Aemetis (AMTX) 10-Q2024 Q3 Quarterly report

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.

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:

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:

India Biodiesel Revenues: 

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

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:

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:

5. Inventories

Inventories consist of the following:

6. Property, Plant and Equipment

Property, plant and equipment consist of the following:

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.

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:

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:

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:

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.

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.

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 ZEBREX^TM 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:

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.

The components of lease expense are as follows:

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

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:

Supplemental balance sheet information related to leases is as follows:

Maturities of operating lease liabilities are as follows:

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:

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

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.

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:

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:

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.

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:

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:

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:

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.

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: