Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is traded under the symbol "AMTX" on the NASDAQ Stock Market.
Number of Stockholders
As of March 1, 2024, our common stock was held by 175 holders of record and by approximately 26 thousand stockholders who hold shares in street name.
Dividends
We have never declared or paid any cash dividends on our common stock. We currently expect to retain any future earnings for use to operate and expand our business and to reduce our outstanding debt, and therefore do not anticipate paying cash dividends in the foreseeable future. In addition, we currently have covenants in certain of our debt agreements that prohibit paying dividends without the consent of the applicable lender.
Securities authorized for issuance under equity compensation plans
See Note 9 to the Consolidated Financial Statements contained in Item 8 of this Annual Report.
Sales of Unregistered Equity Securities
In addition to issuances of unregistered securities previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K, the Company issued the following unregistered securities during 2023:
On October 16, 2023, our senior lender increased the credit limit under one of our debt agreements. Under the terms of that preexisting debt agreement, this increase automatically revised a previously issued warrant to increase the number of shares issuable under the warrant by 25,000 shares. The warrant has an exercise price of $10.20 per share and a remaining term of 3.4 years. This issuance was exempt from registration under Section 4 of the Securities Act of 1933 as a transaction by an issuer not involving any public offering.
On December 12, 2023, we issued 126,008 shares of common stock to the holders of our Series B Preferred Stock in an exchange at a 1 for 10 ratio of all outstanding shares of Series B Stock. The issuance of common stock was exempt from registration under Section 3(a)(9) of the Securities Act of 1933 as a security exchange by the issuer with existing security holders for which no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange. In connection with the exchange, we filed a Registration Statement on Form S-1 on December 5, 2023, to register the subsequent resale or other disposition of the common stock in the exchange, and the S-1 was declared effective by the SEC on December 12, 2023.
Stock Repurchases
None .
Item 6. [Reserved]
Not applicable.
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Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations
Our Management ’ s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
●
Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A.
●
Key Performance Indicators. Discussion of our key performance indicators, to provide context for company operations.
●
Results of Operations. An analysis of our financial results comparing the twelve months ended December 31, 2023 and 2022.
●
Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition.
●
Critical Accounting Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, particularly under “ Part I, Item 1A. Risk Factors, ” and in other reports we file with the SEC. All references to years relate to the calendar year ended December 31 of the particular year.
Overview
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 low and negative carbon intensity products and technologies that replace traditional fossil derived products. We operate in three reportable segments consisting of “California Ethanol,” “California Dairy Renewable Natural Gas,” and “India Biodiesel.” We have other operating segments determined not to be separately reportable that are collectively represented by the “All Other” category. Our mission is to generate sustainable and innovative renewable fuel solutions that benefit communities and restore our environment. We do this by building a local circular bioeconomy utilizing agricultural waste to produce low carbon, advanced renewable fuels that reduce greenhouse gas (“GHG”) emissions and improve air quality by replacing traditional petroleum-based products. For revenue and other information regarding our operating segments, see Note 11 - Segment Information, of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
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 (“CO 2 ”) emissions from our fermenters and sell it to Messer 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; an Allen Bradley Decision Control System (DCS) to manage and optimize energy use and other plant operations; and a Mechanical Vapor Recompression (MVR) system to produce steam using low carbon electricity instead of natural gas. This changes will 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 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. We currently have eight operating digesters that receive dairy waste from nine dairies, and we are actively growing with an additional six digesters under construction that will receive dairy waste from nine dairies. 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 43 dairies and are seeking to increase that.
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. Kakinada Plant is capable of processing 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 All Other segment consists of our projects that are under development, including the planned sustainable aviation fuel and renewable diesel plant in Riverbank, California and our planned Carbon Capture and Underground Sequestration (CCUS) operations. It also includes our research and development facility in Minneapolis, Minnesota and our corporate offices in Cupertino, California.
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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 initially planned facility will be located at the Riverbank Industrial Complex in Riverbank, California. We signed a lease with purchase to option 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 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, 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 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.
Key Performance Indicators (KPI):
Aemetis measures performance based on the utilization of our plants, production of products, and associated pricing and margins. For California ethanol, the key products are ethanol and WDG, measured in millions of gallons sold and tons sold, respectively. For India Biodiesel, the products are biodiesel and refined glycerin, both measured in metric tons sold. Since our Keyes Plant currently uses corn as the sole feedstock, the delivered quantity and cost of corn is also a key performance indicator as it indicates high-level operating margin of the plant. Utilization is measured as the production of transportation fuel produced as a percentage of the nameplate capacity, the engineering specification of the plant. For California RNG, the products are Renewable Gas (RNG), D3 RINs, and LCFS credits. The RNG quantity measured in MMBtu, and quantity of D3 RINs and LCFS credits generated are based on the quantity of RNG dispensed. Management utilizes these metrics to assess cash generated by each facility on a daily or weekly basis and to make decisions about the appropriate level of operation to balance market demand with plant capabilities and efficiency.
The following table summarized our KPIs:
Production and Price Performance
(Unaudited)
Years ended December 31,
2023 vs 2022 %
2023
2022
Change
Ethanol
Gallons Sold (in millions)
32.1
59.0
-45.6
%
Average Sales Price/Gallon
$
2.44
$
2.81
-13.2
%
Percent of nameplate capacity
58
%
107
%
-45.8
%
WDG
Tons Sold (in thousands)
225
397
-43.3
%
Average Sales Price/Ton
$
97
$
128
-24.2
%
Delivered Cost of Corn
Bushels ground (in millions)
11.5
20.2
-43.1
%
Average delivered cost / bushel
$
7.11
$
9.65
-26.3
%
Dairy Renewable Natural Gas
MMBtu external sales (in thousands)
194.2
8.4
2211.9
%
MMBtu stored as inventory (in thousands)
68.0
9.0
655.6
%
MMBtu intercompany sales (in thousands)
-
48.6
-100.0
%
Biodiesel
Metric tons sold (in thousands)
60.5
17.7
241.8
%
Average Sales Price/Metric ton
$
1,232
$
1,526
-19.3
%
Percent of Nameplate Capacity
40
%
12
%
Refined Glycerin
Metric tons sold (in thousands)
4.2
1.2
250.0
%
Average Sales Price/Metric ton
$
640
$
850
-24.7
%
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Results of Operations
Year Ended December 31, 2023, Compared to Year Ended December 31, 2022
Revenue
We sell all ethanol, WDG, CDO, and CDS produced to J.D. Heiskell, which resells it to customers designated by us. Our finished ethanol tank is leased by J.D. Heiskell and legal title to the product is transferred when we put our ethanol product into the tank. We have designated Murex LLC to purchase all of the ethanol and A.L. Gilbert to purchase the WDG. Each company resells to third-party customers. We sell the CO 2 that we capture from our fermenters to Messer Gas.
Most of our California Dairy Renewable Natural Gas segment revenues during the year ended
December 31, 2023, were from sales of D3 RINs generated from sales of our RNG for transportation use.
Substantially all of our India segment revenues during the years ended December 31, 2023 and 2022, were from sales of biodiesel to OMCs and refined glycerin to other external customers.
Fiscal Year Ended December 31 (in thousands)
2023 vs 2022
2023
2022
Inc/(dec)
% change
California Ethanol
$
104,068
$
228,194
$
(124,126
)
-54.4
%
California Dairy Renewable Natural Gas*
5,455
1,210
4,245
350.8
%
India Biodiesel
77,194
28,111
49,083
174.6
%
Eliminations
-
(1,002
)
1,002
-100.0
%
Total
$
186,717
$
256,513
$
(69,796
)
-27
%
*Most California Dairy Renewable Natural Gas revenue is intercompany in 2022, refer to Item 8, Footnote 11 for the split between intercompany and external sales.
California Ethanol . For the year ended December 31, 2023, the segment generated 75% of revenue from sales of ethanol, 21% from sales of WDG, and 4% from sales of corn oil, CDS, CO₂, and other sales. During the year ended December 31, 2023, plant production average d 58% of the 55 million gallon per year na meplate capacity. The decrease in revenues was due to an extended maintenance cycle and acceleration of the implementation of several important ethanol plant energy efficiency upgrades to the Keyes Plant during the first five months of 2023 coupled with decrease in average price of ethanol by 13% and WDG by 24%.
California Dairy Renewable Natural Gas. During the years ended December 31, 2023 and 2022, we produced and sold 194.2 thousand and 8.4 thousand MMBtu ("million British thermal units") of Renewable Natural Gas ("RNG"), to an external party at an average price of $5.12 and $25 per MMBtu, respectively, and we also sold 48.6 MMBtu to an intercompany party during the year ended December 31, 2022. In addition, we entered into agreement with a marketing partner to dispense RNG into transportation vehicles, which allowed us to begin generating D3 RINs in 2023 as a new revenue stream that did not previously exist. During the year ended December 31, 2023, we generated 1.4 million D3 RINs and sold them at an average price of $3.19 per D3 RIN.
India Biodiesel. For the year ended December 31, 2023, the segment generated 97% of revenue from sales of biodiesel, and 3% from other sales, compared to 96% of sales from biodiesel, and 4% from other sales during the year ended December 31, 2022. The increase in revenues for the year ended December 31, 2023, compared to the year ended December 31, 2022, was due to an increase in the sales volume of biodiesel from 17.7 thousand metric tons to 60.5 thousand metric tons offset by decrease in average biodiesel price per metric ton to $1,232 from $1,526 per metric ton during the same period in 2022. The increase in revenues was primarily attributable to the Kakinada Plant obtaining and executing on the India government-sponsored OMC tenders and purchase contracts.
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Cost of Goods Sold
Cost of goods sold consists primarily of feedstock, chemicals, direct costs (principally labor and labor related costs) and factory overhead. Depending on the costs of these inputs in comparison to the sales price of our end products, our gross margins at any given time can vary from positive to negative. Factory overhead includes direct and indirect costs associated with plant operations, including the cost of repairs and maintenance, consumables, maintenance, on-site security, insurance, depreciation, and inbound freight.
Our feedstock for California Ethanol is procured by J.D. Heiskell pursuant to the Heiskell Supply Agreement. Title to the corn passes to us when the corn is deposited into our weigh bin and entered into the production process. Our cost of feedstock is established by J.D Heiskell based on the Chicago Board of Trade pricing and includes rail, truck or ship transportation, local basis costs, and a handling fee paid to J.D. Heiskell. The credit term for the corn purchased from J.D. Heiskell is one day. Cost of goods sold also includes chemicals, plant overhead and out-bound transportation. Plant overhead includes direct and indirect costs associated with the operation of the Keyes Plant, including the cost of electricity and natural gas, maintenance, insurance, direct labor, depreciation and freight.
The feedstock for producing Renewable Natural Gas is supplied by dairy operators who lease us land and supply our digesters with their manure flush. Our cost of feedstock is established by manure supply agreements based on the value of the environmental attributes and the size of the dairy.
Substantially all of our feedstock for India Biodiesel is procured as crude palm stearin, a non-edible feedstock, from neighboring natural oil processing plants at a discount to refined palm oil or imported from international market when prices are viable. Raw material is received by truck and title passes when the goods are loaded at our vendors’ facilities. Credit terms vary by vendor. However, we generally receive 15 days of credit on the purchases. We purchase crude glycerin in the international market on letters of credit or advance payment terms.
The following table shows Cost of Goods Sold:
Fiscal Year Ended December 31 (in thousands)
2023 vs 2022
2023
2022
Inc/(dec)
% change
California Ethanol
$
110,670
$
241,211
$
(130,541
)
-54.1
%
California Dairy Renewable Natural Gas
5,786
1,988
3,798
191.0
%
India Biodiesel
68,244
19,838
48,406
244.0
%
All other
-
13
(13
)
-100.0
%
Eliminations
-
(1,002
)
1,002
-100.0
%
Total
$
184,700
$
262,048
$
(77,348
)
-30
%
California Ethanol. We ground 11.5 million bushels of corn at an average price of $7.11 per bushel during the year ended December 31, 2023, compared to 20.2 million bushels of corn at an average price of $9.65 per bushel during the year ended December 31, 2022. The decrease in cost of goods for the year ended December 31, 2023, is mainly due to the extended shutdown from December 2022 to June 2023, as well as $8.2 million more in natural gas costs and $3.6 million more in transportation costs during 2022.
California Dairy Renewable Natural Gas . Cost of Goods Sold expenses relate to dairy manure payments, maintenance on the dairy digesters, production bonuses, and depreciation. The eliminations in 2022 relate to intercompany sales.
India Biodiesel . The increase in cost of goods sold during the year ended December 31, 2023, compared to December 31, 2022, was attributable to an increase in the volume of biodiesel feedstock by 241% to 60.5 thousand metric tons during the year ended December 31, 2023, compared to 17.7 thousand metric tons during th e year ended December 31, 2022, offset by a decrease in the average price of biodiesel feedstock by 1% to $838 per metric ton, compared to $843 per metric ton in the same period in 2022.
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Gross Profit (loss)
Fiscal Year Ended December 31 (in thousands)
2023 vs 2022
2023
2022
Inc/(dec)
% change
California Ethanol
$
(6,602
)
$
(13,017
)
$
6,415
-49.3
%
California Dairy Renewable Natural Gas
(331
)
(778
)
447
-57.5
%
India Biodiesel
8,950
8,273
677
8.2
%
All other
-
(13
)
13
-100.0
%
Total
$
2,017
$
(5,535
)
$
7,552
-136
%
California Ethanol. Gross loss decreased by 49.3% in the year ended December 31, 2023, primarily due to lower volumes of ethanol and WDG sold combined with lower ethanol and WDG prices offset by higher corn costs combined with increased costs in natural gas and transportation in the same period ending December 31, 2022.
California Dairy Renewable Natural Ga s. Gross loss reflects expenses incurred as we begin to ramp up our Dairy Renewable Natural Gas business including dairy manure payments, maintenance on the dairy digesters, production bonuses, and depreciation.
India Biodiesel. The increase in gross profit was attributable to the increase in sales and production of biodiesel to fulfill the government OMC tender offers.
Operating (income)/expense and non-operating (income)/expense
In 2023 and 2022, substantially all of our R&D expenses related to research and development activities in Minnesota. R&D e xpenses decreased in the year ended December 31, 2023, due to decreases in expenses related to research subcontract work.
SG&A expenses consist primarily of salaries and related expenses for employees, marketing expenses related to sales of ethanol and WDG in California Ethanol and biodiesel and other products in India Biodiesel, as well as professional fees, insurance, other corporate expenses, and related facilities expenses. SG&A expenses as a percentage of revenue were 21% in the year ended December 31, 2023, compared to 11% in the year ended December 31, 2022. The increase in SG&A percentage over sales was due to a decrease in sales and reclass of several cost of goods expenses to SG&A for the period when the plant did not operate during the first five months of 2023. The increase in SG&A expenses in the year ended December 31, 2023, was primarily due to an increase in headcount, salaries and stock-based compensation of $4.7 million, an increase in professional fees of $0.9 million, an increase in depreciation and amortization of $1.7 million due to a reclass of cost of goods sold to SG&A, an increase in taxes, insurance, rent and utilities of $1.9 million, an increase in supplies and services of $0.6 million, and an increase in other costs of $1.6 million due to the reclass of cost of goods sold to SG&A which was offset by $0.8 million in rental income increase.
2023 vs 2022
2023
2022
Inc/(dec)
% change
Research and development expenses
$
152
$
180
$
(28
)
-16
%
Selling, general and administrative expenses
39,266
28,686
$
10,580
37
%
Other expense (income):
Interest expense
Interest rate expense
32,995
21,407
$
11,588
54
%
Debt related fees and amortization expense
6,524
7,363
(839
)
-11
%
Accretion and other expenses of Series A preferred units
25,313
9,888
15,425
156
%
Loss on debt extinguishment
-
49,386
(49,386
)
-100
%
Gain on litigation
-
(1,400
)
1,400
-100
%
Other income
(2,077
)
(14,340
)
12,263
-86
%
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Other expense (income) consists primarily of interest and amortization expense attributable to our debt facilities and accretion of biogas Series A preferred units. The cost of debt facilities includes stock or warrants issued as fees. The fair value of stock and warrants are amortized as expenses, except when the extinguishment accounting method is applied, in which case refinanced debt costs are recorded as extinguishment expense. Interest expense and debt related fees and amortization increased in the year ended
December 31, 2023, due to higher variable interest rates and higher debt balances from obtaining the Carbon Revolving line, Fuels Revolving line, and the construction loan with Greater Nevada Credit Union. The decrease in accretion and other expenses of the Series A Preferred Units was due to amendments obtained at lower interest costs and a $30.0 million payment on the Series A preferred units. Gain on litigation reflects the settlement of the EdenIQ lawsuit in the second quarter of 2022. Other expense (income) change
r
elates to a grant in the amount of $14.2 million received from the USDA's Biofuel Producer Program in 2022, created as part of the CARES Act, to compensate biofuel producers that experienced market losses due to the COVID-19 pandemic.
Liquidity and Capital Resources
Cash and Cash Equivalents
Cash and cash equivalents were $2.7 million at December 31, 2023, of which $2.6 million was held in our North American entities and $0.1 million was held in our India entity. Our current ratio was 0.43 and 0.21, respectively, at December 31, 2023 and 2022. We expect that our future available liquidity resources will consist primarily of cash generated from operations, remaining cash balances, borrowings available, if any, under our senior debt facilities and our subordinated debt facilities, and any additional funds raised through sales of equity. The use of proceeds from all equity raises and debt financings are subject to approval by our senior lender.
Liquidity
Cash and cash equivalents, current assets, current liabilities, and debt at the end of each period were as follows (in thousands):
As of
December 31, 2023
December 31, 2022
Cash and cash equivalents
$
2,667
$
4,313
Current assets (including cash, cash equivalents, and deposits)
36,400
18,136
Current and long term liabilities (excluding all debt)
165,662
162,728
Current & long term debt
294,721
246,240
Our principal sources of liquidity have been cash provided by the sale of equity, operations, and borrowings under various debt arrangements.
We operate in a volatile market in which we have limited control over the major components of input costs and product revenues and are making investments in future facilities and facility upgrades that improve the overall margin while lessening the impact of these volatile markets. As such, we expect cash provided by operating activities to fluctuate in future periods primarily because of changes in the prices for corn, ethanol, WDG, DCO, CDS, biodiesel, waste fats and oils, glycerin, non-refined palm oil, natural gas, LCFS credits, and D3 RINs. To the extent that we experience periods in which the spread between ethanol prices and corn and energy costs narrow or the spread between biodiesel prices and waste fats and oils or palm oil and energy costs narrows, we require additional working capital to fund operations.
As a result of negative capital and negative operating results, and collateralization of substantially all of the Company assets, we have been reliant on our senior secured lender to provide additional funding and have been required to remit substantially all excess cash from operations to our senior lender. 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 will have a full year of revenue from both sources in 2024, which will provide significant increased liquidity.
For the Riverbank SAF/RD production plan, we are continuing with permitting, engineering and other development activities and seeking both debt and equity funds needed for development and construction.
For the Kakinada Plant, we plan to continue to enter into cost-plus contracts with the OMCs as our primary customer. 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 rely on our working capital lines with Gemini and Secunderabad Oils in India to fund our commercial arrangements for the acquisitions of feedstock.
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In addition to the above we plan to continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling high yield debt instruments, selling bonds in the taxable and tax-exempt markets, selling equity through the ATM and otherwise, selling the current EB-5 Phase II offering, or by vendor financing arrangements.
As of December 31, 2023 , the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes equaled $177.2 million. The maturity dates for the Third Eye Capital financing arrangements April 1, 2025, for $121.2 million (based on a February 2024 extension); March 1, 2025, for $32.5 million; and March 1, 2026, for $23.5 million. Our senior lender has provided a series of accommodating amendments to the existing and previous loan facilities as described in further detail in Note 4. Debt of the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K. However, future amendments or accommodations will continue to be at the discretion of the lender.
Change in Working Capital and Cash Flows
The following table describes changes in current and long-term debt (in thousands) during the year ended December 31, 2023:
Increases to debt:
Accrued interest
$
33,870
Maturity date extension fee and other fees
2,329
Sub debt extension fees
680
Revolving Notes Series B draw
800
Fuels Revolving Line draw
15,065
Construction Loan draw
21,467
Working capital loan draw
40,040
Change in debt issuance costs, net of amortization
116
Total Increases to debt
$
114,367
Decreases to debt:
Principal, fees, and interest payments to senior lender
$
(26,896
)
Principal and interest payments to EB-5 investors
(213
)
Term loan payments
(9
)
Construction Term loan payments
(2,217
)
Working capital loan payments
(36,551
)
Total Decreases to debt
$
(65,886
)
Change in total debt
$
48,481
Working capital changes reflect (i) a $13.6 million increase in inventories consisting mostly of raw material procurement in India and production of biodiesel, (ii) a $7.4 million increase in accounts receivable, (iii) a $0.9 million decrease in prepaid expenses, (iv) a decrease in other current assets of $0.2 million, and (v) a $1.6 million decrease in cash caused by India segment operational activities.
Cash provided by operating activities was $13.8 million, derived from a net loss of $46.4 million, non-cash charges of $46.2 million, and changes in operating assets and liabilities of $14.1 million. The non-cash charges consisted of: (i) $6.6 million in amortization of debt issuance costs and other intangible assets, (ii) $6.9 million in depreciation expenses, (iii) $7.7 million in stock-based compensation expense, (iv) $25.3 million in preferred unit accretion and other expenses of Series A preferred units, (v) $0.4 million in fair value of warrants issued, and (vi) $25 thousand of impairment loss on intangibles. Net changes in operating assets and liabilities consisted primarily of an increase in (i) inventories of $13.8 million, (ii) accounts receivable of $7.4 million, (iii) other assets of $2.0 million, (iv) an increase in accounts payable of $13.7 million, (v) and an increase in accrued interest and fees of $23.6 million. This was partially offset by (i) a decrease in prepaid expenses of $1.8 million and (ii) a decrease in other liabilities of $1.8 million.
Cash used by investing activities was $23.7 million, of which $5.7 million was used for capital projects in the Keyes Plant, $24.7 million was used for capital projects associated with production of Renewable Natural Gas, $1.3 million for capital projects at the India Plant, and $1.4 million related to all other capital projects. This was partially offset by grant proceeds of $9.4 million.
Cash provided by financing activities was $9.1 million, consisting primarily of $75.5 million proceeds from borrowings, $0.1 million from stock option exercises, and $21.7 million from issuance of common stock, offset by repayments of borrowings of $56.1 million, debt renewal and waiver fee payments of $1.7 million, Series A preferred financing payments of $30.0 million, and payments on finance leases of $0.4 million.
In October 2020, we commenced an at-the-market stock sales program, which allows us to sell and issue shares of our common stock into the publicly traded markets. During the year ended December 31, 2023, we issued 4.5 million shares of common stock under the at-the-market offering program for net proceeds of $21.7 million net of commissions and offering related expenses.
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Off-Balance Sheet Arrangements
We had no outstanding off-balance sheet arrangements as of December 31, 2023.
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.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance on the recognition of revenue. The guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. In March and April 2016, the FASB issued further revenue recognition guidance amending principal versus agent considerations regarding whether an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The Company adopted this guidance on January 1, 2019, using the modified retrospective approach. There was no cumulative impact to retained earnings. We assess all of our revenue streams to identify any differences in the timing, measurement or presentation of revenue recognition.
We derive revenue primarily from sales of ethanol and related co-products, renewable natural gas, and biodiesel pursuant to supply agreements and purchase order contracts. We assess the following criteria under the ASC 606 guidance: (i) identify the contracts with customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when the entity satisfies the performance obligations.
We have elected to adopt the practical expedient that allows for ignoring the significant financing component of a contract when estimating the transaction price when the transfer of promised goods to the customer and customer payment for such goods are expected to be within one year of contract inception. Further, we have elected to adopt the practical expedient in which incremental costs of obtaining a contract are expensed when the amortization period would otherwise be less than one year.
California Ethanol: On May 25, 2023, we entered into the second amendment to the Aemetis Keyes Grain Procurement and Working Capital Agreement with J.D. Heiskell, the second amendment to the Corn Procurement and Working Capital Agreement with J.D. Heiskell, and the second amendment to the Keyes Ethanol and Corn Tank Lease with J.D. Heiskell. The amendments provide that J.D. Heiskell will buy all ethanol, WDG, CDS, and Corn Oil produced by the Keyes Plant and sell those products to customers designated by us and pay us the same price as it receives, (ii) J.D. Heiskell will lease our ethanol product storage tanks at the Keyes Plant, and (iii) Aemetis will provide J.D. Heiskell with payments sufficient to provide working capital credit sufficient to pay for four days of grain. Given the similarity of the individual sales transactions with J.D. Heiskell, we have assessed them as a portfolio of similar contracts. Prior to May 25, 2023, the performance obligation was satisfied by delivery of the physical product from our finished goods tank to our customer’s contracted trucks. Effective on May 25, 2023, the performance obligation for ethanol sales is satisfied by delivery of the physical product to the finished goods tank leased by J.D. Heiskell. The transaction price is determined based on daily market prices negotiated by Murex for ethanol and by our marketing partner A.L. Gilbert Company (“A.L. Gilbert”) for WDG. The transaction price is allocated to one performance obligation.
The below table shows our sales in California Ethanol by product category:
California Ethanol
For the twelve months ended December 31,
2023
2022
Ethanol sales
$
78,403
$
165,876
Wet distiller's grains sales
21,963
50,930
Other sales
3,702
11,388
$
104,068
$
228,194
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In addition to selling our products to J.D. Heiskell, we also buy the corn that we use as feedstock to produce ethanol from J.D. Heiskell. We consider the purchase of corn as a cost of goods sold and consider the sale of ethanol as revenue upon transfer to the finished goods tank and consider the sale of WDG, CDO, and CDS as revenue, upon trucks leaving the Keyes Plant with the product. Shipments of ethanol and WDG are billed net of the related transportation and marketing charges. The transportation component is accounted for in cost of goods sold and the marketing component is accounted for in sales, general and administrative expense. Transportation and marketing charges are known within days of the transaction and are recorded at the actual amounts. We have elected an accounting policy under which these charges have been treated as fulfillment activities provided after control has transferred. As a result, these charges are recognized in cost of goods sold and selling, general and administrative expenses, respectively, and revenues are recorded at the gross invoiced amount.
California Renewable Natural Gas: We recognize revenue from the sale of Renewable Natural Gas, D3 RINs, and LCFS Credits. The RNG is transported through a regional natural gas pipeline to our customer, and we recognize sales of the gas molecules concurrent with the injection into the pipeline. We have entered into a contract with a regional transportation fuel supply company to dispense the RNG for transportation use in conformance with the book-and-claim accounting rules of the RFS and LCFS programs. We generate D3 RINs concurrent with the dispensing activity. We may hold the D3 RINs or sell them, and we generate associated revenue at the time of sale. We generate LCFS credits on a quarterly basis that are associated with RNG dispensed two quarters prior. We may hold or sell the LCFS credits, and we generate associated revenue at the time of sale. We first generated revenue from the sale of D3 RINs in the third quarter of 2023 and first generated revenue from the sale of LCFS credits in the first quarter of 2024.
India Biodiesel: We sell products pursuant to purchase orders (written or verbal) or by contract with governmental or international parties, in which performance is satisfied by delivery and acceptance of the physical product. Given that the contracts are sufficiently similar in nature, we have assessed these contracts as a portfolio of similar contracts as allowed under the practical expedient. Doing so does not result in a materially different outcome compared to individually accounting for each contract. All domestic and international deliveries are subject to certain specifications as identified in contracts. The transaction price is determined based on reference market prices for biodiesel, refined glycerin, and Palm Fatty Acid Distillers (“PFAD”) net of taxes. There is no transaction price allocation needed.
The following table shows our sales in India Biodiesel by product category:
India Biodiesel
For the twelve months ended December 31,
2023
2022
Biodiesel sales
$
74,503
$
27,041
Other sales
2,691
1,070
$
77,194
$
28,111
Recoverability of Our Long-Lived Assets
Property and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation after assets are placed in service and are comprised primarily of buildings, furniture, machinery, equipment, land, and plants in North America and India. When property, plant and equipment are acquired as part of an acquisition, the items are recorded at fair value on the purchase date. It is our policy to depreciate capital assets over their estimated useful lives using the straight-line method.
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Impairment of Long-Lived Assets
Our long-lived assets consist of property, plant and equipment. We review long-lived asset groups for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset groups may not be recoverable. We measure recoverability of assets to be held and used by comparing the carrying amount of an asset group to the estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, we record an impairment charge in the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.
The impairment test for long-lived asset groups requires us to make estimates regarding amount and timing of projected cash flows to be generated by an asset or asset group over an extended period of time. Management judgment regarding the existence of circumstances that indicate impairment is based on numerous potential factors including, but not limited to, a decline in our future projected cash flows, a decision to suspend operations at a plant for an extended period of time, adoption of our product by the market, a sustained decline in our market capitalization, a sustained decline in market prices for similar assets or businesses, or a significant adverse change in legal or regulatory factors or the business climate. Significant management judgment is required in determining the fair value of our long-lived assets to measure impairment, including projections of future cash flows. Fair value is determined through various valuation techniques including discounted cash flow models, market values and third-party independent appraisals, as considered necessary. Changes in estimates of fair value could result in a write-down of the asset in a future period.
Long-term assets are analyzed based on their line items on the consolidated balance sheet and the lowest level where the asset groups are expected to generate cash flow. We consider the lowest level asset group as one where the value of the asset becomes independent from the other assets and has the ability to operate on an independent basis, and results in a functional unit. We therefore group the reporting units into the following: the Keyes, California ethanol plant, the Kakinada, India biodiesel plant, the Central California Dairy Digester Network, the Riverbank, California Carbon Zero plant under development, the Goodland Energy Center LLC, which consists of a partially completed dry-mill, and the Carbon Capture Sequestration asset group under development. These asset groups represent our significant long-lived assets. Both the Keyes and Kakinada plants have been operated efficiently and no asset groups showed indicators of impairment, therefore no impairment test was needed for our Company’s long-lived assets.
Series A Preferred unit liability and Testing for Debt Modification or Extinguishment Accounting
During 2023 and 2022, we evaluated amendments to our debt under the ASC 470-50 guidance for modification and extinguishment accounting and under ASC 470-60 for Troubled Debt Restructuring. The evaluation for troubled debt restructuring included assessing whether the Company is experiencing financial difficulties and whether the creditor granted a concession. To determine whether the Company is experiencing financial difficulties, we evaluate if the payments on debt made on time, forecasting of cash flows, and other ways if the Company can meet its upcoming obligations. To determine whether a concession is granted, we calculate the post-restructuring effective interest rate by projecting cash flows on the new terms and calculating a discount rate equal to the carrying amount of pre-restructuring debt and comparing this calculation to the terms of prior amendments. If the post restructuring effective interest rate is less than the prior terms effective interest rate, we assess this as having been granted a concession. We then apply troubled debt restructuring accounting to any debt in which the creditor granted a concession. The above evaluation determines if there is no troubled debt restructuring, then the evaluation for modification and extinguishment includes comparing the net present value of cash flows of the new debt to the old debt to determine if changes greater than 10 percent occurred. In instances where our future cash flows change more than 10 percent, we record our debt at fair value based on factors available to us for similar borrowings and use the extinguishment accounting method to account for the debt extinguishment.
Recently Issued Accounting Pronouncements
Refer to Note 1 of the Financial Statements for a description of new accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
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