lease expense
|
14
|
41
|
|
Variable
lease expense
|
34
|
32
|
|
Sub
lease income
|
-
|
(17
)
|
|
Total
lease cost
|
$
225
|
$
237
|
Supplemental non-cash flow information related to ROU asset and
lease liabilities was as follows for the three months ended March
31, 2020 and March 31, 2019:
|
|
Three months ended March 31
|
|
|
|
2020
|
2019
|
|
Accretion
of the lease liability
|
$
17
|
$
40
|
|
|
|
|
|
Amortization
of right-of-use assets
|
$
160
|
$
141
|
22
As of March 31, 2020, our weighted average remaining lease term and
discount rate were as follows:
|
Weighted
Average Remaining Lease Term Operating Leases
|
1.5
years
|
|
Weighted
Average Discount Rate Operating Leases
|
14.8%
|
Supplemental balance sheet information related to leases was as
follows:
|
|
As of
|
|
|
|
March 31,
2020
|
December 31,
2019
|
|
Operating
lease right-of-use assets
|
$
397
|
$
557
|
|
|
|
|
|
Operating
lease liability:
|
|
|
|
Short
term lease liability
|
$
257
|
$
377
|
|
Long
term lease liability
|
$
158
|
$
200
|
Maturities of operating lease liabilities were as
follows:
|
Twelve months ended March 31,
|
Operating leases
|
|
|
|
|
2021
|
$
293
|
|
2022
|
167
|
|
Total
lease payments
|
$
460
|
|
|
|
|
Less
imputed interest
|
(45
)
|
|
|
|
|
Total
operating lease liability
|
$
415
|
|
|
|
23
Other Commitments
The Company entered into an agreement with Mitsubishi Chemical
America, Inc. We purchased certain equipment to save energy used in
the Keyes Plant. We also entered into a financing agreement with
the seller for $5.7 million for this equipment. Payments pursuant
to the financing transaction will commence after the installation
date and interest will be charged based on the certain performance
metrics after operation of the equipment. The equipment was
delivered in March 2020; however the installation has been delayed
due to the COVID-19 pandemic. Hence, we recorded the asset in
construction in progress fixed assets and related liability in
other liabilities of $5.7 million as of March 31,
2020.
Sales Commitments
We entered into
several agreements with customers to sell approximately 3.1 million
gallons of product through April 2021.
Property taxes
The Company entered into a payment plan with Stanislaus County for
unpaid property taxes for the Keyes Plant site on June 28, 2018 by
paying $1.5 million as a first payment. Under the annual payment
plan, the Company was set to pay 20% of the outstanding redemption
amount, in addition to the current year property taxes and any
interest incurred on the unpaid balance to date annually, on or
before April 10 starting in 2019. After making one payment, Company
defaulted on the payment plan and as of March 31, 2020 and December
31, 2019, the balance in property tax accrual was $4.4 million and
$4.1 million, respectively. Stanislaus County agreed not to enforce
collection actions and we are now in discussions with Stanislaus
County regarding a payment plan.
Legal Proceedings
On August 31, 2016, the Company filed a lawsuit in Santa Clara
County Superior Court against defendant EdenIQ, Inc.
(“EdenIQ”). The lawsuit was based on
EdenIQ’s wrongful termination of a merger agreement that
would have effectuated the merger of EdenIQ into a new entity that
would be primarily owned by Aemetis. The lawsuit asserted
that EdenIQ had fraudulently induced the Company into assisting
EdenIQ to obtain EPA approval for a new technology that the Company
would not have done but for the Company’s belief that the
merger would occur. The relief sought included EdenIQ’s
specific performance of the merger, monetary damages, as well as
punitive damages, attorneys’ fees, and costs. In
response to the lawsuit, EdenIQ filed a cross-complaint asserting
causes of action relating to the Company’s alleged inability
to consummate the merger, the Company’s interactions with
EdenIQ’s business partners, and the Company’s use of
EdenIQ’s name and trademark in association with publicity
surrounding the merger. Further, EdenIQ named Third Eye
Capital Corporation (“TEC”) as a defendant in a second
amended cross-complaint alleging that TEC had failed to disclose
that its financial commitment to fund the merger included terms
that were not disclosed. Finally, EdenIQ claimed that TEC and
the Company concealed material information surrounding the
financing of the merger. By way of its cross-complaint,
EdenIQ sought monetary damages, punitive damages, injunctive
relief, attorneys’ fees and costs. In November 2018, the
claims asserted by the Company were dismissed on summary judgment
and the Company filed a motion to amend its claims, which remains
pending. In December 2018, EdenIQ dismissed all of its claims prior
to trial. In February 2019, the Company and EdenIQ each filed
motions seeking reimbursement of attorney fees and costs associated
with the litigation. On July 24, 2019, the court awarded EdenIQ a
portion of the fees and costs it had sought in the amount of
approximately $6.2 million. The Company recorded the $6.2 million
as loss contingency on litigation during the year ended December
31, 2019. The Company’s ability to amend its claims and
present its claims to the court or a jury could materially affect
the court’s decision to award EdenIQ its fees and costs. In
addition to further legal motions and a potential appeal of the
Court’s summary judgment order, the Company plans to appeal
the court’s award of EdenIQ’s fees and costs. The
Company intends to continue to vigorously pursue its legal claims
and defenses against EdenIQ.
24
6. Biogas LLC – Series A Preferred Financing
On December 20, 2018, Aemetis Biogas LLC entered into a Series A
Preferred Unit Purchase Agreement (the “Preferred Unit
Agreement”) by selling Series A Preferred Units to Protair-X
Americas, Inc. (the “Purchaser”), with Third Eye
Capital acting as an agent for the purchaser (the
“Agent”). ABGL plans to construct and collect biogas
from dairies located near the Keyes Plant. Biogas is a blend of
methane along with CO
2
and other impurities that can be
captured from dairies, landfills and other sources. After a
gas cleanup and compression process, biogas can be converted into
bio-methane, which is a direct replacement of petroleum natural gas
and can be transported in existing natural gas
pipelines.
ABGL is authorized to issue 11,000,000 common units, and up to
6,000,000 convertible, redeemable, secured, preferred membership
units (the “Series A Preferred Units”). ABGL issued
6,000,000 common units to the Company. ABGL also issued 1,660,000
Series A Preferred Units to the Purchaser for $8,300,000 with the
ability to issue an additional 4,340,000 Series A Preferred Units
at $5.00 per Unit for a total of up to $30,000,000 in funding.
Additionally, 5,000,000 common units are held in reserve as
potential conversion units issuable to the Purchaser upon certain
triggering events discussed below.
The Preferred Unit Agreement includes (i) preference payments of
$0.50 per unit on the outstanding Series A Preferred Units
commencing on the second anniversary, (ii) conversion rights for up
to 1,200,000 common units or up to maximum number of 5,000,000
common units (also at a one Series A Preferred Unit to one common
unit basis) if certain triggering events occur, (iv) one board seat
of the three available to be elected by Series A Preferred Unit
holders, (iii) mandatory redemption value at $15 per unit payable
at an amount equal to 75% of free cash flow generated by ABGL, up
to $90 million in the aggregate (if all units are issued), (iv)
full redemption of the units on the sixth anniversary, (v) minimum
cash flow requirements from each digester, and (vi) $0.9 million
paid as fees to the Agent from the proceeds.
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 75% to 100% of free cash flows,
and (iii) total number of common units into which preferred units
may be converted increases from 1,200,000 common units to 5,000,000
common units on a one for one basis. As of March 31, 2020, ABGL has
not completed construction within one year from the date of initial
investment and generated minimum quarterly operating cash flows.
Upon the violation of this covenant, cash flows applied for
redemption payments increased to 100% from 75% of free cash
flows.
From inception of the agreement to date, ABGL issued 2,880,000
Series A Preferred Units on first tranche for a value of $13.1
million. The Company is accreting up this first tranche to the
redemption value of $43.2 million over the estimated future cash
flow periods of six years using the effective interest method. In
addition, the Company identified freestanding future tranche rights
and the accelerated redemption feature related to a change in
control provision as derivatives which required bifurcation. These
derivative features were assessed to have minimal value as of March
31, 2020 and March 31, 2019 based on the evaluation of the other
conditions included in the agreement.
During the quarter ended March 31, 2020, ABGL issued 257,000 Series
A Preferred Units for incremental proceeds of $1.3 million as part
of the first tranche of the Preferred Unit Agreement. Consistent
with the previous issuances, the units are treated as a liability
as the conversion option was deemed to be non-substantive. The
Company is accreting up to the redemption value of $3.9 million
over the estimated future cash flow periods of six years from the
original anniversary date using the effective interest
method.
As of March 31, 2020 and December 31, 2019, the Company recorded
Series A Preferred Unit liabilities of $16.3 million and $14.1
million net of unit issuance costs and inclusive of accretive
preferences pursuant to this agreement.
25
7. Stock-Based Compensation
2019 Plan
On April 29, 2019, the Aemetis 2019 Stock Plan (the “2019
Stock Plan”) was approved by stockholders of the Company.
This plan permits the grant of 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 Administrator of the
plan may determine in its discretion. The 2019 Stock Plan’s
term is 10 years and supersedes all prior plans. The 2019 Stock
Plan authorized the issuance of 200,000 shares of common stock for
the 2019 calendar year, in addition to permitting the transfer and
grant of any available and unissued or expired options under the
prior Amended and Restated 2007 Stock Plan in an amount up to
177,246 options.
Employee grants have a general vesting term of 1/12th every three
months and are exercisable at any time after vesting subject to
continuation of employment. Option grants for directors have
immediate vesting with a 10-year term expiration.
With the approval of the 2019 Stock Plan, the Zymetis 2006 Stock
Plan and the Amended and Restated 2007 Stock Plan (the “Prior
Plans,” and together with the 2019 Stock Plan, the
“Stock Plans”) are terminated for granting any options
under either plan. However, any options granted before the 2019
Stock Plan approved will remain outstanding and can be exercised,
and any expired options issued pursuant to the Prior Plans can be
granted under the 2019 Stock Plan.
On January 9, 2020, 771,500 stock option grants were issued for
employees and directors under the 2019 Stock Plan.
On March 28, 2020, 1,075,500 stock options grant were approved by
Board for employees and directors under the 2019 Stock
Plan.
As of March 31, 2020, 5.6 million options are outstanding under the
Stock Plans.
Inducement Equity Plan Options
In March 2016, the Directors of the Company approved an Inducement
Equity Plan (“Inducement Equity Plan,” together with
the Stock Plans, the “Plans”) authorizing the issuance
of 0.1 million non-statutory options to purchase common stock. As
of March 31, 2020, no options are outstanding under the Inducement
Equity Plan.
26
Common Stock Reserved for Issuance
The following is a summary of awards granted under the
Plans:
|
|
Shares Available for Grant
|
Number of Shares Outstanding
|
Weighted-Average Exercise Price
|
|
|
|
|
|
|
Balance
as of December 31, 2019
|
147
|
3,746
|
$
1.38
|
|
Authorized
|
1,892
|
-
|
-
|
|
Granted
|
(1,847
)
|
1,847
|
0.71
|
|
Balance
as of March 31, 2020
|
192
|
5,593
|
$
1.16
|
As of March 31, 2020, there were 3.2 million options vested under
the Plans.
Stock-based compensation for employees
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.
For the three months ended March 31, 2020 and 2019, the Company
recorded option expense in the amount of $310 thousand and $290
thousand, respectively.
27
Valuation and Expense Information
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.
There were 1.8 million options granted during the three months
ended March 31, 2020.
The weighted average fair value calculations for options granted
during the three months ended March 31, 2020 and 2019 are based on
the following assumptions:
|
Description
|
For the
three months ended
March
31,
|
|
|
|
2020
|
2019
|
|
Dividend-yield
|
0
%
|
0
%
|
|
Risk-free
interest rate
|
1.08
%
|
2.59
%
|
|
Expected
volatility
|
87.43
%
|
88.52
%
|
|
Expected
life (years)
|
6.93
|
6.41
|
|
Market
value per share on grant date
|
$
0.71
|
$
0.70
|
|
Fair
value per share on grant date
|
$
0.54
|
$
0.53
|
As of March 31, 2020, the Company had $1.3 million of total
unrecognized compensation expense for employees, which the Company
will amortize over the 2.34 years of weighted average remaining
term.
28
8.
Agreements
Working Capital Arrangement.
Pursuant to the J.D. Heiskell Procurement
Agreement, 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 J.D. Heiskell Procurement
Agreement
expires on December 31, 2020 and the term
can be automatically renewed for additional one-year terms. J.D.
Heiskell further agrees to sell all ethanol the Company produces to
Kinergy or other marketing purchasers designated by the Company and
all WDG the Company produces to A.L. Gilbert. The Company markets
and sells DCO to A.L. Gilbert and other third parties. The
Company’s relationships with J.D. Heiskell, Kinergy, 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. Revenue is recognized upon delivery of ethanol to J.
D. Heiskell as revenue recognition criteria have been met and any
performance required of the Company subsequent to the sale to J.D.
Heiskell is inconsequential. These agreements are ordinary purchase
and sale agency agreements for the Keyes Plant.
The J.D. Heiskell sales and purchases activity associated with the
J.D. Heiskell Purchase Agreement and
the J.D. Heiskell Procurement
Agreement
during the three months ended March 31,
2020, and 2019 were as follows:
|
|
As of and for the three months ended March 31,
|
|
|
|
2020
|
2019
|
|
Ethanol
sales
|
$
24,383
|
$
27,189
|
|
Wet
distiller's grains sales
|
8,374
|
8,603
|
|
Corn
oil sales
|
928
|
800
|
|
Corn
purchases
|
29,214
|
29,261
|
|
Accounts
receivable
|
60
|
1,340
|
|
Accounts
payable
|
1,749
|
2,766
|
Ethanol and Wet Distillers Grains Marketing Arrangement.
The Company entered into an Ethanol
Marketing Agreement with Kinergy and a Wet Distillers Grains
Marketing Agreement with A.L. Gilbert. The Ethanol Marketing
Agreement matures on August 31, 2020 and the Wet Distillers Grains
Marketing Agreement matures on December 31, 2020 with automatic
one-year renewals thereafter. For the three months ended March 31,
2020 and 2019, the Company expensed marketing costs of $0.6 million
for each period respectively, under the terms of each
agreement.
29
9.
Segment Information
Aemetis recognizes two reportable geographic segments: “North
America” and “India.” The “North
America” operating segment includes the Keyes Plant, the
Riverbank Cellulosic Ethanol Facility, the Biogas Project, the
Goodland Plant and the research and development facility in
Minnesota.
The “India” operating segment includes the Kakinada
Plant, the administrative offices in Hyderabad, India, and the
holding companies in Nevada and Mauritius. The Company’s
biodiesel is marketed and sold primarily to customers in India
through brokers and by the Company directly.
Summarized financial information by reportable segment for the
three months ended March 31, 2020 and 2019 follows:
|
|
Three months ended March 31, 2020
|
Three months ended March 31, 2019
|
||||
|
|
North America
|
India
|
Total Consolidated
|
North
America
|
India
|
Total Consolidated
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
35,872
|
3,608
|
39,480
|
36,636
|
5,252
|
$
41,888
|
|
Cost
of goods sold
|
36,413
|
3,500
|
39,913
|
36,967
|
5,272
|
42,239
|
|
|
|
|
|
|
|
|
|
Gross
profit (loss)
|
(541
)
|
108
|
(433
)
|
(331
)
|
(20
)
|
(351
)
|
|
|
|
|
|
|
|
|
|
Other
Expenses
|
|
|
|
|
|
|
|
Research
and development expenses
|
117
|
-
|
117
|
33
|
-
|
33
|
|
Selling,
general and administrative expenses
|
3,120
|
816
|
3,936
|
4,066
|
175
|
4,241
|
|
Interest
expense
|
6,857
|
19
|
6,876
|
6,042
|
167
|
6,209
|
|
Accretion
of Series A preferred units
|
960
|
-
|
960
|
449
|
-
|
449
|
|
Other
(income) expense
|
(53
)
|
(10
)
|
(63
)
|
111
|
(734
)
|
(623
)
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
$
(11,542
)
|
$
(717
)
|
$
(12,259
)
|
(11,032
)
|
372
|
$
(10,660
)
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
$
1,298
|
$
1,074
|
$
2,372
|
351
|
247
|
$
598
|
|
Depreciation
|
933
|
157
|
1,090
|
994
|
144
|
1,138
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
$
89,322
|
$
14,493
|
$
103,815
|
82,990
|
16,906
|
$
99,896
|
30
North America.
During the three
months ended March 31, 2020 and 2019, the Company’s revenues
from ethanol, WDG, and DCO were made pursuant to
the J.D. Heiskell Procurement
Agreement
. Sales of ethanol, WDG, and DCO to J.D.
Heiskell accounted for 93.4% and 99.9% of the Company’s North
America segment revenues for the three months ended March 31, 2020
and 2019.
India
. During the three months
ended March 31, 2020, two customers in biodiesel accounted for 32%
and 18% of the Company’s consolidated India segment revenues.
One of the PFAD customers accounted for 18% of the Company’s
consolidated India segment revenues and none of the refined
glycerin customers accounted for the Company’s consolidated
India segment revenues. During the three months ended March 31,
2019, one customer in biodiesel accounted for 45% of the
Company’s consolidated India segment revenues. None of the
refined glycerin customers accounted for 10% of the Company’s
consolidated India segment revenues.
10.
Related Party Transactions
The Company owes Eric McAfee, the Company’s Chairman and CEO,
and McAfee Capital, owned by Eric McAfee, $0.4 million as of March
31, 2020 and December 31, 2019 in connection with employment
agreements and expense reimbursements previously accrued as
salaries expense and currently held as an accrued liability. For
the three months ended March 31, 2020 and 2019, the Company
expensed none and $13 thousand, respectively, to reimburse actual
expenses incurred for McAfee Capital and related entities. The
Company previously prepaid $0.2 million to Redwood Capital, a
company controlled by Eric McAfee, for the Company’s use of
flight time on a corporate jet. As of March 31, 2020, $0.1 million
remained as a prepaid expense related to Redwood
Capital.
As consideration for the reaffirmation of guaranties required by
Amendment No. 13 and 14 to the Note Purchase Agreement entered into
by the Company with Third Eye Capital on March 1, 2017 and March
27, 2018 respectively, the Company also agreed to pay $0.2 million
for each year to McAfee Capital in exchange for their willingness
to provide the guaranties. The balance of $292 thousand and $304
thousand for the guaranty fee remained as an accrued liability as
of March 31, 2020 and December 31, 2019 respectively.
The Company owes various board members amounts totaling $1.2
million as of March 31, 2020 and December 31, 2019, respectively,
in connection with board compensation fees, which are included in
accounts payable on the balance sheet. For the three months ended
March 31, 2020 and 2019, the Company expensed $78 thousand and $101
thousand respectively, in connection with board compensation
fees.
11. Subsequent Events
The Company entered into a loan with Bank of America, NA in an
aggregate principal amount of $1.1 million (the “BofA
Loan”) evidenced by two promissory notes dated April 30, 2020
and May 1, 2020. The BofA Loan matures two years from the funding
date and bears interest at a fixed rate of 1.00% per annum, with
the first six months of interest deferred. Principal and interest
are payable monthly commencing six months after the funding date
and may be prepaid by the Company prior to maturity without a
prepayment penalty. Subject to the Company’s satisfaction of
certain terms and conditions, all or a portion of the BofA Loan may
be forgiven. Such forgiveness will be determined, subject to
limitations, based on the use of loan proceeds for covered payment
of payroll costs, mortgage interest, rent and utilities. However,
no assurance is provided that the Company will be able to satisfy
any or all of the conditions necessary for forgiveness for any
portion of the BofA Loan.
On May
13, 2020, Aemetis entered into the first amendment to the Amended
and Restated Heiskell Purchasing Agreement, dated May 16, 2013,
between Aemetis and J.D. Heiskell (the “J.D. Heiskell
Purchase Agreement”). The amendment, among other things,
removes J.D. Heiskell’s obligation under the J.D. Heiskell
Purchase Agreement to purchase and market ethanol from Aemetis and
grants J.D. Heiskell certain protective rights over its Collateral
(as defined therein) held by Aemetis.
On May
13, 2020, Aemetis entered into the first amendment to the Amended
and Restated Aemetis Keyes Grain Procurement and Working Capital
Agreement, dated May 2, 2013, between Aemetis and J.D. Heiskell
(the “J.D. Heiskell Procurement Agreement”). The
amendment, among other things, modifies certain terms and
conditions governing the procurement of Grains (as defined
therein), including the calculation of true-up amount and
settlement mechanics. Additionally, the amendment requires Aemetis
to build up a cash deposit for J.D. Heiskell to cover the costs of
Grains purchased over weekends.
On May
13, 2020, Aemetis entered into the Eighth Amended and Restated
Promissory Note with Third Eye Captial which waived covenant
violations that existed as of March 31, 2020.
31
12. Management’s Plans
The accompanying financial statements have been prepared
contemplating the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has been
required to remit substantially all excess cash from operations to
its senior lender and is therefore reliant on senior lender to
provide additional funding when required. In order to meet its
obligations during the next 12 months, the Company will need to
either refinance the Company’s debt or receive the continued
cooperation of 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:
●
Operate the Keyes
Plant and continue to improve operational performance at the Plant,
including the expansion into new products, new markets for existing
products, and adoption of new technologies or process changes that
allow for energy efficiency, cost reduction or revenue
enhancements.
●
Expand the ethanol
sold at the Keyes Plant to include the cellulosic ethanol to be
generated at the Riverbank Cellulosic Ethanol Facility and to
utilize lower cost, non-food advanced feedstocks to significantly
increase margins by 2021.
●
Monetize the
CO
2
produced at the Keyes Plant by delivery of gas to Messer facility
starting in the second quarter of 2020.
●
Construct and
operate the Biogas Project to capture and monetize biogas which is
expected to begin operations in the third quarter of
2020.
●
Raise the funds
necessary to construct and operate the Riverbank Cellulosic Ethanol
Facility using the licensed technology from LanzaTech and InEnTec
Technology to generate federal and state carbon credits available
for ultra-low carbon fuels.
●
Secure higher
volumes of shipments of fuels at the India plant by developing the
sales channels and expanding the existing domestic
markets.
●
Continue to locate
funding for existing and new business opportunities through a
combination of working with our senior lender, restructuring
existing loan agreements, selling the current offering for $50
million from the EB-5 Phase II funding, or by vendor financing
arrangements.
Management believes that through the above actions, the Company
will have the ability to generate capital liquidity to carry out
the business plan for 2020.
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 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 months ended March 31, 2020 and
2019.
●
Liquidity and Capital Resources. An analysis of changes in our
balance sheets and cash flows and discussion of our financial
condition.
●
Critical Accounting Estimates. Accounting estimates that we believe
are important to understanding the assumptions and judgments
incorporated in our reported financial results and
forecasts.
32
The following discussion should be read in conjunction with our
consolidated 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
Headquartered in Cupertino, California, Aemetis is an international
advanced renewable fuels and biochemicals company focused on the
acquisition, development and commercialization of innovative
technologies that replace traditional petroleum-based products
through the conversion of second-generation ethanol and biodiesel
plants into advanced biorefineries. We operate in two
reportable geographic segments: “North America” and
“India.”
Founded in 2006, we own and operate a 60 million gallon per year
ethanol facility in the California Central Valley in Keyes,
California where we manufacture and produce ethanol, high proof
alcohol, WDG, CDS and DCO.
We
operate a research and development laboratory to develop efficient
conversion technologies using waste feedstocks to produce biofuels
and biochemicals. We also own and operate a 50 million gallon per
year renewable chemical and advanced fuel production facility on
the East Coast of India producing high quality distilled biodiesel
and refined glycerin for customers in India and
Europe.
We also lease a site in Riverbank, California, near the Keyes
Plant, where we plan to utilize biomass-to-fuel technology that we
have licensed from LanzaTech and InEnTec to build the Riverbank
Cellulosic Ethanol Facility capable of converting local California
surplus biomass–principally agricultural waste–into
ultra-low carbon renewable cellulosic ethanol. By producing
ultra-low carbon renewable cellulosic ethanol, we expect to capture
higher value D3 cellulosic RINs and California’s LCFS
credits. D3 RINs have a higher value in the marketplace than D6
RINs due to D3 RINs’ relative scarcity and mandated pricing
formula from the United States EPA.
In December 2018, we acquired a 5.2-acre parcel of land for the
construction of a facility by Messer to sell CO
2
produced at the Keyes Plant, which
will add incremental income for the North America segment. We
commenced operations and expect to recognize revenue from this
project in the second quarter of 2020.
In 2018, we formed ABGL to construct biogas digesters at local
dairies near the Keyes Plant, many of whom are already customers of
the WDG produced at the Keyes Plant. The digesters are connected by
a pipeline to a gas cleanup and compression facility to produce
RNG. ABGL currently has signed participation agreements with
over a dozen local dairies and fully executed leases with three
dairies near the Keyes Plant in order to capture their methane,
which would otherwise be released into the atmosphere, primarily
from manure wastewater lagoons. We plan to capture methane from
multiple dairies and pipe the gas to a centralized location at our
Keyes Plant. The impurities of the methane will then be removed and
cleaned into bio-methane for injection into the local utility
pipeline or to a RCNG truck loading station that will service local
trucking fleets to displace diesel fuel. The bio-methane can
also be used in our Keyes Plant to displace petroleum-based natural
gas. The environmental benefits of the Biogas Project are
potentially significant because dairy biogas has a negative CI
under the California LCFS and will also receive D3 RINs under the
federal RFS. ABGL has constructed the first two digesters, and
construction of our pipeline began in the first quarter 2020 with
an expected operational date during the third quarter of
2020.
Additionally, we own the Goodland Plant through GAFI. We plan to
deploy a cellulosic ethanol technology to the Goodland
Plant.
33
North America Revenue
Our revenue development strategy in North America has historically
relied on supplying ethanol into the transportation fuel market in
Northern California and supplying feed products to dairy and other
animal feed operations in Northern California. We are actively
seeking higher value markets for our ethanol in an effort to
improve our overall margins and to add incremental income to the
North America segment, including the development of the Riverbank
Cellulosic Ethanol Facility, the sale of CO
2
produced at the Keyes Plant to Messer,
the construction of biogas digesters at local dairies near the
Keyes Plant, and the implementation of the Aemetis Integrated
Microgrid System, the Food Emission and Energy Efficiency Delivery
Initiative, the Mitsubishi dehydration system and other
technologies at our plants. We are also actively working with local
dairy and feed potential customers to promote the value of our WDG
product in an effort to strengthen demand for this
product.
During the first quarter of 2020, certain TTB prohibitions were
lifted, allowing for the sale of high proof alcohol by ethanol
producers. Accordingly, during the last week of March 2020, Aemetis
obtained the necessary permits and began selling high proof alcohol
for industrial and commercial applications directly to customers on
the West Coast on prepayment terms. Sales represented less than 3%
of quarterly revenue.
We produce five products at the Keyes Plant: denatured ethanol
fuel, high proof alcohol, WDG, DCO, and CDS. During the first
quarter of 2020, we sold 100% of the ethanol and WDG we produced to
J.D. Heiskell pursuant to the J.D. Heiskell Purchase Agreement. DCO
was sold to J.D. Heiskell and other local animal feedlots
(primarily poultry). Smaller amounts of CDS were sold to various
local third parties. We began selling high proof alcohol in March
2020 directly to various customers throughout the West Coast.
Ethanol pricing is determined pursuant to a marketing agreement
between us and Kinergy, 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, as well
as quarterly contracts negotiated by Kinergy with local fuel
blenders. The price for WDG is determined monthly pursuant to a
marketing agreement between A.L. Gilbert and us and is generally
determined in reference to the local price of distillers dried
grains and other feed products. North American revenue is dependent
on the price of ethanol, WDG, and DCO. Ethanol pricing is
influenced by local and national inventory levels, local and
national ethanol production, corn prices and gasoline demand. 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. High proof alcohol pricing is based on the demand for
it and supply restrictions in the current market. Our revenue is
further influenced by our decision to operate the Keyes Plant at
any capacity level, maintenance requirements, and the influences of
the underlying biological processes.
In the fourth quarter of 2019, we entered into an agreement to sell
California Carbon Allowances (“CCA”) and received the
cash in advance. We recorded a contract liability of $1.0 million
as of December 31, 2019, as control of the credits was not
transferred to the customer until January 3, 2020. We recognized
$1.0 million as revenue in the three months ended March 31,
2020.
In the first quarter of 2020, we entered into an agreement to sell
LCFS credits and received the cash in advance. We recorded a
contract liability of $0.3 million as of March 31, 2020, as control
of the credits was not transferred to the customer until April 2,
2020.
In the
first quarter of 2020, we entered into agreements with several
customers to ship product for which we received cash in advance. We
recorded a contract liability of $1.9 million as of March 31, 2020,
as the shipments were fulfilled in April 2020.
34
India 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 Oil Marketing Companies (“GOMCs”) for bulk
purchases of fuels. In 2019, the Indian government imposed
restrictions on imports of biodiesel mixtures, which we expect will
positively impact local sales of biodiesel and provide additional
opportunities to supply biodiesel for manufacturing purposes and
infrastructure companies.
In 2019, under the Indian government mandate of mixing biodiesel
with diesel, the Kakinada Plant won the tender to supply biodiesel
to GOMCs such as Hindustan Petroleum, Bharat Petroleum, and Indian
Oil Corporation. We started supplying biodiesel pursuant to this
tender in May 2019. These tenders open annually, generally in
December, soliciting bids for the next year based on
competitiveness of price and quality of the biodiesel supplied. Due
to the COVID-19 pandemic, the tender notification for 2020 was
delayed, pending further updates in the second quarter of
2020.
Results of Operations
Three Months Ended March 31, 2020 Compared to Three Months Ended
March 31, 2019
Revenues
Our revenues are derived primarily from sales of ethanol and WDG in
North America and biodiesel and refined glycerin in
India.
Three Months Ended March 31 (in thousands)
|
|
2020
|
2019
|
Inc/(dec)
|
% change
|
|
|
|
|
|
|
|
North
America
|
$
35,872
|
$
36,636
|
$
(764
)
|
-2
%
|
|
India
|
3,608
|
5,252
|
(1,644
)
|
-31
%
|
|
|
|
|
|
|
|
Total
|
$
39,480
|
$
41,888
|
$
(2,408
)
|
-6
%
|
North America.
The slight
decrease in revenues during the three months ended March 31, 2020
was due to a 7% decrease in average price of ethanol to $1.56 per
gallon, compared to $1.68 per gallon in the three months ended
March 31, 2019, while the gallons of ethanol sold also decreased to
15.7 million gallons in three months ended March 31, 2020, compared
to 16.2 million gallons in the same period of last year. In
addition, WDG sales volume increased slightly to 107.0 thousand
tons during the three months ended March 31, 2020, compared to
106.9 thousand tons in the three months ended March 31, 2019, and
the average price of WDG decreased by 3% to $78 per ton in the
three months ended March 31, 2020, compared to $80 per ton in the
three months ended March 31, 2019. During the three months ended
March 31, 2020, plant production averaged 114% of the 55 million
gallon per year nameplate capacity. For the three months ended
March 31, 2020, we generated 68% of our North America revenues from
sales of ethanol, 23% from sales of WDG, 3% from sales of
industrial alcohol, and 6% from sales of DCO, CCA credits, and CDS,
compared to 75% of our North America revenues from sales of
ethanol, 23% from sales of WDG, and 2% from sales of DCO and CDS
for the three months ended March 31, 2019.
35
India.
The decrease in revenues
was primarily attributable to the India Plant shut down for repairs
and maintenance in Feb 2020 and the operations were stopped during
March 2020 due to COVID-19 government mandatory shut down for all
businesses. In addition, the decrease in revenues was due to
decrease in sales volume of biodiesel by 31% to 3,554 metric tons
in the three months ended March 31, 2020 compared to 5,182 metric
tons in the three months ended March 31, 2019, and by a 6% decrease
in average price of biodiesel to $786 per metric ton in the three
months ended March 31, 2020, compared to $839 per metric ton in the
three months ended March 31, 2019. In addition, refined glycerin
sales volume decreased by 90% to 145 metric tons in the three
months ended March 31, 2020, compared to 1,396 metric tons in the
three months ended March 31, 2019, and average price per metric ton
decreased by 4% to $619 in the three months ended March 31, 2020,
compared to $644 per metric ton in the three months ended March 31,
2019. For the three months ended March 31, 2020, we generated 77%
of our revenues from the sale of biodiesel, 3% of our revenues from
the sale of refined glycerin, and 20% of our revenues from the sale
of PFAD, compared to 83% of our revenues from the sale of biodiesel
and 17% of our revenues from the sale of refined glycerin for the
three months ended March 31, 2019.
Cost of Goods Sold
Three Months Ended March 31 (in thousands)
|
|
2020
|
2019
|
Inc/(dec)
|
% change
|
|
|
|
|
|
|
|
North
America
|
$
36,413
|
$
36,967
|
$
(554
)
|
-1
%
|
|
India
|
3,500
|
5,272
|
(1,772
)
|
-34
%
|
|
|
|
|
|
|
|
Total
|
$
39,913
|
$
42,239
|
$
(2,326
)
|
-6
%
|
North America.
We ground 5.7
million and 5.6 million bushels of corn in the three months ended
March 31, 2020 and 2019, respectively. Our average cost of
feedstock per bushel stayed the same at $5.20 per bushel during the
three months ended March 31, 2020 compared to three months ended
March 31, 2019. The cost of sales was consistent period over period
even after 1% increase in bushels ground, as this cost was offset
by an 8% decrease in average price of natural gas and a 40%
decrease in enzymes cost.
India.
The decrease in costs of
goods sold was attributable to the decrease in biodiesel feedstock
volume by 30% to 3,235 metric tons in the three months ended March
31, 2020, compared to 4,642 metric tons in the three months ended
March 31, 2019, coupled with a decrease in the average price of
biodiesel feedstock to $657 per metric ton in the three months
ended March 31, 2020, compared to $693 per metric ton in the three
months ended March 31, 2019. Refined glycerin feedstock volumes
decreased by 90% to 109 metric tons in the three months ended March
31, 2020, compared to 1,140 metric tons in the three months ended
March 31, 2019, while the average price of refined glycerin
feedstock decreased by 47% to $441 per metric ton in the three
months ended March 31, 2020, compared to $827 per metric ton in the
three months ended March 31, 2019.
36
Gross Profit (loss)
Three Months Ended March 31 (in thousands)
|
|
2020
|
2019
|
Inc/(dec)
|
% change
|
|
|
|
|
|
|
|
North
America
|
$
(541
)
|
$
(331
)
|
$
(210
)
|
63
%
|
|
India
|
108
|
(20
)
|
128
|
-640
%
|
|
|
|
|
|
|
|
Total
|
$
(433
)
|
$
(351
)
|
$
(82
)
|
23
%
|
North America.
Gross profit
decreased in the three months ended March 31, 2020 due to the
decrease in the average price of ethanol by 7% while the average
corn price stayed the same during the three months ended March 31,
2020 compared to the three months ended March 31,
2019.
India.
The increase in gross
profit was attributable to the 5% decrease in biodiesel feedstock
cost per metric ton and the 47% decrease in refined glycerin
feedstock cost per metric ton, coupled with the increase in other
sales of PFAD at the average price of $881 per
ton.
Operating Expenses
R&D
Three Months Ended March 31 (in thousands)
|
|
2020
|
2019
|
Inc/(dec)
|
% change
|
|
|
|
|
|
|
|
North
America
|
$
117
|
$
33
|
$
84
|
255
%
|
|
India
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
Total
|
$
117
|
$
33
|
$
84
|
255
%
|
R&D expense in our North America segment increased for the
three months ended March 31, 2020 compared to the three months
ended March 31, 2019 due to an increase in research related
consulting fees and professional fees of $84 thousand.
37
Selling, General and Administrative Expenses
(SG&A)
Three Months Ended March 31 (in thousands)
|
|
2020
|
2019
|
Inc/(dec)
|
% change
|
|
|
|
|
|
|
|
North
America
|
$
3,120
|
$
4,066
|
$
(946
)
|
-23
%
|
|
India
|
816
|
175
|
641
|
366
%
|
|
|
|
|
|
|
|
Total
|
$
3,936
|
$
4,241
|
$
(305
)
|
-7
%
|
SG&A expenses consist primarily of salaries and related
expenses for employees, marketing expenses related to sales of
ethanol and WDG in North America and biodiesel and other products
in India, as well as professional fees, other corporate expenses,
and related facilities expenses.
North America
. The decrease in
the dollar amount of SG&A expenses for the three months ended
March 31, 2020 was mainly due to a decrease in professional fees of
$0.9 million. SG&A expenses as a percentage of revenue in the
three months ended March 31, 2020 decreased to 9% as compared to
11% in the corresponding period of 2019.
India
. The increase in the
dollar amount of SG&A expenses for the three months ended March
31, 2020 was due to an increase in maintenance, supplies, and plant
services of $0.3 million, and professional fees, travel, marketing
costs of $0.3 million. SG&A expenses as a percentage of revenue
in the three months ended March 31, 2020 increased to 23% as
compared to 3% in the corresponding period of
2019.
38
Other Income and Expense
Three Months Ended March 31 (in thousands)
|
Other
(income)/expense
|
|
|
|
|
|
|
2020
|
2019
|
Inc/dec
|
% change
|
|
North
America
|
|
|
|
|
|
Interest
rate expense
|
$
5,567
|
$
4,819
|
$
748
|
16
%
|
|
Debt
related fees and amortization expense
|
1,290
|
1,223
|
$
67
|
5
%
|
|
Accretion
of Series A preferred units
|
960
|
449
|
$
511
|
114
%
|
|
Other
(income)/expense
|
(53
)
|
111
|
$
(164
)
|
-148
%
|
|
|
|
|
|
|
|
India
|
|
|
|
|
|
Interest
rate expense
|
19
|
167
|
$
(148
)
|
-89
%
|
|
Other
income
|
(10
)
|
(734
)
|
$
724
|
-99
%
|
|
|
|
|
|
|
|
Total
|
$
7,773
|
$
6,035
|
$
1,738
|
29
%
|
Other (Income)/Expense.
Other
(income) expense consists primarily of interest and amortization
expense attributable to debt facilities acquired by our parent
company and our subsidiaries. When the debt facilities include
stock or warrants issued as fees, the fair value of stock and
warrants is amortized as amortization expense, except when the
extinguishment accounting method is applied, in which case
refinanced debt costs are recorded as extinguishment
expense.
North America
. Interest expense
was higher in the three months ended March 31, 2020 due to higher
debt balances. Increase in accretion on the Series A Preferred Unit
was due to issuance of additional shares. The increase in other
income was due to no guarantee fee amortization during the three
months ended March 31, 2020, compared to amortization of guarantee
fees of $125 thousand in the three months ended March 31,
2019.
India
. Interest expense
decreased due to accruing on only one working capital line while
the other line was treated as feedstock provider for working
capital without interest accrual during the three months ended
March 31, 2020. The decrease in other income of $0.7 million was
due to release of non-recurring items in the three months ended
March 31, 2019 as matters closed legally.
39
Liquidity and Capital Resources
Cash and Cash Equivalents
Cash and cash equivalents were $0.3 million at March 31, 2020, $0.2
million of which was held in North America and the rest was held at
our Indian subsidiary. Our current ratio at March 31, 2020 was
0.16, compared to a current ratio of 0.22 at December 31, 2019. We
expect that our future available capital resources will consist
primarily of cash generated from operations, remaining cash
balances, EB-5 program borrowings, amounts available for borrowing,
if any, under our senior debt facilities and our subordinated debt
facilities, and any additional funds raised through sales of
equity.
Liquidity
Cash and cash equivalents, current assets, current liabilities and
debt at the end of each period were as follows (in
thousands):
|
|
As of
|
|
|
|
March 31,
2020
|
December 31,
2019
|
|
|
|
|
|
Cash
and cash equivalents
|
$
303
|
$
656
|
|
Current
assets (including cash, cash equivalents, and
deposits)
|
9,853
|
12,576
|
|
Current
and long term liabilities (excluding all debt)
|
61,456
|
51,843
|
|
Current
& long term debt
|
209,048
|
202,425
|
Our principal sources of liquidity have been cash provided by
operations and borrowings under various debt arrangements. As of
March 31, 2020, the EB-5 escrow account is holding funds in the
amount of $0.5 million from one investor pending approval by the
USCIS.
We launched an EB-5 Phase II funding in 2016, under which we expect
to issue $50.0 million in additional EB-5 Notes on substantially
similar terms and conditions as those issued under our EB-5 Phase I
funding. On November 21, 2019, the minimum investment amount was
raised from $500,000 per investor to $900,000 per investor. As of
March 31, 2020, EB-5 Phase II funding in the amount of $4.0 million
had been released from escrow to the Company. 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 and
natural gas. 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.
40
Management believes that through the following actions, the Company
will have the ability to generate capital liquidity to carry out
the business plan:
●
Operate the Keyes
Plant and continue to improve operational performance at the Plant,
including the expansion into new products, new markets for existing
products, and adoption of new technologies or process changes that
allow for energy efficiency, cost reduction or revenue
enhancements.
●
Expand the ethanol
sold at the Keyes Plant to include the cellulosic ethanol to be
generated at the Riverbank Cellulosic Ethanol Facility and to
utilize lower cost, non-food advanced feedstocks to significantly
increase margins by 2021.
●
Monetize the
CO
2
produced at the Keyes Plant by delivery of gas to Messer facility
starting in the second quarter of 2020.
●
Construct and
operate the Biogas Project to capture and monetize biogas which is
expected to begin operations in the third quarter of
2020.
●
Raise the funds
necessary to construct and operate the Riverbank Cellulosic Ethanol
Facility using the licensed technology from LanzaTech and InEnTec
Technology to generate federal and state carbon credits available
for ultra-low carbon fuels.
●
Secure higher
volumes of shipments of fuels at the India plant by developing the
sales channels and expanding the existing domestic
markets.
●
Continue to locate
funding for existing and new business opportunities through a
combination of working with our senior lender, restructuring
existing loan agreements, selling the current offering for $50
million from the EB-5 Phase II funding, or by vendor financing
arrangements.
●
At March 31, 2020,
the outstanding balance of principal, interest and fees, net of
discounts, on all Third Eye Capital Notes equaled $146.8 million
including the GAFI debt. The current maturity date for all of the
Third Eye Capital financing arrangements, except the GAFI financing
arrangements, is April 1, 2021. The current maturity date for all
of the Third Eye Capital GAFI financing arrangements is July 10,
2020 with option to extend with one-year renewals. GAFI intends to
repay its Third Eye Capital Notes obligations through proceeds from
the issuance of a GAFI EB-5 offering or other debt/equity offerings
by an Aemetis subsidiary. We intend to repay rest of the Third Eye
Capital Notes through operational cash flow, proceeds from the
issuance of the EB-5 Notes and/or a senior debt refinancing and/or
an equity financing.
As of March 31, 2020, the Company has $18.0 million additional
borrowing capacity to fund future cash flow requirements under the
Reserve Liquidity Notes.
Our senior lender has provided a series of accommodating amendments
to the existing and previous loan facilities as described in
further detail in
Note 4. Debt
of the Notes to Consolidated Financial
Statements of this Form 10-Q. However, there can be no
assurance that our senior lender will continue to provide further
amendments or accommodations or will fund additional amounts in the
future.
We also rely on our working capital lines with Gemini and
Secunderabad Oils in India to fund our commercial arrangements for
the acquisitions of feedstock. We currently provide our own working
capital for the Keyes Plant; Gemini currently provides us with
working capital for the Kakinada Plant and Secunderabad Oils
provides us inter-corporate deposit for our BP operations.
The ability of Gemini, and Secunderabad Oils to continue to provide
us with working capital depends in part on both of their respective
financial strength and banking relationships.
41
Change in Working Capital and Cash Flows
The below table (in thousands) describes the changes in current and
long-term debt during the three months ended March 31,
2020:
|
Increases
to debt:
|
|
|
|
Accrued
interest
|
$
5,562
|
|
|
Feb
2019 Promissory note advances including fees
|
613
|
|
|
Sub
debt extension fees
|
340
|
|
|
India
working capital draws and changes due to foreign
currency
|
3,069
|
|
|
Change
in debt issuance costs, net of amortization
|
826
|
|
|
Total increases to debt
|
$
10,410
|
|
|
Decreases
to debt:
|
|
|
|
Principal
and interest payments to senior lender
|
$
(98
)
|
|
|
Interest
payments to EB-5 investors
|
(28
)
|
|
|
Principal,
fees and interest payments on working capital loans in
India
|
(3,641
)
|
|
|
GAFI
interest and principal payments
|
(20
)
|
|
|
Total decreases to debt
|
$
(3,787
)
|
|
|
Change in total
debt
|
$
6,623
|
|
Working capital changes resulted in (i) a $1.3 million decrease in
inventories due to a $1.3 million decrease mostly in finished goods
in India operations as the inventory was built up in the fourth
quarter of 2019 to sell in first quarter of 2020 due to climate
issues during winter months as of March 31, 2020, (ii) a $0.1
million increase in prepaid expenses mainly due to $0.1 million
paid for carbon treatment unit for high proof alcohol processing in
North America entities, (iii) a decrease in accounts receivable of
$0.3 million in India operations and $0.2 million in North America
entities respectively, and (iv) a decrease in other assets in India
operations of $1.2 million offset by an increase of $0.5 million in
North America operations, and (v) a $0.4 million decrease in
cash.
Net cash provided by operating activities during the three months
ended March 31, 2020 was $0.6 million, consisting of non-cash
charges of $3.4 million, net changes in operating assets and
liabilities of $9.2 million, and net loss of $12.1 million. The
non-cash charges consisted of: (i) $1.3 million in amortization of
debt issuance costs and other intangible assets, (ii) $1.1 million
in depreciation expenses, (iii) $0.3 million in stock-based
compensation expense, (iv) $0.2 million in tax benefit, and (v)
$1.0 million in preferred unit accretion. Net changes in operating
assets and liabilities consisted primarily of an decrease in (i)
inventories of $1.1 million, (ii) other assets of $0.4 million,
(iii) accounts receivable of $0.4 million, and offset by (v) an
increase in accounts payable of $1.1 million (vi) an increase in
prepaid expense of $0.1 million, (iv) an increase in other
liabilities of $0.9 million, and (vii) an increase in accrued
interest of $5.4 million.
42
Cash used by investing activities was $2.4 million, of which $1.3
million were used by North America entities and $1.1 million were
capital improvements made by India operations.
Cash provided by financing activities was $1.4 million, consisting
primarily of $0.6 million received from Third Eye Capital Note,
$1.3 million received for issuing Preferred Series A Units, and
$3.1 million from working capital partners in India for Kakinada
Plant operations, partially offset by payments of $3.6 million in
principal to working capital partners in India.
Critical Accounting Policies
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, defined as those policies 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, 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,
2019.
Recently Issued Accounting Pronouncements
None reported beyond those disclosed in our Annual Report on Form
10-K for the year ended December 31, 2019.
Off Balance Sheet Arrangements
We had no off balance sheet arrangements during the three months
ended March 31, 2020.
43
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), carried out 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 weakness over financial reporting as
identified in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2019, 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
accumulated 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, 2019, we initiated a remediation plan to address the
material weakness in our internal control over financial reporting
identified as of the fiscal year then ended. Our efforts to improve
our internal controls are ongoing.
For a more comprehensive discussion of the material weakness in
internal control over financial reporting identified by management
as of December 31, 2019, and the remedial measures undertaken to
address this material weakness, investors are encouraged to review
Item 9A, Controls and Procedures, in our Annual Report on Form 10-K
for the year ended December 31, 2019.
44
PART II -- OTHER INFORMATION
Item
1.
Legal
Proceedings
On August 31, 2016, the Company filed a lawsuit in Santa Clara
County Superior Court against defendant EdenIQ, Inc.
(“EdenIQ”). The lawsuit was based on
EdenIQ’s wrongful termination of a merger agreement that
would have effectuated the merger of EdenIQ into a new entity that
would be primarily owned by Aemetis. The lawsuit asserted
that EdenIQ had fraudulently induced the Company into assisting
EdenIQ to obtain EPA approval for a new technology that the Company
would not have done but for the Company’s belief that the
merger would occur. The relief sought included EdenIQ’s
specific performance of the merger, monetary damages, as well as
punitive damages, attorneys’ fees, and costs. In
response to the lawsuit, EdenIQ filed a cross-complaint asserting
causes of action relating to the Company’s alleged inability
to consummate the merger, the Company’s interactions with
EdenIQ’s business partners, and the Company’s use of
EdenIQ’s name and trademark in association with publicity
surrounding the merger. Further, EdenIQ named Third Eye
Capital Corporation (“TEC”) as a defendant in a second
amended cross-complaint alleging that TEC had failed to disclose
that its financial commitment to fund the merger included terms
that were not disclosed. Finally, EdenIQ claimed that TEC and
the Company concealed material information surrounding the
financing of the merger. By way of its cross-complaint,
EdenIQ sought monetary damages, punitive damages, injunctive
relief, attorneys’ fees and costs. In November 2018, the
claims asserted by the Company were dismissed on summary judgment
and the Company filed a motion to amend its claims, which remains
pending. In December 2018, EdenIQ dismissed all of its claims prior
to trial. In February 2019, the Company and EdenIQ each filed
motions seeking reimbursement of attorney fees and costs associated
with the litigation. On July 24, 2019, the court awarded EdenIQ a
portion of the fees and costs it had sought in the amount of
approximately $6.2 million and the Company recorded these fees
based on the court order. The Company’s ability to amend its
claims and present its claims to the court or a jury could
materially affect the court’s decision to award EdenIQ its
fees and costs. In addition to further legal motions and a
potential appeal of the Court’s summary judgment order, the
Company plans to appeal the court’s award of EdenIQ’s
fees and costs. The Company intends to continue to vigorously
pursue its legal claims and defenses against EdenIQ.
Item
1A.
Risk
Factors.
No change in risk factors since the Company’s Annual Report
on Form 10-K for the year ended December 31, 2019 filed with the
SEC on March 12, 2020, except as set forth below.
The widespread outbreak of an illness, pandemic (such as COVID-19)
or any other public health crisis may have material adverse effects
on our financial position, results of operations or cash
flows.
The spread of COVID-19 has caused global business disruptions
beginning in January 2020, including disruptions in the energy and
natural gas industry. In March 2020, the World Health Organization
declared the outbreak of COVID-19 to be a pandemic, and the U.S.
economy began to experience pronounced effects. The COVID-19
pandemic has negatively impacted the global economy, disrupted
global supply chains, reduced global demand of goods and services,
and created significant volatility and disruption of financial and
commodity markets. The extent of the impact of the COVID-19
pandemic on our operational and financial performance, including
our ability to execute our business strategies and projects in the
expected time frame, is uncertain and depends on various factors,
including the demand for ethanol, WDG, CDS and DCO, the
availability of personnel, equipment and services critical to our
ability to operate our properties and the impact of potential
governmental restrictions on travel, transports and operations.
There is uncertainty around the extent and duration of the
disruption. The degree to which the COVID-19 pandemic or any other
public health crisis adversely impacts our results will depend on
future developments, which are highly uncertain and cannot be
predicted, including, but not limited to, the duration and spread
of the outbreak, its severity, the actions to contain the virus or
treat its impact, its impact on the economy and market conditions,
and how quickly and to what extent normal economic and operating
conditions can resume. Therefore, the degree of the adverse
financial impact cannot be reasonably estimated at this
time.
Aemetis has entered new markets for alcohol, including the
sanitizer market and other industrial alcohol segments. These new
markets, along with the existing transportation/energy markets
Aemetis already serves, are highly volatile and have significant
risk associated with current market conditions.
We have
limited experience in marketing and selling high proof alcohol. As
such, we may not be able to compete successfully with existing or
new competitors in supplying high proof alcohol to potential
customers. Furthermore, there can be no assurance that our high
proof alcohol business will ever generate significant revenues or
maintain profitability. The failure to do so could have a material
adverse effect on our business and results of
operations.
45
Item
2.
Unregistered
Sales of Equity Securities and Use of Proceeds.
During the first quarter of 2020, we issued 112
thousand
shares of our common stock to certain subordinated promissory note
holders pursuant to the note holders’ warrant exercise at an
exercise price of $0.01 per share.
The above issuance was exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, as
sales of securities not involving any public offering.
Item
3.
Defaults
Upon Senior Securities.
No unresolved defaults on senior securities occurred during the
three months ended March 31, 2020.
Item
4.
Mine
Safety Disclosures.
None
Item
5.
Other
Information.
None
46
Item
6.
Exhibits.
|
|
Amended and Restated Articles of Incorporation filed on March 16,
2017.
|
|
|
The First Amendment to the Amended and Restated Heiskell
Purchasing Agreement, dated May 13, 2020
|
|
|
The First
Amendment to the Amended and Restated Aemetis Keyes Grain
Procurement and Working Capital Agreement, dated May 13,
2020
|
|
|
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
|
|
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.
|
|
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
47
SIGNATURES
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.
|
|
|
|
|
|
|
|
|
|
|
Date:
May 14, 2020
|
By:
|
/s/ E
ric
A. M
c
A
fee
|
|
|
|
Eric A. McAfee
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
|
AEMETIS, INC.
|
|
|
|
|
|
|
|
|
|
|
Date:
May 14, 2020
|
By:
|
/s/ Todd Waltz
|
|
|
|
Todd Waltz
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
48
TABLE OF CONTENTS
Part I - Financial InformationItem 1 - Financial StatementsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsNote 4. DebtItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II -- Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits