UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended:
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction |
| (I.R.S. Employer |
of incorporation or organization) |
| Identification No.) |
(Address of Principal Executive Offices, including zip code)
(
(Registrant’s telephone number, including area code)
Title of each class of registered securities |
| Trading Symbol |
| Name of each exchange on which registered |
|
|
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.
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).
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 ☐ | 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
The number of shares outstanding of the registrant’s Common Stock on October 31, 2021 was
AEMETIS, INC.
FORM 10-Q
Quarterly Period Ended September 30, 2021
INDEX
2 |
Table of Contents |
SPECIAL NOTE REGARDING FORWARD—LOOKING STATEMENTS
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 markets 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 |
Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements.
AEMETIS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except for par value)
|
| September 30, 2021 |
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| December 31, 2020 |
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Assets |
| (unaudited) |
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Current assets: |
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Cash and cash equivalents ($ |
| $ |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventories |
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Prepaid expenses ($ |
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Other current assets ($ |
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Total current assets |
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Property, plant and equipment, net ($ |
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Operating lease right-of-use assets ($ |
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Other assets ($ |
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Total assets |
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Liabilities and stockholders' deficit |
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Current liabilities: |
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Accounts payable ($ |
| $ |
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| $ |
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Current portion of long term debt |
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Short term borrowings |
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Mandatorily redeemable Series B convertible preferred stock |
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Accrued property taxes |
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Accrued contingent litigation fees |
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Current portion of operating lease liability ($ |
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Current portion of Series A preferred units ($ |
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Other current liabilities ($ |
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Total current liabilities |
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Long term liabilities: |
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Senior secured notes and revolving notes |
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EB-5 notes |
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Other long term debt ($ |
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Series A preferred units ($ |
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Operating lease liability ($ |
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Other long term liabilities ($ |
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Total long term liabilities |
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Stockholders' deficit: |
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Series B convertible preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders' deficit |
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| ( | ) |
Total liabilities and stockholders' deficit |
| $ |
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| $ |
|
The accompanying notes are an integral part of the financial statements.
4 |
Table of Contents |
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)
(Unaudited, in thousands except for earnings per share)
|
| For the three months ended September 30, |
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| For the nine months ended September 30, |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Revenues |
| $ |
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| $ |
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| $ |
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| $ |
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Cost of goods sold |
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Gross profit (loss) |
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Research and development expenses |
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Selling, general and administrative expenses |
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Operating income (loss) |
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Other expense (income): |
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Interest expense |
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Interest rate expense |
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Debt related fees and amortization expense |
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Accretion and other expenses of Series A preferred units |
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Gain on debt extinguishment |
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Other expense (income) |
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Loss before income taxes |
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Income tax expense (benefit) |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Other comprehensive (loss) |
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Foreign currency translation gain (loss) |
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| ( | ) |
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Comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Net loss per common share |
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Basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Weighted average shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of the financial statements.
5 |
Table of Contents |
AEMETIS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
| For the nine months ended September 30, |
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| 2021 |
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| 2020 |
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Operating activities: |
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Net loss |
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| ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Share-based compensation |
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Depreciation |
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Debt related fees and amortization expense |
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Intangibles and other amortization expense |
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Accretion and other expenses of Series A preferred units |
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Gain on debt extinguishment |
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| ( | ) |
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Deferred tax benefit |
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| ( | ) | |
Provision for bad debts |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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| ( | ) | |
Inventories |
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| ( | ) |
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Prepaid expenses |
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| ( | ) |
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Other assets |
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Accounts payable |
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| ( | ) |
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Accrued interest expense and fees |
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Other liabilities |
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| ( | ) | |
Net cash (used in) provided by operating activities |
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Investing activities: |
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Capital expenditures |
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Grant proceeds received for capital expenditures |
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Note receivable |
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Net cash used in investing activities |
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Financing activities: |
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Proceeds from borrowings |
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Repayments of borrowings |
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TEC debt renewal and waiver fee payments |
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Grant proceeds received for capital expenditures |
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Payments on finance leases |
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Proceeds from issuance of common stock in equity offering |
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Proceeds from the exercise of stock options |
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Proceeds from Series A preferred units financing |
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Series A preferred financing redemption |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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Net change in cash and cash equivalents for period |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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| $ |
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Supplemental disclosures of cash flow information, cash paid: |
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Cash paid for interest |
| $ |
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| $ |
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Income taxes paid |
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Supplemental disclosures of cash flow information, non-cash transactions: |
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Subordinated debt extension fees added to debt |
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Fair value of warrants issued to subordinated debt holders |
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TEC debt extension, waiver fees, promissory notes fees added to debt |
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Capital expenditures in accounts payable |
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Operating lease liabilities arising from obtaining right of use assets |
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Financing lease liabilities arising from obtaining right of use assets |
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Capital expenditures purchased on financing |
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Issuance of equity to pay off accounts payable |
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The accompanying notes are an integral part of the financial statements.
6 |
Table of Contents |
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in thousands)
For the nine months ended September 30, 2021 | ||||||||||||||||||||||||||||||||
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|
Series B Preferred Stock |
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Common Stock |
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| Additional |
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| Accumulated |
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| Accumulated Other Comprehensive |
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| Total Stockholders' |
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Description |
| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Paid-in Capital |
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| Deficit |
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| Loss |
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| deficit |
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Balance at December 31, 2020 |
| $ |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
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Issuance of common stock |
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| - |
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Stock options exercised |
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Stock-based compensation |
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| - |
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| - |
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Issuance and exercise of warrants |
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Foreign currency translation loss |
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| - |
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| - |
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| ( | ) |
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Net loss |
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| - |
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| - |
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Balance at March 31, 2021 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
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Issuance of common stock |
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| - |
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Stock options exercised |
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| - |
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Stock-based compensation |
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| - |
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Foreign currency translation loss |
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| - |
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| ( | ) |
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Net loss |
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| - |
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| ( | ) |
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Balance at June 30, 2021 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
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Issuance of common stock |
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Sereis B conversion to common stock |
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Stock options exercised |
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Stock-based compensation |
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| - |
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Issuance and exercise of warrants |
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Foreign currency translation gain |
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| - |
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| - |
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Net loss |
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| - |
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| - |
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| ( | ) |
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| ( | ) | ||
Balance at September 30, 2021 |
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| $ |
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|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
For the nine months ended September 30, 2020 | ||||||||||||||||||||||||||||||||
|
| Series B Preferred Stock |
|
| Common Stock |
|
| Additional |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' |
| ||||||||||||||
Description |
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| Deficit |
|
| Loss |
|
| deficit |
| ||||||||
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|
|
|
|
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|
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|
|
|
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|
|
|
|
| ||||||||
Balance at December 31, 2019 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance and exercise of warrants |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Foreign currency translation loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||
Balance at March 31, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance and exercise of warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Foreign currency translation loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||
Net income |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance at June 30, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||||
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options exercised |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Stock-based compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Issuance and exercise of warrants |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Foreign currency translation gain |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||
Balance at September 30, 2020 |
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
The accompanying notes are an integral part of the financial statements.
7 |
Table of Contents |
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 and reduce greenhouse gas emissions.
Founded in 2006, we have completed Phase 1 and are expanding a California biogas digester network and pipeline system to convert dairy waste gas into Renewable Natural Gas (RNG). 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. In the fourth quarter of 2021, an ethanol membrane dehydration system was commissioned at the Keyes Plant, a key part of increasing the electrification and decreasing natural gas usage at the facility. This project reduces greenhouse gas (“GHG”) emissions and decreases the carbon intensity of fuel produced at the Keyes Plant, allowing us to realize a higher price for the ethanol produced and sold.
We also own and operate a
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 dairy 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 as renewable compressed natural gas (“RCNG”) that will service local trucking fleets, or used as renewable energy at the Keyes Plant.
During the first quarter of 2021, we announced our “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 our existing 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
The Company is continuing to develop a biomass-to-fuel technology to build a carbon zero production facility. By producing ultra-low carbon renewable fuels, the Company expects 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.
8 |
Table of Contents |
On April 1, 2021, we established Aemetis Carbon Capture, Inc. to build carbon sequestration projects to generate LCFS and IRS 45Q credits by injecting CO₂ into wells which are monitored for emissions to ensure the long-term sequestration of carbon underground. California’s Central Valley is well established as a major region for large-scale natural gas production and CO₂ injection projects due to the subsurface geologic formation that retains gases.
We also own and operate the Kakinada Plant with a nameplate capacity of
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 interest. 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.
The accompanying consolidated condensed balance sheet as of September 30, 2021, the consolidated condensed statements of operations and comprehensive (loss) for the three and nine months ended September 30, 2021 and 2020, the consolidated condensed statements of cash flows for the nine months ended September 30, 2021 and 2020, and the consolidated condensed statements of stockholders’ deficit for the three and nine months ended September 30, 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 and nine months ended September 30, 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 and nine months ended September 30, 2021 are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year or any future periods.
9 |
Table of Contents |
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 our customer’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 were minimal for the third quarter and year to date revenue for 2021 and were aggregated with ethanol sales for the three and nine months ended September 30, 2021. Sales of high-grade alcohol represented
The below table shows our sales in North America by product category:
|
| For the three months ended September 30, |
|
| For the nine months ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Ethanol and high-grade alcohol sales |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Wet distiller's grains sales |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other sales |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
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.
10 |
Table of Contents |
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. During the second quarter, the Company signed a biofuels offtake agreement with Murex, LLC, and beginning on October 1, 2021 the Company will sell all of our fuel ethanol to that customer.
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.
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 palm fatty acid distillate (“PFAD”) net of taxes. Transaction price allocation is not needed.
The below table shows our sales in India by product category:
|
| For the three months ended September 30, |
|
| For the nine months ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Biodiesel sales |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Refined glycerin sales |
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|
|
|
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| ||||
PFAD sales |
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| ||||
Other sales |
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|
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|
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|
|
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| ||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
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.
11 |
Table of Contents |
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 $
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.
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 guarants (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
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.
12 |
Table of Contents |
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 plant and buildings, furniture, machinery, equipment, land, and biogas dairy digesters. The Goodland Plant is partially completed and is not ready for operation. 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 and nine months ended September 30, 2021 and 2020.
California Energy Commission Low-Carbon Fuel Production Program. The Company has been awarded $
California Department of Food and Agriculture Dairy Digester Research and Development Grant. In 2019, the Company was awarded $
In October 2020, the Company was awarded $
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 $
13 |
Table of Contents |
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 and nine months ended September 30, 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 September 30, 2021 and 2020:
|
| As of |
| |||||
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||
|
|
|
|
|
|
| ||
Series B preferred (post split basis) |
|
|
|
|
|
| ||
Common stock options and warrants |
|
|
|
|
|
| ||
Debt with conversion feature at $30 per share of common stock |
|
|
|
|
|
| ||
Total number of potentially dilutive shares excluded from the diluted net (loss) per share calculation |
|
|
|
|
|
|
Comprehensive Income (Loss). ASC 220 Comprehensive Income (Loss) 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.
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
The “India” operating segment includes the Company’s
14 |
Table of Contents |
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.
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:
15 |
Table of Contents |
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Raw materials |
| $ |
|
| $ |
| ||
Work-in-progress |
|
|
|
|
|
| ||
Finished goods |
|
|
|
|
|
| ||
Total inventories |
| $ |
|
| $ |
|
As of September 30, 2021, and December 31, 2020, the Company recognized a lower of cost or net realizable value impairment of none and $
3. Property, Plant and Equipment
Property, plant and equipment consist of the following:
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| As of |
| |||||
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Land |
| $ |
|
| $ |
| ||
Plant and buildings |
|
|
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|
|
| ||
Furniture and fixtures |
|
|
|
|
|
| ||
Machinery and equipment |
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|
|
|
|
| ||
Construction in progress |
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|
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|
|
| ||
Property held for development |
|
|
|
|
|
| ||
Finance lease right of use assets |
|
|
|
|
|
| ||
Total gross property, plant & equipment |
|
|
|
|
|
| ||
Less accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Total net property, plant & equipment |
| $ |
|
| $ |
|
For the three months ended September 30, 2021 and 2020, interest capitalized in property, plant, and equipment was $
Construction in progress contains incurred costs for the ABGL biogas project, Riverbank project, and energy efficient upgrades at the Keyes Plant. In the second quarter of 2020, the CO₂ Project commenced operations and was placed in service at that time. In the third quarter of 2020, two dairy digesters commenced operations and were placed in service at that time. Spending for ongoing capital projects is accumulated in construction in progress and will be capitalized with subsequent depreciation 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 |
|
| |
Machinery and equipment |
| ||
Furniture and fixtures |
|
|
For the three months ended September 30, 2021 and 2020, the Company recorded depreciation expense of $
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 and nine months ended September 30, 2021 and 2020.
16 |
Table of Contents |
4. Debt
Debt consists of the following:
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Third Eye Capital term notes |
| $ |
|
| $ |
| ||
Third Eye Capital revolving credit facility |
|
|
|
|
|
| ||
Third Eye Capital revenue participation term notes |
|
|
|
|
|
| ||
Third Eye Capital acquisition term notes |
|
|
|
|
|
| ||
Third Eye Capital promissory note |
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|
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|
| ||
Cilion shareholder seller notes payable |
|
|
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|
|
| ||
Subordinated notes |
|
|
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|
|
| ||
EB-5 promissory notes |
|
|
|
|
|
| ||
GAFI Term and Revolving loans |
|
|
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|
| ||
Term loans on capital expenditures |
|
|
|
|
|
| ||
PPP loans |
|
|
|
|
|
| ||
Total debt |
|
|
|
|
|
| ||
Less current portion of debt |
|
|
|
|
|
| ||
Total long term debt |
| $ |
|
| $ |
|
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