Aemetis, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unless otherwise noted, dollar amounts below are in millions. Aemetis operates California ethanol, California dairy renewable natural gas (RNG), and India biodiesel businesses, alongside development-stage carbon capture and renewable-fuel projects.
Financial performance
- Q2 revenue: $45.1 million, down 31.5% from $65.9 million. Gross profit was $2.0 million (4.3% margin), compared with a $0.2 million gross loss a year earlier. Operating loss was $7.8 million; net loss was $25.3 million, or $0.68 per share, versus $0.2 million, or $0.01 per share.
- Six-month revenue: $47.3 million, down 59.9% from $118.0 million. Gross profit was $0.7 million (1.4% margin), versus a $3.3 million gross loss. Operating loss was $19.9 million and net loss was $51.7 million, or $1.40 per share, compared with a net loss of $18.5 million, or $0.54 per share.
- Segment drivers: Q2 California Ethanol revenue fell to $11.3 million from $65.9 million as the Keyes plant underwent an extended maintenance and upgrade shutdown; the plant restarted in Q2. India Biodiesel generated $33.6 million of Q2 revenue, including sales under a government tender, and $5.3 million of gross profit. Dairy RNG revenue was $0.2 million; the company sold physical gas while holding environmental attributes pending carbon-pathway approvals.
- Cash flow: In the first half, operating activities used $14.0 million, investing activities used $2.5 million, and financing activities provided $15.2 million. Capital expenditures were $9.8 million, partly offset by $7.3 million of grants and reimbursements. Cash and cash equivalents were $3.5 million at June 30, down from $4.3 million at year-end; the cash-flow statement’s ending total, including restricted cash, was $5.5 million.
- Liquidity and debt: Current assets were $20.9 million against current liabilities of $108.9 million; the reported current ratio was 0.19. Total debt, net of issuance costs, was $267.8 million, including $62.9 million classified as current. Senior secured notes and revolving notes totaled $163.9 million on the balance sheet; EB-5 notes were $29.5 million. Series A preferred-unit liabilities were $129.7 million, separate from reported debt.
- Costs and loss factors: Q2 interest-rate expense was $8.3 million and Series A preferred-unit accretion and related expense was $6.9 million. For the first half, those items were $15.4 million and $12.4 million, respectively. SG&A increased to $9.7 million in Q2 and $20.5 million for the first half. Inventory included a $0.9 million lower-of-cost-or-net-realizable-value impairment in the first half.
Material changes, outlook, and risks
- The Keyes ethanol plant’s extended outage sharply reduced first-half sales; management says it restarted in Q2 after maintenance and energy-efficiency work. The company plans further upgrades to lower energy use and improve margins.
- India biodiesel sales resumed at scale following government tender awards. Aemetis reported a new initial $20.0 million tender award for Q3 2023 and said it was in the process of fulfilling it. In July, the company also entered a construction and term-loan agreement for up to $25 million for a biogas subsidiary.
- Going concern: Management states that negative working capital, operating losses, adverse market conditions, and liens on substantially all company assets create substantial doubt about the company’s ability to continue as a going concern. Meeting obligations over the next 12 months depends on refinancing debt or continued senior-lender cooperation. Planned funding sources include debt restructuring, equity, EB-5 notes, grants, and vendor financing; availability is uncertain.
- Debt and covenant exposure: Third Eye Capital debt carries high interest rates, extensive collateral and cross-default provisions, and production and other covenants. The lender waived minimum ethanol-production covenant violations for Q1 and Q2 2023. A special advance of $8.1 million was due for repayment by August 31, 2023; subsequent to quarter-end, the lender approved a further $2.3 million overadvance with repayment conditions. The filing reports $50 million of reserve-liquidity capacity, but no borrowings under that facility at June 30.
- Preferred-unit obligations: ABGL’s Series A preferred-unit redemption terms were amended again in May 2023. The redemption price was set at $135 million by August 31, 2023; failure to redeem would require a credit agreement effective September 1, 2023. The filing says the preferred liability was being accreted toward $171.7 million by August 2024. ABGL had not met minimum quarterly operating-cash-flow requirements, potentially increasing the share of future free cash flow applied to redemption.
- Other execution risks include obtaining permits and financing for Riverbank renewable-fuel and carbon-sequestration projects, securing grant reimbursements subject to matching contributions and approvals, establishing RNG carbon pathways to monetize stored attributes, and obtaining approvals to repatriate funds from India. Management provided plans, but no quantified company-wide earnings or cash-flow guidance.
- Disclosure controls and internal controls over financial reporting were deemed ineffective; remediation of previously identified material weaknesses was underway. Management reported no material change in internal control during the quarter.
Investor verification priorities
- Confirm the status and terms of the August 2023 preferred-unit redemption deadline and any resulting credit agreement.
- Verify repayment, extension, or refinancing of near-term debt and special advances, including the lender’s waivers and any covenant compliance.
- Track Keyes plant operating levels, margins, and progress and costs of energy-efficiency upgrades.
- Assess whether India tender deliveries, feedstock economics, and cash repatriation approvals support sustainable positive cash flow.
- Check progress on RNG carbon-pathway approvals, grant conditions, project funding, and the company’s stated going-concern uncertainty.
- Review remediation of the material weaknesses and the company’s ability to fund operations without further costly borrowing or equity dilution.