Aemetis, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Unaudited consolidated results; financial amounts below are in U.S. dollars and generally rounded to millions unless stated otherwise.
Business context and results
Aemetis develops and operates renewable-fuels and biochemicals businesses. Its North American operations include a 60-million-gallon-per-year ethanol plant in Keyes, California, and the partially completed Goodland, Kansas plant; its India segment operates a 50-million-gallon-per-year biodiesel and glycerin facility in Kakinada.
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Revenue | $43.0 million | $31.6 million |
| Gross profit (loss) | $1.9 million | ($0.6 million) |
| Gross margin | 4.3% | (1.9%) |
| Operating loss | ($2.0 million) | ($4.0 million) |
| Net loss | ($11.1 million) | ($8.5 million) |
| Net loss attributable to Aemetis | ($10.4 million) | ($8.5 million) |
| Basic and diluted loss per share | ($0.51) | ($0.43) |
| Net cash used in operating activities | ($0.03 million) | ($2.47 million) |
| Capital expenditures | $1.0 million | $0.04 million |
Revenue rose 36% year over year: North America increased 24% to $37.2 million, while India increased 260% to $5.8 million. Keyes ethanol sales volume rose 19% to 16.1 million gallons and WDG volume rose 16% to 102,600 tons. India biodiesel volume increased to 5,286 metric tons from 850 metric tons. The Keyes plant averaged production at 117% of its stated 55-million-gallon-per-year capacity during the quarter.
Despite improved gross profit and a smaller operating loss, net loss widened. Interest-rate expense rose to $4.3 million from $2.8 million, and amortization expense rose to $4.8 million from $1.7 million. The company recorded approximately $3.1 million of debt-extension/redemption-fee amortization and $0.5 million of amendment fees related to its senior debt restructuring.
Financial position and liquidity
- Cash was $0.4 million at March 31, 2018, compared with $0.4 million at year-end. Current assets were $11.3 million and current liabilities were $57.8 million, a current ratio of 0.20 and a current-asset shortfall of approximately $46.4 million.
- Total debt, net of discounts, was $162.2 million, up from $153.8 million at December 31, 2017. The debt note reports $35.2 million of current debt maturities. Stockholders’ deficit was $90.8 million.
- Operating cash use was nearly flat, but cash declined $35,000 after $1.0 million of investing outflows and $1.0 million of financing inflows. Operating cash flow benefited from non-cash charges and increases in accrued interest and accounts payable.
- The March 2018 senior-lender amendment extended Third Eye Capital note maturities to April 1, 2020, with a possible further extension to April 1, 2021 for a 5% fee. The amendment added a $0.5 million fee to debt and involved a 6% extension/redemption fee. A reserve liquidity facility provides up to $6 million, but carries 30% annual interest (40% following default); no amount was drawn at quarter-end.
Outlook, risks, and unusual items
- Going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern. It needs to refinance debt or obtain continued senior-lender cooperation to meet obligations over the next 12 months; substantially all excess operating cash has been required to go to the senior lender.
- Management’s plans include improving Keyes operations and margins, developing Riverbank cellulosic ethanol using licensed technologies, monetizing Keyes CO2, expanding India fuel sales, and obtaining funding through refinancing, equity, vendor financing, and the $50 million EB-5 Phase II offering. The company also relies on approval of a proposed $125 million USDA loan guarantee for Riverbank. These plans and funding sources are not assured; the filing gives no formal earnings or revenue guidance.
- Results remain exposed to volatile feedstock, fuel, and energy prices. North American revenue is highly concentrated: J.D. Heiskell-related sales represented 99.4% of segment revenue. The filing also cites reliance on working-capital providers and uncertainty about continued lender accommodations.
- The company consolidated Goodland Advanced Fuels, Inc. as a variable interest entity. Its Goodland plant was not yet operating and had $24.5 million of secured and revolving notes outstanding.
- Aemetis is pursuing litigation involving EdenIQ and related parties; discovery remained pending and the company said it could not estimate its chances of prevailing. Risk factors were unchanged from the 2017 Form 10-K.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the company can refinance or otherwise address near-term maturities and sustain lender support, given its low cash balance and stated going-concern uncertainty.
- Whether the EB-5 Phase II offering, remaining escrow releases, USDA loan-guarantee approval, and other planned financing are completed on expected terms and timing.
- Whether improved operating volumes and gross profit can persist while managing feedstock-price exposure, customer concentration, and high interest and debt-related charges.
- The status and potential financial effects of the EdenIQ litigation and any developments in the company’s debt covenants or lender arrangements.