UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
———————
FORM 10-Q
———————
☑ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31,
2021
OR
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number: 001-36475
———————
AEMETIS, INC.
(Exact name of registrant as specified in its
charter)
———————
|
Nevada
|
26-1407544
|
|
(State or other jurisdiction
|
(I.R.S. Employer
|
|
of incorporation or organization)
|
Identification No.)
|
20400 Stevens Creek Blvd., Suite 700
Cupertino, CA 95014
(Address of Principal Executive Offices, including zip
code)
(408) 213-0940
(Registrant’s
telephone number, including area code)
|
Title of each class of registered securities
|
|
Trading Symbol
|
|
Name of each exchange on which registered
|
|
Common Stock, $0.001 par value
|
|
AMTX
|
|
NASDAQ
|
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ☑
No ☐
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes ☑
No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☑
Emerging growth company ☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No
☑
The
number of shares outstanding of the registrant’s Common Stock
on April 30, 2021 was 31,414,465 shares.
AEMETIS, INC.
FORM 10-Q
Quarterly Period Ended March 31, 2021
INDEX
|
PART I--FINANCIAL INFORMATION
|
||
|
4
|
||
|
34
|
||
|
44
|
||
|
44
|
||
|
PART II--OTHER INFORMATION
|
||
|
45
|
||
|
45
|
||
|
45
|
||
|
45
|
||
|
45
|
||
|
45
|
||
|
46
|
||
|
47
|
||
2
On one or more occasions, we may make forward-looking statements in
this Quarterly Report on Form 10-Q, including statements regarding
our assumptions, projections, expectations, targets, intentions or
beliefs about future events or other statements that are not
historical facts. Forward-looking statements in this Quarterly
Report on Form 10-Q include, without limitation, statements
regarding management’s plans; trends in market conditions
with respect to prices for inputs for our products versus prices
for our products; our ability to leverage approved feedstock
pathways; our ability to leverage our location and infrastructure;
our ability to incorporate lower-cost, non-food advanced biofuels
feedstock at the Keyes plant; our ability to adopt value-add
by-product processing systems; our ability to expand into
alternative markets for biodiesel and its by-products, including
continuing to expand our sales into international markets; our
ability to maintain and expand strategic relationships with
suppliers; our ability to continue to develop new and to maintain
and protect new and existing intellectual property rights; our
ability to adopt, develop and commercialize new technologies; our
ability to refinance our senior debt on terms reasonably acceptable
to us or at all; our ability to continue to fund operations and our
future sources of liquidity and capital resources; our ability to
sell additional notes under our EB-5 note program and our
expectations regarding the release of funds from escrow under our
EB-5 note program; our ability to improve margins; and our ability
to raise additional capital. Words or phrases such as
“anticipates,” “may,” “will,”
“should,” “believes,”
“estimates,” “expects,”
“intends,” “plans,” “predicts,”
“projects,” “targets,” “will likely
result,” “will continue” or similar expressions
are intended to identify forward-looking statements. These
forward-looking statements are based on current assumptions and
predictions and are subject to numerous risks and uncertainties.
Actual results or events could differ materially from those set
forth or implied by such forward-looking statements and related
assumptions due to certain factors, including, without limitation,
the risks set forth under the caption “Risk Factors”
below, which are incorporated herein by reference as well as those
business risks and factors described elsewhere in this report and
in our other filings with the Securities and Exchange Commission
(the “SEC”), including without limitation, our most
recent Annual Report on Form 10-K.
3
PART I - FINANCIAL
INFORMATION
Item
1 - Financial Statements.
AEMETIS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except for par value)
|
|
March
31,
2021
|
December
31,
2020
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
and cash equivalents ($1,102 and $235 respectively from
VIE)
|
$15,787
|
$592
|
|
Accounts
receivable, net of allowance for doubtful accounts of $1,404 and
$1,260 as of March 31, 2021 and December 31, 2020
|
1,755
|
1,821
|
|
Inventories
|
4,210
|
3,969
|
|
Prepaid
expenses ($135 and $192 respectively from VIE)
|
2,141
|
750
|
|
Other
current assets ($91 and $741 respectively from VIE)
|
323
|
1,551
|
|
Total
current assets
|
24,216
|
8,683
|
|
|
|
|
|
Property,
plant and equipment, net ($26,440 and $22,628 respectively from
VIE)
|
113,090
|
109,880
|
|
Operating
lease right-of-use assets ($23 and $28 respectively from
VIE)
|
2,783
|
2,889
|
|
Other
assets ($24 and $24 respectively from VIE)
|
3,644
|
3,687
|
|
Total
assets
|
$143,733
|
$125,139
|
|
|
|
|
|
Liabilities and stockholders' deficit
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable ($6,988 and $6,271 respectively from
VIE)
|
$17,574
|
$20,739
|
|
Current
portion of long term debt
|
11,848
|
44,974
|
|
Short
term borrowings
|
13,559
|
14,541
|
|
Mandatorily
redeemable Series B convertible preferred stock
|
3,277
|
3,252
|
|
Accrued
property taxes
|
6,085
|
5,674
|
|
Accrued
contingent litigation fees
|
6,200
|
6,200
|
|
Current
portion of operating lease liability ($10 and $10 respectively from
VIE)
|
325
|
316
|
|
Current
portion of Series A preferred units ($3,000 and $2,015 respectively
from VIE)
|
3,000
|
2,015
|
|
Other
current liabilities ($300 and $129 respectively from
VIE)
|
4,498
|
4,524
|
|
Total
current liabilities
|
66,366
|
102,235
|
|
Long
term liabilities:
|
|
|
|
Senior
secured notes and revolving notes
|
129,968
|
125,624
|
|
EB-5
notes
|
32,500
|
32,500
|
|
Other
long term debt
|
11,540
|
11,980
|
|
Series
A preferred units ($36,293 and $32,022 respectively from
VIE)
|
36,293
|
32,022
|
|
Operating
lease liability ($8 and $11 respectively from VIE)
|
2,502
|
2,578
|
|
Other
long term liabilities ($77 and $74 respectively from
VIE)
|
2,931
|
2,944
|
|
Total
long term liabilities
|
215,734
|
207,648
|
|
|
|
|
|
Stockholders'
deficit:
|
|
|
|
Series
B convertible preferred stock, $0.001 par value; 7,235 authorized;
1,323 shares issued and outstanding each period, respectively
(aggregate liquidation preference of $3,969 for each period
respectively)
|
1
|
1
|
|
Common
stock, $0.001 par value; 40,000 authorized; 29,851 and 22,830
shares issued and outstanding each period,
respectively
|
30
|
23
|
|
Additional
paid-in capital
|
157,933
|
93,426
|
|
Accumulated
deficit
|
(292,192)
|
(274,080)
|
|
Accumulated
other comprehensive loss
|
(4,139)
|
(4,114)
|
|
Total
stockholders' deficit
|
(138,367)
|
(184,744)
|
|
Total
liabilities and stockholders' deficit
|
$143,733
|
$125,139
|
The accompanying notes are an integral part of the financial
statements.
4
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE
LOSS
(Unaudited, in thousands except for earnings per
share)
|
|
For the three months
ended March 31,
|
|
|
|
2021
|
2020
|
|
Revenues
|
$42,807
|
$39,480
|
|
Cost
of goods sold
|
46,415
|
39,913
|
|
Gross
loss
|
(3,608)
|
(433)
|
|
|
|
|
|
Research
and development expenses
|
23
|
117
|
|
Selling,
general and administrative expenses
|
5,382
|
3,936
|
|
Operating
loss
|
(9,013)
|
(4,486)
|
|
|
|
|
|
Other
(income) expense:
|
|
|
|
Interest
expense
|
|
|
|
Interest
rate expense
|
5,965
|
5,586
|
|
Debt
related fees and amortization expense
|
1,215
|
1,290
|
|
Accretion
of Series A preferred units
|
1,943
|
960
|
|
Other
income
|
(31)
|
(63)
|
|
Loss
before income taxes
|
(18,105)
|
(12,259)
|
|
Income
tax expense (benefit)
|
7
|
(207)
|
|
Net
loss
|
$(18,112)
|
$(12,052)
|
|
|
|
|
|
Other
comprehensive loss
|
|
|
|
Foreign
currency translation loss
|
(25)
|
(668)
|
|
Comprehensive
loss
|
$(18,137)
|
$(12,720)
|
|
|
|
|
|
Net
loss per common share
|
|
|
|
Basic
|
$(0.69)
|
$(0.58)
|
|
Diluted
|
$(0.69)
|
$(0.58)
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
|
Basic
|
26,289
|
20,651
|
|
Diluted
|
26,289
|
20,651
|
The accompanying notes are an integral part of the financial
statements.
5
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
|
For the three months ended March 31,
|
|
|
|
2021
|
2020
|
|
Operating activities:
|
|
|
|
Net
loss
|
$(18,112)
|
$(12,052)
|
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
Share-based
compensation
|
835
|
310
|
|
Depreciation
|
1,386
|
1,090
|
|
Debt
related fees and amortization expense
|
1,215
|
1,290
|
|
Intangibles
and other amortization expense
|
12
|
12
|
|
Accretion
of Series A preferred units
|
1,943
|
960
|
|
Deferred
tax benefit
|
-
|
(215)
|
|
Provision
for bad debts
|
144
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(78)
|
384
|
|
Inventories
|
(242)
|
1,075
|
|
Prepaid
expenses
|
(1,391)
|
(117)
|
|
Other
assets
|
1,363
|
428
|
|
Accounts
payable
|
(1,795)
|
1,074
|
|
Accrued
interest expense and fees
|
571
|
5,440
|
|
Other
liabilities
|
76
|
931
|
|
Net
cash provided by (used in) operating activities
|
(14,073)
|
610
|
|
|
|
|
|
Investing activities:
|
|
|
|
Capital
expenditures
|
(6,560)
|
(2,372)
|
|
Grant
proceeds received for capital expenditures
|
1,191
|
-
|
|
Net
cash used in investing activities
|
(5,369)
|
(2,372)
|
|
|
|
|
|
Financing activities:
|
|
|
|
Proceeds
from borrowings
|
-
|
3,780
|
|
Repayments
of borrowings
|
(31,631)
|
(3,645)
|
|
Grant
proceeds received for capital expenditures
|
115
|
-
|
|
Payments
on finance leases
|
(124)
|
-
|
|
Proceeds
from issuance of common stock in equity offering
|
62,438
|
-
|
|
Proceeds
from the exercise of stock options
|
1,003
|
-
|
|
Proceeds
from Series A preferred units financing
|
3,130
|
1,285
|
|
Series
A preferred financing redemption
|
(300)
|
-
|
|
Net
cash provided by financing activities
|
34,631
|
1,420
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
6
|
(11)
|
|
Net
change in cash and cash equivalents for period
|
15,195
|
(353)
|
|
Cash
and cash equivalents at beginning of period
|
592
|
656
|
|
Cash
and cash equivalents at end of period
|
$15,787
|
$303
|
|
|
|
|
|
Supplemental
disclosures of cash flow information, cash paid:
|
|
|
|
Cash
paid for interest
|
$5,296
|
$182
|
|
Income
taxes paid
|
7
|
8
|
|
Supplemental
disclosures of cash flow information, non-cash
transactions:
|
|
|
|
Subordinated
debt extension fees added to debt
|
340
|
340
|
|
Fair
value of warrants issued to subordinated debt holders
|
281
|
93
|
|
TEC
debt extension, waiver fees, promissory notes fees added to
debt
|
1,215
|
29
|
|
Capital
expenditures in accounts payable
|
4,556
|
2,289
|
|
Capital
expenditures purchased on financing
|
-
|
5,652
|
The accompanying
notes are an integral part of the financial
statements.
6
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in thousands)
|
For the three months ended March 31, 2021
|
||||||||
|
|
|
|
|
|
Accumulated Other
|
|
||
|
|
Series B Preferred Stock
|
Common Stock
|
Additional
|
Accumulated
|
Comprehensive
|
`Total Stockholders'
|
||
|
Description
|
Shares
|
Dollars
|
Shares
|
Dollars
|
Paid-in Capital
|
Deficit
|
Loss
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2020
|
1,323
|
$1
|
22,830
|
$23
|
$93,426
|
$(274,080)
|
$(4,114)
|
$(184,744)
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
common stock
|
-
|
-
|
5,682
|
6
|
62,389
|
-
|
-
|
62,395
|
|
Stock options
exercised
|
-
|
-
|
1,226
|
1
|
1,002
|
-
|
-
|
1,003
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
835
|
-
|
-
|
835
|
|
Issuance and
exercise of warrants
|
-
|
-
|
113
|
-
|
281
|
-
|
-
|
281
|
|
Foreign
currency translation loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(25)
|
(25)
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(18,112)
|
-
|
(18,112)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
March 31, 2021
|
1,323
|
$1
|
29,851
|
$30
|
$157,933
|
$(292,192)
|
$(4,139)
|
$(138,367)
|
|
For the three months ended March 31, 2020
|
||||||||
|
|
|
|
|
|
Accumulated Other
|
|
||
|
|
Series B Preferred Stock
|
Common Stock
|
Additional
|
Accumulated
|
Comprehensive
|
Total Stockholders'
|
||
|
Description
|
Shares
|
Dollars
|
Shares
|
Dollars
|
Paid-in Capital
|
Deficit
|
Loss
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2019
|
1,323
|
$1
|
20,570
|
$21
|
$86,852
|
$(237,421)
|
$(3,825)
|
$(154,372)
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
310
|
-
|
-
|
310
|
|
Issuance and
exercise of warrants
|
-
|
-
|
113
|
-
|
93
|
-
|
-
|
93
|
|
Foreign
currency translation loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(668)
|
(668)
|
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(12,052)
|
-
|
(12,052)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
March 31, 2020
|
1,323
|
$1
|
20,683
|
$21
|
$87,255
|
$(249,473)
|
$(4,493)
|
$(166,689)
|
The accompanying
notes are an integral part of the financial
statements.
7
1.
Nature of Activities and Summary of Significant Accounting
Policies
Nature of Activities.
Headquartered in Cupertino, California, Aemetis, Inc. (collectively
with its subsidiaries on a consolidated basis,
“Aemetis,” the “Company,” “we,”
“our” or “us”) is an international
renewable natural gas, renewable fuels and byproducts company
focused on the acquisition, development and commercialization of
innovative negative carbon intensity products and technologies that
replace traditional petroleum-based products.
Founded in 2006, we own and operate a 65 million gallon per year
ethanol production facility located in Keyes, California (the
“Keyes Plant”). In addition to low carbon renewable
fuel ethanol, the Keyes Plant produces Wet Distillers Grains
(“WDG”), Distillers Corn Oil (“DCO”), and
Condensed Distillers Solubles (“CDS”), all of which are
sold to local dairies and feedlots as animal feed. We also own and
operate a 50 million gallon per year renewable chemical and
advanced fuel production facility (“Kakinada Plant”) on
the East Coast of India that produces high quality distilled
biodiesel and refined glycerin for customers in India and Europe.
We operate a research and development laboratory to develop
efficient conversion technologies using waste feedstocks to produce
biofuels and biochemicals. Additionally, we own a partially
completed plant in Goodland, Kansas (the “Goodland
Plant”) through our subsidiary Goodland Advanced Fuels, Inc.,
(“GAFI”), which was formed to acquire the Goodland
Plant. On December 31, 2019 we exercised an option to acquire all
capital stock of GAFI for $10 and consolidated assets, liabilities,
and equity of GAFI are included as a wholly owned subsidiary from
December 31, 2019.
We lease a site in Riverbank, California, near the Keyes Plant,
where we plan to utilize biomass-to-fuel technology that we have
licensed from LanzaTech Technology (“LanzaTech”) and
InEnTec Technology (“InEnTec”) to build a cellulosic
ethanol production facility (the “Riverbank Cellulosic
Ethanol Facility”). By producing ultra-low carbon renewable
cellulosic ethanol, we expect to capture higher value D3 RINs and
California’s LCFS credits. D3 RINs have a higher value in the
marketplace than D6 RINs due to D3 RINs’ relative scarcity
and mandated pricing formula from the United States
EPA.
We also own and operate the Kakinada Plant with a nameplate
capacity of 150 thousand metric tons per year, or about 50 million
gallons per year. We believe the Kakinada Plant is one of the
largest biodiesel production facilities in India on a nameplate
capacity basis. The Kakinada Plant is capable of processing a
variety of vegetable oils and animal fat waste feedstocks into
biodiesel that meet international product standards. The Kakinada
Plant also distills the crude glycerin byproduct from the biodiesel
refining process into refined glycerin, which is sold to the
pharmaceutical, personal care, paint, adhesive and other
industries.
During 2018, Aemetis Biogas, LLC (“ABGL”) was formed to
construct bio-methane anaerobic digesters at local dairies near the
Keyes Plant, many of whom also purchase WDG produced at the Keyes
Plant. The digesters are connected via a pipeline owned by ABGL to
a gas cleanup and compression unit being built at the Keyes Plant
to produce Renewable Natural Gas (“RNG”). During the
third quarter of 2020, ABGL completed construction on the first two
diary digesters along with the pipeline that carries bio-methane
from these dairies to the Keyes Plant. Upon receiving the
bio-methane from the dairies, impurities are removed, and the
bio-methane is converted to RNG where it will be either injected
into the local gas utility pipeline, supplied to a renewable
compressed natural gas (“RCNG”) truck loading station
that will service local trucking fleets, or used as renewable
energy at the Keyes Plant.
In December 2018, we acquired a 5.2-acre parcel of land for the
construction of a gas-to-liquid CO₂ production facility by
Messer. Aemetis sells carbon dioxide (“CO₂”)
produced at the Keyes Plant (the “CO₂ Project”)
to Messer for conversion and sale into the food processing,
beverage, and technology sectors. We commenced operations in late
April 2020 and started recognizing revenue from this project in the
second quarter of 2020.
8
On March 18, 2020, in order to address a worldwide shortage of hand
sanitizer during the COVID-19 pandemic, the US Treasury Tobacco and
Alcohol Tax and Trade Bureau (the “TTB”) provided
emergency waivers allowing fuel ethanol plants to produce
high-grade alcohol for use in the production of hand sanitizer.
Immediately following the emergency waiver for ethanol producers in
March, Aemetis began supplying high-grade alcohol for the
production of hand sanitizer. During the first week of April 2020,
Aemetis applied for and was approved by the TTB as a Distilled
Spirits Producer (“DSP”), allowing the Company to
produce fuel ethanol, high-grade alcohol for sanitizer, and other
health care and sanitary products, as well as industrial alcohol
and potable alcohol for beverage spirits.
To further address this market, Aemetis began a series of capital
projects at the Keyes Plant that will ultimately enable the Company
to produce US Pharmacopeia (“USP”) grade alcohol for
sale into these key medical, consumer, governmental and industrial
alcohol markets. During June 2020, Aemetis renamed Biofuels
Marketing, Inc. as Aemetis Health Products, Inc., and began a sales
and marketing strategy of blending, bottling, and selling hand
sanitizer into bulk, retail branded, and white label markets.
Additionally, Aemetis Health Products, Inc. is developing sales and
marketing channels for other personal protective
equipment.
In December 2020, Aemetis Properties Riverbank, Inc., acquired less
than a 20% ownership in Nevo Motors, Inc. (“Nevo
Motors”). Under this agreement, Nevo Motors will utilize
certain of Aemetis’ existing and future manufacturing
facilities and fueling stations, as well as renewable natural gas
and renewable electricity produced by Aemetis. The investment has
been recorded at zero value as of March 31, 2021 and December 31,
2020.
During the first quarter of 2021, Aemetis announced its
“Carbon Zero” biofuels production plants designed to
produce biofuels, including renewable jet and diesel fuel utilizing
cellulosic hydrogen and non-edible renewable oils sourced from
existing Aemetis biofuels plants and other sources. The first
plant, in Riverbank, California, “Carbon Zero 1”, is
expected to utilize hydroelectric and other renewable power
available onsite to produce 45 million gallons per year of jet
fuel, renewable diesel, and other byproducts. The plant is expected
to supply the aviation and truck markets with ultra-low carbon
renewable fuels to reduce greenhouse gas (“GHG”)
emissions and other pollutants associated with conventional
petroleum-based fuels.
On April 1, 2021, Aemetis established a new subsidiary named
Aemetis Carbon Capture, Inc. that is expected to initially
capture, dehydrate, compress, and sequester CO₂ from
Aemetis Biogas dairy digester projects. Additional capacity for the
capture and storage of CO₂ from other carbon emission sources
is under development.
Basis of Presentation and Consolidation. These consolidated financial statements include
the accounts of Aemetis. Additionally, we consolidate all entities
in which we have a controlling financial. A controlling financial
interest is usually obtained through ownership of a majority of the
voting interests. However, an enterprise must consolidate a
variable interest entity (“VIE”) if the enterprise is
the primary beneficiary of the VIE, even if the enterprise does not
own a majority of the voting interests. The primary beneficiary is
the party that has both the power to direct the activities of the
VIE that most significantly impact the VIE’s economic
performance, and the obligation to absorb losses or the right to
receive benefits from the VIE that could potentially be significant
to the VIE. ABGL was assessed to be a VIE and through the Company's
ownership interest in all of the outstanding common stock, the
Company has been determined to be the primary beneficiary and
accordingly, the assets, liabilities, and operations of ABGL are
consolidated into those of the Company.
All intercompany balances and transactions have been eliminated in
consolidation.
9
The accompanying consolidated condensed balance sheet as of March
31, 2021, the consolidated condensed statements of operations and
comprehensive loss for the three months ended March 31, 2021 and
2020, the consolidated condensed statements of cash flows for the
three months ended March 31, 2021 and 2020, and the consolidated
condensed statements of stockholders’ deficit for the three
months ended March 31, 2021 and 2020 are unaudited. The
consolidated condensed balance sheet as of December 31, 2020 was
derived from the 2020 audited consolidated financial statements and
notes thereto. The consolidated condensed financial statements in
this report should be read in conjunction with the 2020 audited
consolidated financial statements and notes thereto included in the
Company’s annual report on Form 10-K for the year ended
December 31, 2020. The accompanying consolidated condensed
financial statements have been prepared in accordance with
accounting principles generally accepted in the United States
(“U.S. GAAP”) and pursuant to the rules and regulations
of the SEC. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with U.S.
GAAP have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of Company’s management, the unaudited interim
consolidated condensed financial statements for the three months
ended March 31, 2021 and 2020 have been prepared on the same basis
as the audited consolidated statements as of December 31, 2020 and
reflect all adjustments, consisting primarily of normal recurring
adjustments, necessary for the fair presentation of its statement
of financial position, results of operations and cash flows. The
results of operations for the three months ended March 31, 2021 are
not necessarily indicative of the operating results for any
subsequent quarter, for the full fiscal year or any future
periods.
Use of Estimates. The
preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements, revenues, and expenses during the reporting period. To
the extent there are material differences between these estimates
and actual results, the Company’s consolidated financial
statements will be affected.
Revenue Recognition. We derive
revenue primarily from sales of ethanol and related co-products in
North America, and biodiesel and refined glycerin in India pursuant
to supply agreements and purchase order contracts. We assessed the
following criteria under the Accounting Standards Codification
(“ASC”) 606 guidance: (i) identify the contracts with
customer, (ii) identify the performance obligations in the
contract, (iii) determine the transaction price, (iv) allocate the
transaction price to the performance obligations, and (v) recognize
revenue when the entity satisfies the performance
obligations.
North America:
In North America, until May 13, 2020,
we sold all our ethanol to J.D. Heiskell & Co. (“J.D.
Heiskell”) under the Working Capital and Purchasing Agreement
(the “J.D. Heiskell Purchasing Agreement”). On May 13,
2020, we entered into an amendment to the Corn Procurement and
Working Capital Agreement with J.D. Heiskell (the “Corn
Procurement and Working Capital”), under the terms of which
we buy all corn from J.D. Heiskell and sell all WDG and corn oil we
produce to J.D. Heiskell. Following May 13, 2020, we sold the
majority of our fuel ethanol production to one customer, Kinergy
Marketing, LLC (“Kinergy”), through individual sales
transactions. Given the similarity of the individual sales
transactions with Kinergy, we have assessed them as a portfolio of
similar contracts. The performance obligation is satisfied by
delivery of the physical product to one of Kinergy’s
contracted trucking companies. Upon delivery, the customer has the
ability to direct the use of the product and receive substantially
all of its benefits. The transaction price is determined based on
daily market prices negotiated by Kinergy for ethanol and by our
marketing partner A.L. Gilbert Company (“A.L. Gilbert”)
for WDG. There is no transaction price allocation
needed.
During the first quarter of 2020, Aemetis began selling high-grade
alcohol for consumer applications directly to customers on the West
Coast and Midwest using a variety of payment terms. These
agreements and terms were evaluated according to ASC 606 guidance
and such revenue is recognized upon satisfaction of the performance
obligation by delivery of the product based on the terms of the
agreement. Sales of high-grade alcohol represented less than 3% of
quarterly revenue, and as such aggregated with ethanol sales for
the three months ended March 31, 2020. The Company had no sales of
high-grade alcohol in the three months ended March 31,
2021.
10
The below table shows our sales in North America by product
category:
|
North America (in thousands)
|
|
|
|
|
For the three months
ended March 31,
|
|
|
|
2021
|
2020
|
|
Ethanol
and high-grade alcohol sales
|
$29,920
|
$25,322
|
|
Wet
distiller's grains sales
|
11,035
|
8,374
|
|
Other
sales
|
1,373
|
2,176
|
|
|
$42,328
|
$35,872
|
We have elected to adopt the practical expedient that allows for
ignoring the significant financing component of a contract when
estimating the transaction price when the transfer of promised
goods to the customer and customer payment for such goods are
expected to be within one year of contract inception. Further, we
have elected to adopt the practical expedient in which incremental
costs of obtaining a contract are expensed when the amortization
period would otherwise be less than one year.
We also assessed principal versus agent criteria as we buy our
feedstock from our customers and process and sell finished goods to
those customers in certain contractual agreements.
In North America, we buy corn as feedstock for the production of
ethanol, from our working capital partner J.D. Heiskell. Prior to
May 13, 2020, we sold all our ethanol, WDG, and corn oil to J.D.
Heiskell. Subsequent to May 13, 2020, we sold most of our fuel
ethanol to one customer, Kinergy, and sold all WDG and corn oil to
J.D. Heiskell. We consider the purchase of corn as a cost of goods
sold and the sale of ethanol, upon transfer to the common carrier,
as revenue on the basis that (i) we control and bear the risk of
gain or loss on the processing of corn which is purchased at market
prices into ethanol and (ii) we have legal title to the goods
during the processing time. The pricing for both corn and ethanol
is set independently. Revenues from sales of ethanol and its
co-products are billed net of the related transportation and
marketing charges. The transportation component is accounted for in
cost of goods sold and the marketing component is accounted for in
sales, general and administrative expense. Transportation and
marketing charges are known within days of the transaction and are
recorded at the actual amounts. The Company has elected an
accounting policy under which these charges have been treated as
fulfillment activities provided after control has transferred. As a
result, these charges are recognized in cost of goods sold and
selling, general and administrative expenses, respectively, when
revenue is recognized. Revenues are recorded at the gross invoiced
amount. Hence, we are the principal in North America sales
scenarios where our customer and vendor may be the
same.
We have a contract liability of $0.2 million as of March 31, 2021
and December 31, 2020, in connection with a contract with a
customer to sell carbon credit allowances.
India:
In India, we sell products pursuant to
purchase orders (written or verbal) or by contract with
governmental or international parties, in which performance is
satisfied by delivery and acceptance of the physical product. Given
that the contracts are sufficiently similar in nature, we have
assessed these contracts as a portfolio of similar contracts as
allowed under the practical expedient. Doing so does not result in
a materially different outcome compared to individually accounting
for each contract. All domestic and international deliveries are
subject to certain specifications as identified in the contracts.
The transaction price is determined daily based on reference market
prices for biodiesel, refined glycerin, and PFAD net of taxes.
Transaction price allocation is not needed.
11
The below table shows our sales in India by product
category:
|
India (in thousands)
|
|
|
|
|
For the three months
ended March 31,
|
|
|
|
2021
|
2020
|
|
Biodiesel
sales
|
$358
|
$2,793
|
|
Refined
glycerin sales
|
116
|
90
|
|
PFAD
sales
|
-
|
712
|
|
Other
sales
|
5
|
13
|
|
|
$479
|
$3,608
|
In India, we also assessed principal versus agent criteria as we
buy our feedstock from our customers and process and sell finished
goods to those same customers in certain contractual agreements. In
those cases, we receive the legal title to feedstock from our
customers once it is on our premises. We control the processing and
production of biodiesel based on contract terms and specifications.
The pricing for both feedstock and biodiesel is set independently.
We hold the title and risk to biodiesel according to agreements
when we enter into in these situations. Hence, we are the principal
in India sales scenarios where our customer and vendor may be the
same.
Cost of Goods Sold. Cost of
goods sold includes those costs directly associated with the
production of revenues, such as raw material consumed, factory
overhead and other direct production costs. During periods of idle
plant capacity, costs otherwise charged to cost of goods sold are
reclassified to selling, general and administrative
expense.
Accounts Receivable. The
Company sells ethanol and WDG through third-party marketing
arrangements generally without requiring collateral and high-grade
alcohol directly to customers on a variety of terms including
advanced payment terms, based on the size and creditworthiness of
the customer. DCO is marketed and sold to A.L. Gilbert and other
customers under the J.D. Heiskell Purchasing Agreement. The Company
sells CDS directly to customers on standard 30 day payment terms.
The Company sells biodiesel, glycerin, and processed natural oils
to a variety of customers and may require advanced payment based on
the size and creditworthiness of the customer. Usually, invoices
are due within 30 days on net terms. Accounts receivables consist
of product sales made to large creditworthy customers. Trade
accounts receivable are presented at original invoice amount, net
of any allowance for doubtful accounts.
The Company maintains an allowance for doubtful accounts for
balances that appear to have specific collection issues. The
collection process is based on the age of the invoice and requires
attempted contacts with the customer at specified intervals. If,
after a specified number of days, the Company has been unsuccessful
in its collection efforts, a bad debt allowance is recorded for the
balance in question. Delinquent accounts receivables are charged
against the allowance for doubtful accounts once un-collectability
has been determined. The factors considered in reaching this
determination are the apparent financial condition of the customer
and the Company’s success in contacting and negotiating with
the customer. If the financial condition of the Company’s
customers were to deteriorate, additional allowances may be
required. We reserved $1.4 million and $1.3 million in the
allowances for doubtful accounts as of March 31, 2021 and December
31, 2020, respectively.
Inventories. Finished goods,
raw materials, and work-in-process inventories are valued using
methods which approximate the lower of cost (first-in, first-out)
or net realizable value (“NRV”). Distillers’
grains and related products are stated at NRV. In the valuation of
inventories, NRV is determined as estimated selling price in the
ordinary course of business, less reasonably predictable costs of
completion, disposal, and transportation.
12
Investments. The Company
follows ASC 325-20, Cost Method
Investments, to account for its
ownership interest in noncontrolled entities. Under ASC 325-20,
equity securities that do not have readily determinable fair values
(i.e., non-marketable equity securities) and are not required to be
accounted for under the equity method are typically carried at cost
(i.e., cost method investments). Investments of this nature are
initially recorded at cost. Income is recorded for dividends
received that are distributed from net accumulated earnings of the
noncontrolled entity subsequent to the date of investment.
Dividends received in excess of earnings subsequent to the date of
investment are considered a return of investment and are recorded
as reductions in the cost of the investment. Investments are
written down only when there is clear evidence that a decline in
value that is other than temporary has occurred. During 2020, the
Company received 489,716 preferred stock shares and 5,000,000
common stock shares in Nevo Motors, a privately held company, in
exchange for conversion of its existing debt, carried at zero
value, into equity. Due to the lack of operations, the carrying
amount of our investment is zero at March 31, 2021 and December 31,
2020.
Variable Interest Entities. We determine at the inception of each
arrangement whether an entity in which we have made an investment
or in which we have other variable interests in is considered a
variable interest entity (“VIE”). We consolidate VIEs
when we are the primary beneficiary. The primary beneficiary of a
VIE is the party that meets both of the following criteria: (1) has
the power to make decisions that most significantly affect the
economic performance of the VIE; and (2) has the obligation to
absorb losses or the right to receive benefits that in either case
could potentially be significant to the VIE. Periodically, we
assess whether any changes in our interest or relationship with the
entity affect our determination of whether the entity is still a
VIE and, if so, whether we are the primary beneficiary. If we are
not the primary beneficiary in a VIE, we account for the investment
or other variable interests in a VIE in accordance with
applicable GAAP.
Property, Plant and Equipment.
Property, plant, and equipment are carried at cost less accumulated
depreciation after assets are placed in service and are comprised
primarily of buildings, furniture, machinery, equipment, land,
biogas dairy digesters, and the Keyes Plant, Goodland Plant and
Kakinada Plant. The Goodland Plant is partially completed and is
not ready for operation. The first two dairy digesters and pipeline
in the Biogas Project were completed, commissioned and began to be
depreciated during the third quarter of 2020. The CO₂ Project
was completed and commenced operations in the second quarter of
2020. Accordingly, any assets under the CO₂ Project began
being depreciated starting in May 2020. It is the Company’s
policy to depreciate capital assets over their estimated useful
lives using the straight-line method.
The Company evaluates the recoverability of long-lived assets with
finite lives in accordance with ASC Subtopic
360-10-35 Property
Plant and Equipment—Subsequent
Measurements, which requires
recognition of impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an
asset group may not be recoverable. When events or changes in
circumstances indicate that the carrying amount of an asset group
may not be recoverable, based on estimated undiscounted cash flows,
the impairment loss would be measured as the difference between the
carrying amount of the assets and its estimated fair value. The
Company has not recorded any impairment during the three months
ended March 31, 2021 and 2020.
California Energy Commission Low-Carbon Fuel Production
Program. The Company has been
awarded $4.2 million in matching grants from the California Energy
Commission Low-Carbon Fuel Production Program
(“LCFPP”). The LCFPP grant reimburses the Company for
costs to design, procure, and install processing facility to
clean-up, measure and verify negative-carbon intensity dairy
renewable natural gas fuel at the production facility in Keyes,
California. The Company has received $875 thousand from the LCFPP
as of March 31, 2021 as reimbursement for actual costs incurred.
Due to the uncertainty associated with the approval process under
the grant program, the Company recognizes the grant as a reduction
of the costs in the period when approval is
received.
13
California Department of Food and Agriculture Dairy Digester
Research and Development Grant.
The Company has been awarded $3.2 million in matching grants from
the California Department of Food and Agriculture
(“CDFA”) Dairy Digester Research and Development
program. The CDFA grant reimburses the Company for costs required
to permit and construct two of the Company’s biogas capture
systems under contract with central California dairies. The Company
received $3.2 million as of March 31, 2021 as reimbursement for
actual costs incurred. Due to the uncertainty associated with the
approval process under the grant program, the Company recognizes
the grant as a reduction of the costs in the period when approval
is received.
California Energy Commission Low Carbon Advanced Ethanol Grant
Program. In May 2019, the
Company was awarded the right to receive reimbursements from the
California Energy Commission Community-Scale and Commercial-Scale
Advanced Biofuels Production Facilities grant under the Alternative
and Renewable Fuel and Vehicle Technology Program in an amount up
to $5.0 million (the “CEC Reimbursement Program”) in
connection with the Company’s expenditures toward the
development of the Riverbank Cellulosic Ethanol Facility. To comply
with the guidelines of the CEC Reimbursement Program, the Company
must make a minimum of $7.9 million in matching contributions to
the Riverbank Project. The Company receives funds under the CEC
Reimbursement Program for actual expenses incurred up to $5.0
million as long as the Company makes the minimum matching
contribution. Given that the Company has not made the minimum
matching contribution, the grant for reimbursement of capital
expenditures of $115 thousand received during the first quarter of
2021, and $1.7 million from prior years were recorded as other long
term liabilities as of March 31, 2021. Due to the uncertainty
associated with meeting the minimum matching contribution, the
reimbursement will be recognized when the Company makes the minimum
matching contribution.
Basic and Diluted Net Loss per Share. Basic net loss per share is computed by dividing
net loss attributable to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted
net loss per share reflects the dilution of common stock
equivalents such as options, convertible preferred stock, debt, and
warrants to the extent the impact is dilutive. As the Company
incurred net losses for the three months ended March 31, 2021 and
2020, potentially dilutive securities have been excluded from the
diluted net loss per share computations as their effect would be
anti-dilutive.
The following table shows the number of potentially dilutive shares
excluded from the diluted net loss per share calculation as of
March 31, 2021 and 2020:
|
|
As
of
|
|
|
|
March 31,
2021
|
March 31,
2020
|
|
|
|
|
|
Series
B preferred (post split basis)
|
132
|
132
|
|
Common
stock options and warrants
|
5,080
|
5,688
|
|
Debt
with conversion feature at $30 per share of common
stock
|
1,286
|
1,269
|
|
|
|
|
|
Total
number of potentially dilutive shares excluded from the diluted
loss per share calculation
|
6,498
|
7,089
|
Comprehensive Loss. ASC
220 Comprehensive
Income requires that an
enterprise report, by major components and as a single total, the
change in its net assets from non-owner sources. The
Company’s other comprehensive loss and accumulated other
comprehensive loss consists solely of cumulative currency
translation adjustments resulting from the translation of the
financial statements of its foreign subsidiary. The investment in
this subsidiary is considered indefinitely invested overseas, and
as a result, deferred income taxes are not recorded related to the
currency translation adjustments.
14
Foreign Currency Translation/Transactions. Assets and liabilities of the Company’s
non-U.S. subsidiary that operates in a local currency environment,
where that local currency is the functional currency, are
translated into U.S. dollars at exchange rates in effect at the
balance sheet date and the resulting translation adjustments
directly recorded to a separate component of accumulated other
comprehensive loss. Income and expense accounts are translated at
average exchange rates during the year. Transactional gains and
losses from foreign currency transactions are recorded in other
(income) loss, net.
Operating Segments. Operating
segments are defined as components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision-making
group, in deciding how to allocate resources and in assessing
performance. Aemetis recognized two reportable geographic segments:
“North America” and
“India.”
The “North America” operating segment includes the
Company’s 65 million gallons per year capacity Keyes Plant in
California, the cellulosic ethanol facility in Riverbank, the
cluster of biogas digesters on dairies near Keyes, California, the
Goodland Plant, Kansas and the research and development facility in
Minnesota.
The “India” operating segment includes the
Company’s 50 million gallon per year capacity Kakinada Plant
in India, the administrative offices in Hyderabad, India, and the
holding companies in Nevada and Mauritius.
Fair Value of Financial Instruments. Financial instruments
include accounts receivable, accounts payable, accrued liabilities,
current and non-current portion of subordinated debt, notes
receivable, notes payable, series A preferred units, and
long-term debt. Due to the unique terms of our notes payable
and long-term debt and the financial condition of the Company, the
fair value of the debt is not readily determinable. The fair
value, determined using level 3 inputs, of all other current
financial instruments is estimated to approximate carrying value
due to the short-term nature of these instruments.
Share-Based Compensation. The Company recognizes share-based
compensation expense in accordance with ASC 718 Stock Compensation requiring the
Company to recognize expenses related to the estimated fair value
of the Company’s share-based compensation awards at the time
the awards are granted, adjusted to reflect only those shares that
are expected to vest.
Commitments and Contingencies. The Company records and/or discloses commitments
and contingencies in accordance with ASC 450 Contingencies.
ASC 450 applies to an existing condition, situation or set of
circumstances involving uncertainty as to possible loss that will
ultimately be resolved when one or more future events occur or fail
to occur.
Convertible Instruments. The
Company evaluates the impacts of convertible instruments based on
the underlying conversion features. Convertible instruments are
evaluated for treatment as derivatives that could be bifurcated and
recorded separately. Any beneficial conversion feature is recorded
based on the intrinsic value difference at the commitment
date.
Debt Modification Accounting.
The Company evaluates amendments to its debt in accordance with ASC
470-50 Debt–Modification and
Extinguishments for
modification and extinguishment accounting. This evaluation
includes comparing the net present value of cash flows of the new
debt to the old debt to determine if changes greater than 10
percent occurred. In instances where the net present value of
future cash flows changed more than 10 percent, the Company applies
extinguishment accounting and determines the fair value of its debt
based on factors available to the Company.
15
Recently Issued Accounting Pronouncements.
ASU 2016-13: Measurement of Credit Losses on Financial
Instruments. This
ASU requires the use of an expected loss model for certain types of
financial instruments and requires consideration of a broader range
of reasonable and supportable information to calculate credit loss
estimates. For trade receivables, loans and held-to-maturity debt
securities, an estimate of lifetime expected credit losses is
required. For available-for-sale debt securities, an allowance for
credit losses will be required rather than a reduction to the
carrying value of the asset. This standard is effective for fiscal
years beginning after December 15, 2022. We are assessing the
impact of adopting this standard on our consolidated financial
statements and related disclosures.
For a complete summary of the Company’s significant
accounting policies, please refer to the Company’s audited
financial statements and notes thereto for the years ended December
31, 2020 and 2019 included in the Company’s Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 15, 2021.
2.
Inventories
Inventories consist of the following:
|
|
As of
|
|
|
|
March 31,
2021
|
December 31,
2020
|
|
Raw
materials
|
$1,321
|
$1,382
|
|
Work-in-progress
|
1,938
|
1,266
|
|
Finished
goods
|
951
|
1,321
|
|
Total
inventories
|
$4,210
|
$3,969
|
As of March 31, 2021 and December 31, 2020, the Company recognized
a lower of cost or market impairment of $0.1 million and $0.7
million respectively, related to inventory.
3.
Property, Plant and Equipment
Property, plant and equipment consist of the
following:
|
|
As of
|
|
|
|
March 31,
2021
|
December 31,
2020
|
|
Land
|
$4,091
|
$4,092
|
|
Plant
and buildings
|
97,249
|
97,398
|
|
Furniture
and fixtures
|
1,191
|
1,195
|
|
Machinery
and equipment
|
5,272
|
5,188
|
|
Construction
in progress
|
30,032
|
25,397
|
|
Property
held for development
|
15,408
|
15,408
|
|
Finance
lease right of use assets
|
2,308
|
2,308
|
|
Total
gross property, plant & equipment
|
155,551
|
150,986
|
|
Less
accumulated depreciation
|
(42,461)
|
(41,106)
|
|
Total
net property, plant & equipment
|
$113,090
|
$109,880
|
For the three
months ended March 31, 2021 and 2020, interest capitalized in
property, plant, and equipment was $0.6 and $0.1 million,
respectively.
16
Construction in progress contains incurred costs for the Biogas
Project, Riverbank Project, and Zebrex equipment installation at
the Keyes Plant. In the second quarter of 2020, CO₂ Project
commenced operations and was placed in service at that time.
In
the third quarter of 2020, two diary digesters commenced operations
and were placed in service at that time. Given there are
several ongoing capital projects, their capital expenses have
been accumulated in construction in progress and will be
capitalized and depreciated once the capital projects are finished
and are in service. Depreciation on the components of property, plant
and equipment is calculated using the straight-line method over
their estimated useful lives as follows:
|
|
Years
|
|
|
Plant and buildings
|
|
20 - 30
|
|
Machinery and equipment
|
|
5 - 15
|
|
Furniture and fixtures
|
|
3 - 5
|
For the three months ended March 31, 2021 and 2020, the Company
recorded depreciation expense of $1.4 and $1.1 million,
respectively.
Management is required to evaluate these long-lived assets for
impairment whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable. Management
determined there was no impairment on the long-lived assets during
the three months ended March 31, 2021 and 2020.
4.
Debt
Debt consists of the following:
|
|
March 31,
2021
|
December 31,
2020
|
|
Third
Eye Capital term notes
|
$7,095
|
$7,066
|
|
Third
Eye Capital revolving credit facility
|
85,105
|
80,310
|
|
Third
Eye Capital revenue participation term notes
|
11,913
|
11,864
|
|
Third
Eye Capital acquisition term notes
|
26,463
|
26,384
|
|
Third
Eye Capital promissory note
|
-
|
1,444
|
|
Cilion
shareholder seller notes payable
|
6,311
|
6,274
|
|
Subordinated
notes
|
12,973
|
12,745
|
|
Term
loan on Equipment purchase
|
5,652
|
5,652
|
|
EB-5
promissory notes
|
42,769
|
43,120
|
|
PPP
loans
|
1,134
|
1,134
|
|
GAFI
Term and Revolving loans
|
-
|
33,626
|
|
Total debt
|
199,415
|
229,619
|
|
Less
current portion of debt
|
25,407
|
59,515
|
|
Total long term debt
|
$174,008
|
$170,104
|
17
Third Eye Capital Note Purchase Agreement
On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes,
Inc. (“AAFK”), entered into an Amended and Restated
Note Purchase Agreement with Third Eye Capital (the “Note
Purchase Agreement”). Pursuant to the Note Purchase
Agreement, Third Eye Capital extended credit in the form of (i)
senior secured term loans in an aggregate principal amount of
approximately $7.2 million to replace existing notes held by Third
Eye Capital (the “Term Notes”); (ii) senior secured
revolving loans in an aggregate principal amount of $18.0 million
(the “Revolving Credit Facility”); (iii) senior secured
term loans in the principal amount of $10.0 million to convert the
prior revenue participation agreement to a note (the “Revenue
Participation Term Notes”); and (iv) senior secured term
loans in an aggregate principal amount of $15.0 million (the
“Acquisition Term Notes”) used to fund the cash portion
of the acquisition of Cilion, Inc. (the Term Notes, Revolving
Credit Facility, Revenue Participation Term Notes and Acquisition
Term Notes are referred to herein collectively as the
“Original Third Eye Capital Notes”).
On April 1, 2020, the Company exercised the option to extend the
maturity of Third Eye Capital Notes to April 1, 2021 for a fee of
1% of the outstanding note balance instead of agreed fee of 5% in
Amendment No.14 to the Note Purchase Agreement. We have evaluated
the reduction in extension fee to 1% in accordance with ASC 470-60
Troubled Debt Restructuring. According to the guidance, we
considered the 1% extension fee to be a troubled debt
restructuring.
On August 11, 2020, Third Eye Capital agreed to Limited Waiver and
Amendment No. 17 to the Note Purchase Agreement (“Amendment
No. 17”), to (i) provide that the maturity date of the Third
Eye Capital Notes may be further extended at our election to April
1, 2022 in exchange for an extension fee equal to 1% of the Note
Indebtedness in respect to each Note, provided that such fee may be
added to the outstanding principal balance of each Note on the
effective date of each such extension, (ii) provide for a waiver of
the ratio of note indebtedness covenant for the quarters ended
March 31, 2021 and June 30, 2021. As consideration for such
amendment and waivers, the borrowers also agreed to pay Third Eye
Capital an amendment and waiver fee of $0.3 million in cash (the
“Amendment No. 17 Fee”). On November 5, 2020,
Third Eye Capital agreed to Limited Waiver and Amendment No. 18 to
the Note Purchase Agreement (“Amendment No. 18”) to
provide for a waiver of the ratio of note indebtedness covenant for
the quarter ended September 30, 2021. As consideration for such
amendment and waivers, the borrowers also agreed to pay Third Eye
Capital an amendment fee of $50 thousand. We have evaluated
the 1% extension fee in Amendment No. 17, and the $50 thousand
waiver fee in Amendment No. 18 in accordance with ASC 470-60
Troubled Debt
Restructuring.
According to the guidance, we considered the 1% extension fee in
Amendment No.17 and the $50 thousand waiver fee in Amendment No. 18
to be troubled debt restructurings. In order to assess whether the
creditor granted a concession, we calculated the post-restructuring
effective interest rate by projecting cash flows on the new terms
and calculated a discount rate equal to the carrying amount of
pre-restructuring of debt, and by comparing this calculation to the
terms of Amendment No. 15, we determined that Third Eye Capital
provided a concession in accordance with the provisions of ASC
470-60 and thus applied troubled debt restructuring accounting,
resulting in no gain or loss from the application of this
accounting. Using the effective interest method of amortization,
the 1% extension fee of $1.0 million and Amendment No. 17 Fee of
$0.3 million are being amortized over the stated remaining life of
the Third Eye Capital Notes.
On February 27, 2019, a promissory note (the “February 2019
Note”, together with the Original Third Eye Capital Notes,
the “Third Eye Capital Notes”) for $2.1 million was
advanced by Third Eye Capital to Aemetis, Inc., as a short-term
credit facility for working capital and other general corporate
purposes with an interest rate of 14% per annum maturing on the
earlier of (a) receipt of proceeds from any financing, refinancing,
or other similar transaction, (b) extension of credit by payee, as
lender or as agent on behalf of certain lenders, to the Company or
its affiliates, or (c) April 30, 2019. In consideration of the
February 2019 Note, $0.1 million of the total proceeds were paid to
Third Eye Capital as financing charges. On April 30, 2019, the
February 2019 Note was modified to remove the stated maturity date
and instead be due on demand by Third Eye Capital. In third quarter
of 2019, the February 2019 Note was modified to include additional
borrowings of $0.7 million. In first quarter of 2020, the February
2019 Note was modified to include additional borrowings of $0.6
million. The February 2019 note was fully repaid in the first
quarter of 2021.
18
On March 14, 2021, Third Eye Capital agreed to Limited Waiver and
Amendment No. 19 to the Note Purchase Agreement (“Amendment
No. 19”), to (i) provide for a waiver of the ratio of note
indebtedness covenant for the quarter ended December 31, 2021, (ii)
provide for a waiver of the consolidated unfunded capital
expenditures covenant for the quarters through March 31, 2021. As
consideration for such amendment and waivers, the borrowers also
agreed to pay Third Eye Capital an amendment and waiver fee of $0.1
million in cash (the “Amendment No. 19 Fee”). We gave
the notice to extend the maturity date of the Notes to April 1,
2022 and the extension fee equal to 1% of the Note Indebtedness in
respect to each Note, provided that half of such fee may be added
to the outstanding principal balance of each Note on the effective
date of each such extension and rest of the balance may be payable
in cash or common stock within 60 days of the date of such relevant
extension. We evaluated the terms of the Amendment No. 19 and the
maturity date extension and applied modification accounting
treatment in accordance with ASC 470-50 Debt – Modification and
Extinguishment.
Based on prior amendments and Amendment No. 19, the ratio of note
indebtedness covenant is waived for the quarters ended June 30,
2021 through December 31, 2021. In addition, the ratio of note
indebtedness covenant is increased from 70% to 100% in the
Amendment No. 19 effective March 31, 2022. According to ASC
470-10-45 Debt -Other Presentation Matters, if it is probable that
the Company will not be able to cure the default at measurement
dates within the next 12 months, the related debt needs to be
classified as current. To assess this guidance, the Company
performed ratio and cash flow analysis using its cash flow forecast
and debt levels. The Company forecasted sufficient cash flows over
the next 12 months to reduce debt levels of Third Eye Capital and
meet operations of the Company. Based on this analysis, the Company
believes that it is not probable that through a combination of cash
flows from operations, sales from EB-5 investments, and proceeds
from the sale of common stock, it will not be able to meet the
ratio of the note indebtedness covenant over the next 12 months. As
such, the notes are classified as long-term debt.
On
March 6, 2020, we and a subsidiary entered into a one-year reserve
liquidity facility governed by a promissory note, payable to Third
Eye Capital, in the principal amount of $18 million. We do not
currently expect to draw upon the note. However, we determined that
it was prudent to maintain a liquidity reserve in case of
unforeseen needs. Borrowings under the facility are available from
March 6, 2020 until maturity on April 1, 2021. Interest on borrowed
amounts accrues at a rate of 30% per annum, paid monthly in
arrears, or 40% if an event of default has occurred and continues.
The outstanding principal balance of the indebtedness evidenced by
the promissory note, plus any accrued but unpaid interest and any
other sums due thereunder, shall be due and payable in full at the
earlier to occur of (a) the closing of any new debt or equity
financing, refinancing or other similar transaction between Third
Eye Capital or any fund or entity arranged by them and the Company
or its affiliates, (b) receipt by the Company or its affiliates of
proceeds from any sale, merger, equity or debt financing,
refinancing or other similar transaction from any third party and
(c) April 1, 2021. The promissory note is secured by liens and
security interests upon the property and assets of the Company as
described in that certain Amended and Restated Note Purchase
Agreement, dated as of July 6, 2012. If any amounts are drawn under
the facility, the Company will pay a non-refundable fee in the
amount of $500,000, payable from the proceeds of the first drawing
under the facility.
On March 14, 2021, Third Eye agreed to increase the amount
available under the Liquidity facility to $70.0 million and extend
the maturity date to April 1, 2022. Borrowings under the facility
are available from March 14, 2021 until maturity on April 1, 2022.
Interest on borrowed amounts accrues at a rate of 30% per annum,
paid monthly in arrears and may be capitalized and due upon
maturity, or 40% if an event of default has occurred and continues.
The outstanding principal balance of the indebtedness evidenced by
the promissory note, plus any accrued but unpaid interest and any
other sums due thereunder, shall be due and payable in full at the
earlier to occur of (a) receipt by the Company or its affiliates of
proceeds from any sale, merger, equity or debt financing,
refinancing or other similar transaction from any third party and
(b) April 1, 2022. Any amounts may be re-borrowed up to repaid
amounts up until the maturity date of April 1, 2022. The promissory
note is secured by liens and security interests upon the property
and assets of the Company. In return, the Company will pay a
non-refundable standby fee at 2% per annum of the difference
between the aggregate principal amount outstanding and the
commitment, payable monthly in cash. In addition, if any initial
advances are drawn under the facility, the Company will pay a
non-refundable one-time fee in the amount of $0.5 million provided
that such fee may be added to the principal amount of the
promissory note on the date of such initial advance.
Terms of Third Eye Capital Notes
A.
Term
Notes. As of March 31, 2021, the Company had $7.1 million
in principal and interest outstanding net of $71 thousand
unamortized debt issuance costs under the Term Notes. The Term
Notes accrue interest at 14% per annum. The Term Notes mature on
April 1, 2022. Fifty percent of the extension fee is due by May 31,
2021 and can be paid in cash or stock, hence $35 thousand was
included as part of current portion of long term debt at March 31,
2021.
19
B
Revolving
Credit Facility. The Revolving Credit Facility accrues interest at
the prime rate plus 13.75% (17.00% as of March 31, 2021) payable
monthly in arrears. The Revolving Credit Facility matures on April
1, 2022. As of March 31, 2021, AAFK had $85.1 million in principal
and interest and waiver fees outstanding net of $926 thousand
unamortized debt issuance costs under the Revolving Credit
Facility. Fifty percent of the extension fee is due by May 31, 2021
and can be paid in cash or stock, hence $418 thousand was included
as part of current portion of long term debt at March 31,
2021.
C.
Revenue
Participation Term Notes. The Revenue Participation Term Note bears interest
at 5% per annum and matures on April 1, 2022. As of March 31, 2021,
AAFK had $11.9 million in principal and interest outstanding net of
$119 thousand unamortized debt issuance costs on the Revenue
Participation Term Notes. Fifty percent of the extension fee is due
by May 31, 2021 and can be paid in cash or stock, hence $60
thousand was included as part of current portion of long term debt
at March 31, 2021.
D.
Acquisition
Term Notes. The Acquisition Term Notes accrue interest at the
prime rate plus 10.75% (14.00% per annum as of March 31, 2021) and
mature on April 1, 2022. As of March 31, 2021, Aemetis Facility
Keyes, Inc. had $26.4 million in principal and interest and
redemption fees outstanding net of $191 thousand unamortized debt
issuance costs. The outstanding principal balance includes a total
of $7.5 million in redemption fees. Fifty percent of the extension
fee is due by May 31, 2021 and can be paid in cash or stock, hence
$95 thousand was included as part of current portion of long term
debt at March 31, 2021.
E.
Reserve
Liquidity Notes. The Reserve Liquidity
Notes, with available borrowing capacity in the amount of
$70.0 million, accrues interest at the rate of 30% per annum
and are due and payable upon the earlier of receipt by
the Company or its affiliates of proceeds from any sale,
merger, equity or debt financing, refinancing or other
similar transaction from any third party and April 1, 2022. We
have no borrowings outstanding under the Reserve
Liquidity Notes as of March 31, 2021.
The Third Eye Capital Notes contain various covenants, including
but not limited to, debt to plant value ratio, minimum production
requirements, and restrictions on capital expenditures. The terms
of the Third Eye Capital Notes allow the lender to accelerate the
maturity in the occurrence of any event that could reasonably be
expected to have a material adverse effect, such as any change in
the business, operations, or financial condition. The terms of the
notes allow interest to be capitalized.
The Third Eye Capital Notes are secured by first priority liens on
all real and personal property of, and assignment of proceeds from
all government grants and guarantees from the Company’s North
American subsidiaries. The Third Eye Capital Notes all contain
cross-collateral and cross-default provisions. McAfee Capital, LLC
(“McAfee Capital”), owned by Eric McAfee, the
Company’s Chairman and CEO, provided a guaranty of payment
and performance secured by all of its Company shares. In addition,
Eric McAfee provided a blanket lien on substantially all of his
personal assets, and McAfee Capital provided a guarantee in the
amount of $8.0 million.
Cilion shareholder seller notes payable. In connection with the Company’s merger
with Cilion, Inc., (“Cilion”) on July 6, 2012, the
Company issued $5.0 million in notes payable to Cilion shareholders
as merger compensation subordinated to the senior secured Third Eye
Capital Notes. The liability bears interest at 3% per annum and is
due and payable after the Third Eye Capital Notes have been paid in
full. As of March 31, 2021, Aemetis Facility Keyes, Inc. had $6.3
million in principal and interest outstanding under the Cilion
shareholder seller notes payable.
20
Subordinated Notes. On January
6 and January 9, 2012, AAFK entered into Note and Warrant Purchase
Agreements with two accredited investors pursuant to which it
issued $0.9 million and $2.5 million in original notes to the
investors (“Subordinated Notes”). The Subordinated
Notes mature every six months. Upon maturity, the Subordinated
Notes are generally extended with a fee of 10% added to the balance
outstanding plus issuance of warrants exercisable at $0.01 with a
two-year term. Interest accrues at 10% and is due at maturity.
Neither AAFK nor Aemetis may make any principal payments under the
Subordinated Notes until all loans made by Third Eye Capital to
AAFK are paid in full.
The Subordinated Notes were amended to extend the maturity date on
January 1, 2020 and again on July 1, 2020 with six months extension
for maturity until December 31, 2020. We evaluated these amendments
and the refinancing terms of the notes and applied modification
accounting treatment in accordance with ASC
470-50 Debt – Modification and
Extinguishment.
On January 1, 2021, the Subordinated Notes were amended to extend
the maturity date until the earlier of (i) June 30, 2021; (ii)
completion of an equity financing by AAFK or Aemetis, Inc. in an
amount of not less than $25.0 million; or (iii) after the
occurrence of an Event of Default, including failure to pay
interest or principal when due and breaches of note covenants. A
10% cash extension fee was paid by adding the fee to the balance of
the new note and warrants to purchase 113 thousand shares of common
stock were granted with a term of two years and an exercise price
of $0.01 per share. We evaluated the January 1, 2021 amendment and
the refinancing terms of the notes and applied modification
accounting treatment in accordance with ASC
470-50 Debt – Modification and
Extinguishment.
At March 31, 2021 and December 31, 2020, the Company had, in
aggregate, the amount of $13.0 million and $12.7 million in
principal and interest outstanding, respectively, net of $324
thousand and none of unamortized debt issuance costs, respectively,
under the Subordinated Notes.
EB-5 promissory notes. EB-5 is
a U.S. government program authorized by the Immigration and
Nationality Act designed to foster employment-based visa preference
for immigrant investors to encourage the flow of capital into the
U.S. economy and to promote employment of U.S. workers. The Company
entered into a Note Purchase Agreement dated March 4, 2011 (as
further amended on January 19, 2012 and July 24, 2012) with
Advanced BioEnergy, LP, a California limited partnership authorized
as a “Regional Center” to receive EB-5 investments, for
the issuance of up to 72 subordinated convertible promissory notes
(the “EB-5 Notes”) bearing interest at 2-3%. Each note
was issued in the principal amount of $0.5 million and due and
payable four years from the date of each note, for a total
aggregate principal amount of up to $36.0 million (the “EB-5
Phase I funding”). The original maturity date on the
promissory notes can be extended automatically for a one- or
two-year period initially and is eligible for further one-year
automatic extensions as long as there is no notice of non-extension
from investors and the investors’ immigration process is in
progress. On February 27, 2019, Advanced BioEnergy, LP, and the
Company entered into an Amendment to the EB-5 Notes which restated
the original maturity date on the promissory notes with automatic
six-month extensions as long as the investors’ immigration
processes are in progress. Except for six early investor EB-5
Notes, the Company was granted 12 months from the date of the
completion of immigration process to redeem these EB-5 Notes.
Accordingly, the notes have been recognized as long-term debt while
the six early investor notes and several investors who obtained
green card approval have been classified as current debt. The EB-5
Notes are convertible after three years at a conversion price of
$30 per share.
Advanced BioEnergy, LP arranges investments with foreign investors,
who each make loans to the Keyes Plant in increments of $0.5
million. The Company has sold an aggregate principal amount of
$36.0 million of EB-5 Notes under the EB-5 Phase I funding since
2012 to the date of this filing. As of March 31, 2021, $35.5
million has been released from the escrow amount to the Company,
with $0.5 million remaining to be funded to escrow. As of March 31,
2021, the Company paid principal amount of one of the EB-5
investors who obtained the green card approval under the program.
As of March 31, 2021, $35.0 million in principal and $3.6 million
in accrued interest was outstanding on the EB-5 Notes sold under
the EB-5 Phase I funding.
21
On October 16, 2016, the Company launched its EB-5 Phase II
funding, with plans to issue $50.0 million in additional EB-5 Notes
on substantially similar terms and conditions as those issued under
the Company’s EB-5 Phase I funding, to refinance indebtedness
and capital expenditures of Aemetis, Inc. and GAFI (the “EB-5
Phase II funding”). On November 21, 2019, the minimum
investment was raised from $0.5 million per investor to $0.9
million per investor. The Company entered into a Note Purchase
Agreement dated with Advanced BioEnergy II, LP, a California
limited partnership authorized as a Regional Center to receive EB-5
Phase II funding investments, for the issuance of up to 100 EB-5
Notes bearing interest at 3%. On May 1, 2020 Supplement No. 3
amended the offering documents and lowered the total eligible new
EB-5 Phase II funding investors to 60. Eight EB-5 investors have
funded at the $0.5 million per investor amount, so 52 new EB-5
Phase II funding investors are eligible at the new $0.9 million per
investor amount under the current offering. Job creation studies
show it may be possible to add additional investors and increase
the total offering amount in the future. Each new note will be
issued in the principal amount of $0.9 million and due and payable
five years from the date of each note, for a total aggregate
principal amount of up to $50.8 million.
Advanced BioEnergy II, LP arranges investments with foreign
investors, who each make loans to the Riverbank Cellulosic Ethanol
Facility in increments of $0.9 million after November 21, 2019. The
Company has sold an aggregate principal amount of $4.0 million of
EB-5 Notes under the EB-5 Phase II funding since 2016 to the date
of this filing. As of March 31, 2021, $4.0 million has been
released from escrow to the Company and $46.8 million remains to be
funded to escrow. As of March 31, 2021, $4.2 million was
outstanding on the EB-5 Notes under the EB-5 Phase II
funding.
Unsecured working capital loans. On April 16, 2017, the Company entered into an
operating agreement with Gemini Edibles and Fats India Private
Limited (“Gemini”). Under this agreement, Gemini agreed
to provide the Company with working capital, on an as needed basis,
to fund the purchase of feedstock and other raw materials for the
Kakinada Plant. Working capital cash advances bear interest at 12%
and working capital can be induced through trading of feedstock or
finished goods by Gemini, which does not have any interest accrual.
In return, the Company agreed to pay Gemini an amount equal to 30%
of the plant’s monthly net operating profit and recognized
these as operational support charges in the financials. In the
event that the Company’s biodiesel facility operates at a
loss, Gemini owes the Company 30% of the losses as operational
support charges. Either party can terminate the agreement at any
time without penalty. Additionally, Gemini received a first
priority lien on the assets of the Kakinada Plant. During the three
months ended March 31, 2021 and 2020, we have accrued no interest
on Gemini. During the three months ended March 31, 2021 and 2020,
the Company made principal payments to Gemini of none and
approximately $3.6 million, respectively. As of March 31, 2021 and
December 31, 2020, the Company had no outstanding balance under
this agreement.
In November 2008, the Company entered into an operating agreement
with Secunderabad Oils Limited (“Secunderabad Oils”).
The 2008 agreement provided the working capital and had the first
priority lien on assets in return for 30% of the plant’s
monthly net operating profit. These expenses were recognized as
selling, general, and administrative expenses by the Company in the
financials. All terms of the 2008 agreement with Secunderabad Oils
were terminated to amend the agreement as below. On July 15, 2017,
the agreement with Secunderabad Oils was amended to provide the
working capital funds for British Petroleum business operations
only in the form of inter-corporate deposit for an amount of
approximately $2.3 million over a 95 day period at the rate of
14.75% per annum interest rate. The term of the agreement continues
until either party terminates it. Secunderabad Oils has a second
priority lien on the assets of the Company’s Kakinada Plant
after this agreement. On April 15, 2018, the agreement was amended
to purchase the raw material for business operations at 12% per
annum interest rate. During the three months ended March 31, 2021
and 2020, the Company made principal and interest payments to
Secunderabad Oils of none and approximately $34 thousand,
respectively. As of March 31, 2021 and December 31, 2020 the
Company had no outstanding balance under this
agreement.
22
GAFI Term loan and Revolving loan. On July 10, 2017, GAFI entered into a Note
Purchase Agreement (“Note Purchase Agreement”) with
Third Eye Capital. See further discussion regarding GAFI in Note 6.
Pursuant to the Note Purchase Agreement, Third Eye Capital agreed,
subject to the terms and conditions of the Note Purchase Agreement
and relying on each of the representations and warranties set forth
therein, to make (i) a single term loan to GAFI in an aggregate
amount of $15 million (“Term Loan”) and (ii) revolving
advances not to exceed $10 million dollars in the aggregate (the
“Revolving Loans”). The interest rate applicable to the
Term Loan is equal to 10% per annum. The interest rate applicable
to the Revolving Loans is the greater of prime rate plus 7.75% and
12.00% per annum. The maturity date of the loans was extended to
July 10, 2021 by exercising an option to extend the GAFI Loan
Maturity Date for a fee of $0.5 million.
On June 28, 2018, GAFI entered into Amendment No. 1 to the GAFI
Term Loan with Third Eye Capital for an additional amount of $1.5
million with a fee of $75 thousand added to the loan from Third Eye
Capital at a 10% interest rate. On December 20, 2018, $1.6 million
from Amendment No. 1 was repaid. Pursuant to Amendment No. 1,
Aemetis, Inc. entered into a Stock Appreciation Rights Agreement to
issue 1,050,000 Stock Appreciation Rights (“SARs”) to
Third Eye Capital on August 23, 2018, with an exercise date of one
year from the issuance date with a call option for the Company at
$2.00 per share during the first 11 months of the agreement either
to pay $2.1 million in cash or issue common stock worth $2.1
million based on the 30-day weighted average price of the stock on
the call date, and a put option for Third Eye Capital at $1.00 per
share during the 11th month of the agreement where the Company can
redeem the SARs for $1.1 million in cash. In the event that none of
the above options is exercised, the SARs will be automatically
exercised one year from the issuance date based upon the 30-day
weighted average stock price and paid in cash and cash equivalents.
On July 22, 2019, Third Eye Capital exercised the put option at
$1.00 per share for $1.1 million. The exercise value of the SARs of
$1.1 million was added to the GAFI Term Loan and the SARs fair
value liability was released.
The Company fully repaid the GAFI notes in the first quarter of
2021. As of March 31, 2021 and December 31, 2020, GAFI had none and
$22.2 million net of debt issuance costs of none and $0.4 million
outstanding on the Term Loan and none and $11.8 million on the
Revolving Loan respectively, classified as current portion of
long-term debt.
Payroll Protection Program. On May 5, 2020, certain wholly owned
subsidiaries of the Company received loan proceeds of approximately
$1.1 million; (“PPP Loans”) under the Paycheck
Protection Program (“PPP”). The PPP, established as
part of the Coronavirus Aid, Relief and Economic Security Act
(“CARES Act”), provides loans to qualifying businesses
for payroll expenses of the qualifying business. The PPP Loan and
accrued interest are forgivable after 24 weeks if the borrower uses
the loan proceeds for eligible purposes, including payroll,
benefits, rent and utilities, and maintains its payroll levels. The
amount of loan forgiveness will be reduced if the borrower
terminates employees or reduces salaries during the 24 week period.
In order to obtain full or partial forgiveness of the PPP Loan, the
Company must request forgiveness and must provide satisfactory
documentation in accordance with applicable Small Business
Administration (“SBA”) guidelines. The Company is in
process for applying for forgiveness.
The PPP Loans are evidenced by promissory notes, dated May 1, 2020
and April 30, 2020 (the “Notes”), between the Company,
as borrower, and Bank of America, N.A., as lender (the “PPP
Lender”). The interest rate on the Note is 1.00% per annum.
No payments of principal or interest are due during the six-month
period beginning on the funding date (the “Deferral
Period”). If the SBA does not confirm forgiveness or only
partly confirms forgiveness of the PPP Loans, or Borrower fails to
apply for loan forgiveness, the Company will be obligated to repay
to the PPP Lender the total outstanding balance remaining due under
the PPP Loans, including principal and interest and in such case,
the PPP Lender will establish the terms for repayment of the PPP
Loans in a separate letter to be provided to the Company in which
the letter will set forth the loan balance, the amount of each
monthly payment, the interest rate (not in excess of a fixed rate
of 1.00% per annum, the term of the PPP Loans, and the maturity
date, which, if not established by the PPP Lender, shall be two
years from the funding date of the PPP Loans.
23
Financing Agreement for Equipment Purchase. The Company entered into an agreement with
Mitsubishi Chemical America, Inc. (“Mitsubishi”) to
purchase certain equipment to save energy used in the Keyes Plant.
We also entered into a financing agreement with the Mitsubishi for
$5.7 million for this equipment. Payments pursuant to the financing
transaction will commence after the installation date and interest
will be charged based on the certain performance metrics after
operation of the equipment. The equipment was delivered in March
2020; however, the installation has been delayed due to the
COVID-19 pandemic. Hence, we recorded the asset in property, plant
and equipment, net and the related liability of $0.6 million in
short term borrowings and $5.1 million in other long term debt,
respectively as of March 31, 2021.
Scheduled debt repayments for the Company’s loan obligations
follow:
|
Twelve months ended March 31,
|
Debt Repayments
|
|
2022
|
$25,407
|
|
2023
|
160,624
|
|
2024
|
7,936
|
|
2025
|
4,496
|
|
2026
|
936
|
|
There
after
|
1,324
|
|
Total
debt
|
200,723
|
|
Debt
issuance costs
|
(1,308)
|
|
Total
debt, net of debt issuance costs
|
$199,415
|
5. Commitments and Contingencies
Leases
We have identified assets as the corporate office, warehouse,
monitoring equipment and laboratory facilities over which we have
control and obtain economic benefits fully. We classified these
identified assets as operating leases after assessing the terms
under classification guidance. We have entered into several leases
for trailers and carbon units with purchase option at the end of
the term. We have concluded that it is reasonably certain that we
would exercise the purchase option at the end of the term, hence
the leases were classified as finance leases. All of our leases
have remaining term of less than a year to 8 years.
When discount rates implicit in leases cannot be readily
determined, the Company uses the applicable incremental borrowing
rate at lease commencement to perform lease classification tests on
lease components and measure lease liabilities and right-of-use
(“ROU”) assets. The incremental borrowing rate used by
the Company was based on weighted average baseline rates
commensurate with the Company’s secured borrowing rate over a
similar term. At each reporting period, when there is a new lease
initiated, the rates established for that quarter will be
used.
24
The components of lease expense and sublease income was as
follows:
|
|
Three Months ended March 31,
|
|
|
|
2021
|
2020
|
|
Operating lease cost
|
|
|
|
Operating
lease expense
|
$204
|
$177
|
|
Short
term lease expense
|
39
|
14
|
|
Variable
lease expense
|
33
|
34
|
|
Total
operating lease cost
|
$276
|
$225
|
|
|
|
|
|
Finance lease cost
|
|
|
|
Amortization
of right-of-use assets
|
$55
|
$-
|
|
Interest
on lease liabilities
|
21
|
-
|
|
Total
finance lease cost
|
$76
|
$-
|
Cash paid for amounts included in the measurement of lease
liabilities:
|
|
Three Months ended March 31,
|
|
|
|
2021
|
2020
|
|
Operating
cash flows used in operating leases
|
$167
|
$179
|
|
Operating
cash flows used in finance leases
|
21
|
-
|
|
Financing
cash flows used in finance leases
|
$124
|
-
|
Supplemental non-cash flow information related to ROU asset and
lease liabilities was as follows for the three months ended March
31, 2021 and March 31, 2020:
|
|
Three Months ended March 31,
|
|
|
|
2021
|
2020
|
|
Operating leases
|
|
|
|
Accretion
of the lease liability
|
$99
|
$17
|
|
Amortization
of right-of-use assets
|
105
|
160
|
|
|
|
|
|
Weighted
Average Remaining Lease Term
|
|
|
|
Operating
leases
|
|
6.7
years
|
|
Finance
leases
|
|
3.0
years
|
|
|
|
|
|
Weighted
Average Discount Rate
|
|
|
|
Operating
leases
|
|
14.0%
|
|
Finance
leases
|
|
5.5%
|
25
Supplemental balance sheet information related to leases was as
follows:
|
|
As of
|
|
|
|
March 31,
2021
|
December 31,
2020
|
|
Operating leases
|
|
|
|
Operating
lease right-of-use assets
|
$2,783
|
$2,889
|
|
|
|
|
|
Current
portion of operating lease liability
|
325
|
316
|
|
Long
term operating lease liability
|
2,502
|
2,578
|
|
Total
operating lease liabilities
|
2,827
|
2,894
|
|
|
|
|
|
Finance leases
|
|
|
|
Property
and equipment, at cost
|
$2,204
|
$2,308
|
|
Accumulated
depreciation
|
(200)
|
(249)
|
|
Property
and equipment, net
|
2,004
|
2,059
|
|
|
|
|
|
Other
current liability
|
422
|
417
|
|
Other
long term liabilities
|
1,057
|
1,164
|
|
Total
finance lease liabilities
|
1,479
|
1,581
|
Maturities of operating le