
PART I - FINANCIAL INFORMATION Item 1. Financial Statements The company's Q2 2022 financial statements show increased assets and liabilities, a widened deficit, 20% revenue growth, and a reduced net loss due to grants and litigation gains Consolidated Condensed Balance Sheets Total assets increased to $178.5 million by June 30, 2022, driven by property, plant, and equipment, while total liabilities rose to $301.2 million, widening the stockholders' deficit to ($122.7 million) Balance Sheet Comparison (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total current assets | $15,045 | $20,693 | | Property, plant and equipment, net | $156,790 | $135,101 | | Total assets | $178,452 | $160,831 | | Total current liabilities | $60,362 | $65,330 | | Total long term liabilities | $240,803 | $215,739 | | Total liabilities | $301,165 | $281,069 | | Total stockholders' deficit | ($122,713) | ($120,238) | Consolidated Condensed Statements of Operations and Comprehensive (Loss) Q2 2022 revenues grew 20% to $65.9 million, but higher costs led to a gross loss; a $14.2 million USDA grant and litigation gain reduced net loss to $0.2 million Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $65,901 | $54,884 | $117,950 | $97,691 | | Gross profit (loss) | ($214) | $3,646 | ($3,299) | $38 | | Operating loss | ($7,686) | ($2,128) | ($18,113) | ($11,141) | | Net loss | ($209) | ($10,557) | ($18,503) | ($28,669) | | Net loss per share (Basic) | ($0.01) | ($0.34) | ($0.54) | ($1.00) | - A $14.2 million grant from the USDA's Biofuel Producer Program and a $1.4 million gain on litigation significantly reduced the net loss in Q2 20221568 Consolidated Condensed Statements of Cash Flows Net cash used in operations decreased to $6.5 million for H1 2022, while investing cash use increased to $16.4 million, and financing provided $18.7 million, resulting in a $4.2 million cash decrease Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,483) | ($18,213) | | Net cash used in investing activities | ($16,371) | ($11,711) | | Net cash provided by financing activities | $18,705 | $36,526 | | Net change in cash | ($4,193) | $6,583 | Notes to Consolidated Condensed Financial Statements Notes detail business segments, $208.6 million debt, financing, and management's substantial doubt about going concern due to reliance on its senior lender - The company operates in three reportable segments: California Ethanol, Dairy Renewable Natural Gas, and India Biodiesel, while developing 'Carbon Zero' sustainable aviation fuel (SAF) and Carbon Capture and Sequestration (CCS) projects25272930 - Total debt stood at $208.6 million as of June 30, 2022, primarily from Third Eye Capital, with a new $100 million revolving credit facility secured in March 202284104 - Management plans to address the 'going concern' issue by improving plant efficiencies, executing grants, developing new projects, and securing additional funding168169170 - Subsequent to quarter-end, the company extended its Third Eye Capital debt maturity option to April 2024 and amended its Series A Preferred Unit agreement for full redemption by December 31, 2022166167 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights 20% Q2 2022 revenue growth offset by 29% higher costs, leading to a gross loss, and discusses liquidity concerns, including substantial doubt about going concern, and strategic initiatives in RNG and SAF Results of Operations Q2 2022 revenues increased 20% to $65.9 million due to higher ethanol prices, but a 29% rise in cost of goods sold led to a gross loss, partially offset by a $14.2 million USDA grant Q2 2022 vs Q2 2021 Revenue by Segment (in thousands) | Segment | Q2 2022 | Q2 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | California Ethanol | $65,891 | $54,730 | $11,161 | 20% | | India Biodiesel | $10 | $154 | ($144) | -93.5% | | Total | $65,901 | $54,884 | $11,017 | 20% | - The increase in California Ethanol revenue was driven by a higher average ethanol price of $3.13/gallon in Q2 2022 versus $2.78/gallon in Q2 2021191 - Cost of goods sold increased primarily due to a rise in the average cost of corn feedstock to $10.21 per bushel in Q2 2022 from $8.04 in Q2 2021196 - A $14.2 million grant was received from the USDA's Biofuel Producer Program, created under the CARES Act, and recorded as other income187203 Liquidity and Capital Resources Liquidity is constrained with $3.6 million cash, raising substantial doubt about going concern due to reliance on its senior lender; future liquidity depends on debt refinancing and new capital for strategic projects - The company's dependence on its senior lender raises substantial doubt about its ability to continue as a going concern221168 Liquidity Snapshot (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,558 | $7,751 | | Current assets | $15,045 | $20,693 | | Current liabilities | $60,362 | $65,330 | | Current Ratio | 0.25 | 0.32 | - The company plans to fund operations and growth projects by working with its senior lender, restructuring debt, selling bonds, selling equity via its ATM program, and continuing its EB-5 Phase II offering224171 Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not applicable for the current quarterly report - The company has indicated that Quantitative and Qualitative Disclosures about Market Risk are not applicable for this quarterly report234 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2022, due to material weaknesses identified in the 2021 Annual Report, with ongoing remediation plans - The CEO and CFO concluded that disclosure controls and procedures were not effective as of the end of the period235 - The ineffectiveness is due to material weaknesses identified in the 2021 Form 10-K, with remediation plans currently in progress236237 - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting236 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company settled a lawsuit with EdenIQ, Inc. for $4.8 million on May 6, 2022, resulting in a $1.4 million gain on litigation in Q2 2022 - On May 6, 2022, the company settled a lawsuit with EdenIQ, Inc. for $4.8 million238127 - The settlement resulted in a gain on litigation of $1.4 million, recognized on the income statement in Q2 2022238127 Item 1A. Risk Factors Updated risk factors highlight the material impact of inflation on operations, with rising commodity prices for inputs like corn and natural gas compressing profit margins - A new risk factor was added regarding the adverse impact of inflation on key production inputs, wages, and other business expenses239 - The war in Ukraine is cited as a driver of sharp rises in grain and energy prices, which are primary input commodities for the company240 - The company may be unable to raise its product prices sufficiently to offset inflation, which would reduce profit margins241 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported241 Item 3. Defaults Upon Senior Securities No unresolved defaults on senior securities were reported during the six months ended June 30, 2022 - No unresolved defaults on senior securities occurred during the six months ended June 30, 2022241 Item 4. Mine Safety Disclosures No mine safety disclosures were reported - None241 Item 5. Other Information No other information was reported for this item - None241 Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and material agreements like debt and preferred unit amendments - Exhibits include certifications from the CEO and CFO as required by the Sarbanes-Oxley Act242 - Material agreements filed as exhibits include Limited Waiver and Amendment No. 24 to the Amended and Restated Note Purchase Agreement and a Waiver and Amendment to the Series A Preferred Unit Purchase Agreement242