SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

We make forward-looking statements in this Quarterly Report on Form 10-Q, including statements regarding our assumptions, projections, expectations, targets, intentions, or beliefs about future events or other statements that are not historical facts. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements regarding management’s plans; trends in market conditions with respect to prices for inputs for our products and 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 expand into alternative markets for biodiesel and its byproducts, including continuing to expand our sales into international markets; our ability to maintain and expand strategic relationships with suppliers; our ability to access governmental carbon reduction incentives; our ability to supply gas into transportation markets; our ability to continue to develop, maintain, and protect new and existing intellectual property rights; our ability to adopt, develop and commercialize new technologies; our ability to extend or refinance our senior debt on terms reasonably acceptable to us or at all; our ability to continue to fund operations and our future sources of liquidity and capital resources; our ability to fund, develop, build, maintain and operate digesters, facilities and pipelines for our California Dairy Renewable Natural Gas segment; our ability to fund, develop and operate our carbon capture sequestration projects, including obtaining required permits; our ability to receive awarded grants by meeting all of the required conditions, including meeting the minimum contributions; our ability to obtain additional financing under the EB-5 program; our ability to generate and sell or utilize various credits, including LCFS, D3 RINs, production tax credits, and investment tax credits; our ability to improve margins; and our ability to raise additional debt and equity funding at the parent, subsidiary, or project level. Words or phrases such as “anticipates,” “may,” “will,” “should,” “could,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will continue” and 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”), including without limitation, our most recent Annual Report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

 

PART I - FINANCIAL INFORMATION

 

Item 1 - Financial Statements

AEMETIS, INC.

 

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands except for par value)

 

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

 

 

AEMETIS, INC.

 

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands except for loss per share)

 

 

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

 

 

AEMETIS, INC.

 

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

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

 

 

AEMETIS, INC.

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited, in thousands)

 

 

 

 

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

   

 

1. General

 

Nature of Activities

 

Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis referred to herein as “Aemetis,” the “Company,” “we,” “our” or “us”) is an international renewable natural gas and renewable fuels company focused on the operation, acquisition, development, and commercialization of innovative technologies to produce low and negative carbon intensity renewable fuels that replace fossil-based products. We do this by building a local circular bioeconomy using agricultural products and waste to produce low carbon, advanced renewable fuels that reduce greenhouse gas ("GHG") emissions and improve air quality.  Our current operations include:

 

► California Ethanol - We own and operate a 65 million gallon per year capacity ethanol production facility 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.  The Keyes Plant also produces and sells CO₂ to Messer Gas who converts it to liquid and sells it to food, beverage, and industrial customers. We are implementing several energy efficiency initiatives at the Keyes Plant focused on reducing operating costs and lowering the carbon intensity of our fuel by reducing fossil fuel inputs.

 

► California Dairy Renewable Natural Gas - We produce Renewable Natural Gas (RNG) in central California.  Our facilities include nine anaerobic digesters that produce biogas from dairy waste, a 36-mile biogas collection pipeline leading to a central upgrading hub, and a utility interconnection to inject the RNG into the natural gas pipeline for delivery to customers for use as transportation fuel. We are actively expanding our RNG production dairies, with five additional digesters under construction, agreements with a total of 48 dairies, and environmental review completed for an additional 24 miles of pipeline. We are also building our own RNG dispensing station, which is planned to begin operating in Q1 2025.

 

► India Biodiesel - We own and operate a plant in Kakinada, India ("Kakinada Plant" or "India Plant") with a capacity to produce 60 million gallons per year of high-quality distilled biodiesel from a variety of vegetable oil and animal waste feedstocks.  The Kakinada Plant is one of the largest biodiesel production facilities in India. 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. 

 

In addition, we are actively growing our business by seeking to develop or acquire new facilities, including the following key projects:

 

► Sustainable Aviation Fuel and Renewable Diesel – We are developing a sustainable aviation fuel and renewable diesel (“SAF/RD”) production plant to be located at the Riverbank Industrial Complex in Riverbank, CA. The plant is currently designed to produce an expected 90 million gallons per year of SAF/RD from renewable oil and fats obtained from the Company’s biofuels plants and other sources. The plant will use low-carbon hydroelectric electricity and renewable hydrogen that is generated within the plant’s own processes using byproducts of the SAF/RD production. In 2023, we received approval of the Use Permit and California Environmental Quality Act ("CEQA") evaluation for the development of the plant, and in March 2024, we received the Authority to Construct air permits for the plant. We are continuing with the engineering and other required development activities for the plant.

 

► Carbon Capture and Underground Sequestration – We are developing Carbon Capture and Underground Sequestration (“CCUS”) facilities that will inject carbon dioxide captured from our biofuel production facilities and other sources deep into the ground for geologic storage to reduce emissions to the atmosphere of greenhouse gases that contribute to global warming. In May 2023, we received a permit from the State of California to build a geologic characterization well that will provide information for the permitting and design of a CCUS well located in Riverbank, California. We drilled the first phase of the characterization well in September 2024, and plan to complete the drilling in 2025 while at the same time continuing engineering, permitting and other development activities for the sequestration well.

 

The Company’s current and planned businesses produce renewable fuels and reduce carbon emissions, while generating valuable Renewable Fuel Standard credits, California Low Carbon Fuel Standard credits, and federal tax credits.

 

Basis of Presentation and Consolidation

 

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

 

All intercompany balances and transactions have been eliminated in consolidation.

 

The accompanying consolidated condensed balance sheet as of  September 30, 2024, the consolidated condensed statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023, the consolidated condensed statements of cash flows for the nine months ended September 30, 2024 and 2023, and the consolidated condensed statements of stockholders’ deficit for the three and nine months ended September 30, 2024 and 2023, are unaudited. The consolidated condensed balance sheet as of December 31, 2023, is derived from the 2023 audited consolidated financial statements and notes thereto.

 

The consolidated condensed financial statements in this report should be read in conjunction with the 2023 audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023. The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.

 

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In the opinion of Company’s management, the unaudited interim consolidated condensed financial statements as of and for the three and nine months ended September 30, 2024 and 2023, have been prepared on the same basis as the audited consolidated statements as of and for the year ended  December 31, 2023 and reflect all adjustments, consisting primarily of normal recurring adjustments, necessary for the fair presentation of its statement of financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2024, are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year, or any future periods. 

 

There have been no material changes to our significant accounting policies disclosed in Note 1 - Nature of Activities and Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

2.  Revenue

 

We derive revenue primarily from sales of ethanol and related co-products in California, renewable natural gas ("RNG") and related environmental attributes in California, and biodiesel and refined glycerin in India.

 

California Ethanol Revenues: We sell most of our ethanol to J.D. Heiskell Holdings, LLC ("J.D. Heiskell"), who sells it to a customer designated by us, Murex, LLC, who markets the product. We also buy our corn feedstock from J.D. Heiskell, and J.D. Heiskell pays us the net balance between the sales of ethanol and other products we sell to J.D. Heiskell and the cost of our corn purchases from J.D. Heiskell. Our accounting (i) treats us as the purchaser/customer for corn purchases from J.D. Heiskell and accordingly we record the full purchase cost in cost of goods sold, and (ii) treats us as the seller for ethanol and other product sales and accordingly we recognize the full amount as revenue.

 

Given the similarity of the individual sales transactions with J.D. Heiskell, we have assessed them as a portfolio of similar contracts. The performance obligation is satisfied by delivery of the physical product to our finished goods tank that is leased by J.D. Heiskell. The transaction price is determined based on daily market prices and quarterly contract pricing negotiated by Murex for its customers for ethanol and based on dry distillers' market and local demand by our marketing partner A.L. Gilbert Company (“A.L. Gilbert”) for WDG. The transaction price is allocated to one performance obligation.

 

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

 

		For the three months ended September 30,								For the nine months ended September 30,
		2024				2023				2024				2023
Ethanol sales		$	33,925			$	36,375			$	88,748			$	45,388
Wet distiller's grains sales			8,961				9,427				27,476				11,980
Other sales			2,048				1,637				4,931				1,878
Total		$	44,934			$	47,439			$	121,155			$	59,246

 

From December 2022 until May 2023, we undertook an extended maintenance cycle and accelerated the implementation of several important ethanol plant energy efficiency upgrades, which accounts for lower revenue amounts shown in the table above for the nine months ending September 30, 2023.

 

California Dairy Renewable Natural Gas Revenues: As of September 30, 2024, we operate nine anaerobic digesters that process feedstock from ten dairies into biogas, a 36-mile collection pipeline leading to a central upgrading hub, and an interconnect to inject the RNG into the utility natural gas pipeline for delivery to customers for use as transportation fuel. In connection with dispensing the RNG, we generate sellable credits under the federal Renewable Fuel Standard (referred to as "D3 RINs") and the California Low Carbon Fuel Standard ("LCFS"). We began selling D3 RINs in the third quarter of 2023 and began selling LCFS credits in the first quarter of 2024. We recognize revenue from sales of RNG concurrently with our production and injection into the pipeline. We recognize revenue from sales of D3 RINs and LCFS credits at the time we sell the credits.

 

The following table represents sales in our Renewable Natural Gas segment:

 

		For the three months ended September 30,								For the nine months ended September 30,
		2024				2023				2024				2023
RNG, LCFS and D3 RIN sales		$	4,250			$	1,107			$	9,640			$	1,523

 

India Biodiesel Revenues: 

 

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

 

		For the three months ended September 30,								For the nine months ended September 30,
		2024				2023				2024				2023
Biodiesel sales		$	31,121			$	19,291			$	85,821			$	53,292
Other sales			1,136				853				4,020				1,892
Total		$	32,257			$	20,144			$	89,841			$	55,184

  

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3.  Cash and Cash Equivalents

 

The following table reconciles cash, cash equivalents, and restricted cash reported in the consolidated condensed balance sheet to the statement of cash flows:

 

		As of
		September 30, 2024				December 31, 2023
Cash and cash equivalents		$	296			$	2,667
Restricted cash included in other current assets			115				289
Restricted cash included in other assets			2,882				3,324
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows		$	3,293			$	6,280

 

Restricted cash shown in the table above includes amounts required to be set aside by the Aemetis Biogas 1 LLC Term Loan Agreement and Aemetis Biogas 2 LLC Construction and Term Loan Agreement for financing reserves and construction contingencies.

4.  Basic and Diluted Net Income (Loss) Per Share

 

Basic net income (loss) per share is computed by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per share reflects the dilution of common stock equivalents such as options, debt and warrants to the extent the impact is dilutive.

 

The following table shows the number of potentially dilutive shares excluded from the diluted net income (loss) per share calculation as of September 30, 2024 and 2023:

 

		As of
		September 30, 2024				September 30, 2023
Common stock options and warrants			7,728				3,281
Debt with conversion feature at $30 per share of common stock			1,151				1,259
Total number of potentially dilutive shares			8,879				4,540

 

5. Inventories

 

Inventories consist of the following:

		As of
		September 30, 2024				December 31, 2023
Raw materials		$	10,642			$	9,907
Work-in-progress			1,591				1,682
Finished goods			7,559				6,702
Total inventories		$	19,792			$	18,291

 

6. Property, Plant and Equipment

 

Property, plant and equipment consist of the following:

 

		As of
		September 30, 2024				December 31, 2023
Land		$	7,341			$	7,345
Plant and buildings			171,814				136,318
Furniture and fixtures			2,641				2,266
Machinery and equipment			5,695				14,982
Construction in progress			52,978				73,057
Property held for development			15,431				15,431
Finance lease right of use assets			2,889				2,889
Total gross property, plant & equipment			258,789				252,288
Less accumulated depreciation			(62,850	)			(57,180	)
Total net property, plant & equipment		$	195,939			$	195,108

 

For the three months ended September 30, 2024 and 2023, interest capitalized in property, plant and equipment was $1.0 million and $1.5 million (not including depreciation), respectively.  For the nine months ended September 30, 2024 and 2023, interest capitalized in property, plant and equipment was $4.0 million and $3.9 million, respectively.

 

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Construction in progress includes costs for biogas digesters that are under construction, the Riverbank sustainable aviation fuel and renewable diesel plant, the carbon capture and sequestration characterization well, and energy efficiency projects at the Keyes Plant. Property held for development is the partially completed Goodland Plant which is not ready for operation. Depreciation will begin for each project when the project is operational and placed into 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:

 

		Years
Plant and buildings			20 - 30
Machinery and equipment			5 - 15
Furniture and fixtures			3 - 5

 

For the three months ended September 30, 2024 and 2023, the Company recorded depreciation expense of $2.3 million and $1.7 million, respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded depreciation expense of $6.1 million and $5.2 million, respectively.

7. Debt

 

Debt consists of the following:

		September 30, 2024				December 31, 2023
Third Eye Capital term notes		$	7,182			$	7,159
Third Eye Capital revolving credit facility			29,921				20,922
Third Eye Capital revolving notes Series B			64,719				54,412
Third Eye Capital revenue participation term notes			12,066				12,011
Third Eye Capital acquisition term notes			26,737				26,655
Third Eye Capital Fuels Revolving Line			39,284				32,511
Third Eye Capital Carbon Revolving Line			25,382				23,486
Construction and term loans			46,585				41,024
Cilion shareholder purchase obligation			7,188				7,028
Subordinated notes			18,771				17,625
EB-5 promissory notes			38,925				42,211
EB-5 broker promissory note			2,775				-
Working capital loans			2,647				3,827
Term loans on capital expenditures			24				5,850
Total debt			322,206				294,721
Less current portion of debt			77,215				37,028
Total long term debt		$	244,991			$	257,693

 

Third Eye Capital Keyes Notes

 

On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (“AAFK”), entered into an Amended and Restated Note Purchase Agreement (the “Note Purchase Agreement”) with Third Eye Capital Corporation (“Third Eye Capital”). 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. On May 16, 2023, Third Eye Capital and the Company entered into new Revolving Notes Series B related to certain existing principal under the Revolving Credit Facility and for subsequent principal increases. The Term Notes, Revolving Credit Facility, Revolving Notes Series B, Revenue Participation Term Notes, and Acquisition Term Notes are referred to herein collectively as the “Third Eye Capital Keyes Notes.” The Third Eye Capital Keyes Notes have been amended several times, and the current key terms are as follows:

 

A.	Term Notes.  As of September 30, 2024, the Company had $7.2 million in principal and interest outstanding under the Term Notes and $55.8 thousand unamortized debt issuance costs. The Term Notes accrue interest at 14% per annum. The Term Notes mature on April 1, 2025.

 

B.

Revolving Credit Facility. The Revolving Credit Facility accrues interest at the prime rate plus 13.75% (21.75% as of September 30, 2024) payable monthly in arrears. The Revolving Credit Facility matures on April 1, 2025. As of September 30, 2024, AAFK had $30.5 million in principal and interest and waiver fees outstanding and $0.6 million unamortized debt issuance costs under the Revolving Credit Facility.

 

C.

Revolving Notes Series B. The Revolving Notes Series B accrues interest at the prime rate plus 13.75% (21.75% as of September 30, 2024) payable monthly in arrears. The Revolving Notes Series B matures on April 1, 2025. As of September 30, 2024, AAFK had $65.2 million in principal and interest and waiver fees outstanding and $0.5 million unamortized debt issuance costs under the Revolving Notes Series B.

 

D.

Revenue Participation Term Notes. The Revenue Participation Term Notes bear interest at 5% per annum and mature on April 1, 2025. As of September 30, 2024, AAFK had $12.2 million in principal and interest outstanding under the Revenue Participation Term Notes and $86.1 thousand unamortized debt issuance costs.

 

E.

Acquisition Term Notes. The Acquisition Term Notes accrue interest at the prime rate plus 10.75% (18.75% per annum as of September 30, 2024) and mature on April 1, 2025. As of September 30, 2024, Aemetis Facility Keyes, Inc. had $26.9 million in principal and interest and redemption fees outstanding under the Acquisition Term Notes and $187.1 thousand unamortized debt issuance costs. The outstanding principal balance includes $7.5 million in redemption fee on which interest is not charged.

 

On July 31, 2024, the Company and Third Eye Capital entered into Amendment 29 to Amended and Restated Note Purchase Agreement ("Amendment 29") that provides the Company with a right to extend the maturity dates of the Third Eye Capital Keyes Notes by one year from April 1, 2025, to April 1, 2026, by providing written notice to Third Eye Capital.  As a condition of such extension, the Company would pay a fee of 1% of the amount due under the applicable note, of which 50% can be added to the outstanding debt and 50% would be paid in cash or common stock (if paid using common stock, the value of shares issued would equal 110% of the 50% portion of the extension fee). As a result of the Company's ability to extend the maturity date, the Third Eye Capital Keyes Notes are classified as non-current debt.

 

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The Third Eye Capital Keyes 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 any default that could reasonably be expected to have a material adverse effect on the Company, 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 notes allow interest to be added to the outstanding principal balance. The notes are secured by first priority liens on all real and personal property of, assignment of proceeds from all government grants and guarantees from the Company’s North American subsidiaries except for Aemetis Biogas LLC and its subsidiaries, and contain cross-collateral and cross-default provisions. McAfee Capital, LLC (“McAfee Capital”), owned by Eric McAfee, the Company’s Chair and CEO, provided a guaranty of payment and performance secured by all Company shares owned by McAfee Capital and additional assets, and Mr. McAfee has also provided a personal guaranty of up to $10 million plus a pledge of his ownership interests in several personal assets.

 

Third Eye Capital Reserve Facility. On March 6, 2020, we entered into a reserve liquidity facility governed by a promissory note, payable to Third Eye Capital Corporation, in the principal amount of $18 million. The reserve liquidity facility has been amended several times.  Most recently, on March 25, 2024, the Company and Third Eye Capital entered into a "Seventh Amended and Restated Promissory Note" that increased the amount available under the reserve liquidity facility to $85 million and extended the maturity date to  April 1, 2025. Borrowings under the Note are available until maturity. Interest on borrowed amounts would accrue at a rate of 30% per annum, to be paid monthly in arrears, or 40% if an event of default has occurred and continues. Interest payments due may be capitalized into the principal balance of the Note. The Company pays a standby fee of 2% per annum of the difference between the aggregate principal outstanding under the Note and the commitment, payable monthly in arrears in either cash or stock. The Note also requires the Company to pay a fee in the amount of $0.5 million in connection with a request for an advance on the Note, provided that such fee may be added to the principal amount of the Note. In addition, the Company would be required to make payments on the Note with funds received from the closing of certain new debt or equity financing or transactions, as described in the Note. The Note is secured by liens and security interests on the property and assets of the Company. As of September 30, 2024, we have no borrowings outstanding under the Reserve Liquidity Note.

 

Third Eye Capital Revolving Credit Facility for Fuels and Carbon Lines. On March 2, 2022, Goodland Advanced Fuels, Inc. ("GAFI") and Aemetis Carbon Capture, Inc. (“ACCI”) entered into an Amended and Restated Credit Agreement (“Credit Agreement”) with Third Eye Capital, as administrative agent and collateral agent, and the lender party thereto (the “New Credit Facility”). The New Credit Facility provides for two credit lines 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” and together with the Fuels Revolving Line, the “Revolving Lines”). Loans received under the Fuels Revolving Line have a maturity date of March 1, 2025, and accrue interest per annum at a rate equal to the greater of (i) the prime rate plus 6.00% and (ii) ten percent (10.0%).  Loans received under the Carbon Revolving Line have a maturity date of March 1, 2026 and accrue interest per annum at a rate equal to the greater of (i) the prime rate plus 4.00% and (ii) eight percent (8.0%). Loans under the Fuels Revolving Line are available for working capital purposes and loans made under the Carbon Revolving Line are available for projects that reduce, capture, use, or sequester carbon with the objective of reducing carbon dioxide emissions. As of September 30, 2024, GAFI had principal and interest outstanding of $40.2 million classified as current debt net of $0.9 million unamortized debt issuance costs. As of September 30, 2024, ACCI had principal and interest outstanding of $1.6 million classified as current debt, $24.9 million classified as long-term debt, and $1.1 million in unamortized debt issuance costs.

 

Cilion Shareholder Purchase Obligation. In connection with the Company’s merger with Cilion, Inc. (“Cilion”), on July 6, 2012, the Company incurred a $5.0 million payment obligation to Cilion shareholders as merger compensation subordinated to the senior secured Third Eye Capital Notes. The liability bears interest at 3% per annum and is due and payable after the Third Eye Capital Notes have been paid in full. As of September 30, 2024, Aemetis Facility Keyes, Inc. had $7.2 million in principal and interest outstanding under the Cilion payment obligation under the merger agreement.

 

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 $3.4 million in original notes to the investors (“Subordinated Notes”). The Subordinated Notes mature every six months and the current maturity date is December 31, 2024. Upon maturity, the Subordinated Notes are renewable at the Company's election for six month periods 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% per annum and is due at maturity. Neither AAFK nor Aemetis may make any principal payments under the Subordinated Notes until all loans made by Third Eye Capital to AAFK are paid in full. As of  September 30, 2024, and December 31, 2023, the Company had, in aggregate, $18.8 million and $17.6 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 that is 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 by U.S. Citizenship and Immigration Services 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 to 3%. The EB-5 Notes are convertible into Aemetis, Inc. common stock at a conversion price of $30 per share. Advanced BioEnergy, LP received equity investments from foreign investors, and then Advanced BioEnergy used the invested equity to make loans to the Keyes Plant. The EB-5 Notes are subordinated to the Company's senior secured debt to Third Eye Capital.  On February 27, 2019, Advanced BioEnergy, LP, and the Company entered into an Amendment to the EB-5 Notes that modified the stated maturity dates of the EB-5 Notes to provide automatic six-month extensions as long as the Advanced BioEnergy investors’ immigration processes are in progress. Accordingly, notes derived from Advanced BioEnergy equity provided by investors pending green card approval have been recognized as long-term debt while notes derived from Advanced BioEnergy equity provided by investors who have obtained green card approval have been classified as current debt. In July 2024, in connection with settlement of litigation initiated by a broker engaged by Advanced BioEnergy, we entered into a further amendment of a portion of the EB-5 notes to reduce the interest rate to 1% in exchange for the Company entering into a separate promissory note and agreeing to pay the broker certain of Advanced Bioenergy's obligations.  In connection with this amendment, we recognized a gain of $162 thousand which is recorded in the Statement of Operations as Other Income. As of September 30, 2024, and December 31, 2023, $34.5 million and $37.9 million was outstanding, respectively, on the EB-5 Notes.

 

On October 16, 2016, the Company launched its EB-5 Phase II funding (the “EB-5 Phase II Funding”) and entered into certain Note Purchase Agreements with Advanced BioEnergy II, LP, a California limited partnership authorized to receive EB-5 equity funding investments. The Company received $4.0 million in loan funds from Advanced BioEnergy II, LP before certain changes to and expiration of the EB-5 program prevented further funding. The federal EB-5 program was recently reauthorized, and in March 2024, U.S. Citizenship and Immigration Services approved the Company's project for up to $200 million of additional investment using EB-5 funds. Under the new rules, the minimum investment is raised from $0.5 million per investor to $0.8 million per investor. The terms of the EB-5 Phase II Funding are similar to the terms of the first round of EB-5 funding. As of both  September 30, 2024, and  December 31, 2023, $4.4 million was outstanding on the notes under the EB-5 Phase II funding, respectively.

 

EB-5 Broker Promissory Note. In July 2024 we signed a promissory note with a broker engaged by Advanced BioEnergy in an agreement to pay the broker certain of Advanced BioEnergy's obligations. The note principal was $3.3 million, and payable through fourth quarter of 2026 at 0% interest. As of September 30, 2024, $1.3 million was outstanding as current portion of long-term debt, and $1.5 million in other long-term debt.

 

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India Biodiesel Secured and Unsecured Loans. On November 13, 2023, the Company entered into a secured loan agreement with Secunderabad Oils Limited in an amount not to exceed $3.6 million. The loan is secured by the fixed assets and currents assets of the Kakinada Plant and bears interest at 18% payable monthly. On November 6, 2023, the Company entered into a short-term loan with Leo Edibles & Fats Limited in an amount not to exceed $1.27 million. The loans bear interest at 18% and are payable monthly.  The loans are repayable on demand by the lender or within one year from the date of issuance. As of September 30, 2024 and December 31, 2023, the Company had outstanding balances totaling $2.6 million and $3.8 million, respectively.

 

Aemetis Biogas 1 LLC Term Loan. On  October 4, 2022, the Company entered into a Construction Loan Agreement ("AB1 Construction Loan") with Greater Nevada Credit Union (“GNCU”). Pursuant to the AB1 Construction Loan, the lender made available an aggregate principal amount of $25 million, secured by all personal property collateral and real property collateral of Aemetis Biogas 1 LLC. Effective as of December 22, 2023, the AB1 Construction Loan was refinanced and replaced with a term loan ("AB1 Term Loan"). The AB1 Term Loan is secured by all personal property collateral and real property collateral of Aemetis Biogas 1 LLC. It bears interest at a rate of 9.25% per annum, to be adjusted every five years to equal the five-year Treasury Constant Maturity Rate, as published by the Board of Governors of the Federal Reserve System as of the adjustment date, plus 5.00% or (ii) the index floor. Other material terms of the loan include: (i) payments of interest only to be paid in monthly installments beginning January 22, 2024, (ii) payments of equal combined monthly installments of principal and interest beginning on January 22, 2025, and (iii) a maturity date of December 22, 2042, at which time the entire unpaid principal amount, together with accrued and unpaid interest thereon, shall become due and payable. The AB1 Term Loan contains certain financial covenants to be measured as of the last day of each fiscal year beginning fiscal year end 2025, and annually for the term of the loan. The AB1 Term Loan also contains other affirmative and negative covenants, representations and warranties and events of default customary for loan agreements of this nature. As of both  September 30, 2024, and December 31, 2023, the Company had $25.1 million outstanding under the AB1 Term Loan.

 

Aemetis Biogas 2 LLC Construction and Term Loan. On July 28, 2023, the Company entered into a Construction and Term Loan Agreement ("AB2 Loan") with Magnolia Bank, Incorporated. Pursuant to the AB2 Loan, the lender has made available an aggregate principal amount not to exceed $25 million. The loan is secured by all personal property collateral and real property collateral of Aemetis Biogas 2 LLC. The loan bears interest at a rate of 8.75% per annum, to be adjusted every five years thereafter to equal the five-year Treasury Constant Maturity Rate, as published by the Board of Governors of the Federal Reserve System as of the adjustment date, plus 5.00%. Other material terms of the AB2 Loan include: (i) payments of interest only to be paid in monthly installments beginning August 15, 2023, (ii) payments of equal combined monthly installments of principal and interest beginning on August 15, 2025, and (iii) a maturity date of July 28, 2043, at which time the entire unpaid principal amount, together with accrued and unpaid interest thereon, shall become due and payable. The AB2 Loan contains certain financial covenants to be measured as of the last day of each fiscal year beginning fiscal year end 2025, and annually for the term of the loan. The AB2 Loan also contains other affirmative and negative covenants, representations and warranties and events of default customary for loan agreements of this nature. As of September 30, 2024, and December 31, 2023, the Company had $22.3 million and $16.8 million, respectively, outstanding and unamortized discount issuance costs of $0.8 million for each period, respectively, under the AB2 Loan. 

 

Financing Agreement for Capital Expenditures. In 2018, the Company entered into an agreement with Mitsubishi Chemical America, Inc. ("MCA") to purchase ZEBREXTM membrane dehydration equipment to conserve energy and improve operating efficiencies at the Keyes Plant. The Company is no longer operating the equipment, and in June 2024, entered into an Agreement with MCA to amicably resolve all differences and terminate the 2018 equipment purchase agreement. As a result, the Company derecognized $9.6 million in net property, plant, and equipment; $3.6 million in long-term liabilities; $2.2 million in short-term liabilities and $0.2 million in accounts payable from its consolidated condensed balance sheet. The derecognition resulted in a net $3.6 million loss that is included in selling, general and administrative expense on the consolidated condensed statement of operations for the nine months ended  September 30, 2024.

 

Maturity Date Schedule

 

Scheduled debt repayments for the Company’s loan obligations by year are as follows:

 

Twelve Months ended September 30,		Debt Repayments
2025		$	77,215
2026			183,492
2027			17,469
2028			4,238
2029			1,421
Thereafter			41,605
Total debt			325,440
Debt issuance costs			(3,234	)
Total debt, net of debt issuance costs		$	322,206

 

8. Leases

 

The Company is a party to operating leases for the Company's corporate office in Cupertino, modular offices at the Keyes Plant and Biogas operations center, and laboratory facilities. We have also entered into several finance leases for mobile equipment and for the Riverbank Industrial Complex. These finance leases have a purchase option at the end of the term that we are reasonably certain we will exercise, so the leases are classified as finance leases. Our leases have remaining terms of one year to 13 years. We made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. We will recognize those lease payments in the Consolidated Statements of Operations as we incur the expenses.

 

The Company evaluates leases in accordance with ASC 842 – Lease Accounting. When discount rates implicit in leases cannot be readily determined, we use the applicable incremental borrowing rate at lease commencement to perform lease classification tests on lease components and to measure lease liabilities and right of use (ROU) assets. The incremental borrowing rate used by the Company is 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 are used.

 

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The components of lease expense are as follows:

 

		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Operating lease cost
Operating lease expense		$	195			$	180			$	571			$	542
Short term lease expense			32				89				95				131
Variable lease expense			23				26				90				70
Total operating lease cost		$	250			$	295			$	756			$	743
Finance lease cost
Amortization of right-of-use assets		$	30			$	30			$	90			$	91
Interest on lease liabilities			87				83				256				256
Total finance lease cost		$	117			$	113			$	346			$	347

 

Cash paid for amounts included in the measurement of lease liabilities:

 

		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Operating cash flows used in operating leases		$	189			$	169			$	603			$	499
Operating cash flows used in finance leases			87				83				256				256
Financing cash flows used in finance leases		$	9			$	83			$	170			$	394

 

Supplemental non-cash flow information related to ROU asset and lease liabilities was as follows for the three and nine months ended September 30, 2024 and 2023:

 

		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Operating leases
Accretion of the lease liability		$	82			$	81			$	245			$	252
Amortization of right-of-use assets			112				100				325				291
The weighted average remaining lease term and weighted average discount rate as of September 30, 2024 are as follows:
Weighted Average Remaining Lease Term
Operating leases (in years)			8.2				4.5
Finance leases (in years)			12.4				13.3
Weighted Average Discount Rate
Operating leases			13.7	%			14.1	%
Finance leases			13.3	%			13.2	%

 

Supplemental balance sheet information related to leases is as follows:

 

		September 30, 2024				December 31, 2023
Operating leases
Operating lease right-of-use assets		$	2,333			$	2,056
Other current liability			494				406
Other long term liabilities			1,939				1,783
Total operating lease liabilities			2,433				2,189
Finance leases
Property and equipment, at cost		$	2,889			$	2,889
Accumulated depreciation			(318	)			(228	)
Property and equipment, net			2,571				2,661
Other current liability			245				30
Other long term liabilities			2,557				2,687
Total finance lease liabilities			2,802				2,717

 

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Maturities of operating lease liabilities are as follows:

 

Twelve months ended September 30,		Operating leases				Finance leases
2025		$	783			$	176
2026			710				145
2027			703				145
2028			498				145
2029			63				145
Thereafter			1,219				9,960
Total lease payments			3,976				10,716
Less imputed interest			(1,543	)			(7,914	)
Total lease liability		$	2,433			$	2,802

 

The Company acts as sublessor in certain leasing arrangements, primarily related to land and buildings. Fixed sublease payments received are recognized on a straight-line basis over the sublease term. Sublease income and head lease expense for these transactions are recognized on net basis on the consolidated financial statements. Sublease income is recorded in the General and Administrative Expense section of the Consolidated Statements of Operations and Comprehensive Loss.

 

The components of lease income are as follows for the three and nine months ended September 30, 2024 and 2023, respectively:

 

		Three months ended September 30,								Nine months ended September 30,
		2024				2023				2024				2023
Lease income		$	569			$	230			$	1,576			$	1,182

 

  

Future lease commitments to be received by the Company as of September 30, 2024, are as follows:

 

Twelve months ended September 30,
2025		$	1,385
2026			1,473
2027			1,419
2028			1,271
2029			1,309
Thereafter			431
Total future lease commitments		$	7,288

 

9.  Aemetis Biogas LLC – Series A Preferred Financing

 

On December 20, 2018, Aemetis Biogas LLC ("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 6,000,000 convertible, redeemable, secured, preferred membership units (the “Series A Preferred Units”). ABGL issued 6,000,000 common units to Aemetis, Inc. at a value of $5.00 per common unit, and 5,000,000 common units of ABGL are held in reserve as potential conversion units issuable to the Preferred Unit holder upon certain triggering events. From inception of the agreement through 2022, ABGL issued 6,000,000 Series A Preferred Units in exchange for $30.0 million in funding, reduced by a redemption of 20,000 Series A Preferred Units for $0.3 million. The original Preferred Unit Purchase Agreement included requirements for preference payments and mandatory redemption, in addition to several operating covenants.

 

On November 6, 2024, ABGL entered into an agreement entitled Seventh Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Seventh Amendment") with an Effective Date of August 31, 2024, that provides, among other provisions, the right for ABGL to redeem all of the outstanding Series A Preferred Units by January 31, 2025, for an aggregate redemption price of $115.5 million. The PUPA Seventh Amendment further provides that if ABGL does not redeem the Series A Preferred Units by the redemption date, ABGL will enter into a credit agreement with Protair-X and Third Eye Capital effective as of February 1, 2025, and maturing January 31, 2026, in substantially the form attached to the PUPA Seventh Amendment and specifies that entry of the credit agreement will satisfy the obligation to redeem the units. The credit agreement would bear an interest rate equal to the greater of (i) the prime rate plus 10.0% and (ii) 16.0%.  The PUPA Seventh Amendment is attached to this Form 10-Q as Exhibit 10.1. We will evaluate the terms of the PUPA Seventh Amendment in accordance with ASC 470. The Company recorded Series A Preferred Unit liabilities of $123.9 million and $113.2 million as long term liabilities as of September 30, 2024, and December 31, 2023, respectively.

 

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10. Stock-Based Compensation

 

2019 Stock Plan

 

On August 26, 2021, the stockholders of the Company approved the Aemetis, Inc. Amended and Restated 2019 Stock Plan (the “2019 Stock Plan”) which allows our Board or delegated Board committee to grant 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 to employees, Directors, and consultants. The Company did not issue any stock options or RSAs during the three months ending September 30, 2024. The following table summarizes activity under the 2019 Stock Plan during the nine-month period ending September 30, 2024:

 

		Shares Available for Grant				Number of Shares Outstanding				Weighted-Average Exercise Price
Balance as of December 31, 2023			456				5,526			$	4.42
Authorized			1,740
Options Granted			(1,761	)			1,761			$	3.10
RSAs Granted			(364	)			-			$	-
Exercised			-				(15	)		$	2.56
Forfeited/expired			75				(75	)		$	7.25
Balance as of September 30, 2024			146				7,197			$	4.07

 

The number of outstanding option shares as of September 30, 2024, includes 4.9 million shares that are vested.

 

Inducement Equity Plan

 

In March 2016, the Board of Directors of the Company approved an Inducement Equity Plan authorizing the issuance of 100,000 non-statutory stock options to purchase common stock. This plan was not approved by stockholders, and as a result is available only for grants to prospective employees. As of September 30, 2024, there are no option grants outstanding under the Inducement Equity Plan.

 

Stock-based Compensation Expense

 

Stock-based compensation is accounted for in accordance with ASC 718, Compensation - Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, directors, and consultants based on estimated fair value on the grant date. We estimate the fair value using the Black-Scholes option pricing model and recognize that fair value as an expense over the vesting period of each grant using the straight-line method. We only record compensation cost for vested options. The Black-Scholes valuation model for stock-based compensation expense requires us to make assumptions and judgments about the variables used in the calculation, including 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, expected dividends, and expected forfeitures. We use the simplified calculation of expected term described in SEC Staff Accounting Bulletin Topic 14, Share-Based Payment. Volatility is based on an average of the historical volatility of Aemetis, Inc. common stock during the period of time preceding the date of option issuance that matches the term of the option grant. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the treasury maturity term 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. To the extent actual forfeitures occur, the difference is recorded as an adjustment in the scheduled expense during the period of the forfeiture.

 

The weighted average fair value calculations for the options granted during the nine months ended September 30, 2024 and 2023, are based on the following assumptions:

 

		For the nine months ended September 30,
Description		2024				2023
Dividend-yield			-	%			-	%
Risk-free interest rate			3.93	%			3.86	%
Expected volatility			115.42	%			124.62	%
Expected life (years)			5.81				7.00
Market value per share on grant date		$	3.10			$	3.60
Fair value per option on grant date		$	2.65			$	3.29

 

During the nine months ended September 30, 2024 and 2023, the Company granted 363,500 and 243,850 restricted stock awards, respectively, with a fair value on date of grant of $3.10 and $3.60, respectively, per share.

 

As of  September 30, 2024, the Company had $5.9 million of total unrecognized compensation expense for option issuance, which the Company will amortize over the remaining vesting period for each applicable grant, which has a weighted average of 1.73 years as of September 30, 2024.

 

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11. Warrants

 

On July 1, 2024, the maturity dates on two accredited investor's Subordinated Notes were extended to December 31, 2024. In connection with the extension, the Company issued the noteholders warrants exercisable for the purchase of 113 thousand shares of Aemetis, Inc. common stock with a term of two years and an exercise price of $0.01 per share. The warrants were subsequently fully exercised. The following table summarizes warrant activity during the nine months ending September 30, 2024:

 

		Warrants Outstanding & Exercisable				Weighted - Average Exercise Price				Average Remaining Term in Years
Outstanding December 31, 2023			530			$	11.70				5.77
Granted			226			$	0.01
Exercised			(226	)		$	0.01
Outstanding September 30, 2024			530			$	11.70				5.03

 

All of the above outstanding warrants are fully vested and exercisable as of September 30, 2024.

 

The fair value calculations for issued warrants are based on the following weighted average factors:

 

		For the nine months ended September 30,
Description		2024				2023
Dividend-yield			-	%			-	%
Risk-free interest rate			4.50	%			3.80	%
Expected volatility			99.85	%			117.60	%
Expected life (years)			2.00				4.63
Exercise price per share		$	0.01			$	1.18
Market value per share on grant date		$	4.05			$	4.11
Fair value per share on grant date		$	4.04			$	3.97

  

12. Agreements

 

J.D. Heiskell Working Capital Agreements. The Company procures whole yellow corn from J.D. Heiskell pursuant to a Corn Procurement and Working Capital Agreement. 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. Pursuant to a separate agreement entered in May 2023, J.D. Heiskell also purchases all of our ethanol and other products and sells them to customers designated by us. We have designated Murex to purchase ethanol and A.L Gilbert to purchase WDG. The Company’s relationships with J.D. Heiskell, Murex, and A.L. Gilbert are well established, and the Company believes that the relationships are beneficial to all parties involved by utilizing distribution logistics to reach our customer base, managing inventory, and providing working capital relationships. 

 

The sales and purchases activity associated with the J.D. Heiskell Purchase Agreement and J.D. Heiskell Procurement Agreement during the three and nine months ended September 30, 2024 and 2023, was as follows:

 

		For the three months ended September 30,								For the nine months ended September 30,
		2024				2023				2024				2023
Ethanol sales		$	32,812			$	36,375			$	87,635			$	45,388
Wet distiller's grains sales			8,961				9,427				27,476				11,980
Corn oil sales			1,746				1,487				4,199				1,613
CDS sales			24				9				49				62
Corn purchases			33,170				37,030				97,489				48,029

 

		September 30, 2024				December 31, 2023
Accounts receivable			19				1,073
Accounts payable			124				1,207

 

Ethanol and Wet Distillers Grains Marketing Arrangement. On May 30, 2023, the Company entered into Amendment No. 1 to the Fuel Ethanol Purchase and Sale Agreement with Murex that suspends the agreement for the duration of the Company's Working Capital Agreement with J.D. Heiskell and extends the term to March 31, 2025. While the Murex agreement is suspended, Murex remains as our marketing partner to market the ethanol we sold to J.D Heiskell. The Company has a Wet Distillers Grains Marketing Agreement with A.L. Gilbert that matures on December 31, 2024, with automatic one-year renewals thereafter.

 

The agreements with J.D. Heiskell, Murex, and A.L. Gilbert include marketing and transportation services. For the three months ended September 30, 2024 and 2023, the Company expensed marketing costs of $0.7 million and $0.8 million, respectively, and for the nine months ended September 30, 2024 and 2023, the Company expensed marketing costs of $1.9 million and $0.7 million respectively, under the terms of both the Ethanol Marketing Agreement and the Wet Distillers Grains Marketing Agreement. These marketing costs are presented as part of selling, general, and administration expenses. For the three months ended September 30, 2024 and 2023, the Company expensed transportation costs of $1.1 million and $0.7 million related to sales of ethanol and $1.5 million and $1.4 million related to sales of WDG, respectively. For the nine months ended  September 30, 2024 and 2023, the Company expensed transportation costs of $2.6 million and $0.9 million related to sales of ethanol and $4.4 million and $1.8 million related to sales of WDG, respectively.

 

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Supply Trade Agreement. On July 1, 2022, the Company entered into an operating agreement with Gemini Edibles and Fats India Private Limited (“Gemini”) pursuant to which Gemini supplies the Company with feedstock up to a credit limit of $12.7 million with collateral interest in inventories, current assets, and fixed assets. If the Company fails to pay an invoice within the ten-day credit period, the outstanding balance bears interest at 18%. The agreement lasts until June 2025, and either party can terminate the agreement by giving one month's notice in writing. As of September 30, 2024, and December 31, 2023, the Company had accounts payable of $0.1 million and $0.5 million, respectively, under this agreement.

 

Forward Sale Commitments.  As of September 30, 2024, we have no forward sale commitments.

 

Natural Gas Purchase Agreement. As of September 30, 2024, we have forward purchase agreement in place to buy approximately 394 thousand MMBtu of natural gas at a fixed price from July through October 2024, which aligns with our expected natural gas usage at the Keyes Plant. The Company has elected to apply the normal purchases and normal sales scope exception under ASC 815, hence the natural gas purchased under this agreement is accounted for and presented as cost of goods sold in the Company's financial statements. 

13. Segment Information

 

Aemetis recognizes three reportable segments: “California Ethanol,” “California Dairy Renewable Natural Gas,” and “India Biodiesel.”  

 

● The “California Ethanol” segment includes the Company’s 65 million gallon per year ethanol plant in Keyes, California, and the adjacent land leased to produce CO₂.

 

● The “California Dairy Renewable Natural Gas” segment includes the production and sale of Renewable Natural Gas ("RNG") and associated environmental attributes, consisting of nine anaerobic digesters processing waste from ten dairies, a 36 mile biogas collection pipeline, a biogas upgrading hub that produces RNG from the biogas, a pipeline interconnect, and ongoing construction of additional digesters.

 

● The “India Biodiesel” segment includes the Company’s 60 million gallon per year biodiesel manufacturing plant in Kakinada, India, and administrative offices in Hyderabad, India.

 

The Company has additional operating segments that have been determined not to be separately reportable so are reported in the "All Other" category, including our key projects for the development of a sustainable aviation fuel and renewable diesel production plant in Riverbank, California, and Carbon Capture and Underground Sequestration wells in California. Additionally, our corporate offices, Goodland Plant in Kansas, and research and development facility in Minnesota are included in the “All Other” category.

 

Summarized financial information by reportable segment for the three months ended September 30, 2024 and 2023, follows: 

 

		For the three months ended September 30, 2024
		California Ethanol				California Dairy Renewable Natural Gas				India Biodiesel				All Other				Total
Revenues		$	44,934			$	4,250			$	32,257			$	-			$	81,441
Gross profit			85				1,897				1,896				-				3,878
Interest expense including amortization of debt fees			7,911				808				30				2,998				11,747
Accretion and other expenses of Series A preferred units			-				3,267				-				-				3,267
Income tax expense			-				-				274				-				274
Capital expenditures			154				3,762				257				317				4,490
Depreciation			1,111				866				241				56				2,274

 

		For the three months ended September 30, 2023
		California Ethanol				California Dairy Renewable Natural Gas				India Biodiesel				All Other				Total
Revenues			47,439			$	1,107			$	20,144			$	-			$	68,690
Gross profit (loss)			(1,473	)			(807	)			2,772				-				492
Interest expense including amortization of debt fees			6,729				620				19				2,814				10,182
Accretion and other expenses of Series A preferred units			-				7,739				-				-				7,739
Income tax expense (benefit)			-				(55,164	)			(145	)			1				(55,308	)
Capital expenditures			1,363				6,819				372				233				8,787
Depreciation			960				598				158				31				1,747

 

---

 

The following table summarizes financial information by reportable segment for the nine months ended September 30, 2024 and 2023: 

 

		For the nine months ended September 30, 2024
		California Ethanol				California Dairy Renewable Natural Gas				India Biodiesel				All other				Total
Revenues		$	121,155			$	9,640			$	89,841			$	-			$	220,636
Gross profit (loss)			(9,494	)			3,971				6,983				-				1,460
Interest expense including amortization of debt fees			22,807				2,174				659				8,344				33,984
Accretion and other expenses of Series A preferred units			-				10,055				-				-				10,055
Income tax expense			-				36				1,501				-				1,537
Loss on asset disposals			3,644				-				-				-				3,644
Capital expenditures			584				10,911				575				1,400				13,470
Depreciation			3,120				2,206				629				166				6,121

 

		For the nine months ended September 30, 2023
		California Ethanol				California Dairy Renewable Natural Gas				India Biodiesel				All other				Total
Revenues		$	59,246			$	1,523			$	55,184			$	-			$	115,953
Gross profit (loss)			(3,807	)			(2,644	)			7,604				-				1,153
Interest expense including amortization of debt fees			18,499				1,841				313				8,205				28,858
Accretion and other expenses of Series A preferred units			-				20,188				-				-				20,188
Income tax expense (benefit)			-				(55,151	)			653				8				(54,490	)
Capital expenditures			2,423				14,622				523				1,027				18,595
Depreciation			3,029				1,578				470				131				5,208

 

 

 

 

Total assets by reportable segment as of  September 30, 2024, and December 31, 2023, are as follows:

 

		September 30, 2024				December 31, 2023
California Ethanol		$	57,060			$	67,991
California Dairy Renewable Natural Gas			110,975				92,794
India Biodiesel			40,116				34,769
All Other			39,274				47,852
Total consolidated assets		$	247,425			$	243,406

  

14. Related Party Transactions

 

The Company owes Eric McAfee, the Company’s Chairman and CEO, and McAfee Capital LLC (“McAfee Capital”), owned by Eric McAfee, $1 million in connection with employment agreements, bonus awards, expense reimbursements, and guarantee fees in connection with McAfee Capital’s guarantees of the Company’s indebtedness with Third Eye Capital.

 

The Company owes various members of the Board amounts totaling $0.3 million as of September 30, 2024, and December 31, 2023, in connection with board compensation fees, which are included in accounts payable on the balance sheet. For the three months ended September 30, 2024 and 2023, the Company expensed $0.1 million respectively, in connection with board compensation fees. For the nine months ended September 30, 2024 and 2023, the Company expensed $0.3 million respectively, in connection with board compensation fees. 

 

---

  

15. Subsequent Events

 

Series A Preferred Unit Purchase Agreement

 

On November 6, 2024, ABGL, Third Eye Capital Corporation, and Protair-X Technologies Inc. entered into an agreement entitled Seventh Waiver and Amendment to Series A Preferred Unit Purchase Agreement (“PUPA Seventh Amendment") with an Effective Date of August 31, 2024, that provides, among other provisions, that ABGL will redeem all of the outstanding Series A Preferred Units by January 31, 2025, for an aggregate redemption price of $115.5 million. The PUPA Seventh Amendment further provides that if ABGL does not redeem the Series A Preferred Units by the redemption date, ABGL will enter into a credit agreement with Protair-X and Third Eye Capital effective as of February 1, 2025, and maturing January 31, 2026, in substantially the form attached to the PUPA Seventh Amendment and specifies that entry of the credit agreement will satisfy the obligation to redeem the units. The credit agreement would bear an interest rate equal to the greater of (i) the prime rate plus 10.0% and (ii) 16.0%. The PUPA Seventh Amendment and the form of credit agreement are attached to this Form 10-Q as Exhibit 10.1, and this summary description is subject to the terms of the actual agreements.

16. Liquidity

 

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, negative operating results, and collateralization of substantially all of the Company assets, the Company has been reliant on its senior secured lender to provide extensions to the maturity dates of its debt and loan facilities and was required in 2023 to remit excess cash from operations to our senior secured lender.  In order to meet our obligations during the next twelve months, we will need to refinance debt with our senior lender for amounts becoming due in the next twelve months or receive the continued cooperation of our senior lender. This dependence on our senior lender raises substantial doubt about the Company's ability to continue as a going concern. While we believe our India biodiesel and California RNG businesses will generate positive cash flow from operations and reduce cash demands and allows payments against other obligations, we will also continue to sell equity through our at-the-market registration and pursue the following strategies to improve liquidity:

 

Operations and Project Development

 

For the Keyes Plant, we plan to operate the plant and continue to improve its financial performance by adopting new technologies or process changes that allow for energy efficiency, cost reduction, or revenue enhancements, as well as execute upon awarded grants that support investments in equipment to improve energy and operational efficiencies resulting in lower cost, lower carbon emissions, and overall margin improvement.

 

For Aemetis Biogas, we plan to operate our existing biogas digesters to produce and sell Renewable Natural Gas (RNG) and the associated Federal D3 RINs and California LCFS credits. We are continuing to build new dairy digesters and pipeline extensions.  We began generating revenue from biogas operations in 2023 and we expect that this revenue will continue for the full year 2024, as well as increase as we build new digesters.  We also expect revenue to increase when the California Air Resource Board processes our LCFS pathway applications and approves a provisional carbon intensity that is lower than the temporary carbon intensity we currently use to calculate the quantity of LCFS credits that we generate.  We are seeking debt financing from a variety of sources to accelerate the construction of additional digesters.

 

For the Kakinada Plant, we plan to continue to sell our biodiesel to India Oil Marketing Companies ("OMCs") pursuant to cost-plus contracts.  We are also continuing to upgrade the plant to increase feedstock flexibility (and thereby lower feedstock costs), increase production capacity, and produce new products. Additionally, we are in the process of negotiating contractual arrangements for the export of refined animal tallow into international markets.

 

Financing

 

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, entering into additional debt agreements for specific projects, obtaining project specific equity and debt for development projects, and obtaining additional debt from the current EB-5 Phase II offering.

 

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Item 2. 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 condensed financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

 

●

Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A.

 

●

Results of Operations. An analysis of our financial results comparing the three and nine months ended September 30, 2024 and 2023.

 

●

Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition.

 

●

Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

 

The following discussion should be read in conjunction with our consolidated condensed 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 II, Item 1A. Risk Factors,” and in other reports we file with the SEC. All references to years relate to the calendar year ended December 31 of the particular year.

 

Overview

 

Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis referred to herein as “Aemetis,” the “Company,” “we,” “our” or “us”) is an international renewable natural gas and renewable fuels company focused on the operation, acquisition, development, and commercialization of innovative technologies to produce low and negative carbon intensity renewable fuels that replace fossil-based products.  We do this by building a local circular bioeconomy using agricultural products and waste to produce low carbon, advanced renewable fuels that reduce greenhouse gas ("GHG") emissions and improve air quality.

 

Our California Ethanol segment consists of a 65 million gallon per year capacity ethanol production facility located in Keyes, California (the “Keyes Plant”) that we own and operate. In addition to low carbon renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), and Condensed Distillers Solubles (“CDS”), all of which are sold as animal feed to more than 80 local dairies and feedlots.  We also capture the Carbon Dioxide (“CO2”) emissions from our fermenters and sell it to Messer Gas for use to produce liquid CO₂ that it sells to food, beverage, and industrial customers. We are implementing several energy efficiency initiatives focused on lowering the carbon intensity of our fuels, primarily by decreasing the use of fossil natural gas. These energy efficiency projects include high efficiency heat exchangers; a two-megawatt solar microgrid with battery storage that became operational in the second quarter; a Decision Control System (DCS) to manage and optimize energy use and other plant operations; and a Mechanical Vapor Recompression (MVR) system that is expected to replace about 80% of our natural gas consumption with low carbon electricity. These changes are expected to lower the carbon intensity (CI) of the ethanol we produce and allow us to sell it for a correspondingly higher price.

 

Our California Dairy Renewable Natural Gas segment, Aemetis Biogas or “ABGL,” operates anaerobic digesters at local dairies near the Keyes Plant (many of whom also purchase WDG produced by the Keyes Plant as animal feed) to produce biogas from dairy waste; transports the biogas by pipeline to the Keyes Plant site; and converts the biogas to Renewable Natural Gas (“RNG”) that is delivered to customers through the PG&E regional natural gas pipeline. As of September 30, 2024, we had nine operating digesters that receive dairy waste from ten dairies, and we are actively growing with an additional five digesters currently under construction that are expected to receive dairy waste from eight dairies. We expect to initiate construction on several additional digesters in the fourth quarter when we close on currently planned debt financing. We have constructed 36 miles of collection pipeline and have received environmental approval to construct an additional 24 miles.  We currently have agreements with a total of 44 dairies and are seeking to increase that number.

 

Our India Biodiesel segment includes a biodiesel production plant in Kakinada, India (“Kakinada Plant”) with a nameplate production capacity of about 60 million gallons per year.  It produces high quality distilled biodiesel and refined glycerin for customers in India. We believe the Kakinada Plant is one of the largest biodiesel production facilities in India on a nameplate capacity basis. The Kakinada Plant can process a variety of vegetable oils and animal fat waste feedstocks into biodiesel that meets applicable product standards. Our Kakinada Plant can also distill the crude glycerin byproduct from the biodiesel refining process into refined glycerin, which is sold to the pharmaceutical, personal care, paint, adhesive, and other industries.

 

Our planned sustainable aviation fuel (SAF) and renewable diesel (RD) production plant is currently designed to produce 90 million gallons per year of combined SAF and RD from feedstocks consisting of renewable waste oils and fats. Our planned facility will be located at the Riverbank Industrial Complex in Riverbank, California. We signed a lease with an option to purchase for the Riverbank Industrial Complex in 2021 and took possession of the site in 2022.  In 2023, we received a Use Permit and CEQA approval for the SAF/RD plant, and in March 2024, we received Authority to Construct air permits for the plant. We are continuing with development activities, including permitting, engineering, and financing. The site has access to low carbon hydroelectric power, and our plant is designed to use renewable hydrogen that will be produced from byproducts of the SAF/RD production process.

 

Our planned CCUS projects will compress and inject CO₂ into deep wells that are monitored to ensure the long-term sequestration of carbon underground. California’s Central Valley has been identified as one of the world’s most favorable regions for large-scale CO₂ injection projects due to the subsurface geologic formation that absorbs and retains CO₂ gas. The two initial Aemetis CCUS injection projects are being designed to capture and sequester more than two million metric tons per year of CO₂ at the Aemetis biofuels plant sites in Keyes and Riverbank, California. In July 2022, Aemetis purchased 24 acres at the Riverbank Industrial Complex in Riverbank, California to develop a CCUS injection well with more than 1 million metric ton per year of CO₂ sequestration capacity. In 2023, we obtained a permit to construct a geologic characterization well at the Riverbank site to obtain information to support an EPA Class VI CO₂ injection well permit application. Once operational, we expect that these projects will generate revenue by selling California LCFS credits and federal Internal Revenue Code Section 45Q tax credits.

 

 

Our Minneapolis, Minnesota research and development laboratory evaluates and develops technologies that would use low carbon intensity biomass and waste feedstocks to produce low or below zero carbon intensity biofuels and biochemicals. We are focused on processes that extract sugar from cellulosic feedstocks and then use the remaining biomass to produce low carbon ethanol, renewable hydrogen, sustainable aviation fuel, and renewable diesel.

 

Results of Operations

Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023

 

Revenues

 

Our revenues are derived primarily from sales of ethanol and WDG for our California Ethanol segment, renewable natural gas ("RNG") for our California Dairy Renewable Natural Gas segment, and biodiesel for our India Biodiesel segment.

 

		2024				2023				Inc/(dec)				% change
California Ethanol		$	44,934			$	47,439			$	(2,505	)			(5.3	)%
California Dairy Renewable Natural Gas			4,250				1,107				3,143				283.9	%
India Biodiesel			32,257				20,144				12,113				60.1	%
Total		$	81,441			$	68,690			$	12,751				18.6	%

 

California Ethanol. For the three months ended September 30, 2024, the Company sold 15.5 million gallons of ethanol at an average price of $2.12 per gallon and 106 thousand tons of WDG at a price of $84 per ton. For the three months ended September 30, 2023, the Company sold 13.8 million gallons of ethanol at an average price of $2.64 per gallon and 98 thousand tons of WDG at a price of $96 per ton. The change in revenue primarily was attributable to a 20% reduction in the ethanol average sales price and a 12.3% reduction in the WDG sales price.

 

California Dairy Renewable Natural Gas. During the three months ended September 30, 2024, we produced 86.6 thousand MMBtu of RNG and sold 86.0 thousand MMBtu at an average price of $2.77 per MMBtu. In the third quarter of 2024, we also sold 935 thousand D3 RINs at an average price of $3.37 per RIN and 20,000 LCFS credits at an average price of $43 per metric ton. As of September 30, 2024, we had 67.6 thousand MMBtu of RNG available for dispensing. During the three months ended September 30, 2023, we produced and sold 66.6 thousand MMBtu of RNG at an average price of $2.13 per MMBtu and we also sold 271 thousand D3 RINs at an average price of $2.97 per RIN and we did not sell any LCFS credits.

 

India Biodiesel.  For the three months ended September 30, 2024, we generated 97% of our revenues from the sale of biodiesel, and 3% of our revenue from other sales compared to 96% of our revenue from biodiesel, and 4% of our revenue from other sales for the three months ended September 30, 2023. The increase in revenues was primarily due to an increase in biodiesel sales volume to 26.0 thousand metric tons in the three months ended September 30, 2024, compared to 15.5 thousand metric tons in the three months ended September 30, 2023, and offset by decrease in the sales price per metric ton by 4%.

 

Cost of Goods Sold

 

		2024				2023				Inc/(dec)				% change
California Ethanol		$	44,849			$	48,912			$	(4,063	)			(8.3	)%
California Dairy Renewable Natural Gas			2,353				1,914				439				22.9	%
India Biodiesel			30,361				17,372				12,989				74.8	%
Total		$	77,563			$	68,198			$	9,365				13.7	%

 

California Ethanol. For the three months ended September 30, 2024, we purchased 5.5 million bushels of corn at $6.07 per bushel and incurred $ 1.6 million in chemicals and denaturant costs, $ 2.2 million in natural gas costs, and $ 2.6 million in transportation costs. The decrease in cost of goods sold was due to 19% decrease in corn costs offset by 10% increase in bushels of corn grind. 

 

California Dairy Renewable Natural Gas. Cost of goods sold includes dairy manure payments, equipment maintenance, and depreciation. The increase from the third quarter of 2023 to the third quarter of 2024 was primarily due to the increase in the number of operating digesters.

 

India Biodiesel.  In the three months ended September 30, 2024, we processed 26.0 thousand metric tons of feedstock, compared to 15.6 thousand metric tons of feedstock in the same period in 2023. During the three months ended September 30, 2024, the average price of biodiesel feedstock was $984 per metric ton compared to $752 per metric ton in the same period as in 2023. The increase was attributable to the increase in biodiesel production along with 31% increase in the average price per ton for feedstock.

 

Gross profit (loss)

 

		2024				2023				Inc/(dec)				% change
California Ethanol		$	85			$	(1,473	)		$	1,558				(105.8	)%
California Dairy Renewable Natural Gas			1,897				(807	)			2,704				(335.1	)%
India Biodiesel			1,896				2,772				(876	)			(31.6	)%
Total		$	3,878			$	492			$	3,386				688.2	%

 

California Ethanol. The increase in gross income during the period ended September 30, 2024, was attributable primarily to lower corn costs. 

 

California Dairy Renewable Natural Gas. The increase in gross income in the three months ended September 30, 2024, compared to the same period in 2023 is due to the substantial increase in sales of RNG, D3 RINs, and LCFS credits without a corresponding increase in costs.

 

India Biodiesel. The decrease in gross profit was attributable to an increase in the feedstock costs by 31% and a 4% decrease in biodiesel price. 

 

 

Operating (income)/expense and non-operating (income)/expense

 

Selling, general, and administrative (“SG&A”) expenses consist primarily of salaries and related expenses for employees, marketing expenses related to sales of ethanol and WDG in California and biodiesel and other products in India, as well as professional fees, insurance, other corporate expenses, and related facilities expenses. Total SG&A also includes receipts of lease payments as an offset to expenses. Research and development expenses are also included in the SG&A expenses. Other expense (income) consists primarily of interest and amortization expense attributable to our debt facilities and accretion of Series A preferred units.

 

		2024				2023				Inc/(dec)				% change
Selling, general and administrative			7,750				9,021				(1,271	)			(14.1	)%
Other expense (income):
Interest expense
Interest rate expense		$	10,096			$	8,749			$	1,347				15.4	%
Debt related fees and amortization expense			1,651				1,433				218				15.2	%
Accretion and other expenses of Series A preferred units			3,267				7,739				(4,472	)			(57.8	)%
Other income			(1,225	)			(1,853	)			628				(33.9	)%

 

The decrease in SG&A expenses for the three months ended September 30, 2024, was due to decrease in (i) a $2.0 million in professional fees, (ii) decreases in utilities, penalties, and insurance of $0.2 million, offset by increase in (iii) salaries, supplies, and other of $0.9 million.

 

Interest expense increased in the three months ended September 30, 2024, due to an increases in principal under the Revolving Loans and Revolving Credit Facilities, and the impact of rising interest rates on our variable interest rate debt compared to the same period in the prior year. The lower accretion and other expenses of the Series A Preferred Units was due to a decrease in the effective interest rate on the PUPA redemption obligation in the recent PUPA amendments. The decrease in other income was due to receiving USDA grant income of $1.8 million during the 2023 compared to a $1.0 million of income recognized in the sale of unused feedstock at higher prices than the acquisition costs. 

 

Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023

 

Revenues

 

Our revenues are derived primarily from sales of ethanol and WDG for our California Ethanol segment, RNG for our California Dairy Renewable Natural Gas segment, and biodiesel for our India Biodiesel segment.

 

		2024				2023				Inc/(dec)				% change
California Ethanol		$	121,155			$	59,246			$	61,909				104.5	%
California Dairy Renewable Natural Gas			9,640				1,523				8,117				533.0	%
India Biodiesel			89,841				55,184				34,657				62.8	%
Total		$	220,636			$	115,953			$	104,683				90.3	%

 

California Ethanol. For the nine months ended September 30, 2024, the Company sold 44.4 million gallons of ethanol at an average price of $1.97 per gallon and 305 thousand tons of WDG at a price of $90 per ton. For the nine months ended September 30, 2023, the Company sold 16.7 million gallons of ethanol at an average price of $2.72 per gallon. The increase in revenue was attributable to operating the Keyes Plant for nine full months during 2024 compared to 2023 when the Keyes Plant operated during only four of the nine months due to an extended maintenance period.

 

California Dairy Renewable Natural Gas. During the nine months ended September 30, 2024, we produced 236.3 thousand MMBtu of RNG and sold 234.8 thousand MMBtu at an average price of $2.88 per MMBtu. During this period, we also sold 2.0 million D3 RINs at an average price of $3.23 per RIN and 43 thousand metric tons of California LCFS credits at an average price of $55.16 per metric ton. As of September 30, 2024, we had 67.6 thousand MMBtu of RNG available for dispensing. During the nine months ended September 30, 2023, we produced and sold 142.0 thousand MMBtu of RNG at an average price of $5.06 per MMBtu.  We also sold 270.7 thousand D3 RINs at an average price of $2.97 per RIN and did not sell any LCFS credits.

 

India Biodiesel.  For the nine months ended September 30, 2024, we generated 96% of our revenues from the sale of biodiesel, and 4% of our revenue from other sales compared to 97% of our revenue from biodiesel, and 3% of our revenue from other sales for the nine months ended September 30, 2023. The increase in revenues was primarily attributable to fulfilling the demand from India's Oil Marketing Companies during the first nine months of the 2024 compared to absence of OMC contracts in the first three months of 2023. Biodiesel sales volume increased to 73.5 thousand metric tons in the nine months ended September 30, 2024 compared to 43.7 thousand metric tons in the nine months ended September 30, 2023 while price per metric ton decreased by 4%.

 

Cost of Goods Sold

 

		2024				2023				Inc/(dec)				% change
California Ethanol		$	130,649			$	63,053			$	67,596				107.2	%
California Dairy Renewable Natural Gas			5,669				4,167				1,502				36.0	%
India Biodiesel			82,858				47,580				35,278				100.0	%
Total		$	219,176			$	114,800			$	104,376				90.9	%

 

California Ethanol. For the nine months ended September 30, 2024, we purchased 15.6 million bushels of corn at $6.25 per bushel and incurred $4.6 million in chemicals and denaturant costs, $7.0 million in natural gas costs, and $7.0 million in transportation costs. For the nine months ended September 30, 2023, we incurred corn or other chemical costs for four months due to the extended maintenance at the Keyes Plant, which was offset by costs incurred for starting up the Keyes Plant along with resuming full operation of plant during third quarter of 2023 with 15% higher corn costs. 

 

California Dairy Renewable Natural Gas. The cost of goods sold includes dairy manure payments, equipment maintenance, and depreciation. The increase in the cost of goods sold was primarily due to the increase in the number of operating digesters.

 

 

India Biodiesel. The increase in costs of goods sold was attributable to the increase in production and sales of biodiesel. In the nine months ended September 30, 2024, we processed 74.0 thousand metric tons of feedstock, compared to 43.7 thousand metric tons of feedstock in the same period in 2023. During the nine months ended September 30, 2024, the average price of feedstock was $835 per metric ton compared to $797 per metric ton in the same period as in 2023.

 

Gross profit (loss)

 

		2024				2023				Inc/(dec)				% change
California Ethanol		$	(9,494	)		$	(3,807	)		$	(5,687	)			149.4	%
California Dairy Renewable Natural Gas			3,971				(2,644	)			6,615				(250.2	)%
India Biodiesel			6,983				7,604				(621	)			(8.2	)%
Total		$	1,460			$	1,153			$	307				26.6	%

 

California Ethanol. The increase in gross loss during the period ended September 30, 2024, was attributable to a 28% decrease in the price of ethanol. During the maintenance cycle in 2023, the fixed expenses that would have normally been accounted for in gross profit/(loss) in that period were charged to SG&A.

 

California Dairy Renewable Natural Gas. The increase in gross profit in the nine months ended September 30, 2024, is due to an increased RNG production and sales quantities and sales of D3 RINs and LCFS credits after June 30, 2023, compared to sales of only RNG in the six-month period ended September 30, 2023.

 

India Biodiesel. The decrease in gross profit was attributable to an increase in feedstock usage by 69%, an increase in average feedstock price per metric ton by 5%, and a decrease in average sales price of biodiesel by 4%.

 

Operating (income)/expense and non-operating (income)/expense

 

Selling, general, and administrative (“SG&A”) expenses consist primarily of salaries and related expenses for employees, marketing expenses related to sales of ethanol and WDG in California and biodiesel and other products in India, as well as professional fees, insurance, other corporate expenses, and related facilities expenses. Total SG&A also includes receipts of lease payments as an offset to expenses. Research and development expenses are also included in the SG&A expenses.

 

Other expense (income) consists primarily of interest and amortization expense attributable to our debt facilities and accretion of Series A preferred units.

 

		2024				2023				Inc/(dec)				% change
Selling, general and administrative expenses			28,400				29,595				(1,195	)			(4.0	)%
Other expense (income):
Interest expense
Interest rate expense		$	29,092			$	24,126				4,966				20.6	%
Debt related fees and amortization expense			4,892				4,732				160				3.4	%
Accretion and other expenses of Series A preferred units			10,055				20,188				(10,133	)			(50.2	)%
Other income			(1,176	)			(2,020	)			844				(41.8	)%

 

The slight decrease in SG&A expenses for the nine months ended September 30, 2024, was due to (i) a $3.6 million loss on an asset write-off during 2024 and increase salaries and supplies of $1.4 million offset by (ii) decreases in expenses of $2.5 million that had been reclassified from cost of goods sold due to maintenance at the Keyes Plant during the five months half of 2023, (iii) decreases in professional fees of $2.4 million, and (iv) decreases in utilities, penalties, and insurance of $1.3 million. 

 

Interest expense increased in the nine months ended September 30, 2024, due to the new Construction and Term Loan debt, increases in principal under the Revolving Loans and Revolving Credit Facilities, and the impact of rising interest rates on our variable interest rate debt compared to the same period in the prior year. The lower accretion and other expenses of the Series A Preferred Units was due to a decrease in the effective interest rate on the PUPA redemption obligation in the recent PUPA amendments. Other income consists of USDA grants of $1.8 million during 2023 and the recognition of $1.0 million from the purchase and sale of feedstock. 

 

Liquidity and Capital Resources

 

Cash and Cash Equivalents

 

Cash and cash equivalents were$ 296 thousand at September 30, 2024. Our current ratio at September 30, 2024, was $0.26 compared to $0.43 at December 31, 2023. We expect that our future available liquidity resources will consist primarily of cash generated from operations, borrowings under debt arrangements, and sales of equity.

 

Liquidity

 

Cash and cash equivalents, current assets, current liabilities, and debt at the end of each period were as follows:

 

		As of
		September 30, 2024				December 31, 2023
Cash and cash equivalents		$	296			$	2,667
Current assets (including cash, cash equivalents, and deposits)			34,900				36,400
Current and long-term liabilities (excluding all debt)			184,128				165,662
Current & long-term debt			322,206				294,721

 

Our principal sources of liquidity have been cash provided by operations, the sale of equity, and borrowings under various debt arrangements.  Our principal uses of cash have been to fund operations, fund capital expenditures, and pay indebtedness. We anticipate these uses will continue to be our principal uses of cash in the future.

 

 

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 overall margins 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, natural gas, LCFS credits, and D3 RINs as well as the timing of the sales of environmental attributes held in inventory. To the extent that we experience periods in which the spread between ethanol prices and corn and energy costs narrows or the spread between biodiesel prices and waste fats and oils or palm oil and energy costs narrow, we require additional working capital to fund operations. 

 

As a result of negative capital and negative operating results, and collateralization of substantially all the Company assets, we have been reliant on our senior secured lender to extend the maturity dates of our debt and loan facilities. In order to meet obligations during the next twelve months, we will need to either refinance our debt or receive the continued cooperation of its senior lender. We plan 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 its financial performance by adopting new technologies or process changes that increase energy efficiency, reduce costs, and enhance revenue, as well as execute upon awarded grants that improve energy and operational efficiencies resulting in lower cost, lower carbon intensity, and overall margin improvement.

 

For our dairy RNG production, we plan to continue to operate our existing digesters as well as continue to build new dairy digesters and extend the existing pipeline. Funding for continued construction has been based on government guaranteed debt financing and grant programs.  We are seeking multiple sources of additional project funding to allow us to accelerate the addition of new digesters.  We began generating revenue from D3 RIN sales in 2023 and first generated revenue from the sale of LCFS credits in January 2024.  We expect to have a full year of revenue from both sources in 2024, which will provide increased liquidity.

 

For the Kakinada Plant, we plan to continue to enter cost-plus contracts with the OMCs as our primary customers. We also plan to continue to upgrade our plant to increase capacity and expand feedstock flexibility.  We are also evaluating the production of additional products and developing channels for the export of allow. The Kakinada plant has had positive gross income during the last two years and we expect this to continue. We also will continue to rely on our working capital lines with Gemini and Secunderabad Oils to fund our commercial arrangements for the acquisitions of feedstock.

 

For the Riverbank SAF/RD production plan, we are continuing with engineering and other development activities and seeking both debt and equity funds needed for development and construction.

 

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, seeking project specific debt and equity, selling equity through the ATM and otherwise, selling the current EB-5 Phase II offering, and by vendor financing arrangements.

 

At September 30, 2024, the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes was $205.3 million. The maturity dates for the Third Eye Capital financing arrangements are March 1, 2025, for $39.3 million; March 1, 2026, for $140.6 million; and, April 1, 2026, for $25.4 million based on the Company's option to extend the maturity.

 

Change in Working Capital and Cash Flows

 

The following table describes the changes in current and long-term debt (in thousands) during the nine months ended September 30, 2024:

 

Increases to debt:
Accrued interest		$	30,024
Maturity date extension fee and other fees added to senior debt			1,446
Sub debt extension fees			680
Fuels Revolving Line draw			3,848
Change in debt issuance costs, net of amortization			965
Construction Loan draw			5,525
Secured loans and Working capital loan draw			3,156
EB-5 broker promissory note settlement			3,305
Total increases to debt						$	48,949
Decreases to debt:
Principal, fees, and interest payments to senior lender		$	(3,486	)
Principal and interest payments and reductions to EB-5 promissory note			(3,915	)
Principal paid to EB-5 broker's promissory note			(530	)
Term loan payments			(7	)
Construction Loan Payments			(3,041	)
Secured loans working capital loan payments			(4,667	)
Extinguishment of Zebrex			(5,818	)
Total decreases to debt						$	(21,464	)
Change in total debt						$	27,485

 

Working capital changes resulted from (i) a $1.5 million increase in inventories (ii) a $0.7 million decrease in accounts receivable due to the last day of quarter falling on a weekend, offset by $85 thousand increase in India accounts receivable, and (iii) a decrease in other current assets of $0.5 million in North America and an increase in India current assets by $2 million due to tax receivables. This was partially offset by a $2.3 million decrease in cash.

 

 

Net cash used in operating activities during the nine months ended September 30, 2024, was $20.4 million, which was calculated based on non-cash charges of $31.5 million, net cash provided by operating assets and liabilities of $19.5 million, and net loss of $71.3 million. The non-cash charges consisted of: (i) $4.9 million in amortization of debt issuance costs and other intangible assets, (ii) $6.1 million in depreciation expenses, (iii) $6.9 million in stock-based compensation expense, (iv) $10.1 million in accretion expense of Series A preferred units and (v) $3.6 million in loss on asset write-off. Net changes in operating assets and liabilities consisted primarily of (i) an increase in accrued interest of $20.9 million, (ii) an increase in accounts payable of $3.5 million, (iii) an increase in other liabilities of $1.5 million, (iv) an increase in inventories of $1.6 million and (v) a decrease in prepaid expenses of $1.6 million, (vi) an increase in other assets of $6.9 million, and (vii) an decrease in accounts receivable of $0.6 million.

 

Cash used in investing activities included $13.5 million used for capital projects, partially offset by grant proceeds and other reimbursements of $3.0 million.

 

Cash provided by financing activities was $27.8 million, consisting of $21.7 million from sales of common stock and proceeds from exercises of stock options and $12.5 million proceeds from borrowings, partially offset by repayments of borrowings of $4.8 million, payment of debt renewal and waiver fees of $1.4 million and payment on finance leases of $0.2 million. 

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with 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 net sales and expenses for each period. We believe that of our most significant accounting policies and estimates, defined as those policies and estimates 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 are: revenue recognition; recoverability of long-lived assets, Series A Preferred unit liability, and debt modification and extinguishment accounting. These significant accounting principles are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

Recently Issued Accounting Pronouncements

 

None reported beyond those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

Off Balance Sheet Arrangements

 

None.

 

Item 3.          Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

Item 4.          Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures.

 

Management (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), conducted 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 weaknesses over financial reporting as identified in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, 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 compiled and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

As discussed in greater detail under Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the year ended December 31, 2023, we continued implementing a remediation plan to address the material weakness in our internal control related to information technology general controls and information technology systems.

 

 

PART II -- OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

There has been no change in risk factors since the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 29, 2024. We urge you to read the risk factors contained therein.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

No unresolved defaults on senior securities occurred during the nine months ended September 30, 2024.

 

Item 4. Mine Safety Disclosures.

 

None.

Item 5. Other Information.

 

Current Reports

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On November 6, 2024, ABGL and Third Eye Capital entered a Seventh Waiver and Amendment to Series A Purchase Agreement (the "PUPA Seventh Amendment"). The PUPA Seventh Amendment is attached at Exhibit 10.1 and is described in the notes to the Financial Statements under 9. Aemetis Biogas LLC – Series A Preferred Financing and 15. Subsequent Events, and those descriptions are incorporated herein by reference.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Todd A. Waltz, Executive Vice President and Chief Financial Officer of Aemetis, Inc., has informed the Company of his desire to retire from the position of Executive Vice President and Chief Financial Officer, provided that Mr. Waltz has indicated that he will remain in his current position until the Company has identified a successor, he will assist with transition to a new Chief Financial Officer, and he will remain with the Company in an employee or consulting capacity following the transition to provide continuity of operations. Mr. Waltz has also indicated that he does not have any specific date by which he needs to retire, and the Company expects the transition to a new Chief Financial Officer will take from six to twelve months. Mr. Waltz has further indicated that his retirement is for personal reasons and is not a result of any Company activities.  

Item 6. Exhibits.

10.1	Seventh Waiver and Amendment to Series A Preferred Unit Purchase Agreement, effective as of August 31, 2024, and entered by Aemetis Biogas LLC, Protair-X Technologies Inc., and Third Eye Capital Corporation.
31.1	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
32.1	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *	Inline XBRL Instance Document
101.SCH *	Inline XBRL Taxonomy Extension Schema
101.CAL *	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF *	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB *	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

 

SIGNATURES

 

Pursuant to the requirements 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.

 

	Aemetis, Inc.
Date: November 12, 2024	By:	/s/ Eric A. McAfee
		Eric A. McAfee Chair of the Board and Chief Executive Officer (Principal Executive Officer)

 

Date: November 12, 2024	By:	/s/ Todd A. Waltz
		Todd A. Waltz Executive Vice President and Chief Financial Officer (Principal Financial Officer)