Aemetis, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2022; comparisons are with the third quarter and first nine months of 2021. Unaudited financial amounts below are in U.S. dollars, generally millions unless stated otherwise.
Business context
Aemetis develops and operates renewable fuels and renewable natural gas businesses. Its reportable segments are California Ethanol, Dairy Renewable Natural Gas, and India Biodiesel. The company also has development-stage projects, including a proposed sustainable aviation fuel and renewable diesel facility and carbon capture and sequestration projects.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $71.8 | $49.9 | $189.8 | $147.6 |
| Gross profit (loss) | $(1.1) | $(4.8) | $(4.4) | $(4.7) |
| Operating loss | $(7.6) | $(9.9) | $(25.7) | $(21.0) |
| Net loss | $(66.8) | $(17.6) | $(85.3) | $(46.3) |
| Net loss per share | $(1.92) | $(0.55) | $(2.49) | $(1.55) |
- Revenue increased 44% in Q3 and 29% for the nine-month period. California Ethanol remained the largest business; India Biodiesel revenue rose to $10.9 million in Q3, principally from government tender sales.
- Gross margin was approximately negative 1.5% in Q3 versus negative 9.6% a year earlier, and negative 2.3% for the nine-month period versus negative 3.2%. California Ethanol continued to report gross losses as higher corn, natural gas, and transportation costs offset stronger sales. India Biodiesel generated $2.8 million of Q3 gross profit.
- Q3 net loss included a $49.4 million loss on extinguishment of debt associated with the amended Series A preferred unit terms. For the nine months, a $14.2 million USDA Biofuel Producer Program grant was recorded in other income; the period also included a $1.4 million gain from settlement of the EdenIQ litigation.
- Nine-month operating cash use was $16.3 million, compared with $20.0 million in 2021. Investing cash use was $21.5 million, including $28.9 million of capital expenditures, partly offset by $7.4 million of grant reimbursements. Financing provided $30.4 million. Cash declined $7.5 million to $0.3 million.
- At September 30, current assets were $24.1 million and current liabilities were $183.1 million; the reported current ratio was 0.13. Total debt was $223.0 million, up from $188.8 million at year-end 2021. Stockholders’ deficit was $184.9 million.
Material changes and unusual items
- On August 8, 2022, Aemetis amended the ABGL Series A preferred unit agreement. The units became redeemable for $116 million by December 31, 2022; the company recorded $109.4 million as a current liability at quarter-end. A stated option to redeem by September 30, 2022 for $106 million had also been included in the amendment.
- Third Eye Capital debt amendments included covenant waivers and an option to extend certain notes to April 2024. The filing reports approximately $151 million outstanding under Third Eye Capital notes, with differing maturities and interest terms. The company stated that covenant compliance over the next 12 months depended on forecast cash flows, EB-5 investment proceeds, and/or common-stock proceeds.
- In October 2022, after quarter-end, the company entered into a construction loan agreement providing up to $25 million for biogas construction, with a March 2023 maturity and repayment expected from a USDA-guaranteed term loan. No amount was outstanding under it at September 30.
- Common shares outstanding increased to 35.0 million from 33.5 million at December 31, 2021. Nine-month cash proceeds from common-stock issuance were $8.0 million.
Outlook, risks, and contingencies
- Going concern: Management stated that negative capital, operating losses, substantial asset collateralization, and dependence on the senior lender raise substantial doubt about the company’s ability to continue as a going concern. Meeting obligations over the next 12 months will require refinancing or continued senior-lender cooperation.
- Management plans to improve Keyes margins through efficiency projects, expand dairy digesters and RNG pipeline capacity, seek financing for Riverbank renewable-fuels and carbon-capture projects, and develop Indian biodiesel markets and export channels. These plans depend on financing, permits, grant conditions, carbon-credit pathways, and successful project execution. The filing gives no consolidated earnings or revenue guidance.
- Key risks include volatile corn, natural gas, feedstock, and transportation costs; the possibility that product prices will not keep pace with inflation; high interest expense and refinancing needs; customer concentration; and reliance on grants, government incentives, and regulatory approvals.
- The company reported that disclosure controls and related internal controls over financial reporting were not effective, citing previously identified material weaknesses and ongoing remediation efforts.
- The EdenIQ dispute was settled for $4.8 million and paid in May 2022; the company recognized a $1.4 million gain. The filing also notes other lawsuits or threatened actions incidental to ordinary business, without providing a clear aggregate exposure value.
Important facts for investors to verify
- How Aemetis will fund the $116 million Series A preferred unit redemption due by December 31, 2022, and the consequences if it is not completed.
- Available liquidity, lender cooperation, covenant status, and the ability to refinance or repay debt as maturities approach; confirm whether the post-quarter construction financing and expected USDA-guaranteed term loan close on stated terms.
- Whether operating cash flow and product margins improve despite negative gross profit, rising input costs, and very limited quarter-end cash.
- Progress toward RNG pathway approvals and project commissioning, and whether planned grant funding, carbon credits, and India tender sales are realized.
- Progress in remediating the disclosed internal-control weaknesses and any changes in legal or other contingent exposures.