Aemetis, Inc. (AMTX) Q1 2017 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and welcome to the first quarter 2017 earnings review conference call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Todd Waltz, Executive Vice President and Chief Financial Officer. Sir, the floor is yours.

Thank you, Operator. Welcome to the Aemetis First Quarter 2017 Earnings Review Conference Call. We suggest visiting our Web site at aemetis.com to review today's earnings press release, updated corporate presentations, filing with the SEC, recent press releases, and previous earnings conference calls. This presentation is available for review or download on the aemetis.com homepage. Before we begin our discussion today, I'd like to read the following disclaimer statement. During today's call, we'll be making forward-looking statements, including, without limitation, statements with respect to our future stock price, plans, opportunities, and expectations with respect to financing activity. These statements must be considered in conjunction with the disclosures and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements made on this call involve risks and uncertainty, and that future events may differ materially from the statements made. For additional information, please refer to the company's Security and Exchange Commission filings, which are posted on our Web site and are available from the company without charge. Our discussion on this call will include a review of non-GAAP measures as a supplement to financial results based on GAAP. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the quarter ended on March 31, 2017, which is available on our Web site. Adjusted EBITDA is defined as net income or loss plus to the extent deducted in calculating such net income, interest expense, loss on extinguishment, interest tax expense, intangible and other amortization expense, depreciation expense, and share-based compensation expense. Now, I'd like to review the financial results for the first quarter of 2017. Revenues were $31.6 million for the first quarter of 2017, compared to $33.3 million for the first quarter of 2016. Increases in ethanol production and average selling price resulted in an additional $1.9 million of revenue, which was offset by $3.6 million of lower volumes of biodiesel sales, resulting in lower revenues during the first quarter as compared to the same period in 2016. Gross loss for the first quarter of 2017 was $600,000, compared to gross profit of $2.1 million during the first quarter of 2016. During the first quarter, gross margins declined due to high feedstock costs principally from rail dislocation associated with wet winter weather in California, and lower distiller grain prices. Selling, general, and administrative expenses were $3.3 million in the first quarter of 2017, compared to $3 million in the first quarter of 2016. The increase in selling, general, and administrative expenses was driven by an increase in share-based compensation compared to the same period of the prior year. Operating loss was $4 million for the first quarter of 2017, compared to an operating loss of $1 million for the same period in 2016. Net loss was $8.5 million for the first quarter of 2017, compared to net loss of $5.1 million for the first quarter 2016. Adjusted EBITDA loss for the first quarter of 2017 was $2.5 million, compared to adjusted EBITDA of $250,000 for the same period in 2016. Cash at the end of the first quarter was $231,000 compared to $1.5 million at the close of 2016. That completes our financial review of the first quarter. Now, I'd like to introduce the Founder, Chairman, and Chief Executive Officer of Aemetis, Eric McAfee, for a business update. Eric.

Thank you, Todd. For those of you who may be new to our company, let me take a moment to provide some brief background information. Aemetis was founded in 2006, and we own and operate facilities with more than 110 million gallons per year of renewable fuel capacity in the U.S. and India. Included in our production portfolio is a 60 million gallon per year capacity ethanol plant located in Keyes, California, near Modesto. We also built, own, and operate a 50 million gallon per year capacity distilled biodiesel and refined glycerin bio refinery on the East Coast of Indian, near the port city of Kakinada. We will first briefly discuss our platform businesses in ethanol and biodiesel, and then review our low-cost financing initiatives and important projects in advanced biofuels. To begin, let's review our ethanol business. During the first quarter of 2017, our ethanol business grew 12% year-over-year, partially as a result of a focus on the marketing of ethanol coal products, allowing us to increase both the gallons of ethanol, and the tons of distillers' grains produced and sold. Ethanol pricing also improved by 6% year-over-year, however, are the gross margin was impacted by a 17% increase in feedstock costs due to a one-time wet winter during Q1, 2017, that caused sharply higher transportation costs from railroad delays as corn was moved from the Midwest to California. In Q2, 2017, and later this year, we expect revenues and margins to follow a positive trend due to stronger demand for gasoline from seasonal summer driving demand, stability in the enforcement of the federal renewable fuel standard, and strong demand for low-carbon biofuels in California, and in growing forward markets. Let's review our India biodiesel business. Aemetis is the leading U.S.-owned producer of biofuels in India, a country of 1.3 billion people that consumes about 25 billion gallons of petroleum diesel each year. Aemetis biodiesel produced at our India plant reduces harmful emissions by 80%, and sells as a less expensive fuel than diesel. India biodiesel and refined glycerin revenues in the first quarter of 2017 decreased on a year-over-year basis to $1.6 million from $5.3 million. The primary reason for the revenue decline is a pricing disparity between the price of diesel and the cost of feedstock in the domestic market. However, during the first and second quarters of 2017, our India business achieved important and significant milestones that expanded our customer base, including milestone one, a three-year biodiesel supply contract with a major oil company. During Q1 and Q2 2017, we negotiated and finalized the documentation of a three-year biodiesel supply contract with a major oil company that we expect to sign next week. In late 2016, Aemetis was approached for an exclusive biodiesel supply contract by one of the world's largest oil companies. Aemetis is the only India biodiesel producer approved under the low-carbon fuel standard for the delivery of tallow and used cooking oil biodiesel into California. And Aemetis filed a patent in April, 2017, for the production of low-carbon biofuels based on process technology developed by the operations and laboratory team at our India plant. These unique capabilities contributed to the opportunity for Aemetis and this major oil company to enter into a three-year supply agreement that is currently in draft from. We plan to announce the signing of the agreement with the major oil company as soon as the agreement is fully signed. And we'll be doing an investor road show and other communications to clarify any questions about this important agreement. Please note that until the agreement is signed we cannot, of course, guarantee that it will be. Milestone two is the first oil marketing company supply contract. During Q1 and Q2 2017, we won our first significant supply contract from the three India oil marketing companies that supply 70% of the fuel in India. The contract is a six-month supply agreement for 7,500 tons of biodiesel for about $6 million of revenues. And we expect to be able to win larger supply agreements in the future as we expand this business. Milestone three is a large letter of credit financing facility for shipments to the major oil company. Related to the production of biodiesel for the major oil company, we obtained a letter of credit financing facility that will support the purchase of large volumes of feedstock in order to supply more than $100 million per year of biodiesel to the major oil company. Milestone four is an expanded feedstock financing facility for domestic India sales. During Q2, 2017, we arranged a new financing facility with one of the world's largest suppliers of feedstock to purchase imported [indiscernible] and other feedstocks. This financing provides the physical supply of feedstock for existing bulk market of trucking and bus companies' customers in India. And also, for the first time, offers us the ability to offer flat pricing of biodiesel for six months or more, which is required for sales to the three national oil marketing companies. Let's now review our key financing initiatives, starting with our EB-5 update. As part of our Phase 1 EB-5 offering, we received $35 million of subordinated debt from 70 foreign investors at a 3% interest rate from escrow. After an uncertain period resulting from national political events in the U.S., the EB-5 program was extended last week without any material changes. I have presented in Asia and the Middle East during five trips in the last three quarters. And we are well positioned to make excellent progress this year on a $50 million EB-5 offering Phase 2 that is currently in process. These funds will repay the existing Third Eye capital loan, and fund expansion of company revenues and earnings. Now, let's review our two important advanced biofuels projects. In April 2016, Aemetis signed an agreement to acquire Edeniq, a biofuels technology company that converts corn kernel fiber into higher priced and lower carbon cellulosic ethanol. We are pleased with the progress [indiscernible] litigation related to enforcement of the signed definitive agreement, and we believe the documents disclosed to us in the discovery process strongly support our claims. Our LanzaTech advanced biofuels project continues to achieve important milestones. In January 2017, we received the key California Environmental Quality Act permit approval for the project, and we have executed lease for the project site. We have received Phase 1 approval from the U.S. Department of Agriculture for a loan guarantee, and have received approval for the integrated demonstration plant from the USDA that is now under construction in Washington State. Our eventual goal is to produce more than 32 million gallons per year of cellulosic ethanol, in addition to the existing 60 million gallons per year at the Keyes Plant. The initial 8 million gallons of this project is expected to generate about $50 million of revenue and more than $25 million per year of positive operating cash flow. In summary, we believe that Aemetis' is well positioned with improved fundamentals of the North American ethanol business, potential for increased biodiesel business shipping to domestic and foreign customers from our facility in India, significantly reduced interest cost by repayment of high interest debt with low interest EB-5 funding, and the positive cash flow opportunities from the LanzaTech and other advanced ethanol projects. Now, let's take a few questions from our call participants. Operator?

Thank you. The floor is now open for questions. [Operator Instructions] The first question comes from Carter Driscoll. Please state your question.

Hi, good afternoon; excuse me, good morning. First question, so you are in the I guess the discovery phase with Edeniq and is there any updated timeframe on when you expect potential resolution or moving to -- I don't know, whether that -- resolution outside of the court system or do you anticipate that it will work itself through the legal system?

We have a mediation that is scheduled to occur before August 12, which is a process in the court system, and we'll see whether we have some business resolution occurs without having to go through the entire litigation process.

Okay. So, shifting over to India, could we discuss the milestones are they I mean in your opinion are they inter-linked because it does seem like there are separate aspects to it was the first milestone that helped develop into the other milestones or they really unrelated obviously just within a very large market opportunity?

They are fundamentally unrelated but let me connect the dots, the major oil company came to us third quarter of last year and in order to support the importation and export of each stock to support that supply agreement, we did put in a special letter of credit facility that can support $100 million or more of sales to the major oil company every year and so those are linked to each other because a letter of credit facility was needed standard significantly in order to support the volumes of this particular customer. And then the domestic market with the win on our oil marketing company contract for the first time had a specific requirement for ability to deliver a flat price over a six month period and so we were able to expand the existing financing arrangement we use for over eight years into a related party which is one of the world's largest feedstock producers and from that, we were able to expand our credit lines to support doing all marketing business but an indirect I guess benefit as we can offer expanded production, expanded feedstock purchases and financing for all of our customers in India. So you could kind of think it as the letter of credit supports our export activities and the financing and supply of feedstock pretty much takes off any limit we would have on supplying feedstock to domestic market.

Okay. So the first milestone you're not yet able to announce the party but you're hoping to do so when the contract is actually signed would you anticipate shortly, are there any other it's three years, is it take or pay or their minimums can you share volume expectations ahead of this and or whether this will be as exclusively in the domestic industry or will it be eligible for exports?

Of those questions we can confirm that this is focused on export, India is benefiting from a couple of international features number one it does not have anti-dumping tariffs into the U.S. or into the EU, number two is on January of this year what had been a tariff was ruled to be not proper by the World Trade Organization and so sales by India into Europe are now tariff free. And then number three Aemetis is very extensive, I think it was couple of years process to get approved under the low carbon fuel center in California is a unique opportunity to export from India into California but the logistics in California include tank engine distribution et cetera, this major oil companies one of the world's largest suppliers of diesel to Europe as well as the U.S. and so they're uniquely positioned with the logistics financing and marketing structures already in place. But they didn't have, they didn't have India supply and there's really only a handful of Indian suppliers of which we are the only U.S. led publicly held company with accountability and governance and other features that would be attractive to a multinational oil company to have this counterparty. So we really were the first choice and in an eight month process, now have expectation that next week we'll be able to get a definitive agreement signed there. We have let's say in terms of volumes which would be probably something that people should be aware of their requirements are in excess of four times more than what we can produce in our plant in terms of their actual requirements, the limitation here is really on us and on the feedstock, logistics, and procurement process. So in India, there's certain limitations on the amount of domestic feedstock available and so ramping up feedstock supply will be our primary constraint but our customer is interested in not only the capacity of our plant but potentially we would acquire other plants or expand our plant capacity to 100 million gallons or both in order to meet the fact that they need easily in excess of four times and actually probably five times the capacity of our plant to meet some of their original demands.

And the export is primarily right now was the first Europe and then California, or California because of the LCTFS [ph] and the RINs associated with that export if you just give me your view of where you think the first target market would be and give timeframe assuming you do sign the agreement next week or in short order and maybe potentially some type of ramp given the gauging factors you have currently in place?

Aemetis is uniquely positioned in California that is certainly a target opportunity for everyone but industry analysts have pointed out India's unique position in supplying Europe and with Europe looking at Argentina as an antidumping penalty that is expected to occur this year maybe even another month or two. There is definitely a shortage in Europe of supply of biodiesel from countries that aren't improperly subsidizing their production. So Argentina, Indonesia, Malaysia all ended up with and U.S. by the way ended up with heavy antidumping penalty going into Europe whereas India which has not subsidized biodiesel is uniquely positioned to be the low cost supplier. So our issues really are this the existing demand by this customer is significantly more than what our plant capacity is and as they grow markets for example in California where they like to potentially have much bigger presence, those will be in addition to the current capacity constraints. We do expect to ramp up of this business and we're expecting that again it's based on the logistics constraints of feedstock delivery and shipments but we expect to ramp up over the next two quarters as we get this logistics supply chain working.

Okay. And is the gauging factor more on the feedstock side or the current size, the nameplate capacity of your facility and or potentially finding other sources, if you could just rank one of the other as bigger?

I would admit India domestically will have a feedstock constraint primarily and so expanding the domestic sources of feedstock will be our primary ramp up constraint and over time of two to three, four quarters our constraint will be our production capacity our ability to use our plant either at more than 50 million gallons it was originally designed as a 100 million gallon footprint and so expanding to 100 million gallons to support increase the feedstock's supply would be the kind of thing we have to deal with of course in the next three or four quarters.

Would you potentially get some financing from your partner in regards to either the feedstock and or acquisition Of other plant for you.

This particular customer is well known in biofuels as writing very substantial tens of millions of dollars of funding in both equity and other structures to biofuels companies so; they are certainly a source of that kind of funding. They however have probably had a more direct impact on us because the quality of their credit rating and the appetite for commercial banks in India to support initiatives that supply that. So, without a equity dilution or even a direct financing with them, this existing supply contract is already a tool for expanding our, our financing of capital expenditures in India.

And with this most likely be under the subsidiary level to stay away from the parent company's current capital structure?

You are correct that are subsidiary it has no senior secured debt and is available then to do these feedstock and potential investments to capital expenditures as well as acquisitions by the way our subsidiary is well positioned to do any one of those expansion opportunities and you are also correct that, that's the structure we have financing in cash holdings and other things at our India subsidiary that interestingly enough are held in our Mauritius subsidiary which are held in our Nevada subsidiary because of the structure of taxes and moving capital in and out of India its actually multilayer subsidiary systems.

Maybe just a couple quick ones more from your, give your current view of the Supply demand balance for the U.S ethanol market and implications for as we now see the 10% blend wall move into EB15 and or your view if at all changed on the original times maybe the are noise around changing the point of obligation and that would be disruptive? And then one last follow-up I just squeezed in. Thank you.

Very good question. Let me start with policy because enforcement of the, of the policies are, are fundamental for this industry. There had been late last year tremendous concern about the, the oil industry type employee appointments made as Head of the EPA. Head of Department of Energy and others in the Trump administration subsequently just yesterday and the Head of the USDA, former Governor of Georgia pledged that he would not mess with the RFS would not mess with a new biofuel standard. That was his first major policy speech as USDA Secretary. The head of the EPA was interrogated by Senator Grassley as to his commitment to enforcing fully renewable fuels logs that are on the books for the EPA and an order for him to be appointed as the head of the EPA Scott Pruitt had the pledge he would fully enforce the critical fuel standard and then lastly the Governor of Iowa became our ambassador to China and described his job was to sell ethanol and distillers, grain and beef as American products that should be consumed by the Chinese. And the Chinese, Chinese expects for opportunity is the direct link to your second though the second part of question which is supply demand. I am I'm very comfortable the renewable fuel standard will be enforced. I think there's tremendous political support for it and I think secondly that real issues now are about our export markets and their impact on the domestic inventory levels of ethanol. Opening up the Chinese who should be by the way the largest export market for ethanol this year is an important milestone that has not yet been achieved but we are seeing growth in other segments including Brazil but we export significant amount of fuel to Brazil and certainly in excess of not that the exports so, we are in a unique position in which by growing export markets and a continued seasonal growth here in the U.S. because of relatively inexpensive fuel. We do expect inventory levels to gradually subside over the course of this year. Gasoline consumption worldwide continues to grow at a rate of over 1 million barrels per day I think you know that on an annual basis we've averaged thing 1.5 and 1.8 and this year all projections are above the 1 million barrels per day so we're in a growth market for gasoline and ethanol is the additive that enables that gasoline to burn cleaner keep clear, clean skies. So we do see it growing ethanol market worldwide which will directly impact us. The United States is the Saudi Arabia of ethanol production and our 16 billion gallons of production is the global source to supply emerging economies such as the Naam [ph] worked in four times in the last eight months and they have a new 5% mandate Vietnam or country of over a 100 million people that will be a significance consumer of ethanol from us and other global suppliers. So I think global growth in ethanol directly impacts the, the supply demand curve in U.S. and that all those trends combined with the fortunate of U.S. policy are very favorable.

And then just last EB-5 Phase II you make several trips abroad to secure financing, expectation of when that may hit in 2017 and that you think the approval process is then expedited versus what you experienced under Phase I.

We have had a the delay in EB-5 implementation globally because of concerns about immigration policy in the U.S. that is being I think results there was a vote to extend the EB-05 program again until the end of September along with the federal budget continuing resolution so we have a five month window here in which brokers now know what the rules of the game are and are not as concerned that there is going to be some change midstream. So we expect some significant progress over the next five months. The EB-5 process is an immigration process but this Phase II offering has a unique feature in which, when the paperwork is installed with the immigration service, our funds are released whereas in the prior offering. The funds had to wait for up to a year and half while the immigration office was reviewing documents. So this, what we are seeing as recovery of confidence in the, in immigration and EB-5 projects and that there examples in the media of large influential people doing EB-5 projects so we are part of that positive trend. In terms of projecting was going to occur I would cite that, our last project in but only two weekends back to back we raised over $30 million and so it's a process of doing a lot of speed work and then hitting it hard for a few weekends in the few countries. And so we do expect a repeat of the experience and we do not have a projection right now about the level of confidence of brokers would have to be able to do that in the next month or two but we certainly met with them and will be continuing the trips over the next five months and it very possibly could occur in the next three to five months that we have significant level of subscriptions for the $50 million offer.

I'm sorry one last one given the, kind of weak volumes Kakinada could you with the six months agreement you just signed I guess you are anticipating about $6 million in revenue could you exceed your our dollar sales in Kakinada in 2017 versus 2016 is that expectation and then maybe it's quite a bit volatile pricing on a quarterly basis maybe your expectations for pricing for the balance of this year or at least next quarter? Thank you. And I'll get back in queue.

But let me do a little work on that and get back to your curve so, that we are giving interactive numbers because I want to be able to do the comparisons to 2016 and not just to be generalities but in general we're ramping up the business rapidly in India between our existing bus and truck customers. One of our customers has 4000 trucks and buses they operate and so, demand for our existing customers is very material. The new credit line is going to be very helpful in supplying them and then secondly the $6 million six month contract is a material addition that we've not had as a market before and then of course add on top of that, the major oil company supply chain so, we have a very significant ramp up but I do expect will significantly feed 2016 numbers on a quarterly basis.

Appreciate all the color. I get back in queue gentlemen. Thank you.

Thank you, Carter.

Okay. Our next question comes from Tom Welch. State your question.

Hi, quick question for you. The dots, plans in place with the ability to do in India IPO of the biodiesel subsidiary was originally put in place to finance expansion growth of the India business; on a scale of one to ten how likely are we to be looking at doing the IPO in the next 12 months, India?

I would put it at a five in likelihood and it's not necessarily our performance is more the performance of the SENSEX which is the India Stock Exchange and as you may recall we retained investment banking for an IPO and then the price of oil due to Saudi decisions declined for the next couple of years. We are now in a very positive trend operationally and certainly are trending toward a situation which we have to increase capacity and perhaps use mergers and acquisitions to sustain our ability to meet the requirements of our customers. So this is absolute time in which those kinds of discussions certainly are needing to be focused on. But SENSEX has its own winds of change and so I would give it a five because if the winds blow in our correct direction which by the way is increasing oil prices look for OPEC this month to come together and work together toward a $60 oil price that is a tremendous addition of positive cash flow to our India subsidiary. And so, as oil prices rise to $60 and higher that will be something that the SENSEX and other it doesn't makers in India will look after it closely. And then number two just to expanded feedstock apply and revenues as we grow our business and as we get 100% capacity we will need to do transactions that expand the business and an IPO would certainly be consistent with that. So we're focused on getting the operational growth to occur and then looking closely at what the time would be for a SENSEX opportunity.

Thank you, no more questions.

Okay our next question comes from Scott Ozer. Please take your question.

Hi, Eric, can you tell me what the level of that is with Third Eye now?

Level of Third Eye approximately 69.

Yes.

In today our outstanding with Third Eye is about 68.5 right now.

Okay. And then I hear you correctly you've already raised $30 million with the latest EB-5?

Our Phase I EB-5 we raised $35 million with we have $50 million that would now be replacement of that 68.5 so the use of funds on this current round is to fully repay $50 million of the 68.5 to Third Eye which would mean we have roughly $170 million of additional cost of assets and would only have about $18 million outstand at Third Eye so that's a pretty financial position for the parent company. Our subsidiary already has no senior secured bank that we've been that off last year.

Okay. I'd sure love to see that drop by some significant amounts. Yesterday you came out with some good news with the $6 million and today we get the earnings we you know I just there's a level of frustration that I think many of us feel out here that we're trying to close the Edeniq deal and we're trying to get the earnings straight. Can you give us some guidance on when you think that we can see -- is that my level of frustration I'm sorry. When we are going to be out of the tunnel? When can you see is really making some good forward progress?

Well, our decimal revenues being up and price of ethanol gain up was overshadowed in first quarter with a 17% increase which really was almost entirely attributable to rail costs that despite hugely you're in California so they or build them happen to wipe out a part of the railroad that comes as a surprise our plants. So that let's just fix that lay allows the railroads and other people that control railroad cars to spike their prices. And so if you really look at the U.S. business we're clearly out of the words we are in a very, very positive environment in terms of supply demand trends, oil price trends and other trends that oil's doubled than last year or so since January 2016. And there is winter anomaly which does occur, and I would actually tell you that from a policy perspective, renewable fuel standards have been of great concern to many people over the last six months or so after this new administration. And that is also settling down with the head of the USCA committing to not mess with the RFS. I think we're in very strong policy position so the bright point to look at right now is India all admit that because there's where full capacity in our California plant were revenues up, our production is up demands up and so as we build the U.S. business really the operational uncertainty it's gone at this point time and it's just expanding our India business. But if you do the math on that, that's almost $100 million was more than $100 million a year of increased revenue from getting our India plant not even the full capacity. So we're talking about increasing the size of this business by 80% and that's a fast growth opportunity and it's a positive cash flow opportunity because we don't have any debt India. So we're very comfortable that we're on the right path. We wish the prior administration was more consistent out of enforcing federal law they skipped it for two years for 2014, 2015 there was no enforcement of federal mandates for biofuels and that costs over three billion gallons of last demands for our industry. And over the last two years we've worked that often now I think in much more healthy situation.

Okay, thank you.

Sure, thank you, Scott.

Okay. Our next question comes from Anthony Marchesa [ph]. Please take your question.

Hey, Eric, you're right unfortunately some extraneous factors cause the company result full of course then they probably should have could have been outside of onetime events. But let me ask a question what would be really helpful in terms of just we're in the -- for the stock obviously or what would be helpful to see some insider buying at the company. I don't know what your windows are for buying and selling but certainly at these it sounds like from my vantage point the stock seems to be a bargain relative to the outline of business opportunity so it would be helpful to the see management and or the board at these levels perhaps by some stock in the open market that I think would send the strongest possible signal?

Anthony, I'll give your feedback to the FCC lawyers that regulate all this kind of stuff because the materiality of the outside contracts we just even mentioned today. As you can see there's been some pretty deep concern about insiders taking information they have that's positive outside information and trading on it. But I agree with you we do have that opportunity ahead of us and as we get this information disclosed I think the stock is going to consider the considerable discount to what the value is after we get full disclosure of these opportunities.

Okay, very good. Thanks a lot.

Thanks, Tony.

Okay. Our next question comes from Keith Goodman. Please take your question.

.:

Yes we can, so we have the EB-5 offering which is a subordinated debt 3% long-term that's eminent, but we also have operational cash flow of any of that commute brought back because there is no senior debt instrument with a bank in India it's restricted.

Okay. And maybe I missed it when you say the imminent EB-5 what's the timeframe on that?

We're doing the active marketing right now there have been some uncertainty about the program until last Friday when it was extended without any material changes. But because of immigration policy and other policies in the current administration throwing everybody a little bit of the tizzy; the resolution last part Friday as an extension of the program without change was a very important signal for brokers specifically but also investors. So we're continued to work on getting a significant part of the $50 million subscribed if not the entire $50 million.

Okay, all right. Great, I'll pick up the rest from the transcript. Thanks, guys.

Thank you.

Okay. Our next question comes from James Stone. Please take your question.

Good afternoon, gentleman.

Good afternoon, Jim.

All right, long time since we've chatted. A couple of questions here trying to understand something we had specifically of what has happened if I look at the growth of EB ethanol, ethanol increase sequentially when every quarter and then we had this tremendous fallback this quarter. Could you give us a little better feel for why that happened?

On year-over-year basis ethanol grew 12% and the pricing improved 6% so weather time is the weakest time for gasoline consumption the U.S. and this weather of course with the storms across a bit west we had less driving going on. So gasoline demand seasonally goes down but even with those changes are ethanol business revenues grew 12% and our pricing improved 6% on a year-over-year basis.

I understand that but the volume may not sequentially every quarter last year compare to the year before where it was all over and down slightly in the last quarter. And last in '14 the largest quarter was the first quarter. So again I don't understand specifically why you got in a situation there where you suppose we have an advantage because you're closest to the customers you've got the price advantage and you don't have as larger transportation fees et cetera. And then we see it go down and so I'm trying to understand what's the problem here?

We had constraints primarily on byproducts and ability to shift byproducts. It's not really an ethanol market constrained at all. And as we've expanded our byproducts business this year we've to increase volumes and of course that drove ethanol revenues and ethanol gallons. So Jim I think we're running out of time here the operators signaling that we need to wrap this up. Can you give me a call and will talk three other questions?

Sure…

Good, thank you. Operator?

Yes, thank you. This concludes today's call. We thank you for your participation. You may disconnect your lines at this time, and have a great day.