Aemetis, Inc: Form 10-Q for the period ended Mar 31, 2025

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated condensed financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

• Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of MD&A.
• Results of Operations. An analysis of our financial results comparing the three months ended March 31, 2025 and 2024.
• Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition.
• Critical Accounting Policies and Estimates. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

The following discussion should be read in conjunction with our consolidated condensed financial statements and accompanying notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, particularly under “Part II, Item 1A. Risk Factors,” and in other reports we file with the SEC. All references to years relate to the calendar year ended December 31 of the particular year.

Overview

Founded in 2006 and headquartered in Cupertino, California, we are an international renewable natural gas and biofuels company focused on the operation, acquisition, development and commercialization of innovative low and negative carbon intensity products and technologies. 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 innovative renewable fuel solutions that benefit communities and improve the environment. We are executing our mission by building a circular bioeconomy using agricultural products and waste to produce low carbon renewable fuels that create jobs, reduce greenhouse gas (“GHG”) emissions and improve air quality. For revenue and other information regarding our operating segments, see Note 13 - Segment Information, of the Notes to Consolidated Financial Statements of this Form 10-Q.

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 alcohol for other uses, Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), and Condensed Distillers Solubles (“CDS”). WDG, DCO, and CDS are sold as animal feed to more than 80 local dairies and feedlots. We also capture the Carbon Dioxide (“CO2”) generated by our fermenters and sell it to an industrial gas company 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 ethanol, primarily by decreasing the use of fossil natural gas. Recently completed energy efficiency projects include high efficiency heat exchangers and a solar micro grid. A significant energy efficiency project in progress is the Mechanical Vapor Recompression (MVR) system that will use low carbon electricity instead of natural gas. These changes will reduce our energy costs and will also lower the carbon intensity (CI) of the ethanol we produce and generate increased cash flows from LCFS and tax credits. We have already begun procuring MVR equipment and expect it to be installed later this year and begin operating in the first half of 2026.

Our California Dairy Renewable Natural Gas segment Aemetis Biogas LLC 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 utility natural gas pipeline. We currently have eleven operating digesters that receive waste from twelve dairies, and we are actively growing with additional digesters under construction. We have constructed 36 miles of biogas collection pipeline and have received environmental approval to construct an additional 24 miles of pipeline. We currently have agreements to build digesters and receive waste from a total of 50 dairies and are seeking to sign additional agreements with dairies.

Our India Biodiesel segment includes a biodiesel production plant in Kakinada, India (“Kakinada Plant”) with a production capacity of about 80 million gallons per year. The plant produces high quality distilled biodiesel and refined glycerin for customers in India. We believe the Kakinada Plant is one of the highest capacity biodiesel production facilities in India. The Kakinada Plant is capable of processing a variety of vegetable and animal oil waste feedstocks into biodiesel that meets applicable product standards. Our Kakinada Plant also distills the crude glycerin coproduct 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 our planned Carbon Capture and Underground Sequestration (CCUS) operations and the planned sustainable aviation fuel ("SAF") and renewable diesel ("RD") plant in Riverbank, California. The All Other segment also includes our research and development facility in Minneapolis, Minnesota, operation of the Riverbank Industrial Complex, and our corporate offices in Cupertino, California.

Our SAF/RD production plant is currently designed to produce 90 million gallons per year of combined SAF/RD or 78 million gallons per year of SAF from feedstocks consisting of renewable waste vegetable and animal oils. Our project is located at the Riverbank Industrial Complex in Riverbank, California. We signed a lease with an option to purchase the Riverbank Industrial Complex in 2021 and took possession of the site in 2022. In 2023, we received a Use Permit and the California Environmental Quality Act ("CEQA") approval for the SAF/RD plant and in 2024 we received Authority to Construct air permits for the plant. We are continuing with development activities, including 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 formations that absorb and contain 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 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 produce low carbon ethanol, renewable hydrogen, SAF, and RD.

Results of Operations

Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

Revenues

In our California Ethanol segment, we sell the ethanol, WDG, DCO, and CDS that we produce 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 and market all of the ethanol and A.L. Gilbert to purchase and market the WDG. Each company resells to third-party customers. We sell the CO2 that we capture from our fermenters to an industrial gas company that produces commercial grade CO2 for distribution.

Most of our California Dairy Renewable Natural Gas segment revenues represented below are from sales of D3 RINs and LCFS credits generated from sales of our RNG for transportation use.

In 2024, all of our India sales of biodiesel were to government owned Oil Marketing Companies ("OMCs"). The OMCs paused purchase when the prior allocations were fulfilled in September 2024 and did not resume purchases until April of 2025. As a result, the Kakinada Plant did not generate revenue from biodiesel sales during the three months ended March 31, 2025, and the sales from that segment represent sales of glycerin and some sales of accumulated feedstocks. The Kakinada Plant resumed shipments of biodiesel in April 2025 and will be able to fulfill a significant number of orders from existing inventories of biodiesel and feedstocks.

California Ethanol. For the three months ended March 31, 2025, this segment generated 74% of its revenue from sales of ethanol, 21% from sales of WDG, and 5% from sales of corn oil, CDS, CO₂, and other sales. During the three months ended March 31, 2025, the Keyes plant sold 14.1 million gallons of ethanol at an average price of $1.98 per gallon and 93 thousand tons of WDG at an average price of $86.00 per ton, compared to sales during the three months ended March 31, 2024, when the Keyes plant sold 14.1 million gallons of ethanol at an average price of $1.79 per gallon and 94 thousand tons of WDG at an average price of $98.00 per ton. Overall revenue increased by 4.6% primarily due to increase in the average ethanol sales price.

California Dairy Renewable Natural Gas. During the three months ended March 31, 2025, we sold 70.9 thousand MMBtu ("million British thermal units") of RNG at an average price of $3.65 per MMBtu, compared to the three months ended March 31, 2024, when we sold 60.8 thousand MMBtu of RNG at an average price of $4.02 per MMBtu. During the three months ended March 31, 2025 we sold 388 thousand D3 RINs at an average price of $2.64 per D3 RIN, compared to the three months ended March 31, 2024, when we sold 766 thousand D3 RINs at an average price of $3.08 per RIN. We have been generating LCFS credits associated with the RNG sales based on the default carbon intensity (CI) of negative 150 while our individual dairy CI pathways are waiting for approval from the California Air Resources Board ("CARB"). During the period ended March 31, 2025 we sold 16.0 thousand LCFS credits at an average price of $72.50 each, compared to 18.0 thousand metric tons of LCFS credits at an average price of $66.00 each during the period ended March 31, 2024.

India Biodiesel. For the three months ended March 31, 2025, the Kakinada Plant generated $2.7 million in revenue from sales of feedstock and glycerin. The India biodiesel plant generated $32.8 million in revenue from biodiesel and other sales during the same period in 2024.

Cost of Goods Sold

Cost of goods sold consists primarily of feedstock, energy, chemicals, direct costs (principally labor and labor related costs), and 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. Overhead includes direct and indirect costs associated with plant operations, including the cost of repairs and maintenance, consumables, maintenance, on-site security, insurance, and depreciation.

Our feedstock for California Ethanol is provided by J.D. Heiskell. Title to the corn passes to us when the corn is deposited into our weigh bin and enters the production process. Our cost of feedstock is established by J.D Heiskell based on market prices and includes rail 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, netted from our product sales. Cost of goods sold also includes the cost of electricity and natural gas, chemicals, maintenance, direct labor, depreciation, and freight.

The feedstock for producing RNG is supplied by dairy operators who lease us land and supply our digesters with their manure in liquid form. Our cost of feedstock is established by manure supply agreements based on the value of the environmental attributes and the number of cows at each dairy.

We procure several different feedstocks for the Kakinada Plant, including stearin, a non-edible feedstock, from neighboring natural oil processing plants. 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 purchased crude glycerin in the international market on letters of credit or advance payment terms.

California Ethanol. We ground 4.8 million bushels of corn at an average price of $6.63 per bushel during the three months ended March 31, 2025, compared to 4.9 million bushels of corn at an average price of $6.33 per bushel during the three months ended March 31, 2024. The slight increase in cost of goods sold for the three months ended March 31, 2025, is mainly due to the increase in the cost of corn.

California Dairy Renewable Natural Gas. Cost of goods sold includes dairy manure payments, equipment maintenance, and depreciation. The increase from the first quarter of 2024 to the first quarter of 2025 was primarily due to the increase in the number of operating digesters.

India Biodiesel. The decrease in cost of goods sold during the three months ended March 31, 2025, compared to March 31, 2024, was attributable to a pause in production of biodiesel during the three months ended March 31, 2025, compared to 27.5 thousand metric tons of biodiesel sold during the three months ended March 31, 2024.

Gross profit (loss)

California Ethanol. The decrease in gross loss during the period ended March 31, 2025, was attributable primarily to an increase in the average ethanol sales price.

California Dairy Renewable Natural Gas. The decrease in gross profit for the three months ended March 31, 2025, compared to the same period in 2024 is due to the decrease in sales and increase in costs of goods sold, primarily depreciation, for the increased number of operating digesters.

India Biodiesel. The decrease in gross profit in the first quarter 2025 compared to the first quarter 2024 reflects the paused sales to government OMCs in the first quarter of 2025.

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

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 facility expenses. SG&A expenses as a percentage of revenue were 24% in the three months ended March 31, 2025, compared to 12% in the three months ended March 31, 2024. The increase in SG&A percentage was due to decreased revenues during the three months ended March 31, 2025. The increase in total SG&A expenses in the three months ended March 31, 2025, was primarily due to increases in taxes, insurance, rent, utilities, and professional fees and the insurance and professional fee increases were associated with tax credit sales.

Other expenses consist primarily of interest and amortization expense attributable to our debt and to accretion of biogas Series A Preferred Units. The cost of debt includes issuance of warrants as renewal 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 three months ended March 31, 2025, due to higher variable interest rates and higher debt balances.

Liquidity and Capital Resources

Cash and Cash Equivalents

Cash and cash equivalents were $0.5 million at March 31, 2025, with $0.3 million held in our North American entities and $0.2 million in our India entity. Our current ratio was 0.16 at March 31, 2025 compared to 0.31 at December 31, 2024. We expect that our future available cash resources will be generated from operations, sales of equity, sales of tax credits, and new debt. Incurrence of new debt and the associated use of proceeds from future 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):

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 major components of input costs and product revenues. We are making investments in future facilities and facility upgrades that improve overall margins while lessening the impact of 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 value of environmental attributes or tax credits is reduced, we require additional working capital to fund operations.

As a result of collateralization of substantially all of the Company assets with our senior secured lender, we have been reliant in the past on our senior secured lender to provide a portion of our funding and have been required to remit a significant portion of the cash received from investment tax credit sales to our senior lender. In order to meet obligations during the next twelve months, we will need to receive the continued cooperation of our senior lender to provide extensions of our debt maturities. 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 on awarded grants that improve energy and operational efficiencies resulting in lower cost, lower carbon intensity, and overall margin improvement. The planned improvements include the MVR system that is expected to begin operation in the first half of 2026. The MVR system is expected to reduce energy costs, reduce exposure to fluctuations in natural gas pricing, reduce the carbon intensity of ethanol produced by the plant, reduce the Keyes Plant's direct emissions of greenhouse gases, increase the value of LCFS and tax credits, and substantially improve the cash flows of the Keyes Plant.

For our dairy RNG production, we plan to continue to operate our existing digesters, build new dairy digesters, and extend our pipeline. Funding for construction has been based on government guaranteed debt financing and grant programs, which experienced delays in 2024 but we expect those sources to become available in the first half of 2025. We are seeking additional sources of project funding as well as equipment financing to allow us to accelerate construction of new digesters. Starting January 1, 2025, our RNG production qualifies for federal tax credits under Internal Revenue Code Section 45Z, and we anticipate monetizing these credits by selling them to third parties, which will provide an additional source of cash in addition to the sales of RNG, D3 RINs, and LCFS credits. We also expect LCFS revenue to increase when CARB approves our carbon intensity pathways, allowing us to generate approximately 80% more LCFS credits, and when CARB finalizes its adoption of new LCFS rules that are expected to increase the value of LCFS credits. We are also constructing our own dispensing station so we can sell RNG directly to users and reduce our costs.

For the Kakinada Plant, we plan to continue to enter contracts with the OMCs as our primary customers for biodiesel. We recently completed upgrades to increase our plant production capacity and specifically to increase the capacity to produce biodiesel from lower cost feedstocks and expand feedstock flexibility. 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 arrangements with feedstock suppliers to fund the acquisitions of feedstock and on a bank line of credit to provide lower cost financing secured by our accounts receivable.

In addition to the above we plan to continue to locate funding for operations and for existing and new business opportunities through a combination of working with our senior lender, obtaining new debt, selling equity through our at-the-market sales, selling the current EB-5 Phase II offering, and by vendor financing arrangements.

As of December 31, 2024, the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes equaled $217.4 million. The maturity dates for the Third Eye Capital financing arrangements are as follows:

• Due April 30, 2025: $0.7 million
• Due on demand: $42.9 million
• May 30, 2025: $2 million
• March 1, 2026: $26.7 million
• April 1, 2026: $145.7 million

Our senior lender has provided a series of accommodating amendments to our debt facilities as described in further detail in Note 5. Debt of the Notes to Consolidated Financial Statements in this Form 10-Q. However, future amendments or accommodations will continue to be at the discretion of the lender. In the event our senior lender does not extend our debt, we would likely not have sufficient cash to pay the debt when due unless we are able to obtain alternative financing.

Change in Debt, Working Capital and Cash Flows

The following table describes the changes in current and long-term debt (in thousands) during the three months ended March 31, 2025:

25

Working capital changes reflect (i) a $2.5 million decrease in inventories primarily due to selling feedstock in India during the pause in OMC shipments; (ii) a $12.3 million decrease in tax credit sale receivable due to receipt of the credit sale proceeds; (iii) a decrease in accounts receivable of $0.8 million in the India Biodiesel segment; and (iv) a $0.3 million decrease in other current assets in the India Biodiesel segment.

Cash provided by operating activities was $0.2 million, derived from a net loss of $24.5 million, non-cash changes of $9.6 million, and changes in operating assets and liabilities of $15.1 million. The non-cash changes primarily consisted of: (i) $2.3 million in stock-based compensation expense, (ii) $2.4 million in depreciation expenses, (iii) $2.7 million in amortization of debt issuance costs and other intangible assets, and (iv) $2.3 million in preferred unit accretion and other expenses of Series A Preferred Units. Cash increases related to changes in operating assets and liabilities consisted primarily of (i) a decrease in accounts receivable of $0.8 million, (ii) decrease in inventory of $2.5 primarily due to the India biodiesel segment selling feedstock inventory, (iii) $12.3 million receipt from tax credit sales, and (iv) $0.5 million reduction in other assets. This was offset by (i) a $0.7 million decrease in accounts payable, (ii) $0.2 million decrease in accrued interest expense and fees due to payments towards interest, and (iii) $0.1 million decrease in other liabilities.

Cash used in investing activities was $1.8 million, of which $1.3 million was used for capital projects associated with production of RNG and $0.4 million for capital projects at the Kakinada Plant.

Cash provided by financing activities was $1.3 million, consisting primarily of (i) $3.8 million proceeds from borrowings, and (ii) $5.1 million from sales of common stock, offset by (i) $5.2 million in repayments of borrowings, (ii) $2.2 million in payments on Series A Preferred financing, and (iii) $0.3 million in debt renewal and waiver fee payments.

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 three months ended March 31, 2025, we sold 2.4 million shares of common stock under our at-the-market offering for net proceeds of $5.1 million net of commissions, which is included in the cash provided by financing activities noted above.

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 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: liquidity; debt covenant forecast; and recoverability of long-lived assets. These significant accounting principles are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recently Issued Accounting Pronouncements

None reported beyond those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Off Balance Sheet Arrangements

None.

Evaluation of Disclosure Controls and Procedures.

Management, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our CEO and CFO concluded that, although remediation plans were initiated to address the material weaknesses over financial reporting as identified in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, IT general controls along with certain internal controls over financial reporting were not effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.

As discussed in greater detail under Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the year ended December 31, 2024, we are executing our remediation plans to address the material weaknesses in our internal controls related to information technology general controls and information technology systems as well as documentation.