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, 2021
Commission file number: 000-51354
AEMETIS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(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(b) of the Exchange Act:
Common Stock, Par Value $0.001
(Title of class)
Title of each class of registered securities
Common Stock, $0.001 par value
Trading Symbol
AMTX
Name of each exchanges on which registered
NASDAQ
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, a smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
☐
☐
(Do not check if a smaller reporting
company)
Accelerated filer
Smaller reporting company
☑
☐
Emerging growth company
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☑
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 $302.0 Million as of
June 30, 2021 based on the average bid and asked price on the NASDAQ Global Market 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, 2022 was 33,826,392 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant’s 2022 Annual Meeting of Stockholders which will be filed with the Securities and Exchange
Commission with in 120 days after the end of the Registrants fiscal year ended December 31, 2021, are incorporated by reference in Part III of this Form
10-K.
TABLE OF CONTENTS
PART I
Page
Special Note Regarding Forward-Looking Statements
Item 1. Business
Item 1A. Risk Factors
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
PART II
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
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
Item 15. Exhibits and Financial Statement Schedules
Index to Financial Statements
Signatures
Table of Contents
PART IV
2
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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97
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 market conditions with
respect to prices for inputs for our products versus prices for our products; our ability to leverage approved feedstock pathways; our ability to leverage our
location and infrastructure; our ability to incorporate lower cost, non‑food advanced biofuels feedstock at the Keyes plant; our ability to adopt value‑add
by-product processing systems; our ability to expand into alternative markets for biodiesel and its by-products, including continuing to expand our sales
into international markets; our ability to maintain and expand strategic relationships with suppliers; our ability to continue to develop new and to maintain
and protect new and existing intellectual property rights; our ability to adopt, develop and commercialize new technologies; our ability to refinance our
senior debt on 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 Form 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.
Item 1. Business
General
Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis, “Aemetis,” the
“Company,” “we,” “our” or “us”) is an international renewable fuels and byproducts company focused on the acquisition, development and
commercialization of innovative negative carbon intensity products and technologies that replace traditional petroleum-based products and reduce
greenhouse gas emissions (“GHG”). We recognize three reportable segments which include “California Ethanol,” “Dairy Renewable Natural Gas,” and
“India Biodiesel.” We have other operating segments, which we determined not to be reportable segments, collectively represented by the “All Other”
category. For revenue and other information regarding our operating segments, see Note 12 - Segment Information, of the Notes to Consolidated Financial
Statements in Part II, Item 8 of this Form 10-K.
In 2006, we incorporated in Nevada. In December 2021, we reincorporated in Delaware. We believe the reincorporation is a progression in the growth and
development of the Company. The reincorporation moves us to a more accessible jurisdiction for debt financing and other transactions.
We own and operate a 65 million gallon per year ethanol production facility located in Keyes, California (the “Keyes Plant”). In addition to low carbon
renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), and Condensed Distillers Solubles
(“CDS”), all of which are sold as animal feed to local dairies and feedlots. In the fourth quarter of 2021, an ethanol zeolite membrane dehydration system
was installed, and is in process of being commissioned at the Keyes Plant. The installation is a key first step in the electrification of the Keyes Plant, which
will significantly reduce the use of petroleum based natural gas as process energy. The electrification, along with the future installation of a two-megawatt
zero carbon intensity solar microgrid system and a mechanical vapor recompression (MVR) system will greatly reduce GHG emissions and decreases the
carbon intensity of fuel produced at the Keyes Plant, allowing us to realize a higher price for the ethanol we produce and sell.
Table of Contents
3
During 2018, Aemetis Biogas, LLC (“ABGL”) was formed to construct bio-methane anaerobic digesters at local dairies near the Keyes Plant, many of
whom also purchase WDG produced at the Keyes Plant. Our renewable natural gas segment, ABGL, has completed Phase 1 of our California biogas
digester network and pipeline system that converts waste dairy methane gas into Dairy Renewable Natural Gas (“RNG”) and is now executing Phase 2
construction projects. The digesters are connected via an underground private pipeline owned by ABGL to a gas cleanup and compression unit being built
at the Keyes Plant to produce RNG. During the third quarter of 2020, ABGL completed construction of the first two dairy digesters along with four miles
of pipeline that carries bio-methane from the dairies to the Keyes Plant. Upon receiving the bio-methane from the dairies, impurities are removed, and the
bio-methane is converted to negative carbon intensity RNG where it will be either injected into the statewide PG&E gas utility pipeline, supplied as
compressed RNG that will service local trucking fleets, or used as renewable process energy at the Keyes Plant.
The next phase, involving construction of ten dairy digesters, is planned for completion in 2022. When completed, our dairy digesters are expected to
produce dairy renewable natural gas for use in trucks and buses to displace petroleum-based diesel fuel. The total planned 52 dairies in our Dairy
Renewable Natural Gas segment are expected to be operating by Q4 of 2025 and are expected to capture more than 1.4 million MMBtu of dairy methane
and reduce greenhouse gas emissions.
During the first quarter of 2021, we announced our “Carbon Zero” biofuels production plants designed to produce biofuels, including sustainable aviation
fuel (“SAF”) and diesel fuel utilizing renewable hydrogen and non-edible renewable oils sourced from our existing biofuels plants and other sources. The
first plant to be built in Riverbank, California, “Carbon Zero 1”, is expected to utilize hydroelectric and other renewable power available onsite to produce
90 million gallons per year of SAF, renewable diesel, and other byproducts. The plant is expected to supply the aviation and truck markets with ultra-low
carbon renewable fuels to reduce GHG emissions and other pollutants associated with conventional petroleum-based fuels. By producing ultra-low carbon
renewable fuels, the Company expects to capture higher value D3 Renewable Identification Numbers (“RINs”) and California’s Low Carbon Fuel Standard
(“LCFS”) credits. D3 RINs have a higher value in the marketplace than D6 RINs due to D3 RINs’ relative scarcity and mandated pricing formula from the
United States Environmental Protection Agency (“EPA”). Carbon Zero 1 is included in the All Other category and determined not to be a reportable
segment.
In 2021, the Company signed a 10-year, 250-million-gallon blended fuel (containing SAF) offtake agreement and a 10-year, 450-million-gallon renewable
diesel supply agreement with an industry-leading travel stop company.
On April 1, 2021, we established Aemetis Carbon Capture, Inc. to build Carbon Capture Sequestration (“CCS”) projects to generate LCFS and IRS 45Q
credits by injecting CO₂ into wells which are monitored for emissions to ensure the long-term sequestration of carbon underground. California’s Central
Valley has been identified as the state’s most favorable region for large-scale CO₂ injection projects due to the subsurface geologic formation that retains
gases. The CCS projects are included in the All Other category and determined not to be a reportable segment.
During 2021, a Stanford University study concluded that more than 2 million metric tonnes (MT) per year of CO₂ can be removed from the atmosphere and
injected safely into the earth at ethanol plant sites in California. The study estimated that 1.0 million MT per year of CO₂ can be sequestered in the saline
formations located deep underground at or near the Keyes Plant site. The study also noted that up to 1.4 million MT per year of CO₂ should be injectable at
or near the Aemetis Riverbank site due to the favorable permeability of the saline formation and other factors. The conclusions from geologic formation
and pre-drilling studies confirms the feasibility of our plans to construct two CO₂ injections wells at or near the Aemetis biofuels sites. We have completed
the Front End Loading engineering and are now working on the Front End Engineering Design and obtaining permits for the carbon sequestration projects.
Each MT of CO₂ is expected to generate approximately $200 per MT from the California Low Carbon Fuel Standard and $50 per MT of IRS 45Q tax
credit. Legislation is pending in Congress to increase the federal tax credit to $80 per MT of CO₂ and to provide billions of dollars of grants and loans to
finance CCS projects in the U.S.
We operate a research and development laboratory to develop efficient conversion technologies using waste feedstocks to produce biofuels and
biochemicals. We are continuing to develop a biomass-to-fuel technology to build a carbon zero production facility. The research and development
laboratory is included in the All Other category and determined not to be a reportable segment.
We also own and operate the Kakinada Plant with a nameplate capacity of 150 thousand metric tons per year, or about 50 million gallons per year,
producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. We believe the Kakinada Plant is one of the largest
biodiesel production facilities in India on a nameplate capacity basis. The Kakinada Plant is capable of processing a variety of vegetable oils and animal fat
waste feedstocks into biodiesel that meet international product standards. The Kakinada Plant also distills the crude glycerin byproduct from the biodiesel
refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive and other industries.
4
Table of Contents
Strategy
Key elements of our strategy include:
California Ethanol
Diversify and expand revenue and cash flow by continuing to develop and adopt value-added by-product processing systems and optimize other
systems in our existing plants. In April 2012, we installed a DCO extraction unit at the Keyes Plant and began extracting corn oil for sale into the
livestock feed market. During 2014, we installed a second oil extraction system to further improve corn oil yields from this process. During late
2017, we entered into agreements to sell substantially all of the CO₂ produced at the Keyes Plant to Messer Gas, which built a liquid CO₂ plant
adjacent to the Keyes Plant that was operational in the second quarter of 2020. We have plans to install a mechanical vapor recovery (“MVR”)
system that allows for the compression of process vapor to steam resulting in a significant reduction of natural gas consumption. Additionally, we
are developing the Aemetis Integrated Solar Microgrid Systems (AIMS) with battery backup that allows for the displacement of natural gas
electricity with zero carbon intensity electricity, which is expected to begin construction at the Keyes Plant in the second quarter of 2022. We
continue to evaluate and, as allowed by available financing and free cash flow from operations, adopt additional value-added processes that
decrease costs and increase the value of the ethanol, WDG, DCO, CDS, and CO₂ produced at the Keyes Plant.
Dairy Renewable Natural Gas
Leverage our position as owner/operator of dairy digesters and connected pipeline to expand the network thereby increasing revenues and
profitability. In December 2018, we leveraged our relationship with California’s Central Valley dairy farmers by signing leases and raising funds
to construct dairy digesters that collect bio-methane and pipelines that convey bio-methane to our Keyes Plant. We have constructed our first two
digesters, installed eleven miles of pipeline, and commenced operations of the initial pipeline and digesters in the third quarter of 2020. In
addition, we have signed agreements with over 25 additional dairies to construct additional dairy digesters. We plan on progressing our business
plan by continuing to expand the dairy digesters and pipeline network.
India Biodiesel
Capitalize on recent policy changes by the Government of India. We plan to continue to pursue the traditional bulk, fleet, industrial, retail, and
transportation biodiesel markets in India, which we believe have become more attractive as a result of potential changes to government tax
structures and policies, as well as new marketing channels that may open as a result of changes to government policy changes. The
rationalization of indirect taxation by the introduction of the Goods and Services Tax (the “GST”), the introduction of biodiesel sales under
government oil marketing company (“Government Oil Marketing Company”) contracts and the execution of contracts with major oil consumers
are expected to drive revenue and margins in our India Biodiesel segment.
Pursue tender offers from Government Oil Marketing Companies. In 2019, under the Indian government mandate of mixing biodiesel with
diesel, the Kakinada Plant won the tender to supply biodiesel to Government Oil Marketing Companies such as Hindustan Petroleum, Bharat
Petroleum, and Indian Oil Corporation and began supplying biodiesel in May 2019. These tenders open every six months, soliciting bids for the
next six month period. The Company did not participate in tenders during 2021 due to low OMC offer price, coupled with very high feedstock
prices as a result of COVID-19. We plan to pursue these tender offers made by the Government Oil Marketing Companies on economically
reasonable terms.
Diversify our feedstocks from India. 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”). Between 2014 and 2019, we further diversified our feedstock to include
animal oils and fats, which we used for the production of biodiesel to be sold into the European markets, refined, bleached & deodorized Palm
Stearin, crude palm stearin, and RBD palm stearin. The byproduct of using high fat RBD palm stearin and crude palm stearin is Palm Fatty Acid
Distiller (“PFAD”), which can be further processed into biodiesel and sold, or sold directly into the market starting in the third quarter of 2019.
Additionally, the Kakinada Plant is capable of producing biodiesel from used cooking oil (“UCO”); however, the importation of UCO is not
currently allowed in India, and as a result, we are looking for a local supply source of UCO to expand our feedstock diversity. In 2018, we
completed a pretreatment unit at the Kakinada Plant to convert up to 5% high free fatty acid (“FFA”) feedstocks into oil that can be used to
produce biodiesel, which was further upgraded in 2019 to convert up to 20% high FFA feedstocks, both of which are available at lower cost than
our traditional feedstocks. During 2021, the Company, after receiving approval from the Pollution Control Board of India for use of Refined
Animal Tallow for production of biodiesel, began procuring Refined Animal Tallow. The Indian biodiesel industry is requesting the Indian
government to allow the export of biodiesel to other countries. The Company is exploring the export of Animal Tallow based biodiesel to
California to capture LCFS credits.
Table of Contents
5
Develop and commercially deploy technologies to produce high-margin products. We plan to continue investing in the conversion of lower quality,
waste oils into higher value biofuels, including renewable diesel. Additionally, we continue to evaluate improvements to the throughput capacity
and efficiency of the plant. We plan to invest in those areas that allow for more efficient and higher throughput for the processing of biodiesel and
refined glycerin. The technologies for these conversion process may be licensed from third parties or internally developed.
Evaluate and pursue technology acquisition opportunities. We intend to evaluate and pursue opportunities to acquire technologies and processes
that result in accretive earnings opportunities as financial resources and business prospects make the acquisition of these technologies and
processes 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 earnings business opportunities.
Other Initiatives
Leverage technology for the development and production of additional advanced biofuels and renewable chemicals. We continue to evaluate new
technology, develop technologies under our existing patents and conduct research and development to produce low or negative carbon intensity
advanced biofuels from renewable feedstocks. Our objective is to continue to commercialize our portfolio of technologies and expand the adoption
of these advanced biofuels and bio-chemicals technologies.
We hold certain rights to technologies for the conversion of orchard, forest, dairy, and construction and demolition waste wood into low carbon
renewable fuel. We intend to utilize this technology to produce renewable hydrogen for use in the production of SAF and diesel fuel at the
Riverbank Carbon Zero 1 facility using agricultural biomass waste abundantly available from orchard waste wood in California’s Central Valley.
Our planned first phase has an estimated 90 million gallons per year of nameplate capacity. We intend to expand production facilities to build
additional plants in California to utilize the estimated 1.6 million tons of annual waste orchard wood in Central California, as well as other waste
wood feedstocks.
Acquire, license our technologies to, or joint venture with other ethanol and biodiesel plants. There are approximately 200 ethanol plants that are
operational in the U.S., as well as biofuels plants in Brazil, Argentina, India and elsewhere in the world that could be upgraded to expand revenues
and improve their cash flow using technology commercially deployed or licensed by us. After developing and commercially demonstrating
technologies at the Keyes Plant, Kakinada Plant and the Riverbank Facility, we will evaluate on an opportunistic basis the benefit of acquiring
ownership stakes in other biofuel production facilities and entering into joint venture or licensing agreements with other ethanol, renewable diesel
or renewable SAF 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 and processes
advisable. In addition, we may also seek to acquire companies, enter into licensing agreements or form joint ventures with companies that offer
prospects for the adoption of technologies that would be accretive to earnings.
Additionally, we continue to evaluate technologies from our existing and planned operations for the development of the property in Goodland,
Kansas.
Table of Contents
2021 Highlights
California Ethanol
6
During 2021, we produced five products: denatured fuel ethanol, WDG, DCO, CO₂, and CDS. During the first quarter of 2020, we transitioned from selling
100% of the ethanol we produce pursuant to a purchase agreement with J.D. Heiskell (“J.D. Heiskell Purchase Agreement”), to a model where 100% of the
ethanol is sold directly to Kinergy Marketing LLC (“Kinergy”). We terminated the Ethanol Marketing Agreement with Kinergy as of September 30, 2021.
Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC. Since May 2020, the ethanol stored in our
finished goods tank is 100% owned by Aemetis. WDG continues to be sold to A.L.Gilbert and DCO is sold to other customers under the J.D.Heiskell
Purchase Agreement. Smaller amounts of CDS were sold to various local third parties. We began selling CO₂ to Messer in the second quarter of 2020. We
began selling high-grade alcohol for sanitizer in March 2020 directly to various customers throughout the West Coast and we also produced and sold
Aemetis hand sanitizer under Aemetis Health Products, Inc. California Ethanol revenue is dependent on the price of ethanol, high-grade alcohol, WDG,
CDS, and DCO.
The following table sets forth information about our production and sales of ethanol and high-grade alcohol and WDG in 2021, 2020, and 2019:
Years ended December 31,
2020
2021
2019
2021 vs
2020 %
Change
Ethanol and High-Grade Alcohol
Gallons Sold (in millions)
Average Sales Price/Gallon
WDG
Tons Sold (in thousands)
Average Sales Price/Ton
Dairy Renewable Natural Gas
$
$
59.8
2.72 $
404
103 $
60.3
1.84 $
393
81 $
64.7
1.77
428
81
-0.8%
47.8%
2.8%
27.2%
The following table sets forth information about our production and sales of Dairy Renewable Natural Gas in 2021, 2020, and 2019:
Years ended December 31,
2020
2021
2019
2021 vs
2020 %
Change
Dairy Renewable Natural Gas
MMBtu intercompany sales
India Biodiesel
53,041
9,388
-
465.0%
In 2021, we primarily produced two products at the Kakinada Plant: biodiesel and refined glycerin produced from further processing of the crude glycerin
produced as a by‑product of the production of biodiesel. After the 2019 pretreatment unit upgrade, we can convert high-FFA oil into a renewable oil
feedstock that that may be converted into biodiesel and sold to biodiesel market plants in India or exported to foreign plants to use for the production of
biodiesel, renewable diesel and/or jet fuel. The byproduct of processing high-FFA oil into biodiesel is PFAD, which can be processed further into biodiesel
or sold directly into the market.
The following table sets forth information about our production and sales of biodiesel and refined glycerin in 2021, 2020, and 2019:
Years ended December 31,
2020
2021
2019
2021 vs
2020 %
Change
Biodiesel
Tons sold (1)
Average Sales Price/Ton
Refined Glycerin
Tons sold
Average Sales Price/Ton
455
1,024 $
15,987
863 $
46,971
904
130
956 $
1,440
814 $
5,173
543
$
$
-97.2%
18.7%
-91.0%
17.4%
(1) 1 metric ton is equal to 1,000 kilograms (approximately 2,204 pounds).
7
Table of Contents
Competition
California Ethanol – According to the U.S. Energy Information Agency (the “EIA”), there were approximately 200 commercial ethanol production
facilities in the U.S. with a combined nameplate production of approximately 17.5 billion gallons per year as of January 1, 2021. A May 2021 annual U.S.
ethanol production forecast, by the Renewable Fuels Association, was approximately 16.4 billion gallons. 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 local California markets and
compete with DDG and corn oil imported into the California markets as well as with alternative feed products.
Dairy Renewable Natural Gas – Dairy renewable natural gas competes with petroleum based natural gas for the value of the gas molecule and competes
with other biofuels for qualifying volumes of renewable biofuel volumes under the federal Renewable Fuel Standard and the California Low Carbon Fuel
Standard. When used as a component of the energy inputs at our Keyes plant, the dairy renewable natural gas results in a lower pathway score, allowing us
to sell ethanol into the market with the more valuable carbon attributes, and competing on the same basis as our California ethanol.
India Biodiesel – With respect to biodiesel sold as fuel, we compete primarily with the producers of petroleum diesel, consisting of the three Government
Oil Marketing 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
also purchase our product for blending and further sales to their customers. We compete primarily on the basis of price, quality and reliable delivery, since
our plant can produce distilled biodiesel and has historically been a more reliable and high-quality supplier than some other biodiesel producers in India.
With respect to biodiesel sold directly to fleets and other customers, we supply logistics companies that operate fleets of trucks, ocean port facilities with
extensive trucking activities, beverage distributors, cement ready-mix suppliers, mining companies, infrastructure companies, and other companies that use
diesel for transportation.
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
California Ethanol – During the first quarter of 2020, we transitioned from selling 100% of the ethanol we produce to J.D. Heiskell to selling the ethanol
directly to Kinergy. Since May 2020, the ethanol stored in our finished goods tank is 100% owned by Aemetis. We terminated the Ethanol Marketing
Agreement with Kinergy as of September 30, 2021. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex
LLC, who markets 100% of our fuel ethanol. WDG continues to be sold to A.L.Gilbert and DCO is sold to other customers under the J.D.Heiskell
Purchasing Agreement. Smaller amounts of CDS were sold to various local third parties. We began selling CO₂ to Messer Gas in the second quarter of
2020. In response to the global COVID-19 pandemic, we began selling high-grade alcohol for sanitizer in March 2020 directly to various customers
throughout the West Coast and we also produced and sold Aemetis hand sanitizer under the Aemetis Health Products, Inc. California Ethanol revenue is
dependent on the price of ethanol, high-grade alcohol, WDG, CDS, and DCO.
Dairy Renewable Natural Gas – During 2021, we sold 100% of the biogas produced to the California Ethanol plant for use in the production of ethanol.
The capability to interconnect with the regional pipeline in order to sell to a broader range of customers and to dispense fuel through a RNG station at or
near the California Ethanol plant is in development.
India Biodiesel – During 2021, we derived 67%, 18%, and 15% of our sales from biodiesel, refined glycerin, and other sales respectively. One biodiesel
customer accounted for more than 10% of our consolidated India Biodiesel segment revenues at 66% and one refined glycerin customer accounted for
16% of our consolidated India Biodiesel segment revenues in 2021. During 2020, we derived 87%, 8%, and 5% of our sales from biodiesel, refined
glycerin, and other sales, respectively. Two of our biodiesel customers accounted for more than 10% of our consolidated India Biodiesel segment revenues
at 42% and 26%. None of our refined glycerin customers accounted for more than 10% of our consolidated India Biodiesel segment revenues in 2020.
Table of Contents
Pricing
8
California Ethanol – Revenue is dependent on the price of ethanol, WDG, high-grade alcohol, and DCO. Ethanol pricing is influenced by local and
national inventory levels, local and national ethanol production, imported ethanol, corn prices and gasoline demand, and is determined pursuant to a
marketing agreement with a single fuel marketing customer and is generally based on daily and monthly pricing for ethanol delivered to the San Francisco
Bay Area, California, as published by Oil Price Information Service (“OPIS”), as well as quarterly contracts negotiated by our marketing customer with
local fuel blenders. The price for WDG is influenced by the price of corn, the supply and price of distillers dried grains, and demand from the local dairy
and feed markets and determined monthly pursuant to a marketing agreement with A.L. Gilbert and is generally determined in reference to the local price
of dried distillers’ grains and other comparable feed products. High-grade alcohol pricing is based on the supply and demand restrictions in the current
market. Our revenue is further influenced by the price of natural gas, our decision to operate the Keyes Plant at various capacity levels, conduct required
maintenance, and respond to biological processes affecting output.
Dairy Renewable Natural Gas – Revenue is dependent on the price of petroleum natural gas, the price of alternative sources of renewable gas in the
market, the value of environmental attributes and the method for selling the gas. Renewable natural gas pricing is influenced by local and national
inventory levels, local and national gas production, petroleum production, and value of the related environmental attributes. Further pricing is determined
by the method of distribution, with each of the uses (replacement of natural gas at the California Ethanol plant, sell through the natural gas pipeline, or sell
directly through renewable natural gas stations) providing separate pricing options.
India Biodiesel – 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. In 2019, India changed to a daily dynamic pricing model where diesel prices are changed on daily basis by the Government Oil
Marketing Companies. Biodiesel sold into Europe is based on the spot market price, but a recent Indian government ban on exports closed this market for
the Company for the time being. We sell our biodiesel primarily to Government Oil Marketing Companies, transport companies, resellers, distributors and
private 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
California Ethanol – We entered into a Corn Procurement and Working Capital Agreement with J.D. Heiskell in March 2011, which we amended in May
2020 (the “Heiskell Supply Agreement”). Under the Heiskell Supply Agreement, we agreed to procure number two yellow dent corn from J.D. Heiskell,
with the ability to obtain corn from other sources subject to certain conditions. However, in 2020 and 2021, all our corn supply was purchased from J.D.
Heiskell pursuant to the Heiskell Supply Agreement. Title to the corn and risk of loss pass to us when the corn is deposited into our weigh scale. The
agreement is automatically renewed for additional one-year terms. The current term is set to expire on December 31, 2022, with automatic renewals for
additional one-year terms.
Dairy Renewable Natural Gas – Biogas is produced by anerobic digesters located on property that Aemetis leases from dairy operators. We construct and
own the dairy digester and pipeline that connects the digesters together and feeds this gas to our gas clean up unit at our California Ethanol plant. Our dairy
leases include a manure supply agreement with the dairy where the digester is located. Generally, these leases are for 20-25 years with options to renew
and are based upon the value of environmental attributes and the size of the dairy.
India Biodiesel – In 2021 and 2020, a significant amount of our biodiesel was derived from processing refined palm stearin, which was sourced locally. The
byproduct of using high fat RBD/crude palm stearin is PFAD, which can be processed further into biodiesel or sold directly as a product into the market
starting in the third quarter of 2019. During 2021, the Company, after receiving approval from the Pollution Control Board of India for use of Refined
Animal Tallow for production of biodiesel, began procuring Refined Animal Tallow. The Indian biodiesel industry is requesting the Indian government to
allow the export of biodiesel to other countries. The Company is exploring the export of Animal Tallow based biodiesel to California to capture LCFS
credits. 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.
Sales and Marketing
California Ethanol – During the first quarter of 2020, we transitioned from selling the ethanol we produce to J.D. Heiskell pursuant to the J.D. Heiskell
Purchase Agreement, to a model where the ethanol is sold directly to our fuel marketing customers. We own the ethanol stored in our finished goods tank.
WDG continues to be sold to A.L. Gilbert and DCO is sold to other customers under the J.D. Heiskell Purchase Agreement. Smaller amounts of CDS were
sold to various local third parties. We began selling CO₂ to Messer Gas in the second quarter of 2020. We began selling high-grade alcohol in March 2020
directly to various customers throughout the West Coast and we also produced and sold Aemetis hand sanitizer through our subsidiary, Aemetis Health
Products, Inc., in the fourth quarter of 2020.
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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 current term is set to expire on December 31, 2022 with automatic one-year renewals.
In October 2010, we entered into an exclusive marketing agreement with Kinergy to market and sell our ethanol. Our marketing agreement with Kinergy
was terminated as of September 30, 2021, and, effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC,
who now markets 100% of our fuel ethanol. The initial term of our agreement with Murex ends on October 31, 2023, with automatic one-year renewals
thereafter.
Dairy Renewable Natural Gas – During 2021, we sold 100% of the biogas produced to the California Ethanol plant for use in the production of ethanol.
The capability to interconnect with the regional pipeline in order to sell to a broader range of customers and to dispense fuel through a RNG station directly
to end-users at or near the California Ethanol plant is in development.
India Biodiesel - We sell our biodiesel and refined glycerin to (i) end-users utilizing our own sales force and independent sales agents, (ii) brokers who
resell the product to end-users and (iii) Government Oil Marketing Companies. We pay a sales commission on sales arranged by independent sales agents.
Commodity Risk Management Practices
California Ethanol – The cost of corn and the price of ethanol are volatile and the correlation of the pricing 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 and utilize methods of mitigating the volatility of our commodity prices. Due to market volatility as a
result of the COVID-19 pandemic in 2021 and 2020, we sold our WDG on a month-to-month basis to better manage commodity and pricing risk.
Dairy Renewable Natural Gas – The cost of leasing and operating dairy digesters is dependent on the size of the dairy and the value of the environmental
attributes. The price of renewable natural gas is volatile and uncorrelated with the cost of feedstock. We therefore are exposed to ongoing and substantial
commodity price risk for our supply of dairy natural gas. Our risk management strategy is to arrange for the payment to dairy operators based, in part,
upon the value of the environmental attributes in order to reduce this lack of market correlation. We monitor these prices daily to test for an overall
positive variable contribution margin. We periodically explore and utilize methods of mitigating the volatility of our commodity prices.
India Biodiesel – The cost of crude or refined palm stearin and the price of biodiesel are volatile and are generally uncorrelated. We therefore are exposed
to ongoing and substantial commodity price risk at our Kakinada plant. 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. Additionally, we are
pursuing relationships with large oil companies and trading partners pursuant to which we may match the procurement of feedstocks with the production of
biofuels for sales that provide a fixed margin.
In addition, to minimize our commodity risk, we modified the processes within our facility to utilize lower cost crude palm stearin and palm based products
with high FFA content, which enables us to reduce our feedstock costs. The price of our biodiesel is generally indexed to the local price of petroleum
diesel, which floats with changes in the price determined by the international markets.
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.
Research and Development
Our research and development efforts consist of developing, evaluating, and commercializing technologies and expanding the production of SAF,
renewable diesel fuel, and other renewable bio-chemicals in the United States and India. The objective of this development activity is to bring efficient
conversion technologies using waste feedstocks to produce biofuels and biochemicals on a large-scale, commercial basis. Some of our innovations are
protected by issued or pending patents. We are developing additional technology and expect to file additional patents that will further strengthen our
intellectual property portfolio. We expect to continue to file and protect patents related to our business and future plans.
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In 2018, in cooperation with a federally funded agency, we secured a grant from the California Energy Commission to optimize and demonstrate the
effectiveness of ionic liquids technologies for breaking down biomass to produce SAF and renewable diesel fuel. After completion of technology
development and pilot testing, this technology may be applied to the Carbon Zero production plants to commercialize this technology by converting the
below zero carbon feedstocks such as waste wood and agricultural waste and renewable energy such as solar, RNG, biogas into energy dense liquid
renewable fuels. A patent was awarded for this technology for the production of below zero carbon renewable fuel.
Patents and Trademarks
We 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 nine awarded patents in the United States. Our patents cover processes to break down plant biomass 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 may receive in the future, claims of infringement of other parties’ proprietary rights. See “Item 3. Legal Proceedings”.
Infringement or other claims could be asserted or prosecuted against us in the future, which 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.
In 2018, in cooperation with a federally funded agency, we secured a grant from the California Energy Commission to optimize and demonstrate the
effectiveness of ionic liquids technologies for breaking down biomass to produce SAF and renewable diesel fuel. After completion of technology
development and pilot testing, this technology may be applied to the Carbon Zero production plants to commercialize this technology by converting the
below zero carbon feedstocks such as waste wood and agricultural waste and renewable energy such as solar, RNG, biogas into energy dense liquid
renewable fuels. A patent was awarded for this technology for the production of below zero carbon renewable fuel.
In January 2021, a U.S. patent was awarded for our exclusively licensed technology for the production of below zero carbon renewable fuel. This license
enabled us to launch the “Carbon Zero” production plants that are designed to convert below zero carbon feedstocks such as waste wood and agricultural
waste and renewable energy such as solar, RNG, and biogas into energy dense liquid renewable fuels. These renewable fuels can be utilized in hybrid
electric cars or other electric engines which may create a below zero carbon greenhouse gas footprint across the entire life cycle of the fuel based on the
Argonne National Laboratory’s GREET model, the leading lifecycle analysis measurement tool.
Environmental and Regulatory Matters
California Ethanol and Dairy Renewable Natural Gas – The final volumes requirements are set forth below and 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. As of January 31, 2022, the EPA had not issued final Renewable Fuel Volume Requirements for calendar years 2020, 2021, and 2022, indicating
that the Agency was extending the deadline for compliance until further notice.
Year
Cellulosic biofuel (million gallons)
Biomass-based diesel (billion gallons)
Advanced biofuel (billion gallons)
Renewable fuel (billion gallons)
Source: Environmental Protection Agency
*Proposed volume requirements
Renewable Fuel Volume Requirements for 2018-2022
2020*
2021*
2019
2018
288
2.1
4.29
19.29
418
2.1
4.92
19.92
510
2.43
4.63
17.13
620
2.43
5.20
18.52
2022*
770
2.76
5.77
20.77
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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 such material contamination or 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, 2021 and 2020. 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.
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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. We currently conduct our North American commercial activities exclusively in
California. Climate change and reduction legislation is a topic of consideration by the U.S. Congress and California State Legislature, which may
significantly impact the biofuels industry’s emissions regulations, as will the RFS, California’s LCFS, and other potentially significant changes in existing
transportation fuels regulations.
India Biodiesel - 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, 2021, we had a total of 158 employees, comprised of 14 full-time employees in our corporate offices, 42 full-time equivalent employees
at the Keyes Plant, 5 full-time Aemetis Biogas employees, 3 full-time employees at the Riverbank site, and 94 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 relations with our employees are positive.
Available Information
We file reports with the Securities and Exchange Commission (“SEC”). We make available on our website under “Investor” 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, 2021, we had an accumulated deficit of approximately $321.2 million. For our fiscal years ended December 31, 2021, 2020, and 2019, we
reported a net loss of $47.1 million, $36.7 million, and $39.5 million respectively. We may incur losses for an indeterminate period of time and may not
achieve consistent profitability. We expect to rely on cash on hand, cash, if any, generated from our operations, borrowing availability, if any, under our
lines of credit and proceeds from future financing activities, if any, to fund all of the cash requirements of our business. In some market environments, we
may have limited access to incremental financing, which could defer or cancel growth projects, reduce business activity or cause us to default on our
existing debt agreements if we are unable to meet our payment schedules. An extended period of losses or negative cash flow may prevent us from
successfully operating and expanding our business.
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Our indebtedness, preference payments, 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, 2021, we recognized $27.9 million in interest rate expense and accretion of Series A preferred units (excludes debt
related fees and amortization expense). Our high levels of interest expense pose potential risks such as:
·
·
·
·
Any cash flows after covering the operations if any, equity raises if any, and any EB-5 funding 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;
Any Biogas cash flows are used to pay dividends and redeem Series A preferred shares by reducing the funds available to use by us for
operations.
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.
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, the development of the Riverbank Carbon Zero 1 Facility and bio-methane digesters
at local dairies near our Keyes Plant, and our working capital requirements are financed in part through debt or debt-like facilities. We may need to seek
significant additional financing to continue or grow our operations and to develop our business. 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 Gemini Edibles and Fats India Private Limited (“Gemini”) and Secunderabad Oils Limited (“SOL”). If we are unable to maintain this
strategic relationship, our business may be negatively affected. In addition, the ability of Gemini and SOL to continue to provide us with working capital
depends in part on the financial strength of them and their banking relationships. If Gemini and SOL are 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 be unable to repay or refinance our Third Eye Capital Notes upon maturity.
Under our note facilities with Third Eye Capital, we owe approximately $122.4 million, excluding debt discounts, as of December 31, 2021. 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 current maturity date of these notes is April 2023, as the renewal has been executed subsequent to year end. 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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We are dependent upon our working capital agreements with J.D. Heiskell, Gemini Edibles and Fats India Private Limited 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 agreements with Gemini and SOL. 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 30 days prior to the end of the initial term or
any renewal term. The current term extends through December 31, 2022. In addition, the agreement may be terminated at any time upon an event of
default, such as payment default, bankruptcy, acts of fraud or material breach under one of our related agreements with J.D. Heiskell. The Gemini and SOL
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 milo 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.
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.
As of December 31, 2021 we became an “accelerated filer” and are therefore subject to the auditor attestation requirement in the assessment
of our internal control over financial reporting.
Because the worldwide market value of our common stock held by non-affiliates exceeded $75 million (but was less than $700 million), as of the last
business day of our fiscal quarter ended June 30, 2021, we are an “accelerated filer” as defined by SEC rule. Additionally, we are no longer a “smaller
reporting company” as of December 31, 2021. Therefore, we are now subject to the requirement that we include in this Annual Report on Form 10-K for
the fiscal year ending December 31, 2021, the auditor’s attestation report on assessment of our internal control over financial reporting pursuant to Section
404 of the Sarbanes-Oxley Act. If we do not have a sufficient history for us and our independent registered public accounting firm to test and evaluate our
new processes and controls, we may be unable to obtain an unqualified attestation report from our independent registered public accounting firm required
under Section 404 of the Sarbanes-Oxley Act. If our independent registered public accounting firm is not able to render an unqualified attestation, it could
result in lost investor confidence in the accuracy, reliability, and completeness of our financial reports. We expect that our status as an accelerated filer and
compliance with these increased requirements will require management to expend additional time while also condensing the time frame available to
comply with certain requirements, which may further increase our legal and financial compliance costs.
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 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.
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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. If the price of gasoline decreases in the future, in correlation to the decrease in the
price of gasoline, the price of ethanol may decrease. 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 develop
the Riverbank Carbon Zero 1 Facility, construct a bio-methane digester, pipeline and gas cleanup system near our Keyes plan, the integrated microgrid, the
MVR project, or the Mitsubishi dehydration system 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 CO₂ at cost effective prices or achieve the anticipated energy savings. Any inability to execute our business plan may
have a material adverse effect on our operations, financial position, ability to pay dividends, and ability to continue as a going concern.
We may not be able to recover the costs of our substantial investments in capital improvements and additions, and the actual cost of such
improvements and additions may be significantly higher than we anticipate.
Our strategy calls for continued investment in capital improvements and additions. For example, we are currently developing “Carbon Zero” biofuels
production plants designed to produce biofuels, including renewable jet and renewable diesel fuel utilizing hydrogen and non-edible renewable oils. We
are also building carbon capture sequestration wells to generate low-carbon fuel standard credits by injecting CO₂ into sequestration wells that are
monitored for emissions to ensure the long-term sequestration of carbon underground, developing the Carbon Zero 1 Ethanol Facility in Riverbank, CA to
utilize the licensed Technologies to convert local California surplus biomass into ultra-low carbon renewable ethanol. We are also constructing a network of
biogas digesters, pipelines and gas cleanup systems near our Keyes Plant to convert dairy waste gas into renewable bio-methane and evaluating the
Goodland facility in Goodland, KS for construction of an additional ethanol facility. The construction of these capital improvements and additions involves
numerous regulatory, environmental, political and legal uncertainties, many of which are beyond our control and may require the expenditure of significant
amounts of capital, which may exceed our estimates and we may require significant debt or equity financing. These projects may not be completed at the
planned cost, on schedule or at all due to unavailability of needed financing. The construction of new ethanol and other biofuel facilities is subject to
construction cost overruns due to labor costs, costs of equipment and materials such as steel, labor shortages or weather or other delays, inflation or other
factors, which could be material. In addition, the construction of these facilities is typically subject to the receipt of approvals and permits from various
regulatory agencies. Those agencies may not approve the projects in a timely manner, if at all, or may impose restrictions or conditions on the projects that
could potentially prevent a project from proceeding, lengthen its expected completion schedule and/or increase its anticipated cost. Moreover, our revenues
and cash flows may not increase immediately upon the expenditure of funds on a particular project. For instance, if we expand an existing facility or
construct a new facility, the construction may occur over an extended period of time, and we may not receive any material increases in revenues or cash
flows until the project is completed. As a result, the new facilities may not be able to achieve our expected investment return, which could adversely affect
our results of operations.
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 Supply 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, and corn oil we
produce at the Keyes Plant to J.D. Heiskell. J.D. Heiskell, in turn, sells all WDG and syrup produced to A.L. Gilbert. We sell the majority of our fuel
ethanol production to one customer, Murex LLC (“Murex”), through individual sales transactions. If J.D. Heiskell were to fail to deliver adequate
feedstock to the Keyes Plant or fail to purchase all the contracted product we produce, if Murex were to fail to purchase the majority 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 of operations and financial condition.
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We may not receive the funds we expect under our EB-5 program.
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Our EB-5 Phase I 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, 2021, $35.5 million have
been raised through the EB-5 program and have been released from escrow and $0.5 million remain to be funded to escrow. 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. As of December 31, 2021, $36.6 million of principal and unpaid interest was outstanding on the EB-5
Notes under the EB-5 Phase I funding.
On October 16, 2016, we launched our EB-5 Phase II program, allowing for the issuance of up to 100 subordinated convertible promissory notes, on
substantially similar terms and conditions as those issued under our EB-5 Phase I program, for a total aggregate principal amount of up to $50.8 million.
On November 21, 2019, the minimum investment was raised from $500,000 per investor to $900,000 per investor. As of December 31, 2021, $4.0 million
have been raised through the EB-5 Phase II program and have been released from escrow. As of December 31, 2021, $4.1 million of principal and unpaid
interest was outstanding on the EB-5 Notes under the EB-5 Phase II funding.
There can be no assurance that we will be able to successfully raise additional funds under our EB-5 Phase II program or that such funds, if raised, will be
approved by USCIS. If we are unable to raise, receive approval for, or receive any funds under our EB-5 Phase II program, our business may be negatively
affected.
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, traditional biofuel 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.
We also face competition from international suppliers. Ethanol can be imported into the United States duty-free from some countries, which may
undermine the domestic ethanol industry. Currently, international suppliers produce ethanol primarily from sugar cane and as such, production costs for
ethanol in these countries can be significantly less than those 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.
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 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, which could materially and adversely affect our sales and
profitability.
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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, 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. As we enter into new markets
such as USP alcohol and hand sanitizer, we may be subject to several regulations and health and safety laws by TTB and Food and Drug Administration
(‘FDA”). Failure to comply with these health and safety laws, our license to sell these products may be revoked and we may be subject to certain penalties.
In addition, we may be required to make significant capital expenditures on an ongoing basis to comply with increasingly stringent environmental laws,
regulations, and permit and license requirements.
We may be liable for the investigation and cleanup of environmental contamination at our facilities 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.
Our business is affected by greenhouse gas and climate change regulation.
Emissions of carbon dioxide resulting from manufacturing ethanol are subject to permit requirements. Climate change continues to attract considerable
attention globally. Numerous proposals have been made and could continue to be made at the international, federal, state and local levels to monitor and
limit existing emissions of GHG, including carbon dioxide, as well as to restrict or eliminate future emissions. At this stage, it is not possible to accurately
estimate either a timetable for implementation of any future regulations or our future compliance costs relating to implementation. Under the 2015 Paris
Agreement, parties to the United Nations Framework Convention on Climate Change agreed to undertake ambitious efforts to reduce GHG emissions and
strengthen adaptation to the effects of climate change. In February 2021, the U.S. recommitted to the Agreement after having withdrawn in August 2017.
In the U.S., the EPA promulgated federal GHG regulations under the Clean Air Act affecting certain sources. The EPA issued mandatory GHG reporting
requirements, requirements to obtain GHG permits for certain industrial plants and GHG performance standards for some facilities. Although the EPA
recently scaled back certain GHG requirements, addressing climate change is a stated priority of President Biden and as such additional regulations and
legislation are likely to be forthcoming at the U.S. federal or state level that could result in increased operating costs for compliance, or required acquisition
or trading of emission allowances. Additionally, demand for the products we produce may be reduced.
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. 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.
The operations at our Keyes Plant will result in the emission of CO₂ into the atmosphere. In March 2010, the EPA released its final regulations on the
RFS. We believe the EPA’s final RFS regulations grandfather the Keyes Plant emission levels at its current capacity.
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A change in government policies may cause a decline in the demand for our products.
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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 RFS, which was implemented pursuant to the Energy Policy Act of 2005 and
the Energy Independence and Security Act of 2007 (the “EISA”). The RFS program sets annual quotas for the quantity of renewable fuels (such as ethanol)
that must be blended into motor fuels consumed in the United States. However, legislation aimed at reducing or eliminating the renewable fuel use required
by the RFS has been introduced in the United States Congress. Any change in government policies could have a material adverse effect on our business and
the results of our operations.
Waivers of the RFS minimum levels of renewable fuels included in gasoline or of the requirements by obligate parties to comply with the regulations 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. Additionally, the EPA has exercised the authority to waive the requirements of the RFS for certain small
refiners. 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. Further activity by the EPA to waive the requirements for small refiners could cause softening of pricing in the
industry and cause our results of operations to similarly decline.
A critical state program is California's LCFS, which is designed to reduce greenhouse gas emissions associated with transportation fuels used in California
by ensuring that the fuel sold meets declining targets for such emissions. The regulation quantifies lifecycle greenhouse gas emissions by assigning a CI
score to each transportation fuel based on that fuel’s lifecycle assessment. Each petroleum fuel provider, generally the fuel’s producer or importer (the
“Regulated Party”), is required to ensure that the overall CI score for its fuel pool meets the annual carbon intensity target for a given year. A Regulated
Party’s fuel pool can include gasoline, diesel, and their blend stocks and substitutes. This obligation is tracked through credits and deficits. Fuels with a CI
score lower than the annual standard earn a credit, and fuels that are higher than the standard result in a deficit. Credits can be traded. Any changes to
California’s LCFS could cause our results of operations, particularly in ethanol and biogas, to decline and cause our financial condition to suffer.
Concerns regarding the environmental impact of biofuel production could affect public policy which could impair our ability to operate at a
profit and substantially harm our revenues and operating margins.
Under the EISA, the EPA is required to produce a study every three years of the environmental impacts associated with current and future biofuel
production and use, including effects on air and water quality, soil quality and conservation, water availability, energy recovery from secondary materials,
ecosystem health and biodiversity, invasive species and international impacts. Should such EPA triennial studies, or other analyses find that biofuel
production and use has resulted in, or could in the future result in, adverse environmental impacts, such findings could also negatively impact public
perception and acceptance of biofuel as an alternative fuel, which also could result in the loss of political support. To the extent that state or federal laws are
modified or public perception turns against biofuels, use requirements such as RFS and LCFS may not continue, which could materially harm our ability to
operate profitably.
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, including an integrated microgrid, an MVR distillation system, the Mitsubishi
dehydration system and other technologies. 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 effect on our results of operations and financial position.
Aemetis has entered into new markets for alcohol, including the sanitizer market and other industrial alcohol segments. These new markets,
along with existing transportation/energy markets Aemetis already serves, are highly volatile and have significant risk associated with current market
conditions.
We have limited experience in marketing and selling high grade alcohol and hand sanitizer. As such, we may not be able to compete successfully with
existing or new competitors in supplying high-grade alcohol to potential customers. We may not be able to reach USP grade alcohol to compete further in
the high-grade alcohol and hand sanitizer market. 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 in the market. Furthermore, there can be no assurance that our high-grade alcohol business will
ever generate significant revenues or maintain profitability. The failure to do so could have a material adverse effect on our business and results of
operations.
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We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act.
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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 substantial portions 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. In particular, the Indian government’s 2018 National Biofuels Policy
stated a plan to increase Biodiesel blending to 5% of the diesel market, equal to more than 1.2 billion gallons per year. We cannot assure you that this
policy will continue, nor can we assure you that we will continue to be able to procure biodiesel supply contracts with the Indian state-owned oil marketing
companies through the public tender process. Our financial performance may be adversely affected by any such changes or other changes to the 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 is denominated in Indian rupees. We report our financial results in U.S. dollars. The exchange rates between the
Indian 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 Indian rupee fluctuates
significantly against the U.S. dollar.
We could be subject to strict restrictions on the movement of cash and the exchange of foreign currencies which could limit our access to cash
held in our Indian subsidiary to fund our U.S. operations or otherwise make investments where needed.
Our Indian operations could be subject to strict restrictions on the movement of cash and the exchange of foreign currencies, which would limit our ability
to use this cash across our global operations. For instance, cash and cash equivalents were $7.8 million at December 31, 2021, of which $6.6 million was
held in our North American entities and $1.2 million was held in our Indian subsidiary. Cash held in our Indian subsidiary may not otherwise be available
for servicing debt obligations, potential investment or use for operations in the United States. Moreover, even if we were to repatriate this cash back to the
United States for use in U.S. investments, this cash could be subject to additional withholding taxes. Due to various methods by which cash could be
repatriated to the United States in the future, the amount of taxes attributable to the cash is dependent on circumstances existing if and when remittance
occurs. Due to the various methods by which such earnings could be repatriated in the future, it is not practicable to determine the amount of applicable
taxes that would result from such repatriation. In addition, Indian regulations may impose restrictions on the movement and exchange of foreign currencies
which could further limit our ability to use such funds for repayment of debt, operations or capital or other strategic investments. Our inability to access our
cash where and when needed could impede our ability to service our debt obligations, make investments and support our operations.
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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, as described in the Notes to Consolidated
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.
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, 2021, we had U.S. federal NOL carryforwards of approximately $201.0 million
and state NOL carryforwards of approximately $252.0 million. As of December 31, 2021, the federal NOL’s of $201.0 million and the state NOL’s of
$252.0 million expire on various dates between 2027 and 2041. Due to the 2017 U.S. Tax Reform, U.S. federal NOLs post 2017 in the amount of $12.0
million have no expiration date.
The Section 163(j) excess interest expense carryover does not expire (similar to NOL’s). However, the Section 163j excess interest expense carryover is
subject to allowed amounts and the Section 382 change of ownership rules, similar to NOL’s and tax credits. The annual computation for how much interest
expense allowed includes the prior year interest carry over plus current year interest. The amount allowed is generally 30% (law was modified for 2019 and
2020 to 50% due to COVID) of adjusted taxable income before the interest. Due to the ongoing interest expense every year, our ability may be limited just
to continue to carry forward the interest expense to next year.
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 Keyes Plant (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 Keyes Plant 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 from 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 stock that a non-U.S. stockholder owns and whether, at the time such non-U.S. stockholder 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.
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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:
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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.
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, against
the risks that we believe are consistent with industry practice, and maintain an active safety program. 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.
The widespread outbreak of an illness, pandemic (such as COVID-19) or any other public health crisis may have material adverse effects on
our financial position, results of operations or cash flows.
The spread of COVID-19 has caused global business disruptions beginning in January 2020, including disruptions in the energy and natural gas industry.
The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, reduced global demand of goods and services, and
created significant volatility and disruption of financial and commodity markets. The extent of the impact of the COVID-19 pandemic on our operational
and financial performance, including our ability to execute our business strategies and projects in the expected time frame, continues to be uncertain and
depends on various factors, including the demand for ethanol, WDG, CDS and DCO, the availability of personnel, equipment and services critical to our
ability to operate our properties and the impact of potential governmental restrictions on travel, transports and operations. We continue to monitor federal,
state, and local government recommendations and have made modifications to our normal operations as a result of COVID-19. The degree to which the
COVID-19 pandemic or any other public health crisis adversely impacts our results will depend on future developments, which are highly uncertain and
cannot be predicted, including, but not limited to, the duration and spread of the outbreak, appearance of variants, its severity, the actions to contain the
virus or treat its impact, its impact on the economy and market conditions, and how quickly and to what extent normal economic and operating conditions
can resume. Therefore, the degree of the adverse financial impact cannot be reasonably estimated at this time.
We have facilities located in California and India, and the employees working in those facilities may be at greater risk for exposure to and for contracting
COVID-19. The spread of COVID-19 in these locations may result in our employees being forced to work from home or missing work if they or a member
of their family contract COVID-19. Additionally, the spread of COVID-19 may result in economic downturns in the markets in which we sell our products
and lead to reduced demand for gasoline in such markets, each of which may impair demand for ethanol, harm our operations and negatively impact our
financial condition.
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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. For example, in December 2020, we announced an investment in Nevo Motors, Inc. pursuant to a Strategic Electric Vehicle Production Facilities
Agreement that will utilize our current and future manufacturing facilities and fueling stations, as well as renewable natural gas and electricity produced by
us. The anticipated benefits of these transactions might take longer to realize than expected and these 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 condition. 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 the Superior Court of California, County of Santa Clara against EdenIQ and its CEO, Brian D. Thome.
The lawsuit is based on EdenIQ’s wrongful termination of a merger agreement (the “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. By way of its cross-complaint, EdenIQ sought monetary damages, punitive damages, injunctive relief,
attorneys’ fees and costs. All of the claims asserted by both the Company and EdenIQ have been denied or dismissed. In February 2019, the Company and
EdenIQ each filed motions seeking reimbursement of attorney fees and costs associated with the litigation. On July 24, 2019, the court awarded EdenIQ a
portion of the fees and costs it had sought in the amount of approximately $6.2 million and the Company recorded these fees in 2019. The Company’s
ability to amend its claims and present its claims to the court or a jury could materially affect the court’s decision to award EdenIQ its fees and costs. In
addition to further legal motions and a potential appeal of the Court’s summary judgment order, the Company plans to appeal the court’s award of EdenIQ’s
fees and costs. However, we cannot predict the outcome of such appeal. Such appeal 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 could adversely impact our ability to execute our business plan, 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 they rely extensively on the availability of our network infrastructure and 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, results of operations 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.
Our network infrastructure and internal technology systems may also be subject to other risks such as computer viruses, physical or electronic vandalism or
other similar disruptions that could cause system interruptions and loss of critical data. Cybersecurity threats and incidents can range from uncoordinated
individual attempts to gain unauthorized access to our networks and systems to more sophisticated and targeted measures directed at us or our third-party
service providers. Despite the implementation of cybersecurity measures including access controls, data encryption, vulnerability assessments, employee
training, continuous monitoring, and maintenance of backup and protective systems, our network infrastructure and internal technology systems may still
be vulnerable to cybersecurity threats and other electronic security breaches. While we have taken reasonable efforts to protect ourselves, and to date, we
have not experienced any material breaches or material losses related to cyberattacks, we cannot assure that any of our security measures would be
sufficient in the future.
Adverse weather conditions, including as a result of climate change, may adversely affect the availability, quality and price of agricultural
commodities and agricultural commodity products, as well as our operations and operating results.
Adverse weather conditions have historically caused volatility in the agricultural commodity industry and consequently in our operating results by causing
crop failures or significantly reduced harvests, which may affect the supply and pricing of the agricultural commodities that we sell and use in our business
and negatively affect the creditworthiness of agricultural producers who do business with us, including corn, feed and dairy producers.
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Severe adverse weather conditions, such as hurricanes or severe storms, may also result in extensive property damage, extended business interruption,
personal injuries and other loss and damage to us. Our operations also rely on dependable and efficient transportation services. A disruption in
transportation services, as a result of weather conditions or otherwise, may also significantly adversely impact our operations.
Additionally, the potential physical impacts of climate change are uncertain and may vary by region. These potential effects could include changes in
rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperature levels that could adversely impact
our costs and business operations, the location, costs and competitiveness of global agricultural commodity production and related storage and processing
facilities and the supply and demand for agricultural commodities. These effects could be material to our results of operations, liquidity or capital
resources.
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. In December 2018, the Company wrote
off $0.9 million of patents associated with the Z-microbeTM and enzymatic processes to facilitate the degradation of certain plant biomass as the Company
no longer plans to commercially develop the technologies itself and to free up resources to pursue other methods. In 2018, in cooperation with a federally
funded agency, we secured a grant from the California Energy Commission to optimize and demonstrate the effectiveness of ionic liquids technologies for
breaking down biomass to produce ethanol. 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 or commercial scale production will occur. Commercialization risks include economic financial
feasibility at commercial scale, availability of funding to complete large-scale commercial plant, ability of ionic liquids to function at commercial scale and
market acceptance of product.
Technological advances and changes in production methods in the biomass-based biofuel industry and renewable chemical industry could
render our plants obsolete and adversely affect our ability to compete.
It is expected that technological advances in biomass-based biofuel production methods will continue to occur and new technologies for biomass-based
diesel production may develop. Advances in the process of converting oils and fats into biodiesel and renewable diesel, including co-processing, could
allow our competitors to produce advanced biofuels more efficiently and at a substantially lower cost. New standards or production technologies may
require us to make additional capital investments in, or modify, plant operations to meet these standards. If we are unable to adapt or incorporate
technological advances into our operations, our production facilities could become less competitive or obsolete. Further, it may be necessary for us to make
significant expenditures to acquire any new technology and retrofit our plants in order to incorporate new technologies and remain competitive. In order to
execute our strategy to expand into the production of renewable chemicals, additional advanced biofuels, next generation feedstocks and related renewable
products, we may need to acquire licenses or other rights to technology from third parties. We can provide no assurance that we will be able to obtain such
licenses or rights on favorable terms. If we are unable to obtain, implement or finance new technologies, our production facilities could be less efficient
than our competitors, and our ability to sell biomass-based diesel may be harmed, negatively impacting our revenues and profitability.
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Disruption in the supply chain could materially adversely affect our business.
24
We rely on our suppliers for our business, from feedstocks to materials for our infrastructure projects. Future delays or interruptions in the supply chain due
to the COVID-19 pandemic could expose us to the various risks which would likely significantly increase our costs and/or impact our operations or
business plans including:
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we or our suppliers may have excess or inadequate inventory of feedstocks for operation of our plants;
we may face delays in construction or development of our infrastructure projects;
we may not be able to timely procure parts or equipment to upgrade, replace, or repair our plants and technology system; and
our suppliers may encounter financial hardships unrelated to our demand, which could inhibit their ability to fulfill our orders and meet our requirements.
Failure to remediate a material weakness in, or inherent limitations associated with, internal accounting controls could result in material
misstatements in our financial statements.
Our management has identified a material weakness in our internal control over financial reporting related to our complex business transactions processes.
See “Item 9A. Controls and Procedures”. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or
detected on a timely basis. As a result, management has concluded that, due to such material weakness, our disclosure controls and procedures were not
effective as of December 31, 2021.
Our efforts to improve our internal controls are ongoing; however, there are inherent limitations in all control systems and no evaluation of controls can
provide absolute assurance that all deficiencies have been detected. If we are unable to maintain effective internal control over financial reporting, or after
having remediated such material weakness, fail to maintain the effectiveness of our internal control over financial reporting or our disclosure controls and
procedures, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could
decline, and we could be subject to regulatory scrutiny, civil or criminal penalties or litigation. Continued or future failure to maintain effective internal
control over financial reporting could also result in financial statements that do not accurately reflect our financial condition or results of operations and
may also restrict our future access to the capital markets. There can be no assurance that we will not conclude in the future that this material weakness
continues to exist or that we will not identify any significant deficiencies or other material weaknesses that will impair our ability to report our financial
condition and results of operations accurately or on a timely basis.
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.
On January 31, 2020 we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) indicating that, based upon
the closing bid price of our common stock for the last 30 consecutive business days, we did not meet the minimum bid price of $1.00 per share required for
continued listing on The NASDAQ Global Market pursuant to Nasdaq Listing Rule 5450(a)(1). We were provided with a compliance period of 180
calendar days, or July 29, 2020, to regain our compliance with the minimum bid price requirement.
On February 11, 2020 we received a letter from Nasdaq indicating that, based upon the most recent publicly held shares information and the closing bid
price of the Company’s common stock for the last 30 consecutive business days, we did not meet the minimum market value of publicly held shares
(“MVPHS”) of $15,000,000 required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(3)(C). We were
provided with a compliance period of 180 calendar days, or August 10, 2020, to regain our compliance with the MVPHS requirement.
On August 11, 2020 and August 12, 2020 we received notices from Nasdaq that we had regained compliance with Listing Rules 5450(b)(3)(C) and 5450(a)
(1), respectively. Despite Nasdaq now considering this matter closed, there can be no assurance that we will be able to remain in compliance with the
minimum bid price requirement or with other Nasdaq listing requirements in the future. If we are unable to remain in compliance with the minimum bid
price requirement or with any of the other continued listing requirements, Nasdaq may take steps to delist our common stock, which could have adverse
results, including, but not limited to, a decrease in the liquidity and market price of our common stock, loss of confidence by our employees and investors,
loss of business opportunities, and limitations in potential financing options.
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If our common stock loses its listed status on the NASDAQ Global Market and we are not successful in obtaining a listing on another exchange, our
common stock would likely trade on the over-the-counter market. If our common stock were to trade on the over-the-counter market, selling our common
stock could be more difficult because smaller quantities of our common stock 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 stock is delisted, broker-dealers have certain regulatory burdens imposed
upon them, which may discourage broker-dealers from effecting transactions in our common stock, further limiting the liquidity of our common stock.
These factors could result in lower prices and larger spreads in the bid and ask prices for our common stock.
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, beneficially owns 8.5% of our outstanding common stock. In addition, the other
members of our Board and management, in the aggregate, excluding Mr. McAfee, beneficially own approximately 1.1% 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, 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, 2021, there were 1.3 million shares of our Series B
convertible Preferred Stock outstanding, convertible into 127,506 shares of our common stock on a 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 and directors. As of December 31, 2021, there were outstanding warrants and options to purchase 3.8 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.
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of
actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for
disputes with us or our directors, officers or other employees.
Our certificate of incorporation provides that, with certain limited exceptions, unless we consent in writing to the selection of an alternative forum, the
Court of Chancery of the State of Delaware will be the sole and exclusive forum for any stockholder to bring (i) any derivative action or proceeding
brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any director or officer of the Company owed to us or our
stockholders, creditors or other constituents, (iii) any action asserting a claim against us or any director or officer of the Company arising pursuant to any
provision of the Delaware General Corporation Law or our certificate of incorporation or our bylaws, or (iv) any action asserting a claim against the
Company or any director or officer of the Company governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any
interest in shares of our capital stock is deemed to have received notice of and consented to the foregoing provisions. This choice of forum provision may
limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees,
which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find this choice of forum
provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs
associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
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Provisions in our certificate of incorporation and bylaws may inhibit a takeover of us, which could limit the price investors might be willing to
pay in the future for our common stock and could entrench management.
Our certificate of incorporation and bylaws contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in
their best interests. Our board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of
directors being elected in each year. As a result, at a given annual meeting only a minority of the board of directors may be considered for election. Since
our “staggered board” may prevent our stockholders from replacing a majority of our board of directors at any given annual meeting, it may entrench
management and discourage unsolicited stockholder proposals that may be in the best interests of stockholders. Moreover, our board of directors has the
ability to designate the terms of and issue new series of preferred stock, which could be used to dilute the stock ownership of a potential hostile acquirer.
Although we have opted out of the anti-takeover provisions under Section 203 of the Delaware General Corporation Law, we have adopted anti-takeover
provisions that are substantially similar to such provisions, which could delay or prevent a change of control. Together these provisions may make more
difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for
our securities.
General Risk Factors
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:
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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.
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.
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 maintain key person insurance on our Mr. McAfee as our Chief Executive Officer
for purposes of loan compliance, but do not maintain any key person insurance on our other executives. 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.
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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. Any inability
to effectively manage the risks associated with our foreign operations may have a material adverse effect on our results of operations or financial condition.
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 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 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.
U.S. tax law changes could materially affect the tax aspects of our business and the industries in which we compete.
Continued developments in U.S. tax reform could adversely affect our results of operations and cash flows. It is also possible that provisions of U.S. tax
reform could be subsequently amended in a way that is adverse to the Company. Although we believe that our income tax provisions and accruals are
reasonable and in accordance with generally accepted accounting principles in the United States, and that we prepare our tax filings in accordance with all
applicable tax laws, the final determination with respect to any tax audits and any related litigation, could be materially different from our historical income
tax provisions and accruals. The results of a tax audit or litigation could materially affect our operating results and cash flows in the periods for which that
determination is made. In addition, future period net income may be adversely impacted by litigation costs, settlements, penalties, and interest assessments.
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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.
Inflation may adversely affect us by increasing costs of our business.
Inflation can adversely affect us by increasing costs of feedstock, equipment, materials, and labor. In addition, inflation is often accompanied by higher
interest rates. In an inflationary environment, such as the current economic environment, depending on other economic conditions, we may be unable to
raise prices of our fuels or products to keep up with the rate of inflation, which would reduce our profit margins. Given the inflation rates in fiscal year
2021, we have experienced, and continue to experience, increases in prices of feedstock, equipment, materials, and labor. Continued inflationary pressures
could impact our profitability.
Interest rates could change substantially, materially impacting our profitability.
Our borrowings expose us to interest rate risk, which could adversely affecting our profitability. We monitor and manage this exposure as part of our
overall risk management program, but the changes in interest rates cannot always be predicted, hedged, or offset with price increases to eliminate earnings
volatility.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
California Ethanol
Ethanol Plant in Keyes, CA. 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 adjacent to the Union Pacific Railroad 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.
CO₂ Land in Keyes, CA. On December 3, 2018, we acquired 5.32 acres of parcel land next to our Keyes Plant. The leased land is utilized by Messer Gas to
receive CO₂ from the Keyes Plant, and produce liquid CO₂ for sale into local markets.
Dairy Renewable Natural Gas
Dairy Biogas Digesters, Central Valley, CA. Since 2019, we have entered into arrangements with over 25 dairies in the Central Valley of California to
build dairy digesters on the dairies’ land with a term of 25 years with two optional 5-year extensions. ABGL continues to negotiate and sign participation
agreements with local dairies and convert those agreements into fully executed leases.
We productively utilize the majority of the space in our corporate offices and the ethanol plant facilities. The agreements with the City of Riverbank (as
described below) and the acquisition of GAFI are intended for future expansion and deployment of our SAF and renewable biodiesel fuel technology.
India Biodiesel
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 of finished products.
India Administrative Office. On April 2, 2019, we entered into a three-year lease of approximately 1,000 square feet of office space to accommodate our
principal administrative, sales and marketing facilities in Hyderabad, India.
We productively utilize the majority of the space in these facilities.
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Other Initiatives
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 June 2020 for an additional eight years with a new termination date of May 31, 2028.
Carbon Zero 1 Plant in Riverbank, CA. On February 3, 2017, we entered into a lease agreement with City of Riverbank Local Redevelopment Authority
for leasing of approximately 71,000 square feet. The space is leased for 5 years with 10 five-year extensions allowed. The space is being utilized to build
the Carbon Zero 1 Facility. On December 14, 2021, we entered into a real estate purchase agreements and lease disposition and development agreement
with the City of Riverbank. We plan to utilize the purchased and leased properties, located at 5300 Claus Road in the city of Riverbank, California, for the
construction of the Carbon Zero 1 Facility. Pursuant to the lease disposition and development agreement, we will serve as the master developer for the
development of the leased property to develop, construct, finance, operate and maintain the leased property. The lease commenced on February 12, 2022
and the term is for fifteen years.
Land, Building and Equipment in Goodland, KS. On December 31, 2019, we exercised our option to acquire all of the capital stock of GAFI, comprising
of approximately 93 acres of land, approximately 34,992 square feet of buildings and equipment as part of a partially completed 40 million gallon per year
dry-mill ethanol plant.
Item 3. Legal Proceedings
On August 31, 2016, the Company filed a lawsuit in Santa Clara County Superior Court against defendant EdenIQ, Inc. (“EdenIQ”). The lawsuit was
based on EdenIQ’s wrongful termination of a merger agreement that would have effectuated the merger of EdenIQ into a new entity that would be
primarily owned by Aemetis. The lawsuit asserted that EdenIQ had fraudulently induced the Company into assisting EdenIQ to obtain EPA approval for a
new technology that the Company would not have done but for the Company’s belief that the merger would occur. The relief sought included EdenIQ’s
specific performance of the merger, monetary damages, as well as punitive damages, attorneys’ fees, and costs. In response to the lawsuit, EdenIQ filed a
cross-complaint asserting causes of action relating to the Company’s alleged inability to consummate the merger, the Company’s interactions with
EdenIQ’s business partners, and the Company’s use of EdenIQ’s name and trademark in association with publicity surrounding the merger. Further,
EdenIQ named Third Eye Capital Corporation (“TEC”) as a defendant in a second amended cross-complaint alleging that TEC had failed to disclose that
its financial commitment to fund the merger included terms that were not disclosed. By way of its cross-complaint, EdenIQ sought monetary damages,
punitive damages, injunctive relief, attorneys’ fees and costs. In November 2018, the claims asserted by the Company were dismissed on summary
judgment and the Company filed a motion to amend its claims, which remains pending. In December 2018, EdenIQ dismissed all of its claims prior to
trial. In February 2019, the Company and EdenIQ each filed motions seeking reimbursement of attorney fees and costs associated with the litigation. On
July 24, 2019, the court awarded EdenIQ a portion of the fees and costs it had sought in the amount of approximately $6.2 million and the Company
recorded these fees based on the court order. The Company has retained appellate counsel to appeal the award. If the appeal is successful, the award may be
reduced or eliminated. If the appeal is not successful, the award for this judgment will be increased by approximately $1.8 million to $2.1 million. The
parties may also enter into settlement discussions while the appeal is pending and settle the dispute.
Item 4. Mine Safety Disclosures.
Not Applicable.
30
Table of Contents
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.”
Shareholders of Record
According to the records of our transfer agent, we had 173 stockholders of record as of February 23, 2022. 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 our business and to reduce our 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.
Table of Contents
Performance Graph
31
The graph below compares the cumulative five-year total return to shareholders of our common stock (AMTX) alongside the cumulative total return of the
NASDAQ Composite Index (IXIC) and NASDAQ Clean Edge Green Energy Index (CELS).
The total cumulative return assumes dividends were reinvested at each year-end and is based on an original $100 investment at the respective closing prices
on December 31, 2016. Note that historic stock price performance is not necessarily indicative of future stock price performance.
Year Ended December 31
Aemetis, Inc.
NASDAQ Composite Index
NASDAQ Clean Edge Green Energy Index
2016
2017
2018
2019
2020
$
$
$
100 $
100 $
100 $
40 $
128 $
131 $
44 $
123 $
114 $
60 $
167 $
160 $
179 $
239 $
451 $
2021
894
291
437
Sales of Unregistered Equity Securities
None.
Item 6. Selected Financial Data
[Reserved]
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.
Key Performance Indicators. Discussion of our key performance indicators, to provide context for company operations.
·
·
·
Results of Operations. An analysis of our financial results comparing the twelve months ended December 31, 2021, 2020, and 2019.
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.
Table of Contents
32
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.
This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items
and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2020.
Overview
Founded in 2006 and headquartered in Cupertino, California, we are an international renewable natural gas, renewable fuels and byproducts company
focused on the acquisition, development and commercialization of innovative negative carbon intensity products and technologies that replace traditional
petroleum-based products. We operate in three reportable segments “California Ethanol”, “Dairy Renewable Natural Gas”, and “India Biodiesel”. We have
other operating segments and they were determined not to be reportable segments, collectively represented by the "All Other" category.
We own and operate a 65 million gallon per year ethanol production facility located in Keyes, California (the “Keyes Plant”). In addition to low carbon
renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), and Condensed Distillers Solubles
(“CDS”), all of which are sold as animal feed to local dairies and feedlots. In the fourth quarter of 2021, we installed an ethanol zeolite membrane
dehydration system and is in process of being commissioned at the Keyes Plant. The installation is a key first step in the electrification of the Keyes Plant,
which will significantly reduce the use of petroleum based natural gas as process energy. The electrification, along with the future installation of a two-
megawatt zero carbon intensity solar microgrid system and a mechanical vapor recompression (MVR) system will greatly reduce GHG emissions and
decreases the carbon intensity of fuel produced at the Keyes Plant, allowing us to realize a higher price for the ethanol produced and sold.
During 2018, Aemetis Biogas, LLC (“ABGL”) was formed to construct bio-methane anaerobic digesters at local dairies near the Keyes Plant, many of
whom also purchase WDG produced at the Keyes Plant. Our Dairy Renewable Natural Gas segment, ABGL, has completed Phase 1 of our California
biogas digester network and pipeline system that converts waste dairy methane gas into Dairy Renewable Natural Gas (“RNG”) and is now executing
Phase 2 construction projects. The digesters are connected via an underground private pipeline owned by ABGL to a gas cleanup and compression unit
being built at the Keyes Plant to produce RNG. During the third quarter of 2020, ABGL completed construction of the first two dairy digesters along with
four miles of pipeline that carries bio-methane from the dairies to the Keyes Plant. Upon receiving the bio-methane from the dairies, impurities are
removed, and the bio-methane is converted to negative carbon intensity RNG where it will be either injected into the statewide PG&E gas utility pipeline,
supplied as compressed RNG that will service local trucking fleets, or used as renewable process energy at the Keyes Plant.
During the first quarter of 2021, we announced our “Carbon Zero” biofuels production plants designed to produce biofuels, including sustainable aviation
fuel (“SAF”) and diesel fuel utilizing renewable hydrogen and non-edible renewable oils sourced from existing Aemetis biofuels plants and other sources.
The first plant to be built, in Riverbank, California, “Carbon Zero 1”, is expected to utilize hydroelectric and other renewable power available onsite to
produce 90 million gallons per year of SAF, renewable diesel, and other byproducts. The plant is expected to supply the aviation and truck markets with
ultra-low carbon renewable fuels to reduce GHG emissions and other pollutants associated with conventional petroleum-based fuels. By producing ultra-
low carbon renewable fuels, the Company expects to capture higher value D3 Renewable Identification Numbers (“RINs”) and California’s LCFS credits.
D3 RINs have a higher value in the marketplace than D6 RINs due to D3 RINs’ relative scarcity and mandated pricing formula from the United States
Environmental Protection Agency (“EPA”).
Table of Contents
33
On April 1, 2021, we established Aemetis Carbon Capture, Inc. to build Carbon Capture and Sequestration (CCS) projects to generate LCFS and IRS 45Q
credits by injecting CO₂ into wells which are monitored for emissions to ensure the long-term sequestration of carbon underground. California’s Central
Valley has been identified as the state’s most favorable region for large-scale CO₂ injection projects due to the subsurface geologic formation that absorbs
and retains gases.
We also own and operate the Kakinada Plant with a nameplate capacity of 150 thousand metric tons per year, or about 50 million gallons per year,
producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. We believe the Kakinada Plant is one of the largest
biodiesel production facilities in India on a nameplate capacity basis. The Kakinada Plant is capable of processing a variety of vegetable oils and animal fat
waste feedstocks into biodiesel that meet international product standards. The Kakinada Plant also distills the crude glycerin byproduct from the biodiesel
refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive and other industries.
California Ethanol Revenue
Our revenue development strategy for California Ethanol segment relies upon supplying ethanol into the transportation fuel market in Northern California
and supplying feed products to dairy and other animal feed operations in Northern California. We are actively seeking higher value markets for our ethanol
in an effort to improve our overall margins and to add incremental income to the California Ethanol segment, including the development of the Carbon
Zero Plants, the expansion of the Biogas Project, and the implementation of the Solar Microgrid System, the installation of the membrane dehydration
system and other technologies. We are also actively working with local dairy and feed potential customers to promote the value of our WDG product in an
effort to strengthen demand for this product.
During 2021, we produced five products at the Keyes Plant: denatured fuel ethanol, WDG, DCO, CO₂, and CDS. During the first quarter of 2020, we
transitioned from selling the ethanol we produce to J.D. Heiskell pursuant to the J.D. Heiskell Purchase Agreement, to a model where the ethanol is sold
directly to our fuel marketing customers. We own the ethanol stored in our finished goods tank. WDG continues to be sold to A.L. Gilbert and DCO is sold
to other customers under the J.D. Heiskell Purchase Agreement. Smaller amounts of CDS were sold to various local third parties. We began selling CO₂ to
Messer Gas in the second quarter of 2020. We began selling high-grade alcohol in March 2020 directly to various customers throughout the West Coast and
we also produced and sold Aemetis hand sanitizer through our Aemetis Health Products, Inc. subsidiary in the fourth quarter of 2020.
California Ethanol revenue is dependent on the price of ethanol, WDG, high-grade alcohol, and DCO. Ethanol pricing is influenced by local and national
inventory levels, local and national ethanol production, imported ethanol, corn prices and gasoline demand, and is determined pursuant to a marketing
agreement with a single fuel marketing customer and is generally based on daily and monthly pricing for ethanol delivered to the San Francisco Bay Area,
California, as published by Oil Price Information Service (“OPIS”), as well as quarterly contracts negotiated by our marketing customer with local fuel
blenders. The price for WDG is influenced by the price of corn, the supply and price of distillers dried grains, and demand from the local dairy and feed
markets and determined monthly pursuant to a marketing agreement with A.L. Gilbert and is generally determined in reference to the local price of dried
distillers’ grains and other comparable feed products. High-grade alcohol pricing is based on the supply and demand restrictions in the current market. Our
revenue is further influenced by the price of natural gas, our decision to operate the Keyes Plant at various capacity levels, conduct required maintenance,
and respond to biological processes affecting output.
Dairy Renewable Natural Gas Revenue
In December 2018, we leveraged our relationship with California’s Central Valley dairy farmers by signing leases and raising funds to construct dairy
digesters that collect bio-methane and pipelines that convey bio-methane to our Keyes Plant. We have constructed our first two digesters, four miles of
pipeline, and commenced operations in the third quarter of 2020. In addition, we have signed agreements with over 25 additional dairies to construct
additional dairy digesters. Our revenue development strategy for the Dairy Renewable Natural Gas segment relies upon continuing to build out the network
of dairy digesters and pipeline in Northern California.
India Biodiesel Revenue
Our revenue strategy in India is based on continuing to sell biodiesel to our bulk fuel customers, fuel station customers, mining customers, industrial
customers and tender offers placed by Government Oil Marketing Companies (“OMCs”) for bulk purchases of fuels. In 2020, the tenders were delayed due
to COVID-19, and in 2021 ultimately changed in format to allow for monthly bidding on volumes at a price set by the OMCs on an bi-annual basis. The
Company did not participate in tenders during 2021 due to low OMC offer price, coupled with very high feedstock prices as a result of COVID-19. The
Company plans to participate in these tenders offers made by the OMCs on economically reasonable terms.
Table of Contents
Key Performance Indicators (KPI):
34
Aemetis measures performance primarily on the utilization of its plants and the production of products. For traditional ethanol, the products are ethanol
and WDG, measured in millions of gallons sold and tons sold, respectively. For biodiesel production, the products are biodiesel and refined glycerin, both
measured in metric tons sold. Since our Keyes Plant uses a single feedstock, the delivered quantity and cost of corn is also used as a key performance
indicator for this facility, as it indicates high-level profitability of the plant. Utilization is measured as the production of transportation fuel produced as a
percentage of the nameplate capacity, the engineering specification of the plant. Management utilizes these metrics to assess cash generated by each facility
on a daily or weekly basis and to make decisions on the appropriate level of operation to balance market demand with plant capabilities and efficiency and
allow the investor to understand the major components that comprise revenues within each segment.
The following table summarized our KPIs:
Production and Price Performance
(Unaudited)
Ethanol and High-Grade Alcohol
Gallons Sold (in millions)
Average Sales Price/Gallon
Percent of nameplate capacity
WDG
Tons Sold (in thousands)
Average Sales Price/Ton
Delivered Cost of Corn
Bushels ground (in millions)
Average delivered cost / bushel
Dairy Renewable Natural Gas
MMBtu intercompany sales
Biodiesel
Years ended December 31,
2020
2021
2019
2021 vs 2020
%
Change
$
$
$
59.8
2.72
$
109%
404
103
$
20.9
7.53
$
60.3
1.84
$
112%
393
81
$
21.1
5.05
$
53,041
9,388
64.7
1.77
118%
428
81
22.7
5.28
-
-0.8%
47.8%
-2.7%
2.8%
27.2%
-0.9%
49.1%
465.0%
Metric tons sold (in thousands)
Average Sales Price/Metric ton
Percent of Nameplate Capacity
Refined Glycerin
Metric tons sold (in thousands)
Average Sales Price/Metric ton
Results of Operations
$
$
1
1,024
$
0%
0.1
956
$
16
863
$
9%
1.4
814
$
47
904
31%
5.2
543
-93.8%
18.7%
-92.9%
17.4%
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenues
Our revenues are derived primarily from sales of ethanol, high-grade alcohol, and WDG for California Ethanol, renewable natural gas for Dairy Renewable
Natural Gas, and biodiesel and refined glycerin for India Biodiesel.
In 2010, we entered into an exclusive marketing agreement with Kinergy to market and sell our ethanol. We terminated the Ethanol Marketing Agreement
with Kinergy as of September 30, 2021. Effective October 1, 2021, we entered into the Fuel Ethanol Purchase and Sale Agreement with Murex LLC. Under
the terms of the agreement, the initial term matures on October 31, 2023 with automatic one-year renewals thereafter. We entered into an agreement with
A.L. Gilbert in 2011 to market and sell our WDG that will expire on December 31, 2022 with automatic renewals for additional one-year terms. Pursuant
to these agreements, our marketing costs for ethanol and WDG are less than 2% of sales. Substantially all of our India segment revenues during the years
ended December 31, 2021 and 2020 were from sales of biodiesel and refined glycerin.
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35
Substantially all of our Dairy Renewable Natural Gas segment revenues during the year ended December 31, 2021 were from sales of biogas to the Keyes
Plant for use in boilers, which allowed qualification of carbon credits for the ethanol produced in the Keyes Plant.
Revenue
Fiscal Year Ended December 31 (in thousands)
California Ethanol
Dairy Renewable Natural Gas*
India Biodiesel
All Other
Eliminations
Total
*All Dairy Renewable Natural Gas revenue is intercompany.
2021
2020
2019
Inc/(dec)
% change
2021 vs 2020
$
$
211,251 $
1,445
696
2
(1,445)
211,949 $
149,302 $
40
15,795
548
(128)
165,557 $
154,148 $
-
47,850
-
-
201,998 $
61,949
1,405
(15,099)
(546)
(1,317)
46,392
41.5%
3512.5%
-95.6%
-99.6%
1028.9%
28%
California Ethanol. For the year ended December 31, 2021, the Company generated 77% of revenue from sales of ethanol, 20% from sales of WDG, and
3% from sales of corn oil, CDS, CO₂, and other sales. During the year ended December 31, 2021, plant production averaged 109% of the 55 million gallon
per year nameplate capacity. The increase in revenues was due to the increase in price of ethanol per gallon sold to $2.72 for the year ended December 31,
2021, compared to $1.84 for the year ended December 31, 2020, which was partially offset by the decrease in volume of ethanol gallons sold from 60.3
million gallons for the year ended December 31, 2020 to 59.8 million gallons for the year ended December 31, 2021. In the year ended December 31, 2020,
15% of revenue was from sales of high-grade alcohol which was included in ethanol revenues. The average price of WDG increased by 27% to $103 per
ton for the year ended December 31, 2021 while WDG sales volume also increased by 3% to 404 thousand tons in the year ended December 31, 2021
compared to 393 thousand tons in the year ended December 31, 2020.
Dairy Natural Gas. During the years ended December 31, 2021, 2020, 2019, we produced and sold 53.0 thousand, 9.4 thousand, and no British thermal
units of biogas, respectively to an intercompany party.
India Biodiesel. For the year ended December 31, 2021, the Company generated 67% of revenue from sales of biodiesel, 18% of sales from refined
glycerin, and 15% from other sales, compared to 87% of sales from biodiesel, 8% from sales of refined glycerin, and 5% from other sales during the year
ended December 31, 2020. The decrease in revenues for the year ended December 31, 2021 compared to the year ended December 30, 2020 was due to a
97% decrease in the sales volume of biodiesel to 455 metric tons. The decrease in biodiesel volumes was due to the COVID-19 pandemic and unfavorable
feedstock pricing. The average sales price of biodiesel increased to $1,024 for the year ended December 31, 2021 compared to $863 per metric ton in the
same period in 2020. Compared to the year ended December 31,2020, the sales volume of refined glycerin decreased by 91% to 130 metric tons while the
average price of glycerin increased by 17% to $956 per metric ton for the year ended December 31, 2021.
All Other: For the years ended December 31, 2021 and 2020, revenue generated from All Other segment consisted of revenue from sales of hand sanitizer.
Cost of Goods Sold
Cost of goods sold consists primarily of feedstock, 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 our end products, our gross margins at any given time can vary from positive to
negative. Factory overhead includes direct and indirect costs associated with the plant operations, including the cost of repairs and maintenance,
consumables, maintenance, on-site security, insurance, depreciation and inbound freight.
Substantially all of our feedstock for California Ethanol is procured by J.D. Heiskell pursuant to the Heiskell Supply Agreement. Title to the corn passes to
us when the corn is deposited into our weigh bin and entered into the production process. Our cost of feedstock is established by J.D Heiskell based on the
Chicago Board of Trade pricing and includes rail, truck or ship transportation, local basis costs and a handling fee paid to J.D. Heiskell. The credit term of
the corn purchased from J.D. Heiskell is one day. 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 grain by ship, rail, and
truck, and out-bound shipments of ethanol and WDG by truck.
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36
Substantially all of our feedstock for Dairy Renewable Natural Gas is supplied from dairy operations who lease us land and contract for supply of their
dairy flush. Our cost of feedstock is established by lease agreement based upon the value of the environmental attributes and the size of the dairy.
Substantially all of our feedstock is for India Biodiesel is procured as crude palm stearin, a non-edible feedstock, from neighboring natural oil processing
plants at a discount to refined palm oil or import from international market when prices are viable. 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.
Cost of Goods Sold
Fiscal Year Ended December 31 (in thousands)
California Ethanol
Dairy Renewable Natural Gas
India Biodiesel
All other
Elminations
Total
2021
2020
2019
Inc/(dec)
% change
2021 vs 2020
$
$
201,686 $
1,933
719
1,117
(1,445)
204,010 $
139,568 $
343
14,193
556
(128)
154,532 $
150,197 $
-
39,103
-
-
189,300 $
62,118
1,590
(13,474)
561
(1,317)
49,478
44.5%
463.6%
-94.9%
100.9%
1028.9%
32%
California Ethanol. We ground 20.9 million bushels of corn at an average price of $7.53 per bushel during the year ended December 31, 2021 compared to
21.1 million bushels of corn at an average price of $5.05 per bushel during the year ended December 31, 2020. In addition, for the year ended December
31, 2021, we incurred $3.3 million more in natural gas costs, $5.0 million related to the California Carbon Allowance accrued and paid in October 2021 for
triennial obligation on GHG emissions along with $0.7 million accrued for 2021, and $0.9 million more in chemical costs.
Dairy Natural Gas. Cost of Goods Sold expenses relate to dairy manure payments, maintenance on the dairy digesters, production bonuses, and
depreciation.
India Biodiesel. The decrease in cost of goods sold during the year ended December 31, 2021, compared to December 30, 2020, was attributable to a
decrease in the volume of biodiesel feedstock by 97% to 465 metric tons during the year ended December 31, 2021, compared to 16 thousand tons during
the year ended December 31, 2020, coupled with a decrease in the average price of biodiesel feedstock by 2% to $619 compared to $630 in the same period
in 2020. In addition, the volume of refined glycerin feedstock decreased by 93% to 117 metric tons in the year ended December 31, 2021, partially offset by
an increase in the average price of the refined glycerin feedstock by 20% to $619 per metric ton in the same period in 2020.
All Other. All other Cost of Goods Sold relates to the write-down of Aemetis Health Products inventory during the year ended December 31, 2021.
Gross Profit (loss)
Fiscal Year Ended December 31 (in thousands)
2021
2020
2019
Inc/(dec)
% change
2021 vs 2020
$
$
9,565 $
(488)
(23)
(1,115)
7,939 $
9,734 $
(303)
1,602
(8)
11,025 $
3,951 $
-
8,747
-
12,698 $
(169)
(185)
(1,625)
(1,107)
(3,086)
-1.7%
61.1%
-101.4%
13837.5%
-28%
California Ethanol
Dairy Renewable Natural Gas
India Biodiesel
All other
Total
California Ethanol. Gross profit decreased by 2% in the year ended December 31, 2021 primarily due to the stronger margin associated with high-grade
alcohol sales coupled with the lower corn price during the year ended December 31, 2020.
Dairy Natural Gas. Gross loss relates to incurring more expenses as we begin to ramp up our Dairy Renewable Natural Gas business.
India Biodiesel. The decrease in gross profit was attributable to decrease in the sales volume of biodiesel of 97% to 455 metric tons and refined glycerin of
91% to 130 metric tons.
Operating Expenses
In 2020, substantially all of our R&D expenses were related to research and development activities in Minnesota.
Table of Contents
37
SG&A expenses consist primarily of salaries and related expenses for employees, marketing expenses related to sales of ethanol and WDG in California
Ethanol and biodiesel and other products in India Biodiesel, as well as professional fees, other corporate expenses, and related facilities expenses.
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 Gemini, we receive operational support and working capital for our
Kakinada Plant. We compensate Gemini with a percentage of the profits generated from operations. Payments of interest are identified as interest expense
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 Gemini as a component of SG&A, which 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.
Other (income) expense consists primarily of interest and amortization expense attributable to our debt facilities and those of our subsidiaries and accretion
of our Series A preferred units. 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.
Research and development expenses
$
88 $
213 $
205 $
(125)
-59%
2021
2020
2019
Inc/(dec)
% change
2021 vs 2020
R&D expenses decreased in the year ended December 31, 2021 due to decreases in expenses related to research subcontract work of $84 thousand and lab
supplies of $19 thousand.
Selling, general and administrative expenses
$
23,676 $
16,882 $
17,424 $
6,794
40%
2021
2020
2019
Inc/(dec)
% change
2021 vs 2020
SG&A expenses as a percentage of revenue in the year ended December 31, 2021 increased to 11% in the year ended December 31, 2021 compared to 10%
in the year ended December 31, 2020. The increase in SG&A expenses in the year ended December 31, 2021 was primarily due to an increase in salaries
and stock compensation of $3.9, insurance of $1.0 million, professional fees of $1.5 million, dues and subscriptions of $0.1 million, termination charges of
$0.6 million and marketing fees of $0.5 million, lease expense of $0.3 million, which were partially offset by a decrease in bad debt expense of $1.1 million
as compared to the SG&A expenses during the year ended December 31, 2020.
Other expense (income):
Interest expense
Interest rate expense
Debt related fees and amortization expense
Accretion and other expenses of Series A
preferred units
Loss contingency on litigation
Gain on debt extinguishment
Other expense (income)
2021
2020
2019
Inc/(dec)
% change
2021 vs 2020
$
20,136 $
3,921
22,943 $
3,401
21,089 $
4,666
(2,807)
520
7,718
-
(1,134)
809
4,673
-
-
548
2,257
6,200
-
(797)
3,045
-
(1,134)
261
-12%
15%
65%
0%
0%
48%
Interest expense decreased in the year ended December 31, 2021 due to principal debt payments made to Third Eye Capital in the second quarter of 2021.
Debt related fees and amortization increased due to debt and extension fees being incurred in 2021. The increase in accretion and other expenses of the
Series A Preferred Units was due to the issuance of additional units during the year ended December 31, 2021, coupled with accrued preference payments.
Other income related to gain on debt extinguishment was due to the PPP Loans being forgiven. Other expense increased due to termination charges
recognized during the year, coupled with a guarantee fee of $0.4 million during the year ended December 2021, while guarantee fees of $0.6 million were
added during the same period in 2020.
Table of Contents
Liquidity and Capital Resources
Cash and Cash Equivalents
38
Cash and cash equivalents were $7.8 million at December 31, 2021, of which $6.6 million was held in our North American entities and $1.2 million was
held in our Indian entity. Our current ratio was 0.32 and 0.08, respectively, at December 31, 2021 and 2020. We expect that our future available liquidity
resources will consist primarily of cash generated from operations, remaining cash balances, borrowings available, if any, under our senior debt facilities
and our subordinated debt facilities, and any additional funds raised through sales of equity. The use of proceeds from all equity raises and debt financings
are subject to approval by our senior lender.
Liquidity
Cash and cash equivalents, current assets, current liabilities and debt at the end of each period were as follows (in thousands):
As of
December
31,
December
31, 2020
Cash and cash equivalents
Current assets (including cash, cash equivalents, and deposits)
Current and long term liabilities (excluding all debt)
Current & long term debt
$
2021
7,751 $
20,693
92,302
188,767
592
8,683
80,264
229,619
Our principal sources of liquidity have been cash provided by the sale of equity, operations, and borrowings under various debt arrangements.
We launched an EB-5 Phase II funding in 2016, under which we expect to issue $50.8 million in additional EB-5 Notes on substantially similar terms and
conditions as those issued under our EB-5 Phase I funding. On November 21, 2019, the minimum investment amount was raised from $500,000 per
investor to $900,000 per investor. As of December 31, 2020, EB-5 Phase II funding in the amount of $4.0 million had been released from escrow to the
Company. Our principal uses of cash have been to refinance indebtedness, fund operations, and for 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.
We operate in a volatile market in which we have limited control over the major components of input costs and product revenues, and are making
investments in future facilities and facility upgrades that improve the overall margin while lessening the impact of these volatile markets. As such, we
expect cash provided by operating activities to fluctuate in future periods primarily because of changes in the prices for corn, ethanol, WDG, DCO, CDS,
biodiesel, waste fats and oils, glycerin, non-refined palm oil 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.
As a result of negative capital and negative operating results, and collateralization of substantially all of the company assets, the Company has been reliant
on its senior secured lender to provide additional funding. In order to meet its obligations during the next twelve months, the Company will need to either
refinance the Company’s debt or receive the continued cooperation of senior lender. This dependence on the senior lender raises substantial doubt about
the Company’s ability to continue as a going concern. The Company plans to pursue the following strategies to improve the course of the business.
For the Keyes Plant, we plan to operate the plant and continue to improve financial performance by adopting new technologies or process changes that
allow for energy efficiency, cost reduction or revenue enhancements, execute upon awarded grants that improve energy and operational efficiencies
resulting in lower cost, lower carbon demands and overall margin improvement.
For the Biogas Project, we plan to operate the biogas digesters to capture and monetize biogas while building new dairy digesters and extending the
existing pipeline in order to capture the higher carbon credits available in California. We plan on funding the construction from obtaining government
guaranteed loans and executing on existing and new state grant programs.
For the Riverbank project, we plan to raise the funds necessary to construct and operate the Riverbank Carbon Zero 1 plant using loan guarantees and
public financings based upon the licensed technology that generate federal and state carbon credits available for ultra-low carbon fuels utilizing lower cost,
non-food advanced feedstocks to significantly increase margins.
For the India plant, we plan to secure higher volumes of shipments of fuels at the India plant by developing the sales channels and expanding the existing
domestic markets or exporting to North America markets.
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39
In addition to the above we plan to continue to locate funding for existing and new business opportunities through a combination of working with our
senior lender, restructuring existing loan agreements, selling equity through the ATM and other means, selling the current EB-5 Phase II offering, or by
vendor financing arrangements.
As of December 31, 2021, the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes equaled $121.5 million.
The current maturity date for all of the Third Eye Capital financing arrangements is April 1, 2023 as the Company exercised the right to extend the maturity
date upon notice and payment of a 1% extension fee, pursuant to Amendment No. 20, subsequent to year end. The GAFI notes were fully repaid in the first
quarter of 2021.
As of the date of this report, the Company has $40.0 million additional borrowing capacity to fund future cash flow requirements under the Reserve
Liquidity Notes due on April 1, 2023.
Our senior lender has provided a series of accommodating amendments to the existing and previous loan facilities as described in further detail in Note 4.
Debt of the Notes to Consolidated Financial Statements 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 Gemini and Secunderabad Oils in India to fund our commercial arrangements for the acquisitions of
feedstock. We currently provide our own working capital for the Keyes Plant; Gemini and Secunderabad Oils currently provide us with working capital for
the Kakinada Plant. The ability of Gemini, and Secunderabad Oils to continue to provide us with working capital depends in part on both of their respective
financial strength and banking relationships.
Change in Working Capital and Cash Flows
The below table (in thousands) describes the changes in current and long-term debt during the year ended December 31, 2021:
Increases to debt:
Accrued interest
Maturity date extension fee added to senior debt and waiver fees
Sub debt extension fees
Financing for equipment term loan
$
20,239
1,715
680
55
Decreases to debt:
Principal, fees, and interest payments to senior lender
Principal and interest payments to EB-5 investors
GAFI interest and principal payments
PPP loan forgiveness
Change in debt issuance costs, net of amortization
Term loan payments
Total Increases to debt
$
22,689
$
Total Decreases to debt
(23,959)
(3,508)
(34,846)
(1,134)
(89)
(5)
$
(63,541)
Change in total debt
$
(40,852)
Working capital changes resulted in (i) a $1.2 million increase in inventories, (ii) a $0.2 million decrease in accounts receivable, (iii) a $4.8 million increase
in prepaid expenses mainly due to $4.0 million dollar prepayment to J.D. Heiskell coupled with a $0.8 million prepayment for natural gas, (iv) a decrease
in other current assets of $0.9 million, and (v) a $7.2 million increase in cash due to an increase in ethanol sales and funds raised through the at-the-market
offering program.
Cash used in operating activities was $20.6 million, derived from a net loss of $47.1 million, reduced by non-cash charges of $21.1 million, and changes in
operating assets and liabilities of $8.8 million. The non-cash charges consisted of: (i) $4.0 million in amortization of debt issuance costs and other
intangible assets, (ii) $5.4 million in depreciation expenses, (iii) $3.9 million in stock-based compensation expense, (iv) $7.7 million in preferred unit
accretion and other expenses of Series A preferred units, (v) a gain on debt extinguishment of $1.1 million, (vi) an increase in the provision for excess and
obsolete inventory of $1.0 million and (vii) an increase in the provision for bad debts of $0.1 million. Net changes in operating assets and liabilities
consisted primarily of an increase in (i) inventories of $2.2 million, (ii) prepaid expenses of $4.8 million, and (iii) a decrease in accounts payable of $5.2
million, offset by (iv) an increase in other liabilities of $0.7 million, (v) a decrease in other assets of $2.4 million, (vi) a decrease in accounts receivable of
$0.1 million, and (vii) an increase in accrued interest of $14.5 million.
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40
Cash used by investing activities was $22.9 million, of which $2.8 million was used for capital projects in the Keyes Plant, $17.7 million was used for
capital projects related to Dairy Renewable Natural Gas, $0.1 million for capital projects at the India Plant, and $6.0 million related to all other capital
projects. This was partially offset by grant proceeds of $3.8 million.
Cash provided by financing activities was $50.7 million, consisting primarily of $103.6 million raised from issuance of common stock in equity offerings,
$3.1 million received for issuing Series A Preferred Units, $1.3 million from exercises of stock options, and $0.1 million received for grant matching
program partially offset by repayments of borrowings of $55.5 million, Series A Preferred Units redemption of $0.3 million, debt renewal and waiver fee
payments of $1.1 million, and payments on finance leases of $0.5 million.
In October 2020, we commenced an at-the-market offering program, which allows us to sell and issue shares of our common stock from time-to-
time. During the year ended December 31, 2021, we issued 7,680 thousand shares of common stock under the at-the-market offering program for net
proceeds of $103.6 million net of commissions and offering related expenses. As of December 31, 2021, we had capacity to issue up to $288.2 million of
common stock under the at-the-market offering program.
Off-Balance Sheet Arrangements
We had no outstanding off-balance sheet arrangements as of December 31, 2021.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). 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
In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance on the recognition of revenue. The guidance stated that an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard was effective for annual reporting periods beginning after December 15, 2018,
including interim periods within that reporting period. In March and April 2016, the FASB issued further revenue recognition guidance amending principal
versus agent considerations regarding whether an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The Company adopted this
guidance on January 1, 2019 using the modified retrospective approach. There was no cumulative impact to retained earnings. We assessed all of our
revenue streams to identify any differences in the timing, measurement or presentation of revenue recognition.
Revenue Recognition. We derive revenue primarily from sales of ethanol, high-grade alcohol and related co-products in California Ethanol, and biodiesel
and refined glycerin in India Biodiesel pursuant to supply agreements and purchase order contracts. We assessed the following criteria under the ASC 606
guidance: (i) identify the contracts with customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate
the transaction price to the performance obligations, and (v) recognize revenue when the entity satisfies the performance obligations.
We have elected to adopt the practical expedient that allows for ignoring the significant financing component of a contract when estimating the transaction
price when the transfer of promised goods to the customer and customer payment for such goods are expected to be within one year of contract inception.
Further, we have elected to adopt the practical expedient in which incremental costs of obtaining a contract are expensed when the amortization period
would otherwise be less than one year.
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41
California Ethanol: Until May 13, 2020, we sold all our ethanol to J.D. Heiskell & Co. (“J.D. Heiskell”) under the Working Capital and Purchasing
Agreement (the “J.D. Heiskell Purchasing Agreement”). On May 13, 2020, we entered into an amendment to the Corn Procurement and Working Capital
Agreement with J.D. Heiskell (the “Corn Procurement and Working Capital”), under the terms of which we buy all corn from J.D. Heiskell and sell all
WDG and corn oil we produce to J.D. Heiskell. Following May 13, 2020, we sold the majority of our fuel ethanol production to one customer, Kinergy
Marketing, LLC (“Kinergy”), through individual sales transactions. We terminated the Ethanol Marketing Agreement with Kinergy as of September 30,
2021. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC. Given the similarity of the individual sales
transactions with Kinergy and Murex, we have assessed them as a portfolio of similar contracts. The performance obligation is satisfied by delivery of the
physical product to one of our customer’s contracted trucking companies. Upon delivery, the customer has the ability to direct the use of the product and
receive substantially all of its benefits. The transaction price is determined based on daily market prices negotiated by Kinergy for ethanol and by our
marketing partner A.L. Gilbert Company (“A.L. Gilbert”) for WDG. There is no transaction price allocation needed.
During the first quarter of 2020, Aemetis began selling high-grade alcohol for consumer applications directly to customers on the West Coast and Midwest
using a variety of payment terms. These agreements and terms were evaluated according to ASC 606 guidance and such revenue is recognized upon
satisfaction of the performance obligation by delivery of the product based on the terms of the agreement. Sales of high-grade alcohol represented 15%
revenue for the year ended December 31, 2020.
The below table shows our sales in California Ethanol by product category:
California Ethanol
Ethanol and high-grade alcohol sales
Wet distiller's grains sales
Other sales
For the twelve months ended December
31,
2020
111,219 $
32,048
6,035
149,302 $
2021
162,428 $
41,476
7,347
211,251 $
2019
114,593
34,510
5,045
154,148
$
$
We also assessed principal versus agent criteria as we buy our feedstock from our customers and process and sell finished goods to those customers in some
contractual agreements.
In California Ethanol, we assessed principal versus agent criteria as we buy corn as feedstock in producing ethanol from our working capital partner J.D.
Heiskell and sell all WDG and corn oil produced in this process to J.D. Heiskell through A.L. Gilbert. We sold all ethanol we produced to J.D.Heiskell until
May 13, 2020. We consider the purchase of corn as a cost of goods sold and the sale of ethanol, upon transfer to the common carrier, as revenue on the
basis that (i) we control and bear the risk of gain or loss on the processing of corn which is purchased at market prices into ethanol and (ii) we have legal
title to the goods during the processing time. The pricing for both corn and ethanol is set independently. Revenues from sales of ethanol and its co-products
are billed net of the related transportation and marketing charges. The transportation component is accounted for in cost of goods sold and the marketing
component is accounted for in sales, general and administrative expense. Transportation and marketing charges are known within days of the transaction
and are recorded at the actual amounts. The Company has elected an accounting policy under which these charges have been treated as fulfillment activities
provided after control has transferred. As a result, these charges are recognized in cost of goods sold and selling, general and administrative expenses,
respectively, when revenue is recognized. Revenues are recorded at the gross invoiced amount. Hence, we are the principal in sales scenarios where our
customer and vendor may be the same.
India Biodiesel: We sell products pursuant to purchase orders (written or verbal) or by contract with governmental or international parties, in which
performance is satisfied by delivery and acceptance of the physical product. Given that the contracts are sufficiently similar in nature, we have assessed
these contracts as a portfolio of similar contracts as allowed under the practical expedient. Doing so does not result in a materially different outcome
compared to individually accounting for each contract. All domestic and international deliveries are subject to certain specifications as identified in
contracts. The transaction price is determined daily based on reference market prices for biodiesel, refined glycerin, and Palm Fatty Acid Distillers
(“PFAD”) net of taxes. There is no transaction price allocation needed.
The below table shows our sales in India Biodiesel by product category:
India Biodiesel
Biodiesel sales
Refined glycerin sales
PFAD sales
Other sales
For the twelve months ended December
31,
2020
2019
2021
$
$
465 $
125
-
106
696 $
13,796 $
1,172
774
53
15,795 $
42,464
2,809
2,557
20
47,850
We also assessed principal versus agent criteria as we buy our feedstock from our customers and process and sell finished goods to those same customers in
certain contractual agreements. In those cases, we receive the legal title to feedstock from our customers once it is on our premises. We control the
processing and production of biodiesel based on contract terms and specifications. The pricing for both feedstock and biodiesel is set independently. We
hold the title and risk to biodiesel according to agreements when we enter into in these situations. Hence, we are the principal in sales scenarios where our
customer and vendor may be the same.
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
Our long-lived assets consist of property, plant and equipment. 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.
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42
The impairment test for long-lived assets 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 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.
Long-term assets are analyzed below based on their line items on the consolidated balance sheet and the lowest level where the assets are expected to
generate cash flow or work as a functional unit. We consider the lowest level Asset Group as one where the value of the asset becomes independent from
the other assets and has the ability to operate on an independent basis, and results in a functional unit. We therefore group the reporting units into the
following: the Keyes, California ethanol plant, the Kakinada, India biodiesel plant, the Central California Dairy Digester Network, the Riverbank,
California Carbon Zero 1 plant under development, the Goodland Energy Center LLC, which consists of a partially completed dry-mill, and the Carbon
Capture Sequestration asset group under development. These asset groups represent our significant long-lived assets. Both plants were operated efficiently
and no asset groups showed indicators of impairment, therefore no impairment test was needed for our Company’s long-lived assets.
Testing for Debt Modification or Extinguishment Accounting
During 2021 and 2020, we evaluated amendments to our debt under the ASC 470-50 guidance for modification and extinguishment accounting and under
ASC 470-60 for Troubled Debt Restructuring. This evaluation for modification and extinguishment 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. The evaluation for troubled debt restructuring included assessing whether the creditor granted a concession. To
determine this, we calculate the post-restructuring effective interest rate by projecting cash flows on the new terms and calculating a discount rate equal to
the carrying amount of pre-restructuring debt, and comparing this calculation to the terms of prior amendments. If the post restructuring effective interest
rate is less than the prior terms effective interest rate, we assess this as having been granted a concession. We then apply troubled debt restructuring
accounting to any debt in which the creditor granted a concession.
Recently Issued Accounting Pronouncements
Refer to Note 1 of the Financial Statements for a description of new accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks, including changes in interest rates, commodity prices and currency translation. Market risk is the potential loss
arising from adverse changes in market rates and prices. In the ordinary course of business, we enter into various types of transactions involving financial
instruments to manage and reduce the impact of changes in commodity prices and interest rates. We enter into no market risk sensitive instruments for
trading purposes.
At December 31, 2021 we did not have any open firm-price purchase commitments with our feedstock suppliers. At times in our Indian biodiesel business,
we reduce our exposure to fluctuations in feedstock prices and the price of biodiesel by entering into fixed price contracts to buy and sell commodities. At
the time we enter into a purchase commitment for feedstock, our goal is to also enter into an off-take arrangement with our customer to purchase the
biodiesel at a set price.
Commodity Price Risk
In our US operations we produce ethanol, distillers grains and corn oil from corn and our business is sensitive to changes in the prices of each of these
commodities. The price of corn is subject to fluctuations due to unpredictable factors such as weather; corn planted and harvested acreage; changes in
national and global supply and demand; and government programs and policies. We use natural gas in the ethanol production process and, as a result, our
business is also sensitive to changes in the price of natural gas. The price of natural gas is influenced by such weather factors as extreme heat or cold in the
summer and winter, or other natural events like hurricanes in the spring, summer and fall. Other natural gas price factors include North American
exploration and production, and the amount of natural gas in underground storage during both the injection and withdrawal seasons. Ethanol prices are
sensitive to world crude-oil supply and demand; crude oil refining capacity and utilization; government regulation; and consumer demand for alternative
fuels. Distillers grains prices are sensitive to various demand factors such as numbers of livestock on feed, prices for feed alternatives, and supply factors,
primarily production by ethanol plants and other sources. Even though our commodity outputs and input are sensitive to changes in market prices, we only
opportunistically pursue fixed contract arrangements on a limited basis with regard to the various commodities used in our business.
Ethanol Production
A sensitivity analysis has been prepared to estimate our ethanol production exposure to ethanol, corn, distillers grains and natural gas price risk. Market
risk related to these factors is estimated as the potential change in net income resulting from hypothetical 10% changes in prices of our expected corn and
natural gas inputs, and ethanol and distillers grains outputs for a one-year period from December 31, 2021. The results of this analysis, which may differ
from actual results, are as follows (in millions):
Estimated
Total Volume
Requirements
for the Next
12 Months (1)
Net Income
Effect of
Approximate
10% Change
in Price
Unit of
Measure
55.0 Gallons
19.6 Bushels
0.4 Tons (2)
MMBTU
(3)
1.4
$
$
$
$
15.7
14.8
4.0
0.9
Commodity (000s)
Ethanol
Corn
Distillers grains
Natural gas
(1) Volume requirements assume production at full capacity.
(2) Distillers grains quantities are stated on an equivalent ton basis.
(3) Millions of Thermal Units
43
Table of Contents
Corn Oil
A sensitivity analysis has been prepared to estimate our corn oil production segment exposure to corn oil price risk. Market risk related to these factors is
estimated as the potential change in net income resulting from hypothetical 10% changes in prices of our expected corn oil output for a one-year period
from December 31, 2021. The corn oil market risk at December 31, 2021, based on the estimated net income effect resulting from a hypothetical 10%
change in such prices, was approximately $0.8 million.
In our India operations we are subject to market risk with respect to the price and availability of the main raw materials we use to produce our products
including refined palm oil, palm stearin, animal fats, waste oils, crude glycerin, and chemicals. Unfavorable commodity margins result from a narrowing or
surpassing of the feedstock costs over finish goods sales revenues, which represents an unfavorable market condition. This is especially true when market
conditions do not allow us to pass along increased feedstock costs to our customers due to the commodity nature of our finished goods sales. The
availability and pricing of feedstock for our biodiesel plant fluctuate with unpredictable factors such as global demand and supply of raw materials, weather
conditions, governmental policies toward agriculture and biofuels, and international trade agreements.
Interest Rate Risk
We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from issuing term loans, revolving loans, and
liabilities that bear variable interest rates. Specifically, we had $99.6 million US Dollar denominated outstanding variable interest-rate liabilities as of
December 31, 2021. Interest rates on our variable-rate liabilities are determined based upon the market interest rate of the prime rate. A 1% increase in the
prime rate would increase our interest cost on such debt by approximately $1.1 million per year in the aggregate. Other details of our outstanding debt are
discussed in the notes to the consolidated financial statements included as a part of this report.
Foreign Currency Exchange Rate Risk
We do expect to have exposure to foreign currency risk as we conduct most of our India business in Indian Rupees. Our India subsidiaries use the Indian
Rupee local currency as their functional currency. Our primary exposure with respect to foreign currency exchange rate risk is the change in the Indian
Rupee (INR) to US Dollar (USD) exchange rate. For consolidation purposes, assets and liabilities are translated at month-end exchange rates. Items of
income and expense are translated at average exchange rates. Translation gains and losses are not included in determining net income (loss), but are
accumulated as a separate component of shareholders’ equity. Gains (losses) arising from foreign currency transactions are included in determining net
income (loss). For the twelve months ended December 31, 2021, 2020 and 2019, we recognized a loss of $0.2 million, $0.3 million, and $0.2 million,
respectively, associated with foreign currency translation adjustments to other comprehensive loss. We prepared a foreign currency exchange rate risk
sensitivity analysis to estimate our exposure to currency fluctuations. Using our 2021 Indian subsidiary financials and applying the appropriate actual
weighted average or end exchange rate and then incrementing by 10 points each respective INR to USD exchange rate resulted in a $0.2 million impact to
Net Income (loss), a $0.1 million change in Total Liabilities, a $1.4 million change in Stockholders’ equity (deficit), and a $1.5 million change in Total
Assets in our Indian subsidiary.
As of December 31, 2021, we did not have any outstanding material derivative financial instruments, off-balance sheet guarantees, interest rate swap
transactions or foreign currency contracts.
Item 8. Financial Statements and Supplementary Data
Financial Statements are listed in the Index to Consolidated Financial Statements on page 48 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, 2021.
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, although remediation plans were initiated to address
the material weakness over financial reporting as identified in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021,
the disclosure controls and procedures along with the related internal controls over financial reporting were not 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.
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Inherent Limitations on Effectiveness of Controls
44
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 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 GAAP, 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 CEO and CFO, 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 Tread way Commission - 2013. Based on the results of
management's assessment and evaluation, our CEO and CFO concluded that our internal control over financial reporting was not effective due to not
maintaining sufficient information technology general controls (ITGCs) and segregation of duties in the areas of user access and change-management over
certain information technology systems used in the Company's financial reporting processes and the application of controls relating to the design of
supervision and review controls over the completeness and accuracy of complex transactions.
Changes in Internal Control over Financial Reporting
Discussed below are changes made to our internal control over financial reporting during the quarter ended December 31, 2021, in response to an identified
material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely
basis. A material weakness was identified in our failure to design and maintain effective controls over our supervision and review of the completeness and
accuracy of complex transactions.
Our efforts to improve our internal controls are ongoing and focused on replacing our ERP system with a system that includes the higher levels of control
required by an accelerated filer, expanding our organizational capabilities to improve our control environment and on implementing process changes to
strengthen our internal control and monitoring activities. As part of our ongoing efforts to remediate the weaknesses in our internal controls identified, we
are evaluating our staff and outsourced resources, and hiring personnel or engaging third-parties with appropriate level of technical accounting knowledge
and experience in the application of generally accepted accounting principles commensurate with the volume and complexity of our financial accounting
and reporting requirements to address the material weakness and replacing our core information technology system to strengthen the areas of user access
and change management. There are, however, inherent limitations in all control systems and no evaluation of controls can provide absolute assurance that
all deficiencies have been detected. While these actions and planned actions are subject to ongoing management evaluation and will require validation and
testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the
continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting.
Item 9B. Other Information
Third Eye Reserve Liquidity Facility
On March 8, 2022, Third Eye agreed to extend a one year reserve liquidity facility governed by a promissory note of $40.0 million to April 1, 2023.
Borrowings under the facility are available until maturity on April 1, 2023. Interest on borrowed amounts accrues at a rate of 30% per annum, paid monthly
in arrears and may be capitalized and due upon maturity, or 40% if an event of default has occurred and continues. The outstanding principal balance of the
indebtedness evidenced by the promissory note, plus any accrued but unpaid interest and any other sums due thereunder, shall be due and payable in full at
the earlier to occur of (a) receipt by the Company or its affiliates of proceeds from any sale, merger, equity or debt financing, refinancing or other similar
transaction from any third party and (b) April 1, 2023. Any amounts may be reborrowed up to repaid amounts up until the maturity date of April 1, 2023.
The promissory note is secured by liens and security interests upon the property and assets of the Company. In addition, if any initial advances are drawn
under the facility, the Company will pay a nonrefundable onetime fee in the amount of $0.5 million provided that such fee may be added to the principal
amount of the promissory note on the date of such initial advance.
Third Eye Capital Limited Waiver and Amendment No. 22
On March 8, 2022, Third Eye Capital agreed to the Limited Waiver and Amendment No. 22 to the Note Purchase Agreement (“Amendment No. 22”) to: (i)
provide a waiver for the Blocked Account Agreement Violation in which the Borrowers failed to deliver Blocked Account Control Agreements by
December 31, 2021, (ii) provide for a waiver for the Subordinated Debt Violation, in which the Company made a repayment to a Subordinated Debt lender,
and (iii) provide for a waiver of the consolidated unfunded capital expenditures covenant for the quarters through December 31, 2021. As consideration for
such waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.1 million in cash.
Table of Contents
Item 10. Directors, Executive Officers and Governance
45
PART III
The information required by this Item 10 will be included in our Proxy Statement for our 2022 Annual Meeting of Stockholders to be filed no later than
120 days after December 31, 2021, and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item 11 will be included in our Proxy Statement for our 2022 Annual Meeting of Stockholders to be filed no later than 120
days after December 31, 2021, 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 will be included in our Proxy Statement for our 2022 Annual Meeting of Stockholders to be filed no later than
120 days after December 31, 2021, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 will be included in our Proxy Statement for our 2022 Annual Meeting of Stockholders to be filed no later than
120 days after December 31, 2021, and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this Item 14 will be included in our Proxy Statement for our 2022 Annual Meeting of Stockholders to be filed no later than
120 days after December 31, 2021, and is incorporated herein by reference.
Table of Contents
46
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as a part of this Form 10-K:
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 (PCAOB ID 49)
· 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
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.
Table of Contents
3. Exhibits:
INDEX TO EXHIBITS
47
Exhibit No.
Description
Form
File No.
Exhibit Filing Date
Filed
Herewith
Incorporated by Reference
3.1.1
3.1.2
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
10.14
10.15
10.16
Certificate of Incorporation
Certificate of Designation of Series B Preferred Stock
By Laws
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
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
8-K 001-35475
8-K 001-35475
8-K 001-35475
8-K 000-51354
8-K 000-51354
8-K 000-51354
8-K 000-51354
14A 000-51354
3.1
3.2
3.3
4.1
4.2
4.3
4.4
Nov. 2, 2021
Nov. 2, 2021
Nov. 2, 2021
Dec. 13, 2007
Dec. 13, 2007
Dec. 13, 2007
Dec. 13, 2007
Apr. 3, 2015
14A 000-51354
Apr. 15, 2008
8-K 000-51354
8-K 000-51354
8-K 000-51354
10.2
10.7
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
10-K 000-51354
10-K 000-51354
10-K 000-51354
10.31
10.32
10.33
Oct. 31, 2012
Oct. 31, 2012
Oct. 31, 2012
8-K 000-51354
10.1
Sept. 8, 2011
8-K 000-51354
8-K 000-51354
8-K 000-51354
10.1
10.2
10.3
Jan. 1, 2012
Jan. 1, 2012
Jan. 1, 2012
8-K 000-51354
10.1
Apr. 19, 2012
Table of Contents
48
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
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.
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 000-51354
8-K 000-51354
8-K 000-51354
10.1
10.1
10.1
Jun. 6, 2012
Jun. 6, 2012
Jun. 6, 2012
8-K 000-51354
10.1
Jun. 28, 2012
8-K 000-51354
10.2
Jun. 28, 2012
Form of Warrant to Purchase Common Stock
8-K 000-51354
10.3
Jun. 28, 2012
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
8-K 000-51354
10.1
July 3, 2012
8-K 000-51354
10.2
July 3, 2012
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
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.
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.*
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
10-K 000-51354
10.64
Oct. 31, 2012
10-K 000-51354
10.65
Oct. 31, 2012
Table of Contents
49
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
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
10.66
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
Table of Contents
50
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.
51
Table of Contents
10.62
10.64
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.
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
8-K 000-51354
10.2
May 23,
2013
May 23,
2013
8-K 000-51354
10.1
July 31, 2013
8-K 000-51354
10.1
Nov. 1, 2013
10-Q 000-51354
10.1
10-Q/A 000-51354
10.1
Mar. 31,
2014
Nov. 13,
2014
10.65
Limited Waiver and Amendment No. 9 to Amended and Restated Note
10K 000-51354
10.1
Mar. 12,2015
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
10.66
10.67
10.68
10.69
10.70
10.71
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, 2017by 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. 14 to Amended and Restated Note
Purchase Agreement, dated as of March 27, 2018 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.
Table of Contents
52
10.72
10.73
10.74
10.75
10.76
10.77
Promissory Note, dated as of March 27, 2018 by and among Aemetis,
Inc.; Aemetis Advanced Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.,
Aemetis, Inc.; and Third Eye Capital Corporation, an Ontario
corporation,
Promissory Note, dated as of March 11, 2019 by and among Aemetis,
Inc.; Aemetis Advanced Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.,
Aemetis, Inc.; and Third Eye Capital Corporation, an Ontario
corporation,
Limited Waiver and Amendment No. 15 to Amended and Restated Note
Purchase Agreement, dated as of March 11, 2019 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.
Promissory Note, dated as of March 6, 2020 by and among Aemetis,
Inc.; Aemetis Advanced Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.,
Aemetis, Inc.; and Third Eye Capital Corporation, an Ontario
corporation,
Limited Waiver and Amendment No. 16 to Amended and Restated Note
Purchase Agreement, dated as of March 11, 2019 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. 17 to Amended and Restated Note
Purchase Agreement, dated as of August 11, 2020 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-Q 000-51354
10.1
May 7, 2015
10-Q 000-51354
10.1
Nov. 5, 2015
10-K 000-51354
10.68
10-K 000-51354
10.69
10-K 000-51354
10.70
10-K 000-51354
10.71
10-K 000-51354
10.72
10-K 000-51354
10.73
10-K 000-51354
10.74
Mar. 28,
2016
Mar. 28,
2016
Mar. 16,
2017
Mar. 27,
2018
Mar. 27,
2018
Mar. 14,
2019
Mar. 14,
2019
10-K 000-51354
10.75
Mar. 6, 2020
000-51354
000-51354
10-Q
10.1
August 13,
2020
November
12, 2020
10.78
Limited Waiver and Amendment No. 18 to Amended and Restated Note
10-Q 000-51354
99.1
Purchase Agreement, dated as of November 5, 2020 by and among
10.79
10.80
10.81
10.82
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.
Promissory Note, dated as of March 10, 2021 by and among Aemetis,
Inc.; Aemetis Advanced Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.,
Aemetis, Inc.; and Third Eye Capital Corporation, an Ontario
corporation,
Limited Waiver and Amendment No. 19 to Amended and Restated Note
Purchase Agreement, dated as of March 14, 2021 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 Ninepoint.
Limited Waiver and Amendment No. 20 to Amended and Restated Note
Purchase Agreement, dated as of August 9, 2021 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
Ninepoint Third Eye Capital Private Credit Fund.
Fourth Amended and Restated Promissory Note, dated as of August 9,
2021 by and among Aemetis, Inc.; Aemetis Advanced Fuels Keyes, Inc.;
Aemetis Facility Keyes, Inc.; Third Eye Capital Corporation including
Third Eye Capital Management Inc.
Table of Contents
53
10-K 000-51354
10.79
10-K 000-51354
10.80
10-Q 000-51354
10.1
10-Q 000-51354
10.2
10.83
10.84
10.85
10.86
10.87
10.88
Real Estate Purchase and Sale Agreement, dated as of December 14,
2021 by and between Aemetis Properties Riverbank, Inc. and City of
Riverbank, California
Lease Disposition and Development Agreement, dated as of December
14, 2021 by and between Aemetis Properties Riverbank, Inc. and City of
Riverbank, California
Guaranty Agreement, dated as of December 14, 2021 by and between
Aemetis, Inc. and City of Riverbank, California
Real Estate Purchase and Sale Agreement, dated as of December 14,
2021 by and between Aemetis Properties Riverbank, Inc. and City of
Riverbank, California
Warrant to Purchase Stock, dated as of March 2, 2022 ("Fuels Revolving
Line Warrant")
Warrant to Purchase Stock, dated as of March 2, 2022 ("Carbon
Revolving Line Warrant")
8-K 001-36475
10.1
8-K 001-36475
10.2
8-K 001-36475
10.3
8-K 001-36475
10.4
8-K 001-36475
8-K 001-36475
4.1
4.2
10.89
Amended and Restated Credit Agreement, dated as of March 2, 2022
8-K 001-36475
10.1
10.90
10.91
Amended and Restated General Security Agreement, dated as of March
2, 2022
Intellectual Property Security Agreement Supplement, dated as of March
2, 2022
8-K 001-36475
10.2
8-K 001-36475
10.3
10.92
Third Amended and Restated Guaranty, dated as of March 2, 2022
8-K 001-36475
10.4
10.93
Amended and Restated Pledge Agreement, dated as of March 2, 2022
8-K 001-36475
10.5
March 14,
2021
March 14,
2021
August 12,
2021
August 12,
2021
December
21, 2021
December
21, 2021
December
21, 2021
December
21, 2021
March 4,
2022
March 4,
2022
March 4,
2022
March 4,
2022
March 4,
2022
March 4,
2022
March 4,
2022
10.94
14
21
23
24
31.1
31.2
32.1
32.2
Limited Waiver and Amendment No. 22 to Amended and Restated Note
Purchase Agreement dated as of March 8, 2022 by and Among Aemetis
Inc.; Aemetic Advanced Fuels Keyes, Inc.; Aemetics Facility Keyes,
Inc.; Third Eye Capital Corporation, an Ontario corporation, as agent for
Third Eye Capital Credit Opportunities Fund- Insight Fund, and
Ninepoint Third Eye Capital Private Credit Fund.
Code of Ethics
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Power of Attorney (see signature page)
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
10-K 001-36475
10.1
December
31, 2021
X
10-K 000-51354
14
May 20,
2009
x
x
x
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.
Table of Contents
54
AEMETIS, INC.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 49)
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
Table of Contents
To the Stockholders and the Board of Directors of Aemetis, Inc.
Report of Independent Registered Public Accounting Firm
55
Page
Number
56
58
59
60
61
62-95
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Aemetis, Inc. and its subsidiaries (the Company) as of December 31, 2021 and 2020, the
related consolidated statements of operations and comprehensive loss, stockholders’ deficit and cash flows for each of the three years in the period ended
December 31, 2021, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the
United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March —-9, 2022 expressed an adverse opinion on the
effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.
Liquidity & Management’s Plan
As disclosed in Note 17 of the consolidated financial statements, the Company has been reliant on their senior secured lender for liquidity and has been
required to remit substantially all excess cash from operations to the senior secured lender. Management believes, based on the Company’s business plan,
that cash flows from operations and established financing arrangements, including financing available under the reserve liquidity facility provided by the
Company’s senior secured lender, and potential additional issuances of common stock are sufficient to fund future cash flow requirements and satisfy the
Company’s obligations as they come due for at least one year from the financial statement issuance date.
56
We determined the adequacy of the available commitment on the reserve liquidity facility to be a critical audit matter because management’s plan includes
certain significant assumptions related to the Company’s cash flow needs. Auditing management’s assumptions related to the Company’s cash flow needs
involved a high degree of auditor judgment and increased audit efforts.
Our audit procedures related to the Company’s liquidity evaluation and the adequacy of the commitment on the reserve liquidity facility included the
following, among others:
·
·
·
·
·
We evaluated the reasonableness of forecasted cash needs by comparing to historical operating results as well as forecasted market data for
both ethanol and corn.
We evaluated the reasonableness of management’s estimated reduction in current liabilities from the Company’s cash needs for a period of
greater than a year from the financial statement issuance date by evaluating subordination agreements that are in place and the ability for the
Company to defer interest payments on various debt agreements.
We evaluated management’s forecasted cash needs in the context of other audit evidence obtained, including, but not limited to, board of
director minutes and investor presentation to determine whether the other audit evidence supported or contradicted the forecast.
We tested the subsequent event activity related to additional cash available or needed to fund working capital.
We tested the Company’s ability to maintain compliance with covenants under the existing loan agreements and the ability of the Company’s
senior lender to provide the additional funding under the amended reserve liquidity facility.
/s/ RSM US LLP
We have served as the Company's auditor since 2012.
Des Moines, Iowa
March 9, 2022
Table of Contents
57
To the Stockholders and the Board of Directors of Aemetis, Inc.
Report of Independent Registered Public Accounting Firm
Opinion on the Internal Control Over Financial Reporting
We have audited Aemetis, Inc. and its subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2021, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In
our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, the Company has
not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ deficit and cash
flows for each of the three years in the period ended December 31, 2021, and the related notes to the consolidated financial statements of the Company and
our report dated March 9, 2022 expressed an unqualified opinion.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following
material weaknesses have been identified and included in management's assessment:
·
·
There were ineffective information technology general controls (ITGCs) and segregation of duties in the areas of user access and change-
management over certain information technology systems used in the Company’s financial reporting processes. As a result of the pervasive
impact of these controls, automated and manual business process controls that are dependent on ITGCs and appropriate segregation of duties
were also ineffective.
There were ineffective controls relating to the design of supervision and review controls over the completeness and accuracy of complex
transactions. As a result, the objective of maintaining sufficient personnel with an appropriate level of technical accounting knowledge and
experience in the application of generally accepted accounting principles commensurate with the volume and complexity of the financial
accounting and reporting requirements was not met.
These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2021 financial statements,
and this report does not affect our report dated March 9, 2022 on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed 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. A company's internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ RSM US LLP
Des Moines, Iowa
March 9, 2022
Table of Contents
Assets
Current assets:
58
AEMETIS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF December 31, 2021 and 2020
(In thousands except for par value)
December 31,
2021
December 31,
2020
Cash and cash equivalents ($19 and $235 respectively from VIE)
Accounts receivable, net of allowance for doubtful accounts of $1,404 and $1,260 as of December 31, 2021 and
$
7,751 $
592
2020, respectively
Inventories, net of allowance for excess and obsolete inventory of $1,040 and $0 as of December 31, 2021 and
2020, respectively
Prepaid expenses ($335 and $192 respectively from VIE)
Other current assets ($0 and $741 respectively from VIE)
Total current assets
Property, plant and equipment, net ($39,625 and $22,628 respectively from VIE)
Operating lease right-of-use assets ($10 and $28 respectively from VIE)
Other assets ($38 and $24respectively from VIE)
Total assets
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable ($4,950 and $6,271 respectively from VIE)
Current portion of long term debt
Short term borrowings ($9 and $0 respectively from VIE)
Mandatorily redeemable Series B convertible preferred stock
Accrued property taxes ($121 and $0 respectively from VIE)
Accrued contingent litigation fees
Current portion of operating lease liability ($11 and $10 respectively from VIE)
Current portion of Series A preferred units ($3,169and $2,015 respectively from VIE)
Other current liabilities ($306 and $129 respectively from VIE)
Total current liabilities
Long term liabilities:
Senior secured notes and revolving notes
EB-5 notes
Other long term debt ($40 and $0 respectively from VIE)
Series A preferred units ($44,978 and $32,022respectively from VIE)
Operating lease liability ($0 and $11 respectively from VIE)
Other long term liabilities ($0 and $74 respectively from VIE)
Total long term liabilities
Stockholders' deficit:
Series B convertible preferred stock, $0.001 par value; 7,235 authorized; 1,275 and 1,323 shares issued and
$
$
1,574
5,126
5,598
644
20,693
1,821
3,969
750
1,551
8,683
135,101
2,462
2,575
160,831 $
109,880
2,889
3,687
125,139
16,415 $
8,192
14,586
3,806
6,830
6,200
260
3,169
5,872
65,330
121,451
32,500
12,038
44,978
2,318
2,454
215,739
20,739
44,974
14,541
3,252
5,674
6,200
316
2,015
4,524
102,235
125,624
32,500
11,980
32,022
2,578
2,944
207,648
outstanding
each period, respectively (aggregate liquidation preference of $3,825 and $3,969 respectively)
Common stock, $0.001 par value; 80,000 authorized; 33,461 and 22,830 shares issued and outstanding each
period, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders' deficit
Total liabilities and stockholders' deficit
1
1
33
205,305
(321,227)
(4,350)
(120,238)
160,831 $
23
93,426
(274,080)
(4,114)
(184,744)
125,139
$
The accompanying notes are an integral part of the financial statements.
Table of Contents
59
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED December 31, 2021, 2020, AND 2019
(In thousands, except for earnings per share)
For the years ended December 31,
2020
2019
2021
Revenues
Cost of goods sold
Gross profit
Research and development expenses
Selling, general and administrative expenses
Operating loss
Other expense (income):
Interest expense
Interest rate expense
Debt related fees and amortization expense
Accretion and other expenses of Series A preferred units
Loss contingency on litigation
Gain on debt extinguishment
Other expense (income)
Loss before income taxes
Income tax expense (benefit)
Net loss
Less: Net loss attributable to non-controlling interest
Net loss attributable to Aemetis, Inc.
Other comprehensive (loss)
Foreign currency translation loss
Comprehensive loss
Net loss per common share
Basic
Diluted
Weighted average shares outstanding
Basic
Diluted
$
211,949 $
204,010
7,939
165,557 $
154,532
11,025
88
23,676
(15,825)
213
16,882
(6,070)
20,136
3,921
7,718
-
(1,134)
809
(47,275)
(128)
(47,147) $
-
(47,147) $
22,943
3,401
4,673
-
-
548
(37,635)
(976)
(36,659) $
-
(36,659) $
201,998
189,300
12,698
205
17,424
(4,931)
21,089
4,666
2,257
6,200
-
(797)
(38,346)
1,131
(39,477)
(3,761)
(35,716)
(236)
(47,383) $
(289)
(36,948) $
(249)
(39,726)
(1.54) $
(1.54) $
(1.74) $
(1.74) $
(1.75)
(1.75)
30,682
30,682
21,012
21,012
20,467
20,467
$
$
$
$
$
The accompanying notes are an integral part of the financial statements.
60
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED December 31, 2021, 2020, AND 2019
(In thousands)
For the year ended December 31,
2020
2019
2021
(47,147) $
(36,659) $
(39,477)
Table of Contents
Operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Share-based compensation
Depreciation
Debt related fees and amortization expense
Intangibles and other amortization expense
Accretion and other expenses of Series A preferred units
Gain on debt extinguishment
Deferred tax benefit
Provision for excess and obsolete inventory
Provision for bad debts
Change in fair value of stock appreciation rights
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses
Other assets
Accounts payable
Accrued interest expense and fees
Other liabilities
Net cash (used in) provided by operating activities
Investing activities:
Capital expenditures
Grant proceeds received for capital expenditures
Net cash used in investing activities
Financing activities:
Proceeds from borrowings
Repayments of borrowings
TEC debt renewal and waiver fee payments
Grant proceeds received for capital expenditures
Payments on finance leases
Proceeds from issuance of common stock in equity offering
Proceeds from the exercise of stock options
Proceeds from Series A preferred units financing
Series A preferred financing redemption
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents for period
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
3,928
5,448
3,921
46
7,717
(1,134)
-
1,040
144
-
94
(2,211)
(4,849)
2,368
(5,198)
14,456
730
(20,647)
995
4,894
3,401
48
4,673
-
(984)
-
1,260
-
(1,088)
2,392
44
253
1,400
21,728
123
2,480
(26,652)
3,758
(22,894)
(19,340)
2,031
(17,309)
-
(55,523)
(1,108)
115
(505)
103,591
1,304
3,130
(300)
50,704
(4)
7,159
592
7,751 $
12,648
(15,463)
(350)
256
(1,471)
5,113
287
13,755
-
14,775
(10)
(64)
656
592 $
Supplemental disclosures of cash flow information, cash paid:
Cash paid for interest
Income taxes paid
Supplemental disclosures of cash flow information, non-cash transactions:
Subordinated debt extension fees added to debt
Fair value of warrants issued to subordinated debt holders
Fair value of warrants issued for capital expenditures
TEC debt extension, waiver fees, promissory notes fees added to debt
Capital expenditures in accounts payable
Operating lease liabilities arising from obtaining right of use assets
Financing lease liabilities arising from obtaining right of use assets
Stock Appreciation Rights issued for GAFI Amendment No. 1
Capital expenditures purchased on financing
Issuance of equity to pay off accounts payable
$
5,682 $
7
1,324 $
8
680
1,546
1,344
608
7,693
-
113
-
55
893
680
181
-
1,747
5,931
2,817
2,309
-
5,652
-
The accompanying notes are an integral part of the financial statements.
Table of Contents
61
AEMETIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED December 31, 2021, 2020 AND 2019
(In thousands)
774
4,434
4,666
48
2,257
-
1,123
-
-
(80)
(963)
(491)
147
(594)
1,001
18,033
7,088
(2,034)
(8,578)
-
(8,578)
56,314
(51,878)
(530)
1,364
-
-
-
4,815
-
10,085
(5)
(532)
1,188
656
2,476
8
680
162
-
1,602
2,391
1,181
-
1,050
-
-
Series B Preferred
Stock
Shares
Dollars Shares
Additional
Common Stock
Paid-in
Dollars Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Noncontrolling
Interest
Total
Balance at
1,323 $
1
20,345 $
20 $
85,917 $
(193,204) $
(3,576) $
(4,740) $ (115,582)
December 31,
2018
Stock-based
compensation
Issuance and
exercise of
warrants
Foreign currency
translation loss
Net loss
Reclassification
of GAFI
noncontrolling
interest
Balance at
December 31,
2019
Issuance of
common stock
Stock options
exercised
Stock-based
compensation
Issuance and
exercise of
warrants
Foreign currency
translation loss
Net loss
Balance at
December 31,
2020
Issuance of
common stock
Sereis B
conversion to
common stock
Stock options
exercised
Stock-based
compensation
Issuance and
exercise of
warrants
Foreign currency
translation loss
Net loss
Balance at
December 31,
2021
Table of Contents
-
-
-
-
-
225
-
1
774
161
-
-
-
-
-
-
-
-
-
-
-
-
-
(35,716)
-
-
-
-
774
162
(249)
-
-
(3,761)
(249)
(39,477)
-
1,323
-
-
-
-
-
1
-
-
-
-
-
-
-
(8,501)
-
8,501
-
20,570
21
86,852
(237,421)
(3,825)
(154,372)
1,507
528
-
225
2
-
-
-
5,111
287
995
181
-
-
-
-
-
(36,659)
-
-
-
-
-
-
-
-
5,113
287
995
181
(289)
-
-
-
(289)
(36,659)
-
-
-
-
-
-
-
-
-
-
1,323
1
22,830
23
93,426
(274,080)
(4,114)
(184,744)
-
(48)
-
-
-
-
-
-
-
-
7,796
5
2,499
-
331
8
-
2
-
-
103,760
-
1,249
3,928
2,942
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(47,147)
-
-
-
-
-
-
-
-
-
-
103,768
-
1,251
3,928
2,942
(236)
-
-
-
(236)
(47,147)
1,275
$
1
33,461
$
33
205,305
$
(321,227)
$
(4,350)
$
-
$ (120,238)
The accompanying notes are an integral part of the financial statements.
62
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 Delaware corporation,
and its wholly owned subsidiaries (collectively, “Aemetis” or the “Company”):
·
·
·
·
Aemetis Americas, Inc., a Delaware corporation, and its subsidiary AE Biofuels, 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 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 Property Keyes, Inc., a Delaware corporation;
Aemetis Advanced Fuels, Inc., a Nevada corporation;
Aemetis Advanced Products Keyes, Inc., a Delaware corporation and its subsidiary Aemetis Properties Riverbank, Inc., a Delaware corporation,
Aemetis Health Products, Inc., a Delaware corporation; Aemetis Riverbank, Inc., a Delaware corporation, and its subsidiary Aemetis Advanced
Products Riverbank, Inc., a Delaware corporation;
Aemetis Advanced Biorefinery Keyes, Inc., a Delaware corporation;
Aemetis Biogas LLC, a Delaware limited liability company; and
Goodland Advanced Fuels, Inc., a Nevada corporation.
Nature of Activities. Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis,
“Aemetis,” the “Company,” “we,” “our” or “us”) is an international renewable fuels and byproducts company focused on the acquisition, development and
commercialization of innovative technologies that replace traditional petroleum-based products.
We own and operate a 65 million gallon per year ethanol production facility located in Keyes, California (the “Keyes Plant”). In addition to low carbon
renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), and Condensed Distillers Solubles
(“CDS”), all of which are sold as animal feed to local dairies and feedlots. In the fourth quarter of 2021, an ethanol zeolite membrane dehydration system
was installed at the Keyes Plant and is in process of being commissioned at the Keyes Plant, a key first step in the electrification of the Keyes facility.
During 2018, Aemetis Biogas, LLC (“ABGL”) was formed to construct bio-methane anaerobic digesters at local dairies near the Keyes Plant, many of
whom also purchase WDG produced at the Keyes Plant. Our Dairy Renewable Natural Gas segment, ABGL, has completed Phase 1 of our California
biogas digester network and pipeline system that converts waste dairy methane gas into Dairy Renewable Natural Gas (“RNG”) and is now executing
Phase 2 construction. The digesters are connected via an underground private pipeline owned by ABGL to a gas cleanup and compression unit being built
at the Keyes Plant to produce RNG. During the third quarter of 2020, ABGL completed construction of the first two dairy digesters along with four miles
of pipeline that carries bio-methane from the dairies to the Keyes Plant. Upon receiving the bio-methane from the dairies, impurities are removed, and the
bio-methane is converted to negative carbon intensity RNG where it will be either be sold to third parties or used as renewable process energy at the Keyes
Plant.
During the first quarter of 2021, we announced our “Carbon Zero” biofuels production plants designed to produce biofuels, including sustainable aviation
fuel (“SAF”) and diesel fuel utilizing renewable hydrogen and non-edible renewable oils sourced from our existing biofuels plants and other sources. The
first plant, in Riverbank, California, “Carbon Zero 1”, is expected to utilize hydroelectric and other renewable power available onsite to produce SAF,
renewable diesel, and other byproducts. The plant is expected to supply the aviation and truck markets with ultra-low carbon renewable fuels.
On April 1, 2021, we established Aemetis Carbon Capture, Inc. to build Carbon Capture and Sequestration (CCS) projects to generate LCFS and IRS 45Q
credits by injecting CO₂ into wells which are monitored for emissions to ensure the long-term sequestration of carbon underground.
Table of Contents
63
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
During 2017, Goodland Advanced Fuels, Inc. (“GAFI”) was formed to acquire land, buildings and process equipment in Goodland, Kansas for the
construction and development of a next generation biofuel facility for $15.4 million. GAFI entered into a Note Purchase Agreement with Third Eye Capital
Corporation (“Third Eye Capital”). On December 31, 2019, we exercised an option to acquire all capital stock of GAFI for $10 and consolidated assets,
liabilities, and equity. In addition, the period costs related to non-controlling interest are presented as separately on the Statement of Operations for the year
ended December 31, 2019. Prior to December 31, 2019, GAFI was consolidated into the financial statements as a variable interest entity.
We also own and operate the Kakinada Plant with a nameplate capacity of 150 thousand metric tons per year, or about 50 million gallons per year,
producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. The Kakinada Plant is capable of processing a variety of
vegetable oils and animal fat waste feedstocks into biodiesel that meet international product standards. The Kakinada Plant also distills the crude glycerin
byproduct from the biodiesel refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive and other industries.
Basis of Presentation and Consolidation. These consolidated financial statements include the accounts of Aemetis. Additionally, we consolidate all entities
in which we have a controlling financial interest. A controlling financial interest is usually obtained through ownership of a majority of the voting interests.
However, an enterprise must consolidate a variable interest entity (“VIE”) if the enterprise is the primary beneficiary of the VIE, even if the enterprise does
not own a majority of the voting interests. The primary beneficiary is the party that has both the power to direct the activities of the VIE that most
significantly impact the VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially
be significant to the VIE. ABGL was assessed to be a VIE and through the Company's ownership interest in all of the outstanding common stock, the
Company has been determined to be the primary beneficiary and accordingly, the assets, liabilities, and operations of ABGL are consolidated into those of
the Company.
Prior to December 31, 2019, GAFI was consolidated into the financial statements as a VIE. We concluded that GAFI did not have enough equity to finance
its activities without additional subordinated financial support and GAFI’s shareholder did not have a controlling financial interest in the entity. Through
providing a Limited Guaranty, pursuant to which, the Guarantors agreed to guarantee the prompt payment and performance of all unpaid principal and
interest on the GAFI Loans and all other obligations and liabilities of GAFI to the GAFI Noteholders in connection with the GAFI Note Purchase
Agreement, and signing the Option Agreement, pursuant to which the Company was granted an irrevocable option to purchase all, but not less than all, of
the capital stock of GAFI for an aggregate purchase price equal to $0.01 per share for a total purchase price of $10.00, the Company took the risks related
to operations, financing the Goodland Plant, and agreed to meet the financial covenants for GAFI to be in existence. Based upon this assessment, Aemetis
has the power to direct the activities of GAFI and has been determined to be the primary beneficiary of GAFI and accordingly, the assets, liabilities, and
operations of GAFI are consolidated into those of the Company. The assets and liabilities were initially recognized at fair value. On December 31, 2019, we
exercised an option to acquire all capital stock of GAFI and consolidated it with the Company.
All intercompany balances and transactions have been 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. We derive revenue primarily from sales of ethanol, high-grade alcohol and related co-products in California Ethanol and India
biodiesel and refined glycerin in India pursuant to supply agreements and purchase order contracts. We assessed the following criteria under the ASC 606
guidance: (i) identify the contracts with customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate
the transaction price to the performance obligations, and (v) recognize revenue when the entity satisfies the performance obligations.
California Ethanol: Until May 13, 2020, we sold all our ethanol to J.D. Heiskell & Co. (“J.D. Heiskell”) under the Working Capital and Purchasing
Agreement (the “J.D. Heiskell Purchasing Agreement”). On May 13, 2020, we entered into an amendment to the Corn Procurement and Working Capital
Agreement with J.D. Heiskell (the “Corn Procurement and Working Capital”), under the terms of which we buy all corn from J.D. Heiskell and sell all
WDG and corn oil we produce to J.D. Heiskell. Following May 13, 2020 and until October, 2021, we sold the majority of our fuel ethanol production to
one customer, Kinergy Marketing, LLC (“Kinergy”), through individual sales transactions. We terminated the Ethanol Marketing Agreement with Kinergy
as of September 30, 2021. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC (“Murex”), in which we
will sell all our Ethanol to Murex. Given the similarity of the individual sales transactions with Kinergy and Murex, we have assessed them as a portfolio of
similar contracts. The performance obligation is satisfied by delivery of the physical product to one of our customer’s contracted trucking companies. Upon
delivery, the customer has the ability to direct the use of the product and receive substantially all of its benefits. The transaction price is determined based
on daily market prices negotiated by Kinergy and Murex for ethanol and by our marketing partner A.L. Gilbert Company (“A.L. Gilbert”) for WDG. The
transaction price is allocated to one performance obligation.
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64
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
During the first quarter of 2020, Aemetis began selling high-grade alcohol for consumer applications directly to customers on the West Coast and Midwest
using a variety of payment terms. These agreements and terms were evaluated according to ASC 606 guidance and such revenue is recognized upon
satisfaction of the performance obligation by delivery of the product based on the terms of the agreement. Sales of high-grade alcohol were minimal for
2021 and were aggregated with ethanol sales. Sales of high-grade alcohol represented 0%, 15%, and 0% of revenue for the years ended December 31,
2021, 2020, and 2019, respectively.
The below table shows our sales in California Ethanol by product category:
California Ethanol
Ethanol and high-grade alcohol sales
Wet distiller's grains sales
Other sales
For the twelve months ended December
31,
2020
111,219 $
32,048
6,035
149,302 $
2021
162,428 $
41,476
7,347
211,251 $
2019
114,593
34,510
5,045
154,148
$
$
We have elected to adopt the practical expedient that allows for ignoring the significant financing component of a contract when estimating the transaction
price when the transfer of promised goods to the customer and customer payment for such goods are expected to be within one year of contract inception.
Further, we have elected to adopt the practical expedient in which incremental costs of obtaining a contract are expensed when the amortization period
would otherwise be less than one year.
We also assessed principal versus agent criteria as we buy our feedstock from our customers and process and sell finished goods to those customers in some
contractual agreements.
For our California Ethanol segment, we buy corn as feedstock for the production of ethanol, from our working capital partner J.D. Heiskell. Prior to May
13, 2020, we sold all our ethanol, WDG, and corn oil to J.D. Heiskell and we bought all our corn to process into ethanol from J.D. Heiskell. After May 13,
2020, we sold most of our fuel ethanol to one customer, Kinergy, and sold all WDG and corn oil to J.D. Heiskell. During the second quarter of 2021, the
Company signed a biofuels offtake agreement with Murex, LLC, and beginning on October 1, 2021 the Company sold all our fuel ethanol to Murex LLC.
We only have customer relationships with Kinergy Marketing and Murex LLC, hence the principal and agent criteria is not applied. However, we are still
buying corn and selling WDG and corn oil to J.D.Heiskell, we analyzed the principal vs agent relationship criteria below.
We consider the purchase of corn as a cost of goods sold and the sale of WDG, corn oil, upon trucks leave the Keyes Plant, as revenue on the basis that (i)
we control and bear the risk of gain or loss on the processing of corn which is purchased at market prices into ethanol and (ii) we have legal title to the
goods during the processing time. The pricing for both corn WDG, and Corn oil is set independently. Revenues from WDG and Corn oil are billed net of
the related transportation and marketing charges. The transportation component is accounted for in cost of goods sold and the marketing component is
accounted for in sales, general and administrative expense. Transportation and marketing charges are known within days of the transaction and are recorded
at the actual amounts. The Company has elected an accounting policy under which these charges have been treated as fulfillment activities provided after
control has transferred. As a result, these charges are recognized in cost of goods sold and selling, general and administrative expenses, respectively, when
revenue is recognized. Revenues are recorded at the gross invoiced amount. Hence, we are the principal in California Ethanol segment where our customer
and vendor may be the same.
We have a contract liability of $0 and $0.2 million as of December 31, 2021 and 2020.
Table of Contents
65
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Dairy Renewable Natural Gas: All of our Dairy Renewable Natural Gas segment revenues during the years ended December 31, 2021 and 2020 were from
sales of biogas to the Keyes Plant for use in boilers. This resulted in lowering the carbon intensity of the Keyes Plant and increased revenues on ethanol
sold through the California Ethanol segment. These revenues have been eliminated once consolidated. Refer to Footnote 12 Segment Information for Dairy
Renewable Natural Gas for the unconsolidated revenue.
India Biodiesel: We sell products pursuant to purchase orders (written or verbal) or by contract with governmental or international parties, in which
performance is satisfied by delivery and acceptance of the physical product. Given that the contracts are sufficiently similar in nature, we have assessed
these contracts as a portfolio of similar contracts as allowed under the practical expedient. Doing so does not result in a materially different outcome
compared to individually accounting for each contract. All domestic and international deliveries are subject to certain specifications as identified in
contracts. The transaction price is determined daily based on reference market prices for biodiesel, refined glycerin, and PFAD net of taxes. Transaction
price is allocated to one performance obligation.
The below table shows our sales in India by product category:
India Biodiesel (in thousands) For the twelve months ended December 31, 2021 2020 2019 Biodiesel sales $465 $13,796 $42,464
Refined glycerin sales 125 1,172 2,809 PFAD sales - 774 2,557 Other sales 106 53 20 $696 $15,795 $47,850
In India, we also assessed principal versus agent criteria as we buy our feedstock from our customers and process and sell finished goods to those same
customers in certain contractual agreements. In those cases, we receive the legal title to feedstock from our customers once it is on our premises. We
control the processing and production of biodiesel based on contract terms and specifications. The pricing for both feedstock and biodiesel is set
independently. We hold the title and risk to biodiesel according to agreements we enter into in these situations. Hence, we are the principal in India
Biodiesel sales scenarios where our customer and vendor may be the same.
Cost of Goods Sold. Cost of goods sold includes those costs directly associated with the production of revenues, such as raw material consumed, factory
overhead and other direct production costs. During periods of idle plant capacity, costs otherwise charged to cost of goods sold are reclassified to selling,
general and administrative expense. The company recorded, in cost of goods sold, in the year ended December 31, 2021, approximately $5.0 million related
to our California triennial obligation on GHG emissions, of which approximately $3.2 million relates to periods prior to 2021 and is considered
insignificant.
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 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.
Accounts Receivable. The Company sells ethanol and WDG through third-party marketing arrangements generally without requiring collateral and high-
grade alcohol directly to customers on a variety of terms including advanced payment terms, based on the size and creditworthiness of the customer. DCO
is marketed and sold to A.L. Gilbert under the J.D. Heiskell Purchasing Agreement. The Company sells CDS directly to customers on standard 30 day
payment terms. The Company sells biodiesel, glycerin, and processed natural oils to a variety of customers and may require advanced payment based on
the size and creditworthiness of the customer. Usually, invoices are due within 30 days on net terms. Accounts receivables mostly 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.
Table of Contents
66
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
The Company maintains an allowance for doubtful accounts for balances that appear to have specific collection issues. The collection process is based on
the age of the invoice and requires attempted contacts with the customer at specified intervals. If, after a specified number of days, the Company has been
unsuccessful in its collection efforts, a bad debt allowance is recorded for the balance in question. Delinquent accounts receivables are charged against the
allowance for doubtful accounts once un-collectability has been determined. The factors considered in reaching this determination are the apparent
financial condition of the customer and the Company’s success in contacting and negotiating with the customer. If the financial condition of the Company’s
customers were to deteriorate, additional allowances may be required. We reserved $1.4 million and $1.3 million in the allowances for doubtful accounts as
of December 31, 2021 and December 31, 2020, respectively.
Inventories. Finished goods, raw materials, and work-in-process inventories are valued using methods which approximate the lower of cost (first-in, first-
out) or net realizable value (NRV). Distillers’ grains and related products are stated at NRV. In the valuation of inventories, NRV is determined as
estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The company
periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions.
Write-downs and write-offs are charged to cost of goods sold. For the years ended December 31, 2021, 2020 and 2019, the company experienced total
write-offs of $1.0 million, none and none.
Variable Interest Entities. We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have
other variable interests in is considered a variable interest entity (VIE). We consolidate VIEs when we are the primary beneficiary. The primary beneficiary
of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance
of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE.
Periodically, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is still a VIE and, if
so, whether we are the primary beneficiary. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a
VIE in accordance with applicable GAAP.
Property, Plant and Equipment. Property, plant, and equipment are carried at cost less accumulated depreciation after assets are placed in service and are
comprised primarily of buildings, furniture, machinery, equipment, land, biogas dairy digesters, and the Keyes Plant, Goodland Plant and Kakinada Plant.
The Goodland Plant is partially completed and is not ready for operation. The first two dairy digesters and pipeline in the Biogas Project were completed,
commissioned and began to be depreciated during the third quarter of 2020. The CO₂ Project was completed and commenced operations in the second
quarter of 2020. Accordingly, any assets under the CO₂ Project began being depreciated starting in May 2020. It is the Company’s policy to depreciate
capital assets over their estimated useful lives using the straight-line method.
The Company evaluates the recoverability of long-lived assets with finite lives in accordance with ASC Subtopic 360-10-35 Property Plant and Equipment
–Subsequent Measurement, which requires recognition of impairment of long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of asset groups may not be recoverable. When events or changes in circumstances indicate that the carrying amount of an asset group may
not be recoverable, based on estimated undiscounted cash flows, the impairment loss would be measured as the difference between the carrying amount of
the asset group and its estimated fair value. The Company has not recorded any impairment as of December 31, 2021, 2020, and 2019.
California Energy Commission Technology Demonstration Grant. The Company has been awarded and completed the demonstration project associated
with the $825 thousand matching grant program from the California Energy Commission (“CEC”) Natural Resources Agency to optimize the effectiveness
of technologies to break down biomass to produce cellulosic ethanol. The Company has received all of the awarded grant proceeds as of December 31,
2020. The project focused on the deconstruction and conversion of sugars liberated from California-relevant feedstocks and then converting the sugars to
ethanol. The Company receives these funds as reimbursement for actual expenses incurred. Due to the uncertainty associated with the expense approval
process under the grant program, the Company recognized the grant as a reduction of the expenses in the period when payment is received.
California Energy Commission Low-Carbon Fuel Production Program. The Company has been awarded $4.2 million in matching grants from the
California Energy Commission Low-Carbon Fuel Production Program (“LCFPP”). The LCFPP grant reimburses the Company for costs to design, procure,
and install processing facility to clean-up, measure and verify negative-carbon intensity dairy renewable natural gas fuel at the production facility in Keyes,
California. The Company has received $2.9 million from the LCFPP as of December 31, 2021 as reimbursement for actual costs incurred. Due to the
uncertainty associated with the approval process under the grant program, the Company recognizes the grant as a reduction of the costs in the period when
payment is received.
Table of Contents
67
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
California Department of Food and Agriculture Dairy Digester Research and Development Grant. In 2019, the Company was awarded $3.2 million in
matching grants from the California Department of Food and Agriculture (“CDFA”) Dairy Digester Research and Development program. The CDFA grant
reimburses the Company for costs required to permit and construct two of the Company’s biogas capture systems under contract with central California
dairies. The Company received all the awarded grant proceeds as of the second quarter 2021.
In October 2020, the Company was awarded $7.8 million in matching grants from the CDFA Dairy Digester Research and Development program. The
CDFA grant reimburses the Company for costs required to permit and construct six of the Company’s biogas capture systems under contract with central
California dairies. The Company has received $545 thousand from the CDFA 2020 grant program as of December 31, 2021 as reimbursement for actual
costs incurred. Due to the uncertainty associated with the approval process under the grant program, the Company recognizes the grant as a reduction of the
costs in the period when payment is received.
California Energy Commission Low Carbon Advanced Ethanol Grant Program. In May 2019, the Company was awarded the right to receive
reimbursements from the California Energy Commission Community-Scale and Commercial-Scale Advanced Biofuels Production Facilities grant under
the Alternative and Renewable Fuel and Vehicle Technology Program in an amount up to $5.0 million (the “CEC Reimbursement Program”) in connection
with the Company’s expenditures toward the development of the Riverbank Carbon Zero 1 plant. To comply with the guidelines of the CEC
Reimbursement Program, the Company must make a minimum of $7.9 million in matching contributions to the Riverbank project. The Company receives
funds under the CEC Reimbursement Program for actual expenses incurred up to $5.0 million as long as the Company makes the minimum matching
contribution. Given that the Company has not made the minimum matching contribution, the grant for reimbursement of capital expenditures of $1.8
million and $1.7 million and is presented with long-term liabilities as of December 31, 2021 and 2020. Due to the uncertainty associated with meeting the
minimum matching contribution, the reimbursement will be recognized when the Company makes the minimum matching contribution.
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, 2021 and 2020, the Company recorded a full valuation allowance
against its U.S. federal and state 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.
In 2018, the Company adopted certain tax accounting policies related to the new global intangible low-taxed income (“GILTI”) provisions under the Tax
Act such that the Company will: (1) account for all GILTI related book-tax differences as period costs and (2) use the Incremental Cash Tax Savings
approach in evaluating its valuation allowance assessment related to the GILTI inclusion.
Basic and Diluted Net Income (Loss) per Share. Basic net income (loss) per share is computed by dividing net income or loss attributable to common
shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share reflects the dilution of
common stock equivalents such as options, convertible preferred stock, debt and warrants to the extent the impact is dilutive. As the Company incurred a
net loss for the years ended December 31, 2021, 2020 and 2019, potentially dilutive securities have been excluded from the diluted net loss per share
computations as their effect would be anti-dilutive.
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68
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
The following table shows the number of potentially dilutive shares excluded from the diluted net loss per share calculation as of December 31, 2021,
2020, and 2019:
Series B preferred (post split basis)
Common stock options and warrants
Debt with conversion feature at $30 per share of common stock
December
31, 2021
As of
December
31, 2020
December
31, 2019
128
3,819
1,220
132
5,422
1,298
132
3,840
1,262
Total number of potentially dilutive shares excluded from the diluted net (loss) per
share calculation
5,167
6,852
5,234
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 and the resulting
translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at
average exchange rates during the year. Transactional gains and losses from foreign currency transactions are recorded in other (income) loss, net.
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. The Company
further evaluates its operating segments to determine its reportable segments. Aemetis recognizes three reportable segments “California Ethanol”, “Dairy
Renewable Natural Gas”, and “India Biodiesel.”
The “California Ethanol” reportable segment includes the Company’s 65 million gallon per year ethanol plant in Keyes, California, and the adjacent land
leased for the production of CO₂.
The “Dairy Renewable Natural Gas” reportable segment includes, the dairy digesters, pipeline and gas condition unit for the production of biogas from
dairies near Keyes, California.
The “India Biodiesel” reportable segment includes the Company’s 50 million gallon per year nameplate capacity biodiesel manufacturing Kakinada Plant,
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.
The Company has additional operating segments that were determined not to be reportable segments, including the Carbon Zero 1 facility in Riverbank, the
Goodland Plant, Kansas and the research and development facility in Minnesota. Refer to the “All Other” category.
Share-Based Compensation. The Company recognizes share based compensation expense in accordance with ASC 718 Stock Compensation requiring the
Company to recognize expenses related to the estimated fair value of the Company’s share-based compensation awards at the time the awards are granted,
adjusted to reflect only those shares that are expected to vest.
Commitments and Contingencies. The Company records and/or discloses commitments and contingencies in accordance with ASC 450
Contingencies. ASC 450 applies to an existing condition, situation, or set of circumstances involving uncertainty as to possible loss that will ultimately be
resolved when one or more future events occur or fail to occur.
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69
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
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 Issuance Costs. The Company records debt issuance costs related to specific incremental costs directly attributable to issuing, modifying, or extending
a debt instrument. The debt issuance costs are reported as an adjustment to the carrying amount of the debt. The debt issuance costs are amortized using
the interest rate method over the life of the debt instrument.
Troubled Debt Restructuring Accounting. The evaluation for troubled debt restructuring includes assessing whether the creditor granted a concession. To
determine this, we calculate the post-restructuring effective interest rate by projecting cash flows on the new terms and calculating a discount rate equal to
the carrying amount of pre-restructuring debt, and comparing this calculation to the terms of prior amendments. If the post restructuring effective interest
rate is less than the prior terms effective interest rate, we assess this as having been granted a concession. We then apply troubled debt restructuring
accounting to any debt in which the creditor granted a concession.
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.
Recently Adopted Accounting Pronouncements.
ASU 2016-13: Measurement of Credit Losses on Financial Instruments. This ASU requires the use of an expected loss model for certain types of financial
instruments and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade
receivables, loans and held-to-maturity debt securities, an estimate of lifetime expected credit losses is required. For available-for-sale debt securities, an
allowance for credit losses will be required rather than a reduction to the carrying value of the asset. The Company adopted the guidance in the fourth
quarter of fiscal 2021 and there was no material impact on its Consolidated Financial Statements.
ASU 2019-12: Simplifying the Accounting for Income Taxes. In December 2019, FASB issued ASU 2019-12, Income Taxes ("Topic 740"): Simplifying the
Accounting for Income Taxes. The ASU simplifies accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The
ASU also improves consistent application of and simplifies generally accepted accounting principles ("GAAP") for other areas of Topic 740 by clarifying
and amending existing guidance. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020,
with early adoption permitted including adoption in any interim period for periods for which financial statements have not yet been issued. On January 1,
2021, we adopted this ASU on a prospective basis and the adoption of this standard did not have an impact on our consolidated financial statements.
2. Inventories
Inventories consist of the following:
Raw materials
Work-in-progress
Finished goods
Total inventories
As of
December
31, 2021
December
31, 2020
$
$
727 $
2,083
2,316
5,126 $
1,382
1,266
1,321
3,969
As of December 31, 2021 and December 31, 2020, the Company recognized a lower of cost or net realizable value of none and $0.7 million respectively,
related to inventory.
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70
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
Property held for development
Finance lease right of use assets
Total gross property, plant & equipment
Less accumulated depreciation
Total net property, plant & equipment
As of
December
31, 2021
December
31, 2020
$
$
4,082 $
97,110
1,334
5,294
55,859
15,437
2,317
181,433
(46,332)
135,101 $
4,092
97,398
1,195
5,188
25,397
15,408
2,308
150,986
(41,106)
109,880
Interest capitalized in property, plant, and equipment was $4.7 million, $1.9 million and $0.3 million for the years ended December 31, 2021, 2020, and
2019, respectively.
Construction in progress contains incurred costs for the Biogas Project, Riverbank Project, and Zebrex equipment installation at the Keyes Plant. Given
there are several ongoing capital projects, their capital expenses have been accumulated in construction in progress and will be capitalized and depreciated
once the capital projects are finished and are in service. Depreciation on the components of property, plant and equipment is calculated using the straight-
line method 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 - 15
3 - 5
The Company recorded depreciation expense of approximately $5.4 million, $4.9 million, and $4.4 million respectively, for the years ended December 31,
2021, 2020, and 2019.
Table of Contents
4. Debt
71
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
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:
Third Eye Capital term notes
Third Eye Capital revolving credit facility
Third Eye Capital revenue participation term notes
Third Eye Capital acquisition term notes
Third Eye Capital promissory note
Cilion shareholder seller notes payable
Subordinated notes
EB-5 promissory notes
GAFI Term and Revolving loans
Term loans on capital expenditures
PPP loans
Total debt
Less current portion of debt
Total long term debt
Third Eye Capital Note Purchase Agreement
December
31, 2021
December
31, 2020
$
$
7,095 $
75,980
11,915
26,461
-
6,619
14,304
40,692
-
5,701
-
188,767
22,778
165,989 $
7,066
80,310
11,864
26,384
1,444
6,274
12,745
43,120
33,626
5,652
1,134
229,619
59,515
170,104
On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (“AAFK”), entered into an Amended and Restated Note Purchase Agreement with
Third Eye Capital (the “Note Purchase Agreement”). Pursuant to the Note Purchase Agreement, Third Eye Capital extended credit in the form of (i) senior
secured term loans in an aggregate principal amount of approximately $7.2 million to replace existing notes held by Third Eye Capital (the “Term Notes”);
(ii) senior secured revolving loans in an aggregate principal amount of $18.0 million (the “Revolving Credit Facility”); (iii) senior secured term loans in the
principal amount of $10.0 million to convert the prior revenue participation agreement to a note (the “Revenue Participation Term Notes”); and (iv) senior
secured term loans in an aggregate principal amount of $15.0 million (the “Acquisition Term Notes”) used to fund the cash portion of the acquisition of
Cilion, Inc. (the Term Notes, Revolving Credit Facility, Revenue Participation Term Notes and Acquisition Term Notes are referred to herein collectively as
the “Original Third Eye Capital Notes”).
On April 1, 2020, the Company exercised the option to extend the maturity of Third Eye Capital Notes to April 1, 2021 for a fee of 1% of the outstanding
note balance. We have evaluated the reduction in extension fee to 1% in accordance with ASC 470-60 Troubled Debt Restructuring. According to the
guidance, we considered the 1% extension fee to be a troubled debt restructuring.
On August 11, 2020, Third Eye Capital agreed to Limited Waiver and Amendment No. 17 to the Note Purchase Agreement (“Amendment No. 17”), to (i)
provide that the maturity date of the Third Eye Capital Notes may be further extended at our election to April 1, 2022 in exchange for an extension fee
equal to 1% of the Note Indebtedness in respect to each Note, provided that such fee may be added to the outstanding principal balance of each Note on the
effective date of each such extension, (ii) provide for a waiver of the ratio of note indebtedness covenant for the quarters ended March 31, 2021 and June
30, 2021. As consideration for such amendment and waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.3
million in cash (the “Amendment No. 17 Fee”). On November 5, 2020, Third Eye Capital agreed to Limited Waiver and Amendment No. 18 to the Note
Purchase Agreement (“Amendment No. 18”) to provide for a waiver of the ratio of note indebtedness covenant for the quarter ended September 30, 2021.
As consideration for such amendment and waivers, the borrowers also agreed to pay Third Eye Capital an amendment fee of $50 thousand. We have
evaluated the 1% extension fee in Amendment No. 17, and the $50k waiver fee in Amendment No. 18 in accordance with ASC 470-60 Troubled Debt
Restructuring.
According to the guidance, we considered the $0.3 million fee in Amendment No.17 and the $50 thousand waiver fee in Amendment No. 18 to be troubled
debt restructurings. In order to assess whether the creditor granted a concession, we calculated the post-restructuring effective interest rate by projecting
cash flows on the new terms and calculated a discount rate equal to the carrying amount of pre-restructuring of debt, and by comparing this calculation to
the terms of Amendment No. 15, we determined that Third Eye Capital provided a concession in accordance with the provisions of ASC 470-60 and thus
applied troubled debt restructuring accounting, resulting in no gain or loss from the application of this accounting. Using the effective interest method of
amortization, the Amendment No. 17 waiver fee of $0.3 million is being amortized over the stated remaining life of the Third Eye Capital Notes.
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72
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
On February 27, 2019, a promissory note (the “February 2019 Note”, together with the Original Third Eye Capital Notes, the “Third Eye Capital Notes”)
for $2.1 million was advanced by Third Eye Capital to Aemetis, Inc., as a short-term credit facility for working capital and other general corporate purposes
with an interest rate of 14% per annum maturing on the earlier of (a) receipt of proceeds from any financing, refinancing, or other similar transaction, (b)
extension of credit by payee, as lender or as agent on behalf of certain lenders, to the Company or its affiliates, or (c) April 30, 2019. In consideration of the
February 2019 Note, $0.1 million of the total proceeds were paid to Third Eye Capital as financing charges. On April 30, 2019, the February 2019 Note
was modified to remove the stated maturity date and instead be due on demand by Third Eye Capital. In third quarter of 2019, the February 2019 Note was
modified to include additional borrowings of $0.7 million. In first quarter of 2020, the February 2019 Note was modified to include additional borrowings
of $0.6million. The February 2019 note was fully repaid in the first quarter of 2021.
On March 14, 2021, Third Eye Capital agreed to Limited Waiver and Amendment No. 19 to the Note Purchase Agreement (“Amendment No. 19”), to (i)
provide for a waiver of the ratio of note indebtedness covenant for the quarter ended December 31, 2021, (ii) provide for a waiver of the consolidated
unfunded capital expenditures covenant for the quarters through March 31, 2021. As consideration for such amendment and waivers, the borrowers also
agreed to pay Third Eye Capital an amendment and waiver fee of $0.1 million in cash (the “Amendment No. 19 Fee”). We gave the notice to extend the
maturity date of the Notes to April 1, 2022 and the extension fee equal to 1% of the Note Indebtedness in respect to each Note, provided that half of such
fee may be added to the outstanding principal balance of each Note on the effective date of each such extension and rest of the balance may be payable in
cash or common stock within 60 days of the date of such relevant extension. We evaluated the terms of the Amendment No. 19 and the maturity date
extension and applied modification accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
On August 9, 2021, Third Eye Capital agreed to the Limited Waiver and Amendment No. 20 to the Note Purchase Agreement (“Amendment No. 20”) to:
(i) provide that, upon written notice to Third Eye Capital, the maturity date may be further extended to April 1, 2023 in exchange for an extension fee
equal to 1% of the Note Indebtedness in respect of each Note, where half of such fee may be added to the outstanding principal balance of each Note on the
effective date of each such extension; (ii) provide for a waiver of the ratio of note indebtedness covenant for the quarters ended March 31, 2022, June 30,
2022, September 30, 2022 and December 31, 2022; and (iii) provide for a waiver of the unfunded capital expenditures covenant for the quarter ended June
30, 2021 in which the Company exceeded the $100,000 capital expenditures limit. As consideration for such amendment and waivers, the borrowers also
agreed to pay Third Eye Capital an amendment and waiver fee of $0.3 million in cash. We evaluated the terms of the Amendment No.20 and applied
modification accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.
On November 5, 2021, Third Eye Capital agreed to the Limited Waiver and Amendment No. 21 to the Note Purchase Agreement (“Amendment No. 21”)
to: (i) provide a waiver for the Blocked Account Agreement Violation in which the Borrowers failed to deliver Blocked Account Control Agreements by
August 31, 2021 and (ii) provide for a waiver for the Subordinated Debt Violation, in which the Company made a repayment to a Subordinated Debt lender.
As consideration for such amendment and waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.1 million in
cash. We evaluated the terms of the Amendment No.21 and applied modification accounting treatment in accordance with ASC 470-50 Debt –
Modification and Extinguishment.
As Amendments No. 19, No. 20, and No. 21 waived certain covenants over the net four quarters and given the Company's projected compliance with other
terms of the agreement, the notes are classified as long-term debt.
On March 6, 2020, we and a subsidiary entered into a one-year reserve liquidity facility governed by a promissory note, payable to Third Eye Capital, in
the principal amount of $18 million. On March 14, 2021, Third Eye agreed to increase the amount available under the reserve liquidity facility to $70.0
million and extend the maturity date to April 1, 2022. Borrowings under the facility are available from March 14, 2021 until maturity on April 1, 2022.
Interest on borrowed amounts accrues at a rate of 30% per annum, paid monthly in arrears and may be capitalized and due upon maturity, or 40% if an
event of default has occurred and continues. The outstanding principal balance of the indebtedness evidenced by the promissory note, plus any accrued but
unpaid interest and any other sums due thereunder, shall be due and payable in full at the earlier to occur of (a) receipt by the Company or its affiliates of
proceeds from any sale, merger, equity or debt financing, refinancing or other similar transaction from any third party and (b) April 1, 2022. Any amounts
may be re-borrowed up to repaid amounts up until the maturity date of April 1, 2022. The promissory note is secured by liens and security interests upon
the property and assets of the Company. In return, the Company will pay a non-refundable standby fee at 2% per annum of the difference between the
aggregate principal amount outstanding and the commitment, payable monthly in cash. In addition, if any initial advances are drawn under the facility, the
Company will pay a non-refundable one-time fee in the amount of $0.5 million provided that such fee may be added to the principal amount of the
promissory note on the date of such initial advance.
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73
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
On August 9, 2021, Third Eye Capital agreed to decrease the amount available under the reserve liquidity facility notes governed by a promissory note to
$40.0 million. Interest on borrowed amounts accrues at a rate of 30% per annum, paid monthly in arrears and may be capitalized and due upon maturity, or
40% if an event of default has occurred and continues. The outstanding principal balance of the indebtedness evidenced by the promissory note, plus any
accrued but unpaid interest and any other sums due thereunder, shall be due and payable in full at the earlier to occur of (a) receipt by the Company or its
affiliates of proceeds from any sale, merger, equity or debt financing, refinancing or other similar transaction from any third party and (b) April 1, 2022.
Any amounts may be re-borrowed up to repaid amounts up until the maturity date of April 1, 2022. The promissory note is secured by liens and security
interests upon the property and assets of the Company. In return, the Company will pay a non-refundable standby fee at 2% per annum of the difference
between the aggregate principal amount outstanding and the commitment, payable monthly in cash. In addition, if any initial advances are drawn under the
facility, the Company will pay a non-refundable one-time fee in the amount of $0.5 million provided that such fee may be added to the principal amount of
the promissory note on the date of such initial advance. On March 8, 2022, Third Eye Capital agreed to extend the maturity of the reserve liquidity facility
to April 1, 2023.
Terms of Third Eye Capital Notes
A.
B.
C.
D.
E.
Term Notes. As of December 31, 2021, the Company had $7.1 million in principal and interest outstanding under the Term Notes net of $37
thousand unamortized debt issuance costs. The Term Notes accrue interest at 14% per annum. The Term Notes mature on April 1, 2023.
Revolving Credit Facility. The Revolving Credit Facility accrues interest at the prime rate plus 13.75% (17% as of December 31, 2021), payable
monthly in arrears. Interest was accrued and accrued interest from all notes can be capitalized to the Revolving Credit Facility. The Revolving Credit
Facility matures on April 1, 2023. As of December 31, 2021, AAFK had $76.0 million in principal and interest and waiver fees outstanding under the
Revolving Credit Facility net of $0.7 million unamortized discount issuance costs.
Revenue Participation Term Notes. The Revenue Participation Term Note bears interest at 5% per annum and matures on April 1, 2023. As of
December 31, 2021, AAFK had $11.9 million in principal and interest outstanding on the Revenue Participation Term Notes net of $57 thousand
unamortized discount issuance costs.
Acquisition Term Notes. The Acquisition Term Notes accrue interest at the prime rate plus 10.75% (14% per annum as of December 31, 2021 and
mature on April 1, 2023. As of December 31, 2021, Aemetis Facility Keyes, Inc. had $26.5 million in principal and interest and redemption fees
outstanding net of unamortized discount issuances costs of $98 thousand. The outstanding principal balance includes a total of $7.5 million in
redemption fees.
Reserve Liquidity Notes. The Reserve Liquidity Notes, with available borrowing capacity in the amount of $40.0 million, accrues interest at the rate
of 30% per annum and are due and payable upon the earlier of: (i) the closing of new debt or equity financings, (ii) receipt from any sale, merger,
debt or equity financing, or (iii) April 1, 2023. We have no borrowings outstanding under the Reserve Liquidity Notes as of December 31, 2021.
The Third Eye Capital Notes contain various covenants, including but not limited to, debt to plant value ratio, minimum production requirements, and
restrictions on capital expenditures. The terms of the Notes allow the lender to accelerate the maturity in the event of default that could reasonably be
expected to have a material adverse effect, such as any change in the business, operations, or financial condition. The Company has evaluated the
likelihood of such an acceleration event and determined such an event to not be probable in the next twelve months. The terms of the notes allow interest to
be capitalized.
The Third Eye Capital Notes are secured by first priority liens on all real and personal property of, and assignment of proceeds from all government grants
and guarantees from the Company’s North American subsidiaries. The Third Eye Capital Notes all contain cross-collateral and cross-default provisions.
McAfee Capital, LLC (“McAfee Capital”), owned by Eric McAfee, the Company’s Chairman and CEO, provided a guaranty of payment and performance
secured by all of its Company shares. In addition, Eric McAfee provided a blanket lien on substantially all of his personal assets, and McAfee Capital
provided a guarantee in the amount of $8.0 million.
Cilion shareholder seller notes payable. In connection with the Company’s merger with Cilion, Inc., (Cilion) on July 6, 2012, the Company issued $5.0
million in notes payable to Cilion shareholders (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, 2021, Aemetis Facility
Keyes, Inc. had $6.6 million in principal and interest outstanding on the Cilion Notes.
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74
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Subordinated Notes. On January 6 and January 9, 2012, AAFK entered into Note and Warrant Purchase Agreements with two
accredited investors pursuant to which it issued $0.9 million and $2.5 million in original notes to the investors (Subordinated
Notes). The Subordinated Notes mature every six months. Upon maturity, the Subordinated Notes are generally extended with a
fee of 10% added to the balance outstanding plus issuance of warrants exercisable at $0.01 with a two-year term. Interest accrues
at 10% and is due at maturity. Neither AAFK nor Aemetis, Inc. may make any principal payments under the Subordinated Notes
until all loans made by Third Eye Capital to AAFK are paid in full.
The Subordinated Notes were amended to extend the maturity date on January 1, 2021 and again on July 1, 2021 with six months extension for maturity
until December 31, 2021. We evaluated the January 1, 2021 amendment and the refinancing terms of the Notes and applied modification accounting
treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment. We evaluated the July 1, 2021 amendment and the refinancing terms of
the Notes and determined in accordance with ASC 470-50 Debt – Modification and Extinguishment that the loans were extinguished, however, the
Company was not required to record a gain or loss on the debt extinguishment.
At December 31, 2021 and 2020, the Company had, in aggregate, the amount of $14.3 million and $12.7 million in principal and interest outstanding,
respectively, under the Subordinated Notes.
EB-5 promissory notes. EB-5 is a U.S. government program authorized by the Immigration and Nationality Act designed to foster employment-based visa
preference for immigrant investors to encourage the flow of capital into the U.S. economy and to promote employment of U.S. workers. The Company
entered into a Note Purchase Agreement dated March 4, 2011 (as further amended on January 19, 2012 and July 24, 2012) with Advanced BioEnergy, LP, a
California limited partnership authorized as a Regional Center to receive EB-5 investments, for the issuance of up to 72 subordinated convertible
promissory notes (the “EB-5 Notes”) bearing interest at 2-3%. Each note was issued in the principal amount of $0.5 million and due and payable four years
from the date of each note, for a total aggregate principal amount of up to $36.0 million (the “EB-5 Phase I funding”). The original maturity date on the
promissory notes can be extended automatically for a one or two-year period initially and is eligible for further one-year automatic extensions as long as
there is no notice of non-extension from investors and the investors’ immigration process is in progress. On February 27, 2019, Advanced BioEnergy, LP,
and the Company entered into an Amendment to the EB-5 Notes which restated the original maturity date on the promissory notes with automatic six-
month extensions as long as the investors’ immigration processes are in progress. Except for six early investor EB-5 Notes, the Company was granted 12
months from the date of the completion of immigration process to redeem these EB-5 Notes. Given the COVID-19 situation and processing delays for
immigration process, Advanced BioEnergy, LP extended the maturity dates for debt repayment based on their projected processing timings as long as the
investors don’t give notice of withdrawal or I-829 gets approved. Accordingly, the notes have been recognized as long-term debt while investor notes who
obtained green card approval have been classified as current debt. The EB-5 Notes are convertible after three years at a conversion price of $30 per share.
Advanced BioEnergy, LP arranges investments with foreign investors, who each make loans to the Keyes Plant in increments of $0.5 million. The
Company has sold an aggregate principal amount of $36.0 million of EB-5 Notes under the EB-5 Phase I funding since 2012 to the date of this filing. As of
December 31, 2021, $35.5 million has been released from the escrow amount to the Company, with $0.5 million remaining to be funded to escrow. During
the year ended December 31, 2021, the Company repaid $3.0 million for six investors who obtained green card approval under the EB-5 Phase I
funding. As of December 31, 2021, $32.5 million in principal and $4.1 million in accrued interest was outstanding on the EB-5 Notes sold under the EB-5
Phase I funding.
On October 16, 2016, the Company launched its EB-5 Phase II funding, with plans to issue $50.0 million in additional EB-5 Notes on substantially similar
terms and conditions as those issued under the Company’s EB-5 Phase I funding, to refinance indebtedness and capital expenditures of Aemetis, Inc. and
GAFI (the “EB-5 Phase II funding”). On November 21, 2019, the minimum investment was raised from $0.5 million per investor to $0.9 million per
investor. The Company entered into a Note Purchase Agreement dated with Advanced BioEnergy II, LP, a California limited partnership authorized as a
Regional Center to receive EB-5 Phase II funding investments, for the issuance of up to 100 EB-5 Notes bearing interest at 3%. On May 1, 2020
Supplement No. 3 amended the offering documents and lowered the total eligible new EB-5 Phase II funding investors to 60. Eight EB-5 investors have
funded at the $0.5 million per investor amount, so 52 new EB-5 Phase II funding investors are eligible at the new $0.9 million per investor amount under
the current offering. Job creation studies show additional investors may be possible to increase the total offering amount in the future. Each new note will
be issued in the principal amount of $0.9 million and due and payable five years from the date of each note, for a total aggregate principal amount of up to
$50.8 million.
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75
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Advanced BioEnergy II, LP arranges investments with foreign investors, who each make loans to the Riverbank Carbon Zero 1
Facility in increments of $0.9 million after November 21, 2019. The Company has sold an aggregate principal amount of $4.0
million of EB-5 Notes under the EB-5 Phase II funding since 2016 to the date of this filing. As of December 31, 2020, $4.0
million has been released from escrow to the Company and $46.8 million remains to be funded to escrow. As of December 31,
2020, $4.1 million was outstanding on the EB-5 Notes under the EB-5 Phase II funding.
Unsecured working capital loans. On April 16, 2017, the Company entered into an operating agreement with Gemini Edibles and Fats India Private
Limited (“Gemini”). Under this agreement, Gemini agreed to provide the Company with working capital, on an as needed basis, to fund the purchase of
feedstock and other raw materials for the Kakinada Plant. Working capital cash advances bear interest at 12%. In return, the Company agreed to pay
Gemini an amount equal to 30% of the plant’s monthly net operating profit and recognized these as operational support charges in the financials. In the
event that the Company’s biodiesel facility operates at a loss, Gemini owes the Company 30% of the losses as operational support charges. Either party can
terminate the agreement at any time without penalty. Additionally, Gemini received a first priority lien on the assets of the Kakinada Plant. During the year
ended December 31, 2021, we have accrued no interest on Gemini balance as the investment was for feedstock purchase and finished goods trade. During
the years ended December 31, 2021 and 2020, the Company made principal payments to Gemini of none and $8.5 million respectively. As of December 31,
2021 and December 31, 2020, the Company had no balance outstanding under this agreement.
In November 2008, the Company entered into an operating agreement with Secunderabad Oils Limited (“Secunderabad Oils”). The 2008 agreement
provided the working capital and had the first priority lien on assets in return for 30% of the plant’s monthly net operating profit. These expenses were
recognized as selling, general, and administrative expenses by the Company in the financials. All terms of the 2008 agreement with Secunderabad Oils
were terminated to amend the agreement as below. On July 15, 2017, the agreement with Secunderabad Oils was amended to provide the working capital
funds for British Petroleum business operations only in the form of inter-corporate deposit for an amount of approximately $2.3 million over a 95 day
period at the rate of 14.75% per annum interest rate. The term of the agreement continues until either party terminates it. Secunderabad Oils has a second
priority lien on the assets of the Company’s Kakinada Plant after this agreement. On April 15, 2018, the agreement was amended to purchase the raw
material for business operations at 12% per annum interest rate. During the years ended December 31, 2021 and 2020, the Company made principal and
interest payments to Secunderabad Oils of none and $3.3 million, respectively. As of December 31, 2021 and 2020, the Company had no balance
outstanding under this agreement.
GAFI Term loan and Revolving loan. On July 10, 2017, GAFI entered into a Note Purchase Agreement (“Note Purchase Agreement”) with Third Eye
Capital (Noteholders). Pursuant to the Note Purchase Agreement, the Noteholders agreed, subject to the terms and conditions of the Note Purchase
Agreement and relying on each of the representations and warranties set forth therein, to make (i) a single term loan to GAFI in an aggregate amount of $15
million (“Term Loan”) and (ii) revolving advances not to exceed ten million dollars in the aggregate (“Revolving Loan”). The interest rate per annum
applicable to the Term Loan is equal to ten percent (10%). The interest rate per annum applicable to the revolving Loans is the greater of Prime Rate plus
seven and three quarters percent (7.75%) and twelve percent (12.00%). The maturity date of the loans (“Maturity Date”) was extended to July 10, 2021 by
exercising an option to extend the GAFI Loan Maturity Date for a fee of $0.5 million.
The Company fully repaid the GAFI notes in the first quarter of 2021. As of December 31, 2021, and December 31, 2020, GAFI had none and $22.2
million net of debt issuance costs of none and $0.4 million outstanding on the Term Loan and none and $11.8 million on the Revolving Loan respectively,
classified as current portion of long-term debt.
Payroll Protection Program. On May 5, 2020, certain wholly owned subsidiaries of the Company received loan proceeds of approximately $1.1 million;
(“PPP Loans”) under the Paycheck Protection Program (“PPP”). In the second quarter of 2021, the Company received notification from the Small Business
Administration that all loan proceeds received by the Company were forgiven. Due to the forgiveness of the loan, the Company recorded a gain on debt
extinguishment in the statements of operations and comprehensive loss in the amount of approximately $1.1 million during the year ended December 31,
2021.
Financing Agreement for Equipment Purchase. The Company entered into an agreement with Mitsubishi Chemical America, Inc. (“Mitsubishi”) to
purchase membrane dehydration equipment to save energy used in the Keyes Plant. The Company also entered into a financing agreement with Mitsubishi
for $5.7 million for this equipment. Payments pursuant to the financing transaction will commence after the commissioned date and interest will be charged
based on the certain performance metrics after operation of the equipment. The equipment was delivered in March 2020; however, the installation has been
delayed due to the COVID-19 pandemic.
In the fourth quarter of 2021, we started the installation of dehydration equipment. Hence, we recorded the asset in property, plant and equipment, net and
the related liability of $0.3 million in short term borrowings and $5.4 million in other long-term debt, respectively as of December 31, 2021 and 2020.
Table of Contents
76
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Debt repayments for the Company’s loan obligations follow:
Twelve months ended December 31,
2022
2023
2024
2025
2026
There after
Total debt
Debt issuance costs
Total debt, net of debt issuance costs
5. Commitments and Contingencies
Leases
$
Debt
Repayments
22,778
154,826
6,945
2,564
945
1,640
189,698
(931)
188,767
$
We have identified assets as the corporate office, warehouse, monitoring equipment and laboratory facilities over which we have control and obtain
economic benefits fully. We classified these identified assets as operating leases after assessing the terms under classification guidance. We have entered
into several leases for trailers and carbon units with purchase option at the end of the term. We have concluded that it is reasonably certain that we would
exercise the purchase option at the end of the term, hence the leases were classified as finance leases. All of our leases have remaining term of less than a
year to 7 years.
We made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. We will recognize those lease
payments in the Consolidated Statements of Operations as we incur the expenses.
When discount rates implicit in leases cannot be readily determined, the Company uses the applicable incremental borrowing rate at lease commencement
to perform lease classification tests on lease components and to measure lease liabilities and ROU assets. The incremental borrowing rate used by the
Company was based on weighted average baseline rates commensurate with the Company’s secured borrowing rate, over a similar term. At each reporting
period when there is a new lease initiated, the rates established for that quarter will be used.
On December 14, 2021, we entered into a real estate purchase agreements and lease disposition and development agreement with the City of Riverbank.
We plan to utilize the purchased and leased properties, located at 5300 Claus Road in the city of Riverbank, California, for the construction of the Carbon
Zero 1 Facility. The lease commences in 2022 and the Company will evaluate and assess the lease upon commencement.
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77
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
The components of lease expense and sublease income was as follows:
Operating lease cost
Operating lease expense
Short term lease expense
Variable lease expense
Sub lease income
Total operating lease cost
Finance lease cost
Amortization of right-of-use assets
Interest on lease liabilities
Total finance lease cost
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases
Operating cash flows used in finance leases
Financing cash flows used in finance leases
Twelve Months ended December 31,
2019
2020
2021
812 $
207
107
-
1,126 $
230 $
81
311 $
566 $
118
105
-
789 $
249 $
68
317 $
712
85
102
(117)
782
-
-
-
Twelve Months ended December 31,
2019
2020
2021
698 $
81
506
616 $
68
1,471
571
-
-
$
$
$
$
$
$
Supplemental non-cash flow information related to the operating ROU asset and lease liabilities was as follows for the year ended December 31, 2021 and
2020:
Operating leases
Accretion of the lease liability
Amortization of right-of-use assets
Weighted Average Remaining Lease Term
Operating leases
Finance leases
Weighted Average Discount Rate
Operating leases
Finance leases
Twelve Months ended December 31,
2019
2020
2021
$
378 $
434
258 $
308
125
587
6.3 years
2.3 years
14.0%
6.1%
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78
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Supplemental balance sheet information related to leases was as follows:
Operating leases
Operating lease right-of-use assets
Current portion of operating lease liability
Long term operating lease liability
Total operating lease liabilities
Finance leases
Property and equipment, at cost
Accumulated depreciation
Property and equipment, net
Other current liability
Other long term liabilities
Total finance lease liabilities
Maturities of operating lease liabilities were as follows:
Year ended December 31,
2022
2023
2024
2025
2026
There after
Total lease payments
Less imputed interest
Total lease liability
Property taxes
December
31,
2021
As of
December
31,
2020
December
31,
2019
$
2,462 $
2,889 $
$
260
2,318
2,578
316
2,578
2,894
2,317 $
(376)
1,941
550
720
1,270
2,308 $
(249)
2,059
417
1,164
1,581
557
377
200
577
-
-
-
-
-
-
Operating
leases
Finance
leases
$
$
597 $
573
590
608
626
918
3,912
(1,334)
2,578 $
611
528
201
23
-
-
1,363
(93)
1,270
The Company entered into a payment plan with Stanislaus County for unpaid property taxes for the Keyes Plant site on June 28, 2018 by paying $1.5
million as a first payment. Under the annual payment plan, the Company was set to pay 20% of the outstanding redemption amount, in addition to the
current year property taxes and any interest incurred on the unpaid balance to date annually, on or before April 10 starting in 2019. After making one
payment, the Company defaulted on the payment plan and as of December 31, 2021 and December 31, 2020, the balance in property tax accrual was $6.8
million and $5.7 million, respectively. On March 3, 2022, the company paid $6.1 million to Stanislaus County.
Legal Proceedings
On August 31, 2016, the Company filed a lawsuit in Santa Clara County Superior Court against defendant EdenIQ, Inc. (“EdenIQ”). The lawsuit was
based on EdenIQ’s wrongful termination of a merger agreement that would have effectuated the merger of EdenIQ into a new entity that would be
primarily owned by Aemetis. The lawsuit asserted that EdenIQ had fraudulently induced the Company into assisting EdenIQ to obtain EPA approval for a
new technology that the Company would not have done but for the Company’s belief that the merger would occur. The relief sought included EdenIQ’s
specific performance of the merger, monetary damages, as well as punitive damages, attorneys’ fees, and costs. In response to the lawsuit, EdenIQ filed a
cross-complaint asserting causes of action relating to the Company’s alleged inability to consummate the merger, the Company’s interactions with
EdenIQ’s business partners, and the Company’s use of EdenIQ’s name and trademark in association with publicity surrounding the merger. Further,
EdenIQ named Third Eye Capital Corporation (“TEC”) as a defendant in a second amended cross-complaint alleging that TEC had failed to disclose that
its financial commitment to fund the merger included terms that were not disclosed. Finally, EdenIQ claimed that TEC and the Company concealed
material information surrounding the financing of the merger. By way of its cross-complaint, EdenIQ sought monetary damages, punitive damages,
injunctive relief, attorneys’ fees and costs. In November 2018, the claims asserted by the Company were dismissed on summary judgment and the
Company filed a motion to amend its claims, which remains pending. In December 2018, EdenIQ dismissed all of its claims prior to trial. In February
2019, the Company and EdenIQ each filed motions seeking reimbursement of attorney fees and costs associated with the litigation. On July 24, 2019, the
court awarded EdenIQ a portion of the fees and costs it had sought in the amount of approximately $6.2 million. The Company recorded the $6.2 million as
loss contingency on litigation during the year ended December 31, 2019. The Company has retained appellate counsel to appeal the award. If the appeal is
successful, the award may be reduced or eliminated. If the appeal is not successful, the award for this judgement will be increased by approximately $1.8
million to $2.1 million. The parties may also enter into settlement discussions while the appeal is pending and settle the dispute.
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79
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
6. Biogas LLC – Series A Preferred Financing and Variable Interest Entity
On December 20, 2018, ABGL entered into a Series A Preferred Unit Purchase Agreement for the sale of Series A Preferred Units to Protair-X Americas,
Inc., with Third Eye Capital acting as an agent.
ABGL is authorized to issue 11,000,000 common units, and up to 6,000,000 convertible, redeemable, secured, preferred membership units (the “Series A
Preferred Units”). ABGL issued 6,000,000 common units to the Company at $5.00 per common unit for a total of $30,000,000 in funding. Additionally,
5,000,000 common units of ABGL are held in reserve as potential conversion units issuable to the Purchaser upon certain triggering events discussed
below.
The Preferred Unit Agreement includes (i) preference payments of $0.50 per unit on the outstanding Series A Preferred Units commencing on the second
anniversary, with any outstanding preference payments shall have an interest per annum rate equal to ten percent (ii) conversion rights for up to 1,200,000
common units or up to maximum number of 5,000,000 common units (also at a one Series A Preferred Unit to one common unit basis) if certain triggering
events occur, (iv) one board seat of the three available to be elected by Series A Preferred Unit holders, (iii) mandatory redemption value at $15 per unit
payable at an amount equal to 75% of free cash flow generated by ABGL, up to $90 million in the aggregate (if all units are issued), (iv) full redemption of
the units on the sixth anniversary, (v) minimum cash flow requirements from each digester, and (vi) $0.9 million paid as fees to the Agent from the
proceeds. Until paid, the obligations of ABGL under the Preferred Unit Agreement are secured by the assets of ABGL in an amount not to exceed the sum
of (i) $30,000,000, plus (ii) all interest, fees, charges, expenses, reimbursement obligations and indemnification obligations of ABGL.
Triggering events occur upon ABGL’s failure to redeem units, comply with covenants, any other defaults or cross defaults, or to perform representations or
warranties. Upon a triggering event: (i) the obligation of the Purchaser to purchase additional Series A Preferred Units is terminated, (ii) cash flow
payments for redemption payments increases from 75% to 100% of free cash flows, and (iii) total number of common units into which preferred units may
be converted increases from 1,200,000 common units to 5,000,000 common units on a one for one basis. As of December 31, 2021, ABGL has not
generated minimum quarterly operating cash flows by operating the dairies. As a result of the violation of this covenant, free cash flows, when they occur,
may be applied for redemption payments at the increased rate of 100% instead of the initial rate of 75% of free cash flows.
From inception of the agreement to date, ABGL issued 3,200,000 Series A Preferred Units on first tranche for a value of $16.0 million and also issued
2,800,000 of Series A Preferred Units on second tranche for a value of $14.0 million, reduced by a redemption of 20,000 Series A Preferred Units for $0.3
million. The Company is accreting these two tranches to the redemption value of $89.7 million over the estimated future cash flow periods of six years
using the effective interest method. In addition, the Company identified freestanding future tranche rights and the accelerated redemption feature related to
a change in control provision as derivatives which required bifurcation. These derivative features were assessed to have minimal value as of December 31,
2021 and December 31, 2020 based on the evaluation of the other conditions included in the agreement.
During the year ended December 31, 2021, ABGL issued626,000 of Series A Preferred Units for incremental proceeds of $3.1 million as part of the second
tranche of the Preferred Unit Agreement and redeemed 20,000 of Series A Preferred Units for $0.3 million. Consistent with the previous issuances which
were treated as a liability as the conversion option was deemed to be non-substantive, the current issuances are treated as a liability as the conversion option
was still deemed to be non-substantive.
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80
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
The Company recorded Series A Preferred Unit liabilities, net of unit issuance costs and inclusive of accretive preference pursuant to this agreement, and
accrued preference payments, classified as current portion of Series A Preferred Units, of $3.2 million and $2.0 million, and long-term liabilities of $45.0
million and $32.0 million as of December 31, 2021 and 2020, respectively.
Variable interest entity assessment
After consideration of ABGL’s operations and the above agreement, we concluded that ABGL did not have enough equity to finance its activities without
additional subordinated financial support. ABGL is capitalized with Series A Preferred Units that are recorded as liabilities under U.S. GAAP. Hence, we
concluded that ABGL is a VIE. Through the Company’s ownership interest in all of the outstanding common stock, its current ability to control the board
of directors, the management fee paid to Aemetis and control of subordinated financing decisions, Aemetis has been determined to be the primary
beneficiary and accordingly, the assets, liabilities, and operations of ABGL are consolidated into those of the Company. Total assets, before intercompany
eliminations, of ABGL were $41.5 million primarily related to biodigesters at two dairies and a pipeline which serve as collateral for the Series A Preferred
Unit totaling $48.1 million. The Series A Preferred Units are not collateralized by any other assets or guarantees from Aemetis or its subsidiaries.
7. Stockholders’ Equity
The Company is authorized to issue up to 80 million shares of common stock, $0.001 par value per share and 65 million shares of preferred stock, $0.001
par value per share.
Convertible Preferred Stock
The following is a summary of the authorized, issued and outstanding convertible preferred stock:
Shares Issued and
Series B preferred stock
Undesignated
7,235
57,765
65,000
1,278
—
1,278
1,323
—
1,323
Authorized Outstanding December 31,
2021
Shares
2020
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 1 for 10, as converted, 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.
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81
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
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.
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 a 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 prime + 2% per year (5.25% at 12/31/2021). At December 31, 2021 and 2020, the Company
had accrued an outstanding obligation of $3.8 million and $3.3 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.
8. Outstanding Warrants
During the years ended December 31, 2021, 2020 and 2019, the Company granted 227 thousand common stock warrants, respectively, for the extension of
certain Notes for each period, respectively. In addition, for the year ending December 31, 2021, the Company granted 65 thousand common stock warrants
for milestones related to the Aemetis Carbon Capture, Inc carbon sequestration project. The accredited investors received 2-year warrants exercisable at
$0.01 per share as part of note agreements.
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82
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The weighted average fair value calculations for warrants granted are based on the following weighted average assumptions:
(Tabular data in thousands, except par value and per share data)
Description
Dividend-yield
Risk-free interest rate
Expected volatility
Expected life (years)
Exercise price per share
Market value per share on grant date
Fair value per share on grant date
For the year ended December 31,
2020
2019
2021
0%
0.21%
136.16%
2
0.01
9.92
9.91
$
$
$
0%
0.84%
108.8%
2
0.01
0.81
0.80
$
$
$
0%
2.13%
103.0%
2
0.01
0.73
0.72
$
$
$
A summary of historical warrant activity for the years ended December 31, 2021, 2020 and 2019 follows:
Outstanding December 31, 2018
Granted
Exercised
Outstanding December 31, 2019
Granted
Exercised
Outstanding December 31, 2020
Granted
Exercised
Outstanding December 31, 2021
Warrants
Outstanding
&
Exercisable
Weighted -
Average
Exercise
Price
Average
Remaining
Term in
Years
95 $
227
(227)
95 $
227
(227)
95 $
292
(332)
55 $
2.59
0.01
0.01
2.59
0.01
0.01
2.59
0.01
0.32
2.59
6.95
5.95
4.95
3.95
All of the above outstanding warrants are vested and exercisable as of December 31, 2021. As of December 31, 2021 and 2020, the Company had no
unrecognized compensation expense related to warrants, respectively.
10. Stock-Based Compensation
2019 Plan
On April 29, 2019, the Aemetis 2019 Stock Plan (the “2019 Stock Plan”) was approved by stockholders of the Company. This plan permits the grant of
Incentive Stock Options, Non-Statutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units,
Performance Shares and other stock or cash awards as the Administrator may determine in its discretion. The 2019 Stock Plan’s term is 10 years and
supersedes all prior plans. The 2019 Stock Plan authorized the issuance of 200,000 shares of common stock for the 2019 calendar year, in addition to
permitting transferring and granting any available and unissued or expired options under the Amended and Restated 2007 Stock Plan in an amount up to
177,246 options.
With the approval of the 2019 Stock Plan, the Zymetis 2006 Stock Plan, and Amended and Restated 2007 Stock Plan are terminated for granting any
options under either plan. However, any options granted before the 2019 Stock Plan approved will remain outstanding and can be exercised, and any
expired options will be available to grant under the 2019 Stock Plan.
During the year ended December 31, 2019, 1,116,000 stock option grants were issued and approved by the Board for employees, consultants, and directors
under the 2019 Stock Plan with 10-year terms and vesting terms from immediately to 3 years.
During the year ended December 31, 2020, 2,320,000 stock option grants were issued and approved by the Board for employees and directors under the
2019 Stock Plan with 10-year terms and vesting terms from immediately to 3 years.
On January 7, 2021, 945,000 incentive stock option grants were issued for employees and directors under the 2019 Stock Plan. In addition, 5,200 restricted
stock award grants, with a fair value of $3.09 per award, were issued to the Company’s board of directors (“Board”) with the restriction that this grant
would satisfy board compensation fees.
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83
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
On April 8, 2021, 34,114 restricted stock award grants, with a fair value of $26.19 per award, were issued to the Board with the restriction that this grant
would pay off outstanding accounts payable owed to the Board members and was included in the summary of awards granted.
On June 3, 2021, 30,000 stock option grants were approved by the Board for new employees under the 2019 Stock Plan with 10-year term and 3-year
vesting.
On November 18, 2021, 165,800 incentive stock option grants were issued for employees and directors under the 2019 Stock Plan. In addition, 80,588
restricted stock award grants, with an average fair value of $18.53 per award, were issued to the Company’s board of directors (“Board”).
Inducement Equity Plan Options
In March 2016, the Board of Directors of the Company (the “Board”) approved an Inducement Equity Plan authorizing the issuance of 100,000 non-
statutory stock options to purchase common stock. As of December 31, 2021, no options were outstanding under the Inducement Equity Plan.
Common Stock Reserved for Issuance
The following is a summary of awards granted under the above Plans:
Balance as of December 31, 2018
Authorized
Granted
Forfeited/expired
Balance as of December 31, 2019
Authorized
Granted
Exercised
Forfeited/expired
Balance as of December 31, 2020
Authorized
Options Granted
RSAs Granted
Exercised
Forfeited/expired
Balance as of December 31, 2021
Shares
Available
for Grant
Number of
Shares
Outstanding
Weighted-
Average
Exercise
Price
149
855
(1,116)
259
147
2,342
(2,320)
-
211
380
816
(1,141)
(154)
-
241
289
2,889 $
-
1,116
(259)
3,746 $
-
2,320
(528)
(211)
5,327 $
-
1,141
(2,498)
(207)
7,509 $
1.80
-
0.78
3.53
1.38
-
0.69
0.96
0.89
1.14
-
5.60
-
1.39
1.84
2.29
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84
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
The following is a summary of vested and unvested awards outstanding as of December 31, 2021, 2020, and 2019:
Vested and Exercisable
Unvested
Total
Vested and Exercisable
Unvested
Total
Vested and Exercisable
Unvested
Total
Weighted
Average
Exercise
Price
Remaining
Contractual
Term (In
Years)
Aggregate
Intrinsic
Value1
Number of
Shares
2021
2020
2019
2,346 $
1,417
3,763 $
3,718 $
1,609
5,327 $
2,659 $
1,087
3,746 $
1.32
3.89
2.29
1.30
0.77
-
1.56
0.93
1.38
7.68 $
8.64
8.04 $
25,771
12,961
38,732
7.42 $
8.82
7.84 $
4,592
2,771
7,363
7.45 $
8.78
7.84 $
145
77
222
(11) Intrinsic value based on the $12.30, $2.49, and $0.83 closing price of Aemetis stock on December 31, 2021, 2020, and 2019 respectively, as
reported on the NASDAQ Exchange.
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, 2021, 2020, and 2019 the Company recorded option expense in the amount of $3.9 million, $1.0 million and $0.8
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 our estimates, the difference will be recorded as a cumulative adjustment in the period estimates are
revised. Compensation cost is recorded only for vested options. 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 and the plan.
Table of Contents
85
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 the year ended 2021, 2020, and 2019 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,
2020
2019
2021
0%
0.83%
100.47%
6.59
5.60
4.68
$
$
0%
0.94%
87.37%
6.55
0.69
0.51
$
$
0%
2.38%
88.54%
6.55
0.78
0.59
$
$
As of December 31, 2021, the Company had $4.4 million of total unrecognized compensation expense for employees which the Company will amortize
over the weighted remaining term of 2.5 years.
11. Agreements
Working Capital Arrangement. Pursuant to a Corn Procurement and Working Capital Agreement with J.D. Heiskell, the Company agreed to procure whole
yellow corn and 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 Corn Procurement and Working Capital Agreement expires on December 31, 2022 and the
term can be automatically renewed for additional one-year terms. WDG continues to be sold to A.L.Gilbert and DCO is sold to other customers under the
J.D.Heiskell Purchase Agreement. The Company’s relationships with J.D. Heiskell, 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. These agreements are ordinary purchase and sale agency agreements for the Keyes Plant. On May 13, 2020,
J.D. Heiskell and the Company entered into Amendment No.1 to the J.D. Heiskell Purchasing Agreement to remove J.D. Heiskell’s obligations to purchase
ethanol from the Company under the J.D. Heiskell Purchasing Agreement.
As of December 31, 2021 and 2020, Aemetis made prepayments to J.D. Heiskell of $4 million and none.
The J.D. Heiskell purchases and sales activity associated with the Purchasing Agreement, Corn Procurement and Working Capital
Agreements during the years ended December 31, 2021 and 2020 were as follows:
Ethanol sales
Wet distiller's grains sales
Corn oil sales
Corn purchases
Accounts receivable
Accounts payable
$
- $
41,476
6,184
159,309
308
862
26,049 $
32,049
3,623
107,033
94
169
2019
114,593
34,510
3,536
119,786
554
2,027
As of and for the twelve months ended
December 31,
2020
2021
Ethanol and Wet Distillers Grains Marketing Arrangement. The Company entered into an Ethanol Marketing Agreement with Kinergy and a Wet Distillers
Grains Marketing Agreement with A.L. Gilbert. Under the terms of the agreements the Wet Distillers Grains Marketing Agreement matures on December
31, 2021 with automatic one-year renewals thereafter. We terminated the Ethanol Marketing Agreement with Kinergy as of September 30, 2021. Effective
October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC. Under the terms of the agreement, the initial term matures
on October 31, 2023 with automatic one-year renewals thereafter.
Sales to Kinergy were $110.7 million, $62.1 million, and none and accounts receivable associated with Kinergy was none, $200 thousand and none during
the years ended December 31, 2021, 2020, and 2019.
Table of Contents
86
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Sales to Murex were $51.7 million, $46 thousand, and none and accounts receivable associated with Murex was $1.0 million,
none, and none during the years ended December 31, 2021, 2020, and 2019.
For the years ended December 31, 2021, 2020 and 2019, the Company expensed marketing costs of $2.9, $2.3, and $2.6 million for each period under the
terms of both the Ethanol Marketing Agreement and the Wet Distillers Grains Marketing Agreement and are presented in Selling, General, and
Administration expense.
For the years ended December 31, 2021, 2020 and 2019, the Company expensed shipping and handling costs related to sales of ethanol and high-grade
alcohol sales of $3.3 million, $4.8 million, and $3.2 million and expensed transportation costs related to sales of WDG of $3.1 million, $2.9 million and
$3.2 million
As of December 31, 2021, the Company has no forward sales commitments.
12. Segment Information
Aemetis recognizes three reportable segments “California Ethanol”, “Dairy Renewable Natural Gas”, and “India Biodiesel.”
The “California Ethanol” reportable segment includes the Company’s 65 million gallon per year ethanol plant in Keyes, California, and the adjacent land
leased for the production of CO₂.
The “Dairy Renewable Natural Gas” reportable segment includes, the dairy digesters, pipeline and gas condition unit for the production of biogas from
dairies near Keyes, California.
The “India Biodiesel” reportable segment includes the Company’s 50 million gallon per year nameplate capacity biodiesel manufacturing Kakinada Plant,
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.
The Company has additional operating segments that were determined not to be reportable segments, including the Carbon Zero 1 facility in Riverbank, the
Goodland Plant, Kansas and the research and development facility in Minnesota. Refer to the “All Other” category.
Summarized financial information by reportable segment for the years ended December 31, 2021, 2020, and 2019 follow:
For the year ended December 31, 2021
California
Ethanol
Dairy
Renewable
Natural Gas
India
Biodiesel
All other
Total
Revenues from external customers
Intersegment revenues
Gross profit (loss)
$
211,251 $
-
9,565
- $
1,445
(488)
696 $
-
(23)
2 $
-
(1,115)
211,949
1,445
7,939
Interest expense
Accretion and other expenses of Series A preferred
units
Gain on debt extinguishment
Capital expenditures
Depreciation
Total Assets
18,092
13
-
2,031
20,136
-
(713)
2,763
4,132
75,909
7,718
-
17,702
577
40,027
-
-
142
686
10,779
-
(421)
6,045
53
34,115
7,718
(1,134)
26,652
5,448
160,831
Table of Contents
87
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
For the year ended December 31, 2020
California
Ethanol
Dairy
Renewable
Natural Gas
India
Biodiesel
All other
Total
Revenues from external customers
Intersegment Revenues
$
149,302 $
-
- $
40
15,795 $
-
460 $
88
165,557
128
Gross profit (loss)
9,734
(303)
1,602
(8)
11,025
Interest expense (income)
Accretion and other expenses of Series A preferred
units
Capital expenditures
Depreciation
Total Assets
18,572
6
38
4,327
22,943
-
1,281
4,044
61,418
4,673
15,687
174
23,847
-
1,371
661
12,827
-
1,001
15
27,047
4,673
19,340
4,894
125,139
Revenues from external customers
Gross profit
Interest expense (income)
Accretion and other expenses of Series A preferred
units
Loss contingency on litigation
Capital expenditures
Depreciation
Total Assets
For the year ended December 31, 2019
California
Ethanol
Dairy
Renewable
Natural Gas
India
Biodiesel
All other
Total
$
154,148 $
3,951
16,667
- $
-
-
47,850 $
8,747
351
- $
-
4,071
201,998
12,698
21,089
-
-
2,255
3,810
56,561
2,257
-
4,214
1
4,776
-
-
1,059
612
16,906
-
6,200
1,050
11
21,652
2,257
6,200
8,578
4,434
99,895
A reconciliation of reportable segment revenues to consolidated totals for the years 2021, 2020, and 2019 follow:
Revenues
Total revenues for reportable segments
Other revenues
Elimination of intersegment revenues
Total consolidated revenues
2021
213,392 $
2
(1,445)
211,949 $
2020
165,137 $
548
(128)
165,557 $
2019
201,998
-
-
201,998
$
$
California Ethanol: During the year ended December 31, 2021, 2020, and 2019, the Company amended the Corn Procurement and Working Capital
Agreement and the J.D. Heiskell Purchasing Agreement to procure corn from J.D. Heiskell and sell all WDG and corn oil the Company produces to J.D.
Heiskell. Sales of ethanol to two customers accounted for 52% and 24% of the California Ethanol segment’s revenue for the year ended December 31,
2021. Sales of WDG, and corn oil to one customer accounted for 23% of the Company’s California Ethanol segment revenues for the year ended
December 31, 2021. Sales of ethanol, WDG, corn oil, and high-grade alcohol to two customers accounted for 42% and 41% of the Company’s California
Ethanol segment revenues for the year ended December 31, 2020. Sales of ethanol, WDG, and corn oil to one customer accounted for 99.1% of the
Company’s California Ethanol segment revenues for the year ended December 31, 2019.
Dairy Renewable Natural Gas: Substantially all of our Dairy Renewable Natural Gas segment revenues during the years ended December 31, 2021 and
2020 were from sales of biogas to the Keyes Plant for use in boilers, which allowed qualification of carbon credits for the ethanol produced in the Keyes
Plant.
India Biodiesel: During the year ended 2021, one biodiesel customers accounted for 66% of the Company’s India Biodiesel segment revenues while one of
the refined glycerin customers accounted for 16% of the Company’s India Biodiesel segment revenues. During the year ended December 30, 2020, two
biodiesel customers accounted for 42% and 26% of the Company’s consolidated India segment revenues while none of the refined glycerin customers
accounted for more than 10%. During the year ended December 31, 2019, three biodiesel customers accounting for 33%, 15% and 13% of the Company’s
consolidated India Biodiesel segment revenues and none of the refined glycerin customers accounting for more than 10%.
Table of Contents
88
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
13. Related Party Transactions
The Company owes Eric McAfee, the Company’s Chairman and CEO, and McAfee Capital LLC (“McAfee Capital”), owned by Eric McAfee, $0.4 million
in connection with employment agreements and expense reimbursements. The balance accrued related to these employment agreements was $1.1 million as
of December 31, 2020. For the years ended December 31, 2021, 2020, and 2019, the Company expensed $15 thousand, $23 thousand, and $36 thousand, to
reimburse actual expenses incurred by McAfee Capital and related entities. The Company previously prepaid $0.2 million to Redwood Capital, a company
controlled by Eric McAfee, for the Company’s use of flight time on a corporate jet. As of December 31, 2021, $0.1 million remained as a prepaid
expense. As of December 31, 2021, one executive owes the Company $106 thousand related to stock option exercises. This was repaid in January 2022.
On May 7, 2020, the Audit Committee of the Company approved a guarantee fee of 0.1% quarterly on the outstanding balance of Third Eye Capital Notes
or $0.6 million. On November 4, 2021, the Audit Committee of the Company approved a guarantee fee of $0.4 million. The balance of $0.3 million and
$0.8 million, for guaranty fees, remained as an accrued liability as of December 31, 2021 and 2020, respectively. On January 12, 2022, the Audit
Committee of the Company approved a one-time guarantee fee of $2.0 million to McAfee Capital in connection with McAfee Capitals extension of certain
guarantees of the Company’s indebtedness with Third Eye Capital.
The Company owes various members of the Board amounts totaling $0.2 million and $1.2 million as of December 31, 2021 and December 31, 2020, for
each period, in connection with board compensation fees, which are included in accounts payable on the balance sheet. For the years ended December 31,
2021, 2020, and 2019 the Company expensed $0.4 million, $0.4 million, and $0.3 million respectively, in connection with board compensation fees. During
the year ended December 31, 2021 the company issued $0.9 million of restricted stock awards to pay off outstanding accounts payable owed to members of
the Board.
14. 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.
Components of tax expense consist of the following:
Current:
Federal
State and Local
Foreign
Deferred:
Federal
State and Local
Foreign
Income tax expense/(benefit)
2021
2020
2019
$
$
- $
11
-
11
-
-
(139)
(128) $
- $
8
-
8
-
8
-
8
-
-
- -
1,123
1,131
(984)
(976) $
The Company recorded $0 and $0.1 million deferred tax liability as of December 31, 2021 and 2020 which is recorded in other long term liabilities in the
Consolidated Balance Sheets. The deferred tax liability resulted as India subsidiary had income for the year ended December 31, 2020. U.S. loss and
foreign income (loss) before income taxes are as follows:
Year Ended December 31,
2020
2021
2019
United States
Foreign
Pretax loss
Table of Contents
$
$
(45,723) $
(1,552)
(47,275) $
(37,496) $
(139)
(37,635) $
(43,419)
5,073
(38,346)
89
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Income tax benefit differs from the amounts computed by applying the statutory U.S. federal income tax rate (21%) to loss before
income taxes as a result of the following:
Income tax benefit at the federal statutory rate
State tax benefit
Foreign tax differential
Stock-based compensation
Interest Expense
GILTI Inclusion
Prior year true-ups
Other
Credits
Valuation Allowance
Income Tax Benefit
Effective Tax Rate
The components of the net deferred tax asset or (liability) are as follows:
Deferred Tax Assets
Organizational Costs, Start-up and Intangible Assets
Stock Based Compensation
NOLs, Unabsorbed Depreciation and R&D Credits C/F's
Interest expense carryover
$
Year Ended December 31,
2020
2021
2019
(9,928) $
(2,875)
(96)
252
1,842
-
140
497
(2,074)
12,114
(128)
0.27%
(7,903) $
(4,066)
(185)
166
1,315
-
(770)
258
(1,388)
11,597
(976)
2.59%
(8,052)
(48)
900
133
478
849
1,493
166
-
5,212
1,131
-2.95%
Year Ended December 31,
2021
2020
$
5,068 $
1,174
61,624
17,436
6,325
397
56,530
13,389
Ethanol Credits
Carbon Oxide Sequestration Credit
Accrued Expenses
Operating Lease Liability
Other, net
Total Deferred Tax Assets
Valuation Allowance
Net Deferred Tax Assets
Deferred Tax Liabilities
Right of Use Asset
Property, Plant & Equipment
Other, net
Total Deferred Tax Liabilities
Net Deferred Tax Liabilities
1,500
3,460
3,312
1,082
737
95,392
(83,260)
12,133
(1,238)
(10,882)
(13)
(12,133)
- $
1,500
1,387
2,813
1,232
486
84,059
(71,145)
12,914
(1,362)
(11,600)
(91)
(13,053)
(139)
$
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.
Table of Contents
90
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
We do 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, 2021, 2020, and 2019 these
undistributed earnings losses totaled $8.9 million, $8.0 million, and $7.0 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, 2021, the Company’s uncertain tax positions were not significant for income tax purposes.
The following describes the open tax years, by major tax jurisdiction, as of December 31, 2021:
United States — Federal
United States — State
India
Mauritius
2007 – present
2008 – present
2013 – present
2006 – present
As of December 31, 2021, the Company had U.S. federal NOL carryforwards of approximately $201.0 million and state NOL carryforwards of
approximately $252.0 million. The Company also has approximately $1.5 million of alcohol and cellulosic biofuel credit carryforwards. The Company
also has approximately $3.5 million of Carbon Oxide Sequestration Credit carryforwards The federal net operating loss and other tax credit carryforwards
expire on various dates between 2027 and 2037. The state net operating loss carryforwards expire on various dates between 2027 through 2041. Under the
current tax law, net operating loss and credit carryforwards available to offset future income in any given year may be limited by US or India statute
regarding net operating loss carryovers and timing of expirations or upon the occurrence of certain events, including significant changes in ownership
interests. The Company’s India subsidiary has unabsorbed depreciation loss carryforwards as of December 31, 2021 of approximately $5.1 million in U.S.
dollars, which do not expire.
Table of Contents
91
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
15. Parent Company Financial Statements (Unaudited)
We conduct substantially all of our operations through subsidiaries and are dependent on cash distributions, dividends and other intercompany transfers of
funds from 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. The following is a summary of
the Parent Company Financial statements.
Aemetis, Inc. (Parent Company)
Balance Sheets
As of December 31, 2021 and 2020
Assets
Current assets
Cash and cash equivalents
Receivables due from subsidiaries
Prepaid expenses
Other current assets
Total current assets
Investment in AE Advanced Products Keyes , Inc.
Investment in Aemetis Property Keyes, Inc.
Investment in Aemetis International, Inc.
Investment in Aemetis Advanced Products Riverbank, Inc.
Investment in Aemetis Carbon Capture, Inc.
Total investments in Subsidiaries, net of advances
Property, plant and equipment, net
Other assets
Total Assets
Liabilities & stockholders' deficit
Current liabilities
Accounts payable
Payables due to subsidiaries
Mandatorily redeemable Series B convertible preferred
Other current liabilities
Total current liabilities
Long term liabilities:
Other long term debt
Operating lease liability
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 Aemetis Property Keyes, Inc.
Investment in AE Advanced Products Keyes , Inc.
Investment in Aemetis Health Products, Inc.
Investment in Goodland Advanced Fuels, Inc.
Investment in Aemetis Biogas LLC
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
$
$
$
2021
2020
- $
93,571
290
116
93,977
-
496
2,546
23
54
3,119
36
2,475
99,607 $
3,024 $
-
3,806
9,521
16,351
-
2,318
150,424
205
2,738
4,536
-
383
2,137
13,587
27,166
201,176
318
-
252
-
570
12
-
4,196
-
-
4,208
9
2,700
7,487
4,881
4,390
3,252
11,930
24,453
150
-
131,432
205
2,738
4,446
247
-
441
12,201
15,918
167,628
203,494
167,778
1
33
205,305
(321,227)
(4,350)
(120,238)
99,607 $
1
23
93,426
(274,080)
(4,114)
(184,744)
7,487
$
Table of Contents
92
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Aemetis, Inc. (Parent Company)
Statements of Operations and Comprehensive Loss
For the Years Ended December 31, 2021, 2020, and 2019
2021
2020
2019
Equity in subsidiary losses
Selling, general and administrative expenses
Operating loss
Other (income) expense
Interest expense
Other (income) expense
Loss before income taxes
Income tax expense
Net loss
Other comprehensive loss
Foreign currency translation adjustment
Comprehensive loss
Table of Contents
$
(34,400) $
11,806
(28,820) $
6,707
(21,745)
6,673
(46,206)
(35,527)
(28,418)
1,031
(97)
677
448
1,392
5,899
(47,140)
(36,652)
(35,709)
7
7
7
(47,147)
(36,659)
(35,716)
$
(27)
(47,174) $
(289)
(36,948) $
(249)
(35,965)
93
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Aemetis, Inc. (Parent Company)
Statements of Cash Flows
For the years ended December 31, 2021, 2020, and 2019
Operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation
SARs Amortization
Depreciation
Subsidiary portion of net losses
Change in fair value of SARs liability
Gain on debt extinguishment
Changes in assets and liabilities:
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 (used in) investing activities
Financing activities:
Proceeds from borrowings under secured debt facilities
Repayments of borrowings under secured debt facilities
Proceeds from the exercise of stock options
Proceeds from issuance of common stock in equity offering
Net cash provided by (used in) financing activities
Net increase 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 taxes paid
2021
2020
2019
(47,147)
(36,659)
(35,716)
3,928
-
8
34,400
-
(421)
(38)
(1,043)
998
(902)
109
(10,108)
995
-
4
28,820
-
-
38
(216)
525
(578)
236
(6,835)
774
800
8
21,745
(82)
-
74
71
1,184
5,891
(232)
(5,483)
(95,105)
(95,105)
1,332
1,332
6,781
6,781
-
-
1,304
103,591
104,895
(318)
318
- $
421
-
287
5,113
5,821
318
-
318 $
- $
7
- $
7
-
(1,298)
-
-
(1,298)
-
-
-
-
8
$
$
Supplemental disclosures of cash flow information, non-cash transactions:
Fair value of warrants issued to subordinated debt holders
1,546
181
162
Fair value of warrants issued for capital expenditures
Exercise of Stock Appreciation Rights added to GAFI debt
Reclassification of GAFI Non-controlling interest
Operating lease liabilities arising from obtaining right of use assets
Issuance of equity to pay off accounts payable
1,344
-
-
-
-
-
-
2,632
893
-
-
1,050
8,501
640
-
94
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
Table of Contents
16. Subsequent Events
Subordinated Notes
On January 1, 2022, the maturity on two accredited investor's Subordinated Notes was extended until the earlier of (i) June 30, 2022; (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 $90 thousand and
$250 thousand cash extension fee was paid by adding the fee to the balance of the new Subordinated Note and 113 thousand Aemetis, Inc. common stock
warrants were granted with a term oftwo years and an exercise price of $0.01 per share.
Amended and Restated Credit Agreement
On March 2, 2022, Goodland Advanced Fuels, Inc. and Aemetis Carbon Capture, Inc. entered into an Amended and Restated Credit Agreement (“Credit
Agreement”) with Third Eye Capital Corporation, as administrative agent and collateral agent, and the lender party there to (the "New Credit Facility").
The New Credit Facility provides for two credit facilities with aggregate availability of up to $100 million, consisting of a revolving credit facility with
GAFI for up to $50 million (the “Fuels Revolving Line”) and a revolving credit facility with ACCI for up to $50 million (the “Carbon Revolving Line”), in
each case upon satisfaction of certain conditions provided in the Credit Agreement (collectively, the “Revolving Loans”). The Revolving Loans made under
the Fuels Revolving Line have a maturity date of March 1, 2025 and will accrue a rate of interest per annum equal to the greater of (i) the prime rate plus
6.00% and (ii) ten percent (10.0%), and the Revolving Loans made under the Carbon Revolving Line will have a maturity date of March 1, 2026 and
accrue a rate of interest per annum equal to the greater of (i) the prime rate plus 4.00% and (ii) eight percent (8.0%). The Revolving Loans made under the
Fuels Revolving Line will be available for working capital purposes and the Revolving Loans made under the Carbon Revolving Line will be available for
projects that reduce, capture, use or sequester carbon with the objective of reducing carbon dioxide emissions. In connection with the New Credit Facility,
the Company agreed to issue to the lender under the New Credit Facility: (i) warrants entitling the lender to purchase 50,000 shares of common stock,
$0.001 par value per share, of the Company at an exercise price equal to $10.20 per share, exercisable for a five-year period from the Closing Date; and (ii)
warrants entitling holders thereof to purchase 250,000 shares of Aemetis, Inc. $0.001 par value common stock, at an exercise price equal to $20.00 per
share, exercisable for a ten-year period from March 02, 2022. Upon closing of the Credit Agreement, the Company drew on the revolving lines to repay
$16.0 million on the higher interest rate Revolving Credit Facility and to pay $6.1 million to Stanislaus County for property taxes.
Third Eye Reserve Liquidity Facility
On March 8, 2022, Third Eye agreed to extend a one-year reserve liquidity facility governed by a promissory note of $40.0 million to April 1, 2023.
Borrowings under the facility are available until maturity on April 1, 2023. Interest on borrowed amounts accrues at a rate of 30% per annum, paid monthly
in arrears and may be capitalized and due upon maturity, or 40% if an event of default has occurred and continues. The outstanding principal balance of the
indebtedness evidenced by the promissory note, plus any accrued but unpaid interest and any other sums due thereunder, shall be due and payable in full at
the earlier to occur of (a) receipt by the Company or its affiliates of proceeds from any sale, merger, equity or debt financing, refinancing or other similar
transaction from any third party and (b) April 1, 2023. Any amounts may be re-borrowed up to repaid amounts up until the maturity date of April 1, 2023.
The promissory note is secured by liens and security interests upon the property and assets of the Company. In addition, if any initial advances are drawn
under the facility, the Company will pay a non-refundable one-time fee in the amount of $0.5 million provided that such fee may be added to the principal
amount of the promissory note on the date of such initial advance.
Third Eye Capital Limited Waiver and Amendment No. 22
On March 8, 2022, Third Eye Capital agreed to the Limited Waiver and Amendment No. 22 to the Note Purchase Agreement (“Amendment No. 22”) to: (i)
provide a waiver for the Blocked Account Agreement Violation in which the Borrowers failed to deliver Blocked Account Control Agreements by
December 31, 2021, (ii) provide for a waiver for the Subordinated Debt Violation, in which the Company made a repayment to a Subordinated Debt lender,
and (iii) provide for a waiver of the consolidated unfunded capital expenditures covenant for the quarters through December 31, 2021. As consideration for
such waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.1 million in cash.
Table of Contents
17. Liquidity
95
AEMETIS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular data in thousands, except par value and per share data)
The accompanying financial statements have been prepared contemplating the realization of assets and satisfaction of liabilities in the normal course of
business. As a result of negative capital and negative operating results, and collateralization of substantially all of the company assets, the Company has
been reliant on its senior secured lender to provide additional funding and has been required to remit substantially all excess cash from operations to the
senior secured lender. In order to provide the necessary liquidity, the senior lender provided an extension of the $40 million reserve liquidity facility
through of April 1, 2023 (see Note 16) that will allow the company to meet its obligations as they come due beyond twelve months after these financial
statements are issued. The Company plans to pursue the following strategies to improve the course of the business.
For the Keyes plant, we plan to operate the plant and continue to improve financial performance by adopting new technologies or process changes that
allow for energy efficiency, cost reduction or revenue enhancements, execute upon awarded grants that improve energy and operational efficiencies
resulting in lower cost, lower carbon demands and overall margin improvement.
For the ABGL biogas project, we plan to operate the biogas digesters to capture and monetize biogas as well as continue to build new dairy digesters and
extend the existing pipeline in order to capture the higher carbon credits available in California. Funding for continued construction is based upon,
obtaining government guaranteed loans and executing on existing and new state grant programs.
For the Riverbank project, we plan to raise the funds necessary to construct and operate the Carbon Zero 1 plant using loan guarantees and public
financings based upon the licensed technology that generate federal and state carbon credits available for ultra-low carbon fuels utilizing lower cost, non-
food advanced feedstocks to significantly increase margins.
For the India plant, we plan to secure higher volumes of shipments of fuels at the India plant by developing the sales channels and expanding the existing
domestic markets or exporting to North America markets.
In addition to the above we plan to continue to locate funding for existing and new business opportunities through a combination of working with our
senior lender, restructuring existing loan agreements, selling equity through the ATM and otherwise, selling the current EB-5 Phase II offering, or by
vendor financing arrangements.
Table of Contents
96
SIGNATURES
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 10, 2022
Aemetis, Inc.
By: /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/ Naomi L Boness
Naomi L. Boness
/s/ Timothy Simon
Title
Date
Chairman of the Board/Chief Executive Officer
(Principal Executive Officer and Director)
March 10, 2022
Chief Financial Officer
(Principal Financial and Accounting Officer)
March 10, 2022
Director
Director
Director
Director
Director
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
March 10, 2022
Timothy Simon
97
LIMITED WAIVER AND AMENDMENT NO. 22 TO
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
EXHIBIT 10.94
This Limited Waiver and Amendment No. 22 to Amended and Restated Note Purchase Agreement (this “Amendment”), is dated as of March 8, 2022, is
made by and among (i) AEMETIS ADVANCED FUELS KEYES, INC., a Delaware corporation (“AEFK”), AEMETIS FACILITY KEYES, INC., a
Delaware corporation (“Keyes Facility”, together with AEFK, the “Borrowers”), AEMETIS, INC., a Nevada corporation (“Parent”), and (ii) THIRD
EYE CAPITAL CORPORATION, an Ontario corporation, as agent for the Noteholders (“Administrative Agent”).
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 from time to time including most recently by an Amendment No. 21 dated as of November 5, 2021 (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 has agreed to waive certain financial covenants included in the Agreement, in
each case on the terms and conditions contained herein.
AGREEMENT
SECTION 1. Reaffirmation of Indebtedness. The Borrowers hereby confirm that as of January 31, 2022, the outstanding principal balance of the
Notes (including accrued interest) is $112,338,084.85.
SECTION 2. Recitals Part of Agreement. The foregoing recitals are hereby incorporated into and made a part of the Agreement, including all
defined terms referenced therein.
SECTION 3. Blocked Account Agreement Waiver.
(1) Based on the information provided to the Administrative Agent by the Borrowers, the Borrowers failed to deliver Blocked Account Control
Agreements by December 31, 2021, in contravention of Section 6.3(p) of the Agreement, which non-compliance would, but for this waiver, constitute an
Event of Default (the "Blocked Account Agreement Violation").
(2) Subject to the terms of this Amendment, the Administrative Agent waives, as of the Effective Date, the Blocked Account Agreement Violation;
provided that the Borrowers shall be and remain obligated to comply with their obligations as stated in Section 6.3(p) of the Agreement by no later than
March 31, 2022.
SECTION 4. Subordinated Debt Waiver.
(1) Based on the information provided to the Administrative Agent by the Borrowers, on each of November 1, 2021 and November 24, 2021, the
Borrowers remitted $500,000 in repayments (an aggregate of $1,000,000) of a Subordinated Debt owed to EB-5 investors under the United States
Citizenship and Immigration Service EB-5 Program, in contravention of Section 6.4(u) of the Agreement, which non-compliance would, but for this
Waiver, constitute an Event of Default (the “Subordinated Debt Violations”).
1
(2) Subject to the terms of this Amendment, the Administrative Agent waives, as of the Effective Date, the Subordinated Debt Violations;
provided that the Borrowers shall be and remain obligated to comply with their obligations as stated in Section 6.4(u) of the Agreement, on a going forward
basis thereafter.
SECTION 5. Consolidated Unfunded Capital Expenditures Waiver.
(1) Based on the information provided to the Administrative Agent by the Borrowers, in the Fiscal Quarter ended December 31, 2021, the Parent
may have incurred or permitted to be incurred Consolidated Unfunded Capital Expenditures in excess of $100,000, which, if incurred, would be in
contravention of Section 6.2(c) of the Agreement, which non-compliance would, but for this Waiver, constitute an Event of Default (the “CapEx
Violation”).
(2) Subject to the terms of this Amendment, the Administrative Agent waives, as of the Effective Date, the CapEx Violation; provided that the
Parent shall be and remain obligated to comply with its obligations as stated in Section 6.2(c) of the Agreement, on a going forward basis thereafter.
SECTION 5. Conditions to Effectiveness.
This Amendment shall be effective on the date first written above but subject to satisfaction of the following conditions precedent:
(A) Administrative Agent shall have been paid an amendment fee in the amount of $100,000 in cash on the date of this Amendment,
which fee shall be deemed fully earned and nonrefundable on the effective date of this Amendment.
(B) Borrowers shall, and will cause the other Company Parties to, 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.
(C) 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: (i)
ratifies and confirms all of the obligations and liabilities of such Borrower owing pursuant to the Agreement and the other Note Purchase Documents, and
(ii) agrees to pay all costs, fees and expenses of Administrative Agent and Noteholders in connection with this Amendment.
2
SECTION 6. 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 course of dealing or other basis for altering any obligation of the Borrowers, or 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 rather 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 7. 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.
SECTION 8. 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. 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. 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.
3
(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.}
4
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
ADMINISTRATIVE AGENT:
THIRD EYE CAPITAL CORPORATION
By: /s/ Arif N. Bhalwani
Name: Arif N. Bhalwani
Title: Managing Director
5
Exhibit 21.1
List of Subsidiaries
Biofuels Marketing, Inc.
Aemetis Biochemicals, Inc.
Aemetis Advanced Products Keyes, Inc.
Aemetis Riverbank, Inc.
Aemetis Advanced Products Riverbank, Inc.
Aemetis Properties Riverbank, Inc.
Aemetis Health Products, Inc.
Aemetis Carbon Capture, 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 Property Keyes, Inc.
Aemetis Advanced Fuels, Inc.
EdenIQ Acquisition Corp
Aemetis Americas, Inc.
AE Biofuels, Inc.
Aemetis Advanced Biorefinery Keyes, Inc.
Aemetis Biogas LLC.
Goodland Advanced Fuels, Inc.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements (No. 333-159556, No. 333-194423, No. 333-194429, No. 333-202327, No. 333-
209620, No. 333-216762, No. 333-224002, and No 333-230293) on Form S-8 and Registration Statement (No. 333-197259 and No. 333-224952) on Form
S-3 of Aemetis, Inc. of our report dated March 10, 2022, relating to the consolidated financial statements of Aemetis, Inc., appearing in the Annual Report
on Form 10-K of Aemetis, Inc. for the year ended December 31, 2021.
Exhibit 23
/s/ RSM US LLP
Des Moines, Iowa
March 10, 2022
EXHIBIT 31.1
I, Eric A. McAfee, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Aemetis, Inc.;
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;
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;
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 10, 2022
/s/ Eric A. McAfee
Eric A. McAfee
Chief Executive Officer
EXHIBIT 31.2
I, Todd Waltz, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Aemetis, Inc.;
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;
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;
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 10, 2022
/s/ Todd Waltz
Todd Waltz
Chief Financial Officer
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, 2021, 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 10, 2021
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, 2021, 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 10, 2021