UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2023ended March 31, 2024
ORor
☐ TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-36475
AEMETIS, INC.
Aemetis, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 26-1407544 |
(State or other jurisdiction | (I.R.S. Employer |
of incorporation or organization) | Identification No.) |
20400 Stevens Creek Blvd., Suite 700
Cupertino, CA 95014
(Address of Principal Executive Offices, including zip code)
(408) 213-0940
(Registrant’sAddress and telephone number including area code)of principal executive offices)
Title of each class of registered securities | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, $0.001 par value | AMTX | NASDAQ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐ Smaller reporting company ☑☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The number of shares outstanding of the registrant’s Common Stock on July 31, 2023 wasApril 30, 2024 was44,397,833 38,847,739 shares.
FORM 10-Q
Quarterly Period Ended June 30, 2023March 31, 2024
SPECIAL NOTE REGARDING FORWARD—-LOOKING STATEMENTS
On one or more occasions, we mayWe 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 versusand 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,byproducts, including continuing to expand our sales into international markets; our ability to maintain and expand strategic relationships with suppliers; our ability to access governmental carbon reduction incentives; our ability to supply gas into transportation markets; our ability to continue to develop, new and to maintain, and protect new and existing intellectual property rights; our ability to adopt, develop and commercialize new technologies; our ability to extend or refinance our senior debt on terms reasonably acceptable to us or at all; our ability to continue to fund operations and our future sources of liquidity and capital resources; our ability to fund, develop, build, maintain and operate digesters, facilities and pipelines for our California Dairy Renewable Natural Gas segment; our ability to fund, develop and operate our carbon capture sequestration projects, including obtaining required permits; our ability to receive awarded grants by meeting all of the required conditions, including meeting the minimum contributions; our ability to sellobtain additional notesfinancing under ourthe EB-5 note program and our expectations regarding the release of funds from escrow under our EB-5 note program; our ability to generate and sell or utilize various credits, including LCFS, D3 RINs, production tax credits, and IRS 45Qinvestment tax credits; our ability to improve margins; and our ability to raise additional capital.debt and equity funding at the parent, subsidiary, or project level. Words or phrases such as “anticipates,” “may,” “will,” “should,” “could,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will continue” orand 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 marketsrisks 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. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements.Statements
AEMETIS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, In thousands except for par value)
June 30, 2023 | December 31, 2022 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents ($381 and $165 respectively from VIE) | $ | 3,494 | $ | 4,313 | ||||
Accounts receivable ($59 and $165 respectively from VIE) | 6,157 | 1,264 | ||||||
Inventories, net of allowance for excess and obsolete inventory of $1,040 as of June 30, 2023 and December 31, 2022, respectively | 7,463 | 4,658 | ||||||
Prepaid expenses ($179 and $858 respectively from VIE) | 1,212 | 4,248 | ||||||
Other current assets ($10 and $725 respectively from VIE) | 2,582 | 3,653 | ||||||
Total current assets | 20,908 | 18,136 | ||||||
Property, plant and equipment, net ($72,031 and $71,633 respectively from VIE) | 182,783 | 180,441 | ||||||
Operating lease right-of-use assets ($185 and $224 respectively from VIE) | 2,258 | 2,449 | ||||||
Other assets ($3,458 and $3,458 respectively from VIE) | 6,636 | 6,088 | ||||||
Total assets | $ | 212,585 | $ | 207,114 | ||||
Liabilities and stockholders' deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable ($8,775 and $9,192 respectively from VIE) | $ | 30,306 | $ | 26,168 | ||||
Current portion of long term debt | 21,458 | 12,465 | ||||||
Short term borrowings ($22,730 and $19,831 respectively from VIE) | 41,396 | 36,754 | ||||||
Mandatorily redeemable Series B convertible preferred stock | 4,289 | 4,082 | ||||||
Accrued property taxes | 1,522 | 1,206 | ||||||
Current portion of operating lease liability ($45 and $41 respectively from VIE) | 372 | 338 | ||||||
Other current liabilities ($580 and $645 respectively from VIE) | 9,578 | 7,268 | ||||||
Total current liabilities | 108,921 | 88,281 | ||||||
Long term liabilities: | ||||||||
Senior secured notes and revolving notes | 163,871 | 155,843 | ||||||
EB-5 notes | 29,500 | 29,500 | ||||||
Other long term debt ($27 and $31 respectively from VIE) | 11,528 | 11,678 | ||||||
Series A preferred units ($129,716 and $116,000 respectively from VIE) | 129,716 | 116,000 | ||||||
Operating lease liability ($92 and $115 respectively from VIE) | 1,995 | 2,189 | ||||||
Other long term liabilities | 5,991 | 5,477 | ||||||
Total long term liabilities | 342,601 | 320,687 | ||||||
Stockholders' deficit: | ||||||||
Series B convertible preferred stock, $0.001 par value; 7,235 authorized; 1,260 and 1,270 shares issued and outstanding each period, respectively (aggregate liquidation preference of $3,780 and $3,810 respectively) | 1 | 1 | ||||||
Common stock, $0.001 par value; 80,000 authorized; 38,178 and 35,869 shares issued and outstanding each period, respectively | 38 | 36 | ||||||
Additional paid-in capital | 247,017 | 232,546 | ||||||
Accumulated deficit | (480,674 | ) | (428,985 | ) | ||||
Accumulated other comprehensive loss | (5,319 | ) | (5,452 | ) | ||||
Total stockholders' deficit | (238,937 | ) | (201,854 | ) | ||||
Total liabilities and stockholders' deficit | $ | 212,585 | $ | 207,114 | ||||
March 31, 2024 | December 31, 2023 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents ($10 and $1,093 respectively from VIE) | $ | 1,629 | $ | 2,667 | ||||
Accounts receivable ($675 and $55 respectively from VIE) | 8,867 | 8,633 | ||||||
Inventories, net of allowance for excess and obsolete inventory of $1,040 as of March 31, 2024 and December 31, 2023, respectively | 16,011 | 18,291 | ||||||
Prepaid expenses ($1,034 and $1,438 respectively from VIE) | 2,418 | 3,347 | ||||||
Other current assets ($143 and $289 respectively from VIE) | 4,027 | 3,462 | ||||||
Total current assets | 32,952 | 36,400 | ||||||
Property, plant and equipment, net ($85,514 and $81,966 respectively from VIE) | 197,737 | 195,108 | ||||||
Operating lease right-of-use assets ($125 and $145 respectively from VIE) | 1,951 | 2,056 | ||||||
Other assets ($4,722 and $4,881 respectively from VIE) | 9,599 | 9,842 | ||||||
Total assets | $ | 242,239 | $ | 243,406 | ||||
Liabilities and stockholders' deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable ($4,387 and $3,815 respectively from VIE) | $ | 29,789 | $ | 32,132 | ||||
Current portion of long term debt ($498 and $190 respectively from VIE) | 48,870 | 13,585 | ||||||
Short term borrowings ($9 and $9 respectively from VIE) | 23,937 | 23,443 | ||||||
Other current liabilities ($50 and $48 respectively from VIE) | 15,322 | 15,229 | ||||||
Total current liabilities | 117,918 | 84,389 | ||||||
Long term liabilities: | ||||||||
Senior secured notes and revolving notes | 150,830 | 176,476 | ||||||
EB-5 notes | 29,500 | 29,500 | ||||||
Other long term debt ($43,416 and $40,857 respectively from VIE) | 54,087 | 51,717 | ||||||
Series A preferred units ($116,870 and $113,189 respectively from VIE) | 116,870 | 113,189 | ||||||
Other long term liabilities ($54 and $67 respectively from VIE) | 5,175 | 5,112 | ||||||
Total long term liabilities | 356,462 | 375,994 | ||||||
Stockholders' deficit: | ||||||||
Common stock, $0.001 par value per share; 80,000 shares authorized; 42,616 and 40,966 shares issued and outstanding each period, respectively | 43 | 41 | ||||||
Additional paid-in capital | 273,167 | 264,058 | ||||||
Accumulated deficit | (499,636 | ) | (475,405 | ) | ||||
Accumulated other comprehensive loss | (5,715 | ) | (5,671 | ) | ||||
Total stockholders' deficit | (232,141 | ) | (216,977 | ) | ||||
Total liabilities and stockholders' deficit | $ | 242,239 | $ | 243,406 | ||||
The accompanying notes are an integral part of the financial statements.
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited, in thousands except for loss per share)
For the three months ended June 30, | For the six months ended June 30, | For the three months ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Revenues | $ | 45,112 | $ | 65,901 | $ | 47,263 | $ | 117,950 | $ | 72,634 | $ | 2,151 | ||||||||||||
Cost of goods sold | 43,156 | 66,115 | 46,602 | 121,249 | $ | 73,246 | 3,446 | |||||||||||||||||
Gross profit (loss) | 1,956 | (214 | ) | 661 | (3,299 | ) | ||||||||||||||||||
Gross loss | (612 | ) | (1,295 | ) | ||||||||||||||||||||
Research and development expenses | 37 | 51 | 79 | 87 | ||||||||||||||||||||
Selling, general and administrative expenses | 9,709 | 7,421 | 20,495 | 14,727 | ||||||||||||||||||||
Selling, general and administrative and R&D expenses | 8,850 | 10,828 | ||||||||||||||||||||||
Operating loss | (7,790 | ) | (7,686 | ) | (19,913 | ) | (18,113 | ) | (9,462 | ) | (12,123 | ) | ||||||||||||
Other expense (income): | ||||||||||||||||||||||||
Interest expense | ||||||||||||||||||||||||
Interest rate expense | 8,299 | 4,928 | 15,377 | 9,363 | 9,092 | 7,078 | ||||||||||||||||||
Debt related fees and amortization expense | 1,330 | 1,740 | 3,299 | 3,566 | 1,421 | 1,969 | ||||||||||||||||||
Accretion and other expenses of Series A preferred units | 6,885 | 1,506 | 12,449 | 3,146 | 3,311 | 5,564 | ||||||||||||||||||
Gain on litigation | - | (1,400 | ) | - | (1,400 | ) | ||||||||||||||||||
Other income | (91 | ) | (14,254 | ) | (167 | ) | (14,295 | ) | ||||||||||||||||
Other (income) expense | 67 | (76 | ) | |||||||||||||||||||||
Loss before income taxes | (24,213 | ) | (206 | ) | (50,871 | ) | (18,493 | ) | (23,353 | ) | (26,658 | ) | ||||||||||||
Income tax expense | 1,066 | 3 | 818 | 10 | ||||||||||||||||||||
Income tax expense (benefit) | 878 | (248 | ) | |||||||||||||||||||||
Net loss | $ | (25,279 | ) | $ | (209 | ) | $ | (51,689 | ) | $ | (18,503 | ) | $ | (24,231 | ) | $ | (26,410 | ) | ||||||
Other comprehensive loss | ||||||||||||||||||||||||
Foreign currency translation gain (loss) | 16 | (390 | ) | 133 | (584 | ) | ||||||||||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||||||
Foreign currency translation (loss) income | (44 | ) | 117 | |||||||||||||||||||||
Comprehensive loss | $ | (25,263 | ) | $ | (599 | ) | $ | (51,556 | ) | $ | (19,087 | ) | $ | (24,275 | ) | $ | (26,293 | ) | ||||||
Net loss per common share | ||||||||||||||||||||||||
Basic | $ | (0.68 | ) | $ | (0.01 | ) | $ | (1.40 | ) | $ | (0.54 | ) | $ | (0.58 | ) | $ | (0.73 | ) | ||||||
Diluted | $ | (0.68 | ) | $ | (0.01 | ) | $ | (1.40 | ) | $ | (0.54 | ) | $ | (0.58 | ) | $ | (0.73 | ) | ||||||
Weighted average shares outstanding | ||||||||||||||||||||||||
Basic | 37,179 | 34,536 | 36,804 | 34,128 | 41,889 | 36,425 | ||||||||||||||||||
Diluted | 37,179 | 34,536 | 36,804 | 34,128 | 41,889 | 36,425 | ||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
For the six months ended June 30, | For the three months ended March 31, | |||||||||||||||
2023 | 2022 | 2024 | 2023 | |||||||||||||
Operating activities: | ||||||||||||||||
Net loss | $ | (51,689 | ) | $ | (18,503 | ) | $ | (24,231 | ) | $ | (26,410 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Share-based compensation | 4,417 | 3,389 | 2,969 | 2,662 | ||||||||||||
Depreciation | 3,461 | 2,661 | 1,798 | 1,790 | ||||||||||||
Debt related fees and amortization expense | 3,289 | 3,566 | 1,421 | 1,969 | ||||||||||||
Intangibles and other amortization expense | 23 | 23 | 12 | 12 | ||||||||||||
Accretion and other expenses of Series A preferred units | 12,449 | 3,146 | 3,311 | 5,564 | ||||||||||||
Loss on asset disposals | - | 47 | ||||||||||||||
Warrants issued for working capital agreement | 409 | - | ||||||||||||||
Gain on litigation | - | (1,400 | ) | |||||||||||||
Loss on lease termination | - | 736 | ||||||||||||||
Deferred tax expense | 701 | - | ||||||||||||||
Deferred tax benefit | - | (262 | ) | |||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | (4,884 | ) | 294 | (245 | ) | 1,005 | ||||||||||
Inventories | (2,872 | ) | 187 | 2,259 | (7,942 | ) | ||||||||||
Prepaid expenses | 2,431 | 2,138 | 929 | 2,315 | ||||||||||||
Other assets | - | (1,647 | ) | (544 | ) | 460 | ||||||||||
Accounts payable | 4,365 | 392 | (3,236 | ) | 3,002 | |||||||||||
Accrued interest expense and fees | 12,095 | 8,542 | 5,500 | 5,356 | ||||||||||||
Other liabilities | 1,828 | (10,054 | ) | (221 | ) | (779 | ) | |||||||||
Net cash used in operating activities | (13,977 | ) | (6,483 | ) | (10,278 | ) | (11,258 | ) | ||||||||
Investing activities: | ||||||||||||||||
Capital expenditures | (9,808 | ) | (22,518 | ) | (3,583 | ) | (7,616 | ) | ||||||||
Grant proceeds and other reimbursements received for capital expenditures | 7,302 | 6,147 | 1,900 | 6,757 | ||||||||||||
Net cash used in investing activities | (2,506 | ) | (16,371 | ) | (1,683 | ) | (859 | ) | ||||||||
Financing activities: | ||||||||||||||||
Proceeds from borrowings | 21,627 | 30,622 | 6,223 | 11,583 | ||||||||||||
Repayments of borrowings | (13,424 | ) | (16,191 | ) | (411 | ) | (2,724 | ) | ||||||||
Lender debt renewal and waiver fee payments | (1,681 | ) | (869 | ) | (750 | ) | - | |||||||||
Payments on finance leases | (311 | ) | (182 | ) | (8 | ) | (83 | ) | ||||||||
Proceeds from issuance of common stock in equity offering | 8,915 | 5,124 | ||||||||||||||
Proceeds from the exercise of stock options | 38 | 201 | ||||||||||||||
Proceeds from sales of common stock | 5,513 | 2,617 | ||||||||||||||
Proceeds from exercise of stock options | 36 | - | ||||||||||||||
Net cash provided by financing activities | 15,164 | 18,705 | 10,603 | 11,393 | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (214 | ) | (44 | ) | ||||||||||||
Net change in cash and cash equivalents for period | (1,533 | ) | (4,193 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 6,999 | 7,751 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 5,466 | $ | 3,558 | ||||||||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 15 | (56 | ) | |||||||||||||
Net change in cash, cash equivalents, and restricted cash for period | (1,343 | ) | (780 | ) | ||||||||||||
Cash, cash equivalents, and restricted cash at beginning of period | 6,280 | 6,999 | ||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 4,937 | $ | 6,219 | ||||||||||||
Supplemental disclosures of cash flow information, cash paid: | ||||||||||||||||
Cash paid for interest | $ | 4,546 | $ | 14,270 | $ | 2,963 | $ | 1,515 | ||||||||
Income taxes paid | 20 | 10 | 878 | 14 | ||||||||||||
Supplemental disclosures of cash flow information, non-cash transactions: | ||||||||||||||||
Subordinated debt extension fees added to debt | 340 | 340 | 340 | 340 | ||||||||||||
Debt fees added to revolving lines | 2,236 | 500 | - | 423 | ||||||||||||
Fair value of warrants issued to subordinated debt holders | 448 | 1,393 | 593 | 448 | ||||||||||||
Fair value of stock issued to a related party for guarantee fees | - | 2,012 | ||||||||||||||
Fair value of warrants issued to lender for debt issuance costs | 245 | 3,158 | ||||||||||||||
Fair value of stock issued to lender | - | 1,335 | ||||||||||||||
Lender debt extension, waiver, and other fees added to debt | 384 | 583 | 595 | 384 | ||||||||||||
Cumulative capital expenditures in accounts payable, including net increase of $474 and $1,535, respectively | 15,885 | 10,230 | ||||||||||||||
Financing lease liabilities arising from obtaining right of use assets | - | 2,932 | ||||||||||||||
Payment of debt added to revolving lines | - | 16,266 | ||||||||||||||
Cumulative capital expenditures in accounts payable, including net increase (decrease) of $1,027 and ($511), respectively | 8,927 | 14,900 | ||||||||||||||
The accompanying notes are an integral part of the financial statements.
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in thousands)
For the six months ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the three months ended March 31, 2024 | For the three months ended March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series B Preferred Stock | Common Stock | Additional | Accumulated Other | Total | Series B Preferred Stock | Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paid-in | Accumulated | Comprehensive | Stockholders' | Paid-in | Accumulated | Comprehensive | Stockholders' | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description | Shares | Dollars | Shares | Dollars | Capital | Deficit | Gain (Loss) | deficit | Shares | Dollars | Shares | Dollars | Capital | Deficit | Gain (Loss) | deficit | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | 1,270 | $ | 1 | 35,869 | $ | 36 | $ | 232,546 | $ | (428,985 | ) | $ | (5,452 | ) | $ | (201,854 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2023 | - | $ | - | 40,966 | $ | 41 | $ | 264,058 | $ | (475,405 | ) | $ | (5,671 | ) | (216,977 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | - | - | 668 | 1 | 2,616 | - | - | 2,617 | - | - | 1,523 | 2 | 5,511 | - | - | 5,513 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | - | - | 40 | - | - | - | - | - | - | - | 14 | - | 36 | - | - | 36 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 2,662 | - | - | 2,662 | - | - | - | - | 2,969 | - | - | 2,969 | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance and exercise of warrants | - | - | 113 | - | 448 | - | - | 448 | - | - | 113 | - | 593 | - | - | 593 | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain | - | - | - | - | - | - | 117 | 117 | - | - | - | - | - | - | (44 | ) | (44 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | (26,410 | ) | - | (26,410 | ) | - | - | - | - | - | (24,231 | ) | - | (24,231 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2023 | 1,270 | $ | 1 | 36,690 | $ | 37 | $ | 238,272 | $ | (455,395 | ) | $ | (5,335 | ) | $ | (222,420 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | - | - | 1,353 | 1 | 6,298 | - | - | 6,299 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series B conversion to common stock | (10 | ) | - | 1 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | - | - | 72 | - | 38 | - | - | 38 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 1,755 | - | - | 1,755 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance and exercise of warrants | - | - | 62 | 654 | 654 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain | - | - | - | - | - | - | 16 | 16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | (25,279 | ) | - | (25,279 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2023 | 1,260 | $ | 1 | 38,178 | $ | 38 | $ | 247,017 | $ | (480,674 | ) | $ | (5,319 | ) | $ | (238,937 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2024 | - | $ | - | 42,616 | $ | 43 | $ | 273,167 | $ | (499,636 | ) | $ | (5,715 | ) | $ | (232,141 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For the three months ended March 31, 2023 | For the three months ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series B Preferred Stock | Common Stock | Additional | Accumulated Other | Total | Series B Preferred Stock | Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paid-in | Accumulated | Comprehensive | Stockholders' | Paid-in | Accumulated | Comprehensive | Stockholders' | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description | Shares | Dollars | Shares | Dollars | Capital | Deficit | Loss | deficit | Shares | Dollars | Shares | Dollars | Capital | Deficit | Loss | deficit | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | 1,275 | $ | 1 | 33,461 | $ | 33 | $ | 205,305 | $ | (321,227 | ) | $ | (4,350 | ) | $ | (120,238 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | 1,270 | $ | 1 | 35,869 | $ | 36 | $ | 232,546 | $ | (428,985 | ) | $ | (5,452 | ) | $ | (201,854 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | - | - | 341 | 1 | 3,348 | - | - | 3,349 | - | - | 668 | 1 | 2,616 | - | - | 2,617 | ||||||||||||||||||||||||||||||||||||||||||||||||
Series B conversion to common stock | (5 | ) | - | 1 | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | - | - | 263 | - | 196 | - | - | 196 | - | - | 40 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 2,040 | - | - | 2,040 | - | - | - | - | 2,662 | - | - | 2,662 | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance and exercise of warrants | - | - | 113 | - | 4,550 | - | - | 4,550 | - | - | 113 | - | 448 | - | - | 448 | ||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss | - | - | - | - | - | - | (194 | ) | (194 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain | - | - | - | - | - | - | 117 | 117 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | (18,294 | ) | - | (18,294 | ) | - | - | - | - | - | (26,410 | ) | - | (26,410 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | 1,270 | $ | 1 | 34,179 | $ | 34 | $ | 215,439 | $ | (339,521 | ) | $ | (4,544 | ) | $ | (128,591 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | - | - | 400 | 1 | 5,123 | - | - | 5,124 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | - | - | 3 | - | 4 | - | - | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 1,349 | - | - | 1,349 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss | - | - | - | - | - | - | (390 | ) | (390 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | (209 | ) | - | (209 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | 1,270 | $ | 1 | 34,582 | $ | 35 | $ | 221,915 | $ | (339,730 | ) | $ | (4,934 | ) | $ | (122,713 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2023 | 1,270 | $ | 1 | 36,690 | $ | 37 | $ | 238,272 | $ | (455,395 | ) | $ | (5,335 | ) | $ | (222,420 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
1. Nature of Activities and Summary of Significant Accounting Policies
Nature of Activities. Activities
Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis referred to herein as “Aemetis,” the “Company,” “we,” “our” or “us”) is an international renewable natural gas and renewable fuels company focused on the operation, acquisition, development, and commercialization of innovative technologies to produce low and negative carbon intensity products and technologiesrenewable fuels that replace traditional petroleum-basedfossil-based products. We operate in three reportable segments consisting of “California Ethanol,” “California Dairy Renewable Natural Gas,” and “India Biodiesel.” We have other operating segments determined not to be reportable segments and are collectively represented by the “All Other” category. At Aemetis, our mission is to generate sustainable and innovative renewable fuel solutions that benefit communities and restore our environment. We do this by building a local circular bioeconomy utilizingusing agricultural products and waste to produce low carbon, advanced renewable fuels that reduce greenhouse gas ("GHG") emissions and improve air quality by replacing traditional petroleum-based products.quality. Our current operations include:
Our ► California Ethanol segment consists of - We own and operate a 65 million gallon per year capacity ethanol production facility located in Keyes, California (the “Keyes Plant”) that we own and operate.. In addition to low carbon renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), Carbon Dioxide (“CO₂”) and Condensed Distillers Solubles (“CDS”), all of which are sold as animal feed to local dairies and feedlots, withfeedlots. The Keyes Plant also sells CO₂ soldto Messer Gas who converts it to liquid and sells it to food, beverage, and industrial customers. We haveare implementing several energy efficiency initiatives at the Keyes Plant focused on significantlyreducing operating costs and lowering the carbon intensity of our fuels. In the third quarter of 2022, we completed installation of a ZEBREXTM ethanol dehydration system and began commissioning the system, 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. During the last two weeks of December 2022, we undertook an extended maintenance cycle and accelerated the implementation of several important ethanol plant energy efficiency upgrades noted above. Our decision was partly driven by the high natural gas prices in Northern California during the period. Furthermore, after monitoring natural gas pricing and margin profitability, we decided to extend the maintenance cycle into the second quarter of 2023. With natural gas pricing in a reasonable range and the maintenance turn-around complete, we restarted operation of the Keyes Plant in the second quarter of 2023.fuel.
Our ► California Dairy Renewable Natural segment, which consists of our subsidiary Aemetis Biogas LLC and its subsidiaries, ("Aemetis Biogas" or "ABGL"), constructs and operates bio-methane anaerobic digesters at local dairies near the Keyes Plant (many of whom also purchase WDG produced by the Keyes Plant as animal feed); transports the biogas via pipeline to the Keyes Plant site; and converts the biogas toGas - We produce Renewable Natural Gas (“RNG”) which is then delivered(RNG) in central California. Our facilities consist of eight anaerobic digesters that produce biogas from dairy waste, a 36-mile biogas collection pipeline leading to customers througha central upgrading hub, and an interconnect to inject the PG&ERNG into the utility natural gas pipeline. The Aemetis Biogas network includes the Aemetis Biogas Central Dairy Project which operates 40 miles of completed biogas pipeline; seven operating dairy digesters; four dairy digesters that are under construction; a centralized biogas-to-RNG conversion facility located at the Keyes Plant site; and a renewable natural gas interconnection with the PG&E utility gas pipeline.
The dairy digesters are connected via an underground private pipeline owned by ABGLfor delivery to a gas cleanup and compression unit at the Keyes Plant to produce dairy RNG. Upon receiving the bio-methane from the dairies, impurities are removed, and the bio-methane is converted to negative carbon intensity RNG that is injected into the statewide PG&E gas utility pipelinecustomers for use as transportation fuel or used as renewable process energy at the Keyes Plant.fuel. We are actively expanding our RNG production dairies, with several additional digesters under construction, agreements with a total of 43 dairies, and environmental review completed for an additional 24 miles of pipeline. We are also building our own RNG dispensing station, which is planned to begin operating in 2024.
Our ► India Biodiesel segment owns - We own and operatesoperate a plant in Kakinada, India (“Kakinada Plant”) with a nameplate capacity ofto produce about 15060 thousand metric tons per year, or about 50 million gallons per year producing high qualityof high-quality distilled biodiesel from a variety of vegetable oil and refined glycerin for customers in India and Europe. We believe theanimal waste feedstocks. The Kakinada Plant is one of the largest biodiesel production facilities in India on a nameplate capacity basis.India. The Kakinada Plant is capable of processing a variety of vegetable oils and animal fat waste feedstocks into biodiesel that meets international product standards. Our Kakinada Plant can also distill the crude glycerin byproduct from the biodiesel refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive, and other industries. During
In addition, we are actively growing our business by seeking to develop or acquire new facilities, including the following key projects:
► Sustainable Aviation Fuel and Renewable Diesel– We are developing a sustainableaviation fuel and renewable diesel (“SAF/RD”) production plant to be located at the Riverbank Industrial Complex in Riverbank, CA. The plant is currently designed to produce an expected second90 quartermillion gallons per year of SAF/RD from renewable oil and fats obtained from the Company’s other biofuels plants and other sources. The plant will use low-carbon hydroelectric electricity and renewable hydrogen that is generated within the plant’s own processes using byproducts of the SAF/RD production. In 2023, Kakinada Plant fulfilled a tender offerwe received approval of $34.0 million worththe Use Permit and CEQA for the development of biodiesel, of which $32.8 million was recognized as revenue while the remainder isplant, and in transitMarch 2024, we received the Authority to Construct air permits for delivery as of June 30, 2023. In July 2023, Kakinada Plant was awarded a new initial tender offer to ship $20.0 million worth of biodiesel in the third quarter of 2023.plant. We are continuing with the engineering and other required development activities for the plant.
Our All Other segment consists of: our Carbon Zero biofuels production plants to produce renewable diesel and sustainable aviation fuel; ► Carbon Capture and Underground Sequestration– We are developing Carbon Capture and Underground Sequestration compression system(“CCUS”) facilities that will inject carbon dioxide captured from air emissions deep into the ground for geologic storage to reduce emissions to the atmosphere of greenhouse gases that contribute to global warming. In May 2023, the Company received a permit from the State of California to build a geologiccharacterization well that will provide information for the permitting and injection wells;design of a researchCCUS well to be located in Riverbank, California. The Company plans to construct the geologic characterization well in 2024 and is at the same time continuing engineering, permitting and other development facility in Minneapolis, Minnesota; and our corporate offices in Cupertino, California.activities for the sequestration well.
OurThe Company’s current and planned businesses produce renewable fuels and reduce carbon emissions, while generating valuable Renewable Fuel Standard credits, California Low Carbon Zero biofuels production plants are designed to produce low or negative carbon intensity sustainable aviation fuel (“SAF”)Fuel Standard credits, and renewable diesel fuel (“RD”) utilizing low carbon hydroelectric electricity, renewable hydrogen and non-edible renewable oils sourced from existing Aemetis biofuels plants and other sources. The first Carbon Zero plant is scheduled to be built in Riverbank, California at the 125-acre former Riverbank Army ammunition plant. The Riverbank plant is expected to utilize zero carbon hydroelectric and other renewable power available onsite to produce SAF, RD, and other byproducts.
Our Carbon Capture subsidiary was established to build Carbon Capture and Sequestration (“CCS”) projects that generate LCFS and IRS 45Qfederal tax credits by compressing and injecting CO₂ into deep wells which are monitored for emissions to ensure the long-term sequestration of carbon underground. In July 2022, Aemetis purchased 24 acres located on the Riverbank Industrial Complex site in Riverbank, California to develop a CCS injection well.credits.
Basis of Presentation and Consolidation.Consolidation
These consolidated financial statements include the accounts of Aemetis. Additionally, weAemetis, Inc. and its subsidiaries. We consolidate all entities in which we have a controlling financial interest. A controlling financial interest is usually obtained through ownership of a majority of the voting interests. However, an enterprise must consolidate a variable interest entity (“VIE”) if the enterprise is the primary beneficiary of the VIE, even if the enterprise does not own a majority of the voting interests. The primary beneficiary is the party that has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. ABGL was assessedWe consider Aemetis Biogas LLC ("ABGL") to be a VIE and throughbecause the Company’s ownership interest inCompany owns all of the outstanding common stock, the Company has been determined to beunits of ABGL and is the primary beneficiary andof ABGL's operations; accordingly, the assets, liabilities, and operations of ABGL are consolidated into those of the Company.in these financial statements.
All intercompany balances and transactions have been eliminated in consolidation.
The accompanying consolidated condensed balance sheet as of June 30, 2023March 31, 2024, the consolidated condensed statements of operations and comprehensive loss for the three and sixmonths ended June 30, 2023March 31, 2024 and 20222023, the consolidated condensed statements of cash flows for the sixthree months ended June 30, 2023March 31, 2024 and 20222023, and the consolidated condensed statements of stockholders’ deficit for the three and sixmonths ended June 30, 2023March 31, 2024 and 20222023 are unaudited. The consolidated condensed balance sheet as of December 31, 2022, 2023, was derived from the 20222023 audited consolidated financial statements and notes thereto. The consolidated condensed financial statements in this report should be read in conjunction with the 20222023 audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 20222023. The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
In the opinion of Company’s management, the unaudited interim consolidated condensed financial statements as of and for the three and sixmonths ended June 30, 2023March 31, 2024 and 20222023 have been prepared on the same basis as the audited consolidated statements as of and for the year ended December 31, 20222023 and reflect all adjustments, consisting primarily of normal recurring adjustments, necessary for the fair presentation of its statement of financial position, results of operations and cash flows. The results of operations for the three and sixmonths ended June 30, 2023March 31, 2024 are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year or any future periods.
UseThere have been no material changes to our significant accounting policies disclosed in Note 1 - Nature of Estimates. The preparationActivities and Summary 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 dateSignificant Accounting Policies of the financial statements, revenues, and expenses duringNotes to the reporting period. ToConsolidated Financial Statements included in the extent there are material differences between these estimates and actual results,Company's Annual Report on Form 10-K for the Company’s consolidated financial statements will be affected.fiscal year ended December 31, 2023.
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.
2. Revenue
We derive revenue primarily from sales of ethanol and related co-products in California, renewable natural gas ("RNG") and related environmental attributes in California, and biodiesel and refined glycerin in India.
California Ethanol Revenues: OnStarting in the May 13, 2020, second quarter of 2023,we entered into an amendmentbegan selling all our ethanol to the Corn Procurement and Working Capital Agreement with J.D. Heiskell (the “Corn ProcurementHoldings, LLC ("J.D. Heiskell"), who sells it to customers designated by us, and Working Capital”), pursuantwe have designated Murex, LLC, who continues to which wemarket the product. J.D. Heiskell does not charge a fee for reselling the ethanol, but it receives the payments from the ultimate customer. We also buy allour corn feedstock from J.D. Heiskell, and sell all WDGJ.D. Heiskell pays us the net balance between ethanol and corn oil we produce to J.D. Heiskell. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC (“Murex”), in whichother product we sell all our ethanol to Murex through individual sales transactions. On May 25, 2023, we entered into the second amendment to the Aemetis Keyes Grain Procurement and Working Capital Agreement with J.D. Heiskell, the second amendment to the Corn Procurement and Working Capital Agreement with J.D. Heiskell and the second amendment to the Keyes Ethanol and Corn Tank Lease withour corn purchases from J.D. Heiskell. The amendments provide thatOur accounting (i) treats us as the Keyes Plant will receive a temporary increase to its working capital credit limit by an amount equal to four days of grain payables repayable in equal daily installments over 120 days, (ii) thatpurchaser/customer for corn purchases from J.D. Heiskell agrees to buyand we record the full purchase cost in cost-of-good sold, and (ii) treats us as the seller for ethanol and other product sales, so we treat all Ethanol, WDG, CDS, and Corn Oil produced by the Keyes Plant, sell all ethanol to certain designated purchasers and pay us the same pricesales as it received from such sales, and (iii) J.D. Heiskell would lease certain ethanol product storage tanks from the Keyes Plant. revenue.
Given the similarity of the individual sales transactions with J.D. Heiskell, we have assessed them as a portfolio of similar contracts. Prior to May 25, 2023, the performance obligation was satisfied by delivery of the physical product from our finished goods tank to our customer’s contracted trucks. Effective on May 25, 2023, the performance obligation is satisfied by delivery of the physical product to theour finished goods tank leased by J.D. Heiskell. Upon delivery, the customer has the ability to direct the use of the product and receive substantially all of its benefits. The transaction price is determined based on daily market prices and quarterly contract pricing negotiated by Murex for its customers for ethanol and based on dry distillers' market and local demand by our marketing partner A.L. Gilbert Company (“A.L. Gilbert”) for WDG. The transaction price is allocated to one performance obligation.
During the last two weeks of December 2022, we undertook an extended maintenance cycle and accelerated the implementation of several important ethanol plant energy efficiency upgrades. Our decision was partly driven by the high natural gas prices in California during the period. After monitoring natural gas pricing and margin profitability, we decided to extend the maintenance cycle into the first and second quarters of 2023 and restarted the plant at the end of May 2023, which accounts for lower revenue amounts shown in the table below for the period ending March 31, 2023.
The belowfollowing table shows our sales in our California Ethanol segment by product category:
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Ethanol sales | $ | 8,647 | $ | 47,656 | $ | 9,015 | $ | 85,551 | ||||||||
Wet distiller's grains sales | 2,553 | 15,150 | 2,553 | 26,666 | ||||||||||||
Other sales | 132 | 3,085 | 239 | 5,715 | ||||||||||||
| $ | 11,332 | $ | 65,891 | $ | 11,807 | $ | 117,932 | |||||||||
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 some contractual agreements. We analyzed the principal versus agent relationship criteria below.
We buy corn as feedstock in producing ethanol from our working capital partner J.D. Heiskell and we sell all ethanol, WDG, CDO, and CDS produced in this process to J.D. Heiskell. Our ethanol finished goods tank is leased by J.D. Heiskell and legal title to the product is transferred upon transfer of our finished ethanol to this location. We consider the purchase of corn as a cost of goods sold and consider the sale of ethanol as revenue upon transfer to the finished goods tank and consider the sale of WDG, CDO, and CDS as revenue, upon trucks leaving the Keyes Plant with the product, on the basis that (i) we control and bear the risk of gain or loss on the processing of corn which is purchased at market prices into ethanol and (ii) we have legal title to the goods during the processing time. The pricing for ethanol, WDG, CDO, and CDS is set independently. Revenues from ethanol and WDG are billed net of the related transportation and marketing charges. The transportation component is accounted for in cost of goods sold and the marketing component is accounted for in sales, general and administrative expense. Transportation and marketing charges are known within days of the transaction and are recorded at the actual amounts. We have elected an accounting policy under which these charges have been treated as fulfillment activities provided after control has transferred. As a result, these charges are recognized in cost of goods sold and selling, general and administrative expenses, respectively, when revenue is recognized. Revenues are recorded at the gross invoiced amount. Hence, we are the principal in California Ethanol segment where our customer and vendor may be the same.
For the three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Ethanol sales | $ | 25,385 | $ | 368 | ||||
Wet distiller's grains sales | 9,213 | - | ||||||
Other sales | 1,491 | 107 | ||||||
Total | $ | 36,089 | $ | 475 | ||||
California Dairy Renewable Natural Gas Revenues: InOur facilities as of December 2018, March 31, 2024we utilized our relationships with California’s Central Valley dairy farmers by signing leases and raising funds to construct dairy, consist of eight anaerobic digesters that process feedstock from dairies into biogas, a 4036 mile-mile collection pipeline leading to a centralized biogas cleanup and a renewable natural gas interconnection with PG&E pipeline. We are currently producing RNG from seven digesters connected to 40 miles of pipeline, then flowing this gas to our RNG cleanupcentral upgrading hub, and delivering the gas through an interconnect to the PG&E pipeline at the Keyes Plant. The RNG upgrade unit at the Keyes Plant is designed to deliver utility-grade RNG for sale as transportation fuel to California customers via pipeline delivery.
We have 34 signed agreements with dairies to construct dairy digesters. Our revenue development strategy for the Dairy Renewable Natural Gas segment relies upon continuing to collect bio-methane gas from the existing dairy digesters, continuing to build out the network of dairy digesters, extending the pipeline in Northern California to grow the supply of RNG available for sale and utilizing the biogas-to-RNG upgrade unit to distribute utility-grade RNG to customers statewide. We plan to storeinject the RNG until the LCFS credit pathway for each dairy has been established, after which we will sell the stored gas by delivering it into the utility natural gas pipeline. Aspipeline for delivery to customers for use as transportation fuel. In connection with dispensing the RNG, we generate sellable credits under the federal Renewable Fuel Standard (referred to as "D3 RINs") and the California Low Carbon Fuel Standard ("LCFS"). We began selling D3 RINs in the third quarter of June 30, 2023, we have 86.7 thousand MMBtu and began selling LCFS credits in the first quarter of 2024. We recognize revenue from sales of RNG in storage. The RNG in storage is recordedconcurrent with our production and injection into the transportation pipeline. We recognize revenue from sales of D3 RINs and LCFS credits at the lower of cost and net realizable value. The value per LCFS as of June 30, 2023 was $76 per metric ton andtime we sell the value per D3 Cellulosic RIN was $2.80; for an estimated market value $68.22 per MMBtu, assuming a CI score of - 415.credits.
For the three months ended March 31, | ||||||||
2024 | 2023 | |||||||
RNG, LCFS and D3 RIN sales | $ | 3,792 | $ | 206 | ||||
India Biodiesel Revenues: 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 PFAD, net of taxes. Transaction price is allocated to one performance obligation.
The belowfollowing table shows our sales in our India Biodiesel segment by product category:
For the three months ended June 30, | For the six months ended June 30, | For the three months ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Biodiesel sales | $ | 32,811 | $ | - | $ | 34,001 | $ | - | $ | 30,992 | $ | 1,190 | ||||||||||||
Other sales | 759 | 10 | 1,039 | 18 | 1,761 | 280 | ||||||||||||||||||
| $ | 33,570 | $ | 10 | $ | 35,040 | $ | 18 | |||||||||||||||||
Total | $ | 32,753 | $ | 1,470 | ||||||||||||||||||||
In India, we also assessed principal versus agent criteria as we buy our feedstock from our customers3. Cash 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 these situations. Hence, we are the principal in India sales scenarios where our customer and vendor may be the same.
Cash Equivalents
CostThe following table reconciles cash, cash equivalents, and restricted cash reported in the Consolidated Balance Sheet to the statement 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.cash flows:
As of | ||||||||
March 31, 2024 | December 31, 2023 | |||||||
Cash and cash equivalents | $ | 1,629 | $ | 2,667 | ||||
Restricted cash included in other current assets | 143 | 289 | ||||||
Restricted cash included in other assets | 3,165 | 3,324 | ||||||
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | 4,937 | $ | 6,280 | ||||
Shipping and Handling Costs. Shipping and handling costs are classified as a component of cost of goods sold
Restricted cash shown in the accompanying consolidated statements of operations.
Research and Development. Research and development costs are expensed as incurred, unless they have alternative future uses to the Company.
Cash, Cash Equivalents, and Restricted Cash. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances at various financial institutions domestically and abroad. The Federal Deposit Insurance Corporation insures domestic cash accounts. The Company’s accounts at these institutions may at times exceed federally insured limits. The Company has not experienced any losses in such accounts. Amounts included in restricted cash represent thosetable above includes amounts required to be set aside by the Construction and Term Loan Agreement witharranged by Greater Nevada Credit UnionCommercial Lending ("GNCU"GCL") for financing reserves and construction contingencies and will be released upon approval by GNCU. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheet to the total of the same such amounts shown in the statement of cash flows.contingencies.
As of | ||||||||
June 30, 2023 | December 31, 2022 | |||||||
Cash and cash equivalents | $ | 3,494 | $ | 4,313 | ||||
Restricted cash included in other current assets | 10 | 725 | ||||||
Restricted cash included in other assets | 1,961 | 1,961 | ||||||
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | 5,465 | $ | 6,999 | ||||
Accounts Receivable. The Company sells ethanol and WDG through third-party marketing arrangements generally without requiring collateral directly to customers on a variety of terms including advanced payment terms, based on the size and creditworthiness of the customer. DCO is marketed and sold to A.L. Gilbert and other customers under the J.D. Heiskell Purchasing Agreement. The Company sells CDS directly to customers on standard 30-day payment terms. The Company sells biodiesel, glycerin, and processed natural oils to a variety of customers and may require advanced payment based on the size and creditworthiness of the customer. Usually, invoices are due within 30 days on net terms. Accounts receivables consist of product sales made to large creditworthy customers. Trade accounts receivable are presented at original invoice amount, net of any allowance for doubtful accounts. We did not reserve any balance for allowances for doubtful accounts as of June 30, 2023 and December 31, 2022.
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.
Inventories. Finished goods, raw materials, and work-in-process inventories are valued using methods which approximate the lower of cost (first-in, first-out) or net realizable value (“NRV”). Distillers’ grains and related products are stated at NRV. In the valuation of inventories, NRV is determined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Variable Interest Entities. We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests in is considered a variable interest entity (“VIE”). We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether any changes in our interest or relationship with the entity affects our determination of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not4. 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 in Goodland, Kansas (the "Goodland Plant") is partially completed and is not ready for operation. It is the Company’s policy to depreciate capital assets over their estimated useful lives using the straight-line method.
The Company evaluates the recoverability of long-lived assets with finite lives in accordance with ASC Subtopic 360-10-35Property Plant and Equipment—Subsequent Measurements, which requires recognition of impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable, based on estimated undiscounted cash flows, the impairment loss would be measured as the difference between the carrying amount of the assets and its estimated fair value. The Company has not recorded any impairment during the three and six months ended June 30, 2023 and 2022.
California Energy Commission Low-Carbon Fuel Production Program. The Company has been awarded $4.2 million in matching grants from the California Energy Commission Low-Carbon Fuel Production Program (“LCFPP”). The LCFPP grant reimburses the Company for costs to design, procure, and install a processing facility to clean-up, measure and verify negative-carbon intensity dairy renewable natural gas fuel at the production facility in Keyes, California. The Company has received $3.8 million from the LCFPP as of June 30, 2023, as reimbursement for actual costs incurred. Due to the uncertainty associated with the approval process under the grant program, the Company recognized the grant as a reduction of costs in the period when payment is received.
In October 2020, the Company was awarded $7.8 million in matching grants from the CDFA Dairy Digester Research and Development program. The CDFA grant reimburses the Company for costs required to permit and construct six of the Company’s biogas capture systems under contract with central California dairies. The Company has received $4.4 million from the CDFA 2020 grant program as of June 30, 2023, as reimbursement for actual costs incurred. Due to the uncertainty associated with the approval process under the grant program, the Company recognized the grant as a reduction of costs in the period when payment is received.
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 $5.0 million (the “CEC Reimbursement Program”) in connection with the Company’s expenditures toward the development of the Riverbank Carbon Zero Facility. To comply with the guidelines of the CEC Reimbursement Program, the Company must make a minimum of $7.9 million in matching contributions to the Riverbank project. The Company receives funds under the CEC Reimbursement Program for actual expenses incurred up to $5.0 million as long as the Company makes the minimum matching contribution. Given that the Company has not made the minimum matching contribution, the grant for reimbursement of capital expenditures of $1.7 million is presented with long-term liabilities as of June 30, 2023, and December 31, 2022. Due to the uncertainty associated with meeting the minimum matching contribution, the reimbursement will be recognized when the Company makes the minimum matching contribution.
U.S. Department of Food and Agriculture Forest Service Grant. Aemetis Advanced Products Keyes (“AAPK”) has been awarded $245 thousand in matching grants from the U.S. Department of Food and Agriculture Forest Service (“US Forest Service”) under the Wood Innovation and Community Wood program. The grant has reimbursed the Company for continued development of technologies and processes to valorize forest waste for the production of cellulosic ethanol. AAPK has received all $245 thousand awarded from the US Forest Service for reimbursement of actual allowable program costs incurred through June 30, 2023.
California Energy Commission Grant for Solar Microgrid, DSC and Battery Backup System. Aemetis Advanced Fuels Keyes (“AAFK”) has been awarded an $8.0 million grant to design, construct and commission a grid-connected 1.56 MW photovoltaic microgrid and 1.25MW/2.5MWh Battery Energy Storage System integrated with an artificial intelligence-driven distributed control system (DCS). The Company has made the required $1.6 million in matching contributions to qualify to receive grant reimbursements. AAFK received $4.2 million in grant funds from this program as reimbursement for actual expenditures incurred through June 30, 2023. Due to the uncertainty associated with the approval process under the grant program, the Company recognized the grant as a reduction of costs in the period when payment is received.
California Department of Forestry and Fire Protection Grant. AAPK has been awarded $2 million in matching grants from the CAL FIRE Business and Workforce Development Grant Program (“CAL Fire”) in May 2022. This CAL Fire grant program reimburses AAPK for costs to design, construct, and commission a 2 million gallon per year cellulosic ethanol facility able to convert conifer biomass from forested regions of the Sierra Nevada into an ultra‐low carbon biofuel derived from 100% forest biomass (“CAL Fire Conversion Program”). AAPK must contribute $5.8 million in cost share contributions to the project to receive grant proceeds. AAPK has received no grant funds from the CAL Fire Conversion Program as reimbursement for actual costs through June 30, 2023.
California Department of Forestry and Fire Protection Grant. AAPK was awarded $500 thousand in grants from CAL Fire in May 2022. This CAL Fire grant program reimburses AAPK for costs to advance a new‐to‐the world technology that circumvents current limitations surrounding the extraction of cellulosic sugars by pioneering a novel route for deconstructing woody biomass using ionic liquids (“CAL Fire Extraction Program”). AAPK has received no grant funds from the CAL Fire Extraction Program as reimbursement for actual costs through June 30, 2023.
U.S Forest Service Community Wood Grant. Aemetis Advanced Products Riverbank (“AAPR”) was awarded $642 thousand in matching grants from the U.S Forest Service Wood Innovations Program (“USFS”) in May 2022. The USFS grant program reimburses AAPR for costs to design, construct, and commission a plant to produce cellulosic ethanol using preliminary research and development in partnership with the Joint Bioenergy Institute (JBEI). USFS grant funds will be used to complete the FEL-3 design phase of the entire process, construct a biomass pretreatment unit to extract sugars at the Aemetis Riverbank site and ferment sugars into ethanol at the Keyes Plant. AAPR must contribute $2.4 million in cost share contributions to the project to receive grant proceeds. AAPK has received no grant funds from the USFS grant program as reimbursement for actual costs through June 30, 2023.
California Energy Commission Grant for Mechanical Vapor Recompression System. Aemetis Advanced Fuels Keyes (“AAFK”) has been awarded a $6.0 million grant to design, construct and commission a mechanical vapor recompression (MVR) system. The additional evaporation stages will eliminate natural gas consumption and related greenhouse gas emissions in the evaporation portion of the process by installing metering equipment and software to monitor and optimize the plant’s energy consumption. The MVR system will compress vapor to a higher pressure and temperature so that it can be recycled multiple times as steam heat in the evaporation process, which will dramatically reduce natural gas use. The grant requires $5.3 million in matching contributions. AAFK has received no grant funds from this program as reimbursement for actual expenditures incurred through June 30, 2023. Due to the uncertainty associated with the approval process under the grant program, the Company will recognize future grant proceeds received as a reduction of costs in the period when payment is received.
Pacific Gas and Electric SEM Manufacturer’s Incentive Program. During the fourth quarter of 2022, AAFK received $374 thousand in PG&E SEM Incentive Program reimbursements for installing more efficient beer feed heat exchangers. The Company has received $27 thousand in PG&E SEM Incentive Program reimbursements in 2023. Third party consultants verified the reduction in natural gas usages from the new heat exchangers to obtain the incentive program funds.
California Energy Commission PG&E A2313 Pipeline Interconnection Grant. The Company has received $5 million in matching grants from the California Energy Commission PG&E A2313 Pipeline Interconnection program (“CEC PG&E Pipeline Interconnect”) during the quarter ended March 31, 2023. The CEC PG&E Pipeline Interconnect grant reimburses the Company for actual costs to design, procure, and install facility and pipeline to interconnect renewable natural gas pipeline with the PG&E utility pipeline. In October 2022 the Company successfully connected and commissioned pipeline interconnection with the PG&E utility pipeline. After three months of renewable natural gas delivery, the interconnection verification process was completed and the CEC PG&E program funds were released. The Company has received all $5 million available from the PG&E program as reimbursement for actual costs incurred as of March 31, 2023. Given the nature of funds received as reimbursement for actual costs incurred, the funds were applied against the actual costs.
Basic and Diluted Net Loss per Share.Per Share
Basic net loss per share is computed by dividing netincome or loss attributable to common shareholdersstockholders by the weighted average number of shares of common sharesstock outstanding for the period. Diluted net loss per share reflects the dilution of common stock equivalents such as options, convertible preferred stock, debt and warrants to the extent the impact is dilutive. As the Company incurred net losses for the three and six months ended June 30, 2023 and 2022, potentially dilutive securities have been excluded from the diluted net loss per share computations as their effect would be anti-dilutive.
The following table shows the number of potentially dilutive shares excluded from the diluted net loss per share calculation as of June 30, 2023March 31, 2024 and 20222023:
As of | ||||||||
June 30, 2023 | June 30, 2022 | |||||||
Series B preferred (post split basis) | 126 | 127 | ||||||
Common stock options and warrants | 6,107 | 4,748 | ||||||
Debt with conversion feature at $30 per share of common stock | 1,251 | 1,228 | ||||||
Total number of potentially dilutive shares excluded from the diluted net (loss) per share calculation | 7,484 | 6,103 | ||||||
Comprehensive Income (Loss). ASC 220Comprehensive Income (Loss) requires that an enterprise report, by major components and as a single total, the change in its net assets from non-owner sources. The Company’s other comprehensive loss and accumulated other comprehensive loss consists solely of cumulative currency translation adjustments resulting from the translation of the financial statements of its foreign subsidiary. The investment in this subsidiary is considered indefinitely invested overseas, and as a result, deferred income taxes are not recorded related to the currency translation adjustments.
Foreign Currency Translation/Transactions. Assets and liabilities of the Company’s non-U.S. subsidiary that operates in a local currency environment, where that local currency is the functional currency, are translated into U.S. dollars at exchange rates in effect at the balance sheet date and the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at average exchange rates during the year. Transactional gains and losses from foreign currency transactions are recorded in other income.
Segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company further evaluates its operating segments to determine its reportable segments. Aemetis recognizes three reportable segments “California Ethanol”, “California Dairy Renewable Natural Gas”, and “India Biodiesel.”
The “California Ethanol” reportable segment includes the Company’s 65 million gallon per year Keyes Plant and the adjacent land leased for the production of CO₂.
The “California Dairy Renewable Natural Gas” reportable segment includes the dairy digesters, pipeline and gas condition hub for the production of biogas from dairies near Keyes, California.
As of | ||||||||
March 31, 2024 | March 31, 2023 | |||||||
Series B preferred (post split basis) | - | 127 | ||||||
Common stock options and warrants | 7,743 | 6,125 | ||||||
Debt with conversion feature at $30 per share of common stock | 1,270 | 1,246 | ||||||
Total number of potentially dilutive shares | 9,013 | 7,498 | ||||||
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 biofuels production plants to produce renewable diesel and sustainable aviation fuel; the Carbon Capture and Sequestration compression system and injection wells; a research and development facility in Minneapolis, Minnesota; and our corporate offices in Cupertino, California.
Fair Value of Financial Instruments. Financial instruments include accounts receivable, accounts payable, accrued liabilities, current and non-current portion of subordinated debt, notes receivable, notes payable, Series A preferred units, and long-term debt. Due to the unique terms of our notes payable and long-term debt and the financial condition of the Company, the fair value of the debt is not readily determinable. The fair value determined using level 3 inputs, of all other current financial instruments is estimated to approximate carrying value due to the short-term nature of these instruments.
Share-Based Compensation. The Company recognizes share-based compensation expense in accordance with ASC 718Stock Compensation requiring the Company to recognize expenses related to the estimated fair value of the Company’s share-based compensation awards at the time the awards are granted, adjusted to reflect only those shares that are expected to vest.
Commitments and Contingencies.The Company records and/or discloses commitments and contingencies in accordance with ASC 450 Contingencies. ASC 450 applies to an existing condition, situation or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur.
Convertible Instruments. The Company evaluates the impacts of convertible instruments based on the underlying conversion features. Convertible instruments are evaluated for treatment as derivatives that could be bifurcated and recorded separately. Any beneficial conversion feature is recorded based on the intrinsic value difference at the commitment date.
Debt Modification Accounting. The Company evaluates amendments to its debt in accordance with ASC 470-60 Troubled Debt Restructuring and ASC 470-50Debt–Modification and Extinguishments for modification and extinguishment accounting. The evaluation for troubled debt restructuring includes assessing qualitative and quantitative factors such as whether the creditor granted a concession and if the Company is experiencing financial difficulties. The quantitative analysis includes the calculation of the post-restructuring effective interest rate by projecting cash flows on the new terms comparing this calculation to the terms of prior amendments. If the post restructuring effective interest rate is less than the prior terms effective interest rate, we assess this as having been granted a concession. The troubled debt restructuring accounting would be applied to any debt which meets the qualitative factors and quantitative factor of concession granted. If the debt would not fall into Troubled Debt Restructuring then we apply ASC 470-50 Debt-Modification and Extinguishment. This evaluation includes comparing the net present value of cash flows of the new debt to the old debt to determine if changes greater than 10 percent occurred. In instances where the net present value of future cash flows changed more than 10 percent, the Company applies extinguishment accounting and determines the fair value of its debt based on factors available to the Company.
For a complete summary of the Company’s significant accounting policies, please refer to the Company’s audited financial statements and notes thereto for the years ended December 31, 2022 and 2021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2023.
2.5. Inventories
Inventories consist of the following:
As of | As of | |||||||||||||||
June 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
Raw materials | $ | 2,039 | $ | 2,971 | $ | 9,564 | $ | 9,907 | ||||||||
Work-in-progress | 2,973 | 127 | 1,657 | 1,682 | ||||||||||||
Finished goods | 2,451 | 1,560 | 4,790 | 6,702 | ||||||||||||
Total inventories | $ | 7,463 | $ | 4,658 | $ | 16,011 | $ | 18,291 | ||||||||
3.6. Property, Plant and Equipment
Property, plant and equipment consist of the following:
As of | As of | |||||||||||||||
June 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
Land | $ | 7,348 | $ | 7,344 | $ | 7,344 | $ | 7,345 | ||||||||
Plant and buildings | 141,238 | 99,116 | 136,750 | 136,318 | ||||||||||||
Furniture and fixtures | 1,934 | 1,831 | 2,529 | 2,266 | ||||||||||||
Machinery and equipment | 14,984 | 15,209 | 15,150 | 14,982 | ||||||||||||
Construction in progress | 52,731 | 88,934 | 76,609 | 73,057 | ||||||||||||
Property held for development | 15,431 | 15,437 | 15,431 | 15,431 | ||||||||||||
Finance lease right of use assets | 2,889 | 3,045 | 2,889 | 2,889 | ||||||||||||
Total gross property, plant & equipment | 236,555 | 230,972 | 256,702 | 252,288 | ||||||||||||
Less accumulated depreciation | (53,772 | ) | (50,531 | ) | (58,965 | ) | (57,180 | ) | ||||||||
Total net property, plant & equipment | $ | 182,783 | $ | 180,441 | $ | 197,737 | $ | 195,108 | ||||||||
For the three months ended June 30, 2023March 31, 2024 and 20222023, interest capitalized in property, plant and equipment was $1.0was $1.7 million and $2.6and $1.8 million, respectively. For the six months ended June 30, 2023 and 2022, interest capitalized in property, plant, and equipment was $2.8 million and $4.7 million, respectively.
Construction in progress includes costs for the biogas construction projects (dairy digesters and pipeline), Riverbank projects (sustainable aviation fuel and renewable diesel plant as well as carbon capture characterization well), and energy efficiency projects at the Keyes Plant. Property held for development is the partially completed Goodland Plant which is not ready for operation. Depreciation will begin for each project when the project is finalized and placed into service. Depreciation on the components of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:
Years | ||||
Plant and buildings | 20 - 30 | |||
Machinery and equipment | 5 - 15 | |||
Furniture and fixtures | 3 - 5 | |||
For the three months ended March 31, 2024 and 2023, the Company recorded depreciation expense of $1.8 million for each period.
4.7. Debt
Debt consists of the following:
June 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
Third Eye Capital term notes | $ | 7,143 | $ | 7,141 | $ | 7,172 | $ | 7,159 | ||||||||
Third Eye Capital revolving credit facility | 23,711 | 60,602 | 23,800 | 20,922 | ||||||||||||
Third Eye Capital revolving notes Series B | 48,401 | 57,694 | 54,412 | |||||||||||||
Third Eye Capital revenue participation term notes | 11,961 | 11,963 | 12,046 | 12,011 | ||||||||||||
Third Eye Capital acquisition term notes | 26,569 | 26,578 | 26,709 | 26,655 | ||||||||||||
Third Eye Capital Fuels Revolving Line | 31,880 | 27,410 | 35,168 | 32,511 | ||||||||||||
Third Eye Capital Carbon Revolving Line | 23,359 | 22,710 | 23,673 | 23,486 | ||||||||||||
Construction Loan | 22,721 | 19,820 | ||||||||||||||
Cilion shareholder seller notes payable | 6,923 | 6,821 | ||||||||||||||
Construction and term loans | 43,894 | 41,024 | ||||||||||||||
Cilion shareholder purchase obligation | 7,081 | 7,028 | ||||||||||||||
Subordinated notes | 16,765 | 15,931 | 17,747 | 17,625 | ||||||||||||
EB-5 promissory notes | 41,806 | 41,404 | 42,439 | 42,211 | ||||||||||||
Working capital loans | 3,954 | 3,827 | ||||||||||||||
Term loans on capital expenditures | 5,854 | 5,860 | 5,847 | 5,850 | ||||||||||||
Secured Loans | 660 | - | ||||||||||||||
Total debt | 267,753 | 246,240 | 307,224 | 294,721 | ||||||||||||
Less current portion of debt | 62,854 | 49,219 | 72,807 | 37,028 | ||||||||||||
Total long term debt | $ | 204,899 | $ | 197,021 | $ | 234,417 | $ | 257,693 | ||||||||
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 $7.2 million to replace existing notes held by Third Eye Capital (the “Term Notes”); (ii) senior secured revolving loans in an aggregate principal amount of $18.0 million (the “Revolving Credit Facility”); (iii) senior secured term loans in the principal amount of $10.0 million to convert the prior revenue participation agreement to a note (the “Revenue Participation Term Notes”); and (iv) senior secured term loans in an aggregate principal amount of $15.0 million (the “Acquisition Term Notes”) used to fund the cash portion of the acquisition of Cilion, Inc. (the Term Notes, Revolving Credit Facility, Revenue Participation Term Notes and Acquisition Term Notes are referred to herein collectively as the “Original Third Eye Capital Notes”).
On March 8, 2022, The Original Third Eye Capital agreed toNotes have been amended several times. Most recently, on March 25,2024, the LimitedCompany and Third Eye Capital Corporation entered into a “Limited Waiver and Amendment No. 2228 to theAmended and Restated Note Purchase AgreementAgreement” (“Amendment No. 22”28”) to:that (i) provide a waiver forrevised the Blocked Accountloan covenant related to Keyes plant note indebtedness to exclude certain draws on Third Eye credit facilities and to exclude the "Redemption Fee," as defined in the Amended and Restated Note Purchase Agreement, Violation in whichand (ii) changed the Borrowers failedmaximum ratio of Note Indebtedness to deliver Blocked Account Control Agreements bythe Keyes Plant market value to December 31, 2021, (120%.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,Amendment No.28, the borrowers alsoCompany agreed to pay Third Eye Capital an amendment and waiver fee of $0.1 million in cash.
On May 11, 2022, Third Eye Capital agreed to the Limited Waiver and Amendment No.23 to the Note Purchase Agreement (“Amendment No.23”) to: (i) provide a waiver for the Blocked Account Agreement Violation in which the Borrowers failed to deliver Blocked Account Control Agreements by March 31, 2022, (ii) provide for a waiver of the ratio of note indebtedness covenant for the quarter ended March 31, 2023 and (iii) provide for a waiver of the unfunded capital expenditures covenant for the quarter ended March 31, 2022 in which the Company exceeded the $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.
On August 8th,2022, Third Eye Capital agreed to Limited Waiver and Amendment No.24 to the Note Purchase Agreement ("Amendment No.24") to: (i) provide that the maturity date of the Third Eye Capital Notes may be further extended at our election to April 1, 2024 in exchange for an extension fee equal to 1% of the Note Indebtedness in respect to each Note, provided that such fee may be added to the outstanding principal balance of each Note on the effective date of each such extension, and (ii) provide for a waiver for certain covenant defaults. As consideration for such amendment and waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.3 million in cash (the "Amendment No.24 Fee").
On March 6, 2023, Third Eye Capital agreed to the Limited Waiver and Amendment No.25 to the Note Purchase Agreement (“Amendment No.25”) to: provide a waiver for the Keyes Plant Minimum Quarterly Production violation for the quarter ended March 31,2023, in which the Borrowers will not meet the minimum production of 10 million gallons requirement. As consideration for such waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.1 million.
On May 4, 2023, Third Eye Capital agreed to the Limited Waiver and Amendment No.26 to the Note Purchase Agreement (“Amendment No.26”) to: provide a waiver for (i) the Keyes Plant Minimum Quarterly Production violation for the quarter ended June 30,2023, in which the Borrowers will not meet the minimum production of 10 million gallons requirement and (ii) the lender agrees to waive the cash payment of certain fees which are required by the Third Eye Capital Notes and allowed these fees to be added to the outstanding balance of the Revolving Notes. As consideration for such waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.1 million. We evaluated the terms of Amendment No. 26 and the maturity date extension in accordance with ASC 470-50 Debt – Modification and Extinguishment and ASC 470-60 Troubled Debt Restructuring and applied modification accounting treatment.
On May 16, 2023, Third Eye Capital agreed to the Limited Waiver and Amendment No.27 to the Note Purchase Agreement (“Amendment No.27”) to: (i) provide that the maturity date of the Third Eye Capital Notes may be further extended at our election to April 1, 2025 in exchange for an extension fee equal to 1% of the Note Indebtedness in respect to each Note, provided that such fee may be added to the outstanding principal balance of each Note on the effective date of each such extension, (ii) create a new series of Revolving Notes ("Revolving Notes Series B"), and (iii) provide for the issuance of new Revolving Notes Series B to provide for emergency funding. As consideration for such waivers, the borrowers also agreed to pay Third Eye Capital an amendment fee of $0.5 million, by adding the balance to the Revolving Notes Series B and issued a warrant exercisable for 80,000 shares of the Company's common stock were issued with an exercise price of $2.00 per each share issuable under the warrant. We evaluated the terms of Amendment No.2728 in accordance with ASC 470-50 Debt – Modification and Extinguishment and ASC 470-60 Troubled Debt Restructuring and applied modification accounting treatment.
According to ASC 470-10-45 Debt–Other Presentation Matters, if it is probable that the Company will not be able to cure the default at measurement dates within the next 12 months, the related debt needs to be classified as current. To assess this guidance, the Company performed ratio and cash flow analysis using its cash flow forecast and debt levels for plant to debt ratio covenant and obtained waivers for the minimum ethanol production covenant for Q1’23 and Q2'23 in Amendments No.25 and No.26. The Company forecasted sufficient cash flows over the next 12 months to reduce debt levels of Third Eye Capital and meet the operations of the Company. Based on this analysis, the Company believes that it is reasonably possible that through a combination of cash flows from operations, sales from EB-5 investments, and proceeds from the sale of common stock, it will be able to meet the ratio of the note indebtedness covenant over the next 12 months. As such, the notes are classified as long-term debt.
On March 6, 2020, we 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 $70.0 million. Interest on borrowed amounts accrues at a rate of 30% per annum, paid monthly in arrears and may be capitalized and due upon maturity, or 40% if an event of default has occurred and continues. The outstanding principal balance of the indebtedness evidenced by the promissory note, plus any accrued but unpaid interest and any other sums due thereunder, shall be due and payable in full at the earlier to occur of (a) receipt by the Company or its affiliates of proceeds from any sale, merger, equity or debt financing, refinancing or other similar transaction from any third party and (b) April 1, 2023. Any amounts may be re-borrowed up to repaid amounts up until the maturity date of April 1, 2023. The promissory note is secured by liens and security interests upon the property and assets of the Company. In return, the Company will pay a non-refundable standby fee at 2% per annum of the difference between the aggregate principal amount outstanding and the commitment, payable monthly in cash. In addition, if any initial advances are drawn under the facility, the Company will pay a non-refundable one-time fee in the amount of $0.5 million provided that such fee may be added to the principal amount of the promissory note on the date of such initial advance. On August 9, 2021, Third Eye Capital agreed to decrease the amount available under the reserve liquidity notes governed by a promissory note to $40.0 million. On March 6, 2023, Third Eye Capital agreed to increase the reserve liquidity facility to $50 million and extend this for one year to April 1, 2024.
Terms of Original Third Eye Capital NotesNotes:
A. | Term Notes. As of |
B. | Revolving Credit Facility. The Revolving Credit Facility accrues interest at the prime rate plus 13.75% |
| C. | Revolving Notes Series B. The Revolving Notes Series B accrues interest at the prime rate plus 13.75% |
D. | Revenue Participation Term Notes. The Revenue Participation Term |
E. | Acquisition Term Notes. The Acquisition Term Notes accrue interest at the prime rate plus 10.75% |
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*The note maturity date can be extended by the Company to April 2025. As a condition to any such extension, the Company would be required to pay a fee of 1% of the carrying value of the debt outstanding under the applicable notes of which 50% can be paid in cash or common stock (if paid through common stock it would be equivalent to 110% of the relevant half of such extension fee) and 50% can be added to the outstanding debt. As a result of this ability to extend the maturity at the Company’s will, the Third Eye Capital Notes are classified as non-current debt.
TheOriginal 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 occurrenceevent of any eventdefault that could reasonably be expected to have a material adverse effect on the Company, such as any change in the business, operations, or financial condition. The Company has evaluated the likelihood of such an acceleration event and determined such an event to not be probable in the next twelve months. The terms of the notesNotes allow interest to be capitalized.
added to the outstanding principal balance. The Original 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 Original Third Eye Capital Notes all contain cross-collateral and cross-default provisions. McAfee Capital, LLC (“McAfee Capital”), owned by Eric McAfee, the Company’s ChairmanChair and CEO, provided a guaranty of payment and performance secured by all of its Company shares.shares owned by McAfee Capital and additional assets. In addition, Eric McAfee has provided a blanket lien on substantially allpersonal guaranty of up to $10 million plus a pledge of his ownership interests in several personal assets,assets.
Third Eye Capital Reserve Facility. On March 6, 2020, we entered into a reserve liquidity facility governed by a promissory note, payable to Third Eye Capital Corporation, in the principal amount of $18 million. The reserve liquidity facility has been amended several times. Most recently, on March 25, 2024, the Company and McAfeeThird Eye Capital providedentered into a guarantee"Seventh Amended and Restated Promissory Note" that increased the amount available under the reserve liquidity facility to $85 million and extended the maturity date to April 1, 2025. Borrowings under the Note are available until maturity. Interest on borrowed amounts would accrue at a rate of 30% per annum, to be paid monthly in arrears, or 40% if an event of default has occurred and continues. Interest payments due may be capitalized into the principal balance of the Note. The Company pays a standby fee of 2% per annum of the difference between the aggregate principal outstanding under the Note and the commitment, payable monthly arrears in either cash or stock. The Note also requires the Company to pay a fee in the amount of $8.0 million.$0.5 million in connection with a request for an advance on the Note, provided that such fee may be added to the principal amount of the Note. In addition, the Company would be required to make payments on the Note with funds received from the closing of certain new debt or equity financing or transactions, as described in the Note. The Note is secured by liens and security interests upon the property and assets of the Company. As of March 31, 2024, we have no borrowings outstanding under the Reserve Liquidity Note.
Third Eye Capital Revolving Credit Facility for Fuels and Carbon Lines. On March 2, 2022, GAFIGoodland Advanced Fuels, Inc. ("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 facilitieslines with aggregate availability of up to $100 million, consisting of a revolving credit facility with GAFI for up to $50 million (the “Fuels Revolving Line”) and a revolving credit facility with ACCI for up to $50 million (the “Carbon Revolving Line” and together with the Fuels Revolving Line, the “Revolving Lines”). The revolving loans madeLoans received under the Fuels Revolving Line have a maturity date of March 1, 2025, and will accrue a rate of interest per annum at a rate equal to the greater of (i) the prime rate plus 6.00% and (ii) ten percent (10.0%), and the revolving loans made. Loans received under the Carbon Revolving Line will have a maturity date of March 1, 2026 and accrue a rate of interest per annum at a rate equal to the greater of (i) the prime rate plus 4.00% and (ii) eight percent (8.0%). The revolving loans madeLoans under the Fuels Revolving Line are available for working capital purposes and the revolving loans made under the Carbon Revolving Line are available for projects that reduce, capture, use, or sequester carbon with the objective of reducing carbon dioxide emissions. In connection with the New Credit Facility, the Company agreed to issue to the lender under the New Credit Facility: (i) warrants entitling the lender to purchase 50,000 shares of common stock of the Company at an exercise price equal to $10.20 per share, exercisable for a five-year period from March 2, 2022; and (ii) warrants entitling holders thereof to purchase 250,000 shares of common stock of the Company, at an exercise price equal to $20.00 per share, exercisable for a ten-year period from March 2, 2022. In addition, under the Fuels Revolving Line, we issued 100,000 shares of common stock to existing note holders under the GAFI note purchase agreement. The shares were accounted at fair value and are being amortized over the life of the Fuels Revolving Line. Upon closing of the New Credit Facility, the Company drew on the revolving lines to repay $16.0 million on the higher interest rate AAFK Revolving Credit Facility, $6.1 million in property taxes, and to fund the capital projects and working capital projects.
As of June 30, 2023March 31, 2024, GAFI had principal and interest outstanding of $8.6$35.1 million classified as current debt and $25.0 million classified as long-term debt and $1.8 million unamortized debt issuance costs. As of June 30, 2023March 31, 2024, ACCI had principal and interest outstanding of $0.5$0.3 million classified as current debt, and $24.9$23.4 million classified as long-term debt, and $2.1$1.5 million in unamortized debt issuance costs. The current portion of the Revolving Lines are part of $8.1 million specific advance between Third Eye Capital and the Company that have been agreed to be repaid by August 31,2023. The special advance had been utilized by the Company to pay the interest on notes and certain fees on notes and some expenses of the Company. As part of this arrangement, the Company issued a warrant exercisable for 80,000 shares of the Company's common stock with an exercise price of $2.00, to Third Eye Capital. As of June 30, 2023 we have no available borrowings under this advance agreement.
Cilion shareholder seller notes payableShareholder Purchase Obligation. In connection with the Company’s merger with Cilion, Inc. (“Cilion”), on July 6, 2012, the Company issuedincurred a $5.0 million inpayment obligation notes payable to Cilion shareholders as merger compensation subordinated to the senior secured Third Eye Capital Notes. The liability bears interest at 3% per annum and is due and payable after the Third Eye Capital Notes have been paid in full. As of June 30, 2023March 31, 2024, Aemetis Facility Keyes, Inc. had $6.9$7.0 million in principal and interest outstanding under the Cilion shareholder seller notes payable.payment obligation under the merger agreement.
Subordinated Notes. On January 6 and January 9, 2012, AAFK entered into Note and Warrant Purchase Agreements with two accredited investors pursuant to which it issued $0.9 million and $2.5$3.4 million in original notes to the investors (“Subordinated Notes”). The Subordinated Notes mature every six months. Upon maturity, the Subordinated Notes are renewable at the Company's election for six month periods with a fee of 10% added to the balance outstanding plus issuance of warrants exercisable at $0.01 with a two-year term. Interest accrues at 10% per annum and is due at maturity. Neither AAFK nor Aemetis may make any principal payments under the Subordinated Notes until all loans made by Third Eye Capital to AAFK are paid in full.
On January 1, 2023,2024, the maturity on twothe Subordinated Notes’Notes was extended until the earlier of (i)to June 30, 2023; (2024. ii) afterIn connection with the occurrence of an Event of Default, including failure to pay interest or principal when due and breaches of note covenants. A $90extension, the Company paid a $340 thousand and $250 thousand cash extension fee was paid by adding the fee to the balance of the new Subordinated Notes and issued warrants exercisable for 113 thousand shares of common stock warrants were granted with a term of two years and an exercise price of $0.01 per share.
The Company evaluated the January 1, 20232024, amendmentsamendment and the refinancing terms of the notes and applied modification accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
At June 30, 2023March 31, 2024 and December 31, 20222023, the Company had, in aggregate, the amount of $16.8$17.7 million and $15.9$17.6 million in principal and interest outstanding, respectively, under the Subordinated Notes.
EB-5 promissory notesPromissory 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%. Advanced BioEnergy, LP arranged equity investments by foreign investors, and then Advanced BioEnergy used the invested equity to make loans to the Keyes Plant. Each note was issued in the principal amount of $0.5 million and due and payable four years from the date of each note, for a total aggregate principal amount of up to $36.0 million (the “EB-5 Phase I funding”). The original maturity date on the promissory notes can be extended automatically for a one- or two-year period initially and is eligible for further one-year automatic extensions as long as there is no notice of non-extension from investors and the investors’ immigration process is in progress.has been extended. On February 27, 2019, Advanced BioEnergy, LP, and the Company entered into an Amendment to the EB-5 Notes which restated the original maturity date on the promissory notes with automatic six-month extensions as long as the Advanced Bioenergy investors’ immigration processes are in progress. Except for six early investor EB-5 Notes, the Company was granted 12 months from the date of the completion of immigration process to redeem these EB-5 Notes. Given the COVID-19 pandemic and processing delays for immigration process, Advanced BioEnergy, LP extended the maturity dates for debt repayment based on their projected processing timings as long as the investors do not give notice of withdrawal or an I-829 gets approved. Accordingly, the notes have been recognized as long-term debt while investor notes who obtained green card approval have been classified as current debt. The EB-5 Notes are convertible after three yearsinto Aemetis, Inc. common stock at a conversion price of $30 per share.
The Company has sold an aggregate principal amount of $36.0 million of EB-5 Notes under the EB-5 Phase I funding since 2012 to the date of this filing. As of June 30, 2023March 31, 2024, $35.5 million has been released from the escrow amount to the Company, with $0.5 million remaining to be funded to escrow. As of June 30, 2023March 31, 2024 and December 31, 20222023, $37.5$38.0 million and $37.2$37.9 million waswas outstanding, respectively, on the EB-5 Notes sold under the EB-5 Phase I funding.
On October 16, 2016, the Company launched its EB-5 Phase II funding (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 $0.5 million per investor to $0.9 million per investor. The Company entered into a Note Purchase Agreement dated with Advanced BioEnergy II, LP, a California limited partnership authorized as a Regional Center to receive EB-5 Phase II funding investments,investments. The Company received $4.0 million in loan funds before certain changes to and expiration of the EB-5 program prevented further funding. The federal EB-5 program was recently reauthorized, and in March 2024, the U.S. Customs and Immigration Service approved the Company's project for the issuance of up to 100$200 million of additional investment using EB-5 Notes bearing interest at 3%. On May 1, 2020 Supplement No.3 amendedfunds. Under the offering documents and lowerednew rules, the total eligible new EB-5 Phase II funding investors to 60. Eight EB-5 investors have funded at theminimum investment was raised from $0.5 million per investor amount, with 52 new EB-5 Phase II funding investors remaining eligible at the new $0.9to $0.8 million per investors amount under the current offering. Job creation studies show it may be possible to add additional investors and increase the total offering amount in the future. Each EB-5 note will be issued in the principal amount and due and payable five years from the dateinvestor. The terms of each EB-5 note, for a total aggregate principal amount of up to $50.8 million.
The Company has sold an aggregate principal amount of $4.0 million of EB-5 Notes under the EB-5 Phase II funding since 2016Funding are similar to the dateterms of this filing. the first round of EB-5 funding. As of June 30, 2023, $4.0 million has been released from escrow to the Company and $46.8 million remains to be funded to escrow. As of June 30, 2023March 31, 2024, and December 31, 20222023, $4.3$4.4 million and $4.2$4.3 million were outstanding on the EB-5 Notes under the EB-5 Phase II funding, respectively.
Working capital loans.
India Biodiesel Secure and Unsecured Loans. On July 26, 2022,November 13, 2023, the Company entered into a short-termsecure loan agreement with Secunderabad Oils Limited in an amount not to exceed $1.88$3.6 million. The loan is secured by the fixed assets and currents assets of the India Plant. The loans bear interest at 18% and are payable monthly. On August 1, 2022,November 6, 2023, the Company entered into a short-term loan with Leo Edibles & Fats Limited in an amount not to exceed $1.27 million. The loans bears interest at 18% and are payable monthly. The loans are repayable on demand by the lender or within one year from the date of issuance. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, the Company had nooutstanding balance under these agreements.of $4.0 million and $3.8 million, respectively.
Secured loans. In theAemetis Biogas first1 quarter of 2023, the Company entered into several short-term loans with IndusInd Bank and HDFC Bank. The loans are secured by fixed deposits made by the Company. The loans bear interest at rates that range from 6% to 8%. The loans mature between November 15, 2023 and May 3, 2024. As of June 30, 2023 and December 31, 2022, the Company had $0.7 million and no balance, respectively, under these agreements.
Construction Loan Agreement.LLC Term Loan. On October 4, 2022, the Company entered into a Construction Loan Agreement (“Loan Agreement”(“AB1 Construction Loan”) with Greater Nevada Credit Union (“GNCU”). Pursuant to the AB1 Construction Loan, the lender made available an aggregate principal amount of $25 million, secured by all personal property collateral and real property collateral of Aemetis Biogas 1 LLC. The AB1 Construction Loan contained certain financial covenants to be measured as of the last day of each fiscal year end, and annually for the term of the loan. Effective as of December 22, 2023, the AB1 Construction Loan was refinanced and replaced with a term loan ("AB1 Term Loan"). The AB1 Term Loan is secured by all personal property collateral and real property collateral of Aemetis Biogas 1 LLC. It bears interest at a rate of 9.25% per annum, to be adjusted every five years thereafter to equal the five-year Treasury Constant Maturity Rate, as published by the Board of Governors of the Federal Reserve System as of the adjustment date, plus 5.00% or (ii) the index floor. Other material terms of the loan include: (i) payments of interest only to be paid in monthly installments beginning January 22, 2024, (ii) payments of equal combined monthly installments of principal and interest beginning on January 22, 2025, and (iii) a maturity date of December 22, 2042, at which time the entire unpaid principal amount, together with accrued and unpaid interest thereon, shall become due and payable. The AB1 Term Loan contains certain financial covenants to be measured as of the last day of each fiscal year beginning fiscal year end 2025, and annually for the term of the loan. The AB1 Term Loan also contains other affirmative and negative covenants, representations and warranties and events of default customary for loan agreements of this nature. As of March 31,2024 and December 31, 2023, the Company had $25.3 million and $25.1 million, respectively, outstanding under the AB1 Term Loan.
Aemetis Biogas 2 LLC Construction and Term Loan. On July 28, 2023, the Company entered into a second Construction and Term Loan Agreement (“AB2 Loan") with Magnolia Bank, Incorporated. Pursuant to the AB2 Loan, the lender has made available an aggregate principal amount not to exceed $25 million. The loan is secured by all personal property collateral and real property collateral of the Aemetis Biogas 12 LLC. The loan bears interest at a rate of 5.95%8.75% per annum, and has an USDA annual renewal feeto be adjusted every five years thereafter to equal the five-year Treasury Constant Maturity Rate, as published by the Board of 0.25%, withGovernors of the Federal Reserve System as of the adjustment date, plus 5.00%. Other material terms of the AB2 Loan include: (i) payments of interest only payments to be paid in monthly installments beginning August 15, 2023, (ii) payments of equal combined monthly installments of principal and interest beginning on August 15, 2025, and (iii) a maturity date of March 4, 2023,July 28, 2043, at which time the entire unpaid principal amount, together with accrued and unpaid interest is expected to be repaid from the proceeds of a term loan this isthereon, shall become due and payable. The 80%AB2 USDA guaranteed and issued by GNCU pursuant to a USDA Conditional Commitment. The Loan Agreement contains certain financial covenants to be measured as of the last day of each fiscal year beginning fiscal year end 2023,2025, and annually for the term of the loan. The AB2Loan Agreement also contains other affirmative and negative covenants, representations and warranties and events of default customary for loan agreements of this nature. As of June 30, 2023March 31, 2024, and December 31, 2022,2023, the CompanyCompany had $22.7$19.4 million and $20.2$16.8 million, respectively, outstandingoutstanding and unamortized discount issuances costs of none and $0.3$0.8 million for each period, respectively, under the Loan Agreement.AB2 Loan.
On March 4, 2023, GNCU extended the maturity date of the Loan Agreement to August 1, 2023 and increase the interest rate to 9.0%. As consideration for the amendment, the borrowers agreed to pay GNCU a lenders fee and expenses of $9 thousand. We analyzed the agreement according to ASC 470-60 Troubled Debt Restructuring and we determined that GNCU provided a concession when comparing the initial credit agreement with a lower interest rate and higher fees to the new debt amendment with a higher interest rate and lower fees. In accordance with the provisions of ASC 470-60 Troubled Debt Restructuring, we applied troubled debt restructuring accounting, resulting in no gain or loss from the application of this accounting.
Financing Agreement for capital expenditures.Capital Expenditures. The Company entered into an agreement with Mitsubishi Chemical America, Inc. (“Mitsubishi”) to purchase ZEBREXTM membrane dehydration equipment to conserve energy and improve operating efficiencies at the Keyes Plant. The Company also entered into a financing agreement with Mitsubishi for $5.7 million for this equipment. Payments pursuant to the financing transaction will commence after the installation date and interest will be charged based on the certain performance metrics after operation of the equipment. After an initial start-up process, process bottlenecks were encountered and operations were suspended pending further examination and optimization. We recorded the asset in property, plant and equipment, net and recorded the related liability of $1.2 $2.2 million in short term borrowings and $4.6$3.6 million in other long-term debt, respectively as of June 30, 2023March 31, 2024.
Maturity Date Schedule
Scheduled debt repayments for the Company’s loan obligations by year are as follows:
Twelve Months ended June 30, | Debt Repayments | |||||||
2024 | $ | 62,854 | ||||||
Twelve Months ended March 31, | Debt Repayments | |||||||
2025 | 176,070 | $ | 72,807 | |||||
2026 | 28,894 | 180,279 | ||||||
2027 | 3,989 | 13,211 | ||||||
2028 | 1,400 | 4,375 | ||||||
2029 | 2,085 | |||||||
Thereafter | 649 | 39,220 | ||||||
Total debt | 273,856 | 311,977 | ||||||
Debt issuance costs | (6,103 | ) | (4,753 | ) | ||||
Total debt, net of debt issuance costs | $ | 267,753 | $ | 307,224 | ||||
5.8. Commitments and ContingenciesLeases
Leases
The Company is a party to operating leases for the Company's corporate office in Cupertino, modular offices, and laboratory facilities. 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 havealso entered into several finance leases for trailersmobile equipment and carbon units with purchase option atfor the end of the term. WeRiverbank Industrial Complex. These finance leases have concluded that it is reasonably certain that we would exercise thea purchase option at the end of the term hencethat we are reasonably certain we will exercise, so the leases wereare classified as finance leases. All of ourOur leases have remaining termterms of twoone yearsyear to fourteen13 years.
We made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. We will recognize those lease payments in the Consolidated Statements of Operations as we incur the expenses.
The Company evaluates leases in accordance with ASC 842 – Lease Accounting. When discount rates implicit in leases cannot be readily determined, the Company useswe use the applicable incremental borrowing rate at lease commencement to perform lease classification tests on lease components and to measure lease liabilities and right-of-use (“ROU”)right of use (ROU) assets. The incremental borrowing rate used by the Company wasis 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 beare used.
The components of lease expense are as follows:
Three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Operating lease cost | ||||||||
Operating lease expense | $ | 181 | $ | 181 | ||||
Short term lease expense | 21 | 21 | ||||||
Variable lease expense | 32 | 22 | ||||||
Total operating lease cost | $ | 234 | $ | 224 | ||||
Finance lease cost | ||||||||
Amortization of right-of-use assets | $ | 30 | $ | 31 | ||||
Interest on lease liabilities | 86 | 91 | ||||||
Total finance lease cost | $ | 116 | $ | 122 | ||||
Cash paid for amounts included in the measurement of lease liabilities:
Three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Operating cash flows used in operating leases | $ | 169 | $ | 164 | ||||
Operating cash flows used in finance leases | 86 | 91 | ||||||
Financing cash flows used in finance leases | $ | 8 | $ | 83 | ||||
Supplemental non-cash flow information related to ROU asset and lease liabilities was as follows for the three months ended March 31, 2024 and 2023:
Three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Operating leases | ||||||||
Accretion of the lease liability | $ | 74 | $ | 87 | ||||
Amortization of right-of-use assets | 105 | 94 | ||||||
The weighted average remaining lease term and weighted average discount rate as of March 31, 2024 are as follows: | ||||||||
Weighted Average Remaining Lease Term | ||||||||
Operating leases (in years) | 4.0 | 4.9 | ||||||
Finance leases (in years) | 12.8 | 13.7 | ||||||
Weighted Average Discount Rate | ||||||||
Operating leases | 14.1 | % | 14.1 | % | ||||
Finance leases | 13.3 | % | 13.2 | % | ||||
On December 14, 2021, we entered into a real estate purchase agreements and lease disposition and development agreement with the City of Riverbank. We plan to utilize the purchased and leased properties, located at 5300 Claus Road in the city of Riverbank, California, for the construction of the Carbon Zero Facility. The lease commenced on April 1, 2022. The Company evaluated the lease in accordance with ASC 842 – Lease Accounting and classified the lease as a finance lease.
The components of lease expense and sublease income were as follows:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Operating lease cost | ||||||||||||||||
Operating lease expense | $ | 181 | $ | 159 | $ | 362 | $ | 347 | ||||||||
Short term lease expense | 21 | 75 | 42 | 102 | ||||||||||||
Variable lease expense | 22 | 23 | 44 | 46 | ||||||||||||
Total operating lease cost | $ | 224 | $ | 257 | $ | 448 | $ | 495 | ||||||||
Finance lease cost | ||||||||||||||||
Amortization of right-of-use assets | $ | 30 | $ | 28 | $ | 61 | $ | 89 | ||||||||
Interest on lease liabilities | 82 | 99 | 173 | 119 | ||||||||||||
Total finance lease cost | $ | 112 | $ | 127 | $ | 234 | $ | 208 | ||||||||
Cash paid for amounts included in the measurement of lease liabilities:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Operating cash flows used in operating leases | $ | 166 | $ | 174 | $ | 330 | $ | 338 | ||||||||
Operating cash flows used in finance leases | 82 | 99 | 173 | 118 | ||||||||||||
Financing cash flows used in finance leases | $ | 228 | $ | 50 | $ | 311 | $ | 182 | ||||||||
Supplemental non-cash flow information related to ROU asset and lease liabilities was as follows for the three and six months ended June 30, 2023 and 2022:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Operating leases | ||||||||||||||||
Accretion of the lease liability | $ | 84 | $ | 85 | $ | 171 | $ | 179 | ||||||||
Amortization of right-of-use assets | 97 | 74 | 191 | 168 | ||||||||||||
The weighted average remaining lease term and weighted average discount rate as of June 30, 2023 are as follows: | ||||||||||||||||
Weighted Average Remaining Lease Term | ||||||||||||||||
Operating leases (in years) | 4.7 | |||||||||||||||
Finance leases (in years) | 13.5 | |||||||||||||||
Weighted Average Discount Rate | ||||||||||||||||
Operating leases | 14.1 | % | ||||||||||||||
Finance leases | 13.2 | % | ||||||||||||||
Supplemental balance sheet information related to leases wasis as follows:
June 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
Operating leases | ||||||||||||||||
Operating lease right-of-use assets | $ | 2,258 | $ | 2,449 | $ | 1,951 | $ | 2,056 | ||||||||
Current portion of operating lease liability | 372 | 338 | ||||||||||||||
Long term operating lease liability | 1,995 | 2,189 | ||||||||||||||
Other current liability | 417 | 406 | ||||||||||||||
Other long term liabilities | 1,677 | 1,783 | ||||||||||||||
Total operating lease liabilities | 2,367 | 2,527 | 2,094 | 2,189 | ||||||||||||
Finance leases | ||||||||||||||||
Property and equipment, at cost | $ | 2,889 | $ | 3,045 | $ | 2,889 | $ | 2,889 | ||||||||
Accumulated depreciation | (168 | ) | (112 | ) | (258 | ) | (228 | ) | ||||||||
Property and equipment, net | 2,721 | 2,933 | 2,631 | 2,661 | ||||||||||||
Other current liability | (57 | ) | 71 | 31 | 30 | |||||||||||
Other long term liabilities | 2,724 | 2,911 | 2,763 | 2,687 | ||||||||||||
Total finance lease liabilities | 2,667 | 2,982 | 2,794 | 2,717 | ||||||||||||
Maturities of operating lease liabilities wereare as follows:
Twelve months ended June 30, | Operating leases | Finance leases | ||||||||||||||
Twelve months ended March 31, | Operating leases | Finance leases | ||||||||||||||
2024 | $ | 676 | $ | 279 | ||||||||||||
2025 | 675 | 179 | $ | 678 | $ | 179 | ||||||||||
2026 | 659 | 151 | 670 | 159 | ||||||||||||
2027 | 636 | 145 | 631 | 145 | ||||||||||||
2028 | 599 | 145 | 650 | 145 | ||||||||||||
2029 | 109 | 145 | ||||||||||||||
Thereafter | - | 10,105 | - | 10,105 | ||||||||||||
Total lease payments | 3,245 | 11,004 | 2,738 | 10,878 | ||||||||||||
Less imputed interest | (878 | ) | (8,337 | ) | (644 | ) | (8,084 | ) | ||||||||
Total lease liability | $ | 2,367 | $ | 2,667 | $ | 2,094 | $ | 2,794 | ||||||||
The Company acts as sublessor in certain leasing arrangements, primarily related to land and buildings. Fixed sublease payments received are recognized on a straight-line basis over the sublease term. Sublease income and head lease expense for these transactions are recognized on a grossnet basis on the consolidated financial statements. This wasSublease income is recorded in the Selling, general and administrative expenseother operating income section of the Consolidated Statements of Operations and Comprehensive Loss.
The components of lease income wereare as follows:
Three months ended June 30, | Six months ended June 30, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
Lease income | $ 484 | $ 375 | $ 953 | $ 375 | ||||
Three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Lease income | $ | 491 | $ | 471 | ||||
Future lease commitments to be received by the Company as of June 30, 2023March 31, 2024 were, are as follows:
Twelve months ended June 30, | ||||||||
2024 | $ | 846 | ||||||
Twelve months ended March 31, | ||||||||
2025 | 748 | $ | 845 | |||||
2026 | 621 | 825 | ||||||
2027 | 474 | 670 | ||||||
2028 | 474 | 615 | ||||||
2029 | 613 | |||||||
Thereafter | 829 | 631 | ||||||
Total future lease commitments | $ | 3,992 | $ | 4,199 | ||||
Legal Proceedings
The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. While the ultimate outcome of these matters is not presently determinable, it is in the opinion of management that the resolution of outstanding claims will not have a material adverse effect on the financial position or results of operations of the Company. The Company's view of the matters not listed may change in the future as the litigation and events related thereto unfold.
6.9. Aemetis Biogas LLC – Series A Preferred Financing and Variable Interest Entity
On December 20, 2018, ABGLAemetis Biogas LLC ("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 11,000,000 common units and up to 6,000,000 convertible, redeemable, secured, preferred membership units (the “Series A Preferred Units”). ABGL issued 6,000,000 common units to the CompanyAemetis, Inc. at a value of $5.00 per common unit for a total of $30,000,000$30.0 million in funding. Additionally, 5,000,000 common units of ABGL are held in reserve as potential conversion units issuable to the PurchaserPreferred Unit holder upon certain triggering events discussed below.
The Preferred Unit Agreement includes (i) preference payments of $0.50 per unit on the outstanding Series A Preferred Units commencing on the second anniversary, with any outstanding preference payments shall have an interest per annum rate equal to ten percent (ii) conversion rights for up to 1,200,000 common units or up to maximum number of 5,000,000 common units (also at a one Series A Preferred Unit to one common unit basis) if certain triggering events occur, (iv) one board seat of the three available to be elected by Series A Preferred Unit holders, (iii) mandatory redemption value at $15 per unit payable at an amount equal to 75% of free cash flow generated by ABGL, up to $90 million in the aggregate (if all units are issued), (iv) full redemption of the units on the sixth anniversary, (v) minimum cash flow requirements from each digester, and (vi) $0.9 million paid as fees to the Agent from the proceeds. Until paid, the obligations of ABGL under the Preferred Unit Agreement are secured by the assets of ABGL in an amount not to exceed the sum of (i) $30,000,000, plus (ii) all interest, fees, charges, expenses, reimbursement obligations and indemnification obligations of ABGL.
Triggering events occur upon ABGL’s failure to redeem units, comply with covenants, any other defaults or cross defaults, or to perform representations or warranties. Upon a triggering event: (i) the obligation of the Purchaser to purchase additional Series A Preferred Units is terminated, (ii) cash flow payments for redemption payments increases from 75% to 100% of free cash flows, and (iii) total number of common units into which preferred units may be converted increases from 1,200,000 common units to 5,000,000 common units on a one for one basis. As of June 30, 2023, ABGL has not generated minimum quarterly operating cash flows by operating the dairies. As a result of the violation of this covenant, free cash flows, when they occur, may be applied for redemption payments at the increased rate of 100% instead of the initial rate of 75% of free cash flows.
events. From inception of the agreement to date,through 2022, ABGL issued 3,200,0006,000,000 Series A Preferred Units on first tranchein exchange for a value of $16.0$30.0 million and also issued 2,800,000 of Series A Preferred Units on second tranche for a value of $14.0 million,in funding, reduced by a redemption of 20,000 Series A Preferred Units for $0.3 million. The Company identified freestanding future tranche rightsoriginal Preferred Unit Purchase Agreement included requirements for preference payments and the acceleratedmandatory redemption, feature relatedin addition to a change in control provision as derivatives which required bifurcation. These derivative features were assessed to have minimal value as of June 30, 2023 and December 31, 2022 based on the evaluation of the other conditions included in the agreement.several operating covenants.
On AugustFebruary 8, 2022,2024, ABGL Protair-X America, Inc. (“Protair”), and Third Eye Capital entered into aan agreement entitled Fifth Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Fifth Amendment") which amends that certainproviding: (i) a waiver to ABGL for not redeeming all Series A Preferred Unit Purchase Agreement (“PUPA”) dated as ofUnits by December 20, 2018.31, 2023 The PUPA Amendment provides for: (i) a waiver of certain covenants prohibitingand (ii) the internal reorganization of ABGL subsidiaries and the incurrence of indebtedness by ABGL and its subsidiaries pursuant to a USDA loan, provided that, among other things, Third Eye Capital shall have received a repayment of at least $7.3 million to be applied to the Carbon Revolving Line contemporaneously with the closing of the Construction Loan Agreement; (ii) a waiver of certain operational defaults under the PUPA; and (iii) an amendment which (a) requiresright for ABGL to redeem all of the outstanding Series A Preferred Units by December 31, 2022 (the “Final Redemption Date”) for $116 million; and (b) provides ABGL the right to redeem all of the outstanding Series A Preferred Units by SeptemberApril 30, 20222024, for $106an aggregate redemption price of $111.0 million. The PUPA Fifth Amendment further provides the failure tothat if ABGL does not redeem the Series A Preferred Units by the Final Redemption Date would constitute a triggering event requiringredemption date, ABGL towill enter into a credit agreement with ProtairProtair-X and Third Eye Capital effective as of JanuaryMay 1, 2023.2024 We evaluatedand maturing April 30, 2025, in substantially the form attached to the PUPA Fifth Amendment. The credit agreement bears an interest rate equal to the greater of (i) the prime rate plus 10.0% and (ii) 16.0%. In accordance with the provisions of ASC 470-60 Troubled Debt Restructuring, we applied troubled debt restructuring accounting to the PUPA Fifth Amendment, resulting in no gain or loss from the application of this accounting to the entry of the PUPA Fifth Amendment. As of filing of this Form 10Q, the Company has not executed the credit agreement and has been in the process of obtaining the extension to redeem the Series A Preferred Units. In addition, consistent with ASC 470-60, the Company accretes the amount of principal and interest due using the effective interest method from the starting liability value to the full amount that would be due as of April 30, 2025. Based on the terms of the PUPA Fifth Amendment, and applied extinguishment accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment and recorded a loss on extinguishment of $49.4 million in the third quarterdeferred PUPA redemption balance is classified as long term liability as of 2022.March 31, 2024.
The Company recorded Series A Preferred Unit liabilities as long-term liabilities of $116.9 million and $113.2 million as of March 31, 2024, and December 31, 2023, respectively.
On January 1,2023, ABGL entered into the Second Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Second Amendment") providing for: (i) a waiver for not redeeming all Series A Preferred Units by December 31, 2022, and (ii) the right by ABGL to redeem all of the outstanding Series A Preferred Units by May 31,2023 for an aggregate redemption price of $125 million. The PUPA Second Amendment further provides that failure to redeem the Series A Preferred Units by the redemption date, ABGL is required to enter into a credit agreement with Protair and Third Eye Capital effective as of June 1,2023 and maturing on May 31, 2024, in substantially the form attached to the PUPA Second Amendment. We determined that Third Eye Capital provided a concession to redeem the preferred shares at lower effective borrowing rate than the credit agreement interest rate or prior amendment rate. In accordance with the provisions of ASC 470-60 Troubled Debt Restructuring, we applied troubled debt restructuring accounting, resulting in no gain or loss from the application of this accounting. In addition, given that the Company could turn the agreement into a credit agreement, the Company is accreting these tranches from an initial carrying value at December 31, 2022 of $116.0 million to $159.0 million over the seventeen months ending May 31,2024.
On May 31, 2023, ABGL entered into the Third Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Third Amendment") providing: (i) a waiver to ABGL for not redeeming all Series A Preferred Units by May 31,2023 and (ii) the right by ABGL to redeem all of the outstanding Series A Preferred Units by August 31,2023, for an aggregate redemption price of $135 million. The PUPA Third Amendment further provides that failure to redeem the Series A Preferred Units by the redemption date, ABGL is required to enter into a credit agreement with Protair and Third Eye Capital effective, as of September 1,2023 and maturing on August 31,2024, in substantially the form attached to the PUPA Third Amendment. We determined that Third Eye Capital provided a concession to redeem the preferred shares at lower effective borrowing rate than the credit agreement interest rate or prior amendment rate. In accordance with the provisions of ASC 470-60 Troubled Debt Restructuring, we applied troubled debt restructuring accounting, resulting in no gain or loss from the application of this accounting In addition, given that the Company could turn the agreement into a credit agreement, the Company is accreting these tranches from a carrying value at May 31,2023 of $127.2 million to $171.7 million over the fifteen months ending August 31,2024. Hence, the preferred redemption balance is classified as long term liability as of June 30,2023.
The Company recorded Series A Preferred Unit liabilities, net of debt discounts pursuant to these agreements, classified as long-term Series A Preferred Units, of $129.7 million and $116.0 million as of June 30, 2023 and December 31, 2022, respectively.
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 June 30, 2023 were $79.0 million which serve as collateral for the Series A Preferred Units. The Series A Preferred Units are not collateralized by any other assets or guarantees from Aemetis or its subsidiaries.
7.10. Stock-Based Compensation
2019 Stock Plan
On April 29, 2019,August 26, 2021, the stockholders of the Company approved the Aemetis, Inc. Amended and Restated 2019 Stock Plan (the “2019 Stock Plan”) was approved by stockholders of the Company.. This plan permits theallows our Board or delegated Board committee to 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 10 yearsto employees, Directors, and supersedes all prior plans.consultants. The 2019 Stock Plan authorizedhas a term of 10 years from the issuanceoriginal version adoption date of 200,000 sharesApril 25, 2019, and supersedes all prior stockholder approved plans with respect to new grants. Options issued under prior plans and the prior version of common stock for the 2019 calendar year, in additionstock plan remain outstanding and exercisable according to permitting transferring and granting any available and unissued or expired options under the Amended and Restatedtheir terms. The 20072019 Stock Plan in an amount up to 177,246authorizes a total pool of 4,558,621 shares as of common stock.
With the approval ofJuly 1, 2021, including all outstanding option grants under all plans and all shares then available for issuance under the 2019 Stock Plan as of that date. Shares within this pool that expire or terminate unused become available for a subsequent grant. In addition, the Zymetisnumber of shares available for issuance automatically increases on 2006January 1 Stock Plan, of each year by an amount equal to 4% of the sum of total common stock outstanding on January 1 and Amended and Restated 2007 Stock Plan (collectively, the “Stock Plans”) were terminated for granting any options2,541,823 shares.
The following table summarizes activity 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 underprior plan during the 2019three Stock Plan.-month period ending March 31, 2024:
Common Stock Reserved for Issuance
Shares Available for Grant | Number of Shares Outstanding | Weighted-Average Exercise Price | ||||||||||
Balance as of December 31, 2023 | 456 | 5,526 | $ | 4.42 | ||||||||
Authorized | 1,740 | - | - | |||||||||
Options Granted | (1,761 | ) | 1,761 | 3.10 | ||||||||
RSAs Granted | (364 | ) | - | - | ||||||||
Exercised | - | (14 | ) | 2.54 | ||||||||
Forfeited/expired | 61 | (61 | ) | 6.97 | ||||||||
Balance as of March 31, 2024 | 132 | 7,212 | $ | 4.08 | ||||||||
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, 2022 | 165 | 4,694 | $ | 4.63 | ||||||||
Authorized | 1,435 | - | - | |||||||||
Options Granted | (1,178 | ) | 1,178 | 3.75 | ||||||||
RSAs Granted | (244 | ) | - | - | ||||||||
Exercised | - | (106 | ) | 1.75 | ||||||||
Forfeited/expired | 164 | (164 | ) | 5.26 | ||||||||
Balance as of June 30, 2023 | 342 | 5,602 | $ | 4.48 | ||||||||
As of June 30, 2023, the number of outstanding option shares aboveas of March 31, 2024, includes 4.3 million shares that are 3.6 million options vested under the Stock Plans.vested.
Inducement Equity Plan
In March 2016, the Board of Directors of the Company approved an Inducement Equity Plan authorizing the issuance of 100,000 non-statutory stock options to purchase common stock. This plan was not approved by stockholders, and as a result is available only for grants to prospective employees. As of March 31, 2024, there are no option grants outstanding under the Inducement Equity Plan.
Stock-based compensation for employeesCompensation Expense
Stock-based compensation is accounted for in accordance with the provisions of ASC 718, Compensation-StockCompensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, directors, and directorsconsultants based on estimated fair valuesvalue 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. Thispricing model and recognize that fair value as an expense over the vesting period of each grant using the straight-line method. We only record compensation cost for vested options. The Black-Scholes 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, expected dividends, and expected dividends. Under ASU 2016-09Improvements to Employee Share-Based Payments Accounting, we have elected to recognize forfeitures as they occur.forfeitures. We use the simplified calculation of expected lifeterm described in the SEC’sSEC Staff Accounting Bulletin Topic No.14, 107,Share-Based Payment and volatility. Volatility is based on an average of the historical volatilitiesvolatility of Aemetis, Inc. common stock during the period of time preceding the date of option issuance that matches the term of the common stock of four entities with characteristics similar to those of the Company.option grant. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periodsthe treasury maturity term 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. To the extent actual forfeitures occur, the difference is recorded as an adjustment in the scheduled expense during the period of the forfeiture.
During the six months ended June 30, 2023 and 2022, the Company granted 1.2 million and 0.9 million options, respectively. The weighted average fair value calculations for the options granted during these periodsthe three months ended March 31, 2024 and 2023 are based on the following assumptions:
For the six months ended June 30, | For the three months ended March 31, | |||||||||||||||
Description | 2023 | 2022 | 2024 | 2023 | ||||||||||||
Dividend-yield | - | % | - | % | - | - | ||||||||||
Risk-free interest rate | 3.82 | % | 1.66 | % | 4.08 | % | 3.82 | % | ||||||||
Expected volatility | 125.32 | % | 113.45 | % | 115.42 | % | 125.32 | % | ||||||||
Expected life (years) | 7.00 | 7.00 | 5.81 | 7.00 | ||||||||||||
Market value per share on grant date | $ | 3.75 | $ | 11.31 | $ | 3.10 | $ | 3.75 | ||||||||
Fair value per option on grant date | $ | 3.43 | $ | 9.89 | $ | 2.65 | $ | 3.43 | ||||||||
During the sixthree months ended June 30, 2023March 31, 2024 and 20222023, the Company granted 24363,8503,500 and 60,300243,850 restricted stock awards, respectively, with a fair value on date of grant of $3.75$3.10 and $11.31,$3.75, respectively, per award.share.
As of March 31, 2024, the Company had $9.9 million of total unrecognized compensation expense for option issuance, which the Company will amortize over the remaining vesting period for each applicable grant, which has a weighted average of 1.9 years as of March 31, 2024.
As of June 30, 2023, the Company had $10.7 million of total unrecognized compensation expense for employees, which the Company will amortize over the 1.9 years of weighted average remaining term.
8.11. Outstanding Warrants
The weighted average fair value calculations for warrants granted are based onDuring the following weighted average assumptions:
Thethree months ending March 31, 2024, the Company granted warrants to two subordinated lenders in connection with debt extensions. The warrants were exercisable for 100,000113,000 shares of the Company's common stock at an exercise price of $2.50$0.01 per share with a two-year term. These warrants have beenwere exercised at option of withhold to cover and 62,293 shares were issued. In addition,during the Company also granted warrants exercisable for 160,000 shares of the Company's common stock to senior lenders at an exercise price of $2.00 per share. These warrants were granted in the quarter ended June 30, 2023 threeand are outstanding as of months ending June 30, 2023.March 31, 2024.
For the six months ended June 30, | ||||||||
Description | 2023 | 2022 | ||||||
Dividend-yield | - | % | - | % | ||||
Risk-free interest rate | 3.76 | % | 1.75 | % | ||||
Expected volatility | 121.50 | % | 151.41 | % | ||||
Expected life (years) | 5.43 | 3.47 | ||||||
Exercise price per warrant | $ | 1.53 | $ | 10.47 | ||||
Market value per share on grant date | $ | 3.14 | $ | 11.29 | ||||
Fair value per warrant on grant date | $ | 2.95 | $ | 9.68 | ||||
The fair value calculations for issued warrants are based on the following weighted average factors:
For the three months ended March 31, | ||||||||
Description | 2024 | 2023 | ||||||
Dividend-yield | - | % | - | % | ||||
Risk-free interest rate | 4.23 | % | 4.41 | % | ||||
Expected volatility | 101.36 | % | 125.32 | % | ||||
Expected life (years) | 2.00 | 2.00 | ||||||
Exercise price per share | $ | 0.01 | $ | 0.01 | ||||
Market value per share on grant date | $ | 5.24 | $ | 3.96 | ||||
Fair value per share on grant date | $ | 5.23 | $ | 3.95 | ||||
A summary of historicalThe following table summarizes warrant activity follows:during the three months ending March 31, 2024:
Warrants Outstanding & Exercisable | Weighted - Average Exercise Price | Average Remaining Term in Years | Warrants Outstanding & Exercisable | Weighted - Average Exercise Price | Average Remaining Term in Years | |||||||||||||||||||
Outstanding December 31, 2022 | 355 | $ | 15.92 | 7.48 | ||||||||||||||||||||
Outstanding December 31, 2023 | 530 | $ | 11.70 | 5.77 | ||||||||||||||||||||
Granted | 373 | 1.53 | 113 | 0.01 | ||||||||||||||||||||
Exercised | (223 | ) | 1.24 | (113 | ) | 0.01 | ||||||||||||||||||
Outstanding June 30, 2023 | 505 | $ | 11.78 | 6.40 | ||||||||||||||||||||
Outstanding March 31, 2024 | 530 | $ | 11.70 | 5.54 | ||||||||||||||||||||
All of the above outstanding warrants are vested and exercisable as of June 30, 2023March 31, 2024. As of June 30, 2023 and 2022, the Company had no unrecognized compensation expense related to warrants, respectively.
9.12. Agreements
Working Capital Arrangement.Arrangement. Pursuant to a Corn Procurement and Working Capital Agreement with J.D. Heiskell, the Company agreed to procureprocures 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 onPursuant to a separate agreement entered in December 31,May 2023, and the term can be automatically renewed for additional one-year terms.J.D. Heiskell further agreedalso purchases all of our ethanol and other products and sells them to sell allcustomers designated by us. We have designated Murex to purchase ethanol to Murex or other marketing purchasers, alland WDG and corn oil to A.L Gilbert and DCO to other customers under the J.D. Heiskell Purchase Agreement.purchase corn oil. The Company’sCompany’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 buildingproviding working capital relationships. These Agreements are ordinary purchase and sale agency agreements for the Keyes Plant. On May 25, 2023, we entered into the second amendment to the Aemetis Keyes Grain Procurement and Working Capital agreement with J.D. Heiskell, the second amendment to the Corn Procurement and Working Capital Agreement with J.D. Heiskell, and the second amendment to the Keyes Ethanol and Corn Tank Lease with J.D. Heiskell. The amendments provide that (i) the Keyes Plant will receive a temporary increase in the credit limit equivalent to four days of grain payables repayable in equal daily installments over 120 days, (ii) that J.D. Heiskell agrees to buy all Ethanol, WDGS, CDS, and Corn Oil produced by the Keyes Plant, sell all ethanol to certain designated purchasers and pay us the same price as it received from such sales, and (iii) J.D. Heiskell would lease certain ethanol product storage tanks from the Keyes Plant.
As of June 30, 2023 and December 31, 2022, Aemetis made prepayments to J.D. Heiskell ofnone and $2.4 million, respectively.
The J.D. Heiskell sales and purchases activity associated with the J.D. Heiskell Purchase Agreement and J.D. Heiskell Procurement Agreement during the three and sixmonths ended June 30, 2023March 31, 2024 and 20222023 were as follows:
| As of and for the three months ended June 30, | As of and for the six months ended June 30, | As of and for the three months ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Ethanol Sales | $ | 8,647 | $ | - | $ | 8,647 | $ | - | ||||||||||||||||
Ethanol sales | $ | 25,385 | $ | - | ||||||||||||||||||||
Wet distiller's grains sales | 2,553 | 15,150 | 2,553 | 26,666 | 9,213 | - | ||||||||||||||||||
Corn oil sales | 89 | 2,812 | 125 | 5,150 | 1,292 | 37 | ||||||||||||||||||
CDS Sales | 11 | - | 11 | - | ||||||||||||||||||||
CDS sales | 21 | - | ||||||||||||||||||||||
Corn purchases | 11,611 | 54,352 | 11,913 | 98,362 | 30,913 | 302 | ||||||||||||||||||
| March 31, 2024 | December 31, 2023 | |||||||||||||||||||||||
Accounts receivable | 739 | 232 | 739 | 232 | 1,540 | 1,073 | ||||||||||||||||||
Accounts Payable | 39 | 612 | 39 | 612 | ||||||||||||||||||||
Working Capital | 1,264 | - | 1,264 | - | ||||||||||||||||||||
Accounts payable | 1,580 | 1,207 | ||||||||||||||||||||||
Ethanol and Wet Distillers Grains Marketing Arrangement. The Company entered into a Fuel Ethanol Purchase and Sale Agreement with Murex, which matures on October 31, 2023, with automatic one-year renewals thereafter. On May 30, 2023, the Company entered into Amendment No. 1 to the Fuel Ethanol Purchase and Sale Agreement that provides (i) the Company temporarily suspend the agreement for the duration of the Company's Working Capital Agreement with J.D. Heiskell, and (ii) the initial term shall be automatically renewed beginning on October 1, 2023, and ending on March 31, 2025. The Company also entered into a Wet Distillers Grains Marketing Agreement with A.L. Gilbert, which matures on December 31, 2023,2024, with automatic one-year renewals thereafter.
Accounts receivable associated with our marketing partners was none and $0.6 million as of June 30, 2023 and December 31, 2022.
For the three months ended June 30, 2023March 31, 2024 and 20222023, the Company expensed marketing costs of $0.2 0.2 million and $0.8 million, respectively, and for the $0six.4 months ended June 30, 2023 and 2022, the Company expensed marketing costs of $0.2 million and $1.5 million, respectively, under the terms of both the Ethanol Marketing Agreement and the Wet Distillers Grains Marketing Agreement. These marketing costs are presented as part of Selling, General, and Administration expense.expenses.
For the three months ended March 31, 2024 and 2023, the Company expensed shipping and handling costs related to sales of ethanol $0.7 million and expensed transportation costs related to sales of WDG of $1.4 million.
For the three months ended March 31, 2023, the Company did not incur material marketing costs, shipping and handling cost related to sales of ethanol, or transportation costs related to the sales of WDG as the Keyes Plant was in extended maintenance cycle.
Supply Trade Agreement.On July 1, 2022, 1,2022,the Company entered into an operating agreement with Gemini Edibles and Fats India Private Limited (“Gemini”). Under this agreement, Gemini agreed to provide the Company with a supply of feedstock up to a credit limit of $12.7 million.million with collateral of inventories, current assets, and fixed assets. If the Company fails to pay the invoice within the ten-day credit period, the outstanding amount will bear interest at 12%18%. The original term of the agreement is for one year. year and which was extended for two years with maturity of June 2025. Either party can terminate the agreement by giving notice one month notice in writing. As of June 30, 2023March 31, 2024 and December 31, 20222023, , the Company had accounts payable of $0.2 $4.3 million and no $7.5 million outstanding balance,balance, respectively, under this agreement.
As of June 30, 2023March 31, 2024, and 2022, the Company haswe have no forward salessale commitments.
Natural Gas Purchase Agreement. As of March 31, 2024, we entered into a forward purchase agreement to buy 80 thousand MMBtu of natural gas at a fixed price from April through October 2024.
10.13. Segment Information
Aemetis recognizes three reportable segments:segments “California Ethanol”,Ethanol,” “California Dairy Renewable Natural Gas”,Gas,” and “India Biodiesel.”
The “California Ethanol” reportable segment includes the Company’s 65 million gallon per year ethanol plant in Keyes, Plant,California, and the adjacent land leased for the production of CO₂.
The “California Dairy Renewable Natural Gas” reportable segment includes the dairyproduction and sale of Renewable Natural Gas ("RNG") and associated environmental attributes, consisting of anaerobic digesters located at diaries, at 36 mile biogas collection pipeline, biogas upgrading hub that produces RNG from the biogas, and gas condition unit for the production of biogas from dairies near Keyes, California.a pipeline interconnect.
The “India Biodiesel” reportable segment includes the Company’s 5060 million gallon per year nameplate capacity biodiesel manufacturing plant in Kakinada Plant, theIndia, and 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.India.
The Company has additional operating segments that werehave been determined not to be separately reportable segments, including our key projects under development which consists of the Carbon Zero facilitydevelopment of a sustainable aviation fuel and renewable diesel production plant in Riverbank, California, and the development of Carbon Capture projectand Underground Sequestration wells in California. Additionally, theour corporate offices, Goodland Plant in Kansas, and the research and development facility in Minnesota are included in the “All Other” category.
Summarized financial information by reportable segment for the three months ended March 31, 2024 and 2023 follows:
For the three months ended March 31, 2024 | ||||||||||||||||||||
California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All Other | Total | ||||||||||||||||
Revenues | $ | 36,089 | $ | 3,792 | $ | 32,753 | $ | - | $ | 72,634 | ||||||||||
Gross profit (loss) | (5,658 | ) | 2,210 | 2,836 | - | (612 | ) | |||||||||||||
Interest expense including amortization of debt fees | 6,753 | 636 | 425 | 2,699 | 10,513 | |||||||||||||||
Accretion and other expenses of Series A preferred units | - | 3,311 | - | - | 3,311 | |||||||||||||||
Income tax expense (benefit) | - | 35 | 843 | - | 878 | |||||||||||||||
Capital expenditures | 107 | 2,843 | 304 | 329 | 3,583 | |||||||||||||||
Depreciation | 966 | 569 | 208 | 55 | 1,798 | |||||||||||||||
For the three months ended March 31, 2023 | ||||||||||||||||||||
California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All Other | Total | ||||||||||||||||
Revenues | $ | 475 | $ | 206 | $ | 1,470 | $ | - | $ | 2,151 | ||||||||||
Gross loss | (12 | ) | (773 | ) | (510 | ) | - | (1,295 | ) | |||||||||||
Interest expense including amortization of debt fees | 5,518 | 704 | 69 | 2,756 | 9,047 | |||||||||||||||
Accretion and other expenses of Series A preferred units | - | 5,564 | - | - | 5,564 | |||||||||||||||
Capital expenditures | 334 | 6,499 | 36 | 747 | 7,616 | |||||||||||||||
Depreciation | 1,109 | 457 | 155 | 69 | 1,790 | |||||||||||||||
Summarized financial information by reportable segment for the three months ended June 30, 2023 and 2022 follows:
For the three months ended June 30, 2023 | ||||||||||||||||||||
California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All other | Total | ||||||||||||||||
Revenues | $ | 11,332 | $ | 210 | $ | 33,570 | $ | - | $ | 45,112 | ||||||||||
Gross loss | (2,322 | ) | (1,064 | ) | 5,342 | - | 1,956 | |||||||||||||
Interest expense including amortization of debt fees | 6,252 | 517 | 225 | 2,635 | 9,629 | |||||||||||||||
Accretion and other expenses of Series A preferred units | - | 6,885 | - | - | 6,885 | |||||||||||||||
Capital expenditures | 726 | 1,304 | 115 | 47 | 2,192 | |||||||||||||||
Depreciation | 960 | 523 | 157 | 31 | 1,671 | |||||||||||||||
For the three months ended June 30, 2022 | ||||||||||||||||||||
California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All other | Total | ||||||||||||||||
Revenues from external customers | $ | 65,891 | $ | - | $ | 10 | $ | - | $ | 65,901 | ||||||||||
Intersegment revenues | - | 297 | - | - | 297 | |||||||||||||||
Gross profit (loss) | (152 | ) | (68 | ) | 10 | (4 | ) | (214 | ) | |||||||||||
Interest expense including amortization of debt fees | 4,869 | 7 | - | 1,792 | 6,668 | |||||||||||||||
Accretion and other expenses of Series A preferred units | - | 1,506 | - | - | 1,506 | |||||||||||||||
Capital expenditures | 5,366 | 6,696 | 69 | 928 | 13,059 | |||||||||||||||
Depreciation | 977 | 154 | 164 | 30 | 1,325 | |||||||||||||||
A reconciliation of reportable segment revenues to total consolidated revenue for the three months ended June 30, 2023 and 2022 follows:
2023 | 2022 | |||||||
Total revenues for reportable segments | $ | 45,112 | $ | 66,198 | ||||
Elimination of intersegment revenues | - | (297 | ) | |||||
Total consolidated revenues | $ | 45,112 | $ | 65,901 | ||||
Summarized financial information by reportable segment for the six months ended June 30, 2023 and 2022 follows:
For the six months ended June 30, 2023 | ||||||||||||||||||||
California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All other | Total | ||||||||||||||||
Revenues | $ | 11,807 | $ | 416 | $ | 35,040 | $ | - | $ | 47,263 | ||||||||||
Gross profit (loss) | (2,334 | ) | (1,837 | ) | 4,832 | - | 661 | |||||||||||||
Interest expense including amortization of debt fees | 11,770 | 1,221 | 294 | 5,391 | 18,676 | |||||||||||||||
Accretion and other expenses of Series A preferred units | - | 12,449 | - | - | 12,449 | |||||||||||||||
Capital expenditures | 1,060 | 7,803 | 151 | 794 | 9,808 | |||||||||||||||
Depreciation | 2,069 | 980 | 312 | 100 | 3,461 | |||||||||||||||
For the six months ended June 30, 2022 | ||||||||||||||||||||
California Ethanol | California Dairy Renewable Natural Gas | India Biodiesel | All other | Total | ||||||||||||||||
Revenues from external customers | $ | 117,932 | $ | - | $ | 18 | $ | - | $ | 117,950 | ||||||||||
Intersegment revenues | - | 632 | - | - | 632 | |||||||||||||||
Gross profit (loss) | (3,032 | ) | (275 | ) | 18 | (10 | ) | (3,299 | ) | |||||||||||
Interest expense including amortization of debt fees | 10,514 | 11 | - | 2,404 | 12,929 | |||||||||||||||
Accretion and other expenses of Series A preferred units | - | 3,146 | - | - | 3,146 | |||||||||||||||
Capital expenditures | 7,169 | 12,145 | 136 | 3,068 | 22,518 | |||||||||||||||
Depreciation | 1,988 | 300 | 332 | 41 | 2,661 | |||||||||||||||
A reconciliation of reportable segment revenues to total consolidated revenue for the six months ended June 30, 2023 and 2022 follows:
2023 | 2022 | |||||||
Total revenues for reportable segments | $ | 47,263 | $ | 118,582 | ||||
Elimination of intersegment revenues | - | (632 | ) | |||||
Total consolidated revenues | $ | 47,263 | $ | 117,950 | ||||
Total assets by reportable segments as of June 30, 2023 and December 31, 2022 follows:
June 30, 2023 | December 31, 2022 | |||||||
California Ethanol | $ | 64,757 | $ | 66,794 | ||||
California Dairy Renewable Natural Gas | 76,302 | 77,714 | ||||||
India Biodiesel | 22,751 | 16,120 | ||||||
All other | 48,775 | 46,486 | ||||||
Total consolidated assets | $ | 212,585 | $ | 207,114 | ||||
California Ethanol: TDuring 2023, t he 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 ethanol, WDG, and corn oil that the Company produces to J.D. Heiskell. Sales of ethanol, WDG, and corn oil to one customer accounted for 100%99.7% of the Company’s California Ethanol segment revenues for the three months ended
Total assets by reportable segments as of March 31, 2024 and December 31, 2023. follows:
March 31, 2024 | December 31, 2023 | |||||||
California Ethanol | $ | 68,403 | $ | 67,991 | ||||
California Dairy Renewable Natural Gas | 100,242 | 92,794 | ||||||
India Biodiesel | 32,820 | 34,769 | ||||||
All Other | 40,774 | 47,852 | ||||||
Total consolidated assets | $ | 242,239 | $ | 243,406 | ||||
11.14. Related Party Transactions
The Company owes Eric McAfee, the Company’s Chairman and CEO, and McAfee Capital LLC (“McAfee Capital”), owned by Eric McAfee, $0.4McAfee, $0.7 million in connectionconnection with employment agreements, bonus, and expense reimbursements previously accrued as salaries expense and accrued liabilities. The Company previously prepaid $0.2 million to Redwood Capital, a company controlled by Eric McAfee, for the Company’s use of flight time on a corporate jet. As of June 30, 2023, $0.1 million remained as a prepaid expense.
On January 12, 2022, the Audit Committee of the Company approved a one-time guarantee fee of $2.0 million to McAfee Capital in connection with McAfee Capital’s extension of certain guarantees of the Company’s indebtedness with Third Eye Capital. The Company paid this fee by issuing 180,000 shares of common stock of the Company.
In the first quarter of 2023, the Audit Committee of the Company approved a one-time guarantee fee of $0.4 million to McAfee Capital in connection with McAfee Capital’s guarantees of the Company’s indebtedness with Third Eye Capital. As of June 30, 2023March 31, 2024, , $0.2 million has been accrued as the guarantee fee.outstanding balance is $0.2 million.
The Company owes various members of the Board amounts totaling $0.4 million and $0.3$0.3 million as of June 30, 2023March 31, 2024, and December 31, 20222023, in connection with board compensation fees, which are included in accounts payable on the balance sheet. For the three months ended June 30, 2023March 31, 2024 and 20222023, the Company expensed $0.1 million and $0.1 million, respectively, in connection with board compensation fees. For the
12.15. Subsequent Events
Subordinated Debt RefinancingNone.
On July 1, 2023, the maturity date of the Subordinated Notes with two accredited investors was extended to the earlier of (i) December 31, 2023; (ii) completion of an equity financing by AAFK or Aemetis in an amount of not less than $25.0 million; or (iii) after the occurrence of an Event of Default (as defined in the Note and Warrant Purchase Agreements), including failure to pay interest or principal when due and breaches of note covenants. A 10% cash extension fee was paid previously in connection with extending the maturity date of Subordinated Notes by adding the fee to the balance of the new note and granting warrants to purchase 113 thousand shares of common stock were granted with a term of two years and an exercise price of $0.01 per share. Accounting for the July 1, 2023 amendments and the refinancing terms of the Subordinated Notes will be evaluated in accordance with ASC 470-50Debt–- Modification and Extinguishment.
Construction Loan Agreement
On July 28, 2023, the Company entered into a Construction and Term Loan Agreement (“AB2 Loan") with Magnolia Bank, Incorporated. Pursuant to the AB2 Loan, the lender has made available an aggregate principal amount not to exceed $25 million. The loan is secured by all personal property collateral and real property collateral of the Aemetis Biogas 2 LLC. The loan bears interest at a rate of 8.75% per annum, to be adjusted every five years thereafter to equal the five-year Treasury Constant Maturity Rate, as published by the Board of Governors of the Federal Reserve System as of the adjustment date, plus 5.00%. Other material terms of the Loan include: (i) payments of interest only to be paid in monthly installments beginning August 15, 2023, (ii) payments of equal combined monthly installments of principal and interest beginning on August 15, 2025, and (iii) a maturity date of July 28, 2043, at which time the entire unpaid principal amount, together with accrued and unpaid interest thereon, shall become due and payable. The AB2 Term Loan contains certain financial covenants to be measured as of the last day of each fiscal year beginning fiscal year end 2024, and annually for the term of the loan. The AB2 Loan Agreement also contains other affirmative and negative covenants, representations and warranties and events of default customary for loan agreements of this nature.
Amendment and Waiver No.2 to Credit Agreement
On August 1, 2023, Third Eye Capital agreed to the Amendment and Waiver No.2 to Credit Agreement ("Amendment No.2") to: (i) approve a special advance of $2.3 million, which will constitute an overadvance, in order to pay and satisfy outstanding fees and obligations under the Credit Agreement; provided, that, such overadvance and prior outstanding overadvances under the Credit Agreement are repaid by the earlier of August 31, 2023 and an occurrence of certain mandatory repayment event; (ii) waive certain interest payment and fee violations under the Credit Agreement; and (iii) waive certain working capital violations and amend the related financial covenants in the Credit Agreement. As a consideration for such consents and waivers, the borrowers agreed to pay Third Eye Capital an amendment and waiver fee of $0.1 million.
13.16. Management's PlanLiquidity
The accompanying financial statements have been prepared contemplating the realization of assets and satisfaction of liabilities in the normal course of business. As a result of negative capital, negative market conditions resulting in prolonged idling of the Keyes Plant, negative operating results, and collateralization of substantially all of the companyCompany assets, the Company has been reliant on its senior secured lender to provide additional fundingextensions to the maturity dates of its debt and has beenloan facilities, and was required in 2023to remit substantially all excess cash from operations to the senior secured lender. In order to meet itsour obligations during the next twelve months, the Companywe will need to either refinance debt with our senior lender for amounts becoming due in the Company’s debtnext twelve months or receive the continued cooperation of itsour senior lender. This dependence on theour senior lender raises substantial doubt about the Company’sCompany's ability to continue as a going concern. The Company plansWhile we believe our India biodiesel and California RNG businesses will generate positive cash flow from operations in 2024 which reduces cash demands and allows payments against other obligations, we will also continue to sell equity through our at-the-market registration at consistent levels and pursue the following strategies to improve the course of the business.liquidity:
Operations and Project Development
For the Keyes Plant, we restarted the plant during the second quarter after completing an extended maintenance cycle and accelerating the implementation of several important ethanol plant energy efficiency upgrades. We plan to operate the plant and continue to improve its financial performance by completing the existing upgrades and adopting new technologies or process changes that allow for energy efficiency, cost reduction, or revenue enhancements, as well as, executingexecute upon awarded grants that support investments in equipment to improve energy and operational efficiencies resulting in lower cost, lower carbon demandsemissions, and overall margin improvement.
For Aemetis Biogas, we plan to operate theour existing biogas digesters to captureproduce and monetize biogas as well as continuesell Renewable Natural Gas (RNG) and the associated Federal D3 RINs and California LCFS credits. We are continuing to build new dairy digesters and extendpipeline extensions. We began generating revenue from biogas operations in 2023 and we expect that this revenue will continue for the existing pipeline in orderfull year 2024, as well as increase as we build new digesters. We also expect revenue to captureincrease when the higherCalifornia Air Resource Board processes our LCFS pathway applications and approves a provisional carbon intensity that is lower than the temporary carbon intensity we currently use to calculate the quantity of LCFS credits available in California. Funding for continuedthat we generate. We are seeking debt financing from a variety of sources to accelerate the construction is based upon obtaining government guaranteed loans and executing on existing and new state grant programs.of additional digesters.
For the Riverbank project, we plan to raise the funds necessary to construct and operate the Carbon Zero plant in Riverbank, CA using loan guarantees and public 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 all facilities in the United States, we plan to utilize the provision of the Inflation Reduction Act of 2022 by qualifying for renewable energy credits, whether in the form of an Investment Tax Credit, Producers Tax Credit or other credits and monetize the credits using the provisions of this congressional act.
For the KakinadaIndia Plant, we plan to continue to develop sales channels for domestic products assell our biodiesel to OMCs pursuant to cost-plus contracts. We are also continuing to upgrade the costs ofplant to increase feedstock normalize against the price of diesel, as recently announced governmental incentives take effect to promote the blending of biodiesel,flexibility (and thereby lower feedstock costs), increase production capacity, and as feedstocks such as refined animal tallow are used domestically and exported.produce new products. Additionally, we are in the process of obtaining approval tonegotiating contractual arrangements for the export of refined animal tallow and biodiesel produced using animal tallow into international markets as the use of refined animal tallow received approval from the Pollution Control Board of India for production of biodiesel. The repatriation of funds from India to the parent company in the U.S. is reliant on favorable governmental approvals. markets.
In addition to the above weFinancing
We plan to continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling bonds in the taxableentering into additional debt agreements for specific projects, obtaining project specific equity and tax-exempt markets, selling equity through the ATMdebt for development projects, and otherwise, sellingobtaining additional debt from the current EB-5 Phase II offering, or by vendor financing arrangements.offering.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated condensed financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
● | Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A. |
● | Results of Operations. An analysis of our financial results comparing the three |
● | Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition. |
● | Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. |
The following discussion should be read in conjunction with our consolidated condensed financial statements and accompanying notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, particularly under “Part II, Item 1A. Risk Factors,” and in other reports we file with the SEC. All references to years relate to the calendar year ended December 31 of the particular year.
Overview
Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis referred to herein as “Aemetis,” the “Company,” “we,” “our” or “us”) is an international renewable natural gas and renewable fuels company focused on the operation, acquisition, development, and commercialization of innovative technologies to produce low and negative carbon intensity products and technologiesrenewable fuels that replace traditional petroleum-basedfossil-based products. We operate in three reportable segments consisting of “California Ethanol,” “California Dairy Renewable Natural Gas,” and “India Biodiesel.” We have other operating segments determined not to be reportable segments and are collectively represented by the “All Other” category. At Aemetis, our mission is to generate sustainable and innovative renewable fuel solutions that benefit communities and restore our environment. We do this by building a local circular bioeconomy utilizingusing agricultural products and waste to produce low-carbon,low carbon, advanced renewable fuels that reduce greenhouse gas (“GHG”("GHG") emissions and improve air quality by replacing traditional petroleum-based products. quality.
Our California Ethanol segment consists of a 65 million gallon per year capacity ethanol production facility located in Keyes, California (the “Keyes Plant”) that we own and operate. In addition to low carbon renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), Carbon Dioxide (“CO2”) and Condensed Distillers Solubles (“CDS”), all of which are sold as animal feed to more than 80 local dairies and feedlots, withfeedlots. We also capture the Carbon Dioxide (“CO2”) emissions from our fermenters and sell it to Messer Gas for use to produce liquid CO₂ soldthat it sells to food, beverage, and industrial customers. We haveare implementing several energy efficiency initiatives focused on significantly lowering the carbon intensity of our fuels, primarily by decreasing ourthe use of petroleum-basedfossil natural gas. These energy efficiency projects include:include high efficiency heat exchangers; the Mitsubishi ZEBREXTM ethanol dehydration system; a two-megawatt solar microgrid with battery storage; thean Allen Bradley Decision Control System (DCS) to manage and optimize energy use and other plant operations; and thea Mechanical Vapor Recompression (MVR) system to reuse steam. These projects are expected to reduce petroleumproduce steam using low carbon electricity instead of natural gas use by converting key Keyes Plant processes to use electricity rather than natural gas and powering systems using low-carbon-intensity hydroelectric electricity or electricity produced onsite from solar panels.
In the third quarter of 2022, we completed the installation and began the operation of the ZEBREXTM ethanol dehydration system at the Keyes Plant, a key first step in the electrification of the Keyes Plant, that is expected to significantly reduce the use of petroleum-based natural gas as process energy at the plant. The electrification, along with the future installation of the two-megawatt zero carbon intensity solar microgrid system and the mechanical vapor recompression (MVR) system,gas. We believe these changes will significantly reduce GHG emissions from the production facility and decreaselower the carbon intensity (CI) of fuel produced at the Keyes Plant. The lower CI of ethanol produced at the Keyes Plant willwe produce and allow us to realizesell it for a correspondingly higher price for the ethanol produced and sold at the Keyes Plant.
During the last two weeks of December 2022, we undertook an extended maintenance cycle and accelerated the implementation of several important ethanol plant energy efficiency upgrades noted above. Our decision was partly driven by the high natural gas prices in Northern California during the period. Furthermore, after monitoring natural gas pricing and margin profitability, we decided to extend the maintenance cycle into the second quarter of 2023. With natural gas pricing in a reasonable range and the maintenance turn-around complete, we restarted the plant in the second quarter of 2023.price.
Our California Dairy Renewable Natural gasGas segment, which consists of our subsidiary Aemetis Biogas LLC, ("Aemetis Biogas" or "ABGL") constructs and“ABGL,” operates bio-methane anaerobic digesters at local dairies near the Keyes Plant (many of whom also purchase WDG produced by the Keyes Plant as animal feed); to produce biogas from dairy waste; transports the biogas viaby pipeline to the Keyes Plant site; and converts the biogas to Renewable Natural Gas (“RNG”), which that is then delivered to customers through the PG&E regional natural gas pipeline.
The Aemetis Biogas network includes the Aemetis Biogas Central Dairy Project, which operates 40 As of March 31, 2024, we had eight operating digesters that receive dairy waste from nine dairies, and we are actively growing with an additional planned six digesters under construction that are expected to receive dairy waste from nine dairies. We have constructed 36 miles of completed biogas pipeline; seven operating dairy digesters; five dairy digesters that are under construction;collection pipeline and have received environmental approval to construct an additional 24 miles. We currently have agreements with a centralized biogas-to-RNG conversion facility located at the Keyes Plant site; and a renewable natural gas interconnection with the PG&E utility gas pipeline. A total of 3443 dairies have signed contracts with Aemetis Biogas in connection with participation in the Aemetis Biogas Central Dairy Project.
The dairy digestersand are connected via an underground private pipeline owned by ABGLseeking to a gas cleanup and compression unit at the Keyes Plant to produce dairy RNG. Upon receiving the bio-methane from the dairies, impurities are removed, and the bio-methane is converted to negative carbon intensity RNGincrease that is injected into the statewide PG&E gas utility pipeline for use as transportation fuel or used as renewable process energy at the Keyes Plant.number.
Our India Biodiesel segment owns and operatesincludes a biodiesel production plant in Kakinada, India (“Kakinada Plant”) with a nameplate production capacity of 150 thousand metric tons per year, or about 5060 million gallons per year, producingyear. It produces high quality distilled biodiesel and refined glycerin for customers in India and Europe.India. We believe the Kakinada Plant is one of the largest biodiesel production facilities in India on a nameplate capacity basis. Kakinada Plant is capable of processing a variety of vegetable oils and animal fat waste feedstocks into biodiesel that meets internationalapplicable product standards. Our Kakinada Plant can also distill the crude glycerin byproduct from the biodiesel refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive, and other industries.
Our All Other segment consists of:of our Carbon Zero biofuels production plants to produceprojects that are under development, including the planned sustainable aviation fuel and renewable diesel plant in Riverbank, California and sustainable aviation fuel;our planned Carbon Capture and Underground Sequestration compression system and injection wells; a(CCUS) operations. It also includes our research and development facility in Minneapolis, Minnesota;Minnesota and our corporate offices in Cupertino, California.
Our Carbon Zero biofuels production plants are designed to produce low or negative carbon intensityplanned sustainable aviation fuel (“SAF”)(SAF) and renewable diesel fuel (“RD”) utilizing low carbon hydroelectric electricity, renewable hydrogen and non-edible renewable oils sourced from existing Aemetis biofuels plants and other sources. The first Carbon Zero(RD) production plant is scheduled to be built in Riverbank, California at the 125-acre former Riverbank Army ammunition plant. The Riverbank plant is expected to utilize zero carbon hydroelectric and other renewable power available onsitecurrently designed to produce 90 million gallons per year of combined SAF and RD from feedstocks consisting of renewable waste oils and other byproducts.fats. Our planned facility will be located at the Riverbank Industrial Complex in Riverbank, California. We signed a lease with purchase to option for the Riverbank Industrial Complex in 2021 and took possession of the site in 2022. In 2023, we received a Use Permit and CEQA approval for the SAF/RD plant, and in March 2024, we received Authority to Construct air permits for the plant. We are continuing with development activities, including permitting, engineering, and financing. The site has access to low carbon hydroelectric power, and our plant is expecteddesigned to supplyuse renewable hydrogen that will be produced from byproducts of 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 high value D3 Renewable Identification Numbers (“RINs”) under the federal Renewable Fuel Standard (“RFS”), generate California Low Carbon Fuel Standard (“LCFS”) credits, and produce Inflation Reduction Act tax credits.SAF/RD production process.
Our Carbon Capture subsidiary was established to build Carbon Captureplanned CCUS projects will compress and Sequestration (“CCS”) projects that generate LCFS and IRS 45Q tax credits by compressing and injectinginject CO₂ into deep wells whichthat are monitored for emissions to ensure the long-term sequestration of carbon underground. California’s Central Valley has been identified as one of the world’s most favorable regions for large-scale CO₂ injection projects due to the subsurface geologic formation that absorbs and retains CO₂ gas. The two initial Aemetis CCSCCUS injection projects are expectedbeing designed to capture and sequester more than two million metric tons per year of CO₂ at the Aemetis biofuels plant sites in Keyes and Riverbank, California. In July 2022, Aemetis purchased 24 acres located onat the Riverbank Industrial Complex site in Riverbank, California to develop a CCSCCUS injection well with more than 1 million metric tonneston per year of CO₂ sequestration capacity. The Company plansIn 2023, we obtained a permit to construct a geologic characterization well at eachthe Riverbank site to obtain soil information for permitting as required for theto support an EPA Class VI CO₂ injection well permit application. Once operational, we expect that these projects will generate revenue by selling California LCFS credits and federal Internal Revenue Code Section 45Q tax credits.
Our Minneapolis, Minnesota research and development laboratory evaluates and develops efficient conversion technologies usingthat would use low carbon intensity and waste feedstocks to produce low or below zero carbon intensity biofuels and biochemicals. We are focused on processes that extract sugar from cellulosic feedstocks and then utilizeuse the remaining biomass to produce low carbon ethanol, renewable hydrogen, for the production of sustainable aviation fuel, and renewable diesel and potential sale of renewable hydrogen to third parties as transportation fuel.diesel.
California Ethanol Revenue
Revenue generation 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 implementing plans that will bring higher value for our fuel ethanol in an effort to improve our overall margins and to add incremental income to the California Ethanol segment, including, the implementation of the Solar Microgrid System, the installation of the Zebrex ethanol dehydration system, the installation of mechanical vapor recompression, and other energy efficiency technologies. The energy efficiency upgrades to the Keyes Plant will result in higher LCFS value through the reduction of the carbon intensity of the fuel ethanol produced at the plant.
We sell all ethanol, WDG, CDO, and CDS produced in this process to J.D. Heiskell. Our ethanol finished goods tank is leased by J.D. Heiskell and legal title to the product is transferred upon transfer of our finished ethanol to this location. The CO₂ produced by the Keyes Plant is sold to Messer Gas.
California Ethanol revenue is dependent on the price of ethanol, WDG, CDS, CO₂, and DCO. Ethanol pricing is influenced by local and national production and inventory levels, imported ethanol, corn prices, and gasoline demand, and is determined pursuant to a marketing agreement with a single fuel marketing customer and is generally based on daily and monthly pricing for ethanol delivered to the San Francisco Bay Area, California, as published by Oil Price Information Service (“OPIS”), as well as quarterly contracts negotiated by our marketing company with local fuel blenders. The price for WDG is influenced by the price of corn, the supply and price of distillers dried grains, and demand from the local dairy and feed markets and determined monthly pursuant to a marketing agreement with A.L. Gilbert and is generally determined in reference to the local price of dried distillers’ grains and other comparable feed products. Our revenue is further influenced by the price of natural gas, and our decision to operate the Keyes Plant at various capacity levels, conduct required maintenance, and respond to biological processes affecting output.
California Dairy Renewable Natural Gas Revenue
In December 2018, we utilized our relationships with California’s Central Valley dairy farmers by signing leases and raising funds to construct dairy digesters, a 40-mile pipeline, and a biogas-to-RNG facility to deliver fuels for sale to utility gas pipeline. We are currently producing RNG from seven digesters connected by our pipeline, then flowing this gas to our RNG cleanup and compression hub at the Keyes Plant. The RNG upgrade unit at the Keyes Plant enables the production and delivery of utility-grade RNG for sale as transportation fuel to California customers via the PG&E pipeline delivery interconnection.
In addition to the existing and operating dairy digesters, we currently have four additional dairy digesters that are under construction. We have approximately 34 signed agreements with dairies to construct dairy digesters. Our revenue development strategy for the Dairy Renewable Natural Gas segment relies upon continuing to collect bio-methane gas from the existing dairy digesters, continuing to build out the network of dairy digesters, extending the pipeline to grow the supply of RNG available for sale and utilizing the biogas-to-RNG upgrade unit to distribute utility-grade RNG to customers statewide. We are currently storing the produced RNG until the LCFS CI pathway for each dairy has been established, after which we will sell the stored gas to transportation customers statewide.
Inflation Reduction Act of 2022
For all facilities in the United States, we plan to utilize the provision of the Inflation Reduction Act of 2022 by qualifying for renewable energy credits, whether in the form of an Investment Tax Credit, Producers Tax Credit or other credits and monetize the credits using the provisions of this congressional act.
India Biodiesel Revenue
Our revenue strategy in India is based on continuing to sell biodiesel to our bulk fuel customers, fuel station customers, mining customers, industrial customers and tender offers placed by Government Oil Marketing Companies (“OMCs”) for bulk purchases of fuels. During the first quarter, the government of India updated the national biofuels policy and adopted a new tax on diesel fuel to promote biodiesel blending. As a result, the OMCs are pricing the tenders at economically viable levels, allowing for biodiesel producers in India to begin production.
During the second quarter of 2023, we fulfilled an OMC tender offer for 27,694 kiloliters (approximately 27,151 metric tons) of which 1443 metric tons, of biodiesel revenue was in transit as of June 30, 2023 and would be recognized as revenue during the third quarter. In addition, during the third quarter of 2023, we received an initial OMC tender offer for 18,000 kiloliters (approximately 17,650 metric tons), which we are in process of fulfilling the order.
Results of Operations
Three Months Ended June 30, 2023,March 31, 2024, Compared to Three Months Ended June 30, 2022March 31, 2023
Revenues
Our revenues are derived primarily from sales of ethanol and WDG for our California Ethanol segment, renewable natural gasRenewable Natural Gas for our California Dairy Renewable Natural Gas segment, and biodiesel for our India Biodiesel.Biodiesel segment.
2023 | 2022 | Inc/(dec) | % change | |||||||||||||
California Ethanol | $ | 11,332 | $ | 65,891 | $ | (54,559 | ) | (82.8 | )% | |||||||
California Dairy Renewable Natural Gas* | 210 | 297 | (87 | ) | (29.3 | )% | ||||||||||
India Biodiesel | 33,570 | 10 | 33,560 | 335600.0 | % | |||||||||||
Eliminations | - | (297 | ) | 297 | (100.0 | )% | ||||||||||
Total | $ | 45,112 | $ | 65,901 | $ | (20,789 | ) | (31.5 | )% | |||||||
California Ethanol. For the three months ended June 30, 2023, the Company sold 2.8 million gallons of ethanol at a price of $3.12 per gallon and 24.3 thousand tons of WDG at a price of $105 per ton. For the three months ended June 30, 2022, the Company sold 15.2 million gallons of ethanol at a price of $3.13 per gallon and 104 thousand tons of WDG at a price of $146 per ton. The decrease in revenues was due to an extended maintenance cycle and the accelerated implementation of several important ethanol plant energy efficiency upgrades to the Keyes Plant.
California Dairy Renewable Natural Gas. During the three months ended June 30, 2023, we produced and sold 54.1 thousand MMBtu of physical molecules to an external party, at an average price of $3.89 per MMBtu, while placing the environmental attributes in storage for sale once the carbon pathways are established. During the three months ended June 30, 2022, we produced and sold to an intercompany party 14.9 thousand MMBtus of dairy biogas.
India Biodiesel. For the three months ended June 30, 2023, we generated 98% of our revenues from the sale of biodiesel, and 2% of our sales from other sales compared to 100% of our sales from other sales for the three months ended June 30, 2022. The increase in revenues was primarily attributable to obtaining the government of India's tender offer making the conversion of biodiesel commercially viable for the Company. Biodiesel sales volume increased to 25.7 thousand metric tons in the three months ended June 30, 2023 compared to none in the three months ended June 30, 2022 while price per ton increased to $1,276.
2024 | 2023 | Inc/(dec) | % change | |||||||||||||
California Ethanol | $ | 36,089 | $ | 475 | $ | 35,614 | 7497.7 | % | ||||||||
California Dairy Renewable Natural Gas | 3,792 | 206 | 3,586 | 1740.8 | % | |||||||||||
India Biodiesel | 32,753 | 1,470 | 31,283 | 2128.1 | % | |||||||||||
Total | $ | 72,634 | $ | 2,151 | $ | 70,483 | 3276.8 | % | ||||||||
California Ethanol. For the three months ended March 31, 2024, the Company sold 14.1 million gallons of ethanol at an average price of $1.79 per gallon and 94 thousand tons of WDG at a price of $98 per ton. For the three months ended March 31, 2023, the Company sold 147 thousand gallons of ethanol at an average price of $2.50 per gallon. The increase in revenue was attributable to operating the Keyes plant for three full months during the first quarter of 2024 compared to first quarter of 2023 when the Keys plant was not operating during an extended maintenance period.
California Dairy Renewable Natural Gas. During the three months ended March 31, 2024, we produced 60.3 thousand MMBtu and sold 60.8 thousand MMBtu of renewable natural gas at an average price of $4.02 per MMBtu. In the first quarter of 2024, we also sold 766 thousand D3 RINs at an average price of $3.08 per RIN and 18 thousand metric tons of California LCFS credits at an average price of $66 per metric ton. As of March 31, 2024, we had 46.8 thousand MMBtu of RNG available for dispensing. During the three months ended March 31, 2023, we produced and sold 21.3 thousand MMBtu of RNG at an average price of $9.67 per MMBtu and did not sell any D3 RINs or LCFS credits.
India Biodiesel. For the three months ended March 31, 2024, we generated 95% of our revenues from the sale of biodiesel, and 5% of our revenue from other sales compared to 81% of our revenue from biodiesel, and 19% of our revenue from other sales for the three months ended March 31, 2023. The increase in revenues was primarily attributable to obtaining the tender offers from India's Oil Market Companies, making the production of biodiesel commercially viable for the Company. Biodiesel sales volume increased to 27.5 thousand metric tons in the three months ended March 31, 2024 compared to 1.0 thousand metric tons in the three months ended March 31, 2023 while price per metric ton decreased by 10%.
Cost of Goods Sold
2023 | 2022 | Inc/(dec) | % change | 2024 | 2023 | Inc/(dec) | % change | |||||||||||||||||||||||||
California Ethanol | $ | 13,654 | $ | 66,043 | $ | (52,389 | ) | (79.3 | )% | $ | 41,747 | $ | 487 | $ | 41,260 | 8472.3 | % | |||||||||||||||
California Dairy Renewable Natural Gas | 1,274 | 365 | 909 | 249.0 | % | 1,582 | 979 | 603 | 61.6 | % | ||||||||||||||||||||||
India Biodiesel | 28,228 | - | 28,228 | 0.0 | % | 29,917 | 1,980 | 27,937 | 1411.0 | % | ||||||||||||||||||||||
All other | - | 4 | (4 | ) | (100.0 | )% | ||||||||||||||||||||||||||
Eliminations | - | (297 | ) | 297 | (100.0 | )% | ||||||||||||||||||||||||||
Total | $ | 43,156 | $ | 66,115 | $ | (22,959 | ) | (34.7 | )% | $ | 73,246 | $ | 3,446 | $ | 69,800 | 2025.5 | % | |||||||||||||||
California Ethanol. For the three months ended June 30, 2023March 31, 2024, we ground 1.4purchased 4.9 million bushels of corn at $6.84$6.33 per bushel and incurred $0.6$1.5 million in chemicals and denaturant costs, $0.6$2.7 million in natural gas costs, $0.5and $2.1 million in transportation costs, $0.5 million in depreciation costs, and $0.8 million in other plant services costs. For the three months ended June 30, 2022March 31, 2023, we ground 5.3 million bushels ofwe did not incur corn or other chemical costs due to the extended maintenance at $10.21 per bushel and incurred $0.6 million in chemicals costs, $3.6 million in natural gas costs, and $2.1 million in transportation costs, $1.0 million in depreciation costs, and $0.8 million in denaturant costs.the Keyes Plant.
California Dairy Renewable Natural Gas. The Cost of Goods Sold expenses relate toincludes dairy manure payments, equipment maintenance, on the dairy digesters, dairy leases bonuses, and depreciation. CostThe increase from the first quarter of Goods Sold increased with seven2023 to the first quarter of 2024 was primarily due to the increase in the number of operating dairies as of June 30, 2023, compared to two in June 30, 2022. digesters.
India Biodiesel. The increase in costs of goods sold was attributable to the increase in production of biodiesel due to the governments tender offer.biodiesel. In the three months ended June 30, 2023 March 31, 2024 we consumed 27.127.3 thousand metric tons of feedstock, compared to none1.0 thousand metric tons of feedstock in the same period in 2023. During the three months ended March 31, 2024 the average price of biodiesel feedstock was $626 per metric ton compared to $876 per metric ton in the same period as in 2022. During the three months ended June 30, 2023 the average price per biodiesel metric ton was $839 compared to none in the same period as in 2022.2023.
Gross profit (loss)
2023 | 2022 | Inc/(dec) | % change | 2024 | 2023 | Inc/(dec) | % change | |||||||||||||||||||||||||
California Ethanol | $ | (2,322 | ) | $ | (152 | ) | $ | (2,170 | ) | 1427.6 | % | $ | (5,658 | ) | $ | (12 | ) | $ | (5,646 | ) | 47050.0 | % | ||||||||||
California Dairy Renewable Natural Gas | (1,064 | ) | (68 | ) | (996 | ) | 1464.7 | % | 2,210 | (773 | ) | 2,983 | (385.9 | )% | ||||||||||||||||||
India Biodiesel | 5,342 | 10 | 5,332 | 53320.0 | % | 2,836 | (510 | ) | 3,346 | (656.1 | )% | |||||||||||||||||||||
All other | - | (4 | ) | 4 | (100.0 | )% | ||||||||||||||||||||||||||
Total | $ | 1,956 | $ | (214 | ) | $ | 2,170 | (1014.0 | )% | $ | (612 | ) | $ | (1,295 | ) | $ | 683 | (52.7 | )% | |||||||||||||
California Ethanol. The decreaseincrease gross loss during the period ended March 31, 2024, was attributable low ethanol prices and high corn prices. The Keyes Plant was in maintenance mode during the period ended March 31, 2023, so many expenses that would have normally been accounted for in gross loss was attributableprofit/(loss) in that period were recharacterized to an extended maintenance cycle and accelerated implementation of several important ethanol plant energy efficiency upgrades at the Keyes Plant during the second quarter of 2023. SG&A.
California Dairy Renewable Natural Gas. The increase in gross lossprofit in the three months ended June 30, 2023March 31, 2024 relates to an increase in manuresales of RNG, D3 RINs, and maintenance costs associated with having seven dairies online,LCFS credits, compared two dairiesto sales of RNG only in the same period ended June 30, 2022March 31, 2023.
India Biodiesel. The increase in gross profit was attributable to receivingan increase in the tender offer from the Indian government, which made the conversionsales volume of biodiesel commercially viable for the Companyby 2,789% and refined glycerin by 513%, and by a 28% decrease of feedstock price. and our ability to operate the plant at a consistent high capacity during the quarter.
Operating (income)/expense and non-operating (income)/expense
Substantially all of our research and development expenses were related to research and development activities in Minnesota.
Selling, general, and administrative (“SG&A”) expenses consist primarily of salaries and related expenses for employees, marketing expenses related to sales of ethanol and WDG in California Ethanol and biodiesel and other products in India, Biodiesel, as well as professional fees, insurance, other corporate expenses, and related facilities expenses.
Other operating income consists Total SG&A also includes receipts of sublease rental income.
Other expense (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 sometimes include stock or warrants issued as fees. The fair value of stock and warrants are amortized as amortization expense,expenses, except when the extinguishment accounting method is applied, in which case refinanced debt costs are recorded as extinguishment expense.
2023 | 2022 | Inc/(dec) | % change | 2024 | 2023 | Inc/(dec) | % change | |||||||||||||||||||||||||
Research and development expenses | $ | 37 | $ | 51 | $ | (14 | ) | (27.5 | )% | |||||||||||||||||||||||
Selling, general and administrative expenses | 9,709 | 7,421 | 2,288 | 30.8 | % | 8,850 | 10,828 | (1,978 | ) | (18.3 | )% | |||||||||||||||||||||
Other expense (income): | ||||||||||||||||||||||||||||||||
Interest expense | ||||||||||||||||||||||||||||||||
Interest rate expense | $ | 8,299 | $ | 4,928 | $ | 3,371 | 68.4 | % | $ | 9,092 | $ | 7,078 | $ | 2,014 | 28.5 | % | ||||||||||||||||
Debt related fees and amortization expense | 1,330 | 1,740 | (410 | ) | (23.6 | )% | 1,421 | 1,969 | (548 | ) | (27.8 | )% | ||||||||||||||||||||
Accretion and other expenses of Series A preferred units | 6,885 | 1,506 | 5,379 | 357.2 | % | 3,311 | 5,564 | (2,253 | ) | (40.5 | )% | |||||||||||||||||||||
Gain on litigation | - | (1,400 | ) | 1,400 | (100.0 | )% | ||||||||||||||||||||||||||
Other (income) expense | (91 | ) | (14,254 | ) | 14,163 | (99.4 | )% | 67 | (76 | ) | 143 | (188.5 | )% | |||||||||||||||||||
The increasedecrease in SG&A expenses for the three months ended June 30, 2023March 31, 2024 was due to increases(i) decreases in (i) stock compensation, salaries and wagesexpenses of $0.8$1.1 million that had been reclassified from Cost of Goods Sold due to extended maintenance at the Keyes Plant during the first quarter of 2023, (ii) decreases in professional fees of $0.2 million, and (ii) miscellaneous expense(iii) decreases in utilities, penalties, and insurance of $1.3 million due to reclassifying cost of goods sold depreciation, maintenance costs and plant services to SG&A during the extended maintenance cycle and the accelerated implementation of several important ethanol plant energy efficiency upgrades to the Keyes Plant.$0.6 million.
Interest expense increased in the three months ended June 30, 2023March 31, 2024 due to the new Construction and Term Loan debt, additional borrowingsincreases in principal under the Revolving Loans and Revolving Credit Facilities, and the impact of rising interest rates on our variable interest rates facilitiesrate debt compared to the same period in the prior year. The increase inlower accretion and other expenses of the Series A Preferred Units was due to provisions ofa decrease in the effective interest rate on the PUPA Amendments.
Six Months Ended June 30, 2023, Compared to Six Months Ended June 30, 2022
Revenues
2023 | 2022 | Inc/(dec) | % change | |||||||||||||
California Ethanol | $ | 11,807 | $ | 117,932 | $ | (106,125 | ) | (90.0 | )% | |||||||
California Dairy Renewable Natural Gas* | 416 | 632 | (216 | ) | (34.2 | )% | ||||||||||
India Biodiesel | 35,040 | 18 | 35,022 | 194566.7 | % | |||||||||||
All other | - | - | - | 0.0 | % | |||||||||||
Eliminations | - | (632 | ) | 632 | (100.0 | )% | ||||||||||
Total | $ | 47,263 | $ | 117,950 | $ | (70,687 | ) | (59.9 | )% | |||||||
California Ethanol. For the six months ended June 30, 2023, the Company sold 2.9 million gallons of ethanol at a price of $3.08 per gallon and 24.3 thousand tons of WDG at a price of $105 per ton. The decreaseredemption obligation in revenues was due to an extended maintenance cycle and accelerated the implementation of several important ethanol plant energy efficiency upgrades to the Keyes Plant during the first quarter of 2023, and with the Keyes Plant restarting operations at the end of May.
California Dairy Renewable Natural Gas. During the six months ended June 30, 2023, we produced and sold 75.4 thousand MMBtu of physical molecules to an external party, at an average price of $5.52 per MMBtu, while placing the environmental attributes in storage for sale once the LCFS pathway for the carbon credits are established. During the six months ended June 30, 2022, we produced and sold to an intercompany party 28.9 thousand MMBtus of dairy biogas.
India Biodiesel. For the six months ended June 30, 2023, we generated 97% of our revenues from the sale of biodiesel, and 3% of our sales from other sales compared to 100% of our sales from other sales for the six months ended June 30, 2022. The increase in revenues was primarily attributable to receiving the tender offer from the Indian government, which made the conversion of biodiesel commercially viable for the Company. Biodiesel sales volume increased to 28.1 thousand metric tons in the six months ended June 30, 2023 compared to none in the six months ended June 30, 2022, while price per ton increased to $1,210 per metric ton.
Cost of Goods Sold
2023 | 2022 | Inc/(dec) | % change | |||||||||||||
California Ethanol | $ | 14,141 | $ | 120,964 | $ | (106,823 | ) | (88.3 | )% | |||||||
California Dairy Renewable Natural Gas | 2,253 | 907 | 1,346 | 148.4 | % | |||||||||||
India Biodiesel | 30,208 | - | 30,208 | 100.0 | % | |||||||||||
All other | - | 10 | (10 | ) | (100.0 | )% | ||||||||||
Eliminations | - | (632 | ) | 632 | (100.0 | )% | ||||||||||
Total | $ | 46,602 | $ | 121,249 | $ | (74,647 | ) | (61.6 | )% | |||||||
California Ethanol. For the six months ended June 30, 2023,we ground 1.4 million bushels of corn at $7.17 per bushel. This decreased was due to an extended maintenance cycle and an accelerated implementation of several important ethanol plant energy efficiency upgrades at the Keyes Plant. As a result of the Keyes Plant shutdown, our corn costs decreased by $89.0 million, natural gas costs decreased by $6.2 million, chemical and denaturant costs decreased by $2.7 million, and transportation costs decreased by $3.5 million compared to the same period in 2022.
California Dairy Renewable Natural Gas. Cost of Goods Sold expenses relate to dairy manure payments, maintenance on the dairy digesters, production bonuses, and depreciation. Cost of goods sold will continue to increase as we expand the business.
India Biodiesel. The increase in costs of goods sold was attributable to receiving the tender offer from the Indian government, which made the conversion of biodiesel commercially viable. In the six months ended June 30, 2023 biodiesel feedstock volume was 28.1 thousand metric tons, compared to none in the same period as in 2022. During the six months ended June 30, 2023 the average price of biodiesel feedstock was $839 per metric ton compared to none in the same period as in 2022.
Gross profit (loss)
2023 | 2022 | Inc/(dec) | % change | |||||||||||||
California Ethanol | $ | (2,334 | ) | $ | (3,032 | ) | $ | 698 | (23.0 | )% | ||||||
California Dairy Renewable Natural Gas | (1,837 | ) | (275 | ) | (1,562 | ) | 568.0 | % | ||||||||
India Biodiesel | 4,832 | 18 | 4,814 | 26744.4 | % | |||||||||||
All other | - | (10 | ) | 10 | (100.0 | )% | ||||||||||
Total | $ | 661 | $ | (3,299 | ) | $ | 3,960 | (120.0 | )% | |||||||
California Ethanol. The increase in gross loss was attributable to an extended maintenance cycle and accelerated implementation of several important ethanol plant energy efficiency upgrades at the Keyes Plant during the first half of 2023.
California Dairy Renewable Natural Gas. The increase in gross loss in the six months ended June 30, 2023 relates to an increase in manure and maintenance costs associated with having seven dairies online, compared two dairies in the same period ended June 30, 2022.
India Biodiesel. The increase in gross profit was attributable to the increase in sales and production of biodiesel to meet the government of India's tender offer as the tender offer was received at the start of the first quarter.
Operating (income)/expense and non-operating (income)/expense
2023 | 2022 | Inc/(dec) | % change | |||||||||||||
Research and development expenses | $ | 79 | $ | 87 | $ | (8 | ) | (9.2 | )% | |||||||
Selling, general and administrative expenses | 20,495 | 14,727 | 5,768 | 39.2 | % | |||||||||||
Other expense (income): | ||||||||||||||||
Interest expense | ||||||||||||||||
Interest rate expense | $ | 15,377 | $ | 9,363 | $ | 6,014 | 64.2 | % | ||||||||
Debt related fees and amortization expense | 3,299 | 3,566 | (267 | ) | (7.5 | )% | ||||||||||
Accretion and other expenses of Series A preferred units | 12,449 | 3,146 | 9,303 | 295.7 | % | |||||||||||
Gain on litigation | - | (1,400 | ) | 1,400 | (100.0 | )% | ||||||||||
Other expense (income) | (167 | ) | (14,295 | ) | 14,128 | (98.8 | )% | |||||||||
The increase in SG&A expenses for the six months ended June 30, 2023 was due to increases in (i) stock compensation, salaries and wages of $2.4 million due to issuing a grant of RSAs, (ii) Depreciation and Amortization of $1.7 million due to reclassifying cost of goods sold depreciation to SG&A depreciation, (iii) Taxes, Insurances, Rent and Utilities increase of $1.1 million and (iv) Miscellaneous expense increase of $1.2 million as we reclassified cost of goods sold to SG&A as we were not operating the Keyes Plant until the end of May.
Interest expense increased in the six months ended June 30, 2023additional Construction Loan debt, additional borrowings under the Revolving Loans and Revolving Credit Facilities, and the impact of rising interest rates on our variable interest rates facilities compared to the same period in the prior year. The increase in accretion and other expenses of the Series A Preferred Units was due to provisions of the recent PUPA Amendments.amendments.
Liquidity and Capital Resources
Cash and Cash Equivalents
Cash and cash equivalents were $3.5$1.6 million at June 30, 2023March 31, 2024, of which $0.6$1.1 million was held in NorthNorth America and the rest was held at our IndianIndia subsidiary. Our current ratio at June 30, 2023 decreaseMarch 31, 2024d was 0.28 compared to 0.19 com0.43 at pared to our current ratio of 0.21 at December 31, 2022.2023. 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 facilitiesarrangements, 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):follows:
As of | As of | |||||||||||||||
June 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
Cash and cash equivalents | $ | 3,494 | $ | 4,313 | $ | 1,629 | $ | 2,667 | ||||||||
Current assets (including cash, cash equivalents, and deposits) | 20,908 | 18,136 | 32,952 | 36,400 | ||||||||||||
Current and long-term liabilities (excluding all debt) | 183,769 | 162,728 | 167,156 | 165,662 | ||||||||||||
Current & long-term debt | 267,753 | 246,240 | 307,224 | 294,721 | ||||||||||||
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 June 30, 2023, 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, natural gas, LCFS credits, and natural gas.D3 RINs. To the extent that we experience periods in which the spread between ethanol prices and corn and energy costs narrow or the spread between biodiesel prices and waste fats and oils or palm oil and energy costs narrow, we may require additional working capital to fund operations.
As a result of negative capital negative market conditions,and negative operating results, and collateralization of substantially all of the companyCompany assets, the Company haswe have been reliant on itsour senior secured lender to provide additional fundingextend the maturity dates of our debt and has been required to remit substantially all excess cash from operations to the senior secured lender.loan facilities. In order to meet its obligations during the next twelve months, the Companywe will need to either refinance the Company’sour 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 plansWe plan to pursue the following strategies to improve the course of the business.
For the Keyes Plant, we restarted the plant during the second quarter after completing an extended maintenance cycle and accelerating the implementation of several important ethanol plant energy efficiency upgrades. We plan to operate the plant and continue to improve its financial performance by completing the existing upgrades and adopting new technologies or process changes that allow forincrease energy efficiency, cost reduction orreduce costs, and enhance revenue, enhancements, as well as executingexecute upon awarded grants that improve energy and operational efficiencies resulting in lower cost, lower carbon demandsintensity, and overall margin improvement.
For Aemetis Biogas,our dairy RNG production, we plan to continue to operate the biogasour existing 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.pipeline. Funding for continued construction ishas been based upon obtainingon government guaranteed loansdebt financing and executing on existinggrant programs. We are seeking multiple sources of additional project funding to allow us to accelerate the addition of new digesters. We began generating revenue from D3 RIN sales in 2023 and new state grant programs.
Forfirst generated revenue from the Riverbank project, we plansale of LCFS credits in January 2024. We expect to raise the funds necessary to construct and operate the Carbon Zero planthave a full year of revenue from both sources in Riverbank, CA using loan guarantees and public 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 to2024, which will provide significantly increase margins.
For all facilities in the United States, we plan to utilize the provision of the Inflation Reduction Act of 2022 by qualifying for renewable energy credits, whether in the form of an Investment Tax Credit, Producers Tax Credit or other credits and monetize the credits using the provisions of this congressional act.increased liquidity.
For the Kakinada Plant, we plan to continue to develop salesenter into cost-plus contracts with the OMCs as our primary customer. We also plan to continue to upgrade our plant to increase capacity and expand feedstock flexibility. We are also evaluating the production of additional products and developing channels for domestic products as the costsexport of feedstock normalize againstallow. The Kakinada plant has had positive gross income during the pricelast two years and we expect this to continue. We also rely on our working capital lines with Gemini and Secunderabad Oils in India to fund our commercial arrangements for the acquisitions of diesel, as recently announced governmental incentives take effect to promotefeedstock.
For the blending of biodiesel, and as feedstocks such as refined animal tallow are used domestically and exported. Additionally,Riverbank SAF/RD production plan, we are in the process of obtaining approval to export refined animal tallowcontinuing with permitting, engineering and biodiesel produced using animal tallow into international markets as the use of refined animal tallow received approval from the Pollution Control Board of Indiaother development activities and seeking both debt and equity funds needed for production of biodiesel. The repatriation of funds from India to the parent company in the U.S. is reliant on favorable governmental approvals. development and construction.
In addition to the above, we plan to continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling bonds in the taxable and tax-exempt markets, selling equity through the ATM and otherwise, selling the current EB-5EB-5 Phase II offering, orand by vendor financing arrangements.
At June 30, 2023,March 31, 2024, the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes equaled $173$186 million. The maturity dates for the Third Eye Capital financing arrangements are August 31, 2023, for $9.2 million, April 1, 2025, for $118$127.4 million, March 1, 2025, for $25.0$35.1 million and March 1, 2026, for $24.9$23.7 million.
As of the date of this report, the Company has $50.0$85.0 million additional borrowing capacity to fund future cash flow requirements under the Reserve Liquidity Notes with a maturity date April 1, 2024.2025.
We also rely on our working capital lines with Gemini, Secunderabad Oils, and Leo Edibles & Fats India Ltd. in India to fund our commercial arrangements for the acquisitions of feedstock. We currently provide our own working capital for the Keyes Plant; Gemini and Secunderabad Oils currently provide us with working capital for the Kakinada Plant. The ability of Gemini, Secunderabad Oils, and Leo Edibles 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 belowfollowing table (in thousands) describes the changes in current and long-term debt during the sixthree months ended June 30, 2023:March 31, 2024:
Increases to debt: | ||||||||||||||||
Accrued interest | $ | 15,747 | $ | 9,742 | ||||||||||||
Maturity date extension fee and other fees added to senior debt | 2,430 | 1,162 | ||||||||||||||
Sub debt extension fees | 340 | 340 | ||||||||||||||
Revolving Notes Series B draw | 800 | |||||||||||||||
Fuels Revolving Line draw | 4,275 | 3,030 | ||||||||||||||
Construction Loan draw | 2,562 | 2,663 | ||||||||||||||
Working capital loan draw | 13,954 | 529 | ||||||||||||||
Total increases to debt | $ | 40,108 | $ | 17,466 | ||||||||||||
Decreases to debt: | ||||||||||||||||
Principal, fees, and interest payments to senior lender | $ | (3,474 | ) | $ | (2,021 | ) | ||||||||||
Principal and interest payments to EB-5 investors | (104 | ) | (26 | ) | ||||||||||||
Change in debt issuance costs, net of amortization | (625 | ) | (1,580 | ) | ||||||||||||
Term loan payments | (5 | ) | (2 | ) | ||||||||||||
Construction Loan Payments | (868 | ) | (773 | ) | ||||||||||||
Working capital loan payments | (13,519 | ) | (577 | ) | ||||||||||||
Total decreases to debt | $ | (18,595 | ) | $ | (4,979 | ) | ||||||||||
Change in total debt | $ | 21,513 | $ | 12,487 | ||||||||||||
Working capital changeschanges resulted infrom (i) a $2.8$2.3 million increasedecrease in inventories due to the Keyes Plant restarting operations and buildup of inventory for production for winter months in India (ii) a $4.9$0.2 million increase in accounts receivable due to UBPL fulfillingincrease in sales, and (iii) a government tenderslight increase in the second quarterother current assets of 2023.$0.6 million due to India paying several payments for vendors and taxes in advance. This was partially offset by (i) a $3.0$0.9 million decrease in prepaid expenses mainly due to the use of a J.D. Heiskell pre-payment, (ii) a decrease inreserves to make interest payments on the biogas construction and term loans and other current assets of $1.1 million due to receipt of the restricted cash from the Construction loan,general amortizations, and (iii) a $0.8$1.0 million decrease in cash.
Net cash used in operating activities during the sixthree months ended June 30, 2023March 31, 2024, was $14.0$10.3 million, consisting ofwhich was calculated based on non-cash charges of $24.7$9.5 million, net cash providedused by operating assets and liabilities of $13.0$4.4 million, and net loss of $51.7$24.2 million. The non-cash charges consisted of: (i) $3.3$1.4 million in amortization of debt issuance costs and other intangible assets, (ii) $3.5$1.8 million in depreciation expenses, (iii) $4.8$3.0 million in stock-based compensation expense, and a warrant grant to our working capital partner, (iv) $12.4$3.3 million in preferred unit accretion and other expensesexpense of Series A preferred units, and (v) $0.7 million change in deferred tax expense.units. Net changes in operating assets and liabilities consisted primarily of (i) an increase in accrued interest of $12.1$5.5 million, (ii) prepaid expensesa decrease of $2.4 million, (iii) an increase in accounts payable of $4.4$3.2 million, and (iv) an increase(iii) a decrease in other liabilities of $1.8$0.2 million, (iv) a decrease in inventories of $2.3 million and (v) a decrease in prepaid expenses of $0.9 million. This was partially offset by an increase in (i) inventoriesother assets of $2.9$0.5 million and (ii) a decreasean increase in Accounts Receivableaccounts receivable of $4.9$0.2 million.
Cash used byin investing activities was $2.5$3.6 million of which $9.8 million were used byin capital projects, partially offset by grant proceeds and other reimbursements of $7.3$1.9 million.
Cash provided by financing activities was $15.2$10.6 million, consisting of $8.9$5.5 million from issuance of common stock and $21.6$6.2 million from proceeds from borrowings, partially offset by repayments of borrowings of $13.4$0.4 million and payment of debt renewal and waiver fees of $1.7 million and payments on finance leases of $0.3$0.8 million.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based uponon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. We believe that of our most significant accounting policies and estimates, defined as those policies and estimates that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain are: revenue recognition; recoverability of long-lived assets, Series A Preferred unit liability, and debt modification and extinguishment accounting. These significant accounting principles are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
Recently Issued Accounting Pronouncements
None reported beyond those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
Off Balance Sheet Arrangements
We had no off-balance sheet arrangements during the three months ended June 30, 2023.March 31, 2024.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.We are exposed to various market risks, including changes in interest rates, commodity prices and currency translation. Market risk is the potential loss arising from adverse changes in market rates and prices. In the ordinary course of business, we enter into various types of transactions involving financial instruments to manage and reduce the impact of changes in commodity prices and interest rates. We enter into no market risk sensitive instruments for trading purposes. Even though our commodity outputs and input are sensitive to changes in market prices, we only opportunistically pursue fixed contract arrangements on a limited basis with regard to the various commodities used in our business.
At times in our business, we reduce our exposure to fluctuations in product sales and margin, principally by entering into fixed price contracts for the purchase of feedstock and energy. At the time we enter into a purchase commitment for feedstock or energy, our goal is to also enter into an off-take arrangement with our customer to purchase the product, primarily biodiesel produced by our India plant, at a set price. For the three months ended March 31, 2024 we did not have any open firm-price sales commitments that extended beyond one month for product sales or any open firm price purchase commitments with our feedstock suppliers. We had one open firm price purchase commitment with our energy supplier where we entered into a fixed price, forward purchase contract for delivery of natural gas through October 2024 to protect against price fluctuations in the natural gas market.
Commodity Price Risk
The tables below provide a sensitivity analysis to help assess our exposure to market fluctuations in the prices of the listed commodities that we purchase or sell. The tables show the potential change in net income resulting from a hypothetical 10% change in prices of the listed commodity for the three months ended March 31, 2024. This analysis is not a forecast but is a means to determine what commodity markets may have an impact on our business. The description of the commodity risk for each operating segment along with the numerical results of this analysis, which may differ from actual results, are as follows (in millions):
California Ethanol Production
Our Keyes Ethanol plant produces ethanol, distiller’s grains, and corn oil from corn and energy, principally natural gas. Ethanol prices are sensitive to world crude-oil supply and demand; crude oil refining capacity and utilization; government regulation; and consumer demand for alternative fuels. Distiller’s grains prices are sensitive to various demand factors such as population of livestock, prices for feed alternatives, and supply factors, primarily wet distillers grains production by California ethanol plants and dry distiller’s grains production from Midwest ethanol plants.
The price of corn is subject to fluctuations due to unpredictable factors such as weather; corn planted and harvested acreage; changes in national and global supply and demand; and government programs and policies. We use natural gas to provide energy for the ethanol production process and, as a result, our business is also sensitive to changes in the price of natural gas. The price of natural gas is influenced by such weather factors as extreme heat or cold in the summer and winter, or other natural events like hurricanes in the spring, summer and fall. Other natural gas price factors include North American exploration and production, and the amount of natural gas in underground storage during both the injection and withdrawal seasons.
Commodity | Estimated Three Month Quantity (thousands) (1) | Unit of Measure | Net Income Effect of a 10% Change in Price ($ millions) | ||||||
Ethanol | 14.1 | Gallons | $ | 2.52 | |||||
WDGS | 0.1 | Tons | $ | 0.92 | |||||
Corn | 4.9 | Bushels | $ | 3.10 | |||||
Nat Gas(2) | 0.3 | Btu | $ | - | |||||
(1) Estimated quantity is based on Q1 results.
(2) Natural gas purchased on a fixed-price, forward purchase commitment for this period.
India Biodiesel Production
Our India Biodiesel plant produces biodiesel from feedstocks that include refined palm oil, palm stearin, animal fats, waste oils, crude glycerin, and chemicals. In addition to pricing factors for biodiesel, we are subject to market risk with respect to the price and availability of the main raw materials we use to produce our products including refined palm oil, palm stearin, animal fats, crude glycerin, and chemicals.
Biodiesel prices are sensitive to world crude-oil supply and demand, crude oil refining capacity and utilization, governmental regulations and consumer demand for alternative fuels, principally diesel. Locally, biodiesel prices are sensitive to the pricing models set by the Oil Marketing Companies, which now reprices monthly using a cost-based based formula. Glycerin pricing is sensitive to various supply and demand factors including world-wide production and availability, demand from consumer purchases of personal care, and demand for industrial chemicals such as paints.
The availability and pricing of feedstock for our biodiesel plant fluctuate with unpredictable factors such as global demand and supply of raw materials, weather conditions, and governmental policies toward agriculture and biofuels and international trade agreements.
Commodity | Estimated Three Month Quantity (thousands) (1) | Unit of Measure | Net Income Effect of a 10% Change in Price ($ millions) | ||||||
Biodiesel | 27.5 | Tons | $ | 3.10 | |||||
Glycerin | 2.4 | Tons | $ | 0.13 | |||||
Oil and Fats feedstock | 27.3 | Tons | $ | 1.71 | |||||
(1) Estimated quantity is based on Q1 results.
Renewable Natural Gas Production
Our Renewable Natural Gas operations produce pipeline quality natural gas from dairy manure.
Dairy renewable natural gas prices are sensitive to weather factors, such as extreme heat or cold in the summer and winter, or other natural events like hurricanes in the spring, summer and fall. Other natural gas price factors include North American exploration and production, and the amount of natural gas in underground storage during both the injection and withdrawal seasons. Additionally, our RNG business is affected by the price of environmental attributes, specifically the price of Renewable Fuel Standard D3 RINs and California LCFS credits.
Commodity | Estimated Three Month Quantity (thousands) | Unit of Measure | Net Income Effect of a 10% Change in Price ($ millions) | ||||||
Renewable Natural Gas | 75.0 | MMBtu | $ | 0.03 | |||||
D3 RINs | 876.6 | D3 RINs | $ | 0.27 | |||||
LCFS Credits | 18.9 | Metric Tons | $ | 0.12 | |||||
Interest Rate Risk
We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from issuing term, construction and revolving loans that accrue interest at variable interest rates. Specifically, we had $217.2 million, before unamortized debt issuance costs, in U.S. Dollar denominated outstanding variable interest-rate debt as of March 31, 2024. Interest rates on our variable-rate debt are determined based on the market interest rate of either Prime Rate or five-year Treasury Constant Maturity Rate. A 1% increase in Prime Rate would increase our annual interest cost by approximately $1.7 million. A 1% increase in the five-year Treasury Constant Maturity Rate would increase our annual interest cost by approximately $0.4 million. Other details of our outstanding debt are discussed in Note 7.Debt in the Notes to the consolidated financial statements included as a part of this report.
Foreign Currency Exchange Rate Risk
We do expect to have exposure to foreign currency risk as we conduct most of our India business in Indian Rupees. Our India subsidiaries use the Indian Rupee local currency as their functional currency. Our primary exposure with respect to foreign currency exchange rate risk is the change in the Indian Rupee (INR) to US Dollar (USD) exchange rate. For consolidation purposes, assets and liabilities are translated at month-end exchange rates. Items of income and expense are translated at average exchange rates. Translation gains and losses are not included in determining year-to-date net income (loss) on the Balance Sheet but are accumulated as a separate component of shareholders’ equity. Gains (losses) arising from foreign currency transactions are included in determining net income (loss) on the Statement of Operations. For the three months ended March 31, 2024 and 2023, we recognized a loss of $44 thousand and a gain of $117 thousand, respectively, associated with foreign currency translation adjustments to other comprehensive income (loss). Using the three months ended March 31, 2024 Indian subsidiary financials and applying the appropriate actual weighted average or end exchange rate and then incrementing by 10 points each respective INR to USD exchange rate resulted in a $141 thousand impact to Net income (loss), a $1.2 million change in Total Liabilities, a $2.4 million change in Stockholders’ equity (deficit), and a $3.7 million change in Total Assets in our Indian subsidiary. These calculations are solely to demonstrate the sensitivity of our financial reports to assumed change in foreign currency exchange and are not intended as a forecast.
Derivatives and Other Instruments
As of March 31, 2024, we did not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions, or foreign currency contracts.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
Management (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our CEO and CFO concluded that, although remediation plans were initiated to address the material weaknesses over financial reporting as identified in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022,2023, the disclosure controls and procedures along with the related internal controls over financial reporting were not effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and is compiled and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
As discussed in greater detail under Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, we initiated a remediation plan to address the material weakness in our internal control related to information technology general controls and information technology systems.
For a more comprehensive discussion of the material weaknesses in internal control over financial reporting identified by management as of December 31, 2022, and the remedial measures undertaken to address these material weaknesses, investors are encouraged to review Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the year ended December 31, 2022.
Item 1. Legal ProceedingsProceedings.
The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. For additional information regarding such matters, see “Part I, Item 1. Financial Statements – Note 5. Commitments and Contingencies - Legal Proceedings.”Not applicable.
NoThere has been no change in risk factors since the Company’s Annual Report on Form 10-K for the year ended December 31, 20222023, filed with the SEC on March 9, 2023.29, 2024. We urge you to read the risk factors contained therein.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the secondfirst quarter of 2023,2024, we issued 62two-year warrants to purchase 113 thousand shares of our common stock to certain working capital partners pursuant tosubordinated lenders in connection with an extension of their debt, and we also issued 113 thousand shares of common stock in connection with their exercise of the note holders’ warrant exercise at an exercise price of $2.50 per share respectively.
The above issuance waswarrants. These issuances were exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as salesissuances of securities not involving any public offering.
During the first quarter of 2024, we issued a stock option pursuant to the 2019 Stock Plan to a consultant that is exercisable for 6 thousand shares of common stock at a strike price of $3.09 per share. The stock option has a term of 10 years and one-twelfth of the shares vest every three months over a three year period from the grant date. This stock option and the subsequent issuance of shares upon exercise of the option are exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, as issuances of securities not involving any public offering.
Item 3. Defaults Upon Senior Securities.
No unresolved defaults on senior securities occurred during the sixthree months ended June 30, 2023.March 31, 2024.
Item 4. Mine Safety Disclosures.
None.
None.Current Reports
On May 8, 2024, the Audit Committee of Contents
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.
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| Date: May 9, 2024 | By: | /s/ Eric A. McAfee |
Eric A. McAfee Chair of the Board and Chief Executive Officer (Principal Executive Officer) | ||
Date: August 4, 2023
| Date: May 9, 2024 | By: | /s/ Todd A. Waltz |
Todd A. Waltz Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||
Date: August 4, 2023