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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
———————
FORM
———————
For the quarterly period ended:
OR
For the transition period from to
Commission File Number:
———————
(Exact name of registrant as specified in its charter)
———————
| ||
(State or other jurisdiction |
| (I.R.S. Employer |
of incorporation or organization) |
| Identification No.) |
(Address of Principal Executive Offices, including zip code)
(
(Registrant’s telephone number, including area code)
Title of each class of registered securities |
| Trading Symbol |
| Name of each exchange on which registered |
|
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically 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).
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 | ☐ | ☒ | |
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
The number of shares outstanding of the registrant’s Common Stock on April 30, 2022 was
AEMETIS, INC.
FORM 10-Q
Quarterly Period Ended March 31, 2022
INDEX
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Management's Discussion and Analysis of Financial Condition and Results of Operations | 30 | |
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| 41 | |
| 2 |
| Table of Contents |
SPECIAL NOTE REGARDING FORWARD—LOOKING STATEMENTS
On one or more occasions, we may make forward-looking statements in this Quarterly Report on Form 10-Q, including statements regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events or other statements that are not historical facts. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements regarding management’s plans; trends in market conditions with respect to prices for inputs for our products versus prices for our products; our ability to leverage approved feedstock pathways; our ability to leverage our location and infrastructure; our ability to incorporate lower-cost, non-food advanced biofuels feedstock at the Keyes plant; our ability to adopt value-add by-product processing systems; our ability to expand into alternative markets for biodiesel and its by-products, including continuing to expand our sales into international markets; our ability to maintain and expand strategic relationships with suppliers; our ability to continue to develop new and to maintain and protect new and existing intellectual property rights; our ability to adopt, develop and commercialize new technologies; our ability to refinance our senior debt on terms reasonably acceptable to us or at all; our ability to continue to fund operations and our future sources of liquidity and capital resources; our ability to 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,” “could,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will continue” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on current assumptions and predictions and are subject to numerous markets and uncertainties. Actual results or events could differ materially from those set forth or implied by such forward-looking statements and related assumptions due to certain factors, including, without limitation, the risks set forth under the caption “Risk Factors” below, which are incorporated herein by reference, as well as those business risks and factors described elsewhere in this report and in our other filings with the Securities and Exchange Commission (the “SEC”), including without limitation, our most recent Annual Report on Form 10-K.
| 3 |
| Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements.
AEMETIS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except for par value)
|
| March 31, 2022 |
|
| December 31, 2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents ($ |
| $ |
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| $ |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventories, net of allowance for excess and obsolete inventory of $ |
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Prepaid expenses ($ |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net ($ |
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Operating lease right-of-use assets ($ |
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Other assets ($ |
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Total assets |
| $ |
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| $ |
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Liabilities and stockholders' deficit |
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Current liabilities: |
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Accounts payable ($ |
| $ |
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| $ |
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Current portion of long term debt |
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Short term borrowings ($ |
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Mandatorily redeemable Series B convertible preferred stock |
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Accrued property taxes ($ |
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Accrued contingent litigation fees |
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Current portion of operating lease liability ($ |
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Current portion of Series A preferred units ($ |
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Other current liabilities ($ |
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Total current liabilities |
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Long term liabilities: |
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Senior secured notes and revolving notes |
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EB-5 notes |
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Other long term debt ($ |
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Series A preferred units ($ |
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Operating lease liability |
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Other long term liabilities |
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Total long term liabilities |
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Stockholders' deficit: |
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Series B convertible preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
|
| ( | ) |
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| ( | ) |
Accumulated other comprehensive loss |
|
| ( | ) |
|
| ( | ) |
Total stockholders' deficit |
|
| ( | ) |
|
| ( | ) |
Total liabilities and stockholders' deficit |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of the financial statements.
| 4 |
| Table of Contents |
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, |
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| 2022 |
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| 2021 |
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Revenues |
| $ |
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| $ |
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Cost of goods sold |
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Gross loss |
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Research and development expenses |
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Selling, general and administrative expenses |
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Operating loss |
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Other expense (income): |
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Interest expense |
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Interest rate expense |
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Debt related fees and amortization expense |
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Accretion and other expenses of Series A preferred units |
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Other income |
|
| ( | ) |
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| ( | ) |
Loss before income taxes |
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| ( | ) |
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| ( | ) |
Income tax expense |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
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Other comprehensive (loss) |
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Foreign currency translation loss |
|
| ( | ) |
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| ( | ) |
Comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
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Net loss per common share |
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Basic |
| $ | ( | ) |
| $ | ( | ) |
Diluted |
| $ | ( | ) |
| $ | ( | ) |
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Weighted average shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of the financial statements.
| 5 |
| Table of Contents |
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
| For the three months ended March 31, |
| |||||
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| 2022 |
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| 2021 |
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| Operating activities: |
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| Net loss |
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| ( | ) |
| $ | ( | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Share-based compensation |
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| Depreciation |
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| Debt related fees and amortization expense |
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| Intangibles and other amortization expense |
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| Accretion and other expenses of Series A preferred units |
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| Provision for bad debts |
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Changes in operating assets and liabilities: |
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| Accounts receivable |
|
|
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|
| ( | ) | |
| Inventories |
|
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| ( | ) | |
| Prepaid expenses |
|
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| ( | ) | |
| Other assets |
|
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| Accounts payable |
|
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| ( | ) | |
| Accrued interest expense and fees |
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| Other liabilities |
|
| ( | ) |
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| |
| Net cash used in operating activities |
|
| ( | ) |
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| ( | ) |
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| Investing activities: |
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| Capital expenditures |
|
| ( | ) |
|
| ( | ) |
| Grant proceeds and other reimbursements received for capital expenditures |
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| Net cash used in investing activities |
|
| ( | ) |
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| ( | ) |
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| Financing activities: |
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| Proceeds from borrowings |
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| Repayments of borrowings |
|
| ( | ) |
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| ( | ) |
| Lender debt renewal and waiver fee payments |
|
| ( | ) |
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| Grant proceeds received for capital expenditures |
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| Payments on finance leases |
|
| ( | ) |
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| ( | ) |
| Proceeds from issuance of common stock in equity offering |
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| Proceeds from the exercise of stock options |
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| Proceeds from Series A preferred units financing |
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| Series A preferred financing redemption |
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| ( | ) | |
| Net cash provided by financing activities |
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| Effect of exchange rate changes on cash and cash equivalents |
|
| ( | ) |
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| Net change in cash and cash equivalents for period |
|
| ( | ) |
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| Cash and cash equivalents at beginning of period |
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| Cash and cash equivalents at end of period |
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| $ |
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| Supplemental disclosures of cash flow information, cash paid: |
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| Cash paid for interest |
| $ |
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| $ |
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| Income taxes paid |
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| Supplemental disclosures of cash flow information, non-cash transactions: |
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| Subordinated debt extension fees added to debt |
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| Debt fees added to revolving lines |
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| Fair value of warrants issued to subordinated debt holders |
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| Fair value of warrants issued for guarantee fees |
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| Fair value of warrants issued to lender for debt issuance costs |
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| Fair value of stock issued to lender |
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| Lender debt extension, waiver, and other fees added to debt |
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| Capital expenditures in accounts payable |
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| Payment of debt added to revolving lines |
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The accompanying notes are an integral part of the financial statements.
| 6 |
| Table of Contents |
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in thousands)
For the three months ended March 31, 2022
|
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| Additional |
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| Accumulated Other |
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| Total |
| ||||||||||
|
| Series B Preferred Stock |
|
| Common Stock |
|
| Paid-in |
|
| Accumulated |
|
| Comprehensive |
|
| Stockholders' |
| ||||||||||||||
Description |
| Shares |
|
| Dollars |
|
| Shares |
|
| Dollars |
|
| Capital |
|
| Deficit |
|
| Loss |
|
| deficit |
| ||||||||
| Balance at December 31, 2021 |
|
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|
| $ |
|
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|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
| Issuance of common stock |
|
| - |
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| |||||||
| Series B conversion to common stock |
|
| ( | ) |
|
| - |
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| 1 |
|
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| |||||
| Stock options exercised |
|
| - |
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| |||||||
| Stock-based compensation |
|
| - |
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| - |
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| ||||||
| Issuance and exercise of warrants |
|
| - |
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| |||||||
| Foreign currency translation loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
| Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||
| Balance at March 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
For the three months ended March 31, 2021
|
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| Accumulated |
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| ||||||||||||||
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| Additional |
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| Other |
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| Total |
| ||||||||||||||
|
| Series B Preferred Stock |
|
| Common Stock |
|
| Paid-in |
|
| Accumulated |
|
| Comprehensive |
|
| Stockholders' |
| ||||||||||||||
Description |
| Shares |
|
| Dollars |
|
| Shares |
|
| Dollars |
|
| Capital |
|
| Deficit |
|
| Loss |
|
| deficit |
| ||||||||
| Balance at December 31, 2020 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
| Issuance of common stock |
|
| - |
|
|
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|
|
|
|
|
|
|
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|
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|
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|
|
|
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| |||||||
| Stock options exercised |
|
| - |
|
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|
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|
|
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|
|
|
|
|
|
| |||||||
| Stock-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| ||||||
| Issuance and exercise of warrants |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Foreign currency translation loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
| Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||
Balance at March 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
The accompanying notes are an integral part of the financial statements.
| 7 |
| Table of Contents |
1. Nature of Activities and Summary of Significant Accounting Policies
Nature of Activities. Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis, “Aemetis,” the “Company,” “we,” “our” or “us”) is an international renewable natural gas, renewable fuels and byproducts company focused on the acquisition, development and commercialization of innovative technologies that replace traditional petroleum-based products.
We own and operate a 65 million gallon per year ethanol production facility located in Keyes, California (the “Keyes Plant”). In addition to low carbon renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), and Condensed Distillers Solubles (“CDS”), all of which are sold as animal feed to local dairies and feedlots. In the fourth quarter of 2021, an ethanol zeolite membrane dehydration system was installed at the Keyes Plant and is in the process of being commissioned, a key first step in the electrification of the Keyes Plant.
During 2018, Aemetis Biogas, LLC (“ABGL”) was formed to construct bio-methane anaerobic digesters at local dairies near the Keyes Plant, many of whom also purchase WDG produced at the Keyes Plant. The digesters are connected via an underground private pipeline owned by ABGL to a gas cleanup and compression unit being built at the Keyes Plant to produce dairy renewable natural gas (“RNG”). Upon receiving the bio-methane from the dairies, impurities are removed, and the bio-methane is converted to negative carbon intensity RNG that will either be injected into the statewide PGE gas utility pipeline, supplied as compressed RNG that will service local trucking fleets, or used as renewable process energy at the Keyes Plant. Our Dairy Renewable Natural Gas segment, comprised of ABGL, has completed Phase 1 of our California biogas digester network and pipeline system that converts waste dairy methane gas into RNG, including two operational dairies and seven miles of pipeline. ABGL is now executing Phase 2 construction with the completion of sixteen miles of pipeline and the commissioning of the biogas-to-RNG upgrade unit at the Keyes Plant as well as beginning construction of additional dairy digesters.
Our “Carbon Zero” biofuels production plants are designed to produce biofuels, including sustainable aviation fuel (“SAF”) and diesel fuel utilizing renewable hydrogen and non-edible renewable oils sourced from our existing biofuels plants and other sources. The first plant, in Riverbank, California, “Carbon Zero 1”, is expected to utilize hydroelectric and other renewable power available onsite to produce SAF, renewable diesel, and other byproducts. The plant is expected to supply the aviation and truck markets with ultra-low carbon renewable fuels.
On April 1, 2021, we established Aemetis Carbon Capture, Inc. to build Carbon Capture and Sequestration (CCS) projects to generate LCFS and IRS 45Q credits by injecting CO₂ into wells which are monitored for emissions to ensure the long-term sequestration of carbon underground.
We also own and operate a production facility on the East Coast of India (the “Kakinada Plant”) with a nameplate capacity of 150 thousand metric tons per year, or about 50 million gallons per year, producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. The Kakinada Plant is capable of processing a variety of vegetable oils and animal fat waste feedstocks into biodiesel that meet international product standards. The Kakinada Plant also distills the crude glycerin byproduct from the biodiesel refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive and other industries.
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. A controlling financial interest is usually obtained through ownership of a majority of the voting interests. However, an enterprise must consolidate a variable interest entity (“VIE”) if the enterprise is the primary beneficiary of the VIE, even if the enterprise does not own a majority of the voting interests. The primary beneficiary is the party that has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. ABGL was assessed to be a VIE and through the Company's ownership interest in all of the outstanding common stock, the Company has been determined to be the primary beneficiary and accordingly, the assets, liabilities, and operations of ABGL are consolidated into those of the Company.
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All intercompany balances and transactions have been eliminated in consolidation.
The accompanying consolidated condensed balance sheet as of March 31, 2022, the consolidated condensed statements of operations and comprehensive (loss) for the three months ended March 31, 2022 and 2021, the consolidated condensed statements of cash flows for the three months ended March 31, 2022 and 2021, and the consolidated condensed statements of stockholders’ deficit for the three months ended March 31, 2022 and 2021 are unaudited. The consolidated condensed balance sheet as of December 31, 2021 was derived from the 2021 audited consolidated financial statements and notes thereto. The consolidated condensed financial statements in this report should be read in conjunction with the 2021 audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021. The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
In the opinion of Company’s management, the unaudited interim consolidated condensed financial statements as of and for the three months ended March 31, 2022 and 2021 have been prepared on the same basis as the audited consolidated statements as of and for the year ended December 31, 2021 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, 2022 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 Accounting Standards Codification (“ASC”) 606 guidance: (i) identify the contracts with customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when the entity satisfies the performance obligations.
California Ethanol: Until May 13, 2020, we sold all our ethanol to J.D. Heiskell Co. (“J.D. Heiskell”) under the Working Capital and Purchasing Agreement (the “J.D. Heiskell Purchasing Agreement”). On May 13, 2020, we entered into an amendment to the Corn Procurement and Working Capital Agreement with J.D. Heiskell (the “Corn Procurement and Working Capital”), under the terms of which we buy all corn from J.D. Heiskell and sell all WDG and corn oil we produce to J.D. Heiskell. Following May 13, 2020 and until October, 2021, we sold the majority of our fuel ethanol production to one customer, Kinergy Marketing, LLC (“Kinergy”), through individual sales transactions. We terminated the Ethanol Marketing Agreement with Kinergy as of September 30, 2021. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC (“Murex”), in which we will sell all our ethanol to Murex. Given the similarity of the individual sales transactions with Kinergy and Murex, we have assessed them as a portfolio of similar contracts. The performance obligation is satisfied by delivery of the physical product to one of our customer’s contracted trucking companies. Upon delivery, the customer has the ability to direct the use of the product and receive substantially all of its benefits. The transaction price is determined based on daily market prices negotiated by Kinergy and Murex for ethanol and by our marketing partner A.L. Gilbert Company (“A.L. Gilbert”) for WDG. The transaction price is allocated to one performance obligation.
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The below table shows our sales in California Ethanol by product category:
|
| For the three months ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
| Ethanol sales |
| $ |
|
| $ |
| ||
| Wet distiller's grains sales |
|
|
|
|
|
| ||
| Other sales |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
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.
For our California Ethanol segment, we buy corn as feedstock for the production of ethanol, from our working capital partner J.D. Heiskell. Prior to May 13, 2020, we sold all our ethanol, WDG, and corn oil to J.D. Heiskell and we bought all our corn to process into ethanol from J.D. Heiskell. After May 13, 2020, we sold most of our fuel ethanol to one customer, Kinergy, and sold all WDG and corn oil to J.D. Heiskell. During the second quarter of 2021, we signed a biofuels offtake agreement with Murex, LLC, and beginning on October 1, 2021 we sold all our fuel ethanol to Murex LLC. We only have customer relationships with Kinergy Marketing and Murex LLC, hence the principal and agent criteria are not applied. However, we are still buying corn and selling WDG and corn oil to J.D.Heiskell. We analyzed the principal vs agent relationship criteria below.
We consider the purchase of corn as a cost of goods sold and the sale of WDG and, corn oil, upon trucks leaving the Keyes Plant, 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 WDG and corn oil is set independently. Revenues from WDG and corn oil are billed net of the related transportation and marketing charges. The transportation component is accounted for in cost of goods sold and the marketing component is accounted for in sales, general and administrative expense. Transportation and marketing charges are known within days of the transaction and are recorded at the actual amounts. We have elected an accounting policy under which these charges have been treated as fulfillment activities provided after control has transferred. As a result, these charges are recognized in cost of goods sold and selling, general and administrative expenses, respectively, when revenue is recognized. Revenues are recorded at the gross invoiced amount. Hence, we are the principal in California Ethanol segment where our customer and vendor may be the same.
Dairy Renewable Natural Gas: All of our Dairy Renewable Natural Gas segment revenues during the three months ended March 31, 2022 and 2021 were from sales of biogas to the Keyes Plant for use in boilers. This resulted in lowering the carbon intensity of the Keyes Plant and increased revenues on ethanol sold through the California Ethanol segment. These revenues have been eliminated once consolidated. Refer to Footnote 9 Segment Information for the unconsolidated revenue of our Dairy Renewable Natural Gas segment.
India Biodiesel: 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 distillate net of taxes. Transaction price is allocated to one performance obligation.
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The below table shows our sales in India Biodiesel by product category:
|
| For the three months ended |
| |||||
|
| March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Biodiesel sales |
| $ |
|
| $ |
| ||
Refined glycerin sales |
|
|
|
|
|
| ||
Other sales |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
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 when 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.
Shipping and Handling Costs. Shipping and handling costs are classified as a component of cost of goods sold in the accompanying consolidated statements of operations.
Research and Development. Research and development costs are expensed as incurred, unless they have alternative future uses to the Company.
Cash and Cash Equivalents. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances at various financial institutions domestically and abroad. The Federal Deposit Insurance Corporation insures domestic cash accounts. The Company’s accounts at these institutions may at times exceed federally insured limits. The Company has not experienced any losses in such accounts.
Accounts Receivable. The Company sells ethanol and WDG through third-party marketing arrangements generally without requiring collateral and high-grade alcohol directly to customers on a variety of terms including advanced payment terms, based on the size and creditworthiness of the customer. DCO is marketed and sold to A.L. Gilbert and other customers under the J.D. Heiskell Purchasing Agreement. The Company sells CDS directly to customers on standard 30 day payment terms. The Company sells biodiesel, glycerin, and processed natural oils to a variety of customers and may require advanced payment based on the size and creditworthiness of the customer. Usually, invoices are due within 30-days on net terms. Accounts receivables consist of product sales made to large creditworthy customers. Trade accounts receivable are presented at original invoice amount, net of any allowance for doubtful accounts.
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 reserved $
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.
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Variable Interest Entities. We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests in is considered a variable interest entity (“VIE”). We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether any changes in our interest or relationship with the entity affects our determination of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable U.S. GAAP.
Property, Plant and Equipment. Property, plant, and equipment are carried at cost less accumulated depreciation after assets are placed in service and are comprised primarily of plant and buildings, furniture, machinery, equipment, land, and biogas dairy digesters. Capital expenses for in-process project are accumulated in construction in progress and will be capitalized and depreciated once the capital projects are finished and are in service. The Company’s plant Goodland, Kansas (the ”Goodland Plant”) is partially completed and is not ready for operation. It is the Company’s policy to depreciate capital assets over their estimated useful lives using the straight-line method.
The Company evaluates the recoverability of long-lived assets with finite lives in accordance with ASC Subtopic 360-10-35 Property Plant and Equipment—Subsequent Measurements, which requires recognition of impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable, based on estimated undiscounted cash flows, the impairment loss would be measured as the difference between the carrying amount of the assets and its estimated fair value. The Company has not recorded any impairment during the three months ended March 31, 2022 and 2021.
California Energy Commission Low-Carbon Fuel Production Program. The Company has been awarded $
California Department of Food and Agriculture Dairy Digester Research and Development Grant. In 2019, the Company was awarded $
In October 2020, the Company was awarded $
California Energy Commission Low Carbon Advanced Ethanol Grant Program. In May 2019, the Company was awarded the right to receive reimbursements from the California Energy Commission Community-Scale and Commercial-Scale Advanced Biofuels Production Facilities grant under the Alternative and Renewable Fuel and Vehicle Technology Program in an amount up to $
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U.S. Department of Food and Agriculture Forest Service Grant. Aemetis Advanced Products Keyes (“AAPK”) has been awarded $
California Energy Commission Grant for Solar Microgrid, DSC and Battery Backup System. Aemetis Advanced Fuels Keyes (“AAFK”) has been awarded an $
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, 2022 and, 2021, 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, 2022 and 2021:
|
| As of |
| |||||
|
| March 31, 2022 |
|
| March 31, 2021 |
| ||
|
|
|
|
|
|
| ||
Series B preferred (post split basis) |
|
|
|
|
|
| ||
Common stock options and warrants |
|
|
|
|
|
| ||
Debt with conversion feature at $30 per share of common stock |
|
|
|
|
|
| ||
Total number of potentially dilutive shares excluded from the diluted net (loss) per share calculation |
|
|
|
|
|
| ||
Comprehensive Income (Loss). ASC 220 Comprehensive Income (Loss) requires that an enterprise report, by major components and as a single total, the change in its net assets from non-owner sources. The Company’s other comprehensive loss and accumulated other comprehensive loss consists solely of cumulative currency translation adjustments resulting from the translation of the financial statements of its foreign subsidiary. The investment in this subsidiary is considered indefinitely invested overseas, and as a result, deferred income taxes are not recorded related to the currency translation adjustments.
Foreign Currency Translation/Transactions. Assets and liabilities of the Company’s non-U.S. subsidiary that operates in a local currency environment, where that local currency is the functional currency, are translated into U.S. dollars at exchange rates in effect at the balance sheet date and the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at average exchange rates during the year. Transactional gains and losses from foreign currency transactions are recorded in other (income) loss, net.
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Segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company further evaluates its operating segments to determine its reportable segments. Aemetis recognizes three reportable segments “California Ethanol”, “Dairy Renewable Natural Gas”, and “India Biodiesel.”
The “California Ethanol” reportable segment includes the Company’s 65 million gallon per year Keyes plant and the adjacent land leased for the production of CO₂.
The “Dairy Renewable Natural Gas” reportable segment include, the dairy digesters, pipeline and gas condition unit for the production of biogas from dairies near Keyes, California.
The “India Biodiesel” reportable segment includes the Company’s 50 million gallon per year nameplate capacity biodiesel manufacturing Kakinada Plant, 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.
The Company has additional operating segments that were determined not to be reportable segments, including the Carbon Zero 1 facility in Riverbank, the Goodland Plant in Kansas and the research and development facility in Minnesota. Refer to the “All Other” category.
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.
Fair Value of Financial Instruments. Financial instruments include accounts receivable, accounts payable, accrued liabilities, current and non-current portion of subordinated debt, notes receivable, notes payable, series A preferred units, and long-term debt. Due to the unique terms of our notes payable and long-term debt and the financial condition of the Company, the fair value of the debt is not readily determinable. The fair value determined using level 3 inputs, of all other current financial instruments is estimated to approximate carrying value due to the short-term nature of these instruments.
Commitments and Contingencies. The Company records and/or discloses commitments and contingencies in accordance with ASC 450 Contingencies. ASC 450 applies to an existing condition, situation or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.
Convertible Instruments. The Company evaluates the impacts of convertible instruments based on the underlying conversion features. Convertible instruments are evaluated for treatment as derivatives that could be bifurcated and recorded separately. Any beneficial conversion feature is recorded based on the intrinsic value difference at the commitment date.
Debt Modification Accounting. The Company evaluates amendments to its debt in accordance with ASC 470-50 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.
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, 2021 and 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2022.
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2. Inventories
Inventories consist of the following:
|
| As of |
| |||||
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
| Raw materials |
| $ |
|
| $ |
| ||
| Work-in-progress |
|
|
|
|
|
| ||
| Finished goods |
|
|
|
|
|
| ||
| Total inventories |
| $ |
|
| $ |
| ||
As of March 31, 2022, and December 31, 2021, the Company recognized a lower of cost or net realizable value impairment of $
3. Property, Plant and Equipment
Property, plant and equipment consist of the following:
|
| As of |
| |||||
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
| Land |
| $ |
|
| $ |
| ||
| Plant and buildings |
|
|
|
|
|
| ||
| Furniture and fixtures |
|
|
|
|
|
| ||
| Machinery and equipment |
|
|
|
|
|
| ||
| Tenant improvements |
|
|
|
|
|
| ||
| Construction in progress |
|
|
|
|
|
| ||
| Property held for development |
|
|
|
|
|
| ||
| Finance lease right of use assets |
|
|
|
|
|
| ||
| Total gross property, plant equipment |
|
|
|
|
|
| ||
| Less accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
| Total net property, plant equipment |
| $ |
|
| $ |
| ||
For the three months ended March 31, 2022 and 2021, interest capitalized in property, plant, and equipment was $
Construction in progress includes costs for the biogas construction projects (dairy digesters, pipeline and biogas-to-RNG upgrade unit), Riverbank projects (sustainable aviation fuel and renewable diesel plant as well as carbon capture characterization well), and energy efficiency projects at the Keyes Plant. Depreciation on the components of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:
Years | ||
Plant and buildings | ||
Machinery and equipment | ||
Furniture and fixtures |
| |
For the three months ended March 31, 2022 and 2021, the Company recorded depreciation expense of $
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, 2022 and 2021.
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4. Debt
Debt consists of the following:
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
| Third Eye Capital term notes |
| $ |
|
| $ |
| ||
| Third Eye Capital revolving credit facility |
|
|
|
|
|
| ||
| Third Eye Capital revenue participation term notes |
|
|
|
|
|
| ||
| Third Eye Capital acquisition term notes |
|
|
|
|
|
| ||
| Third Eye Capital Fuels Revolving Line |
|
|
|
|
|
| ||
| Third Eye Capital Carbon Revolving Line |
|
|
|
|
|
| ||
| Cilion shareholder seller notes payable |
|
|
|
|
|
| ||
| Subordinated notes |
|
|
|
|
|
| ||
| EB-5 promissory notes |
|
|
|
|
|
| ||
| Term loans on capital expenditures |
|
|
|
|
|
| ||
| Total debt |
|
|
|
|
|
| ||
| Less current portion of debt |
|
|
|
|
|
| ||
| Total long term debt |
| $ |
|
| $ |
| ||
Third Eye Capital Note Purchase Agreement
On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (“AAFK”), entered into an Amended and Restated Note Purchase Agreement (the “Note Purchase Agreement”) with Third Eye Capital Corporation (“Third Eye Capital”). Pursuant to the Note Purchase Agreement, Third Eye Capital extended credit in the form of (i) senior secured term loans in an aggregate principal amount of approximately $
On 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
On March 14, 2021, Third Eye Capital agreed to Limited Waiver and Amendment No. 19 to the Note Purchase Agreement (“Amendment No. 19”), to (i) provide for a waiver of the ratio of note indebtedness covenant for the quarter ended December 31, 2021, (ii) provide for a waiver of the consolidated unfunded capital expenditures covenant for the quarters through March 31, 2021. As consideration for such amendment and waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $
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On August 9, 2021, Third Eye Capital agreed to the Limited Waiver and Amendment No. 20 to the Note Purchase Agreement (“Amendment No. 20”) to: (i) provide that, upon written notice to Third Eye Capital, the maturity date may be further extended to
On November 5, 2021, Third Eye Capital agreed to the Limited Waiver and Amendment No. 21 to the Note Purchase Agreement (“Amendment No. 21”) to: (i) provide a waiver for the Blocked Account Agreement Violation in which the Borrowers failed to deliver Blocked Account Control Agreements by August 31, 2021 and (ii) provide for a waiver for the Subordinated Debt Violation, in which the Company made a repayment to a Subordinated Debt lender. As consideration for such amendment and waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $
On March 8, 2022, Third Eye Capital agreed to the Limited Waiver and Amendment No. 22 to the Note Purchase Agreement (“Amendment No. 22”) to: (i) provide a waiver for the Blocked Account Agreement Violation in which the Borrowers failed to deliver Blocked Account Control Agreements by December 31, 2021, (ii) provide for a waiver for the Subordinated Debt Violation, in which the Company made a repayment to a Subordinated Debt lender, and (iii) provide for a waiver of the consolidated unfunded capital expenditures covenant for the quarters through December 31, 2021. As consideration for such waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $
As Amendments No. 19, No. 20, No. 21, No. 22, and No. 23 waived certain covenants over the next four quarters, the notes are classified as long-term debt.
On March 6, 2020, we and a subsidiary entered into a one-year reserve liquidity facility governed by a promissory note, payable to Third Eye Capital, in the principal amount of $18 million. On March 14, 2021, Third Eye Capital agreed to increase the amount available under the reserve liquidity facility to $
| 17 |
| Table of Contents |
Terms of Third Eye Capital Notes
A. Term Notes. As of March 31, 2022, the Company had $
B. Revolving Credit Facility. The Revolving Credit Facility accrues interest at the prime rate plus
C. Revenue Participation Term Notes. The Revenue Participation Term Note bears interest at
D. Acquisition Term Notes. The Acquisition Term Notes accrue interest at the prime rate plus
E. Reserve Liquidity Notes. The Reserve Liquidity Notes, with available borrowing capacity in the amount of $
The Third Eye Capital Notes contain various covenants, including but not limited to, debt to plant value ratio, minimum production requirements, and restrictions on capital expenditures. The terms of the Third Eye Capital Notes allow the lender to accelerate the maturity in the occurrence of any event that could reasonably be expected to have a material adverse effect, such as any change in the business, operations, or financial condition. The Company has evaluated the likelihood of such an acceleration event and determined such an event to not be probable in the next twelve months. The terms of the notes allow interest to be capitalized.
The Third Eye Capital Notes are secured by first priority liens on all real and personal property of, and assignment of proceeds from all government grants and guarantees from the Company’s North American subsidiaries. The Third Eye Capital Notes all contain cross-collateral and cross-default provisions. McAfee Capital, LLC (“McAfee Capital”), owned by Eric McAfee, the Company’s Chairman and CEO, provided a guaranty of payment and performance secured by all of its Company shares. In addition, Eric McAfee provided a blanket lien on substantially all of his personal assets, and McAfee Capital provided a guarantee in the amount of $
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GAFI Term Loan and Revolving Loan. On July 10, 2017, GAFI entered into a Note Purchase Agreement (“Note Purchase Agreement”) with Third Eye Capital. See further discussion regarding GAFI in Note 6. Pursuant to the Note Purchase Agreement, Third Eye Capital agreed, subject to the terms and conditions of the 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 $
Third Eye Capital Revolving Credit Facility for Fuels and Carbon Lines. On March 2, 2022, GAFI and Aemetis Carbon Capture, Inc. (“ACCI”) entered into an Amended and Restated Credit Agreement (“Credit Agreement”) with Third Eye Capital , as administrative agent and collateral agent, and the lender party thereto (the "New Credit Facility"). The New Credit Facility provides for two credit facilities with aggregate availability of up to $
As of March 31, 2022, GAFI had $
Cilion shareholder seller notes payable. In connection with the Company’s merger with Cilion, Inc., (“Cilion”) on July 6, 2012, the Company issued $
Subordinated Notes. On January 6 and January 9, 2012, AAFK entered into Note and Warrant Purchase Agreements with two accredited investors pursuant to which it issued $
On January 1, 2022, the maturity on two Subordinated Notes’ was extended until the earlier of (i) June 30, 2022; (ii) after the occurrence of an Event of Default, including failure to pay interest or principal when due and breaches of note covenants. A $
The Company evaluated the January 1, 2022 amendment and the refinancing terms of the notes and applied modification accounting treatment in accordance with ASC 470-50 Debt - Modification and Extinguishment.
At March 31, 2022 and December 31, 2021, the Company had, in aggregate, the amount of $
| 19 |
| Table of Contents |
EB-5 promissory notes. EB-5 is a U.S. government program authorized by the Immigration and Nationality Act designed to foster employment-based visa preference for immigrant investors to encourage the flow of capital into the U.S. economy and to promote employment of U.S. workers. The Company entered into a Note Purchase Agreement dated March 4, 2011 (as further amended on January 19, 2012 and July 24, 2012) with Advanced BioEnergy, LP, a California limited partnership authorized as a “Regional Center” to receive EB-5 investments, for the issuance of up to 72 subordinated convertible promissory notes (the “EB-5 Notes”) bearing interest at 2-3%. Each note was issued in the principal amount of $
The Company has sold an aggregate principal amount of $
On October 16, 2016, the Company launched its EB-5 Phase II funding (the “EB-5 Phase II Funding”), with plans to issue $50.0 million in additional EB-5 Notes on substantially similar terms and conditions as those issued under the Company’s EB-5 Phase I funding, to refinance indebtedness and capital expenditures of Aemetis, Inc. and Goodland Advanced Fuels Inc., (“GAFI”). On November 21, 2019, the minimum investment was raised from $
The Company has sold an aggregate principal amount of $
In November 2008, the Company entered into an operating agreement with Secunderabad Oils Limited (“Secunderabad Oils”). The 2008 agreement provided the working capital and had the first priority lien on assets in return for
| 20 |
| Table of Contents |
Financing Agreement for capital expenditures. The Company entered into an agreement with Mitsubishi Chemical America, Inc. (“Mitsubishi”) to purchase membrane dehydration equipment to save energy used in the Keyes Plant. The Company also entered into a financing agreement with Mitsubishi for $
Scheduled debt repayments for the Company’s loan obligations follow:
| Three months ended March 31, |
| Debt Repayments |
| |
2022 |
| $ |
| |
2023 |
|
|
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
There after |
|
|
| |
Total debt |
|
|
| |
Debt issuance costs |
|
| ( | ) |
Total debt, net of debt issuance costs |
| $ |
| |
5. Commitments and Contingencies
Leases
We have identified assets as the corporate office, warehouse, monitoring equipment and laboratory facilities over which we have control and obtain economic benefits fully. We classified these identified assets as operating leases after assessing the terms under classification guidance. We have entered into several leases for trailers and carbon units with purchase option at the end of the term. We have concluded that it is reasonably certain that we would exercise the purchase option at the end of the term, hence the leases were classified as finance leases. All of our leases have remaining term of less than a year to
We made an accounting policy election to keep leases with an initial term of
When discount rates implicit in leases cannot be readily determined, the Company uses the applicable incremental borrowing rate at lease commencement to perform lease classification tests on lease components and measure lease liabilities and right-of-use (“ROU”) assets. The incremental borrowing rate used by the Company was based on weighted average baseline rates commensurate with the Company’s secured borrowing rate over a similar term. At each reporting period, when there is a new lease initiated, the rates established for that quarter will be used.
On December 14, 2021, we entered into a real estate purchase agreements and lease disposition and development agreement with the City of Riverbank. We plan to utilize the purchased and leased properties, located at 5300 Claus Road in the city of Riverbank, California, for the construction of the Carbon Zero 1 Facility. The lease commences in the second quarter of 2022 and the Company will evaluate and assess the lease upon commencement.
The components of lease expense and sublease income were as follows:
|
| Three Months ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
| Operating lease cost |
|
|
|
|
|
| ||
Operating lease expense |
| $ |
|
| $ |
| ||
Short term lease expense |
|
|
|
|
|
| ||
Variable lease expense |
|
|
|
|
|
| ||
Total operating lease cost |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
| Finance lease cost |
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
| $ |
|
| $ |
| ||
| Interest on lease liabilities |
|
|
|
|
|
| ||
Total finance lease cost |
| $ |
|
| $ |
| ||
| 21 |
| Table of Contents |
Cash paid for amounts included in the measurement of lease liabilities:
|
| Three Months ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Operating cash flows used in operating leases |
| $ |
|
| $ |
| ||
Operating cash flows used in finance leases |
|
|
|
|
|
| ||
Financing cash flows used in finance leases |
|
|
|
|
|
| ||
Supplemental non-cash flow information related to ROU asset and lease liabilities was as follows for the three months ended March 31, 2022 and 2021:
|
| Three Months ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
| Operating leases |
|
|
|
|
|
| ||
Accretion of the lease liability |
| $ |
|
| $ |
| ||
Amortization of right-of-use assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Weighted Average Remaining Lease Term |
|
|
|
|
|
|
|
|
| Operating leases |
|
|
|
|
|
| ||
| Finance leases |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Weighted Average Discount Rate |
|
|
|
|
|
|
|
|
| Operating leases |
|
|
|
|
|
| % | |
| Finance leases |
|
|
|
|
|
| % | |
Supplemental balance sheet information related to leases was as follows:
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||
| Operating leases |
|
|
|
|
|
| ||
Operating lease right-of-use assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Current portion of operating lease liability |
|
|
|
|
|
| ||
Long term operating lease liability |
|
|
|
|
|
| ||
Total operating lease liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| Finance leases |
|
|
|
|
|
|
|
|
Property and equipment, at cost |
| $ |
|
| $ |
| ||
Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
| Property and equipment, net |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Other current liability |
|
|
|
|
|
| ||
Other long term liabilities |
|
|
|
|
|
| ||
Total finance lease liabilities |
|
|
|
|
|
| ||
Maturities of operating lease liabilities were as follows:
| Year ended March 31, |
| Operating leases |
|
| Finance leases |
| ||
|
|
|
|
|
|
| ||
2023 |
| $ |
|
| $ |
| ||
2024 |
|
|
|
|
|
| ||
2025 |
|
|
|
|
|
| ||
2026 |
|
|
|
|
|
| ||
2027 |
|
|
|
|
|
| ||
There after |
|
|
|
|
|
| ||
Total lease payments |
|
|
|
|
|
| ||
Less imputed interest |
|
| ( | ) |
|
| ( | ) |
Total lease liability |
| $ |
|
| $ |
| ||
| 22 |
| Table of Contents |
Property taxes
On March 3, 2022, the Company paid $
Legal Proceedings
On August 31, 2016, the Company filed a lawsuit in Santa Clara County Superior Court against defendant EdenIQ, Inc. (“EdenIQ”). The lawsuit was based on EdenIQ’s wrongful termination of a merger agreement that would have effectuated the merger of EdenIQ into a new entity that would be primarily owned by Aemetis. On July 24, 2019, the court awarded EdenIQ a portion of the fees and costs it had sought in the amount of approximately $
6. Aemetis Biogas LLC – Series A Preferred Financing and Variable Interest Entity
On December 20, 2018, ABGL entered into a Series A Preferred Unit Purchase Agreement for the sale of Series A Preferred Units to Protair-X Americas, Inc., with Third Eye Capital acting as an agent.
ABGL is authorized to issue
The Preferred Unit Agreement includes (i) preference payments of $
Triggering events occur upon ABGL’s failure to redeem units, comply with covenants, any other defaults or cross defaults, or to perform representations or warranties. Upon a triggering event: (i) the obligation of the Purchaser to purchase additional Series A Preferred Units is terminated, (ii) cash flow payments for redemption payments increases from
From inception of the agreement to date, ABGL issued
| 23 |
| Table of Contents |
For the three months ended March 31, 2021, ABGL issued
The Company recorded Series A Preferred Unit liabilities, net of unit issuance costs and inclusive of accretive preference pursuant to this agreement, and accrued preference payments, classified as current portion of Series A Preferred Units, of $
Variable interest entity assessment
After consideration of ABGL’s operations and the above agreement, we concluded that ABGL did not have enough equity to finance its activities without additional subordinated financial support. ABGL is capitalized with Series A Preferred Units that are recorded as liabilities under U.S. GAAP. Hence, we concluded that ABGL is a VIE. Through the Company's ownership interest in all of the outstanding common stock, its current ability to control the board of directors, the management fee paid to Aemetis and control of subordinated financing decisions, Aemetis has been determined to be the primary beneficiary and accordingly, the assets, liabilities, and operations of ABGL are consolidated into those of the Company. Total assets, before intercompany eliminations, of ABGL as of March 31, 2022 were $
7. Stock-Based Compensation
2019 Stock 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 may determine in its discretion. The 2019 Stock Plan’s term is
With the approval of the 2019 Stock Plan, the Zymetis 2006 Stock Plan, and Amended and Restated 2007 Stock Plan ( collectively, 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 will be available to grant under the 2019 Stock Plan.
During the year ended December 31, 2021,
In January 2022, the company issued
| 24 |
| Table of Contents |
Common Stock Reserved for Issuance
The following is a summary of awards granted under the Stock Plans:
|
| Shares Available for Grant |
|
| Number of Shares Outstanding |
|
| Weighted-Average Exercise Price |
| |||
Balance as of December 31, 2021 |
|
|
|
|
|
|
| $ |
| |||
Authorized |
|
|
|
|
| - |
|
|
| - |
| |
| Options Granted |
|
| ( | ) |
|
|
|
|
|
| ||
| RSAs Granted |
|
| ( | ) |
|
| - |
|
|
| - |
|
| Exercised |
|
| - |
|
|
| ( | ) |
|
|
| |
| Forfeited/expired |
|
|
|
|
| ( | ) |
|
|
| ||
| Balance as of March 31, 2022 |
|
|
|
|
|
|
| $ |
| |||
As of March 31, 2022, there were
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.
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.
During the three months ended March 31, 2022 and 2021, the company granted
Description |
| For the three months ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Dividend-yield |
|
|
|
|
| % | ||
Risk-free interest rate |
|
|
|
|
| % | ||
Expected volatility |
|
| % |
|
| % | ||
Expected life (years) |
|
|
|
|
|
| ||
Market value per share on grant date |
| $ |
|
| $ |
| ||
Fair value per option on grant date |
| $ |
|
| $ |
| ||
| 25 |
| Table of Contents |
As of March 31, 2022, the Company had $
8. Outstanding Warrants
The weighted average fair value calculations for warrants granted are based on the following weighted average assumptions:
Description |
| For the three months ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Dividend-yield |
|
| % |
|
| % | ||
Risk-free interest rate |
|
| % |
|
| % | ||
Expected volatility |
|
| % |
|
| % | ||
Expected life (years) |
|
|
|
|
|
| ||
Exercise price per warrant |
| $ |
|
| $ |
| ||
Market value per share on grant date |
| $ |
|
| $ |
| ||
Fair value per warrant on grant date |
| $ |
|
| $ |
| ||
A summary of historical warrant activity follows:
|
| Warrants Outstanding Exercisable |
|
| Weighted - Average Exercise Price |
|
| Average Remaining Term in Years |
| |||
Outstanding December 31, 2020 |
|
|
|
| $ |
|
|
|
| |||
Granted |
|
|
|
|
|
|
|
|
|
| ||
Exercised |
|
| ( | ) |
|
|
|
|
|
|
| |
Outstanding December 31, 2021 |
|
|
|
| $ |
|
|
|
| |||
Granted |
|
|
|
|
|
|
|
|
|
| ||
Exercised |
|
| ( | ) |
|
|
|
|
|
|
| |
Outstanding March 31, 2022 |
|
|
|
| $ |
|
|
|
| |||
All of the above outstanding warrants are vested and exercisable as of March 31, 2022. As of March 31, 2022 and 2021, the Company had no unrecognized compensation expense related to warrants, respectively.
9. Agreements
Working Capital Arrangement. Pursuant to a Corn Procurement and Working Capital Agreement with J.D. Heiskell, the Company agreed to procure whole yellow corn and grain sorghum, primarily from J.D. Heiskell. The Company has the ability to obtain grain from other sources subject to certain conditions; however, in the past all the Company’s grain purchases have been from J.D. Heiskell. Title and risk of loss of the corn pass to the Company when the corn is deposited into the Keyes Plant weigh bin. The term of the Corn Procurement and Working Capital Agreement expires on December 31, 2022 and the term can be automatically renewed for additional one-year terms. WDG continues to be sold to A.L.Gilbert and DCO is sold to other customers under the J.D.Heiskell Purchase Agreement. The Company’s relationships with J.D. Heiskell, and A.L. Gilbert are well established, and the Company believes that the relationships are beneficial to all parties involved in utilizing the distribution logistics, reaching out to widespread customer base, managing inventory, and building working capital relationships. These agreements are ordinary purchase and sale agency agreements for the Keyes Plant. On May 13, 2020, J.D. Heiskell and the Company entered into Amendment No.1 to the J.D. Heiskell Purchasing Agreement to remove J.D. Heiskell’s obligations to purchase ethanol from the Company under the J.D. Heiskell Purchasing Agreement.
As of March 31, 2022 and December 31, 2021, Aemetis had prepayments to J.D. Heiskell of $
| 26 |
| Table of Contents |
The J.D. Heiskell sales and purchases activity associated with the J.D. Heiskell Purchase Agreement and J.D. Heiskell Procurement Agreement during the three months ended March 31, 2022 and 2021 were as follows:
|
| As of and for the three months |
| |||||
|
| ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
| Wet distiller's grains sales |
| $ |
|
| $ |
| ||
| Corn oil sales |
|
|
|
|
|
| ||
| Corn purchases |
|
|
|
|
|
| ||
| Accounts receivable |
|
|
|
|
|
| ||
| Accounts payable |
|
|
|
|
|
| ||
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. Under the terms of the agreements the Wet Distillers Grains Marketing Agreement matures on December 31, 2022 with automatic one-year renewals thereafter. We terminated the Ethanol Marketing Agreement with Kinergy as of September 30, 2021. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC. Under the terms of the agreement, the initial term matures on October 31, 2023 with automatic one-year renewals thereafter.
Sales to our ethanol marketing partners were $
For the three months ended March 31, 2022 and 2021, the Company expensed marketing costs of $
As of March 31, 2022 and 2021, the Company has no forward sales commitments.
10. Segment Information
Aemetis recognizes three reportable segments “California Ethanol”, “Dairy Renewable Natural Gas”, and “India Biodiesel.”
The “California Ethanol” reportable segment includes the Company’s
The “Dairy Renewable Natural Gas” reportable segment includes, the dairy digesters, pipeline and gas condition unit for the production of biogas from dairies near Keyes, California.
The “India Biodiesel” reportable segment includes the Company’s
The Company has additional operating segments that were determined not to be reportable segments, including the Carbon Zero 1 facility in Riverbank, the Goodland Plant, and the research and development facility in Minnesota. Refer to the “All Other” category.
| 27 |
| Table of Contents |
Summarized financial information by reportable segment for the three months ended March 31, 2022 and 2021 follows:
|
| For the three months year ended March 31, 2022 |
| |||||||||||||||||
|
| California Ethanol |
|
| Dairy Renewable Natural Gas |
|
| India Biodiesel |
|
| All other |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenues from external customers |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit (loss) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accretion and other expenses of Series A preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| For the three months year ended March 31, 2021 |
| |||||||||||||||||
|
| California Ethanol |
|
| Dairy Renewable Natural Gas |
|
| India Biodiesel |
|
| All other |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenues from external customers |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross loss |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accretion and other expenses of Series A preferred units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
A reconciliation of reportable segment revenues to consolidated totals for the three months ended March 31, 2022 and 2021 follow:
|
| 2022 |
|
| 2021 |
| ||
Total revenues for reportable segments |
| $ |
|
| $ |
| ||
Elmination of intersegment revenues |
|
| ( | ) |
|
| ( | ) |
Total consolidated revenues |
| $ |
|
| $ |
| ||
California Ethanol: During the three months ended March 31, 2022 and 2021, the Company amended the Corn Procurement and Working Capital Agreement and the J.D. Heiskell Purchasing Agreement to procure corn from J.D. Heiskell and sell all WDG and corn oil the Company produces to J.D. Heiskell. Sales of ethanol, WDG, corn oil to two customers accounted for
Dairy Renewable Natural Gas: Substantially all of our Dairy Renewable Natural Gas segment revenues during the three months ended March 31, 2022 and 2021 were from sales of biogas to the Keyes Plant for use in boilers, which allowed qualification of carbon credits for the ethanol produced in the Keyes Plant.
11. Related Party Transactions
The Company owes Eric McAfee, the Company’s Chairman and CEO, and McAfee Capital LLC (“McAfee Capital”), owned by Eric McAfee, $
| 28 |
| Table of Contents |
On November 4, 2021, the Audit Committee of the Company approved a guarantee fee of $
The Company owes various members of the Board amounts totaling $
12. Subsequent Events
Third Eye Capital Limited Waiver and Amendment No. 23
On May 11, 2022, Third Eye Capital agreed to the Limited Waiver and Amendment No. 23 to the Note Purchase Agreement (“Amendment No. 23”) to: (i) provide for a waiver of the ratio of note indebtedness covenant for the quarter ended March 31, 2023 and (ii) provide for a waiver of the unfunded capital expenditures covenant for the quarter ended March 31, 2022 in which the Company exceeded the $
13. Management's Plan
The accompanying financial statements have been prepared contemplating the realization of assets and satisfaction of liabilities in the normal course of business. As a result of negative capital and negative operating results, and collateralization of substantially all of the company assets, the Company has been reliant on its senior secured lender to provide additional funding and has been required to remit substantially all excess cash from operations to the senior secured lender. In order to meet its obligations during the next twelve months, the Company will need to either refinance the Company's debt or receive the continued cooperation of its senior lender. This dependence on the senior lender raises substantial doubt about the Company's ability to continue as a going concern. The Company plans to pursue the following strategies to improve the course of the business.
For the Keyes Plant, we plan to operate the plant and continue to improve financial performance by adopting new technologies or process changes that allow for energy efficiency, cost reduction or revenue enhancements, execute upon awarded grants that improve energy and operational efficiencies resulting in lower cost, lower carbon demands and overall margin improvement.
For the ABGL biogas project, we plan to operate the biogas digesters to capture and monetize biogas as well as continue to build new dairy digesters and extend the existing pipeline in order to capture the higher carbon credits available in California. Funding for continued construction is based upon obtaining government guaranteed loans and executing on existing and new state grant programs.
For the Riverbank project, we plan to raise the funds necessary to construct and operate the Carbon Zero 1 plant using loan guarantees and public debt financings based upon the licensed technology that generate federal and state carbon credits available for ultra-low carbon fuels utilizing lower cost, non-food advanced feedstocks to significantly increase margins.
For the Kakinada Plant, we plan to develop sales channels for domestic products as the costs of feedstock normalize against the price of diesel, as recently announced governmental incentives take effect to promote the blending of biodiesel, and as feedstocks such as refined animal tallow are used domestically and exported. Additionally, we are in the process of obtaining approval to export refined animal tallow and biodiesel produced using animal tallow into international markets as the use of refined animal tallow received approval from the Pollution Control Board of India for production of biodiesel. The acquisition of land and equipment to refine crude animal tallow is underway.
In addition to the above we plan to continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling equity through the ATM and otherwise, selling the current EB-5 Phase II offering, or by vendor financing arrangements.
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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 (MDA) is provided in addition to the accompanying consolidated condensed financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MDA 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 MDA. |
|
|
|
| · | Results of Operations. An analysis of our financial results comparing the three months ended March 31, 2022 and 2021. |
|
|
|
| · | 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. |
The following discussion should be read in conjunction with our consolidated condensed financial statements and accompanying notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, particularly under “Part II, Item 1A. Risk Factors,” and in other reports we file with the SEC. All references to years relate to the calendar year ended December 31 of the particular year.
Overview
Founded in 2006 and headquartered in Cupertino, California, we are an international renewable natural gas, renewable fuels and byproducts company focused on the acquisition, development and commercialization of innovative negative carbon intensity products and technologies that replace traditional petroleum-based products. We operate in three reportable segments “California Ethanol”, “Dairy Renewable Natural Gas”, and “India Biodiesel”. We have other operating segments determined not to be reportable segments, and are collectively represented by the "All Other" category.
Our California Ethanol segment consists of a 65 million gallon per year ethanol production facility located in Keyes, California (the “Keyes Plant”) that we own and operate. In addition to low carbon renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), and Condensed Distillers Solubles (“CDS”), all of which are sold as animal feed to local dairies and feedlots. In the fourth quarter of 2021, we installed and are commissioning an ethanol zeolite membrane dehydration system at the Keyes Plant. The installation is a key first step in the electrification of the Keyes Plant, which will significantly reduce the use of petroleum based natural gas as process energy. The electrification, along with the future installation of a two-megawatt zero carbon intensity solar microgrid system and a mechanical vapor recompression (MVR) system will greatly reduce GHG emissions and decreases the carbon intensity of fuel produced at the Keyes Plant, allowing us to realize a higher price for the ethanol produced and sold.
Our Dairy Renewable Natural Gas segment consists of our subsidiary, Aemetis Biogas, LLC (“ABGL”), which was formed to construct bio-methane anaerobic digesters at local dairies near the Keyes Plant, many of whom also purchase WDG produced at the Keyes Plant. The digesters are connected via an underground private pipeline owned by ABGL to a gas cleanup and compression unit being built at the Keyes Plant to produce RNG. Upon receiving the bio-methane from the dairies, impurities are removed, and the bio-methane is converted to negative carbon intensity RNG where it will be either injected into the statewide PGE gas utility pipeline, supplied as compressed RNG that will service local trucking fleets, or used as renewable process energy at the Keyes Plant. Our Dairy Renewable Natural Gas segment, ABGL, has completed Phase 1 of our California biogas digester network and pipeline system that converts waste dairy methane gas into Dairy Renewable Natural Gas (“RNG”), including two operational dairy’s and seven miles of pipeline. ABL is now executing Phase 2 construction with the completion of sixteen miles of pipeline and the commissioning of the biogas-to-RNG upgrade unit at the Keyes plant as well as beginning construction of additional dairy digesters.
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Our “Carbon Zero” biofuels production plants designed to produce biofuels, including sustainable aviation fuel (“SAF”) and diesel fuel utilizing renewable hydrogen and non-edible renewable oils sourced from existing Aemetis biofuels plants and other sources. The first plant to be built, in Riverbank, California, “Carbon Zero 1”, is expected to utilize hydroelectric and other renewable power available onsite to produce 90 million gallons per year of SAF, renewable diesel, and other byproducts. The plant is expected to supply the aviation and truck markets with ultra-low carbon renewable fuels to reduce GHG emissions and other pollutants associated with conventional petroleum-based fuels. By producing ultra-low carbon renewable fuels, the Company expects to capture higher value D3 Renewable Identification Numbers (“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 Environmental Protection Agency (“EPA”).
On April 1, 2021, Aemetis Carbon Capture, Inc. was established to build Carbon Capture and Sequestration (CCS) projects that generate LCFS and IRS 45Q credits by injecting CO₂ into wells which are monitored for emissions to ensure the long-term sequestration of carbon underground. California’s Central Valley has been identified as the state’s most favorable region for large-scale CO₂ injection projects due to the subsurface geologic formation that absorbs and retains gases.
Our India Biodiesel segment consist of the Kakinada Plant with a nameplate capacity of 150 thousand metric tons per year, or about 50 million gallons per year, producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. We believe the Kakinada Plant is one of the largest biodiesel production facilities in India on a nameplate capacity basis. The Kakinada Plant is capable of processing a variety of vegetable oils and animal fat waste feedstocks into biodiesel that meet international product standards. The Kakinada Plant also distills the crude glycerin byproduct from the biodiesel refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive and other industries.
California Ethanol Revenue
Our revenue development strategy for our California Ethanol segment relies upon 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 California Ethanol segment, including the development of the Carbon Zero Plants, the expansion of the biogas project, and the implementation of the Solar Microgrid System, the installation of the membrane dehydration system and other technologies. 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 2022, we produced five products at the Keyes Plant: denatured fuel ethanol, WDG, DCO, CO₂, and CDS. During the first quarter of 2020, we transitioned from selling the ethanol we produce to J.D. Heiskell pursuant to the J.D. Heiskell Purchase Agreement, to a model where the ethanol is sold directly to our fuel marketing customers. We own the ethanol stored in our finished goods tank. WDG continues to be sold to A.L. Gilbert and DCO is sold to other customers under the J.D. Heiskell Purchase Agreement. Smaller amounts of CDS were sold to various local third parties. We began selling CO₂ to Messer Gas in the second quarter of 2020.
California Ethanol revenue is dependent on the price of ethanol, WDG, high-grade alcohol, and DCO. Ethanol pricing is influenced by local and national inventory levels, local and national ethanol production, imported ethanol, corn prices and gasoline demand, and is determined pursuant to a marketing agreement with a single fuel marketing customer and is generally based on daily and monthly pricing for ethanol delivered to the San Francisco Bay Area, California, as published by Oil Price Information Service (“OPIS”), as well as quarterly contracts negotiated by our marketing customer with local fuel blenders. The price for WDG is influenced by the price of corn, the supply and price of distillers dried grains, and demand from the local dairy and feed markets and determined monthly pursuant to a marketing agreement with A.L. Gilbert and is generally determined in reference to the local price of dried distillers’ grains and other comparable feed products. Our revenue is further influenced by the price of natural gas, our decision to operate the Keyes Plant at various capacity levels, conduct required maintenance, and respond to biological processes affecting output.
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Dairy Renewable Natural Gas Revenue
In December 2018, we leveraged our relationship with California’s Central Valley dairy farmers by signing leases and raising funds to construct dairy digesters that collect bio-methane and pipelines that convey bio-methane to our Keyes Plant. We are currently producing gas from two digesters connected to the Keyes plant by four miles of pipeline, and using this gas to reduce the carbon intensity at the Keyes plant. A biogas-to-RNG upgrade unit at the Keyes Plant is commissioned, allowing us to inject RNG into the statewide PGE gas utility pipeline. In addition, we have signed agreements with over 25 additional dairies to construct dairy digesters. Our revenue development strategy for the Dairy Renewable Natural Gas segment relies upon continuing to collect bio-methane gas from the existing dairy digesters, and continuing to build out the network of dairy digesters and pipeline in Northern California to grow the supply of RNG available for sale and to utilize the biogas-to-RNG upgrade unit to distribute RNG to customers statewide.
India Biodiesel Revenue
Our revenue strategy in India is based on continuing to sell biodiesel to our bulk fuel customers, fuel station customers, mining customers, industrial customers and tender offers placed by Government Oil Marketing Companies (“OMCs”) for bulk purchases of fuels. In 2020, the tenders were delayed due to COVID-19, and in 2021 ultimately changed in format to allow for monthly bidding on volumes at a price set by the OMCs on an bi-annual basis. The Company did not participate in tenders during 2021 due to low OMC offer prices, coupled with very high feedstock prices as a result of COVID-19. Going forward, the Company plans to participate in these tenders offers made by the OMCs on economically reasonable terms.
Results of Operations
Three Months Ended March 31, 2022, Compared to Three Months Ended March 30, 2021
Revenues
Our revenues are derived primarily from sales of ethanol and WDG for California Ethanol, renewable natural gas for Dairy Renewable Natural Gas, and biodiesel and refined glycerin for India Biodiesel.
Three Months Ended March 31, (in thousands)
|
| 2022 |
|
| 2021 |
|
| Inc/(dec) |
|
| % change |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| California Ethanol |
| $ | 52,041 |
|
| $ | 42,328 |
|
| $ | 9,713 |
|
|
| 22.9 | % |
| Dairy Renewable Natural Gas* |
|
| 335 |
|
|
| 41 |
|
|
| 294 |
|
|
| 717.1 | % |
| India Biodiesel |
|
| 8 |
|
|
| 479 |
|
|
| (471 | ) |
|
| -98.3 | % |
| Eliminations |
|
| (335 | ) |
|
| (41 | ) |
|
| (294 | ) |
|
| 717.1 | % |
| Total |
| $ | 52,049 |
|
| $ | 42,807 |
|
| $ | 9,242 |
|
|
| 22.0 | % |
*All Dairy Renewable Natural Gas revenue is intercompany.
California Ethanol. For the three months ended March 31, 2022, the Company generated 73% of revenue from sales of ethanol, 22% from sales of WDG, and 5% from sales of corn oil, CDS, CO₂, and other sales. During the three months ended March 31, 2022, plant production averaged 107% of the 55 million gallon per year nameplate capacity. The increase in revenues was due to the increase in price of ethanol per gallon sold to $2.58 for the three months ended March 31, 2022, compared to $1.91 for the year ended March 31, 2021, which was partially offset by the decrease in volume of ethanol gallons sold from 15.6 million gallons for the three months ended March 31, 2021 to 14.7 million gallons for the three months ended March 31, 2022. The average price of WDG increased by 9% to $115 per ton for the three months ended March 31, 2022 while WDG sales volume also decreased by 4% to 100 thousand tons in the three months ended March 31, 2022 compared to 104 thousand tons in the three months ended March 31, 2021.
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| Table of Contents |
Dairy Natural Gas. During the three months ended March 31, 2022 and 2021, we produced and sold to an intercompany 14.0 thousand and 9.4 thousand MMBtus of dairy biogas, respectively. RNG sold to external customers was $0 and RNG stored as inventory was $0, reflecting no external sales or storage of MMBtus during the three months ended March 31, 2022 and 2021.
India Biodiesel. The decrease in revenues was primarily attributable to the Kakinada Plant not receiving orders from the Indian government due to higher feedstock costs making conversion to biodiesel unviable. Biodiesel sales volume decreased by 100% to 0 metric tons in the three months ended March 31, 2022 compared to 349 metric tons in the three months ended March 31, 2021. Refined glycerin sales volume decreased by 100% to 0 metric tons in the three months ended March 31, 2022, compared to 121 metric tons in the three months ended March 31, 2021. For the three months ended March 31, 2022, we generated 100% of our revenues from the other sales, compared to 76% of our revenues from the sale of biodiesel and 24% of our revenues from the sale of refined glycerin for the three months ended March 31, 2021.
Cost of Goods Sold
Three Months Ended March 31, (in thousands)
|
| 2022 |
|
| 2021 |
|
| Inc/(dec) |
|
| % change |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| California Ethanol |
| $ | 54,921 |
|
| $ | 45,459 |
|
| $ | 9,462 |
|
|
| 20.8 | % |
| Dairy Renewable Natural Gas |
|
| 542 |
|
|
| 453 |
|
|
| 89 |
|
|
| 19.6 | % |
| India Biodiesel |
|
| - |
|
|
| 534 |
|
|
| (534 | ) |
|
| -100.0 | % |
| All other |
|
| 6 |
|
|
| 10 |
|
|
| (4 | ) |
|
| -40.0 | % |
| Eliminations |
|
| (335 | ) |
|
| (41 | ) |
|
| (294 | ) |
|
| 717.1 | % |
| Total |
| $ | 55,134 |
|
| $ | 46,415 |
|
| $ | 8,719 |
|
|
| 19 | % |
California Ethanol. We ground 5.0 million and 5.5 million bushels of corn in the three months ended March 31, 2022 and 2021, respectively. Our average cost of feedstock per bushel increased to $8.75 per bushel during the three months ended March 31, 2022 compared to $6.87 per bushel for the three months ended March 31, 2021. In addition, for the three months ended March 31, 2022, we incurred $1.0 million more in natural gas costs, $0.4 million more in chemical costs, and $0.3 million more in transportation costs compared to the same period in 2021. Railroad logistics were also impacted on both gallons produced and the price of delivered corn.
Dairy Natural Gas. Cost of Goods Sold expenses relate to dairy manure payments, maintenance on the dairy digesters, production bonuses, and depreciation.
India Biodiesel. The decrease in costs of goods sold was attributable to the decrease in biodiesel feedstock volume in the three months ended March 31, 2022.
Gross profit (loss)
Three Months Ended March 31, (in thousands)
|
| 2022 |
|
| 2021 |
|
| Inc/(dec) |
|
| % change |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| California Ethanol |
| $ | (2,880 | ) |
| $ | (3,131 | ) |
| $ | 251 |
|
|
| 8.0 | % |
| Dairy Renewable Natural Gas |
|
| (207 | ) |
|
| (412 | ) |
|
| 205 |
|
|
| 49.8 | % |
| India Biodiesel |
|
| 8 |
|
|
| (55 | ) |
|
| 63 |
|
|
| 114.5 | % |
| All other |
|
| (6 | ) |
|
| (10 | ) |
|
| 4 |
|
|
| 40.0 | % |
| Total |
| $ | (3,085 | ) |
| $ | (3,608 | ) |
| $ | 523 |
|
|
| -14 | % |
California Ethanol. Gross loss decreased by 8% in the three months ended March 31, 2022 primarily due to increases in the prices of ethanol and WDG, partially offset by an increase in the price of corn.
Dairy Natural Gas. Gross loss relates to incurring more expenses as we begin to ramp up our Dairy Renewable Natural Gas business.
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| Table of Contents |
Operating Expenses
Substantially all of our research and development expenses were related to research and development activities in Minnesota.
Selling, general, and administrative (“SGA”) expenses consist primarily of salaries and related expenses for employees, marketing expenses related to sales of ethanol and WDG in California Ethanol and biodiesel and other products in India Biodiesel, as well as professional fees, other corporate expenses, and related facilities expenses.
Other (income) expense consists primarily of interest and amortization expense attributable to our debt facilities and those of our subsidiaries and accretion of our Series A preferred units. The debt facilities include stock or warrants issued as fees. The fair value of stock and warrants are amortized as amortization expense, except when the extinguishment accounting method is applied, in which case refinanced debt costs are recorded as extinguishment expense.
Three Months Ended March 31, (in thousands)
|
| 2022 |
|
| 2021 |
|
| Inc/(dec) |
|
| % change |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and development expenses |
| $ | 36 |
|
| $ | 23 |
|
| $ | 13 |
|
|
| 56.5 | % |
| Selling, general and administrative expenses |
| $ | 7,306 |
|
| $ | 5,382 |
|
| $ | 1,924 |
|
|
| 35.7 | % |
| Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate expense |
| $ | 4,435 |
|
| $ | 5,965 |
|
| $ | (1,530 | ) |
|
| -25.6 | % |
Debt related fees and amortization expense |
|
| 1,826 |
|
|
| 1,215 |
|
|
| 611 |
|
| 50.3 | % | |
Accretion and other expenses of Series A preferred units |
|
| 1,640 |
|
|
| 1,943 |
|
|
| (303 | ) |
|
| -15.6 | % |
Other income |
|
| (41 | ) |
|
| (31 | ) |
|
| (10 | ) |
|
| 32.3 | % |
The increase in SGA expenses for the three months ended March 31, 2022 was due to increases in salaries and wages of $1.4 million, which was mostly attributed to an increase in in stock based compensation, professional fees of $0.2 million, and miscellaneous expense increase of $0.3 million. SGA expenses as a percentage of revenue in the three months ended March 31, 2022 increased to 14% as compared to 13% in the corresponding period of 2021.
Interest expense decreased in the three months ended March 31, 2022 due to principal debt payments made to Third Eye Capital in the first quarter of 2022, coupled with capitalizing interest on our capital projects. Debt related fees and amortization increased due to debt issuance costs and extension fees being incurred in 2022 related to extending the Third Eye Capital debt and obtaining the Revolving Loans. The increase in accretion and other expenses of the Series A Preferred Units was due to the issuance of additional units during 2021, coupled with accrued preference payments.
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Liquidity and Capital Resources
Cash and Cash Equivalents
Cash and cash equivalents were $5.5 million at March 31, 2022, of which $4.7 million were held in North America and the rest was held at our Indian subsidiary. Our current ratio at March 31, 2022 was 0.26, compared to a current ratio of 0.32 at December 31, 2021. We expect that our future available liquidity resources will consist primarily of cash generated from operations, remaining cash balances, borrowings available, if any, under our senior debt facilities and our subordinated debt facilities, and any additional funds raised through sales of equity. The use of proceeds from all equity raises and debt financings are subject to approval by our senior lender.
Liquidity
Cash and cash equivalents, current assets, current liabilities and debt at the end of each period were as follows (in thousands):
|
| As of |
| |||||
|
| March 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
| Cash and cash equivalents |
| $ | 5,471 |
|
| $ | 7,751 |
|
| Current assets (including cash, cash equivalents, and deposits) |
|
| 16,153 |
|
|
| 20,693 |
|
| Current and long term liabilities (excluding all debt) |
|
| 91,854 |
|
|
| 92,302 |
|
| Current long term debt |
|
| 203,223 |
|
|
| 188,767 |
|
Our principal sources of liquidity have been cash provided by the sale of equity, operations, and borrowings under various debt arrangements.
We launched an EB-5 Phase II funding in 2016, under which we expect to issue $50.8 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 $0.5 million per investor to $0.9 million per investor. As of March 31, 2022, EB-5 Phase II funding in the amount of $4.0 million had been released from escrow to us. 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.
As a result of negative capital and negative operating results, and collateralization of substantially all of the company assets, the Company has been reliant on its senior secured lender to provide additional funding and has been required to remit substantially all excess cash from operations to the senior secured lender. In order to meet its obligations during the next twelve months, the company will need to either refinance the company's debt or receive the continued of its senior lender. This dependence on the senior lender raises substantial doubt about the company's ability to continue as a going concern. The Company plans to pursue the following strategies to improve the course of the business.
For the Keyes Plant, we plan to operate the plant and continue to improve financial performance by adopting new technologies or process changes that allow for energy efficiency, cost reduction or revenue enhancements, execute upon awarded grants that improve energy and operational efficiencies resulting in lower cost, lower carbon demands and overall margin improvement.
For the biogas project, we plan to operate the biogas digesters to capture and monetize biogas as well as continue to build new dairy digesters and extend the existing pipeline in order to capture the higher carbon credits available in California. Funding for continued construction is based upon, obtaining government guaranteed loans and executing on existing and new state grant programs.
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For the Riverbank project, we plan to raise the funds necessary to construct and operate the Carbon Zero 1 plant using loan guarantees and public debt financings based upon the licensed technology that generate federal and state carbon credits available for ultra-low carbon fuels utilizing lower cost, non-food advanced feedstocks to significantly increase margins.
For the Kakinada Plant, we plan to develop sales channels for domestic products as the costs of feedstock normalize against the price of diesel, as recently announced governmental incentives take effect to promote the blending of biodiesel, and as feedstocks such as refined animal tallow are used domestically and exported. Additionally, we are in the process of obtaining approval to export refined animal tallow and biodiesel produced using animal tallow into international markets as the use of refined animal tallow received approval from the Pollution Control Board of India for production of biodiesel. The acquisition of land and equipment to refine crude animal tallow is underway.
In addition to the above we plan to continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling equity through the ATM and otherwise, selling the current EB-5 Phase II offering, or by vendor financing arrangements.
At March 31, 2022, the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes equaled $137 million. The maturity dates for the Third Eye Capital financing arrangements are April 1, 2023, for $105 million, March 1, 2025, for $9 million and March 1, 2026, for $22 million.
As of March 31, 2022, we have $14.2 million available under the revolving credit lines.
As of the date of this report, the Company has $40.0 million additional borrowing capacity to fund future cash flow requirements under the Reserve Liquidity Notes due on April 1, 2023.
We also rely on our working capital lines with 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; Secunderabad Oils currently provide us with working capital for the Kakinada Plant. The ability of Secunderabad Oils to continue to provide us with working capital depends in part on both of their respective financial strength and banking relationships.
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, 2022:
| Increases to debt: |
|
|
|
|
|
| ||
| Accrued interest |
| $ | 4,710 |
|
|
|
| |
| Maturity date extension fee and other fees added to senior debt |
|
| 1,751 |
|
|
|
| |
Sub debt extension fees |
|
| 340 |
|
|
|
| |
Fuels Revolving Line draw |
|
| 10,454 |
|
|
|
| |
Carbon Revolving Line draw |
|
| 24,586 |
|
|
|
| |
Total increases to debt |
|
|
|
|
| $ | 41,841 |
|
| Decreases to debt: |
|
|
|
|
|
| ||
Principal, fees, and interest payments to senior lender |
| $ | (21,435 | ) |
|
|
|
|
Principal and interest payments to EB-5 investors |
|
| (26 | ) |
|
|
|
|
Change in debt issuance costs, net of amortization |
|
| (5,922 | ) |
|
|
|
|
Term loan payments |
|
| (2 | ) |
|
|
|
|
Total decreases to debt |
|
|
|
|
| $ | (27,385 | ) |
|
|
|
|
|
| |||
Change in total debt |
|
|
|
|
| $ | 14,456 |
|
Working capital changes resulted in (i) a $0.3 million increase in inventories due to decreases in in-process and finished goods inventory, (ii) a $0.9 million decrease in accounts receivable due to repayments of Murex accounts receivable, (iii) a $0.7 million decrease in prepaid expenses mainly due the use of a $2.5 million J.D. Heiskell pre-payment, partially offset by an increase in prepaid guarantee fees of $1.7 million, (iv) a decrease in other current assets of $0.3 million mainly due to use of money paid for raw materials and others in India operations of $0.3 million, and (v) a $2.3 million decrease in cash.
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Net cash used in operating activities during the three months ended March 31, 2022 was $8.2 million, consisting of non-cash charges of $6.9 million, net cash provided by operating assets and liabilities of $3.3 million, and net loss of $18.3 million. The non-cash charges consisted of: (i) $1.8 million in amortization of debt issuance costs and other intangible assets, (ii) $1.3 million in depreciation expenses, (iii) $2.0 million in stock-based compensation expense, and (iv) $1.6 million in preferred unit accretion and other expenses of Series A preferred units. Net changes in operating assets and liabilities consisted primarily of a decrease in (i) inventories of $0.3 million, (ii) prepaid expenses of $2.5 million, and (iii) an increase in accounts payable of $0.8 million, (iv) a decrease in accounts receivable of $0.9 million, (v) a decrease in other assets of $0.3 million, and (vi) an increase in accrued interest expense and fees of $4.7 million, partially offset by (vii) a decrease in other liabilities of $6.1 million.
Cash used by investing activities was $8.0 million, of which $9.5 million were used by capital projects, partially offset by grant proceeds and other reimbursements of $1.5 million.
Cash provided by financing activities was $13.9 million, consisting primarily of $0.2 million from exercises of stock options, and $18.5 million from proceeds from borrowings, partially offset by repayments of borrowings of $4.0 million, debt renewal and waiver fee payments of $0.7 million, and payments on finance leases of $0.1 million.
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, 2021.
Recently Issued Accounting Pronouncements
None reported beyond those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
Off Balance Sheet Arrangements
We had no off-balance sheet arrangements during the three months ended March 31, 2022.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
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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 fiscal year ended December 31, 2021, 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, 2021, 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, 2021, 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, 2021.
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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. On July 24, 2019, the court awarded EdenIQ a portion of the fees and costs it had sought in the amount of approximately $6.2 million and the Company recorded these fees based on the court order. On May 6, 2022, the parties settled the dispute for $4.8 million by entering into a settlement agreement.
Item 1A. Risk Factors.
Except as described below, there are no material changes to the risk factors since the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 10, 2022. We urge you to read the risk factors contained therein.
Inflation, including as a result of commodity price inflation or supply chain constraints due to the war in Ukraine, may adversely impact our results of operations.
We have experienced inflationary impacts on key production inputs, feedstock, wages and other costs of labor, equipment, services, and other business expenses. Commodity prices in particular have risen significantly over the past year. Inflation and its negative impacts could escalate in future periods. In addition, inflation is often accompanied by higher interest rates.
Ukraine is the third largest exporter of grain in the world. Russia is one of the largest producers of natural gas and oil. The commodity price impact of the war in Ukraine has been a sharp rise in grain and energy prices, including corn and natural gas, two of our primary production input commodities. In addition, the war in Ukraine has and may continue to adversely affect global supply chains resulting in further commodity price inflation for our production inputs. Also, given high global grain prices, U.S. farmers may prefer to lock in prices and export additional volumes, reducing domestic grain supplies and resulting in further inflationary pressures.
In an inflationary environment, such as the current economic environment, depending on other economic conditions, we may be unable to raise prices of our fuels or products to keep up with the rate of inflation, which would reduce our profit margins. As a result, inflation may have a material adverse effect on our results of operations and financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the first quarter of 2022, we issued 113 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, 2022.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
Third Eye Capital Limited Waiver and Amendment No. 23
On May 11, 2022, Third Eye Capital agreed to the Limited Waiver and Amendment No. 23 to the Note Purchase Agreement (“Amendment No. 23”) to: (i) provide for a waiver of the ratio of note indebtedness covenant for the quarter ended March 31, 2023 and (ii) provide for a waiver of the unfunded capital expenditures covenant for the quarter ended March 31, 2022 in which the Company exceeded the $100,000 capital expenditures limit. As consideration for such amendment and waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.1 million.
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Item 6. Exhibits.
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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. |
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Date: May 13, 2022 | By: | /s/ Eric A. McAfee |
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| Eric A. McAfee Chief Executive Officer (Principal Executive Officer) |
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Date: May 13, 2022 | By: | /s/ Todd Waltz |
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| Todd Waltz Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
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