Aemetis, Inc. — FY2019 Form 10-K
Business context and reporting period. This is an annual report for the fiscal year ended December 31, 2019, filed March 12, 2020; it does not provide standalone fourth-quarter results. Aemetis operates an ethanol and coproduct plant in California and a biodiesel and glycerin plant in India, and is developing cellulosic ethanol, dairy biogas, and carbon dioxide projects.
Key financial results
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $202.0 million | $171.5 million |
| Gross profit / margin | $12.7 million / 6.3% | $5.4 million / 3.2% |
| Operating loss | $4.9 million | $10.9 million |
| Net loss | $39.5 million | $36.3 million |
| Net loss attributable to Aemetis | $35.7 million | $33.0 million |
| Cash from operating activities | $(2.0) million | $(5.5) million |
| Capital expenditures | $8.6 million | $4.1 million |
| Cash from financing activities | $10.1 million | $10.4 million |
| Cash and cash equivalents at year-end | $0.7 million | $1.2 million |
| Total debt, net of issuance costs | $202.4 million | $175.1 million |
Margins and segments. Revenue rose 18%, while gross profit more than doubled, driven chiefly by India. North America revenue increased 3% to $154.1 million, but gross profit declined 4% to $4.0 million; higher corn and energy costs weighed on results. India revenue increased 123% to $47.9 million and gross profit rose to $8.7 million, reflecting substantially greater biodiesel sales, including government oil-company tenders. Consolidated interest expense was $21.1 million, debt-related fees and amortization were $4.7 million, and Series A preferred-unit accretion was $2.3 million.
Operating volumes and price indicators. Ethanol sales were 64.7 million gallons versus 65.6 million; average selling price was $1.77 per gallon versus $1.74. WDG sales were 428,000 tons versus 424,000, at $80.65 per ton versus $76.38. Biodiesel sales rose to 47,000 metric tons from 19,800, while average price increased to $904 per ton from $857. Refined glycerin sales rose to 5,173 tons from 4,748, but average price fell 42% to $543 per ton.
Material changes and notable items
- India’s stronger biodiesel volumes and lower average feedstock costs contributed to its improved gross profit; refined glycerin pricing was sharply lower.
- Net loss widened despite improved operating performance, reflecting increased interest costs, $2.3 million of preferred-unit accretion, and a $6.2 million EdenIQ litigation-fee accrual. The 2018 comparison included a $0.9 million intangible-asset impairment.
- On December 31, 2019, Aemetis exercised its option to acquire all GAFI stock, bringing the Goodland plant and its financing obligations under direct ownership.
- Cash used for investment increased to $8.6 million, primarily for U.S. construction projects. Financing cash flow included borrowings, preferred-unit proceeds, grants, and Indian working-capital funding, partly offset by repayments.
- A $1.0 million advance for California Carbon Allowance credits was recorded as a contract liability at year-end; control transferred in January 2020.
Liquidity, outlook, risks, and contingencies
- Severe liquidity and refinancing risk. Year-end cash was $0.7 million, the current ratio was 0.22, and total liabilities substantially exceeded assets; stockholders’ deficit was $154.4 million. Management reported substantial doubt about the Company’s ability to continue as a going concern. The filing states that management believes planned actions and subsequent financing will address the doubt, but this depends on execution and funding.
- Third Eye Capital debt maturities were concentrated in 2020, with principal, interest, and fees subject to extension or refinancing. Aemetis reported no remaining availability under its revolving credit facility. Working capital and plant operations also depend on J.D. Heiskell in California and Gemini/Secunderabad Oils in India.
- On March 6, 2020, Third Eye Capital made an $18 million reserve liquidity facility available through April 1, 2021. Aemetis said it did not then expect to draw it. Borrowed amounts bear 30% annual interest (40% after default); drawing also triggers a $500,000 nonrefundable fee. The facility is secured and becomes payable upon specified financing or sale transactions or maturity.
- Management expected the Messer CO2 project and dairy biogas pipeline to begin operating in the second quarter of 2020, and cited plans to improve plant efficiency, use lower-cost feedstocks, grow Indian fuel sales, and raise funds for Riverbank cellulosic ethanol. These are forward-looking plans, not reported results.
- Stanislaus County property-tax accrual was $4.1 million after default on a payment plan. The County agreed after year-end not to enforce collection while the parties discussed a new plan.
- The EdenIQ court awarded approximately $6.2 million in fees and costs to EdenIQ; Aemetis recorded the charge and said it planned to appeal. The outcome remained uncertain.
- Management concluded disclosure controls and internal control over financial reporting were ineffective, citing a material weakness in oversight and review of a third-party specialist’s work. Remediation was ongoing and testing was incomplete. The external auditor issued an unqualified opinion on the financial statements but did not audit internal-control effectiveness.
- The filing identifies commodity-price and feedstock-spread exposure, customer and supplier concentration, regulatory and environmental risks, Indian currency and policy risks, project financing and construction risks, and potential effects of COVID-19. In January and February 2020, Nasdaq notified Aemetis of deficiencies in minimum bid price and publicly held market value, with compliance periods ending July 29 and August 10, 2020, respectively.
Most important facts for investors to verify
- Current debt balances, maturity extensions, covenant status, and whether the high-cost reserve facility or other financing was drawn or refinanced.
- Cash runway, working-capital support from key counterparties, and the status of the going-concern conditions.
- Actual start-up, production, revenues, costs, and funding for the CO2, biogas, Riverbank, and Goodland projects.
- Resolution and cash-payment timing for the $6.2 million EdenIQ award and the $4.1 million property-tax accrual.
- Progress in remediating the material weakness and subsequent Nasdaq listing compliance.
- Whether India biodiesel tender volumes and product margins are sustainable, and whether customer concentration or glycerin-price weakness changed.