Aemetis, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; financial statements are unaudited. Dollar amounts below are in millions unless otherwise noted.
Business context
Aemetis develops and operates renewable fuels and related businesses. Its reportable segments are California ethanol, dairy renewable natural gas (RNG), and India biodiesel. The Keyes, California ethanol plant is operating; the dairy digester and pipeline network is under expansion; and Carbon Zero 1 in Riverbank is planned. India biodiesel activity was minimal in the quarter.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $52.0 | $42.8; up 22.0% |
| Cost of goods sold | $55.1 | $46.4; up 19.0% |
| Gross loss / gross margin | $(3.1) / (5.9%) | $(3.6) / (8.4%) |
| Operating loss | $(10.4) | $(9.0) |
| Net loss | $(18.3) | $(18.1) |
| Basic and diluted loss per share | $(0.54) | $(0.69) |
| Cash used in operating activities | $(8.2) | $(14.1) |
| Cash used in investing activities | $(8.0) | $(5.4) |
| Cash provided by financing activities | $13.9 | $34.6 |
Revenue growth came primarily from California ethanol: segment sales increased 22.9% to $52.0 million. Ethanol price rose to $2.58 per gallon from $1.91, while gallons sold declined to 14.7 million from 15.6 million. Higher corn and energy costs offset much of the revenue increase: corn feedstock averaged $8.75 per bushel versus $6.87, and the company cited higher natural gas, chemical, and transportation costs. India segment revenue fell to $8,000 from $479,000, with no biodiesel or refined glycerin volume sold.
Cash and cash equivalents were $5.5 million at quarter-end, down from $7.8 million at December 31, 2021. Current assets were $16.2 million versus current liabilities of $62.7 million; the reported current ratio was 0.26. Total debt was $203.2 million, up from $188.8 million, and stockholders’ deficit was $128.6 million. Capital expenditures were $9.5 million, partly offset by $1.5 million in grant reimbursements.
Material changes and financing
- On March 2, 2022, Aemetis established Third Eye Capital revolving facilities with aggregate availability of up to $100 million: a fuels line and a carbon-project line. At March 31, balances were $8.7 million and $22.1 million, respectively; the company reported $14.2 million available under revolving credit lines and separately cited $40 million of additional capacity under its reserve liquidity notes.
- The new facilities were used in part to repay $16.0 million on a higher-interest facility and pay $6.1 million in past-due property taxes. The company also extended its principal Third Eye Capital maturities to April 1, 2023 and incurred additional fees and financing costs.
- Interest-rate expense declined to $4.4 million from $6.0 million, while debt-related fees and amortization rose to $1.8 million from $1.2 million. SG&A increased 35.7% to $7.3 million, partly due to higher salaries and stock-based compensation.
Outlook, risks, and unusual items
- Going concern: Management stated that negative working capital and operating results, substantially all assets being collateralized, and reliance on the senior lender raise substantial doubt about the company’s ability to continue as a going concern. Over the next 12 months, it needs to refinance debt or obtain continued lender cooperation.
- Management plans: Improve Keyes margins through efficiency and technology projects; expand dairy digesters and pipeline; secure financing for Riverbank Carbon Zero 1; and seek viable feedstocks and markets for the India plant. Funding plans include lender cooperation, debt restructuring, equity sales, EB-5 financing, grants, and vendor financing. No quantified earnings or revenue guidance is provided.
- Debt and covenant risk: Senior debt has high interest costs, collateral and cross-default provisions, and covenant requirements. The company obtained repeated waivers. On May 11, 2022, after quarter-end, Third Eye Capital granted further covenant waivers for a $0.1 million fee.
- Preferred units: ABGL had not met minimum quarterly operating cash-flow requirements under its Series A preferred-unit agreement; future free cash flow may be directed 100% to redemption payments rather than the initial 75% rate. The carrying liability was $51.4 million, including current and long-term portions.
- Legal settlement: On May 6, 2022, after quarter-end, the company settled the EdenIQ dispute for $4.8 million. The filing reports a previously recorded court award of approximately $6.2 million; settlement payment timing and any additional accounting effect are not clearly specified in the provided text.
- Operating risks: The filing highlights inflation and supply-chain pressures, including higher corn and natural-gas prices associated in part with the war in Ukraine, and warns that product prices may not keep pace with input costs. Ethanol, feedstock, energy, and credit-market volatility could further pressure margins and liquidity.
- Controls: Management concluded disclosure controls and related internal controls over financial reporting were not effective, citing an unresolved material weakness disclosed in the prior-year Form 10-K; remediation was ongoing.
Most important facts for investors to verify
- Whether Aemetis can refinance or extend debt and maintain lender support, and the resulting maturity, interest, covenant, and collateral terms.
- Actual cash availability, including restrictions on borrowing proceeds, reserve-facility conditions, and the pace of cash use and capital spending.
- Whether Keyes can achieve positive unit economics as corn, natural gas, and other costs change, and whether RNG and other projects reach commercial operation on schedule.
- Whether the $4.8 million EdenIQ settlement is paid and how it affects reported liabilities and liquidity.
- Progress in remediating the material weakness and whether controls are subsequently found effective.