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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-36475


AEMETIS, INC.

(Exact name of registrant as specified in its charter)


Delaware

26-1407544

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification No.)

 

20400 Stevens Creek Blvd., Suite 700

Cupertino, CA 95014

(Address of Principal Executive Offices, including zip code)

 

(408) 213-0940

(Registrants telephone number, including area code)


 

Title of each class of registered securities

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, $0.001 par value

 

AMTX

 

NASDAQ

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐ Smaller reporting company  Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☑

The number of shares outstanding of the registrant’s Common Stock on October 31, 2023 was39,451,266 shares.



 

 

 

AEMETIS, INC.

 

FORM 10-Q

 

Quarterly Period Ended September 30, 2023

 

INDEX
     
PART I--FINANCIAL INFORMATION
     
     
Item 1 Financial Statements. 4
     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 33
     
Item 3. Quantitative and Qualitative Disclosures about Market Risk. 43
     
Item 4. Controls and Procedures. 43
     
PART II--OTHER INFORMATION
     
Item 1. Legal Proceedings. 44
     
Item 1A. Risk Factors. 44
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 44
     
Item 3. Defaults Upon Senior Securities. 44
     
Item 4. Mine Safety Disclosures. 44
     
Item 5. Other Information. 44
     
Item 6. Exhibits. 45
     
Signatures 46

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

On one or more occasions, we may make forward-looking statements in this Quarterly Report on Form 10-Q, including statements regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events or other statements that are not historical facts. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements regarding management’s plans; trends in market conditions with respect to prices for inputs for our products versus prices for our products; our ability to leverage approved feedstock pathways; our ability to leverage our location and infrastructure; our ability to incorporate lower-cost, non-food advanced biofuels feedstock at the Keyes plant; our ability to adopt value-add by-product processing systems; our ability to expand into alternative markets for biodiesel and its by-products, including continuing to expand our sales into international markets; our ability to maintain and expand strategic relationships with suppliers; our ability to continue to develop new and to maintain and protect new and existing intellectual property rights; our ability to adopt, develop and commercialize new technologies; our ability to extend or refinance our senior debt on terms reasonably acceptable to us or at all; our ability to continue to fund operations and our future sources of liquidity and capital resources; our ability to fund, develop, build, maintain and operate digesters, facilities and pipelines for our California Dairy Renewable Natural Gas segment; our ability to fund, develop and operate our carbon capture sequestration projects, including obtaining required permits; our ability to receive awarded grants by meeting all of the required conditions, including meeting the minimum contributions; our ability to sell additional notes under our EB-5 note program and our expectations regarding the release of funds from escrow under our EB-5 note program; our ability to generate and sell or utilize various credits, including LCFS and IRS 45Q tax credits; our ability to improve margins; and our ability to raise additional capital. Words or phrases such as “anticipates,” “may,” “will,” “should,” “could,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will continue” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on current assumptions and predictions and are subject to numerous markets and uncertainties. Actual results or events could differ materially from those set forth or implied by such forward-looking statements and related assumptions due to certain factors, including, without limitation, the risks set forth under the caption “Risk Factors” below, which are incorporated herein by reference, as well as those business risks and factors described elsewhere in this report and in our other filings with the Securities and Exchange Commission (the “SEC”), including without limitation, our most recent Annual Report on Form 10-K.

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1 - Financial Statements.

AEMETIS, INC.

 

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited, In thousands except for par value)

 

  

September 30, 2023

  

December 31, 2022

 

Assets

        

Current assets:

        

Cash and cash equivalents ($139 and $165 respectively from VIE)

 $3,899  $4,313 

Accounts receivable ($73 and $165 respectively from VIE)

  4,579   1,264 

Inventories, net of allowance for excess and obsolete inventory of $1,040 as of September 30, 2023, and December 31, 2022, respectively

  8,143   4,658 

Tax Credit Sales receivable ($55,164 and $0 respectively from VIE)

  55,164   - 

Prepaid expenses ($1,937 and $858 respectively from VIE)

  2,895   4,248 

Other current assets ($401 and $725 respectively from VIE)

  3,811   3,653 

Total current assets

  78,491   18,136 
         

Property, plant and equipment, net ($75,284 and $71,633 respectively from VIE)

  188,076   180,441 

Operating lease right-of-use assets ($165 and $224 respectively from VIE)

  2,159   2,449 

Other assets ($5,267 and $3,458 respectively from VIE)

  8,713   6,088 

Total assets

 $277,439  $207,114 
         

Liabilities and stockholders' deficit

        

Current liabilities:

        

Accounts payable ($7,103 and $9,192 respectively from VIE)

 $28,800  $26,168 

Current portion of long term debt

  24,070   12,465 

Short term borrowings ($23,942 and $19,831 respectively from VIE)

  42,415   36,754 

Mandatorily redeemable Series B convertible preferred stock

  4,403   4,082 

Accrued property taxes

  1,543   1,206 

Current portion of operating lease liability ($46 and $41 respectively from VIE)

  390   338 

Other current liabilities ($1,614 and $645 respectively from VIE)

  12,746   7,268 

Total current liabilities

  114,367   88,281 

Long term liabilities:

        

Senior secured notes and revolving notes

  170,261   155,843 

EB-5 notes

  29,500   29,500 

Other long term debt ($9,230 and $31 respectively from VIE)

  20,288   11,678 

Series A preferred units ($137,778 and $116,000 respectively from VIE)

  137,778   116,000 

Operating lease liability ($80 and $115 respectively from VIE)

  1,890   2,189 

Other long term liabilities

  3,347   5,477 

Total long term liabilities

  363,064   320,687 
         

Stockholders' deficit:

        

Series B convertible preferred stock, $0.001 par value; 7,235 authorized; 1,260 and 1,270 shares issued and outstanding each period, respectively (aggregate liquidation preference of $3,780 and $3,810 respectively)

  1   1 

Common stock, $0.001 par value; 80,000 authorized; 39,388 and 35,869 shares issued and outstanding each period, respectively

  39   36 

Additional paid-in capital

  255,510   232,546 

Accumulated deficit

  (449,963)  (428,985)

Accumulated other comprehensive loss

  (5,579)  (5,452)

Total stockholders' deficit

  (199,992)  (201,854)

Total liabilities and stockholders' deficit

 $277,439  $207,114 

 

The accompanying notes are an integral part of the financial statements.

 

 

 

AEMETIS, INC.

 

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in thousands except for loss per share)

 

   

For the three months ended September 30,

   

For the nine months ended September 30,

 
   

2023

   

2022

   

2023

   

2022

 

Revenues

  $ 68,690     $ 71,831     $ 115,953     $ 189,781  

Cost of goods sold

    68,198       72,935       114,800       194,184  

Gross profit (loss)

    492       (1,104 )     1,153       (4,403 )
                                 

Research and development expenses

    36       52       115       139  

Selling, general and administrative expenses

    8,985       6,439       29,480       21,166  

Operating loss

    (8,529 )     (7,595 )     (28,442 )     (25,708 )
                                 

Other expense (income):

                               

Interest expense

                               

Interest rate expense

    8,749       5,456       24,126       14,819  

Debt related fees and amortization expense

    1,433       1,633       4,732       5,199  

Accretion and other expenses of Series A preferred units

    7,739       2,774       20,188       5,920  

Loss on debt extinguishment

    -       49,386       -       49,386  

Gain on litigation

    -       -       -       (1,400 )

Other income

    (1,853 )     (2 )     (2,020 )     (14,297 )

Loss before income taxes

    (24,597 )     (66,842 )     (75,468 )     (85,335 )

Income tax expense (benefit)

    (55,308 )     3       (54,490 )     13  

Net income (loss)

  $ 30,711     $ (66,845 )   $ (20,978 )   $ (85,348 )
                                 

Other comprehensive income (loss)

                               

Foreign currency translation loss

    (260 )     (300 )     (127 )     (884 )

Comprehensive income (loss)

  $ 30,451     $ (67,145 )   $ (21,105 )   $ (86,232 )
                                 

Net income (loss) per common share

                               

Basic

  $ 0.79     $ (1.92 )   $ (0.56 )   $ (2.49 )

Diluted

  $ 0.73     $ (1.92 )   $ (0.56 )   $ (2.49 )
                                 

Weighted average shares outstanding

                               

Basic

    38,881       34,769       37,504       34,344  

Diluted

    41,841       34,769       37,504       34,344  

 

The accompanying notes are an integral part of the financial statements.

 

 

 

AEMETIS, INC.

 

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

  

For the nine months ended September 30,

 
  

2023

  

2022

 

Operating activities:

        

Net loss

 $(20,978) $(85,348)

Adjustments to reconcile net loss to net cash used in operating activities:

        

Share-based compensation

  6,223   4,934 

Depreciation

  5,208   4,039 

Debt related fees and amortization expense

  4,732   5,199 

Intangibles and other amortization expense

  35   35 

Accretion and other expenses of Series A preferred units

  20,188   5,920 

Loss on asset disposals

  -   47 

Loss (gain) on debt extinguishment

  -   49,386 

Warrants issued for working capital agreement

  409   - 

Gain on litigation

  -   (1,400)

Loss on lease termination

  -   736 

Deferred tax expense

  (144)  - 

Changes in operating assets and liabilities:

        

Accounts receivable

  (3,344)  (7,987)

Inventories

  (3,616)  (5,639)

Prepaid expenses

  2,379   2,786 

Other assets

  (56,797)  (505)

Accounts payable

  4,728   12,801 

Accrued interest expense and fees

  18,483   8,754 

Other liabilities

  2,356   (10,065)

Net cash used in operating activities

  (20,138)  (16,307)
         

Investing activities:

        

Capital expenditures

  (18,595)  (28,931)

Grant proceeds and other reimbursements received for capital expenditures

  7,682   7,401 

Net cash used in investing activities

  (10,913)  (21,530)
         

Financing activities:

        

Proceeds from borrowings

  41,449   39,860 

Repayments of borrowings

  (22,586)  (16,191)

Lender debt renewal and waiver fee payments

  (1,681)  (1,169)

Payments on finance leases

  (394)  (314)

Proceeds from issuance of common stock

  14,767   7,996 

Proceeds from exercise of stock options

  45   206 

Net cash provided by financing activities

  31,600   30,388 
         

Effect of exchange rate changes on cash and cash equivalents

  117   (51)

Net change in cash and cash equivalents for period

  666   (7,500)

Cash and cash equivalents at beginning of period

  6,999   7,751 

Cash and cash equivalents at end of period

 $7,665  $251 
         

Supplemental disclosures of cash flow information, cash paid:

        

Cash paid for interest

 $6,926  $15,476 

Income taxes paid

  20   10 

Supplemental disclosures of cash flow information, non-cash transactions:

        

Subordinated debt extension fees added to debt

  680   680 

Debt fees added to revolving lines

  2,236   800 

Fair value of warrants issued to subordinated debt holders

  1,278   1,939 

Fair value of stock issued to a related party for guarantee fees

  -   2,012 

Fair value of warrants issued to lender for debt issuance costs

  245   3,158 

Fair value of stock issued to lender

  -   1,335 

Lender debt extension, waiver, and other fees added to debt

  384   583 

Cumulative capital expenditures in accounts payable, including net increase of $474 and $1,535, respectively

  13,459   15,957 

Payment of debt added to revolving lines

  -   16,266 

Financing lease liabilities arising from obtaining right of use assets

  -   2,932 

Capital expenditures purchased on financing

  -   290 
         

 

The accompanying notes are an integral part of the financial statements.

 

 

 

AEMETIS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT

(Unaudited, in thousands)

 

For the nine months ended September 30, 2023

 
  

Series B Preferred Stock

  

Common Stock

  

Additional

      

Accumulated Other

  

Total

 
                  

Paid-in

  

Accumulated

  

Comprehensive

  

Stockholders'

 

Description

 

Shares

  

Dollars

  

Shares

  

Dollars

  

Capital

  

Deficit

  

Gain (Loss)

  

deficit

 
                                 

Balance at December 31, 2022

  1,270  $1   35,869  $36  $232,546  $(428,985) $(5,452) $(201,854)
                                 

Issuance of common stock

  -   -   668   1   2,616   -   -   2,617 

Stock options exercised

  -   -   40   -   -   -   -   - 

Stock-based compensation

  -   -   -   -   2,662   -   -   2,662 

Issuance and exercise of warrants

  -   -   113   -   448   -   -   448 

Foreign currency translation gain

  -   -   -   -   -   -   117   117 

Net loss

  -   -   -   -   -   (26,410)  -   (26,410)

Balance at March 31, 2023

  1,270  $1   36,690  $37  $238,272  $(455,395) $(5,335) $(222,420)
                                 

Issuance of common stock

  -   -   1,353   1   6,298   -   -   6,299 

Series B conversion to common stock

  (10)  -   1   -   -   -   -   - 

Stock options exercised

  -   -   72   -   38   -   -   38 

Stock-based compensation

  -   -   -   -   1,755   -   -   1,755 

Issuance and exercise of warrants

  -   -   62      654         654 

Foreign currency translation gain

  -   -   -   -   -   -   16   16 

Net loss

  -   -   -   -   -   (25,279)  -   (25,279)

Balance at June 30, 2023

  1,260  $1   38,178  $38  $247,017  $(480,674) $(5,319) $(238,937)
                                 

Issuance of common stock

  -   -   1,062   1   5,850   -   -   5,851 

Stock options exercised

  -   -   35   -   7   -   -   7 

Stock-based compensation

  -   -   -   -   1,806   -   -   1,806 

Issuance and exercise of warrants

  -   -   113   -   830   -   -   830 

Foreign currency translation loss

  -   -   -   -   -   -   (260)  (260)

Net income

  -   -   -   -   -   30,711   -   30,711 

Balance at September 30, 2023

  1,260  $1   39,388  $39  $255,510  $(449,963) $(5,579) $(199,992)

 

For the nine months ended September 30, 2022

 
   

Series B Preferred Stock

   

Common Stock

   

Additional

           

Accumulated Other

   

Total

 
                                   

Paid-in

   

Accumulated

   

Comprehensive

   

Stockholders'

 

Description

 

Shares

   

Dollars

   

Shares

   

Dollars

   

Capital

   

Deficit

   

Loss

   

deficit

 
                                                                 

Balance at December 31, 2021

    1,275     $ 1       33,461     $ 33     $ 205,305     $ (321,227 )   $ (4,350 )   $ (120,238 )
                                                                 

Issuance of common stock

    -       -       341       1       3,348       -       -       3,349  

Series B conversion to common stock

    (5 )     -       1       -       -       -       -       -  

Stock options exercised

    -       -       263       -       196       -       -       196  

Stock-based compensation

    -       -       -       -       2,040       -       -       2,040  

Issuance and exercise of warrants

    -       -       113       -       4,550       -       -       4,550  

Foreign currency translation loss

    -       -       -       -       -       -       (194 )     (194 )

Net loss

    -       -       -       -       -       (18,294 )     -       (18,294 )

Balance at March 31, 2022

    1,270     $ 1       34,179     $ 34     $ 215,439     $ (339,521 )   $ (4,544 )   $ (128,591 )
                                                                 

Issuance of common stock

    -       -       400       1       5,123       -       -       5,124  

Stock options exercised

    -       -       3       -       4       -       -       4  

Stock-based compensation

    -       -       -       -       1,349       -       -       1,349  

Foreign currency translation loss

    -       -       -       -       -       -       (390 )     (390 )

Net loss

    -       -       -       -       -       (209 )     -       (209 )

Balance at June 30, 2022

    1,270     $ 1       34,582     $ 35     $ 221,915     $ (339,730 )   $ (4,934 )   $ (122,713 )
                                                                 

Issuance of common stock

    -       -       319       -       2,872       -       -       2,872  

Stock options exercised

    -       -       29       -       5       -       -       5  

Stock-based compensation

    -       -       -       -       1,545       -       -       1,545  

Issuance and exercise of warrants

    -       -       113       -       546       -       -       546  

Foreign currency translation loss

    -       -       -       -       -       -       (300 )     (300 )

Net loss

    -       -       -       -       -       (66,845 )     -       (66,845 )

Balance at September 30, 2022

    1,270     $ 1       35,043     $ 35     $ 226,883     $ (406,575 )   $ (5,234 )   $ (184,890 )

 

The accompanying notes are an integral part of the financial statements.

 

7

(Tabular data in thousands, except par value and per share data) 
 

 

1. Nature of Activities and Summary of Significant Accounting Policies

 

Nature of Activities. Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis referred to herein as “Aemetis,” the “Company,” “we,” “our” or “us”) is an international renewable natural gas and renewable fuels company focused on the acquisition, development and commercialization of innovative low and negative carbon intensity products and technologies that replace traditional petroleum-based products. We operate in three reportable segments consisting of “California Ethanol,” “California Dairy Renewable Natural Gas,” and “India Biodiesel.” We have other operating segments determined not to be reportable segments and are collectively represented by the “All Other” category. At Aemetis, our mission is to generate sustainable and innovative renewable fuel solutions that benefit communities and restore our environment. We do this by building a local circular bioeconomy using agricultural waste to produce low carbon, advanced renewable fuels that reduce greenhouse gas ("GHG") emissions and improve air quality by replacing traditional petroleum-based products.

 

Our California Ethanol segment consists of a 65 million gallon per year capacity ethanol production facility located in Keyes, California (the “Keyes Plant”) that we own and operate. In addition to low carbon renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), Carbon Dioxide (“CO₂”) and Condensed Distillers Solubles (“CDS”), all of which are sold as animal feed to local dairies and feedlots, with CO₂ sold to food, beverage, and industrial customers. We have several energy efficiency initiatives at the Keyes Plant focused on significantly lowering the carbon intensity of our fuels. During the last two weeks of December 2022, we undertook an extended maintenance cycle and accelerated the implementation of several important ethanol plant energy efficiency upgrades. Our decision was partly driven by the high natural gas prices in California during the period. Furthermore, after monitoring natural gas pricing and margin profitability, we decided to extended the maintenance cycle into the first and second quarters of 2023 and restarted the plant near the end of the second quarter.

 

Our California Dairy Renewable Natural Gas segment, which consists of our subsidiary Aemetis Biogas LLC and its subsidiaries, ("Aemetis Biogas" or "ABGL"), constructs and operates bio-methane anaerobic digesters at local dairies near the Keyes Plant (many of whom also purchase WDG produced by the Keyes Plant as animal feed); transports the biogas via pipeline to the Keyes Plant site; and converts the biogas to Renewable Natural Gas (“RNG”) which is then delivered to customers through the PG&E natural gas pipeline.

 

Our India Biodiesel segment owns and operates a plant in Kakinada, India (“Kakinada Plant”) with a nameplate capacity of 150 thousand metric tons per year, or about 50 million gallons per year, producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. We believe the Kakinada Plant is one of the largest biodiesel production facilities in India on a nameplate capacity basis. The Kakinada Plant is capable of processing a variety of vegetable oils and animal fat waste feedstocks into biodiesel that meets international product standards. Our Kakinada Plant can also distill the crude glycerin byproduct from the biodiesel refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive, and other industries. 

 

Our All Other segment consists of: the development of our Carbon Zero biofuels production plant to produce renewable diesel and sustainable aviation fuel; the development of Carbon Capture and Sequestration compression system and injection wells; operation of the Riverbank Industrial Complex; a research and development facility in Minneapolis Minnesota; and our corporate offices in Cupertino, California.

 

8

(Tabular data in thousands, except par value and per share data) 
 

Our Carbon Zero biofuels production plants are designed to produce low or negative carbon intensity sustainable aviation fuel (“SAF”) and renewable diesel fuel (“RD”) using low carbon hydroelectric electricity, renewable hydrogen and non-edible renewable oils from existing Aemetis biofuels plants and other sources. The first Carbon Zero plant is scheduled to be built in Riverbank, California at the 125-acre former Riverbank Army ammunition plant.  

 

Our Carbon Capture subsidiary was established to build Carbon Capture and Sequestration (“CCS”) projects that generate LCFS and IRS 45Q tax credits by compressing and injecting CO₂ into deep wells that are monitored for emissions to ensure the long-term sequestration of carbon underground. 

 

Basis of Presentation and Consolidation. These consolidated financial statements include the accounts of Aemetis, Inc. and its subsidiaries. We consolidate all entities in which we have a controlling financial interest. A controlling financial interest is usually obtained through ownership of a majority of the voting interests. However, an enterprise must consolidate a variable interest entity (“VIE”) if the enterprise is the primary beneficiary of the VIE, even if the enterprise does not own a majority of the voting interests. The primary beneficiary is the party that has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. ABGL was assessed to be a VIE and through the Company’s ownership interest in all of the outstanding common stock, the Company has been determined to be the primary beneficiary and accordingly, the assets, liabilities, and operations of ABGL are consolidated in these financial statements.

 

All intercompany balances and transactions have been eliminated in consolidation.

 

The accompanying consolidated condensed balance sheet as of  September 30, 2023, the consolidated condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022, the consolidated condensed statements of cash flows for the nine months ended September 30, 2023 and 2022, and the consolidated condensed statements of stockholders’ deficit for the three and nine months ended September 30, 2023 and 2022 are unaudited. The consolidated condensed balance sheet as of December 31, 2022, was derived from the 2022 audited consolidated financial statements and notes thereto. The consolidated condensed financial statements in this report should be read in conjunction with the 2022 audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2022. The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.

 

In the opinion of Company’s management, the unaudited interim consolidated condensed financial statements as of and for the three and nine months ended September 30, 2023 and 2022 have been prepared on the same basis as the audited consolidated statements as of and for the year ended December 31, 2022 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, 2023 are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year or any future periods. 

 

Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, revenues, and expenses during the reporting period. To the extent there are material differences between these estimates and actual results, the Company’s consolidated financial statements will be affected.

 

Revenue Recognition. We derive revenue primarily from sales of ethanol and related co-products in California, renewable natural gas and related environmental attributes in California, and biodiesel and refined glycerin in India pursuant to supply agreements and purchase order contracts. We assessed the following criteria under the Accounting Standards Codification (“ASC”) 606 guidance: (i) identify the contracts with customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when the entity satisfies the performance obligations.

 

9

(Tabular data in thousands, except par value and per share data) 
 

California Ethanol Revenues: On May 13, 2020, we entered into an amendment to the Corn Procurement and Working Capital Agreement with J.D. Heiskell (the “Corn Procurement and Working Capital”), pursuant to which we buy all corn from J.D. Heiskell and sell all WDG and corn oil we produce to J.D. Heiskell. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC (“Murex”), pursuant to which we sold all our ethanol to Murex through individual sales transactions. On  May 25, 2023, we entered into the second amendment to the Aemetis Keyes Grain Procurement and Working Capital Agreement with J.D. Heiskell, the second amendment to the Corn Procurement and Working Capital Agreement with J.D. Heiskell, and the second amendment to the Keyes Ethanol and Corn Tank Lease with J.D. Heiskell. The amendments provide that (i) the Keyes Plant will receive a temporary increase to its working capital credit limit by an amount equal to four days of grain payables repayable in equal daily installments over 120 days, (ii) that J.D. Heiskell will buy all Ethanol, WDG, CDS, and Corn Oil produced by the Keyes Plant, sell all ethanol to certain designated purchasers and pay us the same price as it received from such sales, and (iii) J.D. Heiskell will lease certain ethanol product storage tanks from the Keyes Plant. Given the similarity of the individual sales transactions with J.D. Heiskell, we have assessed them as a portfolio of similar contracts. Prior to May 25, 2023, the performance obligation was satisfied by delivery of the physical product from our finished goods tank to our customer’s contracted trucks. Effective on May 25, 2023, the performance obligation is satisfied by delivery of the physical product to the finished goods tank leased by J.D. Heiskell. Upon delivery, the customer has the ability to direct the use of the product and receive substantially all of its benefits. The transaction price is determined based on daily market prices for ethanol and by our marketing partner A.L. Gilbert Company (“A.L. Gilbert”) for WDG. The transaction price is allocated to one performance obligation.

 

The following table shows sales in our California Ethanol segment by product category:

 

  

For the three months ended September 30,

  

For the nine months ended September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Ethanol sales

 $36,375  $44,673  $45,388  $130,224 

Wet distillers grains sales

  9,427   13,003   11,980   39,669 

Other sales

  1,637   3,232   1,878   8,947 

Total

 $47,439  $60,908  $59,246  $178,840 

 

We have elected to adopt the practical expedient that allows for ignoring the significant financing component of a contract when estimating the transaction price when the transfer of promised goods to the customer and customer payment for such goods are expected to be within one year of contract inception. Further, we have elected to adopt the practical expedient in which incremental costs of obtaining a contract are expensed when the amortization period would otherwise be less than one year.

 

We also assessed principal versus agent criteria as we buy our feedstock from our customer and process and sell finished goods to that same customer. Specifically, we buy corn as feedstock in producing ethanol from our working capital partner J.D. Heiskell and we sell all ethanol, WDG, CDO, and CDS produced to J.D. Heiskell. Our ethanol finished goods tank is leased to J.D. Heiskell and legal title to the product is transferred upon transfer of our finished ethanol to this location. We consider the purchase of corn as a cost of goods sold and consider the sale of ethanol as revenue upon transfer to the finished goods tank and consider the sale of WDG, CDO, and CDS as revenue, upon trucks leaving the Keyes Plant with the product, on the basis that (i) we control and bear the risk of gain or loss on the processing of corn which is purchased at market prices into ethanol and (ii) we have legal title to the goods during the processing time. The pricing for ethanol, WDG, CDO, and CDS is set independently. Revenues from ethanol and WDG are billed net of the related transportation and marketing charges. The transportation component is accounted for in cost of goods sold and the marketing component is accounted for in sales, general and administrative expense. Transportation and marketing charges are known within days of the transaction and are recorded at the actual amounts. We have elected an accounting policy under which these charges have been treated as fulfillment activities provided after control has transferred. As a result, these charges are recognized in cost of goods sold and selling, general and administrative expenses, respectively, when revenue is recognized. Revenues are recorded at the gross invoiced amount. Hence, we are the principal in California Ethanol segment where our customer and vendor may be the same.

 

California Dairy Renewable Natural Gas Revenues: Since 2018, we have used our relationships with California’s Central Valley dairy farmers to sign leases and raise funds to construct dairy digesters, a 40-mile RNG collection pipeline, a centralized biogas upgrading hub, and a renewable natural gas interconnection with PG&E’s natural gas pipeline. As of September 30, 2023, we have seven operating dairy digesters that produce biomethane, five additional digesters under construction, and contracts with additional dairies planned for future construction of digesters. Our RNG upgrading hub converts the biomethane produced by the digesters into utility-grade RNG that is transported by PG&E’s pipeline to California customers for use as transportation fuel.  Our revenue development strategy for the Dairy Renewable Natural Gas segment relies upon continuing to build new dairy digesters and extending the collection pipeline. We have been storing some of our RNG production and postponing the dispensing of RNG for transportation use in order to increase the quantity and value of LCFS credits.  As of  September 30, 2023, we have 64.69 thousand MMBtu of RNG that has been produced by not yet dispensed for use in transportation. This RNG is recorded as inventory valued at the lower of cost and net realizable value.  When dispensed, it will generate LCFS credits and D3 Cellulosic RINs that are not currently reflected in our assets.

 

10

(Tabular data in thousands, except par value and per share data)
 

India Biodiesel Revenues: We sell products pursuant to purchase orders or by contract with governmental or international parties, in which performance is satisfied by delivery and acceptance of the physical product. Given that the contracts are sufficiently similar in nature, we have assessed these contracts as a portfolio of similar contracts as allowed under the practical expedient. Doing so does not result in a materially different outcome compared to individually accounting for each contract. All domestic and international deliveries are subject to certain specifications as identified in contracts. The transaction price is determined daily based on reference market prices for biodiesel, refined glycerin, and PFAD, net of taxes. Transaction price is allocated to one performance obligation.

 

The following table shows our sales in our India Biodiesel segment by product category:

 

  

For the three months ended September 30,

  

For the nine months ended September 30,

 
  

2023

  

2022

  

2023

  

2022

 

Biodiesel sales

 $19,291  $10,828  $53,292  $10,828 

Other sales

  853   95   1,892   113 

Total

 $20,144  $10,923  $55,184  $10,941 

 

In India, we also assessed principal versus agent criteria as in some cases we buy feedstock from our customers and process and sell finished goods to those same customers. In those cases, we receive the legal title to feedstock from our customers once it is on our premises. We control the processing and production of biodiesel based on contract terms and specifications. The pricing for both feedstock and biodiesel is set independently. We hold the title and risk to biodiesel according to agreements when we enter into these situations. Hence, we are the principal in India sales scenarios where our customer and vendor may be the same.

 

Cost of Goods Sold. Cost of goods sold includes those costs directly associated with the production of revenues, such as raw material consumed, factory overhead and other direct production costs. During periods of idle plant capacity, costs otherwise charged to cost of goods sold are reclassified to selling, general and administrative expense.

 

Shipping and Handling Costs. Shipping and handling costs are classified as a component of cost of goods sold in the accompanying consolidated statements of operations.

 

Research and Development. Research and development costs are expensed as incurred, unless they have alternative future uses to the Company.

 

Cash, Cash Equivalents, and Restricted Cash. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances at various financial institutions domestically and abroad. The Federal Deposit Insurance Corporation insures domestic cash accounts. The Company’s accounts at these institutions may at times exceed federally insured limits. The Company has not experienced any losses in such accounts. Amounts included in restricted cash represent those required to be set aside by the Construction Loan Agreement with Greater Nevada Credit Union ("GNCU") for financing reserves and construction contingencies and will be released upon approval by GNCU. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheet to the total of the same such amounts shown in the statement of cash flows.

 

  

As of

 
  

September 30, 2023

  

December 31, 2022

 

Cash and cash equivalents

 $3,899  $4,313 

Restricted cash included in other current assets

  401   725 

Restricted cash included in other assets

  3,365   1,961 

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

 $7,665  $6,999 

 

Accounts Receivable. The Company sells ethanol and WDG through third-party marketing arrangements generally without requiring collateral directly to customers on a variety of terms including advanced payment terms, based on the size and creditworthiness of the customer. DCO is marketed and sold to A.L. Gilbert and other customers under the J.D. Heiskell Purchasing Agreement. The Company sells CDS directly to customers on standard 30-day payment terms. The Company sells biodiesel, glycerin, and processed natural oils to a variety of customers and may require advanced payment based on the size and creditworthiness of the customer. Usually, invoices are due within 30 days on net terms. Accounts receivables consist of product sales made to large creditworthy customers. Trade accounts receivable is presented at original invoice amount, net of any allowance for credit losses. We did not reserve any balance for allowances for credit losses as of September 30, 2023 and December 31, 2022.

 

11

(Tabular data in thousands, except par value and per share data)
 

Inventories. Finished goods, raw materials, and work-in-process inventories are valued using methods which approximate the lower of cost (first-in, first-out) or net realizable value (“NRV”). Distillers’ grains and related products are stated at NRV. In the valuation of inventories, NRV is determined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

 

Variable Interest Entities. We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests in is considered a variable interest entity (“VIE”). We consolidate VIEs when we are the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we assess whether any changes in our interest or relationship with the entity affects our determination of whether the entity is still a VIE and, if so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable U.S. GAAP.

 

Property, Plant and Equipment. Property, plant, and equipment are carried at cost less accumulated depreciation after assets are placed in service and are comprised primarily of plant and buildings, furniture, machinery, equipment, land, and biogas dairy digesters. Capital expenses for in-process projects are capitalized as construction in progress and will be depreciated once the capital projects are finished and are in service. The Company’s plant in Goodland, Kansas (the "Goodland Plant") is partially completed and is not ready for operation. It is the Company’s policy to depreciate capital assets over their estimated useful lives using the straight-line method.

 

The Company evaluates the recoverability of long-lived assets with finite lives in accordance with ASC Subtopic 360-10-35 Property Plant and EquipmentSubsequent Measurements, which requires recognition of impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable, based on estimated undiscounted cash flows, the impairment loss would be measured as the difference between the carrying amount of the assets and its estimated fair value. The Company has not recorded any impairment during the three and nine months ended September 30, 2023 and 2022.

 

California Energy Commission Low-Carbon Fuel Production Program. The Company was awarded $4.2 million in matching grants from the California Energy Commission Low-Carbon Fuel Production Program (“LCFPP”). The LCFPP grant reimburses the Company for costs to design, procure, and install a processing facility to clean-up, measure and verify negative-carbon intensity dairy renewable natural gas fuel at the production facility in Keyes, California. The Company has received $3.8 million from the LCFPP as of September 30, 2023, as reimbursement for actual costs incurred. Due to the uncertainty associated with the approval process under the grant program, the Company recognized the grant as a reduction of costs in the period when the grant payment was received.  

 

CDFA Dairy Digester Research and Development program. In October 2020, the Company was awarded $7.8 million in matching grants from the CDFA Dairy Digester Research and Development program. The CDFA grant reimburses the Company for costs required to permit and construct six of the Company’s biogas capture systems under contract with central California dairies. The Company has received $4.8 million from the CDFA 2020 grant program as of September 30, 2023, as reimbursement for actual costs incurred. Due to the uncertainty associated with the approval process under the grant program, the Company recognized the grant as a reduction of costs in the period when the grant payment was received.

 

12

(Tabular data in thousands, except par value and per share data)
 

California Energy Commission Low Carbon Advanced Ethanol Grant Program. In May 2019, the Company was awarded the right to receive reimbursements from the California Energy Commission Community-Scale and Commercial-Scale Advanced Biofuels Production Facilities grant under the Alternative and Renewable Fuel and Vehicle Technology Program in an amount up to $5.0 million (the “CEC Reimbursement Program”) in connection with the Company’s expenditures toward the development of the Riverbank Carbon Zero Facility. The Company has received $1.7 million under the grant, which is presented with current-term liabilities as of September 30, 2023, and December 31, 2022.  On September 30, 2023, the CEC program decided not to extend the time for the Company to receive additional grant funds due to the requirement to achieve the grant program objectives by June 30, 2024, when the CEC program ends.

 

U.S. Department of Food and Agriculture Forest Service Grant. Aemetis Advanced Products Keyes (“AAPK”) has been awarded $245 thousand in matching grants from the U.S. Department of Food and Agriculture Forest Service (“US Forest Service”) under the Wood Innovation and Community Wood program. The grant has reimbursed the Company for continued development of technologies and processes to valorize forest waste for the production of cellulosic ethanol.  AAPK has received all $245 thousand awarded from the US Forest Service for reimbursement of actual allowable program costs incurred through September 30, 2023.

 

California Energy Commission Grant for Solar Microgrid, DSC and Battery Backup System. Aemetis Advanced Fuels Keyes (“AAFK”) has been awarded an $8.0 million grant to design, construct and commission a grid-connected 1.56 MW photovoltaic microgrid and 1.25MW/2.5MWh Battery Energy Storage System integrated with an artificial intelligence-driven distributed control system (DCS). The Company has made the required $1.6 million in matching contributions to qualify to receive grant reimbursements. AAFK received $4.2 million in grant funds from this program as reimbursement for actual expenditures incurred through September 30, 2023. Due to the uncertainty associated with the approval process under the grant program, the Company recognized the grant as a reduction of costs in the period when grant payment was received.

 

California Department of Forestry and Fire Protection Grant. AAPK has been awarded $2 million in matching grants from the CAL FIRE Business and Workforce Development Grant Program (“CAL Fire”) in May 2022. This CAL Fire grant program reimburses AAPK for costs to design, construct, and commission a 2 million gallon per year cellulosic ethanol facility able to convert conifer biomass from forested regions of the Sierra Nevada into an ultra‐low carbon biofuel derived from 100% forest biomass (“CAL Fire Conversion Program”). AAPK must contribute $5.8 million in cost share contributions to the project to receive grant proceeds. AAPK has received no grant funds from the CAL Fire Conversion Program as reimbursement for actual costs through  September 30, 2023.

 

California Department of Forestry and Fire Protection Grant. AAPK was awarded $500 thousand in grants from CAL Fire in May 2022. This CAL Fire grant program reimburses AAPK for costs to advance a new‐to‐the world technology that circumvents current limitations surrounding the extraction of cellulosic sugars by pioneering a novel route for deconstructing woody biomass using ionic liquids (“CAL Fire Extraction Program”). AAPK has received no grant funds from the CAL Fire Extraction Program as reimbursement for actual costs through  September 30, 2023.

 

U.S Forest Service Community Wood Grant. Aemetis Advanced Products Riverbank (“AAPR”) was awarded $642 thousand in matching grants from the U.S Forest Service Wood Innovations Program (“USFS”) in May 2022. The USFS grant program reimburses AAPR for costs to design, construct, and commission a plant to produce cellulosic ethanol using preliminary research and development in partnership with the Joint Bioenergy Institute (JBEI). USFS grant funds will be used to complete the FEL-3 design phase of the entire process, construct a biomass pretreatment unit to extract sugars at the Aemetis Riverbank site and ferment sugars into ethanol at the Keyes Plant. AAPR must contribute $2.4 million in cost share contributions to the project to receive grant proceeds. AAPK has received no grant funds from the USFS grant program as reimbursement for actual costs through  September 30, 2023.

 

California Energy Commission Grant for Mechanical Vapor Recompression System. Aemetis Advanced Fuels Keyes (“AAFK”) has been awarded a $6.0 million grant to design, construct and commission a mechanical vapor recompression (MVR) system. The additional evaporation stages will eliminate natural gas consumption and related greenhouse gas emissions in the evaporation portion of the process by installing metering equipment and software to monitor and optimize the plant’s energy consumption. The MVR system will compress vapor to a higher pressure and temperature so that it can be recycled multiple times as steam heat in the evaporation process, which will reduce natural gas use. The grant requires $5.3 million in matching contributions. AAFK has received no grant funds from this program as reimbursement for actual expenditures incurred through September 30, 2023. Due to the uncertainty associated with the approval process under the grant program, the Company will recognize future grant proceeds received as a reduction of costs in the period when grant payments will be received.

 

13

(Tabular data in thousands, except par value and per share data)
 

Pacific Gas and Electric SEM Manufacturers Incentive Program. During the fourth quarter of 2022, AAFK received $374 thousand in PG&E SEM Incentive Program reimbursements for installing more efficient beer feed heat exchangers. The Company has received $27 thousand in PG&E SEM Incentive Program reimbursements in 2023. Third party consultants verified the reduction in natural gas usages from the new heat exchangers to obtain the incentive program funds.

 

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