Aemetis, Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2017. Financial statement amounts are in U.S. dollars; unless otherwise noted, amounts below are in millions. The company produces ethanol and related co-products in California and biodiesel and refined glycerin in India.
Financial results and liquidity
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Revenue | $31.574 | $33.326 |
| Gross profit (loss) | $(0.587) | $2.086 |
| Gross margin | (1.9%) | 6.3% |
| Operating loss | $(3.968) | $(1.010) |
| Net loss | $(8.527) | $(5.113) |
| Basic and diluted loss per share | $(0.43) | $(0.26) |
| Cash from (used in) operating activities | $(2.470) | $0.717 |
| Cash and cash equivalents | $0.231 | $1.486 at Dec. 31, 2016 |
| Total debt, net of discounts | $116.590 | $111.714 at Dec. 31, 2016 |
| Current assets / current liabilities | $4.930 / $29.001 | $7.045 / $27.216 at Dec. 31, 2016 |
Cost of goods sold exceeded revenue, producing a gross loss. Interest expense was $2.842 million and debt-related amortization expense was $1.683 million. Capital expenditures were $0.044 million; financing activities provided $0.993 million. Cash declined by $1.255 million during the quarter.
Performance changes and operating context
- Total revenue fell 5% year over year. North American revenue rose 7% to $29.953 million, while India revenue fell 69% to $1.621 million.
- North America generated a $0.696 million gross loss versus $1.893 million gross profit a year earlier. Management cited higher corn and milo costs, freight disruption and a 56% increase in natural gas and electricity costs. Ethanol sales volume and average price increased; WDG average price fell 11%, partly attributed to China tariffs and weaker regional dairy margins.
- India gross profit declined to $0.109 million from $0.193 million. Biodiesel sales volume fell 87%, which management attributed to feedstock costs rising 55% and working-capital constraints limiting purchases. Higher biodiesel and glycerin prices partly offset lower volumes.
- SG&A increased 10% to $3.295 million, including higher North American salaries and stock compensation. The accumulated deficit reached $138.414 million, and stockholders’ deficit was $57.839 million at quarter-end.
Debt, outlook and risks
- Total debt was $116.590 million, including $64.524 million in senior secured notes and $33.500 million in EB-5 notes on the balance sheet. The senior notes are secured, include cross-default provisions and carry substantial interest costs. Scheduled debt repayments include $12.855 million in the 12 months ending March 31, 2018 and $88.569 million in the following 12 months.
- In March 2017, Third Eye Capital extended the senior debt maturity to April 1, 2018, added a 5% extension fee to principal, and allowed a further extension to April 1, 2019 for an additional 5% fee. It also waived certain defaults and removed the free-cash-flow covenant prospectively. A separate $2.1 million Third Eye Capital note was due May 30, 2017. After quarter-end, the company borrowed an additional $1.5 million from Third Eye Capital at 14%, due no later than June 15, 2017, subject to earlier repayment triggers.
- Management cited reliance on senior-lender funding and the need to refinance debt, raise capital and obtain EB-5 financing. Plans included seeking $50 million through EB-5 Phase II, releasing remaining Phase I escrow funds, pursuing equity sales, improving Keyes margins and increasing India shipments. These are plans, not assured funding or formal financial guidance.
- Management believed its plans could fund operations for at least a year, but warned that available facilities and operating cash might be insufficient and additional financing might not be available on acceptable terms. The current ratio was 0.17 at March 31, 2017.
- Key risks include volatile product and feedstock prices, energy and freight costs, limited working capital, dependence on lenders and financing, and customer concentration. The filing reports litigation with EdenIQ and a patent-related dispute with GS Cleantech; outcomes and potential losses are uncertain. The company stated that risk factors were unchanged from its 2016 Form 10-K.
Important facts for investors to verify
- Whether the company obtained the anticipated EB-5 proceeds, equity funding and senior-debt refinancing, and met near-term repayment obligations.
- Whether operations can produce positive cash flow and restore positive gross margins, particularly amid feedstock, energy and freight cost volatility.
- Whether India production and shipments recovered from the working-capital-constrained quarter and how policy or market changes affect demand and pricing.
- The status and potential financial impact of the EdenIQ and GS Cleantech litigation, including appeals or settlement developments.
- The extent of dilution from outstanding options, warrants, convertible securities and any future equity issuance.