Aemetis, Inc. — FY 2016 Form 10-K
Reporting period: Year ended December 31, 2016. This annual filing compares FY 2016 with FY 2015; it does not provide a separate Q4-only financial summary. Unless otherwise noted, amounts are U.S. dollars.
Business context
Aemetis operates an ethanol and animal-feed-products plant in Keyes, California, and a biodiesel and refined-glycerin plant in Kakinada, India. The company is pursuing advanced biofuels and biochemicals, including a planned cellulosic ethanol facility using licensed LanzaTech technology. Keyes operated at an average of 101% of its stated 55-million-gallon capacity in both years; the facility is also described elsewhere as having 60-million-gallon nameplate capacity.
Financial performance and liquidity
| Metric | FY 2016 | FY 2015 |
|---|---|---|
| Revenue | $143.2 million | $146.6 million |
| Gross profit | $11.6 million; 8.1% margin | $4.2 million; 2.9% margin |
| Operating loss | $(0.8) million | $(8.6) million |
| Net loss | $(15.6) million; $(0.79) per share | $(27.1) million; $(1.37) per share |
| Operating cash flow | $0.4 million | $(0.8) million |
| Capital expenditures | $0.6 million | $0.1 million |
| Cash and cash equivalents, year-end | $1.5 million | $0.3 million |
| Total debt, year-end | $111.7 million | $100.9 million |
- Revenue declined 2%, while cost of goods sold fell 8%. Gross profit improved mainly because North American feedstock costs declined and milo use generated grant income.
- North America revenue was $128.7 million, down 1%; segment gross profit rose to $11.7 million from $3.1 million. India revenue declined 16% to $14.5 million, and the segment recorded a $67,000 gross loss versus $1.1 million gross profit.
- Interest expense was $11.5 million, up from $10.2 million, largely reflecting higher debt balances. A $2.0 million gain from settling the State Bank of India loan helped reduce the reported net loss.
- Year-end current assets were $7.0 million and current liabilities were $27.2 million; the reported current ratio was 0.26. Stockholders’ deficit was $49.8 million, and accumulated deficit was $129.9 million.
- Operating cash flow was positive but included a $6.4 million increase in accrued interest and fees. Financing provided $1.6 million net; cash used in investing was $0.6 million.
Material changes and notable items
- Keyes ethanol sales volume was nearly flat at 55.6 million gallons; average price rose 2% to $1.78 per gallon. WDG volume increased 3%, but its average price fell 11% to $70.61 per ton.
- India biodiesel volume fell 18% to 16,080 metric tons, while average price rose 2% to $739 per ton. Refined-glycerin volume decreased 5% and average price fell 13% to $582 per ton. Management cited higher feedstock costs and capital constraints on Indian production.
- The State Bank of India loan was repaid in 2016. Completing the settlement produced approximately $2.0 million of accrued-interest relief.
- EB-5 Phase I had raised $36 million in notes by the filing date; $34 million had been released by year-end, with $1 million in escrow and another $1 million to be funded. A $50 million Phase II offering was launched in October 2016. These are financing plans, not confirmed proceeds.
- In March 2017, Third Eye Capital extended its notes’ maturity to April 1, 2018, with a company option to extend to April 1, 2019 for an additional 5% fee. The amendment added a $3.1 million extension fee and a $750,000 amendment fee to debt and waived/deleted the free-cash-flow covenant. The company also disclosed a separate $2.1 million short-term lender note advanced in January 2017.
Outlook, risks and contingencies
- No quantified revenue, earnings, margin or production guidance is provided. Management said it believed planned operations, additional EB-5 funding, refinancing, working-capital availability, higher Indian sales and possible equity issuance could fund operations for at least a year, but cautioned that funding and positive operating cash flow were not assured.
- Management identifies substantial liquidity and refinancing risk: Third Eye Capital debt was approximately $61.6 million at year-end and scheduled debt repayments included $65.2 million in 2018. The company depends on lender accommodations and working-capital relationships with J.D. Heiskell and Secunderabad Oils.
- Commodity-price spreads, particularly corn and energy versus ethanol in North America and feedstock versus biodiesel in India, drive profitability. India’s Kakinada operation had negative gross margins in 2016. The filing warns that adverse spreads may force reduced or suspended production.
- North American operations rely heavily on J.D. Heiskell for feedstock and marketing arrangements; it accounted for 94% of North American segment revenue. India had two biodiesel customers representing 51% and 12% of segment revenue.
- The company is pursuing cellulosic ethanol development and planned plant expansion, but commercialization, financing, construction, regulatory approval and cost-effectiveness remain uncertain. EdenIQ merger litigation is pending; the company seeks specific performance and damages, and outcome cannot be predicted.
- Greenshift patent litigation remained unresolved. Courts had found the patents invalid and unenforceable, but reconsideration and possible appeals remained; the filing states damages could be $1 million or more if the company ultimately loses relevant issues.
- Other material risks include regulatory and environmental changes, foreign exchange and Indian policy exposure, debt covenants and potential dilution. The company reported no environmental accrual at year-end and no material contamination or related third-party claims known to it.
Key investor verification points
- Confirm current liquidity, cash generation, debt balances, maturities, covenant status and the terms and availability of EB-5 Phase II, refinancing and equity funding.
- Assess whether Keyes margins remain positive and whether the Kakinada plant can return to profitable production despite feedstock-cost volatility and constrained working capital.
- Verify actual progress, capital needs, approvals and commercial economics for the LanzaTech cellulosic project and any proposed Goodland, Kansas asset transaction.
- Track outcomes and potential financial exposure from the EdenIQ and Greenshift litigation.
- Review customer and supplier concentration, potential share dilution from convertible instruments, warrants and options, and the effect of the company’s negative stockholders’ equity.