Aemetis, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013. Financial statements are unaudited. Aemetis produces renewable fuels and chemicals, operating a biodiesel facility in India and an ethanol facility in Keyes, California.
Financial results
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Revenue | $19.42 million | $44.20 million |
| Gross profit (loss) | $0.25 million | ($2.26 million) |
| Gross margin | 1.3% | (5.1%) |
| Operating loss | ($4.20 million) | ($4.41 million) |
| Net loss | ($9.81 million) | ($8.36 million) |
| Net loss per share, basic and diluted | ($0.05) | ($0.06) |
| Cash used in operations | $3.96 million | $2.95 million |
Revenue fell 56% year over year. North American revenue declined to $7.88 million from $41.88 million, principally because the Keyes plant was idled for maintenance and unfavorable margins. India revenue rose to $11.54 million from $2.31 million, reflecting increased biodiesel, glycerin and refined palm oil sales, including a large biodiesel sale and crude palm oil trading. The Keyes plant operated at an average 17% of nameplate capacity during the quarter. Higher interest expense and a $0.96 million debt-extinguishment loss contributed to the larger net loss despite the improved gross result.
Financial position and liquidity
- At March 31, cash was $51,621, down from $290,603 at year-end. The filing says available funds covered less than one month of operating costs.
- Current assets were $5.80 million and current liabilities were $87.92 million, a working-capital deficit of approximately $82.12 million. Management reported a current ratio of 0.06.
- Total debt was $76.81 million, net of discounts; total assets were $94.76 million. Stockholders’ deficit was $3.38 million.
- Operating cash use was $3.96 million; investing activities provided $0.37 million, primarily from asset-sale proceeds; financing activities provided $3.19 million, mainly from borrowings. Cash decreased by $0.24 million overall.
- Interest expense was $5.11 million, compared with $3.97 million in Q1 2012. Debt issuance discounts, lender fees and stock- or warrant-related financing costs contributed to expense.
Material changes, outlook and risks
- Going concern: The company reported recurring losses, negative operating cash flow and a substantial working-capital deficit, and stated that substantial doubt existed about its ability to continue as a going concern. Continued operations depend on additional financing, lender support and improved operating cash flow. Additional funding was not assured.
- Senior lender: Third Eye Capital debt was approximately $58.1 million at quarter-end. The company had covenant violations that were waived or amended. The revolving facility was due July 6, 2013, and a $3.1 million advance plus interest was due by September 30, 2013. Amendments also added fees, raised interest temporarily and required share pledges. Subsequent to quarter-end, Third Eye arranged an additional $2 million borrowing, subject to customary closing conditions, with a $300,000 placement fee, 1 million shares and a lien on the CEO/Chairman’s personal assets.
- State Bank of India: The Indian subsidiary remained in default on principal, interest and covenants under its secured loan, which was classified as current. The bank had demanded repayment, and a recovery case was pending before the Debt Recovery Tribunal; enforcement could affect operations and property.
- Plant restart: Keyes restarted after planned maintenance in April 2013. The filing gives April 18 in its subsequent-events note and April 22 elsewhere. Management expected the restart and improved biodiesel margins to support cash generation, but supplied no quantified earnings or cash-flow guidance.
- Funding plans: Management planned to seek debt and equity financing, pursue remaining potential EB-5 note funding of up to $35 million, restructure the State Bank of India loan, and rely on plant operations and shareholder support. Availability of these sources was uncertain.
- Customer and supplier concentration: J.D. Heiskell accounted for 93% of North American segment revenue in Q1 2013. Five customers represented approximately 80% of India segment revenue. Key feedstock and working-capital arrangements depended on J.D. Heiskell in the U.S. and Secunderabad Oils in India.
- Controls: Management concluded disclosure controls were ineffective due to insufficient personnel with appropriate GAAP knowledge, experience and training. Remediation efforts included seeking qualified accounting hires and retaining a consultant.
Important facts for investors to verify
- Whether Aemetis obtained sufficient committed financing to fund operations, near-term debt obligations and its business plan.
- Current status of Third Eye Capital waivers, facility maturity and repayment requirements, including the additional borrowing’s closing and terms.
- Whether the Keyes restart produced sustained operations and positive cash flow, and whether the State Bank of India loan was restructured or enforced.
- Whether cash, working-capital and debt figures changed after quarter-end; confirm the filing’s differing reported Keyes restart dates.
- Progress in correcting the disclosed control weaknesses and the impact of financing-related share issuance and potential dilution.