Aemetis, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2011, with 2010 comparative financial statements and unaudited 2011 quarterly information. Filed October 31, 2012, to bring the company current with SEC reporting. The filing is an annual report, not a standalone fourth-quarter report.
Business context and performance
Aemetis develops and operates renewable-fuel and specialty-chemical businesses. In 2011 it began commercial operations at its leased 55-million-gallon-per-year Keyes, California corn-ethanol plant and continued operating its 150,000-metric-ton-per-year biodiesel plant in Kakinada, India. It acquired biotechnology company Zymetis in July 2011.
| Metric | FY 2011 | FY 2010 |
|---|---|---|
| Revenue | $141.86 million | $8.13 million |
| Gross profit (loss) | $4.64 million | ($0.12 million) |
| Gross margin | 3.3% | (1.5%) |
| Operating loss | ($4.51 million) | ($5.15 million) |
| Net loss | ($18.30 million) | ($8.56 million) |
| Basic and diluted loss per share | ($0.18) | ($0.10) |
| Cash from operating activities | ($1.25 million) | ($3.68 million) |
| Cash and cash equivalents at year-end | $0.25 million | $0.68 million |
| Total debt | $29.65 million | $21.39 million |
| Current assets / current liabilities | $7.13 million / $29.43 million | $2.08 million / $18.30 million |
| Stockholders’ deficit | ($22.20 million) | ($9.45 million) |
North America contributed $131.95 million of revenue; India contributed $9.91 million. The Keyes plant sold 37.39 million gallons of ethanol and 273,533 tons of wet distillers grains during its operating period. India biodiesel sales rose to 8,636 metric tons from 7,598, while crude-glycerin sales fell sharply; the company also resold purchased refined glycerin.
Material changes and unusual items
- Revenue growth principally reflects the start-up of Keyes operations in April 2011; North America accounted for approximately 93% of consolidated revenue. All Keyes ethanol and wet distillers grains were sold through J.D. Heiskell.
- Despite positive gross profit, net loss more than doubled, chiefly as interest expense rose to $13.56 million from $4.03 million. The company also recorded a $0.40 million loss on a land sale.
- FY 2011 gross profit included $1.80 million of California Ethanol Producer Incentive Program payments recorded as a reduction of cost of goods sold. The program may require repayment if specified crush spreads later exceed a threshold.
- Cash used in investing activities was $0.97 million, including plant-related capital spending partly offset by land-sale proceeds. Financing activities provided $1.87 million. Operating cash use was partly funded by increased trade credit and accrued interest and fees.
- The company reported a 0.24 current ratio and a substantial working-capital deficit. It states that quarter-end cash was limited and operations depended on vendor credit, working-capital partners and its senior lender.
Outlook, risks and contingencies
- No quantified operating guidance is provided. Management’s plans include expanding product markets, diversifying feedstocks, commercializing cellulosic and other renewable-fuel technologies, and securing additional financing. The filing cautions that continued operations depend on financing and lender support and that additional capital may not be available on acceptable terms.
- Key risks include volatile and sometimes unfavorable feedstock-to-product spreads, the absence of hedging, limited liquidity, debt service and covenant compliance, dependence on working-capital arrangements with J.D. Heiskell and Secunderabad Oils, and concentrated customers and sales channels.
- The State Bank of India loan was in default; the bank sought recovery of approximately $5 million before India’s Debt Recovery Tribunal. The filing warns of possible enforcement against company property and reports continuing default interest. A separate UBS Securities contract action was at an early stage, and the company could not estimate the potential loss.
- The company reported significant historical losses, negative cash flow and accumulated deficit of $65.53 million. Its financial statements were prepared on a going-concern basis; management’s plans rely on continued lender or investor support, with no assurance that financing will be sufficient.
- Management concluded disclosure controls and internal control over financial reporting were not effective and identified material weaknesses involving staffing, timely reporting and accounting for complex transactions. The filing also describes late financial statements and significant audit adjustments.
- Subsequent events: in July 2012 Aemetis acquired Cilion and the Keyes plant for $16.5 million cash, 20 million Aemetis shares and contingent consideration of $5 million plus interest, subject to conditions. The associated Third Eye Capital financing included a $15 million term loan, $10 million revenue-participation refinancing and an $18 million revolver; the filing reported $3 million available at closing. An October 2012 amendment increased the revolver to $24 million but required a $4 million waiver fee, leaving $2 million available after that fee. These are post-year-end developments, not FY 2011 results.
- The company’s technology remains in development; it had not completed a large-scale commercial prototype. Environmental, permitting, regulatory, foreign-market and intellectual-property risks may require additional costs or disrupt operations.
Important facts for investors to verify
- Current liquidity, cash availability, debt maturities, covenant status and remaining borrowing capacity after subsequent amendments and fees.
- Status and potential consequences of the State Bank of India default and recovery proceeding, and the UBS litigation.
- How much of reported gross profit depended on the $1.80 million incentive payment, and the company’s exposure to possible reimbursement.
- Customer-concentration disclosures: the filing says J.D. Heiskell represented 93% of consolidated revenue, while also stating Gunvor represented approximately 70% of total revenue; clarify the denominator and reconcile these statements.
- Progress in remediating the disclosed internal-control material weaknesses and the reliability of reported results following audit adjustments.
- Final accounting and financing effects of the Cilion acquisition, including contingent consideration and the reported bargain-purchase gain in subsequent-event disclosures.