Nevada
|
26-1407544
|
(State or other jurisdiction
|
(I.R.S. Employer
|
of incorporation or organization)
|
Identification No.)
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated
filer
|
☐ (Do not check if a smaller reporting
company)
|
Smaller reporting company
|
☒
|
|
|
Emerging
growth company
|
☐
|
PART I--FINANCIAL INFORMATION
|
||
Item 1 Financial Statements.
|
4
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
|
23
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market
Risk.
|
33
|
Item 4.
|
Controls and Procedures.
|
34
|
PART II--OTHER INFORMATION
|
||
Item 1.
|
Legal Proceedings
|
35
|
Item 1A.
|
Risk Factors.
|
35
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of
Proceeds.
|
35
|
Item 3.
|
Defaults Upon Senior Securities.
|
36
|
Item 4.
|
Mine Safety Disclosures.
|
36
|
Item 5.
|
Other Information.
|
36
|
Item 6.
|
Exhibits.
|
36
|
Signatures
|
|
37
|
|
September 30,
2017
|
December 31,
2016
|
Assets
|
(Unaudited)
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$1,749
|
$1,486
|
Accounts
receivable
|
2,199
|
1,557
|
Inventories
|
5,742
|
3,241
|
Prepaid
expenses
|
2,717
|
555
|
Other
current assets
|
233
|
206
|
Total
current assets
|
12,640
|
7,045
|
|
|
|
Property,
plant and equipment, net
|
79,360
|
66,370
|
Intangible
assets, net of accumulated amortization of $485 and $424,
respectively
|
1,239
|
1,300
|
Other
assets
|
3,092
|
3,095
|
Total
assets
|
$96,331
|
$77,810
|
|
|
|
Liabilities and stockholders' deficit
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$9,367
|
$7,842
|
Current
portion of long term debt
|
1,822
|
2,027
|
Short
term borrowings
|
12,737
|
9,382
|
Mandatorily
redeemable Series B convertible preferred stock
|
2,920
|
2,844
|
Accrued
property taxes
|
3,658
|
2,648
|
Other
current liabilities
|
3,312
|
2,473
|
Total
current liabilities
|
33,816
|
27,216
|
Long
term liabilities:
|
|
|
Senior
secured notes
|
70,865
|
61,631
|
EB-5
notes
|
34,000
|
33,000
|
GAFI
secured and revolving notes
|
23,373
|
-
|
Long
term subordinated debt
|
5,786
|
5,674
|
Other
long term liabilities
|
37
|
102
|
Total
long term liabilities
|
134,061
|
100,407
|
|
|
|
Stockholders'
deficit:
|
|
|
Series
B convertible preferred stock, $0.001 par value; 7,235 authorized;
1,323 and 1,328 shares issued and outstanding each period,
respectively (aggregate liquidation preference of $3,969 and $3,984
respectively)
|
1
|
1
|
Common
stock, $0.001 par value; 40,000 authorized; 19,823 and 19,858
shares issued and outstanding, respectively
|
20
|
20
|
Additional
paid-in capital
|
84,128
|
83,441
|
Accumulated
deficit
|
(151,911)
|
(129,887)
|
Accumulated
other comprehensive loss
|
(3,077)
|
(3,388)
|
Total
stockholders' deficit attributable to Aemetis, Inc.
|
(70,839)
|
(49,813)
|
Non-controlling
interest - GAFI
|
(707)
|
-
|
Total
stockholders' deficit
|
(71,546)
|
(49,813)
|
Total
liabilities and stockholders' deficit
|
$96,331
|
$77,810
|
|
For the three months ended
September 30,
|
For the nine months ended
September 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
Revenues
|
$38,935
|
$39,377
|
$111,273
|
$105,762
|
|
|
|
|
|
Cost
of goods sold
|
36,980
|
35,711
|
108,200
|
98,066
|
|
|
|
|
|
Gross
profit
|
1,955
|
3,666
|
3,073
|
7,696
|
|
|
|
|
|
Research
and development expenses
|
1,876
|
87
|
2,072
|
290
|
Selling,
general and administrative expenses
|
3,182
|
3,222
|
9,739
|
9,123
|
|
|
|
|
|
Operating
income (loss)
|
(3,103)
|
357
|
(8,738)
|
(1,717)
|
|
|
|
|
|
Other
(income) expense:
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
|
|
Interest
rate expense
|
3,867
|
3,046
|
9,873
|
8,679
|
Amortization
expense
|
1,265
|
1,425
|
4,112
|
4,269
|
Other
(income) expense
|
(18)
|
(19)
|
2
|
(480)
|
|
|
|
|
|
Loss
before income taxes
|
(8,217)
|
(4,095)
|
(22,725)
|
(14,185)
|
|
|
|
|
|
Income
tax expense
|
-
|
-
|
6
|
6
|
|
|
|
|
|
Net
loss
|
$(8,217)
|
$(4,095)
|
$(22,731)
|
$(14,191)
|
|
|
|
|
|
Less:
Net loss attributable to non-controlling interest
|
(707)
|
-
|
(707)
|
-
|
|
|
|
|
|
Net
loss attributable to Aemetis, Inc.
|
$(7,510)
|
$(4,095)
|
$(22,024)
|
$(14,191)
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
|
|
Foreign
currency translation adjustment
|
(87)
|
56
|
311
|
(50)
|
Comprehensive
loss
|
$(8,304)
|
$(4,039)
|
$(22,420)
|
$(14,241)
|
|
|
|
|
|
Net loss per common share attributable to Aemetis,
Inc.
|
|
|
|
|
Basic
|
$(0.38)
|
$(0.21)
|
$(1.11)
|
$(0.72)
|
Diluted
|
$(0.38)
|
$(0.21)
|
$(1.11)
|
$(0.72)
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
|
|
Basic
|
19,804
|
19,833
|
19,760
|
19,741
|
Diluted
|
19,804
|
19,833
|
19,760
|
19,741
|
|
For the nine months ended
September 30,
|
|
|
2017
|
2016
|
Operating activities:
|
|
|
Net
loss
|
$(22,731)
|
$(14,191)
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
Share-based
compensation
|
800
|
573
|
Depreciation
|
3,471
|
3,523
|
Debt
related amortization expense
|
4,112
|
4,269
|
Intangibles
and other amortization expense
|
98
|
95
|
Change
in fair value of warrant liability
|
3
|
34
|
Loss
on sale/disposal of assets
|
-
|
11
|
Changes
in operating assets and liabilities:
|
|
|
Accounts
receivable
|
(932)
|
150
|
Inventories
|
(2,456)
|
795
|
Prepaid
expenses
|
89
|
82
|
Other
current and long-term assets
|
(41)
|
(175)
|
Accounts
payable
|
1,507
|
(1,315)
|
Accrued
interest expense and fees, net of payments
|
8,091
|
5,910
|
Other
liabilities
|
1,633
|
683
|
Net
cash provided by (used in) operating activities
|
(6,356)
|
444
|
|
|
|
Investing activities:
|
|
|
Capital
expenditures
|
(681)
|
(479)
|
|
|
|
Net
cash used in investing activities
|
(681)
|
(479)
|
|
|
|
Financing activities:
|
|
|
Proceeds
from borrowings
|
13,146
|
8,535
|
Repayments
of borrowings
|
(8,889)
|
(8,091)
|
GAFI
proceeds from borrowings
|
2,810
|
-
|
Net
cash provided by financing activities
|
7,067
|
444
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
233
|
(40)
|
Net
cash and cash equivalents increase for period
|
263
|
369
|
Cash
and cash equivalents at beginning of period
|
1,486
|
283
|
Cash
and cash equivalents at end of period
|
$1,749
|
$652
|
|
|
|
Supplemental
disclosures of cash flow information, cash paid:
|
|
|
Interest
paid
|
$1,875
|
$2,518
|
Income
taxes paid
|
6
|
6
|
Supplemental disclosures of cash flow information, non-cash
transactions:
|
|
|
Subordinated
debt extension fees added to debt
|
680
|
680
|
Fair
value of warrants issued to subordinated debt holders
|
321
|
578
|
Repurchase
of common stock added to TEC promissory note
|
451
|
-
|
Senior
debt extension and waiver fees added to debt
|
4,446
|
4,940
|
TEC
promissory note fees and fees for Goodland transaction
|
1,169
|
-
|
Settlement
of accounts payable through transfer of equipment
|
-
|
66
|
GAFI
plant, property & equipment acquired
|
15,431
|
-
|
Payment
of TEC bridge loan added to GAFI Revolving loan
|
3,669
|
-
|
Prepaid
interest on GAFI Term loan
|
2,250
|
-
|
|
September 30,
2017
|
September 30,
2016
|
|
|
|
Series
B preferred (post split basis)
|
132
|
133
|
Common
stock options and warrants
|
2,554
|
1,965
|
Debt
with conversion feature at $30 per share of common
stock
|
1,194
|
861
|
Total
number of potentially dilutive shares excluded from the diluted net
loss per share calculation
|
3,880
|
2,959
|
|
September 30,
2017
|
December 31,
2016
|
Raw
materials
|
$2,306
|
$1,044
|
Work-in-progress
|
1,946
|
1,360
|
Finished
goods
|
1,490
|
837
|
Total
inventories
|
$5,742
|
$3,241
|
|
September 30,
2017
|
December 31,
2016
|
Land
|
$2,734
|
$2,713
|
Plant
and buildings
|
82,390
|
81,755
|
Furniture
and fixtures
|
983
|
572
|
Machinery
and equipment
|
3,951
|
4,308
|
Construction
in progress
|
522
|
88
|
GAFI
property, plant & equipment
|
15,431
|
0
|
Total
gross property, plant & equipment
|
106,011
|
89,436
|
Less
accumulated depreciation
|
(26,651)
|
(23,066)
|
Total
net property, plant & equipment
|
$79,360
|
$66,370
|
|
Years
|
Plant
and buildings
|
20 - 30
|
Machinery
and equipment
|
5 - 7
|
Furniture
and fixtures
|
3 - 5
|
|
September 30,
2017
|
December 31,
2016
|
Third
Eye Capital term notes
|
$6,832
|
$6,577
|
Third
Eye Capital revolving credit facility
|
32,778
|
24,927
|
Third
Eye Capital revenue participation term notes
|
11,473
|
11,042
|
Third
Eye Capital acquisition term notes
|
19,782
|
19,085
|
Cilion
shareholder seller notes payable
|
5,786
|
5,674
|
Subordinated
notes
|
8,445
|
7,565
|
EB-5
long term promissory notes
|
35,822
|
35,027
|
Unsecured
working capital loans
|
4,292
|
1,817
|
GAFI
Term and Revolving loans
|
23,373
|
-
|
Total debt
|
148,583
|
111,714
|
Less
current portion of debt
|
14,559
|
11,409
|
Total long term debt
|
$134,024
|
$100,305
|
|
As of
|
|
September 30, 2017
|
Term
loan
|
$15,000
|
Revolving
loan
|
9,248
|
Total
debt
|
$24,248
|
Less:
Debt issuance costs
|
(875)
|
Total
debt
|
$23,373
|
|
|
Twelve months ended September 30,
|
Debt Repayments
|
2018
|
$14,559
|
2019
|
119,381
|
2020
|
5,000
|
2021
|
12,536
|
Total
debt
|
151,476
|
Discounts
|
(2,643)
|
Total
debt, net of discounts
|
$148,833
|
|
Shares Available for Grant
|
Number of Shares Outstanding
|
Weighted-Average Exercise Price
|
|
|
|
|
Balance
as of December 31, 2016
|
98
|
1,632
|
$4.37
|
Authorized
|
655
|
-
|
-
|
Granted
|
(637)
|
637
|
1.72
|
Forfeited/expired
|
46
|
(46)
|
21.04
|
Balance
as of September 30, 2017
|
162
|
2,223
|
$3.27
|
|
As of
|
|
September 30, 2017
|
Assets
|
|
Current
assets:
|
|
Cash
and cash equivalents
|
$482
|
Prepaid
expenses
|
1,978
|
Total
current assets
|
2,460
|
|
|
Property,
plant and equipment, net
|
15,408
|
Promissory
note receivable from Aemetis
|
4,802
|
Total
assets
|
$22,670
|
|
|
Liabilities and stockholder's deficit
|
|
|
|
Accounts
Payable
|
$4
|
Secured
and Revolving notes
|
23,373
|
Total
liabilities
|
23,377
|
|
|
Accumulated
deficit
|
(707)
|
Total
liabilities and stockholder's deficit
|
$22,670
|
|
From July 10, 2017 to
|
|
September 30, 2017
|
Selling,
general and administrative expenses
|
$131
|
|
|
Operating
loss
|
(131)
|
|
|
Interest
expense
|
|
Interest
rate expense
|
584
|
Amortization
expense
|
125
|
Other
(income) expense
|
(133)
|
Net
loss
|
$(707)
|
|
As of and for the three months ended September
30,
|
As of and for the nine months ended September
30,
|
||
|
2017
|
2016
|
2017
|
2016
|
Ethanol
sales
|
$26,394
|
$24,687
|
$75,695
|
$68,993
|
Wet
distiller's grains sales
|
5,735
|
6,114
|
15,523
|
16,918
|
Corn
oil sales
|
1,043
|
788
|
2,693
|
2,232
|
Corn/milo
purchases
|
25,751
|
23,098
|
75,478
|
67,766
|
Accounts
receivable
|
776
|
345
|
776
|
345
|
Accounts
payable
|
1,976
|
1,241
|
1,976
|
1,241
|
|
For the three months ended September 30,
|
For the nine months ended September 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
Revenues
|
|
|
|
|
North
America
|
$36,012
|
$33,889
|
$101,430
|
$93,979
|
India
|
2,923
|
5,488
|
9,843
|
11,783
|
Total
revenues
|
$38,935
|
$39,377
|
$111,273
|
$105,762
|
|
|
|
|
|
Cost of goods sold
|
|
|
|
|
North
America
|
$33,995
|
$30,391
|
$99,003
|
$86,174
|
India
|
$2,985
|
5,320
|
9,197
|
11,892
|
Total
cost of goods sold
|
$36,980
|
$35,711
|
$108,200
|
$98,066
|
|
|
|
|
|
Gross profit (loss)
|
|
|
|
|
North
America
|
$2,017
|
$3,498
|
$2,427
|
$7,805
|
India
|
(62)
|
168
|
646
|
(109)
|
Total
gross profit (loss)
|
$1,955
|
$3,666
|
$3,073
|
$7,696
|
|
As of
|
|
|
September 30,
|
December 31,
|
|
2017
|
2016
|
North
America
|
$82,036
|
$67,279
|
India
|
14,295
|
10,531
|
Total
Assets
|
$96,331
|
$77,810
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$36,012
|
$33,889
|
$2,123
|
6%
|
India
|
2,923
|
5,488
|
(2,565)
|
-47%
|
Total
|
$38,935
|
$39,377
|
$(442)
|
-1%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$33,995
|
$30,391
|
$3,604
|
12%
|
India
|
2,985
|
5,320
|
(2,335)
|
-44%
|
Total
|
$36,980
|
$35,711
|
$1,269
|
4%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$2,017
|
$3,498
|
$(1,481)
|
-42%
|
India
|
(62)
|
168
|
(230)
|
-137%
|
Total
|
$1,955
|
$3,666
|
$(1,711)
|
-47%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$1,876
|
$87
|
$1,789
|
2056%
|
India
|
-
|
-
|
-
|
0%
|
Total
|
$1,876
|
$87
|
$1,789
|
2056%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$2,941
|
$3,015
|
$(74)
|
-2%
|
India
|
241
|
207
|
34
|
16%
|
Total
|
$3,182
|
$3,222
|
$(40)
|
-1%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
|
|
|
|
Interest
rate expense
|
$3,713
|
$2,951
|
$762
|
26%
|
Amortization
expense
|
1,265
|
1,425
|
(160)
|
-11%
|
Other
(income) expense
|
(5)
|
5
|
(10)
|
-200%
|
|
|
|
|
|
India
|
|
|
|
|
Interest
rate expense
|
154
|
95
|
59
|
62%
|
Other
(income)
|
(13)
|
(24)
|
11
|
46%
|
|
|
|
|
|
Total
|
$5,114
|
$4,452
|
$662
|
15%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$101,430
|
$93,979
|
$7,451
|
8%
|
India
|
9,843
|
11,783
|
(1,940)
|
-16%
|
Total
|
$111,273
|
$105,762
|
$5,511
|
5%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$99,003
|
$86,174
|
$12,829
|
15%
|
India
|
9,197
|
11,892
|
(2,695)
|
-23%
|
Total
|
$108,200
|
$98,066
|
$10,134
|
10%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$2,427
|
$7,805
|
$(5,378)
|
-69%
|
India
|
646
|
(109)
|
755
|
693%
|
Total
|
$3,073
|
$7,696
|
$(4,623)
|
-60%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$2,072
|
$290
|
$1,782
|
614%
|
India
|
-
|
-
|
-
|
0%
|
Total
|
$2,072
|
$290
|
$1,782
|
614%
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
$8,832
|
$8,177
|
$655
|
8%
|
India
|
907
|
946
|
(39)
|
-4%
|
Total
|
$9,739
|
$9,123
|
$616
|
7%
|
Other
(income)/expense
|
|
|
|
|
|
2017
|
2016
|
Inc/(dec)
|
% change
|
North
America
|
|
|
|
|
Interest
rate expense
|
$9,694
|
$8,461
|
$1,233
|
15%
|
Amortization
expense
|
4,112
|
4,269
|
(157)
|
-4%
|
Other
(income) expense
|
33
|
(405)
|
438
|
-108%
|
|
|
|
|
|
India
|
|
|
|
|
Interest
rate expense
|
179
|
218
|
(39)
|
-18%
|
Other
(income)
|
(31)
|
(75)
|
44
|
59%
|
|
|
|
|
|
Total
|
$13,987
|
$12,468
|
$1,519
|
12%
|
|
September 30,
2017
|
December 31,
2016
|
Cash
and cash equivalents $
|
$1,749
|
1,486
|
Current
assets (including cash, cash equivalents, and
deposits)
|
12,640
|
7,045
|
Current
and long term liabilities (excluding all debt)
|
19,294
|
15,909
|
Current
& long term debt
|
148,583
|
111,714
|
Change in total debt
|
36,869
|
|
Increases
to debt:
|
|
|
Accrued
interest
|
9,569
|
|
Covenant
Waiver fee
|
750
|
|
TEC
debt Extension fee
|
3,100
|
|
January
2017 Promissory note including $0.6 million withheld as fees by
TEC
|
2,100
|
|
April
2017 Promissory note including $1.0 million withheld as fees by
TEC
|
1,500
|
|
GAFI
Term loan and Revolving loan
|
24,160
|
|
Sub
debt extension fees
|
680
|
|
Secunderabad
Oils and Gemini working capital draws
|
10,733
|
|
EB-5
debt escrow funds received
|
500
|
|
Total
increases to debt
|
53,092
|
|
|
|
|
Decreases
to debt:
|
|
|
principal
and Interest payments to senior lender
|
(4,986)
|
|
Interest
payments to EB-5 investors
|
(430)
|
|
Principal
payments to Secunderabad Oils
|
(2,339)
|
|
Principal
and interest payments to Gemini
|
(6,082)
|
|
Debt
discount issuance costs to be amortized
|
(1,890)
|
|
GAFI
interest payments
|
(496)
|
|
Total
decreases to debt
|
(16,223)
|
3.1
|
Amended and Restated Articles of Incorporation filed on March 16,
2017.
|
31.1
|
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under
the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
31.2
|
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under
the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes- Oxley Act of
2002.
|
32.1
|
Certifications pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
Certifications pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
AEMETIS, INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Eric A. McAfee
|
|
|
Eric A. McAfee
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
AEMETIS, INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Todd Waltz
|
|
|
Todd Waltz
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 31, 2017 |
|
Document Document And Entity Information Abstract | ||
Entity Registrant Name | AEMETIS, INC. | |
Entity Central Index Key | 0000738214 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 19,822,962 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2017 |
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Intangible assets, accumulated amortization | $ 485 | $ 424 |
Series B Preferred stock, par value | $ 0.001 | $ 0.001 |
Series B Preferred stock, authorized | 7,235 | 7,235 |
Series B Preferred stock, shares issued | 1,323 | 1,328 |
Series B Preferred stock, shares outstanding | 1,323 | 1,328 |
Aggregate Liquidation Preference | $ 3,969 | $ 3,984 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 40,000 | 40,000 |
Common stock, shares issued | 19,823 | 19,858 |
Common stock, shares outstanding | 19,823 | 19,858 |
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Statement [Abstract] | ||||
Revenues | $ 38,935 | $ 39,377 | $ 111,273 | $ 105,762 |
Cost of goods sold | 36,980 | 35,711 | 108,200 | 98,066 |
Gross profit | 1,955 | 3,666 | 3,073 | 7,696 |
Research and development expenses | 1,876 | 87 | 2,072 | 290 |
Selling, general and administrative expenses | 3,182 | 3,222 | 9,739 | 9,123 |
Operating income (loss) | (3,103) | 357 | (8,738) | (1,717) |
Interest expense | ||||
Interest rate expense | 3,867 | 3,046 | 9,873 | 8,679 |
Amortization expense | 1,265 | 1,425 | 4,112 | 4,269 |
Other (income) expense | (18) | (19) | 2 | (480) |
Loss before income taxes | (8,217) | (4,095) | (22,725) | (14,185) |
Income tax expense | 0 | 0 | 6 | 6 |
Net loss | (8,217) | (4,095) | (2,731) | (14,191) |
Less: Net loss attributable to non-controlling interest | (707) | 0 | (707) | 0 |
Net loss attributable to Aemetis, Inc. | (7,510) | (4,095) | (22,024) | (14,191) |
Other comprehensive income (loss) | ||||
Foreign currency translation adjustment | (87) | 56 | 311 | (50) |
Comprehensive loss | $ (8,304) | $ (4,039) | $ (22,420) | $ (14,241) |
Net loss per common share | ||||
Basic | $ (0.38) | $ (0.21) | $ (1.11) | $ (0.72) |
Diluted | $ (0.38) | $ (0.21) | $ (1.11) | $ (0.72) |
Weighted average shares outstanding | ||||
Basic | 19,804 | 19,833 | 19,760 | 19,741 |
Diluted | 19,804 | 19,833 | 19,760 | 19,741 |
1. Nature of Activities and Summary of Significant Accounting Policies |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
1. Nature of Activities and Summary of Significant Accounting Policies | Nature of Activities. Headquartered in Cupertino, California, Aemetis is an advanced renewable fuels and biochemicals company focused on the acquisition, development and commercialization of innovative technologies that replace traditional petroleum-based products through the conversion of second-generation ethanol and biodiesel plants into advanced biorefineries. Founded in 2006, the Company owns and operates a 60 million gallon per year ethanol production facility in the California Central Valley near Modesto where it manufactures and produces ethanol, wet distillers’ grains (“WDG”), condensed distillers solubles (“CDS”) and distillers’ corn oil. The Company also owns and operates a 50 million gallon per year renewable chemical and advanced fuel production facility on the East Coast of India producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. It also operates a research and development laboratory and holds a portfolio of patents and related technology licenses for the production of renewable fuels and biochemicals.
Basis of Presentation and Consolidation. These consolidated financial statements include the accounts of Aemetis, Inc., a Nevada corporation, and its wholly owned subsidiaries (collectively, “Aemetis” or the “Company”). 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, there are situations in which an enterprise is required to consolidate a variable interest entity (VIE), even though the enterprise does not own a majority of the voting interests. An enterprise must consolidate a VIE if the enterprise is the primary beneficiary of the VIE. 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.
In July 2017, we closed on a transaction with Goodland Advanced Fuels, Inc. (GAFI). Upon application of consolidation guidance in ASC 810 Consolidation, we determined that GAFI is a variable interest entity and Aemetis, Inc. is the primary beneficiary. Accordingly, the consolidated financial statements include the accounts of GAFI (see Note 6).
All intercompany balances and transactions have been eliminated in consolidation including any transactions between GAFI and Aemetis, Inc. The accompanying consolidated condensed balance sheet as of September 30, 2017, the consolidated condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2016, and the consolidated condensed statements of cash flows for the nine months ended September 30, 2017 and 2016 are unaudited. The consolidated condensed balance sheet as of December 31, 2016 was derived from the 2016 audited consolidated financial statements and notes thereto. The consolidated condensed financial statements in this report should be read in conjunction with the 2016 audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2016.
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 management, the unaudited interim consolidated condensed financial statements for the three and nine months ended September 30, 2017 and 2016 have been prepared on the same basis as the audited consolidated statements as of December 31, 2016 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, 2017 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. The Company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed or determinable and collection is reasonably assured. The Company records revenues based upon the gross amounts billed to its customers. Revenue from nonmonetary transactions, principally in-kind by-products received in exchange for material processing where the by-product is contemplated by contract to provide value, is recognized at the quoted market price of those goods received or by-products.
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, WDG, CDS, and distillers’ corn oil through third-party marketing arrangements generally without requiring collateral. The Company sells biodiesel, glycerin, and processed natural oils to a variety of customers and may require advance payment based on the size and creditworthiness of the customer. 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 receivable 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 did not reserve any balance for allowance for doubtful accounts as of September 30, 2017 and December 31, 2016.
Inventories. Finished goods and work-in-process 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.
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, and the plants in Keyes, California, Goodland, Kansas and Kakinada, India. As part of our variable interest entity, the plant in Kansas is partially completed and is not ready for operation; hence, we are not depreciating these assets yet. Otherwise, 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 Accounting Standards Codification (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 may not be recoverable. When events or changes in circumstances indicate that the carrying amount of an asset 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.
Basic and Diluted Net Income (Loss) per Share. Basic net income (loss) per share is computed by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (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, 2017 and 2016, 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 income (loss) per share calculation as of September 30, 2017 and 2016:
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 income (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, with 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. Gains and losses from other foreign currency transactions are recorded in other income (expense).
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 recognizes two reportable operating geographic segments: “North America” and “India.”
The “North America” operating segment includes the Company’s 60 million gallons per year capacity Keyes plant in Keyes, California, the GAFI plant in Goodland, Kansas and the research and development facility.
The “India” operating segment encompasses the Company’s 50 million gallon per year capacity biodiesel plant in Kakinada, India, its administrative offices in Hyderabad, India, and the holding companies in Nevada and Mauritius.
Fair Value of Financial Instruments. The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximate their estimated fair values due to the short-term maturities of those financial instruments. These financial instruments are considered Level 1 measurements under the fair value hierarchy. Due to the unique terms of our notes payable and lines of credit and the financial condition of the Company, the fair value of the debt is not readily determinable.
Share-Based Compensation. The Company recognizes share-based compensation expense in accordance with ASC 718 Stock Compensation, requiring the Company to recognize expense 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.
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.
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.
Recently Issued Accounting Pronouncements.
In May 2014, the FASB issued new guidance on the recognition of revenue. The guidance stated that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company’s adoption of this accounting standard begins with the first quarter of fiscal year 2018. In March and April 2016, the FASB issued further revenue recognition guidance amending principal vs. agent considerations regarding whether an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The Company is currently evaluating the impact of the adoption of this accounting standard update on its consolidated results of operations and financial condition and will be providing guidance in its Form 10-K for the year ended December 31, 2017.
|
2. Inventories |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
2. Inventories | Inventory consists of the following:
|
3. Property, Plant and Equipment |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3. Property, Plant and Equipment | Property, plant and equipment consist of the following:
Depreciation on the components of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:
For the three months ended September 30, 2017 and 2016, the Company recorded depreciation expense of $1.2 million for each period. For the nine months ended September 30, 2017 and 2016, the Company recorded depreciation expense of $3.5 million for each period.
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 of long-lived assets during the three and nine months ended September 30, 2017 and 2016. |
4. Debt |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4. Debt | Debt consists of the following:
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 (“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 (“Revenue Participation Term Notes”); and (iv) senior secured term loans in an aggregate principal amount of $15.0 million (“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). After this financing transaction, Third Eye Capital obtained sufficient equity ownership in the Company to be considered a related party. The Original Third Eye Capital Notes have a maturity date of April 1, 2018.
On January 31, 2017, a Promissory Note (the “January 2017 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) May 30, 2017. In addition, as part of the January 2017 Note agreement, Aemetis used $0.5 million of the total proceeds to buy back 275 thousand common shares that were held by Third Eye Capital. In consideration of the January 2017 Note, $133 thousand of the total proceeds were paid to Third Eye Capital as financing charges. As of June 30, 2017, the outstanding balance on the January 2017 Note was $2.1 million. On July 10, 2017, the January 2017 Note was paid in full.
On March 1, 2017, Third Eye Capital agreed to Amendment No. 13 to the Note Purchase Agreement to: (i) extend the maturity date of the Third Eye Capital Notes to April 1, 2018 in exchange for a 5% extension fee consisting of adding $3.1 million to the outstanding principal balance of the Note Purchase Agreement and allowing for the further extension of the maturity date of the Third Eye Capital Notes to April 1, 2019, at the Company’s election, for an additional extension fee of 5% of the then outstanding Third Eye Capital Notes outstanding balance, (ii) waive the free cash flow financial covenant under the Note Purchase Agreement for the three months ended December 31, 2016, (iii) provide that such covenant will be deleted prospectively from the Note Purchase Agreement, (iv) waive the default under the Note Purchase Agreement relating to indebtedness outstanding to Laird Cagan and (v) waive the covenant under the Note Purchase Agreement to permit the Company to pay off the defaulted Laird Cagan subordinated note by issuing stock. The borrowers agreed to use their best efforts to close the transaction to purchase assets in Goodland, Kansas from Third Eye Capital as described in a non-binding offer to purchase letter between an affiliate of the Company and Third Eye Capital, which closed on July 10, 2017. As consideration for such amendment and waiver, the borrowers agreed to pay Third Eye Capital an amendment and waiver fee of $750 thousand to be added to the outstanding principal balance of the Revolving Credit Facility. As a result of the extension of the maturity date in Amendment No. 13, the Third Eye Capital Notes are classified as non-current debt. We evaluated the Amendment of the Notes and applied modification accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
On April 28, 2017, a Promissory Note (the “April 2017 Note”, and together with the Original Third Eye Capital Notes, the “Third Eye Capital Notes”) for $1.5 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 earliest of (a) closing of the Financing, (b) receipt of proceeds from any financing, refinancing or other similar transaction, (c) extension of credit by the Lender, or Agent on behalf of certain lenders or the Noteholders, to the Debtors or their affiliates, and (d) June 15, 2017. In addition, $1.0 million of this note represents fees payable by Goodland Advanced Fuels, Inc. upon the closing of the Goodland transaction. On July 10, 2017, the April 2017 Note was paid in full and the fees payable by Goodland Advanced Fuels, Inc., were paid.
Terms of Third Eye Capital Notes
The Company can extend the maturity date of the Term Notes, Revolving Credit Facility Notes, Revenue Participation Notes, and Acquisition Term Notes to April 2019. As a condition to any such extension, the Company would be required to pay a fee of 5% of the carrying value of the debt. By this ability to extend the maturity at the Company’s will, the Third Eye Capital Notes are classified as non-current debt.
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 Third Eye Capital Notes are secured by first priority liens on all real and personal property of, and assignment of proceeds from government grants and guarantees from Aemetis, Inc. The Third Eye Capital Notes 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 for $8.0 million.
Cilion shareholder seller notes payable. In connection with the Company’s merger with Cilion, Inc., on July 6, 2012, the Company issued $5.0 million in notes payable to Cilion shareholders as merger consideration, 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 September 30, 2017, Aemetis Facility Keyes, Inc. had $5.8 million in principal and interest outstanding under the Cilion shareholder seller notes payable.
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 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 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.
Interest 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.
On January 1, 2017, the Subordinated Notes were amended to extend the maturity date until the earlier of (i) June 30, 2017; (ii) completion of an equity financing by AAFK or Aemetis 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, 2017 amendment and the refinancing terms of the notes and applied modification accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
On July 1, 2017, the Subordinated Notes were amended to extend the maturity date until the earlier of (i) December 31, 2017; (ii) completion of an equity financing by AAFK or Aemetis 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 July 1, 2017 amendment and the refinancing terms of the notes and applied modification accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
On January 14, 2013, Laird Cagan, a related party, loaned $0.1 million through a promissory note maturing on December 31, 2016 with a five percent annualized interest rate and the right to exercise 5 thousand warrants exercisable at $0.01 per share.
At September 30, 2017, the Company owed, in aggregate, the amount of $8.4 million in principal and interest net of $0.3 million in debt issuance costs under the Subordinated Notes.
EB-5 long-term 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 3%, with each note 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 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. As of September 30, 2017, 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, of which $34.5 million have been released from the escrow account to the Company, with $1.0 million remaining in escrow and $0.5 million to be funded to escrow. As of September 30, 2017, $34.5 million in principal and $1.3 million in accrued interest remained outstanding.
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..
Unsecured working capital loans. In November 2008, the Company entered into an operating agreement with Secunderabad Oils Limited (“Secunderabad Oils”). Under this agreement, Secunderabad Oils agreed to provide the Company with working capital, on an as needed basis, to fund the purchase of feedstock and other raw materials for its Kakinada biodiesel facility. Working capital advances bear interest at the actual bank-borrowing rate of Secunderabad Oils of fifteen percent (15%). In return, the Company agreed to pay Secunderabad Oils 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, Secunderabad Oils owes the Company 30% of the losses. Either party can terminate the agreement at any time without penalty. On January 1, 2016, Secunderabad Oils suspended the agreement to use any funds provided under the agreement to buy feedstock until commodity prices returned to economically viable levels. On June 1, 2016, the agreement was reinitiated on the terms described above. On July 15, 2017, the agreement with Secunderabad Oils was amended to provide the working capital funds for British Petroleum business operations (“BP Operations”) in the form of inter-corporate deposit for an amount of approximately $2.3 million for a period of 95 days at 14.75% per annum interest rate. The Secunderabad Oils has a second priority lien on the assets of the Kakinada biodiesel facility after this agreement. During the nine months ended September 30, 2017 and 2016, the Company made principal and interest payments to Secunderabad Oils of approximately $2.3 million and $4.5 million, respectively. As of September 30, 2017, the Company had $0.7 million outstanding under the Secunderabad Oils agreement.
On April 16, 2017, the Company entered into a similar 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 its Kakinada biodiesel facility. Working capital advances bear interest at the actual bank-borrowing rate of Gemini of twelve percent (12%). 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 biodiesel facility. Since the inception of this agreement, the Company made principal and interest payments to Gemini of approximately $6.2 million. As of September 30, 2017, the Company had $3.6 million outstanding on this raw material purchase agreement.
In October 2016, the Company made an agreement with a supplier of palm stearin to its Kakinada plant to pay 12% interest on an unpaid balance under the raw material purchase agreement of $1.9 million. As of September 30, 2017 and December 31, 2016, the Company had nil and $1.5 million outstanding on this raw material purchase agreement, respectively.
Variable Interest Entity (GAFI) Term loan and Revolving loan
On July 10, 2017, GAFI entered into a Note Purchase Agreement (“VIE Note Purchase Agreement”) with Third Eye Capital Corporation. See further discussion regarding GAFI in Note 6. Pursuant to the VIE Note Purchase Agreement, the Noteholders agreed, subject to the terms and conditions of the VIE 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 fifteen million dollars (“Term Loan”) and (ii) revolving advances not to exceed ten million dollars in the aggregate (“Revolving Loan”). The interest rate per annum applicable to the Term Loan is equal to ten percent (10%). The interest rate per annum applicable to the Revolving Loans is the greater of (a) the Prime Rate plus seven and three quarters percent (7.75%) and (b) twelve percent (12%). The maturity date of the Loans (“Maturity Date”) is July 10, 2019, provided that the Maturity Date may be extended at the option of GAFI for up to two additional one-year periods upon prior written notice and upon satisfaction of certain conditions and the payment of a renewal fee for such extension. An initial advance under the Revolving Loan was made for $2.2 million as a prepayment of interest on the Term Loan for the first eighteen months of interest payments. In addition, a fee of $1.0 million was paid in consideration to Noteholders.
GAFI, the Company and its subsidiary Aemetis Advanced Products Keyes, Inc. (“AAPK”) also entered into separate Intercompany Revolving Promissory Notes, dated July 10, 2017 (“Intercompany Revolving Notes”), pursuant to which GAFI may, from time to time, lend a portion of the proceeds of the Revolving Loan borrowed under the VIE Note Purchase Agreement.
In consideration for the direct and indirect benefits from the transactions contemplated by the VIE Note Purchase Agreement and the Intercompany Revolving Notes, Aemetis, Inc. and AAPK “Guarantors” agreed to enter into a Limited Guaranty. Pursuant to the Limited Guaranty, the Guarantors guarantee the prompt payment and performance of all unpaid principal and interest on the Loans and all other obligations and liabilities of GAFI to any Noteholders in connection with the VIE Note Purchase Agreement. The obligations of the Guarantors pursuant to the Limited Guaranty are secured by a first priority lien over all assets of the Guarantors subject to lien existing in connection with the Existing Note Purchase Agreement of Guarantors. Each Guarantor agreed to make the following regulatory and financial covenants: i) maintenance of existence and compliance, ii) payment of obligations; iii) reporting requirements on financials of Guarantors annually, quarterly; iv) delivery of cellulosic ethanol project progress reports within 15 days of the month end, v) ensuring the ratio of: (a) the sum of (i) the most recent Mortgaged Property Market Value, and (ii) the most recent AAPK’s cellulosic ethanol project value to (b) the Note Indebtedness, to be less than 2.00:1.00, tested as of the last day of each fiscal quarter, and (iv) permit the amount of trade payables due to exceed the sum of the amount of the GAFI’s Cash Equivalents plus the revolving advances available to be advanced under the Revolving Loan, tested as of the last day of each month.
As of September 30, 2017, GAFI obligations are as follows:
Scheduled debt repayments for loan obligations follow:
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5. Stock-Based Compensation |
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5. Stock Based Compensation | Plan Stock Options
Aemetis authorized the issuance of 2.6 million shares of common stock under its Zymetis 2006 Stock Plan and Amended and Restated 2007 Stock Plan (together, the “Company Stock Plans”), which include both incentive and non-statutory stock options. These options generally expire five to ten years from the date of grant with a general vesting term of 1/12th every three months and are exercisable at any time after vesting subject to continuation of employment. On January 19, 2017, 637 thousand stock option grants were issued to employees and directors under the Company Stock Plans. As of September 30, 2017, 2.2 million options are outstanding under the Company Stock Plans.
Non-Plan Stock Options
In November 2012, the Company issued 98 thousand stock options to board members and consultants outside of any Company stock option plan. As of September 30, 2017, all options are vested and 89 thousand options are outstanding.
Inducement Equity Plan Options
In March 2016, the Board of Directors of the Company approved an Inducement Equity Plan authorizing the issuance of 100 thousand non-statutory stock options to purchase common stock. As of September 30, 2017, 37 thousand options were outstanding.
Common Stock Reserved for Issuance
The following is a summary of options granted under the Company Stock Plans:
Stock-based compensation for employees
Stock-based compensation is accounted for in accordance with the provisions of ASC 718, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.
For the three months ended September 30, 2017 and 2016, the Company recorded stock compensation expense in the amount of $196 thousand and $172 thousand, respectively. For the nine months ended September 30, 2017 and 2016, the Company recorded stock compensation expense in the amount of $800 thousand and $573 thousand, respectively.
Valuation and Expense Information
All issuances of stock options or other issuances of equity instruments to employees as the consideration for services received by us are accounted for based on the fair value of the equity instrument issued. The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock based compensation expense requires us to make assumptions and judgments about the variables used in the calculation, including the fair value of our common stock, the expected term (the period of time that the options granted are expected to be outstanding), the volatility of our common stock, a risk-free interest rate, and expected dividends. We also estimate forfeitures of unvested stock options. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest. We use the simplified calculation of expected life described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, and volatility is based on an average of the historical volatilities of the common stock of four entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. We use an expected dividend yield of zero, as we do not anticipate paying any dividends in the foreseeable future. Expected forfeitures are assumed zero due to the small number of plan participants and the plan.
There were no stock options granted during the three months ended September 30, 2017.
As of September 30, 2017, the Company had $1.1 million of total unrecognized compensation expense for employees that the Company will amortize over the 1.81 years of weighted average remaining term.
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6. Variable Interest Entity |
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6. Variable Interest Entity | Goodland Advanced Fuels, Inc., (GAFI) was formed to acquire the Goodland plant in Goodland, Kansas. On July 10, 2017, GAFI entered into the VIE Note Purchase Agreement with Third Eye Capital Corporation. GAFI, the Company and its subsidiary Aemetis AAPK also entered into separate Intercompany Revolving Notes, pursuant to which GAFI may, from time to time, lend a portion of the proceeds of the Revolving Loan incurred under the VIE Note Purchase Agreement. Guarantors also agreed to enter into that certain Limited Guaranty. Pursuant to which the Guarantors guarantee the prompt payment and performance of all unpaid principal and interest on the Loans and all other obligations and liabilities of GAFI to Noteholders in connection with the VIE Note Purchase Agreement. The obligations of the Guarantors pursuant to the Limited Guaranty are secured by a first priority lien over all assets of the Guarantors pursuant to separate general security agreements entered into by each Guarantor. The aggregate obligations and liabilities of each Guarantor is limited to the sum of (i) the aggregate amount advanced by GAFI to such Guarantor under and in accordance with the Intercompany Revolving Notes and (ii) the obligation of the Guarantor pursuant to its indemnity and expense obligations under the Limited Guaranty prior to the date on which the Option is exercised. Additionally, on July 10, 2017, the Company entered into an Option Agreement by and between GAFI and the sole shareholder of GAFI, pursuant to which Aemetis was granted an irrevocable option to purchase all, but not less than all, of the capital stock of GAFI for an aggregate purchase price equal to $0.01 per share (total purchase price of $10.00). This Option provides for automatic triggering in the event of certain default circumstances. After the automatic exercise upon default, the Limited Guaranty no longer applies and the Guarantors are responsible for the outstanding balances of the GAFI term and revolving loan.
After consideration of the above agreements, we concluded that GAFI did not have enough equity to finance its activities without additional subordinated support. Additionally, GAFI’s shareholder did not have a controlling financial interest in the entity. Hence, we concluded that GAFI is VIE. GAFI is also not a business since it also does not have processes or inputs that have the ability to create an output and in turn provide the return to the investor. The primary beneficiary of a VIE is the party that has both the power to direct the activities that most significantly affect the economic performance of the VIE and the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. In determining whether Aemetis is the primary beneficiary, a number of factors are considered, including the structure of the entity, contractual provisions that grant any additional rights to influence or control the economic performance of the VIE, and obligation to absorb significant losses. Through providing Limited Guaranty and signing the Option Agreement, the Company took the risks related to operations, financing the Goodland plant, and agreed to meet the financial covenants to GAFI to be in existence. Based upon this assessment, Aemetis has enough power to direct the activities of GAFI and has been determined to be the primary beneficiary of the GAFI and accordingly the assets, liabilities, and operations of GAFI are consolidated into those of the Company. The assets and liabilities were recognized at fair value. In addition, the interest for 18 months was prepaid which can be used to pay the interest on GAFI term loan only and the Goodland plant is collateral for the term loan obligation.
The following are the Balance Sheet and Statement of Operations of GAFI:
Aemetis, Inc. borrowed $4.8 million under the Intercompany Revolving Notes to pay off agent advances and pay costs associated with the testing of cellulosic ethanol production. Aemetis paid GAFI fees of $1.0 million associated with the entry into the VIE Note Purchase Agreement, and accordingly holds an account receivable from GAFI. In the consolidation process, these intercompany borrowings were eliminated.
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7. Agreements |
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7. Agreements | Working Capital Arrangement. Pursuant to a Corn Procurement and Working Capital Agreement with J.D. Heiskell, the Company agreed to procure whole yellow corn and milo primarily from J.D. Heiskell. The Company has the ability to obtain grain from other sources subject to certain conditions, however, in the past all of our grain purchases have been from J.D. Heiskell. Title and risk of loss of the corn and milo pass to the Company when the corn and milo are deposited into the weigh bin. The term of the Agreement expires on December 31, 2017 and is automatically renewed for additional one-year terms. J.D. Heiskell further agrees to sell all ethanol to Kinergy Marketing or other marketing purchasers designated by the Company and all WDG and corn oil to A.L. Gilbert. Our relationships with J.D. Heiskell, Kinergy Marketing, and A.L. Gilbert are well established and the Company believes that the relationships are beneficial to all parties involved in utilizing the distribution logistics, reaching out to widespread customer base, managing inventory, and building working capital relationships. Revenue is recognized upon delivery of ethanol to J. D. Heiskell as revenue recognition criteria have been met and any performance required of the Company subsequent to the delivery to J.D. Heiskell is inconsequential. These agreements are ordinary purchase and sale agency agreements for the Keyes plant.
The J.D. Heiskell sales activity associated with the Purchasing Agreement, Corn Procurement and Working Capital Agreements during the three and nine months ended September 30, 2017 and 2016 are as follows:
Ethanol and Wet Distillers Grains Marketing Arrangement. The Company entered into an Ethanol Marketing Agreement with Kinergy Marketing and a Wet Distillers Grains Marketing Agreement with A. L. Gilbert. Under the terms of the agreements, subject to certain conditions, Kinergy agreed to market on an exclusive basis all the ethanol we produce and A. L. Gilbert agreed to market on an exclusive basis all the WDG we produce. The agreements with Kinergy Marketing and with A.L. Gilbert expire on August 31, 2018 and on December 31, 2017, respectively, each with automatic one-year renewals thereafter. For the three months ended September 30, 2017 and 2016, the Company expensed marketing costs of $0.6 million for each period, respectively, under the terms of both ethanol and wet distiller’s grains marketing agreements. For the nine months ended September 30, 2017 and 2016, the Company expensed marketing costs of $1.8 million and $1.7 million, respectively.
The Company entered into forward purchase contracts for approximately 0.9 million bushels of corn, which is the principal raw material for ethanol production. The delivery of this grain will be expected through December 2017.
In addition, the Company has forward sales commitments for approximately 56 thousand tons of WDG. These committed sales will be expected through December 2017.
Unrealized gains and losses on forward contracts and commitments, in which delivery has not occurred, are deemed “normal purchases and normal sales”, and therefore are not marked to market in the Company’s financial statements, but are subject to a lower of cost or market assessment.
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8. Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8. Segment Information | Aemetis recognizes two reportable geographic operating segments: “North America” and “India.” The “North America” operating segment includes the Company’s owned ethanol plant in Keyes, California, the GAFI plant in Goodland , Kansas and its technology research and development lab. As the Company’s technology gains market acceptance, this business segment will initially include its domestic commercial application of cellulosic ethanol technology, its plant construction projects and any acquisitions of ethanol or ethanol related technology facilities in North America.
The “India” operating segment includes the Company’s 50 million gallon per year nameplate capacity biodiesel manufacturing plant in Kakinada, the administrative offices in Hyderabad, India, and the holding companies in Nevada and Mauritius. The Company’s biodiesel is marketed and sold primarily to customers in India through brokers and by the Company directly.
Summarized financial information by reportable segment for the three and nine months ended September 30, 2017 and 2016 follows:
North America. During the three and nine months ended September 30, 2017, the Company’s revenues from ethanol, WDG, and corn oil were earned pursuant to the Corn Procurement and Working Capital Agreement established between the Company and J.D. Heiskell. Sales of ethanol, WDG, and corn oil to J.D. Heiskell accounted for 92% and 93% of the Company’s North America segment revenues for the three and nine months ended September 30, 2017, respectively.
During the three and nine months ended September 30, 2016, the Company’s revenues from ethanol, WDG, and corn oil were earned pursuant to the Corn Procurement and Working Capital Agreement established between the Company and J.D. Heiskell. Sales of ethanol, WDG, and corn oil to J.D. Heiskell accounted for 93% and 94% of the Company’s North America segment revenues for the three and nine months ended September 30, 2016, respectively.
India. During the three months ended September 30, 2017, three biodiesel customers accounted for 41%, 29%, and 13% and no refined glycerin customers accounted for more than 10% of consolidated India segment revenues, compared to two biodiesel customers accounted for 57% and 17% and no refined glycerin customers accounted for more than 10% of consolidated India segment revenues during the three months ended September 30, 2016.
During the nine months ended September 30, 2017, two biodiesel customers accounted for 47% and 12% and no refined glycerin customers accounted for more than 10% of consolidated India segment revenues, compared to two biodiesel customers accounted for 55% and 11% and no refined glycerin customers accounted for more than 10% of consolidated India segment revenues during the nine months ended September 30, 2016.
Total assets consist of the following:
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9. Related Party Transactions |
9 Months Ended |
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Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
9. Related Party Transactions | The Company owes Eric McAfee, the Company’s Chairman and CEO, and McAfee Capital, owned by Eric McAfee, $0.4 million in connection with employment agreements and expense reimbursements previously accrued as salaries expense and accrued liabilities. The balance accrued related to these employment agreements was $0.4 million as of September 30, 2017 and December 31, 2016. For the three months ended September 30, 2017 and 2016, the Company expensed $5 thousand and $16 thousand, respectively, to reimburse actual expenses incurred by McAfee Capital and related entities. For the nine months ended September 30, 2017 and 2016, the Company expensed $28 thousand and $57 thousand, respectively, to reimburse actual expenses incurred by McAfee Capital and related entities. The Company previously prepaid $0.2 million to Redwood Capital, a company controlled by Eric McAfee, for the Company’s use of flight time on a corporate jet. As of September 30, 2017, $0.1 million remained as a prepaid expense related to Redwood Capital. As consideration for the reaffirmation of guaranties required by Amendment No. 12 to the Note Purchase Agreement, which the Company entered into with Third Eye Capital on March 21, 2016, the Company also agreed to pay $0.2 million in consideration to McAfee Capital in exchange for their willingness to provide the guarantees. The balance of $156 thousand for guarantee fee remained as accrued liability as of September 30, 2017 and December 31, 2016.
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10. Management's Plan |
9 Months Ended |
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Sep. 30, 2017 | |
Notes to Financial Statements | |
10. Management's Plan | The accompanying financial statements have been prepared contemplating the realization of assets and satisfaction of liabilities in the normal course of business. The Company has been reliant on their senior secured lender to provide additional funding and has been required to remit substantially all excess cash from operations to the senior secured lender. Management’s plans for the Company include, but are not limited to:
● Operating the Keyes plant; ● Continuing to incorporate lower-cost, non-food advanced biofuels feedstock at the Keyes plant when economical; ● Obtaining the remaining $1.0 million of EB-5 Phase I funding from escrow and $0.5 million from fundraising; ● Obtaining $50.0 million in funding from EB-5 Phase II funding currently being offered to investors; ● Pursuing a refinancing of the senior debt with a lender who is able to offer terms conducive to the long term financing of the Keyes plant; ● Use the Company’s India facility as collateral for additional working capital or for reducing current financing costs; ● Securing higher volumes of shipments from the Kakinada, India biodiesel and refined glycerin facility; and ● Offering the Company’s common stock by the ATM Registration Statement.
Management believes that through the above-mentioned actions it will be able to fund company operations and continue to operate the secured assets for the foreseeable future. There can be no assurance that the existing credit facilities and cash from operations will be sufficient nor that the Company will be successful at maintaining adequate relationships with the senior lenders or significant shareholders. Should the Company require additional financing, there can be no assurances that the additional financing will be available on terms satisfactory to the Company.
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1. Nature of Activities and Summary of Significant Accounting Policies (Policies) |
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Nature of Activities | Headquartered in Cupertino, California, Aemetis is an advanced renewable fuels and biochemicals company focused on the acquisition, development and commercialization of innovative technologies that replace traditional petroleum-based products through the conversion of second-generation ethanol and biodiesel plants into advanced biorefineries. Founded in 2006, the Company owns and operates a 60 million gallon per year ethanol production facility in the California Central Valley near Modesto where it manufactures and produces ethanol, wet distillers’ grains (“WDG”), condensed distillers solubles (“CDS”) and distillers’ corn oil. The Company also owns and operates a 50 million gallon per year renewable chemical and advanced fuel production facility on the East Coast of India producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. It also operates a research and development laboratory and holds a portfolio of patents and related technology licenses for the production of renewable fuels and biochemicals. |
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Basis of Presentation and Consolidation | These consolidated financial statements include the accounts of Aemetis, Inc., a Nevada corporation, and its wholly owned subsidiaries (collectively, “Aemetis” or the “Company”). 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, there are situations in which an enterprise is required to consolidate a variable interest entity (VIE), even though the enterprise does not own a majority of the voting interests. An enterprise must consolidate a VIE if the enterprise is the primary beneficiary of the VIE. 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.
In July 2017, we closed on a transaction with Goodland Advanced Fuels, Inc. (GAFI). Upon application of consolidation guidance in ASC 810 Consolidation, we determined that GAFI is a variable interest entity and Aemetis, Inc. is the primary beneficiary. Accordingly, the consolidated financial statements include the accounts of GAFI (see Note 6).
All intercompany balances and transactions have been eliminated in consolidation including any transactions between GAFI and Aemetis, Inc. The accompanying consolidated condensed balance sheet as of September 30, 2017, the consolidated condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2016, and the consolidated condensed statements of cash flows for the nine months ended September 30, 2017 and 2016 are unaudited. The consolidated condensed balance sheet as of December 31, 2016 was derived from the 2016 audited consolidated financial statements and notes thereto. The consolidated condensed financial statements in this report should be read in conjunction with the 2016 audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2016.
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 management, the unaudited interim consolidated condensed financial statements for the three and nine months ended September 30, 2017 and 2016 have been prepared on the same basis as the audited consolidated statements as of December 31, 2016 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, 2017 are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year or any future periods.
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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.
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Revenue recognition | The Company recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred, the price is fixed or determinable and collection is reasonably assured. The Company records revenues based upon the gross amounts billed to its customers. Revenue from nonmonetary transactions, principally in-kind by-products received in exchange for material processing where the by-product is contemplated by contract to provide value, is recognized at the quoted market price of those goods received or by-products.
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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.
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Accounts Receivable | The Company sells ethanol, WDG, CDS, and distillers’ corn oil through third-party marketing arrangements generally without requiring collateral. The Company sells biodiesel, glycerin, and processed natural oils to a variety of customers and may require advance payment based on the size and creditworthiness of the customer. 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 receivable 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 did not reserve any balance for allowance for doubtful accounts as of September 30, 2017 and December 31, 2016. |
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Inventories | Finished goods and work-in-process 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.
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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, and the plants in Keyes, California, Goodland, Kansas and Kakinada, India. As part of our variable interest entity, the plant in Kansas is partially completed and is not ready for operation; hence, we are not depreciating these assets yet. Otherwise, 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 Accounting Standards Codification (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 may not be recoverable. When events or changes in circumstances indicate that the carrying amount of an asset 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.
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Basic and Diluted Net Income (Loss) per Share | Basic net income (loss) per share is computed by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (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, 2017 and 2016, 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 income (loss) per share calculation as of September 30, 2017 and 2016:
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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 income (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.
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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, with 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. Gains and losses from other foreign currency transactions are recorded in other income (expense).
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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 recognizes two reportable geographic operating segments: “North America” and “India.”
The “North America” operating segment includes the Company’s 60 million gallons per year capacity Keyes plant in Keyes, California, the GAFI plant in Goodland , Kansas and the research and development facility.
The “India” operating segment encompasses the Company’s 50 million gallon per year capacity biodiesel plant in Kakinada, India, its administrative offices in Hyderabad, India, and the holding companies in Nevada and Mauritius.
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Fair Value of Financial Instruments | The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximate their estimated fair values due to the short-term maturities of those financial instruments. These financial instruments are considered Level 1 measurements under the fair value hierarchy. Due to the unique terms of our notes payable and lines of credit and the financial condition of the Company, the fair value of the debt is not readily determinable.
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Share-Based Compensation | The Company recognizes share-based compensation expense in accordance with ASC 718 Stock Compensation, requiring the Company to recognize expense 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.
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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.
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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.
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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.
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Recently Issued Accounting Pronouncements | In May 2014, the FASB issued new guidance on the recognition of revenue. The guidance stated that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Company’s adoption of this accounting standard begins with the first quarter of fiscal year 2018. In March and April 2016, the FASB issued further revenue recognition guidance amending principal vs. agent considerations regarding whether an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The Company is currently evaluating the impact of the adoption of this accounting standard update on its consolidated results of operations and financial condition and will be providing guidance in its Form 10-K for the year ended December 31, 2017.
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1. Nature of Activities and Summary of Significant Accounting Policies (Tables) |
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Schedule of dilutive securities |
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2. Inventories (Tables) |
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Schedule of Inventories |
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3. Property, Plant and Equipment (Tables) |
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Schedule of Property, plant and equipment |
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4. Debt (Tables) |
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5. Stock-Based Compensation (Tables) |
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6. Variable Interest Entity (Tables) |
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7. Agreements (Tables) |
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Schedule of working capital agreement activity |
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8. Segment Information (Tables) |
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Segment Information Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment information |
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Schedule of segment assets |
|
1. Nature of Activities and Summary of Significant Accounting Policies (Details) - shares |
Sep. 30, 2017 |
Sep. 30, 2016 |
---|---|---|
Accounting Policies [Abstract] | ||
Series B preferred (1:10 post split basis) | 132 | 133 |
Common stock options and warrants | 2,554 | 1,965 |
Debt with conversion feature at $30 per share of common stock | 1,194 | 861 |
Total number of potentially dilutive shares excluded from the diluted net loss per share calculation | 3,880 | 2,959 |
2. Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
RepaymentsOfBorrowingsUnderShortTermFacilities | ||
Raw materials | $ 2,306 | $ 1,044 |
Work-in-progress | 1,946 | 1,360 |
Finished goods | 1,490 | 837 |
Total inventory | $ 5,742 | $ 3,241 |
3. Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Schedule of warrant activity | ||
Land | $ 2,734 | $ 2,713 |
Plant and Buildings | 82,390 | 81,755 |
Furniture and fixtures | 983 | 572 |
Machinery and equipment | 3,951 | 4,308 |
Construction in progress | 522 | 88 |
GAFI property, plant & equipment | 15,431 | 0 |
Total gross property, plant & equipment | 106,011 | 89,436 |
Less accumulated depreciation | (26,651) | (23,066) |
Total net property, plant & equipment | $ 79,360 | $ 66,370 |
3. Property, Plant and Equipment (Details 1) |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Plant and Buildings | Minimum | |
Depreciation (years) | 20 years |
Plant and Buildings | Maximum [Member] | |
Depreciation (years) | 30 years |
Machinery and Equipment | Minimum | |
Depreciation (years) | 5 years |
Machinery and Equipment | Maximum [Member] | |
Depreciation (years) | 7 years |
Furniture and Fixtures | Minimum | |
Depreciation (years) | 3 years |
Furniture and Fixtures | Maximum [Member] | |
Depreciation (years) | 5 years |
3. Property, Plant and Equipment (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Disclosure 3.Property Plant And Equipment Details Narrative Abstract | ||||
Depreciation expense | $ 1,200 | $ 1,200 | $ 3,471 | $ 3,523 |
4. Debt (Details) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Total revenues | ||
Third Eye Capital term notes | $ 6,832 | $ 6,577 |
Third Eye Capital revolving credit facility | 32,778 | 24,927 |
Third Eye Capital revenue participation term notes | 11,473 | 11,042 |
Third Eye Capital acquisition term notes | 19,782 | 19,085 |
Cilion shareholder Seller note payable | 5,786 | 5,674 |
Subordinated notes | 8,445 | 7,565 |
EB-5 long term promissory notes | 35,822 | 35,027 |
Unsecured working capital loans | 4,292 | 1,817 |
GAFI Term and Revolving loans | 23,373 | 0 |
Total debt | 148,583 | 111,714 |
Less current portion of debt | 14,559 | 11,409 |
Total long term debt | $ 134,024 | $ 100,305 |
4. Debt (Details 1) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Details 1 | ||
Term loan | $ 15,000 | |
Revolving loan | 9,248 | |
Total debt | 24,248 | |
Less: Debt issuance costs | (875) | |
Total debt | $ 23,373 | $ 0 |
4. Debt (Details 2) $ in Thousands |
Sep. 30, 2017
USD ($)
|
---|---|
Twelve months ended September 30, | |
2018 | $ 14,559 |
2019 | 119,381 |
2020 | 5,000 |
2021 | 12,536 |
Total debt | 151,476 |
Discounts | (2,643) |
Total debt, net of discounts | $ 148,833 |
5. Stock-Based Compensation (Details) - Employee Stock Plan |
9 Months Ended |
---|---|
Sep. 30, 2017
$ / shares
shares
| |
Shares Available for Grant, Beginning | 98 |
Shares Available for Grant, Authorized | 655 |
Shares Available for Grant, Granted | (637) |
Shares Available for Grant, Forfeited/Expired | 46 |
Shares Available for Grant, Ending | 162 |
Number of Shares Outstanding, Beginning | 1,632 |
Number of Shares Authorized | 0 |
Number of Shares Granted | 637 |
Number of Shares Forfeited/Expired | (46) |
Number of Shares Outstanding, Ending | 2,223 |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 4.37 |
Weighted Average Exercise Price Authorized | $ / shares | 0.00 |
Weighted Average Exercise Price Granted | $ / shares | 1.72 |
Weighted Average Exercise Price Forfeited/Expired | $ / shares | 21.04 |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 3.27 |
5. Stock-Based Compensation (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Stock-based Compensation Details Narrative | ||||
Stock compensation expense | $ 196 | $ 172 | $ 800 | $ 573 |
Unrecognized compensation expense | $ 1,100 | $ 1,100 |
7. Agreements (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Agreements Details | ||||
Ethanol sales | $ 26,394 | $ 24,687 | $ 75,695 | $ 68,993 |
Wet distiller's grains sales | 5,735 | 6,114 | 15,523 | 16,918 |
Corn oil sales | 1,043 | 788 | 2,693 | 2,232 |
Corn/Milo purchases | 25,751 | 23,098 | 75,478 | 67,766 |
Accounts receivable | 776 | 345 | 776 | 345 |
Accounts payable | $ 1,976 | $ 1,241 | $ 1,976 | $ 1,241 |
7. Agreements (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Agreements | ||||
Marketing costs | $ 600 | $ 600 | $ 1,800 | $ 1,700 |
8. Segment Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Revenues | ||||
North America | $ 36,012 | $ 33,889 | $ 101,430 | $ 93,979 |
India | 2,923 | 5,488 | 9,843 | 11,783 |
Total revenues | 38,935 | 39,377 | 111,273 | 105,762 |
Cost of goods sold | ||||
North America | 33,995 | 30,391 | 99,003 | 86,174 |
India | 2,985 | 5,320 | 9,197 | 11,892 |
Total cost of goods sold | 36,980 | 35,711 | 108,200 | 98,066 |
Gross profit (loss) | ||||
North America | 2,017 | 3,498 | 2,427 | 7,805 |
India | (62) | 168 | 646 | (109) |
Total gross profit (loss) | $ 1,955 | $ 3,666 | $ 3,073 | $ 7,696 |
8. Segment Information (Details 1) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Segment Information Details 1 | ||
North America | $ 82,036 | $ 67,279 |
India | 14,295 | 10,531 |
Total Assets | $ 96,331 | $ 77,810 |
9. Related Party Transactions (Details Narrative) - Eric McAfee and McAfee Capital - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Related party debt | $ 400 | $ 400 | |||
Related party transaction | $ 5 | $ 16 | $ 28 | $ 57 |
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