SECURITIES & EXCHANGE COMMISSION EDGAR FILING
AEMETIS, INC
Form: 10-K
Date Filed: 2017-03-17
Corporate Issuer CIK: 738214
© Copyright 2017, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to the terms of use.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
Commission file number: 000-51354
AEMETIS, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of
incorporation or organization)
26-1407544
(I.R.S. Employer
Identification Number)
20400 Stevens Creek Blvd., Suite 700
Cupertino, CA 95014
(Address of principal executive offices)
Registrant’s telephone number (including area code): (408) 213-0940
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $0.001
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
☐
☐ (Do not check if a smaller reporting company)
Accelerated filer ☐
Smaller reporting company ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $26,667,402 as of June 30,
2016 based on the average bid and asked price on the NASDAQ Markets reported for such date. This calculation does not reflect a determination that certain
persons are affiliates of the registrant for any other purpose.
The number of shares outstanding of the registrant’s Common Stock on February 28, 2017 was 19,696,447 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant’s 2017 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
TABLE OF CONTENTS
Page
Special Note Regarding Forward-Looking Statements
PART I
Item 1. Business
Item 1A. Risk Factors
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Index to Financial Statements
Signatures
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PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
On one or more occasions, we may make forward-looking statements in this Annual Report on Form 10-K, 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
Annual Report on Form 10-K include, without limitation, statements regarding management’s plans; trends in demand for renewable fuels; 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; the impact of changes in regulatory policies on our performance, including the Indian government’s recent changes to tax policies, diesel
prices and related subsidies; our ability to continue to develop new, and to maintain and protect new and existing, intellectual property rights; our ability to adopt,
develop and commercialize new technologies; our ability to refinance our senior debt on more commercial terms or at all; our ability to continue to fund
operations and our future sources of liquidity and capital resources; our ability to sell additional notes under our EB-5 note program and our expectations
regarding the release of funds from escrow under our EB-5 note program; our ability to improve margins; and our ability to raise additional capital. Words or
phrases such as “anticipates,” “may,” “will,” “should,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will
continue” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on current assumptions and
predictions and are subject to numerous risks and uncertainties. Actual results or events could differ materially from those set forth or implied by such forward-
looking statements and related assumptions due to certain factors, including, without limitation, the risks set forth under the caption “Risk Factors” below, which
are incorporated herein by reference as well as those business risks and factors described elsewhere in this report and in our other filings with the Securities and
Exchange Commission (the “SEC”).
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
We obtained the market data used in this report from internal company reports and industry publications. Industry publications generally state that the
information contained in those publications has been obtained from sources believed to be reliable, but their accuracy and completeness are not guaranteed and
their reliability cannot be assured. Although we believe market data used in this 10-K is reliable, it has not been independently verified.
Unless the context requires otherwise, references to “we,” “us,” “our,” and “the Company” refer specifically to Aemetis, Inc. and its subsidiaries.
I tem 1. Business
General
We are an international renewable fuels and biochemicals company focused on the production of advanced fuels and chemicals through the acquisition,
development, and commercialization of innovative technologies that replace traditional petroleum-based products by conversion of first-generation ethanol and
biodiesel plants into advanced biorefineries. We operate in two reportable geographic segments: “North America” and “India.” For revenue and other
information regarding our operating segments, see Note 13- Segment Information, of the Notes to Consolidated Financial Statements in Part II, Item 8 of this
Form 10-K.
We were incorporated in Nevada in 2006.
We own and operate a 60 million gallon per year ethanol production facility located in Keyes, California (the Keyes plant). The facility produces its own
combined heat and power (CHP) through the use of a natural gas-powered steam turbine and reuses 100% of its process water with zero water discharge. In
addition to ethanol, the Keyes plant produces Wet Distillers Grains (WDG), Distillers Corn Oil (DCO), and Condensed Distillers Solubles (CDS), all of which are
sold to local dairies and feedlots as animal feed. The primary feedstock for the production of low carbon fuel ethanol at the Keyes facility is Number Two yellow
dent corn. The corn is procured from various Midwestern grain facilities and shipped, via Union Pacific Rail Road, to an unloading facility adjacent to the plant.
We also lease a site near the Keyes plant where we plan to utilize waste-to-fuel technology that we have licensed from LanzaTech (the LanzaTech Technology)
to build a cellulosic ethanol production facility (the Keyes Cellulosic Ethanol Facility) capable of converting local California biomass waste – including agricultural
waste, forest waste, dairy waste, and construction and demolition waste – to ultra-low carbon cellulosic ethanol. The Keyes Cellulosic Ethanol Facility plans to
utilize the distillation and logistics infrastructure at our Keyes plant. By producing low carbon intensity cellulosic fuel ethanol, we expect to capture higher value
D3 cellulosic renewable identification numbers and California’s Low Carbon Fuel Standard (LCFS) carbon credits.
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We also own and operate a biodiesel production facility in Kakinada, India (the Kakinada plant) with a nameplate capacity of 150,000 metric tons per year, which
is equal to about 50 million gallons per year. We believe this facility is one of the largest biodiesel production facilities in India on a nameplate capacity
basis. Our objective is to continue to capitalize on the substantial growth potential of the industry in India and address established markets in the European
Union and United States of America.
Strategy
Key elements of our strategy include:
North America
Leverage technology for the development and production of additional advanced biofuels and renewable chemicals . In March 2016, we acquired the
exclusive rights to the LanzaTech Technology for the conversion of agricultural waste, forest waste, dairy waste, and construction and demolition waste
to ultra-low carbon fuel ethanol in California. We intend to utilize this technology to produce advanced ethanol from local California biomass
wastes. Utilizing a phased approach, we initially anticipate adopting the LanzaTech Technology at the Keyes Cellulosic Ethanol Facility, which will
initially be an estimated eight million gallon per year name-plate capacity processing unit, and eventually expand to an estimated 32 million gallon per
year name-plate production capacity plant. We also plan on licensing the LanzaTech Technology to other existing California-based ethanol plants. In
addition, we continue to evaluate new technology and develop technology under our existing patents, patent pending and in-process research and
development to produce renewable chemicals and advanced fuels from renewable feedstocks. Our objective is to continue to commercialize this
technology and expand the production of advanced biofuel technologies and other bio-chemicals in the United States.
Diversify and expand revenue and cash flow by continuing to develop and adopt value-added by-product processing systems . During April 2012, we
installed a DCO extraction unit at the Keyes plant and began extracting corn oil for sale into the livestock feed market beginning in May 2012. During
2014, we installed a second oil extraction system to further improve corn oil yields from this process. We continue to evaluate and, as allowed by
available financing and incremental profitability, adopt additional value-added processes that increase the value of the ethanol, distillers grain, corn oil
and CO2 produced at the Keyes plant, including adding liquefied CO 2 processing capability. Advanced planning is underway to partner with a leading
industrial gas supplier to build a liquid CO2 capture plant adjacent to the Keyes plant.
Acquire, license our technologies to, or Joint venture with other ethanol and biodiesel plants . There are approximately 200 ethanol plants and one
hundred biodiesel plants in the U.S., as well as plants in Brazil, Argentina, India and elsewhere, that could be upgraded to expand revenues and improve
cash flow using technology commercially deployed or licensed by us. After developing and commercially demonstrating technologies at the Keyes
and/or Kakinada plants, we will evaluate on an opportunistic basis the benefit of acquiring ownership of a portion of or all of other biodiesel production
facilities, or entering into joint-venture or licensing agreements with other ethanol, renewable diesel or renewable jet fuel facilities.
Evaluate and pursue technology acquisition opportunities . We intend to evaluate and pursue opportunities to acquire technologies and processes that
result in accretive value opportunities as financial resources and business prospects make the acquisition of these technologies advisable. In addition,
we may also seek to acquire companies, or enter into licensing agreements or form joint ventures with companies that offer prospects for the adoption
of accretive technologies.
Acquire additional biofuels production facilities . On an opportunistic basis, we will evaluate the benefit of acquiring ownership of a portion of or all of
other biodiesel production facilities, or entering into joint-venture or licensing agreements with other ethanol, renewable diesel or renewable jet fuel
facilities.
India
Capitalize on recent policy changes by the Government of India, particularly those reducing the subsidies on diesel, reducing unfair taxation of
feedstock, reducing restrictions on sales of fuel into the transportation markets, and promoting the use of renewable transportation fuels. We plan to
continue to pursue the traditional bulk and transportation biodiesel markets in India, which may become more economically attractive as a result of
potential changes to government tax structures (biodiesel is not subsidized in India) and policies. With the rationalization of indirect taxation by the
introduction of Goods and Services Tax, business to government Oil Marketing Company contracts will open up. Additionally, with the European Union
exempting Indian biodiesel from a 6.5% import duty starting January 1, 2017, we plan to pursue export sales and look to aggressively sell in the
European Union.
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Expand alternative market demand for biodiesel and its by-products . We plan to create additional demand for our biodiesel and its by-products by
developing additional alternative markets. In 2011, we began selling biodiesel to textile manufacturers for use as an anti-static chemical. In the first
quarter of 2012, we completed glycerin refining and oil pre-treatment units and began selling refined glycerin to manufacturers of paints and
adhesives. In 2012, our India subsidiary received an Indian Pharmacopeia license, which enables the sale of refined glycerin to the Indian
pharmaceutical industry.
Continue to develop international markets. We expect to increase sales by selling our biodiesel into international markets. During 2014, we completed
the construction of a biodiesel distillation column, which allows us to produce a high-quality biodiesel product meeting European Union standards. We
received the certifications necessary to meet the International Sustainability and Carbon Certification (ISCC) standard, allowing for further access to
European markets for our biodiesel products. During 2015, we obtained the pathway certification permitting importation of biodiesel into California. In
2016, the European Commission adopted a list of new product categories originating in GSP (Generalized System of Preferences) beneficiary countries
for which GSP tariff preferences will be suspended from January 1, 2017 until December 31, 2019. Our distilled biodiesel falls under the category giving
us at least a 6.5% tariff suspension from January 1, 2017. We believe that this ruling will allow us to access the European markets for our high quality
distilled biodiesel.
Diversify our feedstocks from India and international sources. We designed our Kakinada plant with the capability to produce biodiesel from multiple
feedstocks. In 2009, we began to produce biodiesel from non-refined palm oil (NRPO). During 2014, we further diversified our feedstock with the
introduction of animal oils and fats, which we used for the production of biodiesel to be sold into the European markets. The Kakinada plant is capable of
producing biodiesel from used cooking oil (UCO), which can be supplied from China, the Middle East and other foreign markets, as well as domestic
India suppliers.
Develop and commercially deploy technologies to produce high-margin products. The technology applicable to the Keyes plant for the upgrade of corn
oil into valuable, high-margin products also applies to the Kakinada plant in India. By using the existing equipment, process controls, utilities and
personnel at the Kakinada plant, we plan to produce high-value products more quickly and at a lower capital and operating cost than greenfield projects.
Evaluate and pursue technology acquisition opportunities . We intend to evaluate and pursue opportunities to acquire technologies and processes that
result in accretive value opportunities as financial resources and business prospects make the acquisition of these technologies advisable. In addition,
we may also seek to acquire companies, or enter into licensing agreements or form joint ventures with companies that offer prospects for the adoption
of accretive technologies.
2016 Highlights
North America
During 2016, we produced four products at the Keyes plant: denatured fuel ethanol, WDG, DCO), and CDS, or corn syrup. We sold 100% of the
ethanol and WDG produced to J.D. Heiskell pursuant to a Purchase Agreement established with J.D. Heiskell. J.D. Heiskell in turn sells 100% of our ethanol to
Kinergy Marketing LLC (“Kinergy”) and 100% of our WDG to A.L. Gilbert Co. (“A.L. Gilbert”), a local feed and grain business. We sell DCO to local animal
feedlots (primarily poultry) as well as other feed mills for use in various animal feed products. Small amounts of CDS were sold to various local third parties as an
animal feed supplement.
The following table sets forth information about our production and sales of ethanol and its by-products in 2016 and 2015:
Ethanol
Gallons Sold (in thousands)
Average Sales Price/Gallon
WDG
Tons Sold (in thousands)
Average Sales Price/Ton
2016
2015
% Change
$
$
55,641
1.78
$
55,787
1.74
372
70.61
$
360
79.68
-0.3%
2.3%
3.3%
-11.4%
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Ethanol pricing for sales to J.D. Heiskell is determined pursuant to a marketing agreement between Kinergy and us, and is generally based on daily and
monthly pricing for ethanol delivered to the San Francisco Bay Area as published by the Oil Price Information Service (OPIS), as well as quarterly contracts
negotiated by Kinergy with numerous fuel blenders. The price for WDG is determined monthly pursuant to a marketing agreement between A.L. Gilbert and us,
and is generally determined in reference to the local price of dry distillers grains (DDG), corn, and other protein feedstuffs.
India
In 2016, we produced two products at the Kakinada plant: biodiesel and refined glycerin. Crude glycerin produced as a by-product of the production of biodiesel
was further processed into refined glycerin.
The following table sets forth information about our production and sales of biodiesel and refined glycerin in 2016 and 2015:
Biodiesel
Tons sold (1)
Average Sales Price/Ton
Refined Glycerin
Tons sold
Average Sales Price/Ton
2016
2015
% Change
$
$
16,080
739
$
19,523
724
4,413
582
$
4,653
668
-18%
2%
-5%
-13%
(1)
1 metric ton is equal to 1,000 kilograms (approximately 2,204 pounds).
Major new developments in 2016 include approval to use 100 percent biodiesel (B100) in commercial vehicles, which allowed us to sell the drop-in biofuel into
major bulk commercial channels during the warmer months of the year, and the removal of European biofuel-related import tariffs on goods from India for
approximately three years, which is expected to favorably impact the profitability of our Indian operations.
Competition
North America
According to the U.S. Energy Information Agency, there were approximately 200 operating commercial fuel ethanol production facilities in the U.S. with a
combined nameplate production of approximately 14.9 billion gallons per year in 2016. The production of ethanol is a commodity-based business where
producers compete on the basis of price. We sell ethanol into the Northern California market; however, since insufficient production capacity exists in California
to supply the state’s total fuel ethanol consumption (in excess of 1.5 billion gallons annually); we compete with ethanol transported into California from
Midwestern producers. Similarly, our co-products, principally WDG and DCO, are sold into California markets and compete with DDG and corn oil transported
into the California markets as well as alternative feed products.
India
With respect to biodiesel sold as fuel, we compete primarily with the producers of petroleum diesel, consisting of the three state-controlled oil companies: Indian
Oil Corporation, Bharat Petroleum and Hindustan Petroleum, and two private oil companies: Reliance Petroleum and Essar Oil, all of whom have significantly
larger market shares than we do and control a significant share of the distribution network. These competitors may also purchase our product for blending and
further sales to their customers. We compete primarily on the basis of price. The price of biodiesel is impacted by the price of petroleum diesel, which, during
2015, was allowed to float to market pricing by the Indian government. Prior to 2015, the Indian government subsidized state-controlled oil companies, creating
a disparity between the cost of oil on the open market and the price we could obtain from sales of biodiesel. In 2015, the Indian government allowed for the sale
of biodiesel to bulk fuel customers. With respect to international markets, principally the European markets, we compete with biodiesel from Europe, Argentina,
Indonesia and Malaysia, some of which subsidize their biodiesel industry using government payment and taxation programs to promote the sales of their
products into these markets. In 2016, European biofuel-related import tariffs on goods from India were removed for approximately three years, which is expected
to favorably impact the profitability of our Indian operations.
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With respect to biodiesel sold for manufacturing purposes, we compete with specialty chemical manufacturers selling products into the textile industries primarily
on the basis of price. With respect to crude and refined glycerin, we compete with other glycerin producers and refiners selling products into the personal care,
paints and adhesive markets primarily on the basis of price and product quality.
Customers
North America
All of our ethanol and WDG are sold to J.D. Heiskell pursuant to a purchase agreement. J.D. Heiskell in turn sells all of our ethanol to Kinergy and all of our
WDG to A.L. Gilbert. Kinergy markets and sells our ethanol to petroleum refiners and blenders in Northern California. A.L. Gilbert markets and sells our WDG to
approximately 200 dairy and feeding operators in Northern California.
India
During 2016, we derived 82% and 18% of our sales from biodiesel and refined glycerin respectively. Out of the 82% of biodiesel sales, two customers accounted
for more than 10% of our sales of biodiesel at 51% and 12%. None of our refined glycerin customers have accounted for more than 10% of our sales on the
consolidated India segment revenues in 2016. During 2015, we derived 82%, and 18% of our sales from biodiesel and refined glycerin, respectively. Out of the
82% of biodiesel sales, only one customer accounted for more than 10% of our sales of biodiesel at 56%. None of our refined glycerin customers have
accounted for more than 10% of our sales on the consolidated India segment revenues in 2015.
Pricing
North America
We sell 100% of the ethanol and WDG we produce to J.D. Heiskell. Ethanol pricing is determined pursuant to a marketing agreement between Kinergy and us
and is generally based on daily and monthly pricing for ethanol delivered to the San Francisco Bay area in California, as published by OPIS, as well as the terms
of quarterly contracts negotiated by Kinergy with local fuel blenders and available premiums for fuel with low carbon intensity as provided by California’s
LCFS. The price for WDG is determined monthly pursuant to a marketing agreement between A.L. Gilbert and us and is generally determined in reference to the
price of DDG, corn, and other protein feedstuffs, based on local pricing in California’s Central Valley.
India
In India, the price of biodiesel is based on the price of petroleum diesel, which floats with changes in the price determined by the international markets. Biodiesel
sold into Europe is based on the spot market price. We sell our biodiesel primarily to resellers, distributors and refiners on an as-needed basis. We have no
long-term sales contracts. Our biodiesel pricing is related to the price of petroleum diesel, and the increase in the price of petroleum diesel is expected to
favorably impact the profitability of our India operations.
Raw Materials and Suppliers
North America
We entered into a Corn Procurement and Working Capital Agreement with J.D. Heiskell in March 2011, which we amended in May 2013 (Heiskell Agreement).
Under the Heiskell Agreement, we agreed to procure Number Two yellow dent corn from J.D. Heiskell. We have the ability to obtain corn from other sources
subject to certain conditions; however, in 2016, all of our corn supply was purchased from J.D. Heiskell. Title to the corn and risk of loss pass to us when the
corn is deposited into our weigh bin. We also purchased 80,000 tons of milo from J.D. Heiskell during 2016. The agreement is automatically renewed for
additional one-year terms. The current term is set to expire on December 31, 2017.
India
In 2016, all of our biodiesel was produced from NRPO. A number of edible oil processing facilities that produce NRPO as a by-product operate near the
Kakinada. The receiving capabilities of the Kakinada plant allow for import of feedstock using the local port at the Kakinada plant. During 2016 and 2015, we
imported crude glycerin for further processing into refined glycerin. In addition to feedstock, the Kakinada plant requires quantities of methanol and chemical
catalysts for use in the biodiesel production process. These chemicals are also readily available and sourced from a number of suppliers surrounding the
Kakinada plant. We are not dependent on sole source or limited source suppliers for any of our raw materials or chemicals.
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Sales and Marketing
North America
As part of our obligations under the Heiskell Agreement, we entered into a purchase agreement with J.D. Heiskell, pursuant to which we granted J.D. Heiskell
exclusive rights to purchase 100% of the ethanol and WDG we produce at prices based upon the price established by the marketing agreements with Kinergy
and A.L. Gilbert. In turn, J.D. Heiskell agreed to resell all the ethanol to Kinergy (or any other purchaser we designate) and all of the WDG to A.L. Gilbert.
In March 2011, we entered into a WDG Purchase and Sale Agreement with A.L. Gilbert, pursuant to which A.L. Gilbert agreed to market on an exclusive basis
all of the WDG we produce. The agreement is automatically renewed for additional one-year terms. The current term is set to expire on December 31, 2017.
In October 2010, we entered into an exclusive marketing agreement with Kinergy to market and sell our ethanol. The agreement is automatically renewed for
additional one-year terms. The current term is set to expire on August 31, 2017.
India
We sell our biodiesel and refined glycerin (i) to end-users utilizing our own sales force and independent sales agents and (ii) to brokers who resell the product to
end-users. We pay a sales commission on sales arranged by independent sales agents.
Commodity Risk Management Practices
North America
The cost of corn and the price of ethanol are volatile and the correlation of these commodities form the basis for the profit margin at our Keyes plant. We are,
therefore, exposed to commodity price risk. Our risk management strategy is to operate in the physical market by purchasing corn and selling ethanol on a daily
basis at the then prevailing market price. We monitor these prices daily to test for an overall positive variable contribution margin. We periodically explore
methods of mitigating the volatility of our commodity prices. During the fourth quarter of 2016, we offered three month WDG contracts to our customers, which
we offset with the purchase of corn basis, and essentially locking in our margin on this product. We may opportunistically purchase milo when market conditions
present favorable conditions and enter into market hedges when we believe those hedge positions mitigate volatility. Similarly, with the EPA certification
received in August 2013, we intend to opportunistically purchase the combination of milo and biogas to generate advanced biofuel RIN credits, when market
conditions present favorable margins.
India
The cost of NRPO and the price of biodiesel are volatile and are generally uncorrelated. We therefore are exposed to ongoing and substantial commodity price
risk. Our risk management strategy is to produce biodiesel in India only when we believe we can generate positive gross margins and to idle the Kakinada plant
during periods of low or negative gross margins. During 2014, we introduced animal oil and fats as a means of further diversifying our feedstock and improving
margins.
In addition, to minimize our commodity risk, we modified the processes within our facility to utilize lower cost NRPO, which enables us to reduce our feedstock
costs. Our ability to mitigate the risk of falling biodiesel prices is more limited. The price of our biodiesel is generally indexed to the price of petroleum diesel,
which is set by the Indian government. In January 2015, the Indian government fully lifted subsidies for diesel by increasing the sales price of diesel to the market
price.
We have in the past, and we may in the future, use forward purchase contracts and other hedging strategies; however, the extent to which we engage in these
risk management strategies may vary substantially from time to time depending on market conditions and other factors.
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Research and Development
Our R&D efforts consist of working to develop and commercialize our existing microbial technology, to evaluate third party technologies, and to expand the
production of ethanol and other renewable bio-chemicals in the United States. The primary objective of this development activity is to optimize the production of
ethanol using either our proprietary, patent-pending enzyme technology for large-scale commercial production or the evaluation of third party technologies which
have promise for large-scale commercial adoption at one of our operating facilities. Our innovations are protected by several issued or pending patents. We are
in the process of filing additional patents that will further strengthen our portfolio. Some core intellectual property has been exclusively and indefinitely licensed
from the University of Maryland. R&D expense was $0.4 million each in the years ended 2016 and 2015.
Patents and Trademarks
We have filed a number of trademark applications within the U.S. We do not consider the success of our business, as a whole, to be dependent on these
trademarks. In addition, we hold ten awarded patents in the United States. Our patents cover the Z-microbeTM and production of cellulosic ethanol and a
technology to convert carbon chain chemical structures. We intend to develop, maintain and secure further intellectual property rights, and pursue new patents to
expand upon our current patent base.
We have acquired exclusive rights to patented technology in support of the development and commercialization of our products, and we also rely on trade
secrets and proprietary technology in developing potential products. We continue to place significant emphasis on securing global intellectual property rights and
we are pursuing new patents to expand upon our strong foundation for commercializing products in development.
We have received, and in the future we may receive additional, claims of infringement of other parties’ proprietary rights. See Item 3. Legal Proceedings,
below. Infringement or other claims could be asserted or prosecuted against us in the future, and it is possible that future assertions or prosecutions could harm
our business. Any such claims, with or without merit, could be time-consuming, result in costly litigation and diversion of technical and management personnel,
cause delays in the development of our products, or require us to develop non-infringing technology or enter into royalty or licensing arrangements. Such
royalty or licensing arrangements, if required, may require us to license back our technology or may not be available on terms acceptable to us, or at all.
Environmental and Regulatory Matters
North America
In late 2016, the EPA finalized the volume requirements and associated percentage standards that apply under the RFS program in calendar year 2017 for
cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel, as well as the volume requirement for biomass-based diesel for 2018.
The final volumes requirements represent continued growth over historic levels. The final percentage standards meet or exceed the volume targets specified by
Congress for total renewable fuel, biomass-based diesel and advanced biofuel.
Year
Cellulosic biofuel (million gallons)
Biomass-based diesel (billion gallons)
Advanced biofuel (billion gallons)
Renewable fuel (billion gallons)
Source: Environmental Protection Agency
Renewable Fuel Volume Requirements for 2014-2018
2014
2015
2016
2017
2018
33
1.63
2.67
16.28
123
1.73
2.88
16.93
230
1.9
3.61
18.11
311
2.0
4.28
19.28
n/a
2.1
n/a
n/a
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Total volumes grew 1.2 billion gallons under the renewable fuel standards from 2016 to 2017, a 6 percent increase.
The volume requirements of advanced renewable fuel, which require 50 percent lifecycle carbon emissions reductions, grew by roughly 700 million gallons
between 2016 and 2017. The non-advanced or “conventional” renewable fuel volume requirement increases in 2017 meet the 15 billion gallon statutory
congressional mandate for conventional fuels.
Volume requirements for cellulosic biofuel, which must achieve at least 60 percent lifecycle greenhouse gas emissions reductions, grew by 35 percent over the
2016 standard. Volume requirements for advanced biofuels, which is comprised of biomass-based diesel, cellulosic biofuel, and other biofuels that achieve at
least 50 percent lifecycle greenhouse gas emissions reductions, increased by 19 percent over the 2016 standard.
We are subject to federal, state and local environmental laws, regulations and permit conditions, including those relating to the discharge of materials into the air,
water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our
employees. These laws, regulations and permits may, from time to time, require us to incur significant capital costs. These include, but are not limited to, testing
and monitoring plant emissions, and where necessary, obtaining and maintaining mitigation processes to comply with regulations. They may also require us to
make operational changes to limit actual or potential impacts to the environment. A significant violation of these laws, regulations, permits or license conditions
could result in substantial fines, criminal sanctions, permit revocations and/or facility shutdowns. In addition, environmental laws and regulations change over
time, and any such changes, more vigorous enforcement policies or the discovery of currently unknown conditions may require substantial additional
environmental expenditures.
We are also subject to potential liability for the investigation and cleanup of environmental contamination at each of the properties that we own or operate and at
off-site locations where we arrange for the disposal of hazardous wastes. If significant contamination is identified at our properties in the future, costs to
investigate and remediate this contamination as well as costs to investigate or remediate associated damage could be significant. If any of these sites are
subject to investigation and/or remediation requirements, we may be responsible under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (“CERCLA”) or other environmental laws for all or part of the costs of such investigation and/or remediation, and for damage to natural
resources. We may also be subject to related claims by private parties alleging property damage or personal injury due to exposure to hazardous or other
materials at or from such properties. While costs to address contamination or related third-party claims could be significant, based upon currently available
information, we are not aware of any material contamination or any such third party claims. Based on our current assessment of the environmental and
regulatory risks, we have not accrued any amounts for environmental matters as of December 31, 2016. The ultimate costs of any liabilities that may be
identified or the discovery of additional contaminants could materially adversely impact our results of operation or financial condition.
In addition, the production and transportation of our products may result in spills or releases of hazardous substances, which could result in claims from
governmental authorities or third parties relating to actual or alleged personal injury, property damage, or damage to natural resources. We maintain insurance
coverage against some, but not all, potential losses caused by our operations. Our general and umbrella liability policy coverage includes, but is not limited to,
physical damage to assets, employer’s liability, comprehensive general liability, automobile liability and workers’ compensation. We do not carry environmental
insurance. We believe that our insurance is adequate for our industry, but losses could occur for uninsurable or uninsured risks or in amounts in excess of
existing insurance coverage. The occurrence of events which result in significant personal injury or damage to our property, natural resources or third parties
that is not covered by insurance could have a material adverse impact on our results of operations and financial condition.
Our air emissions are subject to the federal Clean Air Act, and similar state laws, which generally require us to obtain and maintain air emission permits for our
ongoing operations as well as for any expansion of existing facilities or any new facilities. Obtaining and maintaining those permits requires us to incur costs, and
any future more stringent standards may result in increased costs and may limit or interfere with our operating flexibility. These costs could have a material
adverse effect on our financial condition and results of operations. Because other ethanol manufacturers in the U.S. are and will continue to be subject to similar
laws and restrictions, we do not currently believe that our costs to comply with current or future environmental laws and regulations will adversely affect our
competitive position with other U.S. ethanol producers. However, because ethanol is produced and traded internationally, these costs could adversely affect us
in our efforts to compete with foreign producers who are not subject to such stringent requirements.
New laws or regulations relating to the production, disposal or emission of carbon dioxide and other greenhouse gases may require us to incur significant
additional costs with respect to ethanol plants that we build or acquire. For example, in 2007, Illinois and four other Midwestern states entered into the
Midwestern Greenhouse Gas Reduction Accord, which directs participating states to develop a multi-sector cap-and-trade mechanism to help achieve reductions
in greenhouse gases, including carbon dioxide. We currently conduct our North American commercial activities exclusively in California; however, it is possible
that other states in which we plan to conduct business could join this accord or require other carbon dioxide emissions reductions. Climate change legislation is
being considered in Washington, D.C. this year which may significantly impact the biofuels industry’s emissions regulations, as will the Renewable Fuel
Standard, California’s Low Carbon Fuel Standard, and other potentially significant changes in existing transportation fuels regulations.
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India
We are subject to national, state and local environmental laws, regulations and permits, including with respect to the generation, storage, handling, use,
transportation and disposal of hazardous materials, and the health and safety of our employees. These laws may require us to make operational changes to limit
actual or potential impacts to the environment. A violation of these laws, regulations or permits can result in substantial fines, natural resource damages,
criminal sanctions, permit revocations and/or facility shutdowns. In addition, environmental laws and regulations (and interpretations thereof) change over time,
and any such changes, more vigorous enforcement policies or the discovery of currently unknown conditions may require substantial additional environmental
expenditures.
Employees
At December 31, 2016, we had a total of 144 employees, comprised of 14 full-time and two part-time equivalent employees in our corporate offices, 45 full-time
equivalent employees at the Keyes plant, one full-time equivalent employee in our Maryland research and development facility and 82 full-time equivalent
employees in India.
We believe that our employees are highly-skilled, and our success will depend in part upon our ability to retain our employees and attract new qualified
employees, many of whom are in great demand. We have never had a work stoppage or strike, and no employees are presently represented by a labor union or
covered by a collective bargaining agreement. We believe our relations with our employees are good.
Available Information
We file reports with the Securities and Exchange Commission (“SEC”). We make available on our website under “Investor Relations,” free of charge, our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after
we electronically file such materials with or furnish them to the SEC. Our website address is www.aemetis.com. Our website address is provided as an inactive
textual reference only, and the contents of that website are not incorporated in or otherwise to be regarded as part of this report. You can also read and copy any
materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may also obtain additional information
about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that
contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
Item 1A. Risk Factors
We operate in an evolving industry that presents numerous risks beyond our control that are driven by factors that cannot be predicted. Should any of the risks
described in this section or in the documents incorporated by reference in this report actually occur, our business, results of operations, financial condition, or
stock price could be materially and adversely affected. Investors should carefully consider the risk factors discussed below, in addition to the other information
in this report, before making any investment in our securities.
Risks Related to our Overall Business
We are currently not profitable and historically, we have incurred significant losses. If we incur continued losses, we may have to curtail our
operations, which may prevent us from successfully operating and expanding our business.
Historically, we have relied upon cash from debt and equity financing activities to fund substantially all of the cash requirements of our activities. As of December
31, 2016, we had an accumulated deficit of approximately $129.9 million. For our fiscal years ended December 31, 2016 and 2015, we reported a net loss of
$15.6 million and $27.1 million, respectively. We may incur losses for an indeterminate period of time and may not achieve consistent profitability. An extended
period of losses or negative cash flow may prevent us from successfully operating and expanding our business.
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We are dependent upon our working capital agreements with J.D. Heiskell and Secunderabad Oils Limited.
Our ability to operate our Keyes plant depends on maintaining our working capital agreement with J.D. Heiskell, and our ability to operate the Kakinada plant
depends on maintaining our working capital agreement with Secunderabad Oils Limited ( Secunderabad Agreement).The Heiskell Agreement provides for an
initial term of one year with automatic one-year renewals; provided, however, that J.D. Heiskell may terminate the agreement by notice 90 days prior to the end
of the initial term or any renewal term. The current term extends through December 31, 2017. In addition, the agreement may be terminated at any time upon a
default, such as payment default, bankruptcy, acts of fraud or material breach under one of our related agreements with J.D. Heiskell. The Secunderabad
Agreement may be terminated at any time by either party upon written notice. If we are unable to maintain these strategic relationships, we will be required to
locate alternative sources of working capital and corn or sorghum supply, which we may be unable to do in a timely manner or at all. If we are unable to
maintain our current working capital arrangements or locate alternative sources of working capital, our ability to operate our plants will be negatively affected.
Disruptions in ethanol production infrastructure may adversely affect our business, results of operations and financial condition.
Our business depends on the continuing availability of rail, road, port, and storage and distribution infrastructure. In particular, due to limited storage capacity at
the Keyes plant and other considerations related to production efficiencies, the Keyes plant depends on just-in-time delivery of corn and milo. The delivery and
transformation of feedstock requires a significant and uninterrupted supply of corn and milo, principally delivered by rail, as well as other raw materials and
energy, primarily electricity and natural gas. The prices of rail, electricity and natural gas have fluctuated significantly in the past and may fluctuate significantly in
the future. The national rail system, as well as local electricity and gas utilities, may not be able to reliably supply the rail logistics, electricity and natural gas that
the Keyes plant will need or may not be able to supply those resources on acceptable terms. Any disruptions in the ethanol production infrastructure, whether
caused by labor difficulties, earthquakes, storms, other natural disasters, or human error or malfeasance or other reasons, could prevent timely deliveries of
corn, milo or other raw materials and energy and may require the Keyes plant to halt production, which could have a material adverse effect on our business,
results of operations and financial condition.
Our results from operations are primarily dependent on the spread between the feedstock and energy we purchase and the fuel, animal feed
and other products we sell.
The results of our ethanol production business in the U.S. are significantly affected by the spread between the cost of the corn and natural gas that we purchase
and the price of the ethanol, WDG and DCO that we sell. Similarly, in India our biodiesel business is primarily dependent on the price difference between the
costs of the feedstock we purchase (principally NRPO and crude glycerin) and the products we sell (principally distilled biodiesel and refined glycerin). The
markets for ethanol, biodiesel, WDG, DCO and glycerin are highly volatile and subject to significant fluctuations. Any decrease in the spread between prices of
the commodities we buy and sell, whether as a result of an increase in feedstock prices or a reduction in ethanol or biodiesel prices, would adversely affect our
financial performance and cash flow and may cause us to suspend production at either of our plants.
The price of ethanol is volatile and subject to large fluctuations, and increased ethanol production may cause a decline in ethanol prices or
prevent ethanol prices from rising, either of which could adversely impact our results of operations, cash flows and financial condition.
The market price of ethanol is volatile and subject to large fluctuations. The market price of ethanol is dependent upon many factors, including the supply of
ethanol and the demand for gasoline, which is in turn dependent upon the price of petroleum, which is also highly volatile and difficult to forecast. Fluctuations in
the market price of ethanol may cause our profitability or losses to fluctuate significantly. In addition, domestic ethanol production capacity increased significantly
in the last decade. Demand for ethanol may not increase commensurately with increases in supply, which could lead to lower ethanol prices. Demand for
ethanol could be impaired due to a number of factors, including regulatory developments and reduced United States gasoline consumption. Reduced gasoline
consumption has occurred in the past and could occur in the future as a result of increased gasoline or oil prices.
Our indebtedness and interest expense could limit cash flow and adversely affect operations and our ability to make full payment on outstanding
debt.
For the year ended December 31, 2016, we recognized $11.5 million in interest expense, primarily due to higher debt balances in 2016. Our high levels of
interest expense pose potential risks such as:
● A substantial portion of cash flows from operations are used to pay principal and interest on debt, thereby reducing the funds available for working
capital, capital expenditures, acquisitions, research and development and other general corporate purposes;
● Insufficient cash flows from operations may force us to sell assets, or seek additional capital, which we may not be able to accomplish on favorable
terms, if at all; and
● The level of indebtedness may make us more vulnerable to economic or industry downturns.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Decreasing gasoline prices may negatively impact the selling price of ethanol which could reduce our ability to operate profitably .
The price of ethanol tends to change in relation to the price of gasoline. Recently, as a result of a number of factors including the current world economy, the
price of gasoline has decreased. In correlation to the decrease in the price of gasoline, the price of ethanol has also decreased. Decreases in the price of ethanol
reduce our revenue. Our profitability depends on a favorable spread between our corn and natural gas costs and the price we receive for our ethanol. If ethanol
prices fall during times when corn and/or natural gas prices are high, we may not be able to operate profitably.
We may be unable to execute our business plan.
The value of our long-lived assets is based on our ability to execute our business plan and generate sufficient cash flow to justify the carrying value of our
assets. Should we fall short of our cash flow projections, we may be required to write down the value of these assets under accounting rules and further reduce
the value of our assets. We can make no assurances that future cash flows will develop and provide us with sufficient cash to maintain the value of these
assets, thus avoiding future impairment to our asset carrying values. As a result, we may need to write down the carrying value of our long-lived assets.
In addition, we intend to modify or adapt third party technologies at the Keyes plant and at the Kakinada plant to accommodate alternative feedstocks and
improve operations. After we design and engineer a specific integrated upgrade to either or both plants to allow us to produce products other than their existing
products, we may not receive permission from the regulatory agencies to install the process at one or both plants. Additionally, even if we are able to install and
begin operations of an integrated advanced fuels and/or bio-chemical plant, we cannot assure you that the technology will work and produce cost effective
products because we have never designed, engineered nor built this technology into an existing bio-refinery. Similarly, our plans to add a CO
at the Keyes plant may not be successful as a result of financing, issues in the design or construction process, or our ability to sell liquid CO
prices. Any inability to execute our business plan may have a material adverse effect on our operations, financial position and ability to pay dividends and
continue as a going concern.
2 conversion unit
2 at cost effective
We are dependent on, and vulnerable to any difficulties of, our principal suppliers and customers.
We buy all of the feedstock for the Keyes plant from one supplier, J.D. Heiskell. Under the Heiskell Agreement, we are only permitted to purchase feedstock
from other suppliers upon the satisfaction of certain conditions. In addition, we have contracted to sell all of the WDG, CDS, corn oil and ethanol we produce at
the Keyes plant to J.D. Heiskell. J.D. Heiskell, in turn, sells all ethanol produced at the Keyes plant to Kinergy Marketing and all WDG and syrup to A.L.
Gilbert. If J.D. Heiskell were to fail to deliver adequate feedstock to the Keyes plant or fail to purchase all the product we produce, if Kinergy were to fail to
purchase all of the ethanol we produce, if A.L. Gilbert were to fail to purchase all of the WDG and syrup we produce, or if any of them were otherwise to default
on our agreements with them or fail to perform as expected, we may be unable to find replacement suppliers or purchasers, or both, in a reasonable time or on
favorable terms, any of which could materially adversely affect our results from operations and financial results.
We may be unable to repay or refinance our Third Eye Capital Notes upon maturity.
Under our note facilities with Third Eye Capital Corporation (Third Eye Capital), we owe approximately $61.6 million, excluding debt discounts, as of December
31, 2016. Our indebtedness and interest payments under these note facilities are currently substantial and may adversely affect our cash flow, cash position and
stock price. The maturity date of these notes has been extended to April 2018, although the maturity can be extended to April 2019 upon payment of certain
fees. We have been able to extend our indebtedness in the past, but we may not be able to continue to extend the maturity of these notes. We may not have
sufficient cash available at the time of maturity to repay this indebtedness. We have default covenants that may accelerate the maturities of these notes. We
may not have sufficient assets or cash flow available to support refinancing these notes at market rates or on terms that are satisfactory to us. If we are unable
to extend the maturity of the notes or refinance on terms satisfactory to us, we may be forced to refinance on terms that are materially less favorable, seek funds
through other means such as a sale of some of our assets or otherwise significantly alter our operating plan, any of which could have a material adverse effect on
our business, financial condition and results of operations. Additionally, if we are unable to amend our current note purchase agreement with Third Eye Capital,
our ability to pay dividends could be restrained.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Our business is dependent on external financing and cash from operations to service debt and provide future growth.
The adoption of new technologies at our ethanol and biodiesel plants and our working capital requirements are financed in part through debt facilities. We may
need to seek additional financing to continue or grow our operations. However, generally unfavorable credit market conditions may make it difficult to obtain
necessary capital or additional debt financing on commercially viable terms or at all. If we are unable to pay our debt we may be forced to delay or cancel
capital expenditures, sell assets, restructure our indebtedness, seek additional financing, or file for bankruptcy protection. Debt levels or debt service
requirements may limit our ability to borrow additional capital, make us vulnerable to increases in prevailing interest rates, subject our assets to liens, limit our
ability to adjust to changing market conditions, or place us at a competitive disadvantage to our competitors. Should we be unable to generate enough cash from
our operations or secure additional financing to fund our operations and debt service requirements, we may be required to postpone or cancel growth projects,
reduce our operations, or may be unable to meet our debt repayment schedules. Any one of these events would likely have a material adverse effect on our
operations and financial position.
There can be no assurance that our existing cash flow from operations will be sufficient to sustain operations and to the extent that we are dependent on credit
facilities to fund operations or service debt, there can be no assurances that we will be successful at securing funding from our senior lender or significant
shareholders. Should we require additional financing, there can be no assurances that the additional financing will be available on terms satisfactory to us. Our
ability to identify and enter into commercial arrangements with feedstock suppliers in India depends on maintaining our operations agreement with
Secunderabad Oil Limited, who is currently providing us with working capital for our Kakinada facility. If we are unable to maintain this strategic relationship, our
business may be negatively affected. In addition, the ability of Secunderabad to continue to provide us with working capital depends in part on the financial
strength of Secunderabad and its banking relationships. If Secunderabad is unable or unwilling to continue to provide us with working capital, our business may
be negatively affected. Our ability to enter into commercial arrangements with feedstock suppliers in California depends on maintaining our operations
agreement with J.D. Heiskell, who is currently providing us with working capital for our Keyes plant. If we are unable to maintain this strategic relationship, our
business may be negatively affected. In addition, the ability of J.D. Heiskell to continue to provide us with working capital depends in part on the financial
strength of J.D. Heiskell and its banking relationships. If J.D. Heiskell is unable or unwilling to continue to provide us with working capital, our business may be
negatively affected. Our consolidated financial statements do not include any adjustments to the classification or carrying values of our assets or liabilities that
might be necessary as a result of the outcome of this uncertainty.
We may not receive the funds we expect under our EB-5 program
Our EB-5 program allows for the issuance of up to 72 subordinated convertible promissory notes, each in the amount of $0.5 million due and payable four years
from the date of the note for a total aggregate principal amount of up to $36.0 million. As of December 31, 2016, $34 million has been raised through the EB-5
program and invested in an Aemetis subsidiary and $1 million in investor funds remain in an escrow account pending release approval by the U.S. Citizenship
and Immigration Services (USCIS). The $1.0 million in EB-5 program funds remaining in escrow may require more than a year to obtain USCIS approval.
Additionally, the USCIS could deny approval of the loans, and then we would not receive some or all of the subscribed funds. If the USCIS takes longer to
approve the release of funds in escrow, or does not approve the loans at all, it would have a material adverse effect on our cash flows available for operations,
and thus could have a material adverse effect on our results of operations.
We face competition for our bio-chemical and transportation fuels products from providers of petroleum-based products and from other
companies seeking to provide alternatives to these products, many of whom have greater resources and experience than we do, and if we cannot
compete effectively against these companies we may not be successful.
Our renewable products compete with both the traditional, largely petroleum-based bio-chemical and fuels products that are currently being used in our target
markets and with the alternatives to these existing products that established enterprises and new companies are seeking to produce. The oil companies, large
chemical companies and well-established agricultural products companies with whom we compete are much larger than we are, and have, in many cases, well
developed distribution systems and networks for their products.
In the transportation fuels market, we compete with independent and integrated oil refiners, advanced biofuels companies and biodiesel companies. Refiners
compete with us by selling traditional fuel products and some are also pursuing hydrocarbon fuel production using non-renewable feedstocks, such as natural
gas and coal, as well as processes using renewable feedstocks, such as vegetable oil and biomass. We also expect to compete with companies that are
developing the capacity to produce diesel and other transportation fuels from renewable resources in other ways.
With the emergence of many new companies seeking to produce chemicals and fuels from alternative sources, we may face increasing competition from
alternative fuels and chemicals companies. As they emerge, some of these companies may be able to establish production capacity and commercial
partnerships to compete with us. If we are unable to establish production and sales channels that allow us to offer comparable products at attractive prices, we
may not be able to compete effectively with these companies.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
The high concentration of our sales within the ethanol production industry could result in a significant reduction in sales and negatively
affect our profitability if demand for ethanol declines.
We expect our U.S. operations are to be substantially focused on the production of ethanol and its co-products for the foreseeable future. We may be unable to
shift our business focus away from the production of ethanol to other renewable fuels or competing products. Accordingly, an industry shift away from ethanol or
the emergence of new competing products may reduce the demand for ethanol. A downturn in the demand for ethanol could materially and adversely affect our
sales and profitability.
Our operations are subject to environmental, health, and safety laws, regulations, and liabilities.
Our operations are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the
air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, access to and impacts on water supply, and
the health and safety of our employees. In addition, our operations and sales in India subject us to risks associated with foreign laws, policies and
regulations. Some of these laws and regulations require our facilities to operate under permits or licenses that are subject to renewal or modification. These
laws, regulations and permits can require expensive emissions testing and pollution control equipment or operational changes to limit actual or potential impacts
to the environment. Violations of these laws and regulations or permit or license conditions can result in substantial fines, natural resource damages, criminal
sanctions, permit revocations and facility shutdowns. We may not be at all times in compliance with these laws, regulations, permits or licenses or we may not
have all permits or licenses required to operate our business. We may be subject to legal actions brought by environmental advocacy groups and other parties
for actual or alleged violations of environmental laws, permits or licenses. In addition, we may be required to make significant capital expenditures on an
ongoing basis to comply with increasingly stringent environmental laws, regulations, permit and license requirements.
We may be liable for the investigation and cleanup of environmental contamination at the Keyes plant and at off-site locations where we arrange for the disposal
of hazardous substances. If hazardous substances have been or are disposed of or released at sites that undergo investigation or remediation by regulatory
agencies, we may be responsible under CERCLA or other environmental laws for all or part of the costs of investigation and remediation, and for damage to
natural resources. We also may be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or
other materials at or from those properties. Some of these matters may require us to expend significant amounts for investigation, cleanup or other costs.
New laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make
additional significant expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future
investments for environmental controls at our production facilities. Environmental laws and regulations applicable to our operations now or in the future, more
vigorous enforcement policies and discovery of currently unknown conditions may require substantial expenditures that could have a negative impact on our
results of operations and financial condition.
Emissions of carbon dioxide resulting from manufacturing ethanol are not currently subject to permit requirements. If new laws or regulations are passed relating
to the production, disposal or emissions of carbon dioxide, we may be required to incur significant costs to comply with such new laws or regulations.
Our business is affected by greenhouse gas and climate change regulation.
The operations at our Keyes plant will result in the emission of carbon dioxide into the atmosphere. In March 2010, the EPA released its final regulations on the
Renewable Fuels Standard Program, or RFS. We believe the EPA’s final RFS regulations grandfather the Keyes facility we operate at its current capacity,
however, compliance with future legislation may require us to take action unknown to us at this time that could be costly, and require the use of working capital,
which may or may not be available, preventing us from operating as planned, which may have a material adverse effect on our operations and cash flow.
A change in government policies may cause a decline in the demand for our products.
The domestic ethanol industry is highly dependent upon a myriad of federal and state regulations and legislation, and any changes in legislation or regulation
could adversely affect our results of operations and financial position. Other federal and state programs benefiting ethanol generally are subject to U.S.
government obligations under international trade agreements, including those under the World Trade Organization Agreement on Subsidies and Countervailing
Measures, and may be the subject of challenges, in whole or in part. Growth and demand for ethanol and biodiesel is largely driven by federal and state
government mandates or blending requirements, such as the Renewable Fuel Standard (RFS). Any change in government policies could have a material
adverse effect our business and the results of our operations.
Ethanol can be imported into the United States duty-free from some countries, which may undermine the domestic ethanol industry. Production costs for ethanol
in these countries can be significantly less than in the United States and the import of lower price or lower carbon value ethanol from these countries may reduce
the demand for domestic ethanol and depress the price at which we sell our ethanol.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Waivers of the RFS minimum levels of renewable fuels included in gasoline could have a material adverse effect on our results of operations. Under the Energy
Policy Act, the U.S. Department of Energy, in consultation with the Secretary of Agriculture and the Secretary of Energy, may waive the renewable fuels
mandate with respect to one or more states if the Administrator of the EPA determines that implementing the requirements would severely harm the economy or
the environment of a state, a region or the nation, or that there is inadequate supply to meet the requirement. Any waiver of the RFS with respect to one or
more states would reduce demand for ethanol and could cause our results of operations to decline and our financial condition to suffer.
We may encounter unanticipated difficulties in converting the Keyes plant to accommodate alternative feedstocks, new chemicals used in
the fermentation and distillation process or new mechanical production equipment.
In order to improve the operations of the Keyes plant and execute on our business plan, we intend to modify the Keyes plant to accommodate alternative
feedstocks and new chemical and/or mechanical production processes. We may not be able to successfully implement these modifications, and they may not
function as we expect them to. These modifications may cost significantly more to complete than our estimates. The Keyes plant may not operate at nameplate
capacity once the changes are complete. If any of these risks materialize, they could have a material adverse impact on our results of operation and financial
position.
We may be subject to liabilities and losses that may not be covered by insurance.
Our employees and facilities are subject to the hazards associated with producing ethanol and biodiesel. Operating hazards can cause personal injury and loss
of life, damage to, or destruction of, property, plant and equipment and environmental damage. We maintain insurance coverage in amounts and against the
risks that we believe are consistent with industry practice. However, we could sustain losses for uninsurable or uninsured risks, or in amounts in excess of
existing insurance coverage. Events that result in significant personal injury or damage to our property or to property owned by third parties or other losses that
are not fully covered by insurance could have a material adverse effect on our results of operations and financial position.
Insurance liabilities are difficult to assess and quantify due to unknown factors, including the severity of an injury, the determination of our liability in proportion to
other parties, the number of incidents not reported and the effectiveness of our safety program. If we were to experience insurance claims or costs above our
coverage limits or that are not covered by our insurance, we might be required to use working capital to satisfy these claims rather than to maintain or expand
our operations. To the extent that we experience a material increase in the frequency or severity of accidents or workers’ compensation claims, or unfavorable
developments on existing claims, our operating results and financial condition could be materially and adversely affected.
Our success depends in part on recruiting and retaining key personnel and, if we fail to do so, it may be more difficult for us to execute our
business strategy.
Our success depends on our continued ability to attract, retain and motivate highly qualified management, manufacturing and scientific personnel, in particular
our Chairman and Chief Executive Officer, Eric McAfee. We do not maintain any key person insurance. Competition for qualified personnel in the renewable fuel
and bio-chemicals manufacturing fields is intense. Our future success will depend on, among other factors, our ability to retain our current key personnel and
attract and retain qualified future key personnel, particularly executive management. Failure to attract or retain key personnel could have a material adverse
effect on our business and results of operations.
Our operations subject us to risks associated with foreign laws, policies, regulations, and markets.
Our sales and manufacturing operations in foreign countries are subject to the laws, policies, regulations, and markets of the countries in which we operate. As a
result, our foreign manufacturing operations and sales are subject to inherent risks associated with the countries in which we operate. Risks involving our foreign
operations include differences or unexpected changes in regulatory requirements, political and economic instability, terrorism and civil unrest, work stoppages or
strikes, natural disasters, interruptions in transportation, restrictions on the export or import of technology, difficulties in staffing and managing international
operations, variations in tariffs, quotas, taxes, and other market barriers, longer payment cycles, changes in economic conditions in the international markets in
which our products are sold, and greater fluctuations in sales to customers in developing countries. If we are unable to effectively manage the risks associated
with our foreign operations, our business may experience a material adverse effect on the results of our operations or financial condition.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act.
Our operations in countries outside the United States, including our operations in India, are subject to anti-corruption laws and regulations, including restrictions
imposed by the U.S. Foreign Corrupt Practices Act (the “FCPA”). The FCPA and similar anti-corruption laws in other jurisdictions generally prohibit companies
and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. We operate in parts of the
world that have experienced governmental corruption to some degree and, in certain circumstances; strict compliance with anti-corruption laws may conflict with
local customs and practices.
Our employees and agents interact with government officials on our behalf, including interactions necessary to obtain licenses and other regulatory approvals
necessary to operate our business. These interactions create a risk that actions may occur that could violate the FCPA or other similar laws.
Although we have policies and procedures designed to promote compliance with local laws and regulations as well as U.S. laws and regulations, including the
FCPA, there can be no assurance that all of our employees, consultants, contractors and agents will abide by our policies. If we are found to be liable for
violations of the FCPA or similar anti-corruption laws in other jurisdictions, either due to our own acts or out of inadvertence, or due to the acts or inadvertence of
others, we could suffer from criminal or civil penalties which could have a material and adverse effect on our results of operations, financial condition and cash
flows.
A substantial portion of our assets and operations are located in India, and we are subject to regulatory, economic and political uncertainties
in India.
Certain of our principal operating subsidiaries are incorporated in India, and a substantial portion of our assets are located in India. We intend to continue to
develop and expand our facilities in India. The Indian government has exercised and continues to exercise significant influence over many aspects of the Indian
economy. India’s government has traditionally maintained an artificially low price for certain commodities, including diesel fuel, through subsidies, but has
recently begun to reduce such subsidies, which benefits us. We cannot assure you that liberalization policies will continue. Various factors, such as changes in
the current federal government, could trigger significant changes in India’s economic liberalization and deregulation policies and disrupt business and economic
conditions in India generally and our business in particular. Our financial performance may be adversely affected by general economic conditions and economic
and fiscal policy in India, including changes in exchange rates and controls, interest rates and taxation policies, as well as social stability and political, economic
or diplomatic developments affecting India in the future.
Currency fluctuations between the Indian Rupee and the U.S. dollar could have a material adverse effect on our results of operations.
A substantial portion of our revenues are denominated in Rupees. We report our financial results in U.S. dollars. The exchange rates between the Rupee and the
U.S. dollar have changed substantially in recent years and may fluctuate substantially in the future. We do not currently engage in any formal currency hedging
of our foreign currency exposure, and our results of operations may be adversely affected if the Rupee fluctuates significantly against the U.S. dollar.
We are a holding company and there are significant limitations on our ability to receive distributions from our subsidiaries.
We conduct substantially all of our operations through subsidiaries and are dependent on cash distributions, dividends or other intercompany transfers of funds
from our subsidiaries to finance our operations. Our subsidiaries have not made significant distributions to us and may not have funds available for dividends or
distributions in the future. The ability of our subsidiaries to transfer funds to us will be dependent upon their respective abilities to achieve sufficient cash flows
after satisfying their respective cash requirements, including subsidiary-level debt service on their respective credit agreements. Our current credit agreement,
the Third Eye Capital Note Purchase Agreement, as amended from time to time, described in the Notes to Consolidated Condensed Financial Statements,
requires us to obtain the prior consent of Third Eye Capital, as the Administrative Agent of the Note holders, to make cash distributions or any intercompany fund
transfers. The ability of our Indian operating subsidiary to transfer funds to us is restricted by Indian laws and may be adversely affected by U.S. federal income
tax laws. Under Indian laws, our capital contributions, or future capital contributions, to our Indian operation cannot be remitted back to the U.S. Remittance of
funds by our Indian subsidiary to us may subject us to significant tax liabilities under U.S. federal income tax laws.
Our Chief Executive Officer has outside business interests that could require time and attention.
Eric McAfee, our Chairman and Chief Executive Officer, has outside business interests which include his ownership of McAfee Capital. Although Mr. McAfee’s
employment agreement requires that he devote reasonable business efforts to our company and prohibits him from engaging in any competitive employment,
occupational and consulting services, this agreement also permits him to devote time to his outside business interests consistent with past practice. As a result,
these outside business interests could interfere with Mr. McAfee’s ability to devote time to our business and affairs.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Our business may be subject to natural forces beyond our control.
Earthquakes, floods, droughts, tsunamis, and other unfavorable weather conditions may affect our operations. Natural catastrophes may have a detrimental
effect on our supply and distribution channels, causing a delay or preventing of our receipt of raw materials from our suppliers or delivery of finished goods to our
customers. In addition, weather conditions may adversely impact the planting, growth, harvest, storage, and general availability of any number of the products
we may process at our facilities or sell to our customers. The severity of these occurrences, should they ever occur, will determine the extent to which and if our
business is materially and adversely affected.
Our ability to utilize our NOL carryforwards may be limited.
Under the Internal Revenue Code of 1986, as amended (the “Code”), a corporation is generally allowed a deduction in any taxable year for net operating losses
(“NOL”) carried over from prior taxable years. As of December 31, 2016, we had U.S. federal NOL carryforwards of approximately $161.0 million and state NOL
carryforwards of approximately $154.0 million. The federal and state net operating loss and other tax credit carryforwards expire on various dates between 2027
and 2036.
Our ability to deduct these NOL carryforwards against future taxable income could be limited if we experience an "ownership change," as defined in Section 382
of the Code. In general, an ownership change may result from one or more transactions increasing the aggregate ownership of certain persons (or groups of
persons) in our stock by more than 50 percentage points over a testing period (generally three years). Future direct or indirect changes in the ownership of our
stock, including sales or acquisitions of our stock by certain stockholders and purchases and issuances of our stock by us, some of which are not in our control,
could result in an ownership change. Any resulting limitation on the use of our NOL carryforwards could result in the payment of taxes above the amounts
currently estimated and could have a negative effect on our future results of operations and financial position.
Non-U.S. stockholders of our common stock, in certain situations, could be subject to U.S. federal income tax on the gain from the sale,
exchange or other disposition of our common stock.
Our ethanol plant in Keyes, California (which constitutes a U.S. real property interest for purposes of determining whether we are a U.S. real property holding
corporation (a “USRPHC”) under the Foreign Investment in Real Property Tax Act (“FIRPTA”)), currently accounts for a significant portion of our assets. The
value of our plant in Keyes, California relative to our real property located outside of the United States and other assets used in our trade or business may be
uncertain and may fluctuate over time. Therefore, we may be, now or at any time while a non-U.S. stockholder owns our common stock, a USRPHC. If we are a
USRPHC, certain non-U.S. stockholders may be subject to U.S. federal income tax on gain on the disposition of our stock under FIRPTA, in which case such
non-U.S. stockholders would also be required to file U.S. federal income tax returns with respect to such gain. Whether the FIRPTA provisions apply depends on
the amount of our stock that a non-U.S. stockholder owns and whether, at the time it disposes of our common stock, such common stock is regularly traded on
an established securities market within the meaning of the applicable U.S. Treasury regulations. Non-U.S. stockholders should consult with their own tax advisors
concerning the U.S. federal income tax consequences of the sale, exchange or other disposition of our common stock.
We are subject to covenants and other operating restrictions under the terms of our debt, which may restrict our ability to engage in some
business transactions.
Our debt facilities contain covenants restricting our ability, among others, to:
● incur additional debt;
● make certain capital expenditures;
● incur or permit liens to exist;
● enter into transactions with affiliates;
● guarantee the debt of other entities, including joint ventures;
● pay dividends;
● merge or consolidate or otherwise combine with another company; and
● transfer, sell or lease our assets.
These restrictions may limit our ability to engage in business transactions that may be beneficial to us, or may restrict our ability to execute our business plan.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Operational difficulties at our facilities may negatively impact our business.
Our operations may experience unscheduled downtimes due to technical or structural failure, political and economic instability, terrorism and civil unrest, natural
disasters, and other operational hazards inherent to our operations. These hazards may cause personal injury or loss of life, severe damage to or destruction of
property, equipment, or the environment, and may result in the suspension of operations or the imposition of civil or criminal penalties. Our insurance may not
be adequate to cover such potential hazards and we may not be able to renew our insurance on commercially reasonable terms or at all. In addition, any
reduction in the yield or quality of the products we produce could negatively impact our ability to market our products. Any decrease in the quality, reduction in
volume, or cessation of our operations due to these hazards would have a material adverse effect on the results of our business and financial condition.
Our success depends on our ability to manage the growth of our operations.
Our strategy envisions a period of rapid growth that may impose a significant burden on our administrative and operational resources and personnel, which, if
not effectively managed, could impair our growth. The growth of our business will require significant investments of capital and management’s close attention. If
we are unable to successfully manage our growth, our sales may not increase commensurately with capital expenditures and investments. Our ability to
effectively manage our growth will require us to substantially expand the capabilities of our administrative and operational resources and to attract, train, manage
and retain qualified management, technicians and other personnel. In addition to our plans to adopt technologies that expand our operations and product
offerings at our biodiesel and ethanol plants, we may seek to enter into strategic business relationships with companies to expand our operations. If we are
unable to successfully manage our growth, we may be unable to achieve our business goals, which may have a material adverse effect on the results of our
operations and financial condition.
Our mergers, acquisitions, partnerships, and joint ventures may not be as beneficial as we anticipate.
We have increased our operations through mergers, acquisitions, partnerships and joint ventures and intend to continue to explore these opportunities in the
future. The anticipated benefits of these transactions may take longer to realize than expected, may never be fully realized, or even realized at all. Furthermore,
partnerships and joint ventures generally involve restrictive covenants on the parties involved, which may limit our ability to manage these agreements in a
manner that is in our best interest. Future mergers, acquisitions, partnerships, and joint ventures may involve the issuance of debt or equity, or a combination of
the two, as payment for or financing of the business or assets involved, which may dilute ownership interest in our business. Any failure to adequately evaluate
and address the risks of and execute on our mergers, acquisitions, partnerships, and joint ventures could have an adverse material effect on our business,
results of operations, and financial position. In connection with such acquisitions and strategic transactions, we may incur unanticipated expenses, fail to realize
anticipated benefits, have difficulty incorporating the acquired businesses, our management may become distracted from our core business, and we may disrupt
relationships with current and new employees, customers and vendors, incur significant debt, or have to delay or not proceed with announced transactions. The
occurrence of any of these events could have an adverse effect on our business.
EdenIQ’s attempt to terminate and failure to close the EdenIQ Merger, and litigation pertaining to the EdenIQ Merger, may negatively impact
our business and operations.
On August 31, 2016, the Company filed a lawsuit in Santa Clara County Superior Court against EdenIQ and its CEO, Brian D. Thome. The lawsuit is based on
EdenIQ’s wrongful termination of a merger agreement that would have effectuated the merger of the Company and EdenIQ (the EdenIQ Merger). The relief
sought includes specific performance of the merger agreement and monetary damages, as well as punitive damages, attorneys’ fees, and costs. We have
incurred and may continue to incur additional costs in connection with the prosecution of the currently pending, and any future, litigation relating to the EdenIQ
Merger. We believe that our lawsuit against EdenIQ is an enforcement of our rights under the Merger Agreement. We cannot predict the outcome of such
litigation. Such litigation may also create a distraction for our management team and board of directors and require time and attention. Any litigation relating to the
EdenIQ Merger or EdenIQ’s wrongful termination of and failure to close the EdenIQ Merger would adversely affect our ability to leverage EdenIQ’s technologies
for the development of additional advanced biofuels and renewable chemicals and could adversely impact our ability to execute our business plan and our
financial condition and results of operations.
Our business may be significantly disrupted upon the occurrence of a catastrophic event or cyberattack.
Our Keyes and Kakinada plants are highly automated and rely extensively on the availability of our network infrastructure and our internal technology systems.
The failure of our systems due to a catastrophic event, such as an earthquake, fire, flood, tsunami, weather event, telecommunications failure, power failure,
cyberattack or war, could adversely impact our business, financial results and financial condition. We have developed disaster recovery plans and maintain
backup systems in order to reduce the potential impact of a catastrophic event; however there can be no assurance that these plans and systems would enable
us to return to normal business operations.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
We may be unable to protect our intellectual property.
We rely on a combination of patents, trademarks, trade name, confidentiality agreements, and other contractual restrictions on disclosure to protect our
intellectual property rights. We also enter into confidentiality agreements with our employees, consultants, and corporate partners, and control access to and
distribution of our confidential information. These measures may not preclude the disclosure of our confidential or proprietary information. Despite efforts to
protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary information. Monitoring unauthorized use of
our confidential information is difficult, and we cannot be certain that the steps we have taken to prevent unauthorized use of our confidential information,
particularly in foreign countries where the laws may not protect proprietary rights as fully as in the U.S., will be effective.
Companies in our industry aggressively protect and pursue their intellectual property rights. From time to time, we receive notices from competitors and other
operating companies, as well as notices from “non-practicing entities,” or NPEs, that claim we have infringed upon, misappropriated or misused other parties’
proprietary rights. Our success and future revenue growth will depend, in part, on our ability to protect our intellectual property. It is possible that competitors or
other unauthorized third parties may obtain copy, use or disclose our technologies and processes, or confidential employee, customer or supplier data. Any of
our existing or future patents may be challenged, invalidated or circumvented.
We may not be able to successfully develop and commercialize our technologies, which may require us to curtail or cease our research and
development activities.
Since 2007, we have been developing patent-pending enzyme technology to enable the production of ethanol from a combination of starch and cellulose, or
from cellulose alone. In July 2011, we acquired Zymetis, Inc., a biochemical research and development firm, with several patents pending and in-process R&D
utilizing the Z-microbe™ to produce renewable chemicals and advanced fuels from renewable feedstocks. Although, the viability of our technology has been
demonstrated in the lab, there can be no assurance that we will be able to commercialize our technology. To date, we have not completed a large-scale
commercial prototype of our technology and are uncertain at this time when completion of a commercial scale prototype will occur. Commercialization risks
include economic financial feasibility at commercial scale, availability of funding to complete large-scale commercial prototype, ability of Z-microbeTM to function
at commercial scale and ability to obtain regulatory approvals, and market acceptance of product.
Risks related to ownership of our stock
If the trading price of our common stock fails to comply with the continued listing requirements of NASDAQ, we could face possible delisting.
NASDAQ delisting could materially adversely affect the market for our shares.
Since August 2016, our common stock has traded on The NASDAQ Capital Market at less than $2.00 per share. If at any time our common stock does not
maintain a minimum bid price of $1.00 per share for 30 consecutive days, as required by NASDAQ Listing Rule 5450(a)(1), then NASDAQ may provide written
notification regarding the delisting of our securities. At that time, we would have the right to request a hearing to appeal the NASDAQ determination.
We cannot be sure that our price will comply with the requirements for continued listing of our common shares on The NASDAQ Capital Market, or that any
appeal of a decision to delist our common shares will be successful. If our common shares lose their listed status on The NASDAQ Capital Market and we are
not successful in obtaining a listing on another exchange, our common shares would likely trade in the over-the-counter market.
If our shares were to trade on the over-the-counter market, selling our common shares could be more difficult because smaller quantities of shares would likely
be bought and sold, transactions could be delayed, and security analysts’ coverage of us may be reduced. In addition, in the event our common shares are
delisted, broker-dealers have certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in our common
shares, further limiting the liquidity thereof. These factors could result in lower prices and larger spreads in the bid and ask prices for common shares.
Future sales and issuances of rights to purchase common stock by us could result in additional dilution of the percentage ownership of our
stockholders and could cause our stock price to fall.
We may issue equity or convertible securities in the future. To the extent we do so, our stockholders may experience substantial dilution. We may sell common
stock, convertible securities, or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common
stock, convertible securities, or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales and new investors
could gain rights superior to our existing stockholders.
Our stock price is highly volatile, which could result in substantial losses for investors purchasing shares of our common stock and in
litigation against us.
The market price of our common stock has fluctuated significantly in the past and may continue to fluctuate significantly in the future. The market price of our
common stock may continue to fluctuate in response to one or more of the following factors, many of which are beyond our control:
● fluctuations in the market prices of ethanol and its co-products including WDG and corn oil;
● the cost of key inputs to the production of ethanol, including corn and natural gas;
● the volume and timing of the receipt of orders for ethanol from major customers;
● competitive pricing pressures;
● our ability to produce, sell and deliver ethanol on a cost-effective and timely basis;
● the announcement, introduction and market acceptance of one or more alternatives to ethanol;
● losses resulting from adjustments to the fair values of our outstanding warrants to purchase our common stock;
● changes in market valuations of companies similar to us;
● stock market price and volume fluctuations generally;
● regulatory developments or increased enforcement;
● fluctuations in our quarterly or annual operating results;
● additions or departures of key personnel;
● our inability to obtain financing; and
● our financing activities and future sales of our common stock or other securities.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Demand for ethanol could be adversely affected by a slowdown in overall demand for oxygenate and gasoline additive products. The levels of our ethanol
production and purchases for resale will be based upon forecasted demand. Accordingly, any inaccuracy in forecasting anticipated revenues and expenses
could adversely affect our business. The failure to receive anticipated orders or to complete delivery in any quarterly period could adversely affect our results of
operations for that period. Quarterly results are not necessarily indicative of future performance for any particular period, and we may not experience revenue
growth or profitability on a quarterly or an annual basis.
The price at which you purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. You may be unable to sell
your shares of common stock at or above your purchase price, which may result in substantial losses to you and which may include the complete loss of your
investment. In the past, securities class action litigation has often been brought against a company following periods of high stock price volatility. We may be the
target of similar litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and our resources away from our
business.
Any of the risks described above could have a material adverse effect on our results of operations or the price of our common stock, or both.
We do not intend to pay dividends.
We have not paid any cash dividends on any of our securities since inception and we do not anticipate paying any cash dividends on any of our securities in the
foreseeable future.
Our principal shareholders hold a substantial amount of our common stock.
Eric A. McAfee, our Chief Executive Officer and Chairman of the Board, and Laird Q. Cagan, a former board member, in the aggregate, beneficially own 24.3% of
our common stock outstanding. In addition, the other members of our Board of Directors and management, in the aggregate, excluding Eric McAfee, beneficially
own approximately 6.0% of our common stock. Our lender, Third Eye Capital, acting as principal and an agent, beneficially owns 9.1% of our common stock. As
a result, these shareholders, acting together, will be able to influence many matters requiring shareholder approval, including the election of directors and
approval of mergers and acquisitions and other significant corporate transactions. See “Security Ownership of Certain Beneficial Owners and
Management.” The interests of these shareholders may differ from yours and this concentration of ownership enables these shareholders to exercise influence
over many matters requiring shareholder approval, may have the effect of delaying, preventing or deterring a change in control, and could deprive you of an
opportunity to receive a premium for your securities as part of a sale of the company and may affect the market price of our securities.
The conversion of convertible securities and the exercise of outstanding options and warrants to purchase our common stock could
substantially dilute your investment and reduce the voting power of your shares, impede our ability to obtain additional financing and cause us to
incur additional expenses.
Our Series B convertible preferred stock is convertible into our common stock. As of December 31, 2016, there were 1.3 million shares of our Series B
convertible Preferred Stock outstanding, convertible into 130 thousand shares of our common stock on 10 to 1 ratio. Certain of our financing arrangements, such
as our EB-5 notes are convertible into shares of our common stock at fixed prices. Additionally, there are outstanding warrants and options to acquire our
common stock issued to employees, directors and others. As of December 31, 2016, there were outstanding warrants and options to purchase 2.0 million
shares of our common stock.
Such securities allow their holders an opportunity to profit from a rise in the market price of our common stock such that conversion of the securities will result in
dilution of the equity interests of our common stockholders. The terms on which we may obtain additional financing may be adversely affected by the existence
and potentially dilutive impact of our outstanding convertible and other promissory notes, Series B convertible preferred stock, options and warrants. In addition,
holders of our outstanding promissory notes and certain warrants have registration rights with respect to the common stock underlying those notes and warrants,
the registration of which involves substantial expense.
Item 1B. Unresolved Staff Comments
None.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Item 2. Properties
North America
Corporate Office. Our corporate headquarters are located at 20400 Stevens Creek Blvd., Suite 700, Cupertino, CA. The Cupertino facility office space consists
of 9,238 rentable square feet. We extended the lease in February 2015 for an additional five years ending on May 31, 2020. From July 2009 through July 2012,
we sublet office space consisting of 3,104 rentable square feet to Solargen, Inc., then from June 1, 2013 through December 31, 2016, we sublet office space
consisting of 3,104 rentable square feet to Splunk Inc., at a monthly rent rate equal to the rent charged to us by our landlord.
Ethanol Plant in Keyes, CA. On July 6, 2012, we acquired Cilion, Inc., including the Keyes plant. The Keyes plant is situated on approximately 11 acres of land
and contains 25,284 square feet of plant building and structures. The property is located next to Union Pacific rail road system to facilitate the transportation of
raw materials. Our tangible and intangible assets, including the Keyes plant, are subject to perfected first liens and mortgages as further described in Note 4.
Debt, of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
We productively utilize the majority of the space in these facilities.
India
Biodiesel Plant in Kakinada, India. The Kakinada plant is situated on approximately 32,000 square meters of land in Kakinada, India. The property is located
7.5 kilometers from the local seaport with connectivity through a third-party pipeline to the port jetty. The pipeline facilitates the importing of raw materials and
exporting finished product.
India Administrative Office. Our principal administrative, sales and marketing facilities are located in approximately 1,000 square feet of office space in
Hyderabad, India which we lease on a month to month rental arrangement.
We productively utilize the majority of the space in these facilities.
Item 3. Legal Proceedings
On August 31, 2016, the Company filed a lawsuit in Santa Clara County Superior Court against defendants EdenIQ, Inc. (EdenIQ) and its CEO, Brian D. Thome
and Trinity Capital Investments (Trinity). The lawsuit is based on EdenIQ’s wrongful termination of a merger agreement that would have effectuated the merger
of the Company and EdenIQ. The lawsuit also asserts that EdenIQ and Mr. Thome fraudulently induced the Company into assisting EdenIQ to obtain EPA
approval for a new technology, which the Company would not have done but for the merger agreement. The relief sought includes EdenIQ’s specific
performance of the merger agreement and monetary damages, as well as punitive damages, attorneys’ fees, and costs.
On August 4, 2013, GS Cleantech Corporation, a subsidiary of Greenshift Corporation (“Greenshift”), filed a complaint in the United States District Court for the
Eastern District of California – Fresno Division against us and our subsidiary, AAFK. The case was transferred to the Southern District of Indiana and joined to a
pending Multidistrict Litigation. The complaint alleges infringement of patent rights assigned to Greenshift and pertaining to corn oil extraction processes we
employ and seeks royalties, treble damages, attorney’s fees, and injunctions precluding us from further infringement. The corn oil extraction process we use is
licensed to us by Valicor Separation Technologies LLC. Valicor has no obligations to indemnify us. On October 23, 2014, the Court ruled that all the claims of all
the patents at issue in the case are invalid and, therefore, not infringed and adopted this finding in our case on January 16, 2015. GS Cleantech has said it will
appeal this decision when the remaining claim in the suit has been decided. We believe the likelihood of Greenshift succeeding on appeal of the invalidity
findings is small since the Court’s findings included several grounds for invalidity of each allegedly infringed patent. If Greenshift successfully appeals the
findings of invalidity, damages may be $1 million or more. The suit also alleged that GS Cleantech obtained the patents at issue by inequitably conducting itself
before the United States Patent Office. A trial in the District Court for the Southern District of Indiana on that issue was concluded and the Court found the
patents unenforceable because of inequitable conduct by GS Cleantech and its counsel before the Patent and Trademark Office. GS Cleantech has asked the
Court to reconsider its decision, citing the existence of a recently issued patent that the patent examiner allowed despite the Court’s findings and the allowance of
which the Court did not consider when making its decision of inequitable conduct. GS Cleantech has indicated it will appeal the current ruling on inequitable
conduct if the Court’s reconsideration does not result in a change in its findings. The Court’s reconsideration has been stayed until April 10, 2017.
Item 4. Mine Safety Disclosures.
Not Applicable.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on the NASDAQ Stock Market under the symbol “AMTX.” Prior to trading on NASDAQ, between November 15, 2011 and June 5,
2014 our common stock was traded on the OTC Bulletin Board under the symbol “AMTX.” Between December 7, 2007 and November 15, 2011, our common
stock traded on the OTC Bulletin Board under the symbol “AEBF.” Prior to December 7, 2007, our common stock traded on the OTC Bulletin Board under the
symbol “MWII.”
The following table sets forth the high and low sale prices of our common stock for the quarterly reporting periods indicated:
Quarter Ending
2016
December 31,
September 30,
June 30,
March 31,
2015
December 31,
September 30,
June 30,
March 31,
Shareholders of Record
High
Low
$
$
$
$
$
$
$
$
1.98
2.31
2.94
2.83
3.05
3.89
5.05
6.18
$
$
$
$
$
$
$
$
1.09
1.01
1.70
1.51
1.80
2.35
3.60
3.39
According to the records of our transfer agent, we had 410 stockholders of record as of February 21, 2017. This figure does not include "street name" holders or
beneficial holders of our common stock whose shares are held of record by banks, brokers and other financial institutions.
Dividends
We have never declared or paid any cash dividends on our common stock. We currently expect to retain any future earnings for use in the operation and
expansion of its business and to reduce its outstanding debt and do not anticipate paying any cash dividends in the foreseeable future. Information with respect
to restrictions on paying dividends is set forth in Note 4. Debt of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
Securities Authorized For Issuance under Equity Compensation Plans
Our shareholders approved our Second Amended and Restated 2007 Stock Plan (“2007 Stock Plan”) at our 2015 Annual Shareholders Meeting. On July 1,
2011, we acquired the Zymetis 2006 Stock Plan (“2006 Stock Plan”) pursuant to the acquisition of Zymetis, Inc. and gave Zymetis option holders the right to
convert shares into our common stock at the same terms as the 2006 Plan. During 2015, we established an Equity Inducement Plan pursuant to which 100,000
shares were made available specifically to attract human talent. Additional information regarding the 2007 Stock Plan, 2006 Stock Plan and other compensatory
warrants may be found under the caption “Equity Compensation Plans,” in the Proxy Statement, which is hereby incorporated by reference.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Sales of Unregistered Equity Securities
None.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated
financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
●
●
●
●
Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of
MD&A.
Results of Operations. An analysis of our financial results comparing the twelve months ended December 31, 2016 and 2015.
Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition.
Critical Accounting Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated
in our reported financial results and forecasts.
The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes included elsewhere in this
report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from
those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in
this Report, particularly under “Part I, Item 1A. Risk Factors,” and in other reports we file with the SEC. All references to years relate to the calendar year ended
December 31 of the particular year.
Overview
We are an advanced renewable fuels and biochemicals company focused on the acquisition, development and commercialization of innovative technologies that
replace traditional petroleum-based products by converting first generation biofuel plants into advanced biorefineries. Founded in 2006, we own and operate a
60 million gallon per year ethanol production facility (Keyes plant) in California’s Central Valley, where we manufacture and produce denatured fuel ethanol,
WDG, DCO and CDS, or syrup, and a 50 million gallon per year renewable chemical and advanced fuel production facility on the East Coast of India (Kakinada
plant), where we manufacture and produce high quality distilled biodiesel and refined glycerin. In addition, we are continuing to operate a research and
development laboratory at the Maryland Biotech Center, and hold a portfolio of patents and related technology licenses for the production of renewable fuels and
biochemicals.
We continue to evaluate the acquisition of businesses and the licensing of technologies that expand the transition of traditional biofuels plants to the production
of valuable advanced biofuels. During the second quarter of 2016, we announced the entry into an agreement to acquire EdenIQ, Inc., a cellulosic ethanol
technology company. Acquiring EdenIQ would extend our ethanol capabilities into cellulosic ethanol by providing capital light and operationally efficient solutions
that can be easily integrated into existing corn ethanol plants. Using our position as a producer of ethanol and biodiesel, we are also focused on the licensing of
technology and the development of capabilities that allow for the production of advanced biofuels at facilities located at or near our current plants.
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North America
We produce four products at the Keyes plant: denatured fuel ethanol, WDG, DCO and CDS. In 2016, we sold 100% of the ethanol and WDG we produced to
J.D. Heiskell pursuant to a Purchase Agreement established with J.D. Heiskell. DCO was sold to J.D. Heiskell and other local animal feedlots (primarily poultry).
Small amounts of CDS were sold to various local third parties. Ethanol pricing is determined pursuant to a marketing agreement between us and Kinergy, and is
generally based on daily and monthly pricing for ethanol delivered to the San Francisco Bay Area, California, as published by OPIS, as well as quarterly contracts
negotiated by Kinergy with local fuel blenders. The price for WDG is determined monthly pursuant to a marketing agreement between A.L. Gilbert and us, and is
generally determined in reference to the price of DDG and corn. North American revenue is dependent on the price of ethanol and WDG. Ethanol pricing is
influenced by national inventory levels, national ethanol production, corn prices and gasoline demand. WDG is influenced by the price of corn, the supply of DDG,
and demand from the local dairy and feed markets. Our revenue is further influenced by our decision to operate the Keyes plant at any capacity level,
maintenance requirements, and the influences of the underlying biological processes. During 2016, the most significant factors impacting revenue were the price
received for ethanol and the price received for WDG.
India
During the twelve months ended December 31, 2016 and 2015, we operated the Kakinada plant. However, our India operations were constrained by funds
available from our working capital partner, the State Bank of India loan repayments, and by the volatility of feedstock prices.
The India segment has benefited from several recent governmental policy changes beginning in October 2014 with the deregulation of diesel and the related
removal of government subsidies that artificially lowered the price of diesel below the world oil price. In August 2015, a policy change occurred that allowed for
the sale of transportation fuel to bulk sales customers which further opened the markets. In October 2015, a policy change occurred that exempted biodiesel
feedstock and chemicals used in the manufacture of biodiesel from central excise duty, including palm stearin, methanol and sodium methoxide. This policy
change had a positive effect on the development of the markets for biodiesel products domestically. In 2016, European biofuel-related import tariffs on goods
from India were removed for approximately three years starting in 2017. This policy change is expected to have a positive effect on exports of our high quality
distilled biodiesel into the European market at better margins.
North America Segment
Revenue
Substantially all of our North America revenues during the years ended December 31, 2016 and 2015 were from sales of ethanol and WDG. During the twelve
months ended December 31, 2016 and 2015, we produced and sold 55.6 million gallons and 55.8 million gallons of ethanol and 372 thousand tons and 360
thousand tons of WDG, respectively.
Cost of Goods Sold
Substantially all of our feedstock is procured by J.D. Heiskell. Our cost of feedstock includes rail, truck, or ship transportation, local basis costs and a handling
fee paid to J.D. Heiskell. Cost of goods sold also includes chemicals, plant overhead and out bound transportation. Plant overhead includes direct and indirect
costs associated with the operation of the Keyes plant, including the cost of electricity and natural gas, maintenance, insurance, direct labor, depreciation and
freight. Transportation includes the costs of in-bound delivery of corn by rail, inbound delivery of milo by ship, rail, and truck, and out-bound shipments of ethanol
and WDG by truck. In 2016, the transportation cost for ethanol and WDG was approximately $0.05 per gallon and $7.50 per ton, respectively.
Pursuant to a Corn Procurement and Working Capital Agreement with J.D. Heiskell, we purchase all of our corn and milo from J.D. Heiskell. Title to the corn or
milo passes to us when the corn is deposited into our weigh bin and entered into the production process. The credit term of the corn or milo purchased from J.D.
Heiskell is five days. J.D. Heiskell purchases our ethanol and WDG on one-day terms. The price of corn is established by J.D Heiskell based on Chicago Board
of Trade pricing including transportation and basis, plus a handling fee.
Sales, Marketing and General Administrative Expenses (SG&A)
SG&A expenses consist of employee compensation, professional services, travel, depreciation, taxes, insurance, rent and utilities, license and permit fees,
penalties, and sales and marketing fees. Our single largest expense is employee compensation, including related stock compensation, followed by sales and
marketing fees paid in connection with the marketing and sale of ethanol and WDG.
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In October 2010, we entered into an exclusive marketing agreement with Kinergy to market and sell our ethanol and an agreement with A.L. Gilbert to market
and sell our WDG. The agreements expire on August 31, 2017 and December 31, 2017, respectively, and are automatically renewed for additional one-year
terms. Pursuant to these agreements, our marketing costs for ethanol and WDG are less than 2% of sales.
Research and Development Expenses (R&D)
In 2016 and 2015, substantially all of our R&D expenses were related to research and development activities in Maryland.
India Segment
Revenue
Substantially all of our India segment revenues during the years ended December 31, 2016 and 2015 were from sales of biodiesel and refined glycerin. During
the twelve months ended December 31, 2016, we sold 16.0 thousand metric tons of biodiesel and 4.4 thousand metric tons of refined glycerin. During the
twelve months ended December 31, 2015, we sold 19.5 thousand metric tons of biodiesel and 4.7 thousand metric tons of refined glycerin. During 2014, we
completed upgrades to the Kakinada plant for the distillation of biodiesel and testing of waste fats and oils for the production of distilled biodiesel for sales into
international markets.
Cost of Goods Sold
Cost of goods sold consists primarily of feedstock oil, chemicals, direct costs (principally labor and labor related costs) and factory overhead. Depending upon
the costs of these inputs in comparison to the sales price of biodiesel and glycerin, our gross margins at any given time can vary from positive to
negative. Factory overhead includes direct and indirect costs associated with the Kakinada plant, including the cost of repairs and maintenance, consumables,
maintenance, on-site security, insurance, depreciation and inbound freight.
We purchase NRPO, a non-edible feedstock, for our biodiesel unit from neighboring natural oil processing plants at a discount to refined palm oil. In addition, we
purchase waste fats and oils from other processing plants in India. Raw material is received by truck and title passes when the goods are loaded at our vendors’
facilities. Credit terms vary by vendor; however, we generally receive 15 days of credit on the purchases. We purchase crude glycerin in the international market
on letters of credit or advance payment terms.
Sales, Marketing and General Administrative Expenses (SG&A)
SG&A expenses consist of employee compensation, professional services, travel, depreciation, taxes, insurance, rent and utilities, licenses and permits,
penalties, and sales and marketing fees. Pursuant to an operating agreement with Secunderabad Oils Limited, we receive operational support and working
capital. We compensate Secunderabad Oils Limited with a percentage of the profits generated from operations. Payments of interest are identified as interest
income while payments of profits are identified as compensation for the operational support component of this agreement. We therefore include the portion of
profits paid to Secunderabad Oils Limited as a component of SG&A and our SG&A component will vary based on the profits earned by operations. In addition,
we market our biodiesel and glycerin through our internal sales staff, commissioned agents and brokers. Commissions paid to agents are included as a
component of SG&A.
Research and Development Expenses (R&D)
Our India segment has no research and development activities.
Results of Operations
Year Ended December 31, 2016 Compared to Year Ended December 31, 2015
Revenues
Our revenues are derived primarily from sales of ethanol and WDG in North America and biodiesel and refined glycerin in India.
Fiscal Year Ended December 31 (in thousands)
North America
India
Total
2016
2015
Inc/(dec)
% change
$
128,706
14,452
$
129,408
17,241
$
(702)
(2,789)
$
143,158
$
146,649
$
(3,491)
-1%
-16%
-2%
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North America. The average price of ethanol increased by 2% to $1.78 for the year ended December 31, 2016 compared to $1.74 per gallon in the year ended
December 31, 2015 while the ethanol sales volume slightly decreased to 55.6 million gallons during the year ended December 31, 2016 compared to 55.8 million
gallons during the year ended December 31, 2015. The slight decrease in revenues in North America segment for the year ended December 31, 2016 reflects a
decrease in average WDG price by 11% to $70.61 per ton in the year ended December 31, 2016 compared to $79.68 in the year ended December 31, 2015,
partially offset by an increase in WDG sales volume by 3% to 372 thousand tons. For the year ended December 31, 2016, we generated approximately 77% of
revenues from sales of ethanol, and 20% of revenues from sales of WDG and 3% of revenues from DCO and CDS sales compared to 75% of revenues from
sales of ethanol, and 22% of revenues from sales of WDG and 3% of revenues from DCO and CDS sales for the year ended December 31, 2015. For the year
ended December 31, 2016 and 2015, the Keyes plant operations averaged 101% of 55 million gallon per year nameplate capacity.
India. The decrease in revenues in the India segment for the year ended December 31, 2016 reflects a decrease in sales volume of biodiesel and refined
glycerin. Biodiesel sales volume decreased by 18% to 16.1 thousand tons due to higher feedstock costs and lower production due to capital constraints while the
average price slightly increased by 2% to $739 per metric ton. Refined glycerin sales volume decreased by 5% to 4.4 thousand tons while the average price per
metric ton also decreased by 13% to $582 per metric ton. For the year ended December 31, 2016 and 2015, we generated approximately 82% of revenue from
sales of biodiesel (methyl ester), and 18% of revenue from sales of glycerin.
Cost of Goods Sold
North America
India
Total
Fiscal Year Ended December 31 (in thousands)
2016
2015
Inc/(dec)
% change
$
117,040
14,519
$
126,290
16,160
$
(9,250)
(1,641)
$
131,559
$
142,450
$
(10,891)
-7%
-10%
-8%
North America. We ground 19.5 million bushels of corn which allowed us to operate the Keyes plant at nearly its full plant capacity during the year ended
December 31, 2016 and 2015. Our cost of feedstock on a per bushel basis decreased by 9% to $4.58 per bushel for the year ended December 31, 2016 as
compared to 2015.
India. The decrease in cost of goods sold reflects the 16% decrease in sales of biodiesel and refined glycerin in 2016. The cost of NRPO feedstock increased
an average of 28% to $529 per metric ton while the volume decreased by 32% to 13.8 thousand metric tons of NRPO and waste oils and fats compared to the
year ended December 31, 2015. The average price of crude glycerin decreased by 28% to $418 per metric ton while the volume increased by 8% to 4.3
thousand metric tons compared to the year ended December 31, 2015.
Gross Profit
North America
India
Total
Fiscal Year Ended December 31 (in thousands)
2016
2015
Inc/(dec)
% change
$
11,666
(67)
$
$
3,118
1,081
8,548
(1,148)
$
11,599
$
4,199
$
7,400
274%
-106%
176%
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
North America. Gross profit increased by 274% in the year ended December 31, 2016 due to decreases in feedstock costs by 9% and the usage of milo which
allowed us to receive grant income.
India. The decrease in gross profit was attributable mainly to our feedstock costs which averaged overall 62% of the revenues causing the decrease of 16% in
overall revenues in the year ended December 31, 2016 compared to the year ended December 31, 2015. Overall sales volume decreased by 15% to 20.5
metric tons while the average feedstock cost increased by 14% to $503 per metric ton.
Operating Expenses
R&D
North America
India
Total
Fiscal Year Ended December 31 (in thousands)
2016
2015
Inc/(dec)
% change
$
$
$
369
-
$
447
-
369
$
447
$
(78)
-
(78)
-17%
0%
-17%
R&D expenses decreased by 17% during the year ended December 31, 2016 due to decreases in salaries of $30 thousand and professional and other fees of
$48 thousand.
SG&A
North America
India
Total
Fiscal Year Ended December 31 (in thousands)
2016
2015
Inc/(dec)
% change
$
10,912
1,099
$
11,162
1,199
$
$
12,011
$
12,361
$
(250)
(100)
(350)
-2%
-8%
-3%
Selling, General and Administrative Expenses (SG&A). SG&A expenses consist primarily of salaries and related expenses for employees, marketing expenses
related to sales of ethanol and WDG in North America and biodiesel and other products in India, as well as professional fees, other corporate expenses, and
related facilities expenses.
North America. SG&A expenses as a percentage of revenue in the year ended December 31, 2016 decreased to 8% as compared to 9% in the year ended
December 31, 2015. The slight decrease in overall SG&A expenses in the year ended December 31, 2016 was primarily attributable to: (i) decrease in
professional fees of $0.7 million, (ii) decrease in salary and stock compensation expenses of $0.2 million, offset by (iii) $0.6 million increase in taxes and utilities
and office supplies and services, (iv) increase in marketing and travel of $0.1 million during year ended December 31, 2016.
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India. SG&A expenses as a percentage of revenue in the year ended December 31, 2016 increased slightly to 8% as compared to 7% in the year ended
December 31, 2015. The overall SG&A expense decreased by 8% in the year ended December 31, 2016 compared to the year ended December 31, 2015. The
decrease was due to a decrease in plant services, utilities, and professional fees by $0.1 million and marketing and other expenses by $0.1 million, offset by an
increase in salaries by $0.1 million.
Other Income/Expense
Fiscal Year Ended December 31 (in thousands)
2016
2015
Inc/(dec)
% change
North America
Interest rate expense
Amortization expense
Loss on debt extinguishment
Loss on impairment of goodwill and intangible assets
Other (income) expense
India
Interest rate expense
Gain on debt extinguishment
Other (income)
$
$
11,234
5,723
-
-
(254)
259
(2,033)
(80)
$
9,308
6,715
330
1,044
349
856
-
(79)
1,926
(992)
(330)
(1,044)
(603)
(597)
(2,033)
(1)
Total
$
14,849
$
18,523
$
(3,674)
21%
-15%
-100%
100%
-173%
-70%
-100%
-1%
-20%
Other (Income)/Expense. Other (income) expense consists primarily of interest, amortization and extinguishment expense attributable to debt facilities acquired
by our parent company and our subsidiaries, and interest accrued on the judgments obtained by Cordillera Fund and The Industrial Company. The debt facilities
include stock or warrants issued as fees. The fair value of stock and warrants are amortized as amortization expense, except when the extinguishment
accounting method is applied, in which case refinanced debt costs are recorded as extinguishment expense.
North America. Interest expense was higher in the year ended December 31, 2016 due to higher debt balances in 2016. The decrease in amortization expense
was due to the amortization of several amendment fees under the Third Eye Capital Notes and Subordinated Note refinancing fees added in 2015, offset by debt
issuance costs associated with the amendment and refinancing of Subordinated Notes in 2016. The debt extinguishment costs were lower in the year ended
December 31, 2016 than in the corresponding period of 2015 as extinguishment accounting was not applied to two Subordinated Notes with two accredited
investors in the 2016 period compared to the extinguishment accounting that was applied once to Subordinated Notes that were refinanced in the 2015
period. The increase in other income in the year ended December 31, 2016 was due to receipt of $0.5 million from a mandated gas credit from PG&E offset by
amortization of debt guarantee fee in the first three months of 2016 compared to increases in expenses due to amortization of a debt guarantee fee in 2015.
India. Interest expense decreased as a result of the payoff of the State Bank of India loan during the year ended December 31, 2016 and principal and interest
payments of $5.0 million on working capital loan. The gain on debt extinguishment was caused by the relief of $2.0 million of accrued interest on State Bank of
India loan by paying the final stipulated amount under the One Time Settlement sanction letter on October 20, 2016. The slight increase in other income was
caused by other miscellaneous income and foreign exchange gains during the year ended December 31, 2016.
Liquidity and Capital Resources
Cash and Cash Equivalents
Cash and cash equivalents were $1.5 million at December 31, 2016, of which $1.0 million was held in North America and $0.5 million was held in our Indian
subsidiary. Our current ratio was 0.26 and 0.27, respectively, at December 31, 2016 and 2015. We expect that our future available capital resources will consist
primarily of cash generated from operations, remaining cash balances, EB-5 program borrowings, amounts available for borrowing, if any, under our senior debt
facilities and our subordinated debt facilities, and any additional funds raised through sales of equity.
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Liquidity
Cash and cash equivalents, current assets, current liabilities and debt at the end of each period were as follows (in thousands):
Cash and cash equivalents
Current assets (including cash, cash equivalents, and deposits)
Current and long term liabilities (excluding all debt)
Current & long term debt
December 31,
2016
December 31,
2015
$
$
1,486
7,045
15,909
111,714
283
8,002
15,296
100,895
Our principal sources of liquidity have been cash provided by operations and borrowings under various debt arrangements. During the year ended December 31,
2016, $10.5 million in funding from the EB-5 program was released to our subsidiary, AE Advanced Fuels, Inc.; additionally, the EB-5 escrow account is holding
funds from two investors pending approval by the USCIS. These funds represent $1.0 million of funding that is expected to be released from the escrow account
early 2017. On October 16, 2016, we launched a new $50.0 million EB-5 Phase II funding, issuing EB-5 Notes on the same terms and conditions as those
issued under our EB-5 Phase I funding. Our principal uses of cash have been to service indebtedness and capital expenditures. We anticipate these uses will
continue to be our principal uses of cash in the future. Global financial and credit markets have been volatile in recent years, and future adverse conditions of
these markets could negatively affect our ability to secure funds or raise capital at a reasonable cost or at all. For additional discussion of our various debt
arrangements see Note 4.Debt of the Notes to Consolidated Financial Statements in Part IV of this Form 10-K.
We operate in a volatile market in which we have little control over the major components of production costs and product revenues. As such, we expect cash
provided by operating activities to fluctuate in future periods primarily as a result of changes in the prices for corn, ethanol, WDG, DCO, CDS, biodiesel, waste
fats and oils, NPRO and natural gas. To the extent that we experience periods in which the spread between ethanol prices and corn and energy costs narrow or
the spread between biodiesel prices and waste fats and oils or palm oil and energy costs narrow, we may require additional working capital to fund operations.
Management believes that through: (i) operating the Keyes plant, (ii) continuing to incorporate lower-cost, non-food advanced biofuels feedstock at the Keyes
plant when economical, thereby increasing operating margins, (iii) obtaining the remaining $1.0 million of EB-5 Phase I funding from escrow and $1.0 million from
fund raising, (iv) obtaining $50.0 million in funding from EB-5 Phase II funding currently being offered to investors, (v) refinancing senior debt on terms more
commensurate with the long-term financing of capital assets, (vi) securing higher volumes of sales from the Kakinada plant, (vii) continuing to expand the
domestic India markets, (viii) using the availability on the existing working capital credit line, and (ix) sales of common stock under the ATM registration
statement, we will be able to obtain the liquidity necessary to fund company operations for the foreseeable future. However, there is no assurance that our
operations will generate significant positive cash flow, or that additional funds will be available to us, through borrowings or otherwise, on favorable terms when
required, or at all.
At December 31, 2016, the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes equaled $61.6 million. The
current maturity date for all of the Third Eye Capital financing arrangements is April 1, 2018; provided, however, that pursuant to Amendment No. 13, dated
March 1, 2017, we have the right to extend the maturity date of the Third Eye Capital Notes to April 1, 2019 upon notice and payment of a 5% extension fee. We
intend to pay the Third Eye Capital Notes through operational cash flow, EB-5 subordinated debt, a senior debt refinancing and/or equity financing.
Our senior lender has provided a series of accommodating amendments to the existing and previous loan facilities in the past as described in further detail in
Note 4.Debt of the Notes to Consolidated Financial Statements in Part IV of this Form 10-K. However, there can be no assurance that our senior lender will
continue to provide further amendments or accommodations or will fund additional amounts in the future.
We also rely on our working capital lines with J.D. Heiskell in California and Secunderabad Oils Limited in India to fund our commercial arrangements for the
acquisitions of feedstock. J.D. Heiskell currently provides us with working capital for the Keyes plant and Secunderabad Oils Limited currently provides us with
working capital for the Kakinada plant. The ability of both J.D. Heiskell and Secunderabad Oils Limited to continue to provide us with working capital depends in
part on both of their respective financial strength and banking relationships.
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Change in Working Capital and Cash Flows
During the twelve months ended December 31, 2016, current and long term debt increased $10.8 million primarily due to (i) additional borrowings of $10.5
million received from the EB-5 investors, (ii) $1.5 million waiver fee, (iii) $3.1 million maturity date extension fee, (iv) $0.3 million drawn on the promissory note for
operations from our senior lender, (v) $3.0 million drawn on the promissory note from our senior lender for State Bank of India repayment and payment on
property tax payment settlement agreement, (vi) $0.7 million in subordinated debt extension fees, (vii) $9.0 million in accrued interest, and (viii) $6.8 million drawn
from the India working capital loans. The increase in current and long term debt was partially offset by decreases due to: (i) payments of principal of $11.9
million to our senior lender, (ii) $5.0 million and $2.1 million of principal payments to our working capital partners in India and on the State Bank of India loan, and
(iii) payments of interest of $4.9 million. Current assets decreased by $1.0 million due to a decrease of $1.0 million in other assets and $1.6 million in inventories
offset by increase in $1.2 million in cash and $0.4 million in accounts receivable.
Net cash provided by operating activities during the year ended December 31, 2016 was $0.4 million consisting of non-cash charges of $9.2 million, net changes
in operating assets and liabilities of $6.8 million, and net loss of $15.6 million. The non-cash charges consisted of: (i) $5.8 million in amortization of debt issuance
costs and patents, (ii) $4.7 million in depreciation expenses, (iii) a $0.7 million in stock-based compensation expense, and (iv) $2.0 million in gain on
extinguishment of State Bank of India loan. Net changes in operating assets and liabilities consisted primarily of a decrease in (i) accounts payable of $2.1
million, (ii) inventories of $1.5 million, (iii) other assets of $0.9 million offset by an increase in (iv) other liabilities of $0.5 million, (v) accounts receivable of $0.4
million, and, (vi) accrued interest of $6.4 million.
Cash used by investing activities during the year ended December 31, 2016 was $0.6 million, consisting of capital expenditures of $0.5 million from India
operations and $0.2 million from US operations.
Cash provided by financing activities during the year ended December 31, 2016 was $1.6 million, consisting primarily of proceeds from borrowings of $10.5
million in EB-5 program, $3.3 million in promissory notes from senior lender, $6.8 million in drawn on Secunderabad Oils working capital loan, offset by
payments of $11.9 million in principal on senior lender debt and promissory notes, $2.1 million on State Bank of India loan, and $5.0 million on working capital
loans in India.
Off-Balance Sheet Arrangements
We had no outstanding off-balance sheet arrangements as of December 31, 2016.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses for each period. The following represents a summary of our critical accounting policies, defined as those policies
that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective
or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
Revenue Recognition
We recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when there is persuasive evidence
of an arrangement, delivery has occurred, the sales price is fixed or determinable, and collection is reasonably assured. We derive revenue primarily from sales
of ethanol and related co-products, biodiesel, refined glycerin, and refined palm oil. We recognize revenue when title transfers to our customers, which is
generally upon the delivery of these products to a customer’s designated location. These deliveries are made in accordance with sales commitments and related
sales orders entered into with customers and our working capital partner J.D. Heiskell for the Keyes plant and Secunderabad Oils Limited for the Kakinada
plant. Commitments can be offered either verbally or in written form. The sales commitments and related sales orders provide quantities, pricing and conditions
of sales. In this regard, sales consist of inventory produced at the Keyes or Kakinada plant.
Revenues from sales of ethanol and its co-products are billed net of the related transportation and marketing charges. The transportation component is
accounted for in cost of goods sold and the marketing component is accounted for in sales, general and administrative expense. Revenues are recorded at the
gross invoiced amount. Additionally, our working capital partner leases our finished goods tank and requires us to transfer legal title to the product upon transfer
of our finished ethanol to this location. We consider the purchase of corn as a cost of goods sold and the sale of ethanol upon transfer to the finished goods tank
as revenue on the basis that (i) we bear the risk of gain or loss on the processing of corn into ethanol and (ii) we have legal title to the goods during the
processing time. 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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Recoverability of Our Long-Lived Assets
Property 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 plants in North America and India. When property, plant and equipment are acquired as part of an acquisition, the
items are recorded at fair value on the purchase date. It is our policy to depreciate capital assets over their estimated useful lives using the straight-line method.
Impairment of Long-Lived Assets and Intangibles
Our long-lived assets consist of property and equipment and intangibles. We review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. We measure recoverability of assets to be held and used by
comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, we record an impairment charge in the amount by which the carrying amount of the asset exceeds the fair value
of the asset.
Our intangibles consist of amounts relating to in-process research and development and patents from our acquisition of Zymetis, Inc. in 2011. We review
intangibles at an individual plant or subsidiary level for impairment at least annually, or more frequently whenever events or changes in circumstances indicate
that impairment may have occurred.
The impairment test for long-lived assets and intangibles requires us to make estimates regarding amount and timing of projected cash flows to be generated by
an asset or asset group over an extended period of time. Management judgment regarding the existence of circumstances that indicate impairment is based on
numerous potential factors including, but not limited to, a decline in our future projected cash flows, a decision to suspend operations at a plant for an extended
period of time, adoption of our product by the market, a sustained decline in our market capitalization, a sustained decline in market prices for similar assets or
businesses, or a significant adverse change in legal or regulatory factors or the business climate. Significant management judgment is required in determining
the fair value of our long-lived assets and intangibles to measure impairment, including projections of future cash flows. Fair value is determined through various
valuation techniques including discounted cash flow models, market values and third-party independent appraisals, as considered necessary. Changes in
estimates of fair value could result in a write-down of the asset in a future period.
During 2015, our annual impairment analysis indicated an impairment of goodwill. Accordingly, we recorded approximately $1 million of impairment charge
relating to goodwill and patents, which was comprised of a $968 thousand charge related to impairment of all goodwill associated with our acquisition of Zymetis,
Inc. in 2011 and a $76 thousand charge resulting from abandoning two filed, but not awarded patents no longer being pursued due to changes in patent strategy.
Our subsidiaries, Aemetis Advanced Fuels Keyes, which operates our Keyes plant, and UBPL, which operates our Kakinada plant, represent our significant long-
lived assets. Both plants were tested for impairment and the undiscounted future cash flows of each plant exceeded the carrying value on our books, so no
impairment was recorded for our Company’s long-lived assets.
Testing for Modification or Extinguishment Accounting
During 2016 and 2015, we evaluated amendments to our debt under the ASC 470-50 guidance for modification and extinguishment accounting. This evaluation
included 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 our future cash flows changed more than 10 percent, we recorded our debt at fair value based on factors available to us for similar borrowings and used
the extinguishment accounting method to account for the debt extinguishment.
32
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Warrant Liability Accounting
Certain common stock warrants issued in our equity financing are classified as liabilities under ASC 480. We use the Black-Scholes option pricing model as our
method of valuation for warrants subject to warrant liability accounting. Warrants subject to liability accounting are valued on the date of issuance and re-
measured at the end of each reporting period with the change in value reported in our consolidated statement of operations. The determination of fair value as
of the reporting date is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables
include, but are not limited to, expected stock price volatility over the term of the security and risk-free interest rate. In addition, the Black-Scholes option pricing
model requires the input of an expected life for the securities, which we estimated based upon the remaining term of the warrant. The primary factors affecting
the fair value of the warrant liability are our stock price and volatility. The use of the Black-Scholes option pricing model in this context requires the input of
highly subjective assumptions, and the model is very sensitive to changes in inputs. Other reasonable assumptions in the pricing model could provide differing
results.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue
recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or
services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The new standard will be
effective for us on January 1, 2018. We are currently evaluating the potential impact that Topic 606 may have on our consolidated financial position and results of
operations.
In February 2016, the FASB issued guidance that amends the existing accounting standards for leases. Consistent with existing guidance, the recognition,
measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification. Under the new guidance,
a lessee will be required to recognize right-of-use assets and lease liabilities on the balance sheet. The new guidance is effective for us beginning January 1,
2020, and for interim periods within that year. Early adoption is permitted and we will be required to adopt using a modified retrospective approach. We are
evaluating the timing of adoption and the impact of this guidance on our consolidated financial statements and disclosures.
In August 2016, the FASB issued amendments to address eight specific cash flow issues with the objective of reducing the existing diversity in practice.
The amendments are effective for us beginning January 1, 2018, and for interim periods within that year. Early adoption is permitted. If we decide to early adopt
the amendments, we will be required to adopt all of the amendments in the same period. We are evaluating the timing of our adoption and the impact of the
amendments on our consolidated statement of cash flows and disclosures.
In November 2016, the FASB issued amendments to require amounts generally described as restricted cash and restricted cash equivalents be included
with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The
amendments are effective for us beginning January 1, 2018, and for interim periods within that year. Early adoption is permitted. We are evaluating the timing of
our adoption and the impact of the amendments on our consolidated statement of cash flows and disclosures.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
Financial Statements are listed in the Index to Consolidated Financial Statements on page 44 of this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
The information contained in this section covers management’s evaluation of our disclosure controls and procedures and our assessment of our internal control
over financial reporting for the year ended December 31, 2016.
Evaluation of Disclosure Controls and Procedures.
Management (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), carried out an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act). Based on this evaluation, our CEO and CFO concluded that, as of the end of the period covered in this report, our disclosure
controls and procedures along with the related internal controls over financial reporting were effective to provide reasonable assurance that the information
required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods
specified in Securities and Exchange Commission rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, as
appropriate, to allow timely decisions regarding required disclosure.
33
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Inherent Limitations on Effectiveness of Controls
Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect
all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control
system’s objectives will be met. Our controls and procedures are designed to provide reasonable assurance that our control system’s objective will be met, and
our CEO and CFO have concluded that our disclosure controls and procedures are effective at the reasonable assurance level. The design of a control system
must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all
control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-
making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions. Projections of any evaluation of the effectiveness of controls in future periods are subject to risks. Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Management’s Annual Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f)
under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles (GAAP). Our
internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures by us are being made
only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting as of the period covered by this report based on the criteria for effective internal control
described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) -
2013. Based on the results of management’s assessment and evaluation, our CEO and CFO concluded that our internal control over financial reporting was
effective as described below.
An attestation report from our accounting firm on internal control over financial reporting is not included in this annual report because an attestation report is only
required under the regulations of the Securities and Exchange Commission for accelerated filers and large accelerated filers.
Changes in Internal Control over Financial Reporting
Our efforts to improve our internal controls are ongoing and focused on expanding our organizational capabilities to improve our control environment and on
implementing process changes to strengthen our internal control and monitoring activities.
34
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Item 9B. Other Information
Third Eye Capital Amendment
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 to allow 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, (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 Q. Cagan (the “Laird Cagan subordinated note”) 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. 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 will evaluate the Amendment of the Notes and will
determine proper accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
The foregoing description of Amendment No. 13 is only a summary and does not purport to be complete and is qualified in its entirety by reference to the full text
of Amendment No. 13, Exhibit 10.70 hereto and is incorporated herein by reference.
Item 10. Directors, Executive Officers and Governance
PART III
The information required by this Item 10 is included in our Proxy Statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item 11 is included in our Proxy Statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 is included in our Proxy Statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is included in our Proxy Statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this Item 14 is included in our Proxy Statement for our 2017 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as a part of this Form 10-K:
PART IV
1. Financial Statements:
The following financial statements of Aemetis, Inc. are filed as a part of this Annual Report:
● Report of Independent Registered Public Accounting Firm
● Consolidated Balance Sheets
● Consolidated Statements of Operations and Comprehensive Loss
● Consolidated Statements of Cash Flows
● Consolidated Statements of Stockholders’ Deficit
● Notes to Consolidated Financial Statements
35
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
2. Financial Statement Schedules:
All schedules have been omitted as the required information is inapplicable or the information is presented in the Consolidated Financial Statements and notes
thereto under Item 8 in Part II of this Form 10-K.
3. Exhibits:
INDEX TO EXHIBITS
Exhibit No.
Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
Filed Herewith
X
1.1
3.1.1
3.1.2
3.1.3
3.1.4
3.1.5
3.1.6
3.1.7
3.2.1
4.1
4.2
4.3
4.4
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
At Market Issuance Sales Agreement dated March 23,
2016 with FBR Capital Markets & Co. and MLV & Co. LLC
and Aemetis Inc.
Articles of Incorporation
Certificate of Amendment to Articles of Incorporation
Certificate of Designation of Series B Preferred Stock
Certificate of Amendment to Articles of Incorporation
Certificate of Amendment to Articles of Incorporation
Certificate of Change in Articles of Incorporation are a
result of 1 for 10 reverse split to Authorized Shares and
Common Shares Outstanding on May 5, 2014
Amended and Restated Articles of Incorporation
Bylaws
Specimen Common Stock Certificate
Specimen Series B Preferred Stock Certificate
Form of Common Stock Warrant
Form of Series B Preferred Stock Warrant
Amended and Restated 2007 Stock Plan
Amended and Restated 2007 Stock Plan form of Stock
Option Award Agreement
Eric McAfee Executive Employment Agreement dated
September 1, 2011
Andrew Foster Executive Employment Agreement, dated
May 22, 2007
Todd Waltz Executive Employment Agreement, dated
March 15, 2010
Sanjeev Gupta Executive Employment Agreement, dated
September 1, 2007
Agreement of Loan for Overall Limit dated June 26, 2008
between Universal Biofuels Private Limited and State Bank
of India
Ethanol Marketing Agreement, dated October 29, 2010
between AE Advanced Fuels Keyes, Inc. and Kinergy
Marketing, LLC
Zymetis, Inc. 2006 Stock Incentive Plan
Zymetis Inc. Incentive Stock Option Agreement
Zymetis Inc. Non-Incentive Stock Option Agreement
First Amendment to Ethanol Marketing Agreement dated
September 6, 2011, between AE Advanced Fuels Keyes,
Inc. and Kinergy Energy Marketing
Form of Note and Warrant Purchase Agreement
10-K
000-51354
1.1
Mar 28, 2016
10-Q
10-Q
8-K
8-K
Pre14C
000-51354
000-51354
000-51354
000-51354
111136140
3.1
3.1.1
3.2
3.3
Nov. 14, 2008
Nov. 14, 2008
Dec. 13, 2007
Dec. 13, 2007
Oct. 11, 2011
10-Q
000-51354
3.1
May 31, 2014
10-K
8-K
8-K
8-K
8-K
8-K
14A
14A
8-K
8-K
8-K
000-51354
000-51354
000-51354
000-51354
000-51354
000-51354
000-51354
000-51354
000-51354
000-51354
000-51354
3.1.7
3.4
4.1
4.2
4.3
4.4
10.2
10.7
March 16, 2017
Dec. 13, 2007
Dec. 13, 2007
Dec. 13, 2007
Dec. 13, 2007
Dec. 13, 2007
Apr. 3, 2015
Apr. 15, 2008
Sep. 8, 2011
Dec. 13, 2007
May 20, 2009
10-K
000-51354
10.11
May 20, 2009
10-Q
000-51354
10.12
Aug. 14, 2008
10-Q
000-51354
10.6
Dec. 1, 2010
000-51354
000-51354
000-51354
000-51354
000-51354
10.31
10.32
10.33
10.1
10.1
Oct. 31, 2012
Oct. 31, 2012
Oct. 31, 2012
Sept. 8, 2011
Jan. 1, 2012
10-K
10-K
10-K
8-K
8-K
36
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
Form of 5% Subordinated Note
Form of Common Stock Warrant
Amendment No. 6 to Note Purchase Agreement dated
April 13, 2012 among Aemetis Advanced Fuels Keyes,
Inc., Third Eye Capital Corporation, as agent, and the
Purchasers
Limited Waiver to Note Purchase Agreement dated March
31, 2012 among Aemetis Advanced Fuels Keyes, Inc., and
Third Eye Capital Corporation, an Ontario corporation, as
agent
Limited Waiver to Note and Warrant Purchase Agreement
dated March 31, 2012 among Aemetis, Inc., Third Eye
Capital Corporation, an Ontario corporation, as agent, and
the Purchasers
Amendment No. 7 to Note Purchase Agreement dated
May 15, 2012 among Aemetis Advanced Fuels Keyes,
Inc., Third Eye Capital Corporation, as agent, and the
Purchasers
Form of Note and Warrant Purchase Agreement
Form of 5% Subordinated Note
Form of Common Stock Warrant
Note and Warrant Purchase Agreement dated June 21,
2012 among Third Eye Capital Corporation, Aemetis
Advanced Fuels Keyes, Inc., and Aemetis, Inc.
5% Subordinated Promissory Note dated June 21, 2012
among Third Eye Capital Corporation, Aemetis Advanced
Fuels Keyes, Inc., and Aemetis, Inc.
Form of Warrant to Purchase Common Stock
Note Purchase Agreement dated June 27, 2012 among
Third Eye Capital Corporation, Aemetis Advanced Fuels
Keyes, Inc., and Aemetis, Inc.
15% Subordinated Promissory Note dated June 27, 2012
among Third Eye Capital Corporation, Aemetis Advanced
Fuels Keyes, Inc., and Aemetis, Inc.
Agreement and Plan of Merger, dated July 6, 2012, among
Aemetis, Inc., AE Advanced Fuels, Inc., Keyes Facility
Acquisition Corp., and Cilion, Inc.
Stockholders’ Agreement dated July 6, 2012, among
Aemetis, Inc., and Western Milling Investors, LLC, as
Security holders’ Representative.
Amended and Restated Note Purchase Agreement, dated
July 6, 2012 among Aemetis Advanced Fuels Keyes, Inc.,
Keyes Facility Acquisition Corp., Aemetis, Inc., Third Eye
Capital Corporation, as Administrative Agent, and the Note
holders
Amended and Restated Guaranty, dated July 6, 2012
among Aemetis, Inc., certain subsidiaries of Aemetis and
Third Eye Capital Corporation, as Agent.
Amended and Restated Security Agreement, dated July 6,
2012 among Aemetis, Inc., certain subsidiaries of Aemetis
and Third Eye Capital Corporation, as Agent.
Investors’ Rights Agreement dated July 6, 2012, by and
among Aemetis, Inc., and the investors listed on Schedule
A thereto.
Technology License Agreement dated August 9, 2012
between Chevron Lummus Global LLC and Aemetis
Advanced Fuels, Inc.
8-K
8-K
000-51354
000-51354
10.2
10.3
Jan. 1, 2012
Jan. 1, 2012
8-K
000-51354
10.1
Apr. 19, 2012
8-K
000-51354
10.1
Apr. 19, 2012
8-K
000-51354
10.1
Apr. 19, 2012
8-K
000-51354
10.1
May 22, 2012
8-K
8-K
8-K
8-K
8-K
8-K
8-K
000-51354
000-51354
000-51354
000-51354
000-51354
000-51354
000-51354
10.1
10.1
10.1
10.1
10.2
10.3
10.1
Jun. 6, 2012
Jun. 6, 2012
Jun. 6, 2012
Jun. 28, 2012
Jun. 28, 2012
Jun. 28, 2012
July 3, 2012
8-K
000-51354
10.2
July 3, 2012
8-K
000-51354
2.1
July 10, 2012
8-K
000-51354
10.1
July 10, 2012
8-K
000-51354
10.2
July 10, 2012
8-K
000-51354
10.3
July 10, 2012
8-K
000-51354
10.4
July 10, 2012
8-K
000-51354
10.5
July 10, 2012
8-K
000-51354
10.1
Aug. 22, 2012
37
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
Corn Procurement and Working Capital Agreement dated
March 9, 2011 between J.D. Heiskell Holdings LLC and
Aemetis Advanced Fuels Keyes, Inc.*
Purchasing Agreement dated March 9, 2011 between J.D.
Heiskell Holdings LLC and Aemetis Advanced Fuels
Keyes, Inc.*
WDG Purchase and Sale Agreement dated March 23,
2011 between A.L. Gilbert Company and Aemetis
Advanced Fuels Keyes, Inc.
Keyes Corn Handling Agreement dated March 23, 2011
among A. L. Gilbert Company, AE Advanced Fuels Keyes,
Inc., and J.D. Heiskell Holdings, LLC
Limited Waiver and Amendment No. 1 to Amended and
Restated Note Purchase Agreement dated as of October
18, 2012 by and among Aemetis Advanced Fuels Keyes,
Inc., a Delaware corporation, Aemetis Facility Keyes, Inc.,
a Delaware corporation, Third Eye Capital Corporation, an
Ontario corporation as agent, Third Eye Capital Credit
Opportunities Fund – Insight Fund, and Sprott PC Trust.
Amendment No. 1 to Revolving Line of Credit Agreement
dated October 16, 2012 by and among Aemetis
International, Inc., a Nevada corporation, and Laird Q.
Cagan
Note Purchase Agreement effective as of March 4, 2011,
amended January 19, 2012 and July 24, 2012 by and
among AE Advanced Fuels, Inc., a Delaware corporation,
and Advanced BioEnergy, LP a California limited
partnership and Advanced BioEnergy GP, LLC, a
California limited liability company.
Form of Convertible Subordinated Promissory Note by and
among AE Advanced Fuels, Inc., a Delaware corporation
and Advanced BioEnergy, LP, a California limited
partnership.
Amendment to the Purchasing Agreement dated March 9,
2011 between J.D. Heiskell Holdings LLC and Aemetis
Advanced Fuels Keyes, Inc. dated September 29, 2012
Agreement for Repayment of Note by Share Issuance
dated as of December 31, 2012 by and among Aemetis,
Inc., Aemetis International, Inc., (formerly known as
“International Biodiesel, Inc.”), a Nevada corporation and
wholly-owned subsidiary of the Company, and Laird Q.
Cagan for himself and on behalf of all other holders of
interests in the Revolving Line of Credit (as defined in the
Agreement).
Agreement for Repayment of Note by Share Issuance
dated as of December 31, 2012 by and among Aemetis,
Inc., Aemetis International, Inc., (formerly known as
“International Biodiesel, Inc.”), a Nevada corporation and
wholly-owned subsidiary of the Company, and Laird Q.
Cagan for himself and on behalf of all other holders of
interests in the Revolving Line of Credit (as defined in the
Agreement).
Limited Waiver and Amendment No. 2 to Amended and
Restated Note Purchase Agreement dated as of February
27, 2013 by and among Aemetis Advanced Fuels Keyes,
Inc., a Delaware corporation, Aemetis Facility Keyes, Inc.,
a Delaware corporation, Third Eye Capital Corporation, an
Ontario corporation as agent, Third Eye Capital Credit
Opportunities Fund – Insight Fund, and Sprott PC Trust.
10-K
000-51354
10.64
Oct. 31, 2012
10-K
000-51354
10.65
Oct. 31, 2012
10-K
000-51354
10.66
Oct. 31, 2012
10-K
000-51354
10.67
Oct. 31, 2012
8-K
000-51354
10.1
Oct. 23, 2012
8-K
000-51354
10.2
Oct. 23, 2012
8-K
000-51354
10.3
Oct. 23, 2012
8-K
000-51354
10.4
Oct. 23, 2012
10-K
000-51354
10.72
Apr. 4, 2013
8-K
000-51354
10.1
Jan. 7, 2013
8-K/A
000-51354
10.1
Feb. 27, 2013
8-K
000-51354
10.1
Mar. 11, 2013
38
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
10.47
10.48
10.49
10.505
10.5
10.51
10.52
10.53
10.54
10.55
Amendment No. 1 to Agreement for Repayment of Note by
Share Issuance dated as of April 10, 2013 by and among
Aemetis, Inc., Aemetis International, Inc., a Nevada
corporation and wholly-owned subsidiary of the Company,
and Laird Q. Cagan for himself and on behalf of all other
holders of interests in the Revolving Line of Credit (as
defined in the Agreement).
Amendment to the Purchasing Agreement dated March 9,
2011 between J.D. Heiskell Holdings LLC and Aemetis
Advanced Fuels Keyes, Inc. dated January 2, 2013.
Limited Waiver and Amendment No.3 to Amended and
Restated Note Purchase Agreement dated as of April 15,
2013 by and among Aemetis Advanced Fuels Keyes, Inc.,
a Delaware corporation, Aemetis Facility Keyes, Inc., a
Delaware corporation, Third Eye Capital Corporation, an
Ontario corporation as agent, Third Eye Capital Credit
Opportunities Fund – Insight Fund, and Sprott PC Trust.
Amendment No. 4 to Amended and Restated Note
Purchase Agreement dated as of April 19, 2013 by and
among Aemetis Advanced Fuels Keyes, Inc., a Delaware
corporation, Aemetis Facility Keyes, Inc., a Delaware
corporation, Aemetis, Inc., a Nevada corporation, and
Third Eye Capital Corporation, an Ontario corporation, as
agent for Third Eye Capital Insight Fund
Special Bridge Advance dated as of March 29, 2013 by
and among Aemetis Advanced Fuels Keyes, Inc., a
Delaware corporation, Aemetis, Inc., a Nevada
corporation, Third Eye Capital Corporation, an Ontario
corporation, as agent for Third Eye Capital Insight Fund
Agreement For Satisfaction of Note by Share and Note
Issuance dated as of April 18, 2013 between Aemetis,
Inc., Aemetis International, Inc. and Laird Q. Cagan for
himself and on behalf of all other holders of interests in the
Revolving Line of Credit dated August 17, 2009 as
amended.
Amended and Restated Heiskell Purchasing Agreement
dated May 16, 2013, by and between Aemetis Advanced
Fuels Keyes, Inc., a Delaware corporation and a wholly-
owned subsidiary of Aemetis, Inc. and J.D. Heiskell
Holdings, LLC, a California limited liability company doing
business as J.D. Heiskell & Co.*
Amended and Restated Aemetis Keyes Corn Procurement
and Working Capital Agreement, dated May 2, 2013, by
and between Aemetis Advanced Fuels Keyes, Inc., and
J.D. Heiskell Holdings, LLC
Limited Waiver and Amendment No.5 to Amended and
Restated Note Purchase Agreement, dated as of July 26,
2013 by and among Aemetis, Inc., Aemetis Advanced
Fuels Keyes, Inc. Aemetis Facility Keyes, Inc., Third Eye
Capital Corporation, an Ontario corporation, as agent,
Third Eye Capital Credit Opportunities Fund - Insight Fund,
and Sprott PC Trust
Limited Waiver and Amendment No.6 to Amended and
Restated Note Purchase Agreement, dated as of October
28, 2013 by and among Aemetis, Inc.; Aemetis Advanced
Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.; Third Eye
Capital Corporation, an Ontario corporation, as agent for
Third Eye Capital Credit Opportunities Fund - Insight Fund,
and Sprott PC Trust.
10-K
000-51354
10.77
Apr. 4, 2013
10-K
000-51354
10.76
Apr. 4, 2013
8-K
000-51354
10.1
Apr. 16, 2013
8-K/A
000-51354
10.2
May 14, 2013
8-K
000-51354
10.2
Apr. 16, 2013
8-K
000-51354
10.1
Apr. 24, 2013
8-K
000-51354
10.1
May 23, 2013
8-K
000-51354
10.2
May 23, 2013
8-K
000-51354
10.1
July 31, 2013
8-K
000-51354
10.1
Nov. 1, 2013
39
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Limited Waiver and Amendment No.7 to Amended and
Restated Note Purchase Agreement, dated as of May 14,
2014 by and among Aemetis, Inc.; Aemetis Advanced
Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.; Third Eye
Capital Corporation, an Ontario corporation, as agent for
Third Eye Capital Credit Opportunities Fund - Insight Fund,
and Sprott PC Trust.
Limited Waiver and Amendment No. 8 to Amended and
Restated Note Purchase Agreement, dated as of
November 7, 2014 by and among Aemetis, Inc.; Aemetis
Advanced Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.;
Third Eye Capital Corporation, an Ontario corporation, as
agent for Third Eye Capital Credit Opportunities Fund -
Insight Fund, and Sprott PC Trust.
Limited Waiver and Amendment No. 9 to Amended and
Restated Note Purchase Agreement, dated as of March
12, 2015 by and among Aemetis, Inc.; Aemetis Advanced
Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.; Third Eye
Capital Corporation, an Ontario corporation, as agent for
Third Eye Capital Credit Opportunities Fund - Insight Fund,
and Sprott PC Trust.
Limited Waiver and Amendment No. 10 to Amended and
Restated Note Purchase Agreement, dated as of April 30,
2015 by and among Aemetis, Inc.; Aemetis Advanced
Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.; Third Eye
Capital
Corporation, an Ontario corporation, as agent for Third Eye
Capital Credit Opportunities Fund - Insight Fund, and
Sprott PC Trust.
Limited Waiver and Amendment No. 11 to Amended and
Restated Note Purchase Agreement, dated as of August 6,
2015 by and among Aemetis,
Inc.; Aemetis Advanced Fuels Keyes, Inc.; Aemetis Facility
Keyes, Inc.; Third Eye Capital Corporation, an Ontario
corporation, as agent for Third Eye Capital Credit
Opportunities Fund - Insight Fund, and Sprott PC Trust
(incorporated by reference to Exhibit 10.2 of the Quarterly
Report on Form 10-Q filed on August 7, 2015).
Limited Waiver and Amendment No. 12 to Amended and
Restated Note Purchase Agreement, dated as of March
21, 2016 by and among Aemetis, Inc.; Aemetis Advanced
Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.; Third Eye
Capital Corporation, an Ontario corporation, as agent for
Third Eye Capital Credit Opportunities Fund - Insight Fund,
and Sprott PC Trust.
Binding letter of intent for the purchase of certain property,
plant and equipment in Goodland, Kansas by Aemetis
Advanced Fuels Goodland, Inc., or such other subsidiary
of Aemetis Inc., dated March 22, 2016 from Third Eye
Capital Corporation, in its capacity as attorney-in-fact for
New Goodland Energy Center, LLC.
Limited Waiver and Amendment No. 13 to Amended and
Restated Note Purchase Agreement, dated as of March 1,
2017 by and among Aemetis, Inc.; Aemetis Advanced
Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.; Third Eye
Capital Corporation, an Ontario corporation, as agent for
Third Eye Capital Credit Opportunities Fund - Insight Fund,
and Sprott PC Trust.
Code of Ethics
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting
Firm
Power of Attorney (see signature page)
10.62
10.64
10.65
10.66
10.67
10.68
10.69
10.70
14
21
23
24
10-Q
000-51354
10.1
Mar. 31, 2014
10-Q/A
000-51354
10.1
Nov. 13, 2014
10K
000-51354
10.1
Mar. 12,2015
10.65
10-Q
000-51354
10.1
May 7, 2015
10-Q
000-51354
10.1
Nov. 5, 2015
10-K
000-51354
10.68
Mar. 28, 2016
10-K
000-51354
10.69
Mar. 28, 2016
10-K
000-51354
10.70
Mar. 16, 2017
10-K
000-51354
14
May 20, 2009
40
X
X
X
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
31.1
31.2
32.1
32.2
Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Section 302 of the Sarbanes-Oxley Act of
2002
Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
X
X
X
X
*Confidential treatment has been requested for portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
41
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
Consolidated Financial Statements
Index To Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' Deficit
Notes to Consolidated Financial Statements
42
Page
Number
43
44
45
46
47
48 -71
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Aemetis, Inc.
We have audited the accompanying consolidated balance sheets of Aemetis, Inc. and subsidiaries as of December 31, 2016 and 2015, and the related
consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aemetis, Inc. and
subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for the years then ended, in conformity with U.S.
generally accepted accounting principles.
/s/ RSM US LLP
Des Moines, Iowa
March 16, 2017
43
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2016 AND 2015
(In thousands except for par value)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses
Other current assets
Total current assets
Property, plant and equipment, net
Intangible assets, net of accumulated amortization of $424 and $344, respectively
Other assets
Total assets
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable
Current portion of long term debt
Short term borrowings
Mandatorily redeemable Series B convertible preferred stock
Accrued property taxes
Other current liabilities
Total current liabilities
Long term liabilities:
Senior secured notes
EB-5 notes
Long term subordinated debt
Other long term liabilities
Total long term liabilities
Stockholders' deficit:
Series B convertible preferred stock, $0.001 par value; 7,235 authorized; 1,328 and 1,398 shares issued and
outstanding each period, respectively (aggregate liquidation preference of $3,984 and $4,194, respectively)
Common stock, $0.001 par value; 40,000 authorized; 19,858 and 19,619 shares issued and outstanding,
respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders' deficit
Total liabilities and stockholders' deficit
The accompanying notes are an integral part of the financial statements
44
December 31,
2016
December 31,
2015
$
$
$
$
$
$
1,486
1,557
3,241
555
206
7,045
66,370
1,300
3,095
77,810
7,842
2,027
9,382
2,844
2,648
2,473
27,216
61,631
33,000
5,674
102
100,407
283
1,166
4,804
527
1,222
8,002
70,718
1,380
3,041
83,141
10,183
5,607
6,340
2,742
2,244
2,181
29,297
60,925
22,500
5,523
190
89,138
1
1
20
83,441
(129,887)
(3,388)
(49,813)
20
82,115
(114,251)
(3,179)
(35,294)
$
77,810
$
83,141
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
(In thousands, except for earnings per share)
Revenues
Cost of goods sold
Gross profit
Research and development expenses
Selling, general and administrative expenses
Operating loss
Other (income) expense
Interest expense
Interest rate expense
Amortization expense
(Gain) loss on debt extinguishment
Loss on impairment of goodwill and intangible assets
Other (income) expense
Loss before income taxes
Income tax expense
Net loss
Other comprehensive loss
Foreign currency translation adjustment
Comprehensive loss
Net loss per common share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
2016
2015
$
143,158
$
146,649
131,559
142,450
11,599
369
12,011
4,199
447
12,361
(781)
(8,609)
11,493
5,723
(2,033)
-
(334)
10,164
6,715
330
1,044
270
(15,630)
(27,132)
6
6
$
(15,636)
$
(27,138)
$
$
$
(209)
(15,845)
$
(217)
(27,355)
(0.79)
(0.79)
$
$
(1.37)
(1.37)
19,771
19,771
19,823
19,823
The accompanying notes are an integral part of the financial statement
45
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
(In thousands)
Operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
2016
2015
$
(15,636)
$
(27,138)
Share-based compensation
Stock issued in connection with consultant services
Depreciation
Debt related amortization expense
Intangibles and other amortization expense
Change in fair value of warrant liability
(Gain) loss on extinguishment of debt
Loss on sale/disposal of assets
Impairment loss on goodwill and intangible assets
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses
Other current assets and other assets
Accounts payable
Accrued interest expense and fees, net of payments
Other liabilities
Net cash provided by (used in) operating activities
Investing activities:
Capital expenditures
Net cash used in investing activities
Financing activities:
Proceeds from borrowings
Repayments of borrowings
Issuance of common stock for services, option and warrant exercises
Payment of debt guarantee fee
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net cash and cash equivalents increase for period
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information, cash paid:
Interest payments
Income tax expense
Supplemental disclosures of cash flow information, non-cash transactions:
Proceeds from exercise of stock options applied to accounts payable
Fair value of warrants issued to subordinated debt holders
Repurchase of common stock on revolver loan advance
Stock issued in connection with services and interest on debt
Settlement of accounts payable through transfer of equipment
747
-
4,670
5,723
126
(25)
(2,033)
11
-
(403)
1,504
(28)
890
(2,097)
6,448
474
371
(629)
(629)
20,583
(18,956)
-
-
1,627
$
$
(166)
1,203
283
1,486
$
$
4,894
6
-
579
-
-
66
938
204
4,730
6,715
129
(54)
330
-
1,044
72
(450)
1,109
(979)
2,020
9,800
744
(786)
(71)
(71)
30,331
(29,293)
23
(245)
816
(8)
(49)
332
283
478
6
21
1,087
7,479
432
-
The accompanying notes are an integral part of the financial statement
46
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
(In thousands)
Series B Preferred Stock
Common Stock
Additional
Accumulated
Accumulated
Other
Comprehensive
Shares
Dollars
Shares
Dollars
Paid-in Capital
Deficit
loss
Total
1,665 $
2
20,650 $
21 $
87,080 $
(87,113) $
(2,962) $
(2,972)
(267)
(1)
26
-
-
-
-
-
-
-
-
-
-
-
-
-
-
146
50
270
(1,600)
77
-
-
-
-
-
1
(3)
1
-
-
-
981
204
1,098
(7,476)
-
-
-
-
-
-
-
-
-
-
(1)
981
204
1,099
(7,479)
228
-
-
-
-
(27,138)
-
(217)
-
229
(217)
(27,138)
1,398
1
19,619
20
82,115
(114,251)
(3,179)
(35,294)
(70)
-
-
-
-
-
-
-
-
-
7
-
232
-
-
-
-
-
-
-
-
747
579
-
-
-
-
-
-
-
747
-
-
(15,636)
-
(209)
-
579
(209)
(15,636)
1,328 $
1
19,858 $
20 $
83,441 $
(129,887) $
(3,388) $
(49,813)
The accompanying notes are an integral part of the financial statements.
47
Balance at December 31,
2014
Conversion of Series B
preferred to common stock
Options exercised & stock-
based compensation
Shares issued to consultants
and other services
Issuance and exercise of
warrants
Repurchase of common stock
Issuance of shares for Interest
and additional consideration
Other comprehensive loss
Net loss
Balance at December 31,
2015
Conversion of Series B
preferred to common stock
Stock-based compensation
Issuance and exercise of
warrants
Other comprehensive loss
Net loss
Balance at December 31,
2016
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
1. Nature of Activities and Summary of Significant Accounting Policies
Nature of Activities. These consolidated financial statements include the accounts of Aemetis, Inc. (formerly AE Biofuels, Inc.), a Nevada corporation, and its
wholly owned subsidiaries (collectively, “Aemetis” or the “Company”):
● Aemetis Americas, Inc., a Nevada corporation, and its subsidiary AE Biofuels, Inc., a Delaware corporation;
● Biofuels Marketing, Inc., a Delaware corporation;
● Aemetis International, Inc., a Nevada corporation, and its subsidiary International Biofuels, Ltd., a Mauritius corporation, and its subsidiary Universal
Biofuels Private, Ltd., an India company;
● Aemetis Technologies, Inc., a Delaware corporation;
● Aemetis Biochemicals, Inc., a Nevada corporation;
● Aemetis Biofuels, Inc., a Delaware corporation, and its subsidiary Energy Enzymes, Inc., a Delaware corporation;
● AE Advanced Fuels, Inc., a Delaware corporation, and its subsidiaries Aemetis Advanced Fuels Keyes, Inc., a Delaware corporation, and Aemetis
Facility Keyes, Inc., a Delaware corporation;
● Aemetis Advanced Fuels, Inc., a Nevada corporation;
● Aemetis Advanced Products Keyes, Inc., a Delaware corporation;
● Aemetis Advanced Fuels Goodland, Inc., a Delaware corporation; and,
● Aemetis Advanced Biorefinery Keyes, Inc., a Delaware corporation.
We are an advanced renewable fuels and biochemicals company focused on the acquisition, development and commercialization of innovative technologies that
replace traditional petroleum-based products by converting first generation biofuel plants into advanced biorefineries. Founded in 2006, we own and operate a
60 million gallon per year capacity ethanol production facility (Keyes plant) in California’s Central Valley where we manufacture and produce ethanol, WDG,
Condensed Distillers Solubles (CDS) and distillers’ corn oil and a 50 million gallon per year capacity renewable chemical and advanced fuel production facility on
the East Coast of India (Kakinada plant), where we manufacture and produce high quality distilled biodiesel and refined glycerin. In addition, we are continuing
to operate a research and development laboratory at the Maryland Biotech Center and hold a portfolio of patents and related technology licenses for the
production of renewable fuels and biochemicals.
Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its subsidiaries. All material inter-company accounts
and transactions are eliminated in consolidation.
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 and 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.
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 and Cash Equivalents. 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 (FDIC) 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.
48
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Accounts Receivable. The Company sells ethanol, wet distillers grains, condensed distillers solubles 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
advanced 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 allowances for doubtful accounts in the years ended December
31, 2016 and 2015.
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 net realizable value. 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 our buildings, furniture, machinery, equipment, land at Keyes plant and Kakinada plant. It is our policy to depreciate capital assets over
their estimated useful lives using the straight-line method.
The Company evaluates the recoverability of long-lived assets with finite lives in accordance with ASC Subtopic 360-10-35 Property Plant and Equipment –
Subsequent Measurements, which requires recognition of impairment of long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset 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. In addition, our estimates in coming up with forecasts for Kakinada plant which was in negative gross margins as of December 31,
2016, we used significant assumptions with regard to the cost of inputs mainly palm stearin, and outputs mainly biodiesel. These assumptions were commodity
market driven but we also considered the Government regulations, import and export tariffs, availability of alternate low cost inputs, and potential customer
agreements. We evaluated all assumptions based on conditions which the Company believes will become available to increase production at profitable margins
in the future.
Goodwill and Intangible Assets. Intangible assets consist of intellectual property in the form of patents pending, in-process research and development and
goodwill. Once the patents pending or in-process R&D have secured a definite life in the form of a patent or product, they will be carried at cost less
accumulated amortization over their estimated useful life. Amortization commences upon the commercial application or generation of revenue and is amortized
over the shorter of the economic life or patent protection period.
Company intangible assets such as goodwill have indefinite lives and as a result need to be evaluated at least annually, or more frequently, if impairment
indicators arise. In the Company’s review, we determined the fair value of the reporting unit using market indicators and discounted cash flow modeling. The
Company compares the fair value to the net book value of the reporting unit. An impairment loss would be recognized when the fair value is less than the
related carrying value, and an impairment expense would be recorded in the amount of the difference. Forecasts of future cash flows are judgments based on
the Company’s experience and knowledge of the Company’s operations and the industries in which the Company operates. These forecasts could be
significantly affected by future changes in market conditions, the economic environment, including inflation, and the purchasing decisions of the Company’s
customers.
During the year ended December 31, 2016 and 2015, the Company recognized amortization expense of $80 thousand each period related to patents. The
Company expects to recognize $80 thousand in 2017, $108 thousand in 2018, $198 thousand in 2019, $108 thousand in 2020 and 2021, and $698 thousand
thereafter.
49
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
In December 2015, pursuant to our annual goodwill impairment test, we recorded a full impairment of goodwill amounting to $1.0 million. Due to limitations in the
our access to capital to develop the acquired technology into a product for sale and current industry conditions, the cash flow projections were lowered and the
earnings forecast was revised. We determine the fair value of our reporting units utilizing discounted cash flows and incorporate assumptions that we believe
marketplace participants would utilize.
Warrant liability: The Company adopted guidance related to distinguishing liabilities from equity for certain warrants which contain a conditional obligation to
repurchase feature. As of December 31, 2016 and 2015, there were 18,644 warrants with a conditional obligation to repurchase feature that require liability
treatment. As a result, a warrant liability was recorded to recognize the fair value upon issuance of each warrant. The Company estimates the fair value of future
liability on warrants using the Black-Scholes pricing model. Assumptions within the pricing model include: 1) the risk-free interest rate, which comes from the
U.S. Treasury yield curve for periods within the contractual life of the warrant, 2) the expected life of the warrants is assumed to be the contractual life of the
warrants, and 3) the volatility is estimated based on an average of the historical volatilities.
The Company computes the fair value of the warrant liability at each reporting period and the change in the fair value is recorded through earnings. The key
component in the value of the warrant liability is the Company's stock price, which is subject to significant fluctuation and is not under the Company's control. The
resulting effect on the Company's net loss is therefore subject to significant fluctuation and will continue to be so until the warrants are exercised, amended, or
expired. Assuming all other fair value inputs remain constant, the Company will record non-cash expense when the stock price increases and non-cash income
when the stock price decreases.
Income Taxes. The Company recognizes income taxes in accordance with ASC 740 Income Taxes using an asset and liability approach. This approach
requires the recognition of taxes payable or refundable for the current year and deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company’s consolidated financial statements or tax returns. The measurement of current and deferred taxes is based
on provisions of enacted tax law.
ASC 740 provides for recognition of deferred tax assets if the realization of such assets is more likely than not to occur. Otherwise, a valuation allowance is
established for the deferred tax assets, which may not be realized. As of December 31, 2016 and 2015, the Company recorded a full valuation allowance against
its net deferred tax assets due to operating losses incurred since inception. Realization of deferred tax assets is dependent upon future earnings, if any, the
timing and amount of which are uncertain. Accordingly, the net deferred tax assets were fully offset by a valuation allowance.
The Company is subject to income tax audits by the respective tax authorities in all of the jurisdictions in which it operates. The determination of tax liabilities in
each of these jurisdictions requires the interpretation and application of complex and sometimes uncertain tax laws and regulations. The recognition and
measurement of current taxes payable or refundable and deferred tax assets and liabilities requires that the Company make certain estimates and judgments.
Changes to these estimates or a change in judgment may have a material impact on the Company’s tax provision in a future period.
Basic and Diluted Net Loss per Share. Basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted net loss per share reflects the dilution of common stock equivalents such as options, convertible
preferred stock, debt, and warrants to the extent the impact is dilutive. As the Company incurred net loss for the years ended December 31, 2016 and 2015,
potentially dilutive securities have been excluded from the diluted net loss per share computations as their effect would be anti-dilutive.
The following table shows the number of potentially dilutive shares excluded from the diluted net loss per share calculation as of December 31, 2016 and 2015:
Series B preferred (1:10 post-split basis)
Common stock options and warrants
Debt with conversion feature at $30 per share of common stock
Total number of potentially dilutive shares excluded from the diluted net loss per share calculation
50
As of
December 31,
2016
December 31,
2015
133
1,975
1,168
3,276
140
1,347
783
2,270
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Tabular data in thousands, except par value and per share data)
Comprehensive Loss. ASC 220 Comprehensive Income requires that an enterprise report, by major components and as a single total, the change in its net
assets from non-owner sources. The Company’s other comprehensive loss and accumulated other comprehensive loss consists solely of cumulative currency
translation adjustments resulting from the translation of the financial statements of its foreign subsidiary. The investment in this subsidiary is considered
indefinitely invested overseas, and as a result, deferred income taxes are not recorded related to the currency translation adjustments.
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 during the year. Transactional gains and losses from foreign currency transactions are recorded in other (income) loss, net.
Operating Segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Aemetis
recognized two reportable geographic segments: “North America” and “India.”
The “North America” operating segment includes the Company’s 60 million gallons per year capacity Keyes plant in Keyes, California and the research facilities
in College Park, Maryland.
The “India” operating segment encompasses the Company’s 50 million gallon per year capacity biodiesel plant in Kakinada, India, the administrative offices in
Hyderabad, India, and the holding companies in Nevada and Mauritius.
Fair Value of Financial Instruments. Financial instruments include accounts receivable, accounts payable, accrued liabilities, current and non-current portion of
subordinated debt, notes payable and long-term debt. Due to the unique terms of our notes payable, and long-term debt and the financial condition of the
Company, the fair value of the debt is not readily determinable. The fair value, determined using level 3 inputs, of all other current financial instruments is
estimated to approximate carrying value due to the short-term nature of these instruments.
Share-Based Compensation. The Company recognizes share based compensation expense in accordance with ASC 718 Stock Compensation requiring the
Company to recognize 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.
Convertible Instruments. The Company evaluates the impacts of convertible instruments based on the underlying conversion features. Convertible Instruments
are evaluated for treatment as derivatives that could be bifurcated and recorded separately. Any beneficial conversion feature is recorded based on the intrinsic
value difference at the commitment date.
Debt Modification Accounting. The Company evaluates amendments to its debt in accordance with ASC 540-50 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.
51
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Recently Issued Accounting Pronouncements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition
requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to
customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The new standard will be effective for us
on January 1, 2018. We are currently evaluating the potential impact that Topic 606 may have on our financial position and results of operations.
In February 2016, the FASB issued guidance which amends the existing accounting standards for leases. Consistent with existing guidance, the recognition,
measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification. Under the new guidance,
a lessee will be required to recognize right-of-use assets and lease liabilities on the balance sheet. The new guidance is effective for us beginning January 1,
2019, and for interim periods within that year. Early adoption is permitted and we will be required to adopt using a modified retrospective approach. We are
evaluating the timing of adoption and the impact of this guidance on our consolidated financial statements and disclosures.
In March 2016, the FASB issued ASU 2016-09 Improvements to Employee Share-Based Payment Accounting that changes the accounting for certain aspects of
share-based payments to employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the
awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other
income tax cash flows. The standard also allows the repurchase more of an employee’s shares for tax withholding purposes without triggering liability
accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the cash flows
statement, and provides an accounting policy election to account for forfeitures as they occur. The amendments also remove the requirement to delay the
recognition of an excess tax benefit until it reduces current taxes payable. Under the new guidance the benefit will be recorded when it arises with a cumulative
effect adjustment to opening retained earnings for previously unrecognized benefits. The new guidance is effective for us beginning December 15, 2017. We are
evaluating the timing of adoption and the impact of this guidance on our consolidated financial statements and disclosures.
In August 2016, the FASB issued amendments to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The
amendments are effective for us beginning January 1, 2018, and for interim periods within that year. Early adoption is permitted. If we decide to early adopt the
amendments, we will be required to adopt all of the amendments in the same period. We are evaluating the timing of our adoption and the impact of the
amendments on our consolidated statement of cash flows and disclosures.
In November 2016, the FASB issued amendments to require amounts generally described as restricted cash and restricted cash equivalents be included with
cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments
are effective for us beginning January 1, 2018, and for interim periods within that year. Early adoption is permitted. We are evaluating the timing of our adoption
and the impact of the amendments on our consolidated statement of cash flows and disclosures.
2. Inventories
Inventories consist of the following:
Raw materials
Work-in-progress
Finished goods
Total inventories
December 31,
2016
December 31,
2015
$
$
1,044
1,360
837
3,241
$
$
1,787
1,807
1,210
4,804
52
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
3. Property, Plant and Equipment
Property, plant and equipment consist of the following:
Land
Plant and buildings
Furniture and fixtures
Machinery and equipment
Construction in progress
Total gross property, plant & equipment
Less accumulated depreciation
Total net property, plant & equipment
December 31,
2016
December 31,
2015
$
$
2,713
81,755
572
4,308
88
89,436
(23,066)
66,370
$
$
2,727
81,821
494
4,052
147
89,241
(18,523)
70,718
Depreciation on the components of the property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their
estimated useful lives as follows:
Plant and buildings
Machinery and equipment
Furniture and fixtures
Years
20 - 30
5 - 7
3 - 5
The Company recorded depreciation expense of approximately $4.7 million each for the years ended December 31, 2016 and 2015.
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. Based on the recent third party appraisals of the fair value of plant assets, equipment and land and management’s valuations using
discounted cash flow analysis, both the Keyes ethanol and animal feed production plant and India biodiesel and glycerin processing plant reporting units did not
require impairment adjustment as of December 31, 2016 and 2015.
4. Debt
Debt consists of the notes from the Company’s senior lender, Third Eye Capital, acting as Agent for the Purchasers (Third Eye Capital), other working capital
lenders and subordinated lenders as follows:
53
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Third Eye Capital term notes
Third Eye Capital revolving credit facility
Third Eye Capital revenue participation term notes
Third Eye Capital acquisition term notes
Cilion shareholder seller notes payable
State Bank of India secured term loan
Subordinated notes
EB-5 long term promissory notes
Unsecured working capital loans
Total debt
Less current portion of debt
Total long term debt
Third Eye Capital Note Purchase Agreement
December 31,
2016
December 31,
2015
$
$
6,577
24,927
11,042
19,085
5,674
-
7,565
35,027
1,817
111,714
11,409
100,305
$
$
6,269
25,870
10,526
18,260
5,523
4,200
6,340
23,907
-
100,895
11,947
88,948
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 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 Third Eye Capital Notes have
a maturity date of April 1, 2018.
On March 21, 2016, Third Eye Capital agreed to Amendment No. 12 to the Note Purchase Agreement to: (i) extend the maturity date of the Third Eye Capital
Notes to April 1, 2017 in exchange for a 5% extension fee consisting of adding $3.1 million to the outstanding principal balance of the Revolving Credit Facility
and to allow for the further extension of the maturity date of the Third Eye Capital Notes to April 1, 2018, at the Company’s election, for an additional extension
fee of 5% of the then outstanding Third Eye Capital Notes, (ii) waive the free cash flow financial covenant under the Note Purchase Agreement for the three
months ended December 31, 2015, (iii) provide that such covenant need not be complied with for the fiscal quarters ending March 31, June 30 and September
31, 2016, (iv) revise the Keyes Plant market value to note indebtedness ratio to 70%, (v) add a covenant that the Company shall have received I-924 approval
from the U.S. Citizenship and Immigration Services (USCIS) for additional EB-5 Program financing of at least $35 million by June 1, 2016, and (vi) increase the
basket for all costs and expenses that may be reimbursed to directors of the Company and its affiliates to $0.3 million in any given fiscal year. As consideration
for such amendment and waiver, the borrowers agreed to pay Third Eye Capital an amendment and waiver fee of $1.5 million to be added to the outstanding
principal balance of the Revolving Credit Facility and to deliver a binding letter of intent from Aemetis Advanced Fuels Goodland, Inc. to acquire the plant,
property and equipment located in Goodland, Kansas and previously owned by New Goodland Energy Center for $15,000,000 in assumed debt. In addition, a
Promissory Note dated February 9, 2016 for $0.3 million was added to the outstanding principal balance of the Revolving Credit Facility as part of the
Amendment No. 12 to the Note Purchase Agreement.
54
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
On April 15, 2016, a Promissory Note for $1.2 million (April Promissory Note) was advanced by Third Eye Capital to Aemetis Inc., as a bridge loan with 12%
interest per annum maturing on the earlier of (a) receipt of proceeds from any financing to Aemetis Advanced Fuels Goodland, Inc., and (b) 60 days from the
April Promissory Note date or June 14, 2016. The April Promissory Note was subject to cross default provisions on other Third Eye Capital Notes and the
waiver was obtained on July 31, 2016 to extend the maturity date of the April Promissory Note to September 30, 2016 with an increase in interest per annum to
18%. On July 19, 2016 and October 12, 2016, Promissory Notes for $0.6 million and $1.2 million respectively, were advanced by Third Eye Capital to Aemetis
Inc., as a bridge loan, with 12% interest per annum maturing on the earlier of (a) receipt of proceeds from any financing to Aemetis Advanced Fuels Goodland,
Inc., and (b) 60 days from the date of the Promissory Notes. As of December 31, 2016, the Company had repaid all of the principal and interest outstanding on
April Promissory Note and July and October Promissory Notes.
On January 31, 2017, a Promissory Note (“January 2017 Note”) 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 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, and (c) May 30,
2017. In addition, as part of January 2017 Note agreement, Aemetis used the $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, the $133 thousand of total proceeds were paid to Third Eye Capital as financing
charges.
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 to allow 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, (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 Q. Cagan (the “Laird Cagan subordinated note”) 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. 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 will evaluate the Amendment of the Notes and will
determine proper accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
Terms of Third Eye Capital Notes
A. Term Notes. As of December 31, 2016, the Company had $6.6 million in principal and interest outstanding under the Term Notes, net of unamortized fair
value discounts of $0.1 million. The Term Notes accrue interest at 14% per annum.
B. Revolving Credit Facility. As of December 31, 2016, AAFK had $24.9 million in principal and interest outstanding, net of unamortized debt issuance costs
of $0.5 million on the Revolving Credit Facility. The Revolving Credit Facility accrues interest at the prime rate plus 13.75% (17.50% as of December 31,
2016), payable monthly in arrears.
C. Revenue Participation Term Notes. As of December 31, 2016, AAFK had $11.0 million in principal and interest outstanding, net of unamortized discounts
of $0.2 million, on the Revenue Participation Term Notes. The Revenue Participation Term Notes accrue interest at 5% per annum.
D. Acquisition Term Notes. As of December 31, 2016, Aemetis Facility Keyes, Inc. had $19.1 million in principal and interest outstanding, net of unamortized
discounts of $0.3 million, on the Acquisition Term Notes. The Acquisition Term Notes accrue interest at prime rate plus 10.75% (14.50% per annum as of
December 31, 2016).
The Third Eye Capital Notes contain various covenants, including but not limited to, minimum free cash flow debt ratio and production requirements and
restrictions on capital expenditures. The Company met all covenants except for cash flow covenant as of December 31, 2016 and obtained a waiver in the
Amendment No. 13 to the Note Purchase Agreement with the Third Eye Capital as described above.
The Third Eye Capital Notes are secured by first priority liens on all real and personal property of, and assignment of proceeds from all government grants
and guarantees from Aemetis, Inc. The Third Eye Capital Notes all contain cross-collateral and cross-default provisions. McAfee Capital, LLC (“McAfee
Capital”), owned by Eric McAfee, the Company’s Chairman and CEO, provided a guaranty of payment and performance secured by all of its Company
shares. In addition, Eric McAfee provided a blanket lien on substantially all of his personal assets, and McAfee Capital provided a guarantee in the amount
of $8.0 million.
55
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Cilion shareholder seller notes payable . In connection with the Company’s merger with Cilion, Inc., (Cilion) on July 6, 2012, the Company issued $5.0 million in
notes payable to Cilion shareholders (Cilion Notes) as merger compensation, subordinated to the Third Eye Capital Notes. The Cilion Notes bear interest at 3%
per annum and are due and payable after the Third Eye Capital Notes have been paid in full. As of December 31, 2016, Aemetis Facility Keyes, Inc. had $5.7
million in principal and interest outstanding on the Cilion Notes.
State Bank of India secured term loan . On June 26, 2008, Universal Biofuels Private Limited (“UBPL”), the Company’s India operating subsidiary, entered into a
six year secured term loan with the State Bank of India in the amount of approximately $6.0 million. The term loan is secured by UBPL’s assets, consisting of
the Kakinada plant.
On August 22, 2015, UBPL received from the State Bank of India, a One Time Settlement Sanction Letter allowing for, among other things, four payments over a
360 day period amounting to $4.3 million, an interest rate holiday for 15 days, after which the interest rate is payable at the rate of 2% above the base rate of the
Reserve Bank of India and certain releases by both parties. The base rate was at 9.3% to 9.7% and interest has accrued at 11.3% to 11.7%. Upon performance
under the agreement, including the payment of all stipulated amounts, UBPL would receive relief for prior accrued interest in the amount of approximately $2.1
million. We paid the first payment under the settlement on August 23, 2015, the second payment under the settlement on October 22, 2015 and the third
payment under the settlement on March 27, 2016. The final payment under the settlement was due on August 25, 2016 with a grace period until October 25,
2016. On October 20, 2016, the Company paid the final stipulated amount and received relief for prior accrued interest in the amount of approximately $2.0
million. As of December 31, 2016, the State Bank of India loan had been repaid.
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.
On January 1, 2016 and July 1, 2016, the Subordinated Notes were amended to extend the maturity date and we evaluated these amendments and the
refinancing terms of the notes and determined that modification accounting was appropriate in accordance with ASC 470-50 Debt – Modification and
Extinguishment.
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; (iii) the completion of an Initial Public Offering by AAFK or Aemetis; or (iv) 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 will evaluate these January 1, 2017 amendments and the refinancing terms of the notes and determine the appropriate 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 April 30, 2013 with a five percent annualized
interest rate and the right to exercise 5 thousand warrants exercisable at $0.01 per share (Laird Cagan Note). In January 2017, the Laird Cagan Note was
amended to extend the maturity date until the earlier of (i) December 31, 2017; (ii) completion of an equity financing by AAFK or the Company in an amount of
not less than $25.0 million; (iii) the completion of an initial public offering by AAFK or Company; or (iv) after the occurrence of an Event of Default, including
failure to pay interest or principal when due and breaches of note covenants.
At December 31, 2016 and December 31, 2015, the Company had, in aggregate, the amount of $7.6 million and $6.3 million in principal and interest outstanding,
respectively, under the Subordinated Notes.
56
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
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 (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 (EB-5 Phase I funding). The EB-5 Notes are convertible after three years at a conversion price of $30.00
per share.
Advanced BioEnergy, LP arranges investments with foreign investors, who each make loans to the Keyes plant in increments of $0.5 million. The Company has
sold an aggregate principal amount of $36.0 million of EB-5 Notes under the EB-5 Phase I funding since 2012 to the report date of this filing. As of December 31,
2016, $34.0 million have been released from the escrow amount to the Company, with $1.0 million remaining in escrow and $1.0 million to be funded to
escrow. As of December 31, 2016, $34.0 million in principal and $1.0 million in accrued interest was outstanding on the EB-5 Notes.
On October 16, 2016, the Company launched a new $50.0 million EB-5 Phase II funding, with plans to issue EB-5 Notes on the same terms and conditions as
those issued under the Company’s EB-5 Phase I funding.
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
12%. In return, the Company agreed to pay Secunderabad Oils an amount equal to 30% of the plant’s monthly net operating profit. In the event that the
Company’s biodiesel facility operates at a loss, Secunderabad Oils would owe the Company 30% of the losses. The agreement can be terminated by either
party 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.
During the years ended December 31, 2016 and 2015, the Company made principal and interest payments to Secunderabad Oils of approximately $4.6 million
and $5.9 million, respectively. As of December 31, 2016 and 2015, the Company had approximately $0.3 million and none outstanding under this agreement,
respectively.
In October 2016, the Company made an agreement with one of the raw material vendors to pay 12% interest on unpaid balance of $1.9 million for supplying the
palm stearin. The Company paid $0.4 million during the three months ended December 31, 2016. As of December 31, 2016, the Company had approximately
$1.5 million outstanding on this raw material purchase agreement.
Scheduled debt repayments for loan obligations follow:
Twelve months ended December 31,
2017
2018
2019
2020
Total debt
Discounts
Total debt, net of discounts
5. Commitments and Contingencies
Operating Leases
Debt Repayments
11,409
$
65,237
25,000
11,174
112,820
(1,106)
111,714
$
As of December 31, 2016, the Company, through its subsidiaries, has non-cancelable future minimum operating lease payments for various office space
locations. Future minimum operating lease payments are as follows:
57
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Twelve months ended December 31,
2017
2018
2019
2020
Total
Future Rent
Payments
$
$
462
479
495
209
1,645
The Cupertino facility office space consists of 9,238 rentable square feet. The current lease expires on May 31, 2020. From June 1, 2013 through December
31, 2016, we sublet office space consisting of 3,104 rentable square feet to Splunk Inc., at a monthly rent rate equal to the rent charged to us by our landlord.
For the years ending December 31, 2016 and 2015, the Company received from Splunk Inc., approximately $0.1 million in rent reimbursement. For the years
ended December 31, 2016 and 2015, the Company recognized rent expense of $0.5 million each period.
Legal Proceedings
On August 31, 2016, the Company filed a lawsuit in Santa Clara County Superior Court against defendants EdenIQ, Inc. (EdenIQ) and its CEO, Brian D. Thome
and Trinity Capital Investments (Trinity). The lawsuit is based on EdenIQ’s wrongful termination of a merger agreement that would have effectuated the merger
of the Company and EdenIQ. The lawsuit also asserts that EdenIQ and Mr. Thome fraudulently induced the Company into assisting EdenIQ to obtain EPA
approval for a new technology which the Company would not have done but for the merger agreement. The relief sought includes EdenIQ’s specific performance
of the merger agreement and monetary damages, as well as punitive damages, attorneys’ fees, and costs.
On August 4, 2013, GS Cleantech Corporation, a subsidiary of Greenshift Corporation (“Greenshift”), filed a complaint in the United States District Court for the
Eastern District of California – Fresno Division against us and our subsidiary, AAFK. The case was transferred to the Southern District of Indiana and joined to a
pending Multidistrict Litigation. The complaint alleges infringement of patent rights assigned to Greenshift and pertaining to corn oil extraction processes we
employ and seeks royalties, treble damages, attorney’s fees, and injunctions precluding us from further infringement. The corn oil extraction process we use is
licensed to us by Valicor Separation Technologies LLC. Valicor has no obligations to indemnify us. On October 23, 2014, the Court ruled that all the claims of all
the patents at issue in the case are invalid and, therefore, not infringed and adopted this finding in our case on January 16, 2015. GS Cleantech has said it will
appeal this decision when the remaining claim in the suit has been decided. We believe the likelihood of Greenshift succeeding on appeal of the invalidity
findings is small since the Court’s findings included several grounds for invalidity of each allegedly infringed patent. If Greenshift successfully appeals the
findings of invalidity, damages may be $1 million or more. The suit also alleged that GS Cleantech obtained the patents at issue by inequitably conducting itself
before the United States Patent Office. A trial in the District Court for the Southern District of Indiana on that issue was concluded and the Court found the
patents unenforceable because of inequitable conduct by GS Cleantech and its counsel before the Patent and Trademark Office. GS Cleantech has asked the
Court to reconsider its decision, citing the existence of a recently issued patent that the patent examiner allowed despite the Court’s findings and the allowance of
which the Court did not consider when making its decision of inequitable conduct. GS Cleantech has indicated it will appeal the current ruling on inequitable
conduct if the Court’s reconsideration does not result in a change in its findings. The Court’s reconsideration has been stayed until April 10, 2017.
58
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
6. Stockholders’ Equity
The Company is authorized to issue up to 40 million shares of common stock, $0.001 par value and 65 million shares of preferred stock, $0.001 par value.
Convertible Preferred Stock
The following is a summary of the authorized, issued and outstanding convertible preferred stock:
Series B preferred stock
Undesignated
Authorized
Shares
7,235
57,765
65,000
Shares Issued and
Outstanding December 31,
2016
2015
1328
—
1328
1398
—
1398
Our Articles of Incorporation authorize the Company’s board to issue up to 65 million shares of preferred stock, $0.001 par value, in one or more classes or
series within a class upon authority of the board without further stockholder approval.
Significant terms of the designated preferred stock are as follows:
Voting. Holders of the Company’s Series B preferred stock are entitled to the number of votes equal to the number of shares of Common Stock into which the
shares of Series B preferred stock held by such holder could be converted as of the record date. Cumulative voting with respect to the election of directors is not
allowed. Currently each share of Series B preferred stock is entitled to a 0.1 vote per share of Series B preferred stock. In addition, without obtaining the approval
of the holders of a majority of the outstanding preferred stock, the Company cannot:
● Increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series B preferred stock;
● Effect an exchange, reclassification, or cancellation of all or a part of the Series B preferred stock, including a reverse stock split, but excluding a
stock split;
● Effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series B preferred stock;
or
● Alter or change the rights, preferences or privileges of the shares of Series B preferred stock so as to affect adversely the shares of such series.
Dividends. Holders of all of the Company’s shares of Series B preferred stock are entitled to receive non-cumulative dividends payable in preference and before
any declaration or payment of any dividend on common stock as may from time to time be declared by the board of directors out of funds legally available for
that purpose at the rate of 5% of the original purchase price of such shares of preferred stock. No dividends may be made with respect to the Company’s
common stock until all declared dividends on the preferred stock have been paid or set aside for payment to the preferred stockholders. To date, no dividends
have been declared.
Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Series B preferred
stock are entitled to receive, prior and in preference to any payment to the holders of the common stock, $3.00 per share plus all declared but unpaid dividends
(if any) on the Series B preferred stock. If the Company’s assets legally available for distribution to the holders of the Series B preferred stock are insufficient to
permit the payment to such holders of their full liquidation preference, then the Company’s entire assets legally available for distribution are to be distributed to
the holders of the Series B preferred stock in proportion to their liquidation preferences. After the payment to the holders of the Series B preferred stock of their
liquidation preference, the Company’s remaining assets legally available for distribution are distributed to the holders of the common stock in proportion to the
number of shares of common stock held by them. A liquidation, dissolution or winding up includes (a) the acquisition of the Company by another entity by means
of any transaction or series of related transactions to which the Company is party (including, without limitation, any stock acquisition, reorganization, merger or
consolidation but excluding any sale of stock for capital raising purposes) that results in the voting securities of the Company outstanding immediately prior
thereto failing to represent immediately after such transaction or series of transactions (either by remaining outstanding or by being converted into voting
securities of the surviving entity or the entity that controls such surviving entity) a majority of the total voting power represented by the outstanding voting
securities of the Company, such surviving entity or the entity that controls such surviving entity, or (b) a sale, lease or other conveyance of all or substantially all
of the assets of the Company.
59
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Conversion. Holders of Series B preferred stock have the right, at their option at any time, to convert any shares into common stock. Every 10 shares of preferred
stock will convert into one share of common stock, at the current conversion rate. The conversion ratio is subject to adjustment from time to time in the event of
certain dilutive issuances and events, such as stock splits, stock dividends, stock combinations, reclassifications, exchanges and the like. In addition, at such
time as the Registration Statement covering the resale of the shares of common stock is declared effective, then all outstanding Series B preferred stock shall be
automatically converted into common stock at the then effective conversion rate.
Mandatorily Redeemable Series B preferred stock. In connection with the election of dissenters’ rights by the Cordillera Fund, L.P., at December 31, 2008 the
Company reclassified 583 thousand shares with an original purchase price of $1.8 million out of shareholders’ equity to a liability called “mandatorily redeemable
Series B preferred stock” and accordingly reduced stockholders’ equity by the same amount to reflect the Company’s obligations with respect to this matter. The
obligation accrues interest at the rate of 5.25% per year. At December 31, 2016 and 2015, the Company had accrued an outstanding obligation of $2.8 million
and $2.7 million, respectively. Full cash payment to the Cordillera Fund is past due. The Company expects to pay this obligation upon availability of funds after
paying senior secured obligations.
7. Outstanding Warrants
During the years ended December 31, 2016 and 2015, the Company granted 227 thousand and 229 thousand common stock warrants, for the extension of
certain Notes. The accredited investors received 2 year warrants exercisable at $0.01 per share as part of note agreements. In 2015, the Company also
granted110 thousand common stock warrants outside the Company plans to certain employees with 1/12th vesting every three months over 3 years and to
Directors with immediate vesting. These warrants have a 10 year term and are exercisable at $2.59 per share as part of the warrant agreement.
The weighted average fair value calculations for warrants granted are based on the following weighted average assumptions:
For the years ended December 31, 2016 and 2015, Note investors exercised 227 thousand and 229 thousand warrant shares at exercise prices of $0.01 per
share, respectively.
A summary of historical warrant activity for the years ended December 31, 2016 and 2015 follows:
Description
Dividend-yield
Risk-free interest rate
Expected Volatility
Expected life (years)
Market value per share on grant date
Exercise price per share
60
For the year ended December 31
2016
2015
0%
0.81%
71.8%
2
2.56
0.01
2.55
$
$
$
0%
1.1%
80.0%
3.62
4.06
0.85
3.85
$
$
$
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Outstanding December 31, 2014
Granted
Exercised
Expired
Outstanding December 31, 2015
Exercised
Granted
Expired
Outstanding December 31, 2016
Warrants
Outstanding &
Exercisable
Weighted -
Average Exercise
Price
Average
Remaining Term
in Years
351
339
(272)
(50)
368
(233)
227
(18)
344
$
$
$
3.05
0.85
0.21
1.30
3.36
0.01
0.01
0.01
3.33
2.69
4.61
3.88
40 thousand of the above outstanding warrants are not vested and exercisable as of December 31, 2016. As of December 31, 2016, the Company had $77
thousand of total unrecognized compensation expense related to warrants which the Company will amortize over the 1.94 years of weighted remaining term.
8. Stock-Based Compensation
Common Stock Reserved for Issuance
Aemetis authorized the issuance of 1.9 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.
709 thousand stock option grants were issued on May 19, 2016 for employees and Directors under the Company Stock Plans.10 thousand stock options were
issued on November 17, 2016 under the Company Stock Plans for a new hire. As of December 31, 2016, 1.5 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
December 31, 2016, all options are vested and 89 thousand options are outstanding.
Inducement Equity Plan Options
In March 2015, the Directors of the Company approved an Inducement Equity Plan authorizing the issuance of 100,000 non-statutory options to purchase
common stock. The Company issued 12 thousand stock options on August 18, 2016 under the Inducement Equity Plan for a new hire. As of December 31,
2016, 37 thousand options were outstanding.
The following is a summary of awards granted under the above Plans:
61
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Balance as of December 31, 2015
Authorized
Granted
Forfeited/expired
Balance as of December 31, 2016
Vested and unvested awards outstanding as of December 31, 2016 and 2015 follow:
Shares Available
for Grant
Number of
Shares
Outstanding
Weighted-
Average Exercise
Price
95
655
(721)
69
98
980
-
721
(69)
1,632
$
$
5.76
-
2.52
4.70
4.37
Vested and Exercisable
Unvested
Total
Vested and Exercisable
Unvested
Total
2016
2015
Number of
Shares
Weighted
Average Exercise
Price
Remaining
Contractual Term
(In Years)
Average Intrinsic
Value1
977
655
1,632
$
$
687
293
980
$
$
5.45
2.76
4.37
6.49
4.06
5.76
3.28
8.66
5.44
$
$
2.32
5.59
3.30
$
$
-
-
-
-
-
-
———————
(1) Intrinsic value based on the $1.39 and $2.90 closing price of Aemetis stock on December 31, 2016 and 2015 respectively, as reported on the NASDAQ
Exchange and Over the Counter Bulletin Board respectively.
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 years ended December 31, 2016 and 2015, the Company recorded option expense in the amount of $0.7 million and $0.9 million, 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 to be zero
due to the small number of plan participants.
62
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
The weighted average fair value calculations for options granted during years ended December 31, 2016 and 2015 are based on the following assumptions:
Description
Dividend-yield
Risk-free interest rate
Expected volatility
Expected life (years)
Market value per share on grant date
Fair value per share on grant date
For the year ended December 31,
2016
2015
0%
1.66%
77.69%
6.99
2.52
1.79
$
$
0%
1.61%
76.55%
5.40
3.69
2.27
$
$
As of December 31, 2016, the Company had $1.1 million of total unrecognized compensation expense for employees which the Company will amortize over the
2.15 years of weighted remaining term.
In addition, Company issued 50 thousand shares in the Company’s restricted common stock for services provided by outside consulting firms at an exercise
price of $4.26 during 2015. We determine the fair value of the these awards granted as either the fair value of the consideration received or the fair value of the
equity instruments issued, whichever is more reliably measurable. Stock-based compensation awards issued to non-employees are recorded in expense and
additional paid-in capital in stockholders’ deficit over the applicable service periods based on the fair value of the awards or consideration received at the
vesting date.
9. Agreements
Working Capital Arrangement. Pursuant to a Corn Procurement and Working Capital Agreement with J.D. Heiskell & Co. (J.D. Heiskell), the Company agreed to
procure whole yellow corn and grain sorghum, 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 the Company’s grain purchases have been from J.D. Heiskell. Title and risk of loss of the corn pass to the Company when
the corn is deposited into the Keyes Plant 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 the Company produces to Kinergy Marketing or other marketing purchasers designated by the
Company and all WDG the Company produces to A.L. Gilbert. The Company markets and sells DCO to A.L. Gilbert and other third parties. The Company’s
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 sale to J.D. Heiskell is inconsequential. These agreements are ordinary purchase and sale agency agreements for the Keyes
plant.
63
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
The J.D. Heiskell sales activity associated with the Purchasing Agreement, Corn Procurement and Working Capital Agreements during the years ended
December 31, 2016 and 2015 were as follows:
Ethanol sales$
Wet distillers grains sales
Corn oil sales
Corn/milo purchases
Accounts receivable
Accounts payable
For the year ended December 31,
2016
2015
$
95,556
22,016
2,995
91,234
743
1,821
92,729
24,556
3,485
97,179
305
1,455
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, the agreements with Kinergy
Marketing matures on August 31, 2017 and with A.L Gilbert on December 31, 2017 with automatic one-year renewals thereafter. For the years ended
December 31, 2016 and 2015, the Company expensed marketing costs of $2.3 million and $2.2 million, respectively, under the terms of both ethanol and wet
distillers’ grains agreements.
10. Segment Information
Aemetis recognizes two reportable geographic segments: “North America” and “India.”
The “North America” operating segment includes the Company’s 60 million gallon per year capacity ethanol manufacturing plant in Keyes, California and its
technology lab in College Park, Maryland. As the Company’s technology becomes commercialized, this business segment will include its domestic commercial
application of second generation 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 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 years ended December 31, 2016 and 2015 follow:
Revenues
North America
India
Total revenues
Cost of goods sold
North America
India
Total cost of goods sold
Gross profit (loss)
North America
India
Total gross profit
For the year ended December 31,
2016
2015
128,706
14,452
143,158
$
$
129,408
17,241
146,649
117,040
14,519
131,559
$
$
126,290
16,160
142,450
11,666
(67)
11,599
$
$
3,118
1,081
4,199
$
$
$
$
$
$
64
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
North America: In 2016 and 2015, the majority of the Company’s revenues from sales of ethanol, WDG and corn oil were sold to J.D. Heiskell pursuant to the
Corn Procurement and Working Capital Agreement. Sales to J.D. Heiskell accounted for 94% and 93% of the Company’s North American segment consolidated
revenues in 2016 and 2015 respectively.
India: During the 2016, two customers in biodiesel accounted for 51% and 12%, of the consolidated India segment revenues compared to one customer in
biodiesel accounted for 56% of the of the consolidated India segment revenues in 2015.
Company total assets by segment follow:
North America
India
Total Assets
11. Related Party Transactions
As of
December 31,
December 31,
2016
2015
$
$
67,279
10,531
77,810
$
$
69,165
13,976
83,141
The Company owes Eric McAfee and McAfee Capital, solely owned by Eric McAfee, amounts of $0.4 million each period in connection with employment
agreements and expense reimbursements, which are included in accrued expenses and accounts payable on the balance sheet as of December 31, 2016 and
2015. For the years ended December 31, 2016 and 2015, the Company expensed $0.1 million for each period, respectively, to reimburse actual expenses
incurred for McAfee Capital and related entities. The Company 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 December 31, 2016, $0.1 million remained as a prepaid expense.
As consideration for the reaffirmation of guaranties required by Amendment No.12 to the Notes which we entered with Third Eye Capital on March 21, 2016, the
Company also agreed to pay $0.2 million in consideration to Mr. McAfee and McAfee Capital in exchange for their willingness to provide the guaranties. As part
of the Guarantee fee agreement, $0.2 million is accrued as of December 31, 2016.
The Company owes various Board Members amounts totaling $1.5 million at both December 31, 2016 and 2015, respectively, in connection with board
compensation fees, which are included in accounts payable on the balance sheet. For each of the years ended December 31, 2016 and 2015, the Company
expensed $0.4 million each year, in connection with board compensation fees.
On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc., entered into an Amended and Restated Note Purchase Agreement with Third Eye
Capital. Third Eye Capital extended credit in the form of (i) senior secured revolving loans in an aggregate principal amount of $18.0 million (“Revolving Credit
Facility”); (ii) senior secured term loans in the principal amount of $10.0 million to convert the Revenue Participation agreement to a Note (“Revenue
Participation Term Notes”); and (iii) 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. After this financing transaction, Third Eye Capital obtained sufficient equity ownership in the Company to be considered a
related party. Please refer to Debt - Note 4 for more information on the transactions with Third Eye Capital.
65
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
12. Income Tax
The Company files a consolidated federal income tax return including all its domestic subsidiaries. State tax returns are filed on a consolidated, combined or
separate basis depending on the applicable laws relating to the Company and its subsidiaries.
Income tax expense for each of the years ended December 31, 2016 and 2015 consisted of $6 thousand of state and local taxes.
During the years ended December 31, 2016 and 2015, there is minimal tax expense recognized. The deferred tax liability resulted in a reduction in the valuation
allowance of the Company, as the Company believes the reversal of the deferred tax liability will occur prior to the expiration of the NOL carryforward. U.S. loss
and foreign loss before income taxes are as follows:
United States
Foreign
Pretax Income
Year Ended December 31,
2016
2015
(16,316)
686
(15,630)
(26,241)
(891)
(27,132)
Income tax benefit differs from the amounts computed by applying the statutory U.S. federal income tax rate (34%) to loss before income taxes as a result of the
following:
Income tax expense (benefit) at the federal statutory rate
State tax expense (benefit)
Foreign tax differential
Stock-based compensation
Interest expense
Goodwill impairment
Other
Credits
Valuation allowance
Income Tax Expense
Year Ended December 31,
2016
2015
(5,314)
(775)
(401)
152
26
-
127
(24)
6,215
6
(9,225)
(760)
180
253
16
329
113
(17)
9,117
6
Effective Tax Rate
-0.04%
-0.02%
The components of the net deferred tax asset or (liability) are as follows:
Org, Start-up and Intangible Assets
Stock Based Comp
Prop., Plant, and Equip.
NOLs and Credits
Convertible Debt
Ethanol Credits
Debt Extinguishment
Other, net
Subtotal
Valuation Allowance
Deferred tax assets (liabilities)
66
Year Ended December 31,
2016
2015
7,435
185
(21,639)
66,698
(5)
1,500
612
620
55,406
(55,406)
-
8,067
67
(22,717)
60,603
(5)
1,500
1,361
536
49,411
(49,411)
-
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Based on the Company’s evaluation of current and anticipated future taxable income, the Company believes it is more likely than not that insufficient taxable
income will be generated to realize the net deferred tax assets, and accordingly, a valuation allowance has been set against these net deferred tax assets.
The Company does not provide for U.S. income taxes for any undistributed earnings of the Company’s foreign subsidiaries, as the Company considers these to
be permanently reinvested in the operations of such subsidiaries and have a cumulative foreign loss. At December 31, 2016 and 2015, these undistributed
losses totaled $10.9 million, and $11.6 million, respectively. If any earnings were distributed, some countries may impose withholding taxes. However, due to the
Company’s overall deficit in foreign cumulative earnings and its U.S. loss position, the Company does not believe a material net unrecognized U.S. deferred tax
liability exists.
ASC 740 Income Taxes provides that the tax effects from an uncertain tax position can be recognized in the Company’s financial statements only if the position
is more-likely-than-not of being sustained on audit, based on the technical merits of the position. Tax positions that meet the recognition threshold are reported at
the largest amount that is more-likely-than-not to be realized. This determination requires a high degree of judgment and estimation. The Company periodically
analyzes and adjusts amounts recorded for the Company’s uncertain tax positions, as events occur to warrant adjustment, such as when the statutory period for
assessing tax on a given tax return or period expires or if tax authorities provide administrative guidance or a decision is rendered in the courts. The Company
does not reasonably expect the total amount of uncertain tax positions to significantly increase or decrease within the next 12 months. As of December 31,
2016, the Company’s uncertain tax positions were not significant for income tax purposes.
We conduct business globally and, as a result, one or more of the Company’s subsidiaries file income tax returns in the U.S. federal jurisdiction and various state
and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such
major jurisdictions as India, Mauritius, and the United States. The Company files a U.S. federal income tax return and tax returns in three U.S. states, as well as
in two foreign jurisdictions. Penalties and interest are classified as general and administrative expenses.
The following describes the open tax years, by major tax jurisdiction, as of December 31, 2016:
United States — Federal
United States — State
India
Mauritius
2005 – present
2005 – present
2006 – present
2006 – present
As of December 31, 2016, the Company had federal net operating loss carryforwards of approximately $161.0 million and state net operating loss carryforwards
of approximately $154.0 million. Included in the federal and state net operating loss carryforwards are approximately $0.4 million and $0.3 million of excess stock
based compensation related deductions that will be credited to additional paid in capital when the tax benefits realized. The Company also has approximately
$1.5 million of alcohol and cellulosic biofuel credit carryforwards. The federal net operating loss and other tax credit carryforwards expire on various dates
between 2027 and 2036. The state net operating loss carryforwards expire on various dates between 2027 through 2036. Under the current tax law, net
operating loss and credit carryforwards available to offset future income in any given year may be limited by U.S. or India statute regarding net operating loss
carryforwards and timing of expirations or upon the occurrence of certain events, including significant changes in ownership interests. The Company’s India
subsidiary also will have net operating loss carryforwards as of March 31, 2017, its tax fiscal year end, of approximately $11.0 million in U.S. dollars, which
expire from March 30, 2017 to March 30, 2024.
67
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
13. Parent Company Financial Statements (Unaudited)
The following is a summary of the Parent Company financial statements for the years ended December 31, 2016 and 2015:
Aemetis, Inc. (Parent Company)
Consolidated Balance Sheets
As of December 31, 2016 and 2015
2016
2015
$
$
-
12,244
270
12,514
-
15,609
315
15,924
27
54
54
$
12,595
$
15,978
$
$
3,039
2,844
1,419
7,302
49,694
205
2,738
2,405
51
113
349
(449)
55,106
2,746
2,742
1,158
6,646
39,019
205
2,741
2,285
-
349
27
44,626
55,106
44,626
1
20
83,441
(129,887)
(3,388)
(49,813)
12,595
$
1
20
82,115
(114,251)
(3,179)
(35,294)
15,978
$
Assets
Current assets
Cash and cash equivalents
Intercompany receivables
Prepaid expenses
Total current assets
Property, plant and equipment, net
Other assets
Total Assets
Liabilities & stockholders' deficit
Current liabilities
Accounts payable
Mandatorily redeemable Series B convertible preferred
Other current liabilities
Total current liabilities
Subsidiary obligation in excess of investment
Investment in AE Advanced Fuels, Inc.
Investment in Aemetis Americas, Inc
Investment in Aemetis Biofuels, Inc.
Investment in Aemetis Technologies, Inc.
Investment in AE Advanced Fuels Goodland , Inc.
Investment in AE Advanced Products Keyes , Inc.
Investment in Biofuels Marketing, Inc.
Investment in Aemetis International, Inc.
Total subsidiary obligation in excess of investment
Total long term liabilities
Stockholders' deficit
Series B Preferred convertible stock
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders' deficit
Total liabilities & stockholders' deficit
68
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Aemetis, Inc. (Parent Company)
Consolidated Statements of Operations and Comprehensive Loss
For the Years Ended December 31, 2016 and 2015
Equity in subsidiary losses
Selling, general and administrative expenses
Operating loss
Other expense
Interest expense
Other expense
Loss before income taxes
Income tax expense
Net loss
Other comprehensive loss
Foreign currency translation adjustment
Comprehensive loss
69
2016
2015
$
(10,272)
$
(22,669)
4,818
3,910
(15,090)
(26,579)
278
262
179
374
(15,630)
(27,132)
6
6
(15,636)
(27,138)
(209)
(15,845)
$
(217)
(27,355)
$
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
2016
2015
(15,636)
(27,138)
747
-
(25)
10,272
45
293
284
104
-
(3,916)
3,916
3,916
-
-
-
-
-
$
$
4,894
6
-
578
-
-
66
938
204
(54)
22,669
294
(103)
197
120
(31)
(2,904)
2,816
2,816
23
23
(65)
65
-
6,824
6
21
1,087
7,479
432
-
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Aemetis, Inc. (Parent Company)
Consolidated Statements of Cash Flows
For the years ended December 31, 2016 and 2015
Operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation
Stock issued in connection with consultant services
Change in fair value of warrant liability
Changes in assets and liabilities:
Subsidiary portion of net losses
Prepaid expenses
Accounts payable
Accrued interest expense
Other liabilities
Other assets
Net cash used in operating activities
Investing activities:
Subsidiary advances, net
Net cash provided by investing activities
Financing activities:
Issuance of common stock for services, option and warrant exercises
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures of cash flow information, cash paid:
Interest payments
Income tax expense
Supplemental disclosures of cash flow information, non-cash transactions:
Proceeds from exercise of stock options applied to accounts payable
Fair value of warrants issued to subordinated debt holders
Repurchase of common stock on revolver loan advance
Stock issued in connection with services and interest on debt
Settlement of accounts payable through transfer of equipment
70
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
14. Subsequent Events
Subordinated Notes
On January 1, 2017, the two accredited investors Subordinated Notes’ maturity was extended 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 million; (iii) the completion of an Initial Public Offering by AAFK or Aemetis; or (iv) after the
occurrence of an Event of Default, including failure to pay interest or principal when due and breaches of note covenants. A 10 percent cash extension fee was
paid by adding the fee to the balance of the new Note and 113 thousand in common stock warrants were granted with a term of two years and an exercise price
of $0.01 per share.
Third Eye Capital Promissory Note
On January 31, 2017, a Promissory Note (“January 2017 Note”) 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 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, and (c) May 30,
2017. In addition, as part of January 2017 Note agreement, Aemetis used the $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, the $133 thousand of total proceeds were paid to Third Eye Capital as financing
charges.
Third Eye Capital Amendment
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 to allow 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, (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 Q. Cagan (the “Laird Cagan subordinated note”) 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. 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 will evaluate the Amendment of the Notes and will
determine proper accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
19. 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 $1.0 million from fund raising;
● Obtaining $50.0 million in funding from EB-5 Phase II funding currently being offered to investors;
● Refinancing 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 at
least a year. There can be no assurance that the existing credit facilities and cash from operations will be sufficient or 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.
71
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: March 16, 2017
SIGNATURES
Aemetis, Inc.
/s/ ERIC A. MCAFEE
Eric A. McAfee
Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Eric A. McAfee and Todd A. Waltz,
and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him in any and all capacities, to sign any amendments to this
report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Name
/s/ ERIC A. MCAFEE
Eric A. McAfee
/s/TODD WALTZ
Todd Waltz
/s/ FRANCIS BARTON
Fran Barton
/s/ LYDIA I. BEEBE
Lydia I. Beebe
/s/ JOHN R. BLOCK
John R. Block
/s/ DR. STEVEN HUTCHESON
Dr. Steven Hutcheson
/s/ HAROLD SORGENTI
Harold Sorgenti
Title
Chairman/Chief Executive Officer
(Principal Executive Officer and Director)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
72
Date
March 16, 2017
March 16, 2017
March 16, 2017
March 16, 2017
March 16, 2017
March 16, 2017
March 16, 2017
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
ARTICLES OF INCORPORATION
of
AEMETIS, INC.
(Pursuant to NRS 78)
Exhibit 3.1.7
1. Name of Corporation: Aemetis, Inc.
2. Resident Agent Name and Street Address (must be a Nevada address where process may be served):
David A. Garcia
5441 Kietzke Lane, Second Floor
Reno, NEVADA 89511
3. Shares (number of shares corporation is authorized to issue):
Number of shares with par value: 105,000,000
Par value: $0.001
Number of shares without par value:
4. Names & Addresses, of Board of Directors/Trustees (each Director/Trustee must be a natural person at least 18 years of age; attach additional
pages if more than two Directors/ Trustees:
a. Timothy S. Morris
203 N. LaSalle Street, Suite 2100, Chicago, IL 60601
b. William J. Maender
203 N. LaSalle Street, Suite 2100, Chicago, IL 60601
5. Purpose (optional; see instructions):
The purpose of this Corporation shall be: To engage in any lawful activity.
6. Names, Addresses and Signature of Incorporator (attach additional page if more than one incorporator):
/s/ David A. Garcia
David A. Garcia
5441 Kietzke Lane, Second Floor
Reno, NEVADA 89511
1
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
7. Certificate of Acceptance of Appointment of Resident Agent:
I hereby accept appointment as Resident Agent for the above named corporation.
/s/David A. Garcia
Authorized Signature of R.A. or On Behalf of R.A. Company
10-24-06
Date
8. DIRECTORS. The members of the governing board shall be styled directors. The number of directors may be increased or reduced in the manner
provided for in the Bylaws of the Corporation. The board shall be classified, with respect to the time for which the directors severally hold office, into
three classes, as nearly equal in number as possible, the first class, designated “Class I,” to hold office for a term of three (3) years, initially, expiring at
the annual meeting of stockholders to be held in 2019, the second class, designated “Class II,” to hold office for a term of two (2) years, initially, expiring
at the annual meeting of stockholders to be held in 2018, and the third class, designated “Class III,” to hold office for a term of one (1) year, initially,
expiring at the annual meeting of stockholders to be held in 2017, with members of each class to hold office until their successors are elected and
qualified or until their earlier death, resignation, retirement or removal. At each annual meeting of the stockholders of the Corporation, the successors to
the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election. If the number of directors which constitutes the whole board is changed, any increase or decrease shall
be apportioned among the classes so as to maintain the number of directors in each class as nearly equally as possible, and any additional director of
any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that coincides with the remaining term of that class,
but in no event shall a decrease in such number of directors shorten the term of any incumbent director. Any director chosen to fill a vacancy not
resulting from an increase in the number of directors shall hold office until the next election of the class for which such director has been chosen, and
until that director’s successor has been elected and qualified or until such director’s earlier death, resignation, retirement or removal.
9. CLASSIFICATION OF CAPITAL STOCK. The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock”
and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is One Hundred and Five Million (105,000,000) shares,
Forty Million (40,000,000) shares of which shall be common Stock, $0.001 par value (the “Common Stock”), and Sixty-Five Million (65,000,000) shares
of which shall be Preferred Stock, $0.001 par value (the “Preferred Stock”). The undesignated Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized, subject to any restrictions set forth herein or in any Certificate of Designation of Preferred
Stock, to fix or alter the rights, preferences, privileges and restrictions of any wholly unissued series of Preferred Stock, and the number of shares
constituting any such series or the designation thereof and to increase or decrease the number of shares of any such series subsequent to the issuance
of shares of that series, including as may be required pursuant to the provisions hereof or of any Certificate of Designation of Preferred Stock, but not
below the number of shares of such series then outstanding. In case the number of shares of any series shall so be decreased, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of such series.
2
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
10. VOTING.
A. Restricted Class Voting. Except as otherwise expressly provided herein or in a Certificate of Designation of Preferred Stock or as required by law,
the holders of Preferred Stock and the holders of Common Stock shall vote together and not as separate classes.
B. No Series Voting. Other than as provided herein or in a Certificate of Designation or as required by law, there shall be no series voting.
C. Common Stock. Each holder of shares of Common Stock shall be entitled to one vote for each share thereof held.
D. Preferred Stock. Each holder of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which
the shares of Preferred Stock held by such holder could be converted as of the record date. The holders of shares of the Preferred Stock shall be
entitled to vote on all matters on which the Common Stock shall be entitled to vote. Holders of Preferred Stock shall be entitled to notice of any
shareholders’ meeting in accordance with these Articles of Incorporation and the Bylaws of the Corporation. Fractional votes shall not, however, be
permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Preferred Stock held by
each holder could be converted), shall be disregarded.
E. Stockholder Voting. Action required or permitted to be taken at a meeting of the stockholders of the Corporation may not be taken by consent or
consents in writing in lieu of meeting.
F. Adjustment in Authorized Common Stock . Subject to the provisions of any Certificate of Designation of Preferred Stock, the number of authorized
shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding) with the
approval or consent of the holders of a majority of the outstanding Common Stock and Preferred Stock of the Corporation voting together as a single
class.
G. Preemptive Rights. Holders of Preferred Stock and holders of Common Stock shall not be entitled to any preemptive, subscription or similar rights in
respect to any securities of the Corporation, except as specifically set forth herein or in any other document agreed to by the Corporation.
11. DISTRIBUTIONS. Subject to the terms of these Articles of Incorporation and any Certificate of Designation of Preferred Stock, and to the fullest extent
permitted by the Nevada Revised Statutes, the Corporation shall be expressly permitted to redeem, repurchase, or make distributions, as that term is
defined in Section 78.191 of the Nevada Revised Statutes, with respect to the shares of its capital stock in all circumstances other than where doing so
would cause the Corporation to be unable to pay its debts as they become due in the usual course of business.
3
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
12. INDEMNIFlCATION. The Corporation shall indemnify its officers and directors and may indemnify any other person to the fullest extent permitted by law.
Any amendment, repeal or modification of any provision of this Article 9 shall not adversely affect any right or protection of any agent of this Corporation
existing at the time of such amendment, repeal or modification.
13. LIABILITY OF DIRECTORS AND OFFICERS . To the maximum extent permitted under the Nevada Revised Statutes, no director or officer of the
corporation shall be personally liable to the corporation or its stockholders for damages as a result of any act or failure to act in his capacity as a director
or officer.
4
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LIMITED WAIVER AND AMENDMENT NO. 13 TO
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
Exhibit 10.70
This Limited Waiver and Amendment No. 13 to Amended and Restated Note Purchase Agreement (this “ Amendment”), is dated as of March 1, 2017, is
made by and among (i) AEMETIS ADVANCED FUELS KEYES, INC. (f/k/a AE Advanced Fuels Keyes, Inc.) , a Delaware corporation (“ AEAFK”), AEMETIS
FACILITY KEYES, INC., a Delaware corporation and successor-in-interest to Keyes Facility Acquisition Corp., a Delaware corporation (“ Keyes Facility”,
together with AEAFK, the “Borrowers”), AEMETIS, INC. (formerly known as AE Biofuels, Inc.), a Nevada corporation (“ Parent”), and (ii) THIRD EYE CAPITAL
CORPORATION, an Ontario corporation, as agent for the Noteholders (“ Administrative Agent”), THIRD EYE CAPITAL CREDIT OPPORTUNITIES FUND –
INSIGHT FUND (“TEC Insight Fund Purchaser”) and SPROTT PRIVATE CREDIT TRUST (“Sprott Private Credit Trust Purchaser”, and together with TEC
Insight Fund Purchaser, the “Noteholders”).
RECITALS
A. The Borrowers, Administrative Agent and Noteholders entered into the Amended and Restated Note Purchase Agreement dated as of July 6,
2012, as amended by a Limited Waiver and Amendment No.1 to Amended and Restated Note Purchase Agreement dated as of October 18, 2012, as amended
by a Limited Waiver and Amendment No. 2 to Amended and Restated Note Purchase Agreement dated as of February 27, 2013, as amended by a Limited
Waiver and Amendment No. 3 to Amended and Restated Note Purchase Agreement dated as of April 15, 2013, as amended by an Amendment No. 4 to
Amended and Restated Note Purchase Agreement dated as of April 19, 2013, as amended by a Limited Waiver and Amendment No. 5 to Amended and
Restated Note Purchase Agreement dated as of July 26, 2013, as amended by a Limited Waiver and Amendment No. 6 to Amended and Restated Note
Purchase Agreement dated as of September 30, 2013, as amended by a Limited Waiver and Amendment No. 7 to Amended and Restated Note Purchase
Agreement dated as of May 14, 2014, as amended by an Amendment No. 8 to Amended and Restated Note Purchase Agreement dated as of November 7,
2014, as amended by an Amendment No. 9 to Amended and Restated Note Purchase Agreement dated as of March 12, 2015, as amended by an Amendment
No. 10 to Amended and Restated Note Purchase Agreement dated as of April 30, 2015, as amended by an Amendment No. 11 to Amended and Restated Note
Purchase Agreement dated as of August 6, 2015 and as amended by an Amendment No. 12 to Amended and Restated Note Purchase Agreement dated as of
March 21, 2016 (as the same may be amended, restated, supplemented, revised or replaced from time to time, the “Agreement”). Capitalized terms used but
not defined in this Amendment shall have the meaning given to them in the Agreement.
B. The Borrowers have requested, and the Administrative Agent and Noteholders have agreed, to amend the Agreement on the terms and
conditions contained herein.
AGREEMENT
SECTION 1. Reaffirmation of Indebtedness. The Borrowers hereby confirm that as of March 1, 2017 and before giving effect to this Amendment, the
outstanding principal balance of the Notes is $63,772,817.02.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
SECTION 2. Limited Waiver . Subject to the terms, covenants and conditions of this Amendment, Administrative Agent hereby waives:
(A) the Event of Default arising from the failure of the Borrowers to comply with Section 6.2(a) of the Agreement for the Fiscal Quarter
ending December 31, 2016 (failure to maintain trailing Free Cash Flow); and
(B) the Event of Default which occurred pursuant to Section 8.1(k) whereby the Parent failed to pay certain Indebtedness outstanding to
Laird Q. Cagan (“Cagan”) in the aggregate principal amount of $128,500, which exceeds that $100,000 threshold in Section 8.1(k), when such amount was due
and payable;
(C) the Parent’s obligations in Section 6.4(u), but only to the extent required to permit the Parent to issue up to $128,500 worth of Capital
Stock to Cagan, or his registered broker or intermediary, in payment for and in full and final satisfaction and release of certain Subordinated Debt owed by
Parent to Cagan referred to in (A) above.
Except as expressly provided herein, nothing contained herein shall be construed as a waiver by Administrative Agent or Noteholders of any covenant or
provision of the Agreement, the other Note Purchase Documents, or of any other contract or instrument among the Borrowers, any Company Party, Noteholders
and Administrative Agent, and the failure of Administrative Agent or Noteholders at any time or times hereafter to require strict performance by the Borrowers or
any Company Party of any provision thereof shall not waive, affect or diminish any right of Administrative Agent or Noteholders to thereafter demand strict
compliance therewith. Administrative Agent and Noteholders hereby reserve all rights granted under the Agreement, the Note Purchase Documents and any
other contract or instrument among the Borrowers, any Company Party, Noteholders and Administrative Agent.
SECTION 3. Amendments. The following sections of the Agreement shall be and hereby are amended as follows:
( A ) Recitals Part of Agreement. The foregoing recitals are hereby incorporated into and made a part of the Agreement, including all
defined terms referenced therein.
(B) Section 1.1 (Definitions).
Section 1.1 of the Agreement is hereby amended by substituting and adding the following definitions in lieu of or in addition to the versions of
such terms and related definitions contained in the Agreement, as applicable, in the appropriate alphabetical order:
“Acquisition Notes” means, collectively, the amended and restated notes in the principal amount of $18,554,286.69 issued by the Borrowers
made payable to the Noteholders, together with all other notes accepted from time to time in substitution, renewal or replacement for all or any part thereof.
“Acquisition Notes Stated Maturity Date ” means April 1, 2018; provided that the Acquisition Notes Stated Maturity Date shall be extended to
April 1, 2019 upon written notice to the Administrative Agent of the Borrowers’ election to extend not earlier than 60 days, and not later than 30 days, prior to
April 1, 2018, so long as at the time of the extension (a) no Default or Event of Default has occurred and is continuing under any Financing Document and (b) the
Borrowers pay to the Administrative Agent an extension fee in cash in an amount equal to 5% of the Note Indebtedness in respect to the Acquisition Notes
which fee shall be deemed fully earned and nonrefundable, provided that such fee may be added to the outstanding principal balance of the Acquisition Notes
on the effective date of such extension at the election of the Borrowers.
2
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
“Existing Notes” means, collectively, the amended and restated notes in the principal amount of $6,941,946.55 issued by the Borrowers made
payable to the Noteholders, together with all other notes accepted from time to time in substitution, renewal or replacement for all or any part thereof.
“Existing Notes Stated Maturity Date ” means April 1, 2018; provided that the Existing Notes Stated Maturity Date shall be extended to April 1,
2019 upon written notice to the Administrative Agent of the Borrowers’ election to extend not earlier than 60 days, and not later than 30 days, prior to April 1,
2018, so long as at the time of the extension (a) no Default or Event of Default has occurred and is continuing under any Financing Document and (b) the
Borrowers pay to the Administrative Agent an extension fee in cash in an amount equal to 5% of the Note Indebtedness in respect to the Existing Notes which
fee shall be deemed fully earned and nonrefundable, provided that such fee may be added to the outstanding principal balance of the Existing Notes on the
effective date of such extension at the election of the Borrowers.
“Financing” means, collectively, (i) the issuance and sale by the Borrowers of $6,941,946.55 aggregate principal amount of Existing Notes
pursuant to this Agreement, (ii) the issuance and sale by the Borrowers of $18,554,286.69 aggregate principal amount of Acquisition Notes pursuant to this
Agreement, (iii) the issuance and sale by the Borrowers of up to $28,523,013.74 aggregate principal amount of Revolving Notes (plus any PIK Amount added to
the outstanding principal amount of the Revolving Notes pursuant to Section 2.11(1)), pursuant to this Agreement and (iv) the issuance and sale by the
Borrowers of $11,744,099.19 aggregate principal amount of Revenue Participation Notes pursuant to this Agreement and (iv) the entry into by the parties
thereto of the other transactions contemplated by the Financing Documents.
“Non-Revolving Portion” means the Thirteenth Amendment Advance and the Revolving Notes Extension Fee Advance (together with any PIK
Amounts added to the Revolving Notes pursuant to Section 2.11(1)) in the aggregate principal amount, inclusive of PIK Amounts as of March 1, 2017, of
$10,523,013.73.
“Principal Waterfall” means the order in which payments are applied in respect of the repayment and redemption of the principal outstanding
under the Notes, as follows: (i) first, to the components of the Non-Revolving Portion of the Revolving Notes as follows: (A) the portion of the Revolving Notes
issued in respect of the Thirteenth Amendment Advance, (B) the portion of the Revolving Notes issued in respect of the Revolving Notes Extension Fee
Advance and (C) any PIK Amounts added to the principal amount of the Revolving Notes, (ii) second, to the Existing Notes, (iii) third, to the Acquisition Notes,
(iv) fourth, to the Revenue Participation Notes and (v) fifth, to the Revolving Portion of Revolving Notes.
3
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
“Redemption Event” means any of the following events: (i) the completion of any equity offering of Capital Stock of any Company Party that
results in gross proceeds of at least $2,000,000, (ii) the consummation of, or the receipt of any proceeds in respect of, a Program by any Company Party, (iii) if
any Company Party receives proceeds from any government grants and credits, including the California Energy Commission granted provided under the
California Producer Incentive Program, and (iv) if any Company Party receives any insurance proceeds of any kind; provided, that so long as no Default or Event
of Default has occurred and is continuing and the amount of loss does not exceed $250,000, this clause (iv) shall not be a Redemption Event to the extent such
Company Party reinvests all such insurance proceeds in productive assets of a kind then used in the Business within 180 days after the event of loss with
respect to such insurance proceeds.
“Revenue Participation Notes” means, collectively, the amended and restated notes in the principal amount of $11,744,099.19 issued by the
Borrowers made payable to the Noteholders, together with all other notes accepted from time to time in substitution, renewal or replacement for all or any part
thereof.
“Revenue Participation Notes Stated Maturity Date ” means April 1, 2018; provided that the Revenue Participation Notes Stated Maturity Date
shall be extended to April 1, 2019 upon written notice to the Administrative Agent of the Borrowers’ election to extend not earlier than 60 days, and not later than
30 days, prior to April 1, 2018, so long as at the time of the extension (a) no Default or Event of Default has occurred and is continuing under any Financing
Document and (b) the Borrowers pay to the Administrative Agent an extension fee in cash in an amount equal to 5% of the Note Indebtedness in respect to the
Revenue Participation Notes which fee shall be deemed fully earned and nonrefundable, provided that such fee may be added to the outstanding principal
balance of the Revenue Participation Notes on the effective date of such extension at the election of the Borrowers.
“Revolving Notes” means, collectively, the amended and restated notes in the principal amount of $28,523,013.74 (plus any PIK Amount added
to the outstanding principal amount of the Revolving Notes pursuant to Section 2.11(1)) issued by the Borrowers made payable to the Noteholders, together with
all other notes accepted from time to time in substitution, renewal or replacement for all or any part thereof.
“Revolving Notes Extension Fee ” has the meaning set forth in Section 2.4
“Revolving Notes Stated Maturity Date ” means April 1, 2018; provided that the Revolving Notes Stated Maturity Date shall be extended to
April 1, 2019 upon written notice to the Administrative Agent of the Borrowers’ election to extend not earlier than 60 days, and not later than 30 days, prior to
April 1, 2018, so long as at the time of the extension (a) no Default or Event of Default has occurred and is continuing under any Financing Document and (b) the
Borrowers pay to the Administrative Agent an extension fee in cash in an amount equal to 5% of the Note Indebtedness in respect to the Revolving Notes which
fee shall be deemed fully earned and nonrefundable, provided that such fee may be added to the outstanding principal balance of the Revolving Notes on the
effective date of such extension at the election of the Borrowers.
4
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
“Subsequent Closing” means, at the option of the Borrowers, one or more Closings for the purchase and sale of Revolving Notes following the
First Closing, in each case as contemplated herein, provided that no more than $28,523,013.74 principal amount of Revolving Notes (plus any PIK Amount
added to the outstanding principal amount of the Revolving Notes pursuant to Section 2.11(1)), shall be issued and outstanding at any time.
“Thirteenth Amendment Advance ” has the meaning set forth in Section 2.4.
( C ) Section 2.3 (Creation and Issuance of the Notes) . Section 2.3 of the Agreement is deleted in its entirety and replaced with the
following:
“ 2 . 3 Creation and Issuance of the Notes . The Borrowers hereby create and authorize the Notes for issuance in the aggregate principal
amount of up to $65,763,346.17 (plus any PIK Amount added to the outstanding principal amount of the Revolving Notes pursuant to Section 2.11(1)). The
Notes shall be dated as of their applicable Issue Date (including all replacement certificates issued in accordance with this Agreement) and will become due and
payable, together with all accrued and unpaid interest thereon, on the Maturity Date. Other than the Revolving Portion of the Revolving Notes, which may be re-
issued once redeemed, neither the Non-Revolving Portion of the Revolving Notes nor any other Notes, may be re-issued once redeemed.”
( D ) Section 2.4 (Subsequent Closings and Revolving Notes) . Section 2.4 of the Agreement is deleted in its entirety and replaced with
the following:
“ 2 . 4 Subsequent Closings and Revolving Notes . Subject to the terms and conditions set forth in Section 2.2, on and after the date of
this Agreement and upon written notice by the Borrowers to the Administrative Agent of not less than ten Business Days in substantially the form attached
hereto as Exhibit B (each, a “Revolving Loan Request”), the Borrowers, jointly and severally, agree to issue Revolving Notes in an aggregate amount not to
exceed at any time outstanding the amount identified in the Allocation Notice; provided, however, that (i) after giving effect to any outstanding Revolving Notes,
the aggregate principal amount of all outstanding Revolving Notes shall not exceed $28,523,013.74 (plus any PIK Amount added to the outstanding principal
amount of the Revolving Notes pursuant to Section 2.11(1)), (ii) $750,000 of the Revolving Notes may only be used by the Borrowers to pay the Thirteenth
Amendment and Waiver Fee (the “Thirteenth Amendment Advance ”), (iii) up to (A) $1,322,524.46 of the Revolving Notes may only be used by the Borrowers
to pay the fee in connection with the extension of the Revolving Notes Stated Maturity Date to April 1, 2018 in accordance with the terms set forth in the
definition of Revolving Notes Stated Maturity Date in effect on March 1, 2017 (the “Revolving Notes Extension Fee Advance ”) and (iv) once the portion of the
Revolving Notes representing the Thirteenth Amendment Advance and the Revolving Notes Extension Fee Advance, together with any accrued but unpaid PIK
Amounts thereon, have been redeemed, such amounts shall not be re-issued. The aggregate principal amount of any new Revolving Notes issued at any
Subsequent Closing must be at least $500,000 and in increments of $100,000. At each Subsequent Closing, the Borrowers shall deliver an officer’s certificate to
the Administrative Agent and such other evidence reasonably acceptable to the Administrative Agent that the conditions precedent set forth in Section 2.2 have
been met. The proposed use of proceeds in each Revolving Loan Request shall be acceptable to the Administrative Agent in its sole discretion.”
5
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
(E) Section 6.2(a) (Free Cash Flow Financial Covenant). Section 6.2(a) of the Agreement is deleted in its entirety.
SECTION 4. Redemption on Occurrence of Certain Events. Section 4.2(1) of the Agreement is deleted in its entirety and replaced with the
following:
“Partial Redemption. Upon the occurrence of a Redemption Event, the Borrowers shall redeem Notes, or that portion of the Notes, equal to the net
proceeds received by the Borrowers or Company Parties, as applicable, from such Redemption Event. Upon the occurrence of any Redemption Event
or in the event the Borrowers elect to redeem the Notes pursuant to this Agreement, the Borrowers shall redeem the Notes in the order of priority in
accordance with the Principal Waterfall.”
Section 4.2(3) of the Agreement is deleted in its entirety.
SECTION 5. Conditions to Effectiveness. This Amendment shall be effective February 28, 2017 and subject to satisfaction of the following
conditions precedent:
(A) Administrative Agent shall have received this Amendment duly executed by the parties hereto.
(B) Administrative Agent shall have been paid (i) a waiver fee in the amount of $250,000 (the “ Waiver Fee”), and (ii) an amendment fee in
the amount of $500,000 (the “Amendment Fee”), the Waiver Fee and the Amendment Fee (collectively, the “ Thirteenth Amendment and Waiver Fee ”) shall
be added to the outstanding principal balance of the Revolving Notes on the effective date of this Amendment and deemed fully earned and non-refundable.
(C) Administrative Agent shall have received a Second Amended and Restated Revolving Note for Sprott Private Credit Trust Purchaser
duly executed by the Borrowers in the original principal amount of $22,858,834.07 (which amount includes PIK Amount that has been added to the outstanding
principal amount of the Revolving Notes pursuant to Section 2.11(1)).
(D) Administrative Agent shall have received a Thirteenth Amended and Restated Revolving Note for TEC Insight Fund Purchaser duly
executed by the Borrowers in the original principal amount of $5,664,179.67 (which amount includes PIK Amount that has been added to the outstanding
principal amount of the Revolving Notes pursuant to Section 2.11(1)).
(E) Administrative Agent shall have received a Second Amended and Restated Existing Note for Sprott Private Credit Trust Purchaser duly
executed by the Borrowers in the original principal amount of $5,448,017.27.
(F) Administrative Agent shall have received a Fifth Amended and Restated Existing Note for TEC Insight Fund Purchaser duly executed
by the Borrowers in the original principal amount of $1,493,929.28.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
(G) Administrative Agent shall have received a Second Amended and Restated Acquisition Note for Sprott Private Credit Trust Purchaser
duly executed by the Borrowers in the original principal amount of $15,405,435.58.
(H) Administrative Agent shall have received a Fourth Amended and Restated Acquisition Note for TEC Insight Fund Purchaser duly
executed by the Borrowers in the original principal amount of $3,148,851.11.
(I) Administrative Agent shall have received a Second Amended and Restated Revenue Participation Note for Sprott Private Credit Trust
Purchaser duly executed by the Borrowers in the original principal amount of $8,989,968.42.
(J) Administrative Agent shall have received a Fourth Amended and Restated Revenue Participation Note for TEC Insight Fund Purchaser
duly executed by the Borrowers in the original principal amount of $2,754,130.77.
(K) Administrative Agent shall have received a Reaffirmation of Unconditional Personal Guaranty, duly executed by the Chairman.
(L) Administrative Agent shall have received a Reaffirmation of Guaranty, duly executed by the Company Parties (other than the
Borrowers).
(M) Administrative Agent shall have received a Reaffirmation of Guaranty, duly executed by McAfee Capital, LLC.
(N) Administrative Agent shall have received a certificate of a Senior Officer of the Parent and each Borrower certifying (1) that no change
has occurred to the Organizational Documents of such Person since certified copies thereof were previously delivered to the Administrative Agent and (2) that
attached thereto is a true and complete copy of resolutions duly adopted by the board of directors of each such Person authorizing the execution, delivery and
performance of the Note Purchase Documents to which such Person is a party delivered in connection with this Amendment and that such resolutions have not
been modified, rescinded or amended and are in full force.
(O) Administrative Agent shall have performed and complied with all of the covenants and conditions required by this Amendment and the
Note Purchase Documents to be performed and complied with upon the effective date of this Amendment.
(P) Administrative Agent shall have received all other approvals, opinions, documents, agreements, instruments, certificates, schedules and
materials as Administrative Agent may reasonably request.
Each Borrower acknowledges and agrees that the failure to perform, or to cause the performance of, the covenants and agreements in this Amendment
will constitute an Event of Default under the Agreement and Administrative Agent and Noteholders shall have the right to demand the immediate repayment in
full in cash of all outstanding Indebtedness owing to Administrative Agent and Noteholders under the Agreement, the Notes and the other Note Purchase
Documents. In consideration of the foregoing and the transactions contemplated by this Amendment, each Borrower hereby (a) ratifies and confirms all of the
obligations and liabilities of such Borrower owing pursuant to the Agreement and the other Note Purchase Documents, and (b) agrees to pay all costs, fees and
expenses of Administrative Agent and Noteholders in connection with this Amendment.
7
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
SECTION 6. Covenants.
Each Borrower covenants and agrees, for the benefit of the Administrative Agent and the Noteholders that with respect to the proposed purchase by Aemetis
Advanced Fuels Goodland, Inc., an affiliate of the Borrower (the “Purchaser”), of the “Sale Assets” pursuant to that Offer to Purchase dated September 20, 2016
between the Purchaser and the Administrative Agent, that time is of the essence and they will each use their best efforts to cause the Purchaser to close the
transaction on mutually agreed terms on an expedited basis by March 31, 2017
SECTION 7. Agreement in Full Force and Effect as Amended . Except as specifically amended or waived hereby, the Agreement and other
Note Purchase Documents shall remain in full force and effect and are hereby ratified and confirmed as so amended. Except as expressly set forth herein, this
Amendment shall not be deemed to be a waiver, amendment or modification of, or consent to or departure from, any provisions of the Agreement or any other
Note Purchase Document or any right, power or remedy of Administrative Agent or Noteholders thereunder, nor constitute a waiver of any provision of the
Agreement or any other Note Purchase Document, or any other document, instrument or agreement executed or delivered in connection therewith or of any
Default or Event of Default under any of the foregoing, in each case whether arising before or after the execution date of this Amendment or as a result of
performance hereunder or thereunder. This Amendment shall not preclude the future exercise of any right, remedy, power, or privilege available to
Administrative Agent or Noteholders whether under the Agreement, the other Note Purchase Documents, at law or otherwise. All references to the Agreement
shall be deemed to mean the Agreement as modified hereby. This Amendment shall not constitute a novation or satisfaction and accord of the Agreement or
any other Note Purchase Documents, but shall constitute an amendment thereof. The parties hereto agree to be bound by the terms and conditions of the
Agreement and Note Purchase Documents as amended by this Amendment, as though such terms and conditions were set forth herein. Each reference in the
Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of similar import shall mean and be a reference to the Agreement as amended by this
Amendment, and each reference herein or in any other Note Purchase Documents to “the Agreement” shall mean and be a reference to the Agreement as
amended and modified by this Amendment.
SECTION 8. Representations by Parent and Borrowers . Each of the Parent and the Borrowers hereby represents and warrants to
Administrative Agent and Noteholders as of the execution date of this Amendment as follows: (A) it is duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation; (B) the execution, delivery and performance by it of this Amendment and all other Note Purchase Documents
executed and delivered in connection herewith are within its powers, have been duly authorized, and do not contravene (i) its articles of incorporation, bylaws or
other organizational documents, or (ii) any applicable law; (C) no consent, license, permit, approval or authorization of, or registration, filing or declaration with
any Governmental Entity or other Person, is required in connection with the execution, delivery, performance, validity or enforceability of this Amendment or any
other Note Purchase Documents executed and delivered in connection herewith by or against it; (D) this Amendment and all other Note Purchase Documents
executed and delivered in connection herewith have been duly executed and delivered by it; (E) this Amendment and all other Note Purchase Documents
executed and delivered in connection herewith constitute its legal, valid and binding obligation enforceable against it in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights
generally or by general principles of equity; (F) it is not in default under the Agreement or any other Note Purchase Documents and no Event of Default exists,
has occurred and is continuing or would result by the execution, delivery or performance of this Amendment; and (G) the representations and warranties
contained in the Agreement and the other Note Purchase Documents are true and correct in all material respects as of the execution date of this Amendment as
if then made, except for such representations and warranties limited by their terms to a specific date.
8
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
SECTION 9. Miscellaneous.
(A) This Amendment may be executed in any number of counterparts (including by facsimile or email), and by the different parties hereto on the
same or separate counterparts, each of which shall be deemed to be an original instrument but all of which together shall constitute one and the same
agreement. Each party agrees that it will be bound by its own facsimile or scanned signature and that it accepts the facsimile or scanned signature of each other
party. The descriptive headings of the various sections of this Amendment are inserted for convenience of reference only and shall not be deemed to affect the
meaning or construction of any of the provisions hereof or thereof. Whenever the context and construction so require, all words herein in the singular number
herein shall be deemed to have been used in the plural, and vice versa, and the masculine gender shall include the feminine and neuter and the neuter shall
include the masculine and feminine. The use of the word “including” in this Amendment shall be by way of example rather than by limitation. The use of the
words “and” or “or” shall not be inclusive or exclusive.
(B) This Amendment may not be changed, amended, restated, waived, supplemented, discharged, canceled, terminated or otherwise modified
without the written consent of the Borrowers and Administrative Agent. This Amendment shall be considered part of the Agreement and shall be a Note
Purchase Document for all purposes under the Agreement and other Note Purchase Documents.
(C) This Amendment, the Agreement and the Note Purchase Documents constitute the final, entire agreement and understanding between the
parties with respect to the subject matter hereof and thereof and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements
between the parties, and shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto and thereto. There are no unwritten
oral agreements between the parties with respect to the subject matter hereof and thereof.
(D) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN THE AGREEMENT AND SHALL BE
SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS OF THE AGREEMENT.
(E) Neither the Parent nor any Borrower may assign, delegate or transfer this Amendment or any of their rights or obligations hereunder. No rights
are intended to be created under this Amendment for the benefit of any third party donee, creditor or incidental beneficiary of the Borrowers or any Company
Party. Nothing contained in this Amendment shall be construed as a delegation to Administrative Agent or Noteholders of the Borrowers or any Company Party’s
duty of performance, including any duties under any account or contract in which Administrative Agent or Noteholders have a security interest or lien. This
Amendment shall be binding upon the Borrowers, the Parent and their respective successors and assigns.
(F) All representations and warranties made in this Amendment shall survive the execution and delivery of this Amendment and no investigation by
Administrative Agent or Noteholders shall affect such representations or warranties or the right of Administrative Agent or Noteholders to rely upon them.
(G) THE BORROWERS AND THE PARENT ACKNOWLEDGE THAT SUCH PERSON’S PAYMENT OBLIGATIONS ARE ABSOLUTE AND
UNCONDITIONAL WITHOUT ANY RIGHT OF RECISSION, SETOFF, COUNTERCLAIM, DEFENSE, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND
OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY
THE “OBLIGATIONS” OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM ADMINISTRATIVE AGENT OR ANY
NOTEHOLDER. THE BORROWERS AND THE PARENT HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE
ADMINISTRATIVE AGENT AND EACH NOTEHOLDER AND THEIR RESPECTIVE PREDECESSORS, ADMINISTRATIVE AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “RELEASED PARTIES”), FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED
OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE
DATE THIS AMENDMENT IS EXECUTED, WHICH SUCH PERSON MAY NOW OR HEREAFTER HAVE AGAINST THE RELEASED PARTIES, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND
ARISING FROM ANY “LOANS”, INCLUDING ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN
EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE AGREEMENT OR OTHER
NOTE PURCHASE DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
{Signatures appear on following pages.}
10
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective as of the date first noted above.
BORROWERS:
AEMETIS ADVANCED FUELS KEYES, INC.
By: /s/ Eric A. McAfee
Name: Eric A. McAfee
Title: Chief Executive Officer
AEMETIS FACILITY KEYES, INC.
By: /s/ Eric A. McAfee
Name: Eric A. McAfee
Title: Chief Executive Officer
PARENT:
AEMETIS, INC.
By: /s/ Eric A. McAfee
Name: Eric A. McAfee
Title: Chief Executive Officer
Signature Page to Limited Waiver and Amendment No. 13
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
ADMINISTRATIVE AGENT:
THIRD EYE CAPITAL CORPORATION
By: /s/ Arif N. Bhalwani
Name: Arif N. Bhalwani
Title: Managing Director
NOTEHOLDERS:
SPROTT ASSET MANAGEMENT GP INC., in
its capacity as general partner of SPROTT
ASSET MANAGEMENT L.P., in its capacity as
Manager of SPROTT PC TRUST
By: /s/ Kirstin McTaggart
Name: Kirstin McTaggart
Title: CFO
THIRD EYE CAPITAL CREDIT
OPPORTUNITIES S.ar.l, it its capacity as
Managing General Partner of THIRD EYE
CAPITAL CREDIT OPPORTUNITIES FUND –
INSIGHT FUND
By: /s/ Richard Goddard
Name: Richard Goddard
Title: Manager
By: /s/ Paul de Quant
Name: Paul de Quant
Title: Manager
Signature Page to Limited Waiver and Amendment No. 13
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
List of Subsidiaries
Exhibit 21
Biofuels Marketing, Inc.
Aemetis Biochemicals, Inc.
Aemetis Advanced Products Keyes, Inc.
Aemetis International, Inc.
International Biofuels Ltd (Mauritius)
Universal Biofuels Private Limited (India)
Aemetis Technologies, Inc.
Aemetis Biofuels, Inc.
Energy Enzymes, Inc.
AE Advanced Fuels, Inc.
Aemetis Advanced Fuels Keyes, Inc.
Aemetis Facility Keyes, Inc.
Aemetis Advanced Fuels, Inc.
Aemetis Americas, Inc.
AE Biofuels, Inc.
Aemetis Advanced Fuels Goodland, Inc.
EdenIQ Acquisition Corp
Aemetis Advanced Biorefinery Keyes, Inc.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23
We consent to the incorporation by reference in Registration Statements on Form S-8 (No. 333-194423, No. 333-194429, No. 333-202327, and No. 333-209620)
and Registration Statement on Form S-3 (No. 333-197259) of Aemetis, Inc of our report dated March 16, 2017, relating to our audit of the consolidated financial
statements, which appears in this Annual Report on Form 10-K of Aemetis, Inc. for the year ended December 31, 2016.
/s/ RSM US LLP
Des Moines, Iowa
March 16, 2017
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
EXHIBIT 31.1
I, Eric A. McAfee, certify that:
1. I have reviewed this Annual Report on Form 10-K of Aemetis, Inc.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: March 16, 2017
/s/ Eric A. McAfee
Eric A. McAfee
Chief Executive Officer
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
EXHIBIT 31.2
I, Todd Waltz, certify that:
1. I have reviewed this Annual Report on Form 10-K of Aemetis, Inc.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: March 16, 2017
/s/ Todd Waltz
Todd Waltz
Chief Financial Officer
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of Aemetis, Inc. (the “Company”) on Form 10-K for the year ending December 31, 2016, as filed with the Securities and
Exchange Commission on the date hereof (the “Report “), I, Eric A. McAfee, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
By: /s/ Eric A. McAfee
Eric A. McAfee
Chief Executive Officer
Date: March 16, 2017
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of Aemetis, Inc. (the “Company”) on Form 10-K for the year ending December 31, 2016, as filed with the Securities and
Exchange Commission on the date hereof (the “Report“), I, Todd Waltz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
By: /s/ Todd Waltz
Todd Waltz
Chief Financial Officer
Date: March 16, 2017
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.