~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

4. Debt

~~Debt~~

Debt consists of the ~~following:~~notes from our senior lender, Third Eye Capital, other working capital lenders and subordinated lenders as follows:

	September 30, 2019	December 31, 2018	September 30, 2020	December 31, 2019
Third Eye Capital term notes	$7,022	$7,024	$7,039	$7,024
Third Eye Capital revolving credit facility	58,742	47,225	75,605	62,869
Third Eye Capital revenue participation term notes	11,792	11,794	11,824	11,794
Third Eye Capital acquisition term notes	24,907	23,841	26,313	25,518
Third Eye Capital promissory note	2,814	-	1,840	2,815
Cilion shareholder seller notes payable	6,086	5,974	6,236	6,124
Subordinated notes	11,085	10,080	12,315	11,502
Term loan on Equipment purchase			5,652	-
EB-5 promissory notes	40,199	38,536	42,965	41,932
PPP loans			1,134	-
Unsecured working capital loans	3,518	4,822	2,540	2,631
GAFI Term and Revolving loans	29,373	25,821	32,883	30,216
Total debt	195,538	175,117	226,346	202,425
Less current portion of debt	22,476	17,298	59,336	22,740
Total long term debt	$173,062	$157,819	$167,010	$179,685

On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (“AAFK”), entered into an Amended and Restated Note Purchase Agreement with Third Eye Capital (the “Note Purchase Agreement”). 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. (the Term Notes, Revolving Credit Facility, Revenue Participation Term Notes and Acquisition Term Notes are referred to herein collectively as the “Original Third Eye Capital Notes”).

On March 27, 2018, Third Eye Capital agreed to Limited Waiver and Amendment No. 14 to the Note Purchase Agreement or (“Amendment No. ~~14,~~14”) to: (i) extend the maturity date of the Third Eye Capital Notes by two years to April 1, 2020 in exchange for an amendment fee consisting of 6% (3% per year) of the outstanding note balance in the form of an increase in the fee payable in the event of a redemption of the Third Eye Capital Notes (as defined in the Note Purchase Agreement); (ii) provide that the maturity date may be further extended at our election to April 1, 2021 in exchange for an extension fee of 5%; (iii) provide for an optional waiver of the ratio of note indebtedness covenant until January 1, 2019 with the payment of a waiver fee of $0.25 million; and (iv) remove the redemption fee described in (i) above from the calculation of the ratio of note indebtedness covenant. In addition to the fee discussed in (i), as consideration for such amendment and waiver, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.5 million to be added to the outstanding principal balance of the Revolving Credit Facility.

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

~~We evaluated Amendment No. 14 in accordance with ASC 470-60Troubled Debt Restructuring.~~According to guidance, we considered Amendment No. 14 to be a troubled debt restructuring. We assessed all the terms to confirm if there is a concession granted by the creditor. The maturity date of the Third Eye Capital Notes was extended to April 1, 2020 for a 6% fee, which was lower on an annual basis than the extension fee of 5% provided by Amendment No. 13 for a one-year extension. No interest is accrued on these fees and there were no other settlements in Amendment No. 14 on these Notes. In order to assess whether the creditor granted a concession, we calculated the post-restructuring effective interest rate by projecting cash flows on the new terms and solved for a discount rate equal to the carrying amount of pre-restructuring of debt, and by comparing this calculation to the terms of Amendment No. 13, we determined that Third Eye Capital provided a concession in accordance with the provisions of ASC 470-60~~Troubled Debt Restructuring~~and thus applied troubled debt restructuring accounting. The extension fee, due at maturity, was discounted at the effective interest rate of the Third Eye Capital Notes, and an immediate charge was taken to recognize the fees into amortization expense on the income statement related to the trouble debt restructuring of $3.1 million and amendment fees of $0.5 million. Using the effective interest method of amortization, the remaining extension fee of $1.4 million will be amortized over the stated remaining life of the Third Eye Capital Notes.

On March 27, 2018, Third Eye Capital also agreed to a one-year reserve liquidity facility governed by a promissory note, payable in the principal amount of up to $6 million. Borrowings under the facility are available from March 27, 2018 until maturity on April 1, 2019. Interest on borrowed amounts accrues at a rate of 30% per annum, paid monthly in arrears, or 40% if an event of default has occurred and continues. The outstanding principal balance of the indebtedness evidenced by the promissory note, plus any accrued but unpaid interest and any other sums due thereunder, shall be due and payable in full at the earlier to occur of (a) the closing of any new debt or equity financing, refinancing or other similar transaction between Third Eye Capital or any fund or entity arranged by them and the Company or its affiliates, (b) receipt by the Company or its affiliates of proceeds from any sale, merger, equity or debt financing, refinancing or other similar transaction from any third party and (c) April 1, 2019. The promissory note is secured by liens and security interests upon the property and assets of the Company. If any amounts are drawn under the facility, the Company will pay a non-refundable fee in the amount of $200 thousand payable from the proceeds of the first drawing under the facility. We did not draw any amounts under the facility and no balance was outstanding as of December 31, 2018 under this facility. On March 11, 2019, Third Eye Capital agreed to increase the amount available under the reserve liquidity facility up to $8.0 million and extend the maturity date to April 1, 2020 with the same terms as above.

Based on the terms of Amendment No. 14, the Company intends to extend the maturity to April 1, 2021 for a fee of 5% on the outstanding debt which can be paid or added to the outstanding balance of the revolving notes.

On March 11, 2019, Third Eye Capital agreed to Limited Waiver and Amendment No. 15 to the Note Purchase Agreement (“Amendment No. 15”), to waive the ratio of note indebtedness covenant through December 31, 2019. As a consideration for this amendment, the Company also agreed to pay Third Eye Capital an amendment fee of $1.0 million to be added to the redemption fee which is due upon redemption of the Notes.

On November 11, 2019, Third Eye Capital agreed to Limited Waiver and Amendment No. 16 to the Note Purchase Agreement (“Amendment No. 16”), to waive the ratio of note indebtedness covenant ~~through~~for the quarters ended March 31, 2020, September 30, 2020, September 30, 2020 and December 31, 2020. As a consideration for this amendment, the Company also agreed to pay Third Eye Capital an amendment fee of $0.5 million to be added to the redemption fee which is due upon redemption of the Notes.

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value~~Based on Amendment No. 16, the ratio of note indebtedness covenant is waived for the quarters ended September 30, 2020 and ~~per share data)~~

December 31, 2020. Based on the Amendment No. ~~15,~~17, the ratio of note indebtedness covenant is waived for the quarters ended March 31, ~~2019,~~2021 and June 30, ~~2019, September 30, 2019 and December 31, 2019. Based on the~~2021. On November 5, 2020, Third Eye Capital agreed to Amendment No. ~~16 dated November 11, 2019,~~18 to waive the ratio of note indebtedness covenant ~~is waived~~ for the ~~quarters~~quarter ended ~~March 31, 2020, June 30, 2020,~~ September 30, ~~2020 and December 31, 2020.~~2021 for a fee of $50 thousand. According to ASC 470-10-45 debt covenant classification guidance, if it is probable that the Company will not be able to cure the default at measurement dates within the next 12 months, the related debt needs to be classified as current. ~~Given~~As the ~~waivers are available for~~Amendment No. 16 , Amendment No. 17, and Amendment No.18 waived the ratio of the note indebtedness covenant ~~through December 31, 2020, hence~~over the next four quarters, the notes are classified as ~~long term~~long-term debt.

On February 27, 2019, a Promissory Note (the “February 2019 Note”, together with the Original Third Eye Capital Notes, the “Third Eye Capital Notes”) for $2.1 million was advanced by Third Eye Capital to Aemetis, Inc., as a short-term credit facility for working capital and other general corporate purposes with an interest rate of 14% per annum maturing on the earlier of (a) receipt of proceeds from any financing, refinancing, or other similar transaction, (b) extension of credit by payee, as lender or as agent on behalf of certain lenders, to the Company or its affiliates, or (c) April 30, 2019. In consideration of the February 2019 Note, $0.1 million of the total proceeds were paid to Third Eye Capital as financing charges. On April 30, 2019, the February 2019 Note was modified to remove the stated maturity date and instead will be due on demand by Third Eye Capital. In third quarter of 2019, the February 2019 Note was modified to include additional borrowings of $0.7 million. In first quarter of 2020, the February 2019 Note was modified to include additional borrowings of $0.6 million. As of September 30, ~~2019,~~2020, the outstanding balance of principal and interest on the February 2019 ~~note~~Note was ~~$2.8~~$1.8 million.

On April 1, 2020, the Company exercised the option to extend the maturity of Third Eye Capital Notes to April 1, 2021 for a fee of 1% of the outstanding note balance instead of agreed fee of 5% in the Amendment No.14. We have evaluated the reduction in extension fee to 1% in accordance with ASC 470-60 Troubled Debt Restructuring. According to the guidance, we considered the 1% extension fee to be a troubled debt restructuring. We assessed all the terms to confirm if there is a concession granted by the creditor. The maturity date of the Third Eye Capital Notes was extended to April 1, 2021 for a 1% fee, which was lower than the extension fee of 5% provided by Amendment No. 14 for a one-year extension. On August 11, 2020, Third Eye Capital agreed to Limited Waiver and Amendment No. 17 to the Note Purchase Agreement (“Amendment No. 17”), to (i) provide that the maturity date of the Third Eye Capital Notes may be further extended at our election to April 1, 2022 in exchange for an extension fee equal to 1% of the Note Indebtedness in respect to each Note, provided that such fee may be added to the outstanding principal balance of each Note on the effective date of each such extension, (ii) provide for a waiver of the ratio of note indebtedness covenant for the quarters ended March 31, 2021 and June 30, 2021. As consideration for such amendment and waivers, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.3 million in cash (the “Amendment No. 17 Fee”). We have evaluated the 1% extension fee and Amendment No. 17 in accordance with ASC 470-60 Troubled Debt Restructuring. According to the guidance, we considered 1% extension and Amendment No.17 Fee to be a troubled debt restructuring. In order to assess whether the creditor granted a concession, we calculated the post-restructuring effective interest rate by projecting cash flows on the new terms and calculated a discount rate equal to the carrying amount of pre-restructuring of debt, and by comparing this calculation to the terms of Amendment No. 15, we determined that Third Eye Capital provided a concession in accordance with the provisions of ASC 470-60 Troubled Debt Restructuring and thus applied troubled debt restructuring accounting, resulting in no gain or loss from the application of this accounting. Using the effective interest method of amortization, the 1% extension fee of $1.0 million and the Amendment No. 17 Fee of $0.3 million will be amortized over the stated remaining life of the Third Eye Capital Notes.

Terms of Third Eye Capital Notes

Term Notes. As of September 30, ~~2019,~~2020, the Company had ~~a total of~~ $7.0 million ~~in principal and interest~~ outstanding under the Term ~~Notes.~~Notes net of $53 thousand unamortized discount issuance costs. The Term Notes accrue interest at 14% per ~~annum. The Term Notes~~annum and mature on April 1, 2020*2021*.

B. B.

Revolving Credit Facility. The Revolving Credit Facility accrues interest at the prime rate plus 13.75% ~~(18.75%~~(17.00% as of September 30, ~~2019)~~2020), payable monthly in arrears. The Revolving Credit Facility matures on April 1, 2020*2021*. As of September 30, ~~2019,~~2020, AAFK had ~~$58.7~~$75.6 million ~~in principal, interest, and waiver fees~~ outstanding under the Revolving Credit Facility net of ~~$0.2~~$0.5 million unamortized discount issuance costs.

Revenue Participation Term Notes. The Revenue Participation Term ~~Notes bear~~Note bears interest at 5% per annum and ~~mature~~matures on April 1, 2020*2021*. As of September 30, ~~2019, the Company~~2020, AAFK had ~~a total of~~ $11.8 million ~~in principal and interest~~ outstanding on the Revenue Participation Term ~~Notes.~~Notes net of $87 thousand unamortized discount issuance costs.

Acquisition Term Notes. The Acquisition Term Notes accrue interest at the prime rate plus 10.75% ~~(15.75%~~(14.00% per annum as of September 30, ~~2019)~~2020) and mature on April 1, 2020*2021*. As of September 30, ~~2019,~~2020, Aemetis Facility Keyes, Inc. had ~~$24.9~~$26.3 million ~~in principal, interest and redemption fees~~ outstanding net of unamortized discount issuances costs of ~~$0.9~~$0.1 million. The outstanding ~~principal~~ balance includes a total of ~~$7.0~~$7.5 million in non-interest bearing redemption ~~fees, including $4.5 million which was added to the Acquisition Term Notes on March 27, 2018 as part of Amendment No. 14 and $1.0 million covenant waiver fees as part of Amendment No. 15.~~fees.

Reserve Liquidity Notes. The Reserve Liquidity Notes, with available borrowing capacity in the amount of ~~$8.0~~$18.0 million, accrue interest at the rate of 30% per annum and are due and payable upon the earlier of: (i) the closing of new debt or equity financings, (ii) receipt from any sale, merger, debt or equity financing, or (iii) April 1, ~~2020*.~~2021. We have no borrowings outstanding under the Reserve Liquidity Notes as of September 30, ~~2019.~~2020.

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

The Third Eye Capital 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 Third Eye Capital Notes allow the lender to accelerate the maturity in the occurrence of any event that could reasonably be expected to have a material adverse effect, such as any change in the business, operations, or financial condition. The terms of the notes allow interest to be capitalized.

The Third Eye Capital Notes are secured by first priority liens on all real and personal property of, and assignment of proceeds from all government grants and guarantees from ~~Aemetis, Inc.~~the Company's North American subsidiaries. The Third Eye Capital Notes all contain cross-collateral and cross-default provisions. McAfee Capital, LLC (“McAfee Capital”), owned by Eric McAfee, the Company’s Chairman and CEO, provided a guaranty of payment and performance secured by all of its Company shares. In addition, Eric McAfee provided a blanket lien on substantially all of his personal assets, and McAfee Capital provided a guarantee in the amount of $8.0 million.

*The note maturity date can be extended by the Company to April ~~2021.~~2022. As a condition to any such extension, the Company would be required to pay a fee of 5%1% of the carrying value of the debt which can be paid in cash or added to the outstanding debt. As a result of this ability to extend the maturity at the Company’s will, the Third Eye Capital Notes are classified as non-current debt.

Cilion shareholder seller notes payable. In connection with the Company’s merger with Cilion, Inc., ~~(Cilion)~~(“Cilion”) on July 6, 2012, the Company issued $5.0 million in notes payable 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, ~~2019,~~2020, Aemetis Facility Keyes, Inc. had ~~$6.1~~$6.2 million ~~in principal and interest~~ outstanding under the Cilion shareholder seller notes payable.

Subordinated Notes. On January 6 and January 9, 2012, AAFK entered into Note and Warrant Purchase Agreements with two accredited investors (the “Note and Warrant Purchase Agreements”) pursuant to which it issued $0.9 million and $2.5 million in original notes to the investors (the “Subordinated Notes”). The Subordinated Notes mature every six months. Upon maturity, the Subordinated Notes are generally extended 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% 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.

On July 1, ~~2019,~~2020, the Subordinated Notes were amended to extend the maturity date until the earlier of (i) December 31, ~~2019;~~2020; (ii) completion of an equity financing by AAFK or Aemetis in an amount of not less than $25.0 million; or (iii) after the occurrence of an Event of Default (as defined in the Note and Warrant Purchase Agreements), including failure to pay interest or principal when due and breaches of note covenants. A 10% cash extension fee was paid by adding the fee to the balance of the new note and warrants to purchase 113 thousand shares of common stock were granted with a term of two years and an exercise price of $0.01 per share. We evaluated the July 1, ~~2019~~2020 amendment and the refinancing terms of the Subordinated Notes and applied modification accounting ~~treatment~~ in accordance with ASC 470-50Debt – Modification and ~~Extinguishment~~.Extinguishment.

At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had, in aggregate, ~~$11.1~~$12.3 million and $11.5 million outstanding net of ~~unamortized~~ discount issuance costs of $0.2 million and ~~$10.1 million in principal and interest outstanding,~~none, respectively, under the Subordinated Notes.

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

EB-5 ~~long-term~~ promissory notes. EB-5 is a U.S. government program authorized by the Immigration and Nationality Act 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 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 2-3%. Each note was issued in the principal amount of $0.5 million and due and payable four years from the date of each note, for a total aggregate principal amount of up to $36.0 million (the “EB-5 Phase I funding”). The original maturity date on the promissory notes can be extended automatically for a one or two-year period initially and is eligible for further one-year automatic extensions as long as there is no notice of non-extension from investors and the investors’ immigration ~~processes are~~process is in progress. On February 27, 2019, Advanced BioEnergy, LP, and the Company entered into an Amendment to the EB-5 Notes which restated the original maturity date on the promissory notes with automatic six-month extensions as long as the investors’ immigration processes are in progress. Except for ~~four~~six early investor EB-5 Notes, the Company was granted 12 months from the date of the completion of immigration process to redeem these EB-5 Notes. Accordingly, the notes have been recognized as ~~long term~~long-term debt while the ~~four~~five early investor notes and one investor who obtained the Green Card approval have been classified as current debt. The EB-5 Notes are convertible ~~into Company’s common stock~~ after three years at a conversion price of $30 per share.

Advanced BioEnergy, LP arranges investments with foreign investors, who each make loans to the Keyes Plant in increments of $0.5 million. The Company has sold an aggregate principal amount of $36.0 million of EB-5 Notes under the EB-5 Phase I funding since 2012 to the date of this filing. As of September 30, ~~2019, $35.0~~2020, $35.5 million has been released from the escrow amount to the Company, with $0.5 million remaining ~~in escrow and $0.5 million~~ to be funded to escrow. As of September 30, ~~2019, $35.0~~2020, $35.5 million in principal and ~~$2.7~~$3.3 million in accrued interest was outstanding on the EB-5 Notes sold under the EB-5 Phase I ~~Notes.~~funding.

On October 16, 2016, the Company launched its EB-5 Phase II funding, with plans to issue $50.0 million in additional EB-5 Notes on substantially similar terms and conditions as those issued under the Company’s EB-5 Phase I funding, to refinance indebtedness and capital expenditures of Aemetis, Inc. and ~~GAFI.~~GAFI (the “EB-5 Phase II funding”). On November 21, 2019, the minimum investment was raised from $0.5 million per investor to $0.9 million per investor. The Company entered into a Note Purchase Agreement dated with Advanced BioEnergy II, LP, a California limited partnership authorized as a Regional Center to receive EB-5 Phase II funding investments, for the issuance of up to 100 EB-5 Notes bearing interest at 3%. On May 1, 2020 Supplement No. 3 amended the offering documents and lowered the total eligible new EB-5 Phase II funding investors to 60. Eight EB-5 investors have funded at the $0.5 million per investor amount, so 52 new EB-5 Phase II funding investors are eligible at the new $0.9 million per investor amount under the current offering. Job creation studies show additional investors may be possible to increase the total offering amount in the future. Each new note will be issued in the principal amount of ~~$0.5~~$0.9 million and due and payable five years from the date of each note, for a total aggregate principal amount of up to ~~$50.0 million (the “EB-5 Phase II funding”).~~$50.8 million.

Advanced BioEnergy II, LP arranges investments with foreign investors, who each make loans to the Riverbank Cellulosic Ethanol Facility in increments of ~~$0.5 million.~~$0.9 million after November 21, 2019. The Company has sold an aggregate principal amount of ~~$2.5~~$4.0 million of EB-5 Notes under the EB-5 Phase II funding since 2016 to the date of this filing. As of September 30, ~~2019, $2.5~~2020, $4.0 million ~~was~~has been released from escrow to the Company and ~~$47.5~~$46.8 million remains to be funded to escrow. As of September 30, ~~2019, $2.5~~2020, $4.2 million ~~in principal and interest~~ was outstanding on the EB-5 Notes under the EB-5 Phase II ~~Notes.~~

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

funding.

~~Unsecured working~~Working capital loans. On April 16, 2017, the Company entered into an operating agreement with Gemini Edibles and Fats India Private Limited (“Gemini”). Under this agreement, Gemini agreed to provide the Company with working capital, on an as needed basis, to fund the purchase of feedstock and other raw materials for the Kakinada Plant. Working capital cash advances bear interest at 12%. and working capital can be induced through trading of feedstock or finished goods by Gemini which does not have any interest accrual. In return, the Company agreed to pay Gemini an amount equal to 30% of the plant’s monthly net operating profit and recognized these as operational support charges in the financials. In the event that the Company’s biodiesel facility operates at a loss, Gemini owes the Company 30% of the losses as operational support charges. Either party can terminate the agreement at any time without penalty. Additionally, Gemini received a first priority lien on the assets of the Kakinada Plant. ~~The Company made principal and interest payments to Gemini of approximately $35.6 million and $10.4 million during~~During the nine months ended September 30, 2020, we have accrued no interest on Gemini balance as the investment was for feedstock purchase and finished goods trade. During the nine months ended September 30, 2020 and 2019, the Company made principal payments to Gemini of approximately $8.5 million and ~~2018,~~$35.6 million, respectively. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had ~~$2.9 million~~none and ~~$4.6~~$2.0 million outstanding under this agreement, respectively.

In November 2008, the Company entered into an operating agreement with Secunderabad Oils Limited (“Secunderabad Oils”). The 2008 agreement provided the working capital and had the first priority lien on assets in return for 30% of the plant’s monthly net operating profit. These expenses were recognized as selling, general, and administrative expenses by the Company in the financials. All terms of the 2008 agreement with Secunderabad Oils were terminated to amend the agreement as below. On July 15, 2017, the agreement with Secunderabad Oils was amended to provide the working capital funds for British Petroleum business operations only in the form of inter-corporate deposit for an amount of approximately $2.3 million over a 95 days period at the rate of 14.75% per annum interest rate. The term of the agreement continues until ~~the~~ either party terminates it. Secunderabad Oils has a second priority lien on the assets of the Company’s Kakinada Plant after this agreement. On April 15, 2018, the agreement was amended to purchase the raw material for business operations at 12% per annum interest rate. During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the Company made principal and interest payments to Secunderabad Oils of approximately ~~$0.5~~$0.9 million and ~~$3.0~~$0.5 million, respectively. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had ~~$0.6~~$2.5 million and ~~$0.3~~$0.6 million outstanding under this agreement, respectively.

~~Variable Interest Entity (GAFI)~~

GAFI Term loan and Revolving ~~loan~~

loan.On July 10, 2017, GAFI entered into a Note Purchase Agreement ~~(the “GAFI~~(“GAFI Note Purchase Agreement”) with Third Eye Capital ~~(the “Noteholders”~~(“Noteholders”). ~~See further discussion regarding GAFI in Note 5.~~ Pursuant to the GAFI Note Purchase Agreement, the Noteholders agreed, subject to the terms and conditions of the GAFI Note Purchase Agreement and relying on each of the representations and warranties set forth therein, to make (i) a single term loan to GAFI in an aggregate amount of $15 million ~~(the “GAFI~~(“GAFI Term Loan”) and (ii) revolving advances not to exceed ~~$10.0~~ten million dollars in the aggregate ~~(the “GAFI~~(“GAFI Revolving Loan”). The interest rate per annum applicable to the GAFI Term Loan is equal to ten percent ~~(10.0%~~(10%). The interest rate per annum applicable to the GAFI Revolving Loans is the greater of Prime Rate plus seven and three quarters percent (7.75%) and twelve percent (12.00%). The applicable interest rate as of September 30, ~~2019~~2020 was ~~12.75%~~12.00%. ~~On June 10, 2019, notice was given to renew the maturity date of GAFI notes to July 10, 2020 by following extension terms in the GAFI Note Purchase Agreement in exchange for a fee of $0.5 million.~~ The maturity date of the ~~loans~~GAFI Term Loan and GAFI Revolving Loan (“GAFI Loan Maturity Date”) iswas July 10, 2020, provided that the GAFI Loan Maturity Date may be extended at the option of ~~GAFI~~Aemetis for up to ~~one additional~~ one-year period upon prior written notice and upon satisfaction of certain conditions and the payment of a renewal fee for such extension. ~~An initial advance under~~The Company exercised the option to extend the GAFI ~~Revolving~~ Loan ~~was made~~Maturity Date for ~~$2.2 million as a prepayment of interest on the GAFI Term Loan for the first eighteen months of interest payments. In addition,~~ a fee of ~~$1.0~~$0.5 million ~~was paid~~and the current GAFI Loan Maturity Date is July 10, 2021. We evaluated the extension fee and applied modification accounting in ~~consideration to the Noteholders.~~

accordance with ASC 470-50 Debt – Modification and Extinguishment.

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

On June 28, 2018, GAFI entered into Amendment No. 1 to the GAFI Term Loan with Third Eye Capital for an additional amount of $1.5 million with a fee of $75 thousand added to the loan from Third Eye Capital at a 10% interest rate. ~~The fee of $75 thousand was recognized as expense on the amendment date.~~ On December 20, 2018, $1.6 million from Amendment No. 1 was repaid. Pursuant to Amendment No. 1, Aemetis, Inc. entered into a Stock Appreciation Rights Agreement to issue 1,050,000 Stock Appreciation Rights ~~(SARs)~~(“SARs”) to Third Eye Capital on August 23, 2018, with an exercise date of one year from the issuance date with a call option for the Company at $2.00 per share during the first 11 months of the agreement either to pay $2.1 million in cash or issue common stock worth $2.1 million based on the 30-day weighted average price of the stock on the call date, and a put option for Third Eye Capital at $1.00 per share during the 11th11th month of the agreement where the Company can redeem the SARs for $1.1 million in cash. In the event that none of the above options is exercised, the SARs will be automatically exercised one year from the issuance date based upon the 30-day weighted average stock price and paid in cash and cash equivalents. On July 22, 2019, Third Eye Capital exercised the put option at $1.00 per share for $1.1 million. The exercise value of the SARs of $1.1 million was added to the GAFI ~~term loan~~Term Loan and the SARs fair value liability was released.

On December 3, 2018, GAFI entered into Amendment No. 2 to the GAFI Term Loan with Third Eye Capital for an additional amount of ~~up to~~ $3.5 million from Third Eye Capital at a 10% interest ~~rate (the “CO~~2~~Term Loan”).~~rate. GAFI borrowed $1.8 million against this Amendment No. 2 with a $175 thousand fee added to the loan and $0.2 million was withheld from the $1.8 million for interest payments. $1.5 million is available to draw under GAFI Amendment No. 2 for the CO2~~Project.~~CO2 Project (“CO2 Term Loan”). Among other requirements, the Company is also required to make the following mandatory repayments of the CO2CO2 Term Loan: (i) on a monthly basis, an amount equal to 75% of any payments received by the Company for CO2CO2 produced by ~~Linde LLC,~~Messer, (ii) an amount equal to 100% of each monthly payment received by the Company for land use by Linde for CO2CO2 plant, ~~and~~ (iii) on a monthly basis, an amount equal to the product of: $0.01 multiplied by the number of bushels of corn grain used in the ethanol production at the Keyes Plant. ~~Mandatory repayment amounts~~Based on the mandatory payments, an amount of ~~$0.4~~$1.0 million is estimated to be paid in the next 12 months and is classified as current debt as of September 30, ~~2019. We evaluated the Amendment No. 2 to the GAFI Term Loan and applied modification accounting treatment in accordance with ASC 470-50Debt – Modification and Extinguishment~~.2020.

As of September 30, ~~2019,~~2020, GAFI had ~~$18.9~~$21.5 million net of ~~debt~~discount issuance costs of ~~$0.5~~$0.6 million outstanding on the GAFI Term Loan and ~~$10.4~~$11.4 million ~~outstanding~~ on the GAFI Revolving Loan ~~respectively.~~respectively, classified as current portion of long-term debt.

~~Debt~~Payroll Protection Program.On May 5, 2020, certain wholly owned subsidiaries of the Company received loan proceeds of approximately $1.1 million, (“PPP Loans”) under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides loans to qualifying businesses for payroll expenses of the qualifying business. The PPP Loan and accrued interest are forgivable after twenty-four weeks if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the twenty-four-week period. The Company anticipates that it will utilize the proceeds in accordance with the PPP guidelines and repay amounts that are not forgiven or utilized. In order to obtain full or partial forgiveness of the PPP Loan, the Company must request forgiveness and must provide satisfactory documentation in accordance with applicable Small Business Administration (“SBA”) guidelines.

The PPP Loans are evidenced by promissory notes, dated May 1, 2020 and April 30, 2020 (the “Notes”), between the Company, as Borrower, and Bank of America, N.A., as Lender (the “Lender”). The interest rate on the Note is 1.00% per annum. No payments of principal or interest are due during the six-month period beginning on the funding date (the “Deferral Period”). If the SBA does not confirm forgiveness or only partly confirms forgiveness of the PPP Loans, or Borrower fails to apply for loan forgiveness, the Borrower will be obligated to repay to the Bank the total outstanding balance remaining due under the PPP Loans, including principal and interest and in such case, the Lender will establish the terms for repayment of the Loan in a separate letter to be provided to the Borrower in which the letter will set forth the loan balance, the amount of each monthly payment, the interest rate (not in excess of a fixed rate of one percent (1.00%) per annum), the term of the PPP Loans, and the maturity date, which, if not established by the Lender, shall be two (2) years from the funding date of the PPP Loans.

Scheduled debt repayments for the Company’s loan obligations follow:

Twelve months ended September 30,	Debt Repayments	Debt Repayments
2020	$22,476
2021	166,815	$59,336
2022	3,500	145,530
2023	1,836	13,435
2024	2,500	5,172
2025		2,436
Thereafter		1,247
Total debt	197,127	227,156
Debt issuance costs	(1,589)	(810)
Total debt, net of debt issuance costs	$195,538	$226,346

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

Other Commitments

~~8. Stock-Based Compensation~~

~~2019 Plan~~

On April 29, 2019, the Aemetis 2019 Stock Plan (the “2019 Stock Plan”) was approved by stockholders of the Company. This plan permits the grant of 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 as the Administrator may determine in its discretion. The 2019 Stock Plan’s term is 10 years and supersedes all prior plans. The 2019 Stock Plan authorized the issuance of 200,000 shares of common stock for the 2019 calendar year, in addition to permitting transferring and granting any available and unissued or expired options under the Amended and Restated 2007 Stock Plan in an amount up to 177,246 options.

On June 6, 2019, 374,000 option grants were issued to employees and directors under the 2019 Stock Plan. These options expire ten years from the date of grant. Employee grants have a general vesting term of 1/12th~~every three months and are exercisable at any time after vesting subject to continuation of employment. Option grants for directors had immediate vesting with 10-year term expiration.~~

With the approval of the 2019 Stock Plan, the Zymetis 2006 Stock Plan and Amended and Restated 2007 Stock Plan (together with the 2019 Stock Plan, the “Company Stock Plans”) are terminated for granting any options under either plan. However, any options granted before the 2019 Stock Plan approved will remain outstanding and can be exercised, and any expired options will be available to grant under the 2019 Stock Plan.

On January 8, 2019, 707,000 stock option grants were issued for employees and directors under the Amended and Restated 2007 Stock Plan. On February 21, 2019, 10,000 stock option grants were issued to a consultant by the Company.

~~As of September 30, 2019, 3.8 million options are outstanding under the Company Stock Plans.~~

~~Inducement Equity Plan Options~~

~~In March 2016, the Board of Directors of the Company (the “Board”) approved an Inducement Equity Plan authorizing the issuance of 100,000 non-statutory stock options to purchase common stock.~~

~~On June 6, 2019, 25,000 option grants were made under the Inducement Equity Plan to employees. As of September 30, 2019, 25,000 options were outstanding under the Inducement Equity Plan.~~

~~Common Stock Reserved for Issuance~~

~~The following is a summary of options granted under the Company Stock Plans:~~

Shares Available for Grant

Number of Shares Outstanding

Weighted-Average Exercise Price

Balance as of December 31, 2018
  149
  2,889
$1.80
Authorized
  855
  -
  -
Granted
  (1,116)
  1,116
  0.78
Exercised
  -
  -
  -
Forfeited/expired
  190
  (190)
  3.11




Balance as of September 30, 2019
  78
  3,815
$1.44

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

~~As of September 30, 2019, there were 2.6 million options vested under all the Company Stock Plans.~~

~~Stock-based compensation for employees~~

~~Stock-based compensation is accounted for in accordance with the provisions of ASC 718,Compensation-Stock Compensation~~, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.

For the three months ended September 30, 2019 and 2018, the Company recorded stock compensation expense in the amount of $144 thousand and $202 thousand, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded stock compensation expense in the amount of $630 thousand and $783 thousand, respectively.

~~Valuation and Expense Information~~

All issuances of stock options or other issuances of equity instruments to employees as the consideration for services received by us are accounted for based on the fair value of the equity instrument issued. The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock based compensation expense requires us to make assumptions and judgments about the variables used in the calculation, including the fair value of our common stock, 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, and expected dividends. We also estimate forfeitures of unvested stock options. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest. We use the simplified calculation of expected life described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, and volatility is based on an average of the historical volatilities of the common stock of four entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods 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 zero due to the small number of plan participants and the plan.

~~There were no stock options granted during the three months ended September 30, 2019.~~

~~As of September 30, 2019, the Company had $0.9 million of total unrecognized compensation expense for employees that the Company will amortize over the 1.96 years of weighted average remaining term.~~

~~Agreements~~

~~Working Capital Arrangement.~~Pursuant to a Corn Procurement and Working Capital Agreement with J.D. Heiskell, the Company agreed to procure whole yellow corn and grain sorghum, primarily from J.D. Heiskell. 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. The term of the Corn Procurement and Working Capital Agreement expires on December 31, 2019 and the term can be automatically renewed for additional one-year terms. J.D. Heiskell further agrees to sell all ethanol the Company produces to Kinergy Marketing or other marketing purchasers designated by the Company and all WDG the Company produces to A.L. Gilbert. The Company markets and sells DCO to A.L. Gilbert and other third parties. The Company’s relationships with J.D. Heiskell, Kinergy Marketing, and A.L. Gilbert are well established and the Company believes that the relationships are beneficial to all parties involved in utilizing the distribution logistics, reaching out to widespread customer base, managing inventory, and building working capital relationships. Revenue is recognized upon delivery of ethanol to J. D. Heiskell as revenue recognition criteria have been met and any performance required of the Company subsequent to the sale to J.D. Heiskell is inconsequential. These agreements are ordinary purchase and sale agency agreements for the Keyes Plant.

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

~~The J.D. Heiskell sales activity associated with the Corn Procurement and Working Capital Agreement for the three and nine months ended September 30, 2019 and 2018 are as follows:~~

As of and for the three months ended
September 30,

As of and for the nine months ended
September 30,

2019

2018

2019

2018

Ethanol sales
$27,456
   $29,661
$84,453
$88,002
Wet distiller's grains sales
  8,783
  8,116
  26,119
  24,443
Corn oil sales
  934
  714
  2,586
  2,530
Corn purchases
  30,446
  27,786
  90,426
  84,291
Accounts receivable
  1,066
  1,079
  1,066
  1,079
Accounts payable
  2,484
  2,416
  2,484
  2,416

~~Ethanol and Wet Distillers Grains Marketing Arrangement.~~The Company entered into an ~~Ethanol Marketing Agreement~~agreement with ~~Kinergy Marketing and~~Mitsubishi Chemical America, Inc. to purchase certain equipment to save energy used in the Keyes Plant. We also entered into a ~~Wet Distillers Grains Marketing Agreement~~financing agreement with ~~A.L. Gilbert. Under~~ the terms of the agreements, subject to certain conditions, the Ethanol Marketing Agreement matures on August 31, 2020 and the Wet Distillers Grains Marketing Agreement matures on December 31, 2019 with automatic one-year renewals thereafter. For the three months ended September 30, 2019 and 2018, the Company expensed marketing costs of $0.6 million and $0.7seller for $5.7 million for each period, respectively, under the terms of both the Ethanol Marketing and the Wet Distiller’s Grains Marketing agreements. For the nine months ended September 30, 2019 and 2018, the Company expensed marketing costs of $1.9 million and $2.1 million, respectively.

~~As of September 30, 2019, the Company has forward sales commitments for approximately 81,000 tons of WDG. These committed sales will be expected through December 2019.~~

~~10.~~

~~Segment Information~~

Aemetis recognizes two reportable geographic segments: “North America” and “India.” The “North America” operating segment includes the Keyes Plant in Keyes, the cellulosic ethanol facility in Riverbank, the cluster of biogas digesters on dairies near the Keyes Plant, the Goodland Plant in Kansas, and the research and development facility in Minnesota.

The “India” operating segment includes the Company’s 50 million gallon per year nameplate capacity biodiesel manufacturing plant (“Kakinada Plant”), the administrative offices in Hyderabad, India, and the holding companies in Nevada and Mauritius. The Company’s biodiesel is marketed and sold primarily to customers in India through brokers and by the Company directly.

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

~~Summarized financial information by reportable segment for the three and nine months ended September 30, 2019 and 2018 follows:~~

Three months ended
September 30, 2019

Three months ended
September 30, 2018

North America

India

Total Consolidated

North America

India

Total Consolidated

Revenues
$37,820
$19,569
$57,389
$38,576
$6,059
$44,635
Cost of goods sold
  37,990
  15,417
  53,407
  36,147
  5,820
  41,967







Gross profit (loss)
  (170)
  4,152
  3,982
  2,429
  239
  2,668







Other Expenses






    Research and development expenses
  37
  -
  37
  74
  -
  74
Selling, general and administrative expenses
  2,716
  1,813
  4,529
  3,645
  248
  3,893
Interest expense
  6,293
  49
  6,342
  5,261
  150
  5,411
Accretion of Series A preferred units
  589
  -
  589
  -
  -
  -
Other income
  (265)
  (24)
  (289)
  (55)
  (6)
  (61)







Income (loss) before income taxes
$(9,540)
$2,314
$(7,226)
$(6,496)
$(153)
$(6,649)







Capital expenditures
$3,664
$351
$4,015
$703
$24
$727
Depreciation
  942
  161
  1,103
  992
  166
  1,158

For the nine months ended
September 30, 2019

For the nine months ended
September 30, 2018

North America

India

Total Consolidated

North America

India

Total Consolidated

Revenues
$113,942
$35,954
$149,896
$115,380
$17,301
$132,681
Cost of goods sold
  113,440
  29,552
  142,992
  109,208
  16,171
  125,379







Gross profit
  502
  6,402
  6,904
  6,172
  1,130
  7,302







Other Expenses






Research and development expenses
  160
  -
  160
  191
  -
  191
Selling, general and administrative expenses
  9,972
  2,743
  12,715
  10,580
  709
  11,289
Interest expense
  18,805
  332
  19,137
  19,344
  446
  19,790
Accretion of Series A preferred units
  1,509
  -
  1,509
  -
  -
  -
Loss contingency on litigation
  6,200
  -
  6,200
  -
  -
  -
Other expense (income)
  (228)
  (773)
  (1,001)
  (12)
  14
  2







Income (loss) before income taxes
$(35,916)
$4,100
$(31,816)
$(23,931)
$(39)
$(23,970)







Capital expenditures
$4,249
$804
$5,053
$1,760
$738
$2,498
Depreciation
  2,883
  454
  3,337
  2,976
  481
  3,457

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

~~North America.During the three and nine months ended September 30, 2019, the Company’s revenues from ethanol, WDG, and corn oil were earned~~this equipment. Payments pursuant to the ~~Corn Procurement~~financing transaction will commence after the installation date and ~~Working Capital Agreement established between~~interest will be charged based on the ~~Company and J.D. Heiskell. Sales of ethanol, WDG, and corn oil to J.D. Heiskell accounted for 98.3% and 99.3%~~certain performance metrics after operation of the ~~Company’s North America segment revenues for~~equipment. The equipment was delivered in March 2020; however the ~~three and nine months ended September 30, 2019, respectively.~~

~~During the three and nine months ended September 30, 2018, the Company’s revenues from ethanol, WDG, and corn oil were earned pursuant~~installation has been delayed due to the ~~Corn Procurement~~COVID-19 pandemic. Hence, we recorded the asset in construction in progress and ~~Working Capital Agreement established between~~related liability in the ~~Company~~short and ~~J.D. Heiskell. Sales~~long term debt of ~~ethanol, WDG,~~$0.7 million and ~~corn oil to J.D. Heiskell accounted for 99.8% and 99.6% of the Company’s North America segment revenues for the three and nine months ended September 30, 2018, respectively.~~

~~India~~. During the three months ended September 30, 2019, three biodiesel customers accounted for 41%, 16%, and 15% and no refined glycerin customers accounted for more than 10% of the Company’s consolidated India segment revenues, compared to two biodiesel customers accounting for 57% and 18% and no refined glycerin customers accounting for more than 10% of consolidated India segment revenues during the three months ended September 30, 2018.

During the nine months ended September 30, 2019, three biodiesel customers accounted for 29%, 18%, and 15% and no refined glycerin customers accounted for more than 10% of consolidated India segment revenues, compared to two biodiesel customers accounted for 55% and 13% and no refined glycerin customers accounted for more than 10% of consolidated India segment revenues during the nine months ended September 30, 2018.

~~Total assets consist of the following:~~

As of

September 30,

December 31,

2019

2018

North America
$79,180
$78,149
India
  17,503
  13,672
    Total Assets
$96,683
$91,821

~~11.~~

~~Related Party Transactions~~

~~The Company owes Eric McAfee $0.4~~$5 million, in connection with employment agreements and expense reimbursements previously accrued as salaries expense and accrued liabilities. The balance accrued related to these employment agreements was $0.4 millionrespectively as of September 30, ~~2019 and December 31, 2018. For~~2020.

Property taxes

The Company entered into a payment plan with Stanislaus County for unpaid property taxes for the ~~three months ended September 30, 2019 and~~Keyes Plant site on June 28, 2018 by paying $1.5 million as a first payment. Under the annual payment plan, the Company ~~expensed $1 thousand and $13 thousand, respectively,~~was set to ~~reimburse actual expenses incurred by McAfee Capital and related entities. For~~pay 20% of the nine months ended September 30, 2019 and 2018, the Company expensed $22 thousand and $38 thousand, respectively, to reimburse actual expenses incurred by McAfee Capital and related entities. The Company previously prepaid $0.2 million to Redwood Capital, a company controlled by Eric McAfee, for the Company’s use of flight time on a corporate jet. As of September 30, 2019, $0.1 million remained as a prepaid expense.

~~As consideration for the reaffirmation of guaranties required by Amendments No. 13 and 14~~outstanding redemption amount, in addition to the ~~Note Purchase Agreement entered into by~~current year property taxes and any interest incurred on the unpaid balance to date annually, on or before April 10 starting in 2019. After making one payment, Company ~~with Third Eye Capital~~defaulted on ~~March 1, 2017~~the payment plan and March 27, 2018 respectively, the Company also agreed to pay $0.2 million for each year in consideration to McAfee Capital in exchange for their willingness to provide the guaranties. The balance of $354 thousand and $400 thousand for guaranty fee remained as an accrued liability as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019, the balance in property tax accrual was $5.4 million and $4.1 million, respectively. Stanislaus County agreed not to enforce collection actions and we are now in discussions with Stanislaus County regarding a payment plan.

~~AEMETIS, INC.~~

~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~

~~(Unaudited, tabular data in thousands except par value and per share data)~~

The Company owes various members of its Board amounts totaling $1.2 million and $1.1 million as of September 30, 2019 and December 31, 2018, respectively, in connection with board compensation fees, which are included in accounts payable on the balance sheet. For the three months ended September 30, 2019 and 2018, the Company expensed $96 thousand and $87 thousand respectively, in connection with board compensation fees. For the nine months ended September 30, 2019 and 2018, the Company expensed $294 thousand and $264 thousand respectively, in connection with board compensation fees.

~~12. Management’s Plan~~

The accompanying financial statements have been prepared contemplating the realization of assets and satisfaction of liabilities in the normal course of business. The Company has been required to remit substantially all excess cash from operations to the senior lender and it is therefore reliant on the senior lender to provide additional funding when required. In order to meet its obligations during the next 12 months, the Company will need to either refinance the Company’s debt or receive the continued cooperation of the senior lender. This dependence on the senior lender raises substantial doubt about the entity’s ability to continue as a going concern. The Company plans to pursue the following strategies to improve the course of the business:

●

Operate the Keyes Plant and continue to improve operational performance, including the adoption of new technologies or process changes that allow for energy efficiency, cost reduction or revenue enhancements to the current operations.

●

Expand the ethanol sold at the Keyes Plant to include the cellulosic ethanol to be generated at the Riverbank Cellulosic Ethanol Facility, a cellulosic ethanol production facility in nearby Riverbank, California, and to utilize lower cost, non-food advanced feedstocks to significantly increase margins by 2020.

●

~~Monetize the CO~~2~~produced at the Keyes Plant by executing on the agreement with Linde for the delivery of gas to their neighboring facility to be built during 2019.~~

●

~~Construct and operate biogas digesters to capture and monetize biogas by 2020.~~

●

Raise the funds necessary to construct and operate the Riverbank Cellulosic Ethanol Facility using the licensed technology from LanzaTech and InEnTec Technology to generate federal and state carbon credits available for ultra-low carbon fuels.

●

~~Secure higher volumes of shipments of fuels at the India plant by developing the sales channels and expanding the existing domestic markets.~~

●

Continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling the current offering for $50 million from the Phase II EB-5 program, or by vendor financing arrangements.

~~Item 2.~~

~~Management's Discussion and Analysis of Financial Condition and Results of Operations.~~

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

●

~~Overview. Discussion of our business and overall analysis of financial and other highlights affecting us to provide context for the remainder of MD&A.~~

●

~~Results of Operations. An analysis of our financial results comparing the three and nine months ended September 30, 2019 to the three and nine months ended September 30, 2018.~~

●

~~Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition.~~

●

~~Critical Accounting Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.~~

The following discussion should be read in conjunction with the Aemetis, Inc. consolidated financial statements and accompanying notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect the plans, estimates and beliefs of Aemetis, Inc. As discussed in further detail above, the 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, and in other reports we file with the SEC, specifically our most recent Annual Report on Form 10-K. All references to years relate to the calendar year ended December 31 of the particular year.

~~Overview~~

Headquartered in Cupertino, California, Aemetis is an advanced renewable fuels and biochemicals company focused on the acquisition, development and commercialization of innovative technologies that replace traditional petroleum-based products through the conversion of second-generation ethanol and biodiesel plants into advanced biorefineries. We operate in two reportable geographic segments: “North America” and “India.”

Founded in 2006, we own and operate a 60 million gallon per year ethanol facility in the California Central Valley near Modesto where we manufacture and produce ethanol, wet distillers’ grains (“WDG”), condensed distillers solubles (“CDS”), and distillers’ corn oil (“DCO”). We operate a research and development laboratory to develop efficient conversion technologies using waste feedstocks to produce biofuels and biochemicals. Additionally, we have the option to own a partially completed plant in Goodland, Kansas (the “Goodland Plant”) through a variable interest entity (“VIE”) Goodland Advanced Fuels, Inc., (“GAFI”), which was formed to acquire the Goodland Plant. Upon exercise of the option, we plan to deploy a cellulosic ethanol technology to the Goodland Plant. We also own and operate a 50 million gallon per year renewable chemical and advanced fuel production facility on the East Coast of India producing high quality distilled biodiesel and refined glycerin for customers in India and Europe.

We also lease a site in Riverbank, California, near the Keyes Plant, where we plan to utilize biomass-to-fuel technology that we have licensed from LanzaTech Technology (“LanzaTech”) and InEnTec Technology (“InEnTec”) to build a cellulosic ethanol production facility (the “Riverbank Cellulosic Ethanol Facility”) capable of converting local California surplus biomass – principally agricultural waste – into ultra-low carbon renewable cellulosic ethanol. By producing ultra-low carbon renewable cellulosic ethanol, we expect to capture higher value D3 cellulosic renewable identification numbers (“RINs”) and California’s Low Carbon Fuel Standard (“LCFS”) credits. D3 RINs have a higher value in the marketplace than D6 RINs due to D3 RINs’ relative scarcity and mandated pricing formula from the United States Environmental Protection Agency (the “EPA”).

~~In December 2018, we acquired a 5.2-acre parcel of land for the construction of a facility by Linde LLC industrial gas company to sell CO~~2~~produced at the Keyes Plant, which will add incremental income for the North America segment.~~

During 2018, Aemetis Biogas, LLC (“ABGL”) was formed to construct bio-methane digesters at local dairies near the Keyes Plant, many of whom are already customers of the distillers’ grain produced at the Keyes Plant. The digesters are connected by a pipeline to a gas cleanup and compression facility to produce Renewable Natural Gas (“RNG”). ABGL currently has signed participation agreements with over a dozen local dairies and three fully executed leases with dairies near the Keyes Plant in order to capture their [methane/biogas?], which would otherwise be released into the atmosphere, primarily from manure wastewater lagoons. We plan to capture biogas from multiple dairies and pipe the gas to a centralized location at our Keyes Plant where we will remove the impurities of the biogas and clean it into bio-methane for injection into the local utility pipeline or to a renewable compressed natural gas (“RCNG”) truck loading station that will service local trucking fleets to displace diesel fuel. The biogas can also be used in our Keyes Plant to displace petroleum-based natural gas. The environmental benefits of the ABGL project are potentially significant because dairy biogas has a negative Carbon Intensity (“CI”) under the California LCFS. The biogas produced by ABGL will also receive D3 RIN under the federal Renewable Fuel Standard (“RFS”).

~~North America~~

Our revenue development strategy in North America was based on supplying ethanol into the transportation fuel market in Northern California and supplying feed products to dairy and other animal feed operations in Northern California. We are actively seeking higher value markets for our ethanol in an effort to improve our overall margin and are actively working with local dairy and feed potential customers to promote the value of our WDG product in an effort to strengthen demand for this product. In addition, the development of cellulosic ethanol production facility, CO2~~produced at the Keyes Plant, and bio-methane conversion will add incremental income to the North America segment.~~

We produce four products at the Keyes Plant: denatured ethanol fuel, WDG, DCO and CDS. In the third quarter of 2019, we sold 100% of the ethanol and WDG we produced to J.D. Heiskell pursuant to a Purchase Agreement established with J.D. Heiskell. DCO was sold to J.D. Heiskell and other local animal feedlots (primarily poultry). Smaller amounts of CDS were sold to various local third parties. Ethanol pricing is determined pursuant to a marketing agreement between us and Kinergy, and is generally based on daily and monthly pricing for ethanol delivered to the San Francisco Bay Area, California, as published by OPIS, as well as quarterly contracts negotiated by Kinergy with local fuel blenders. The price for WDG is determined monthly pursuant to a marketing agreement between A.L. Gilbert and us and is generally determined in reference to the local price of DDG and other feed products. North American revenue is dependent on the price of ethanol, WDG, and DCO. Ethanol pricing is influenced by local and national inventory levels, local and national ethanol production, corn prices and gasoline demand. WDG is influenced by the price of corn, the supply and price of DDG, and demand from the local dairy and feed markets. Our revenue is further influenced by our decision to operate the Keyes Plant at any capacity level, maintenance requirements, and the influences of the underlying biological processes.

In May 2019, our ethanol production was approved for a lower CI score and was awarded additional LCFS credits for the ethanol produced from January 1, 2019 to May 21, 2019. These credits have a market value and can be sold in the open market. We recorded a contract liability of $0.4 million as of September 30, 2019, in connection with a contract with a customer to sell LCFS credits which we earned from lowering the CI score on ethanol produced from April 1, 2019 to May 21, 2019. However, the credits were not transferred to the customer until October 2, 2019 while we received cash in advance.

~~India~~

Our revenue strategy in India is based on continuing to sell biodiesel to our bulk fuel customers, retail fuel station customers, mining customers, and tender offers placed by India government oil companies for bulk purchases of fuels. The India government imposed restrictions on imports of biodiesel mixtures, which will positively impact local sales of biodiesel. In addition, this opened doors to supply biodiesel for manufacturing purposes and infrastructure companies which developed interest in our product.

In 2019, under the Indian government mandate of mixing biodiesel with diesel, the Kakinada Plant won the tender to supply biodiesel to Government Oil Marketing Companies (“OMCs”) such as Hindustan Petroleum, Bharat Petroleum, and Indian Oil Corporation. Under this agreement, we started supplying biodiesel in May 2019. These tenders open annually in December for the next year bidding and will be awarded for the following year based on competitiveness of price and quality of the biodiesel supplied. We believe the deployment of these strategies will allow for revenue growth through 2019 and 2020.

~~Results of Operations~~

~~Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018~~

~~Revenues~~

~~Our revenues are derived primarily from sales of ethanol and WDG in North America and biodiesel and glycerin in India.~~

~~Three Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$37,820
$38,576
$(756)
  -2%
India
  19,569
  6,059
  13,510
  223%





Total
$57,389
$44,635
$12,754
  29%

~~North America~~. During the three months ended September 30, 2019, plant production averaged 115% of the 55 million gallons per year nameplate capacity. The decrease in revenues during the three months ended September 30, 2019 was due to ethanol sales volumes decreasing by 6% to 15.8 million gallons from 16.7 million gallons, WDG volumes decreasing by 2% to 106.2 tons from 108.5 tons and average ethanol prices also decreasing by 2% to $1.74 per gallon from $1.78 per gallon compared to September 30, 2018. The average price of WDG increased by 11% to $82.72 per ton from $74.80 per ton during the three months ended September 30, 2019 compared to the three months ended September 30, 2018. For the three months ended September 30, 2019, we generated 73% of our revenue from sales of ethanol, 23% from sales of WDG, and 4% from sales of distillers’ corn oil, LCFS credits trade, and CDS compared to 77% of our revenue from sales of ethanol, 21% from sales of WDG, and 2% from sales of distillers’ corn oil and CDS for the three months ended September 30, 2018.

~~India.~~ The increase in revenues was primarily attributable to increases in overall sales volumes by 205% in the three months ended September 30, 2019 compared to the three months ended September 30, 2018, due to obtaining and supplying OMC tender contracts in addition to retail, mining and bulk customer sales. Biodiesel sales volumes increased to 19.3 thousand metric tons in the three months ended September 30, 2019 from 6.0 thousand metric tons in the three months ended September 30, 2018 while the average sales prices increased by 2% to $882 per metric ton in the three months ended September 30, 2019 compared to $867 per metric ton in the same period last year. Similarly, sales volumes of refined glycerin increased to 2,023 metric tons in the three months ended September 30, 2019 compared to 1,000 metric tons in the three months ended September 30, 2018 while average sales prices of glycerin decreased by 45% to $470 per metric ton in the three months ended September 30, 2019 compared to $852 per metric ton in the same period in 2018. For the three months ended September 30, 2019, we generated 87% of our sales from biodiesel, 5% of our sales from refined glycerin and 8% of our sales from palm fatty acid distillers and scraps, compared to 86% of our sales from biodiesel and 14% of our sales from refined glycerin in the three months ended September 30, 2018.

~~Cost of Goods Sold~~

~~Three Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$37,990
$36,147
$1,843
  5%
India
  15,417
  5,820
  9,597
  165%





Total
$53,407
$41,967
$11,440
  27%

~~North America.~~We ground 5.6 million bushels of corn at an average price of $5.53 per bushel during the three months ended September 30, 2019 compared to 5.8 million bushels of corn at an average price of $4.78 per bushel during the three months ended September 30, 2018. The increase in cost of goods sold was primarily due to the cost of feedstock increasing by 16% offset by decreases in natural gas, chemicals and other variable costs, along with decreases in bushels of corn ground during the three months ended September 30, 2019 compared to the same period in 2018.

~~India.~~The increase in cost of goods sold was attributable to the increase in revenues from biodiesel. The volume of biodiesel feedstock we consumed increased by 242% to 16,374 metric tons in the three months ended September 30, 2019 compared to 4,783 metric tons in the same period last year, partially offset by a 5% decrease in the cost of biodiesel feedstock to $717 per metric ton in the three months ended September 30, 2019 compared to $752 per metric ton in the three months ended September 30, 2018. In addition, the volume of refined glycerin feedstock we consumed increased by 111% to 1,777 metric tons in the three months ended September 30, 2019 compared to 841 metric tons in the three months ended September 30, 2018, offset by a 54% decrease in the average price of feedstock for refined glycerin to $408 per metric ton in the three months ended September 30, 2019 from $885 per metric ton in the same period in 2018.

~~Gross Profit / (Loss)~~

~~Three Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$(170)
$2,429
$(2,599)
  -107%
India
  4,152
  239
  3,913
  1637%





Total
$3,982
$2,668
$1,314
  49%

~~North America.~~Gross profit decreased by 107% due to increases in the average price of corn by 16%, combined with decreases in volume of ethanol sales by 6%, volume of WDG sales by 2%, and the average price of ethanol per gallon by 2% in the three months ended September 30, 2019 compared to the same period in 2018.

~~India.~~The increase in gross profit was attributable to an increase in the sales volumes of biodiesel and refined glycerin by 205%, the average selling price of biodiesel by 2%, offset by a decrease in overall feedstock costs by 11% in the three months ended September 30, 2019, as compared to the three months ended September 30, 2018.

~~Operating Expenses~~

~~R&D~~

~~Three Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$37
$74
$(37)
  -50%
India
  -
  -
  -
  -





Total
$37
$74
$(37)
  -50%

R&D expenses decreased during the three months ended September 30, 2019 due to decreases in depreciation, rent and other expenses by $62 thousand, offset by an increase in professional fees of $14 thousand and lab supplies, utilities and travel of $11 thousand.

~~Selling, General & Administrative (SG&A)~~

~~Three Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$2,716
$3,645
$(929)
  -25%
India
  1,813
  248
  1,565
  631%





Total
$4,529
$3,893
$636
  16%

SG&A expenses consist primarily of salaries and related expenses for employees, marketing expenses related to product sales, as well as professional fees, other corporate expenses, and related facilities expenses.

~~North America.~~SG&A expenses as a percentage of revenue during the three months ended September 30, 2019 decreased to 7% compared to 9% in the corresponding period in 2018. SG&A expenses during the three months ended September 30, 2019 decreased by 26% compared to the three months ended September 30, 2018. The decrease was due to decreases in professional fees of $0.8 million, salaries, supplies, and travel of $90 thousand, and other expenses of $135 thousand due to grant receipts charged against these expenses, offset by increases in insurance and penalties on property taxes of $0.1 million.

~~India~~. SG&A expenses as a percentage of revenue in the three months ended September 30, 2019 increased to 9% compared to 4% in the corresponding period in 2018. SG&A expenses increased in the three months ended September 30, 2019 compared to the three months ended September 30, 2018 due to increases in operational support services of $1.0 million, utilities and other expenses of $0.2 million, salaries and supplies of $0.3 million, marketing expenses of $0.1 million, and professional fees, marketing and other expenses of $22 thousand.

~~Other (Income) and Expense~~

~~Other (Income)/Expense.~~Other (income) expense consists primarily of interest rate and amortization expenses attributable to our debt facilities and those of our subsidiaries. The debt facilities include stock or warrants issued as fees. The fair value of stock and warrants are amortized as amortization expense, except when the extinguishment accounting method is applied, in which case refinanced debt costs are recorded as extinguishment loss or gain.

~~Three Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America

Interest rate expense
$5,347
$4,542
$805
  18%
Debt related fees and amortization expense
  946
  719
$227
  32%
Accretion of Series A preferred units
  589
  -
$589
  100%
Other income
  (265)
  (55)
$320
  582%





India




Interest rate expense
  49
  150
$(101)
  -67%
Other income
  (24)
  (6)
$18
  300%





Total
$6,642
$5,350
$1,292
  24%

~~North America~~. Interest expense was higher during the three months ended September 30, 2019 due to higher debt balances. The increase in amortization expense was due to debt issuance costs present during the prior period becoming amortized as of September 30, 2019. According to accounting treatment for Series A Preferred Unit financing, we accrete the change in the redemption value over the estimated redemption period of six years. We recorded accretion of $0.6 million during the three months ended September 30, 2019. The increase in other income was due to reversal of the change in fair value of SARs of $143 thousand, the receipt of $30 thousand of income for land usage in the CO2~~Project, $50 thousand in income from sub lease of the Cupertino office, and the receipt of $42 thousand in refund of overpaid insurance for the three months ended September 30, 2019.~~

~~India~~. Interest expense decreased as a result of more payments of principal and interest than draws on two working capital loans during the three months ended September 30, 2019. The increase in other income was caused primarily by an increase in other income from insurance and deposits of $18 thousand.

~~Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018~~

~~Revenues~~

~~Our revenues are derived primarily from sales of ethanol and WDG in North America and biodiesel and glycerin in India.~~

~~Nine Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$113,942
$115,380
$(1,438)
  -1%
India
  35,954
  17,301
  18,653
  108%





Total
$149,896
$132,681
$17,215
  13%

~~North America.~~ The slight decrease in revenues between the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was due to decreases in ethanol sales volumes by 2% to 48.1 million gallons and a decrease in the average price of ethanol by 2% to $1.75 per gallon during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The decrease was offset by an increase in WDG sales volumes by 1% to 319.9 tons and an increase in the average WDG price by 6% to $81.64 per ton in the nine months ended September 30, 2019 compared to the same period last year. During the nine months ended September 30, 2019, plant production averaged 117% of the 55 million gallon per year nameplate capacity. For the nine months ended September 30, 2019, we generated 74% of our revenue from sales of ethanol, 23% from sales of WDG, and 3% from sales of distillers’ corn oil, LCFS credit sale, and CDS compared to the nine months ended September 30, 2018, during which we generated 76% of our revenue from sales of ethanol, 21% from sales of WDG, and 3% from sales of distillers’ corn oil and CDS.

~~India~~. The increase in revenues for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was due to a 144% increase in the sales volume of biodiesel to 37,104 metric tons. The increase in biodiesel volumes was due to obtaining and supplying under the OMCs tender contract in addition to sales to our regular retail, mining, and bulk customers. The average sales price of biodiesel decreased by 3% to $868 per metric ton during the nine months ended September 30, 2019 compared to $893 per metric ton in the same period in 2018. The sales volume of refined glycerin increased by 6% to 3,946 metric tons while the average price of glycerin decreased by 45% to $554 per metric ton in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. For the nine months ended September 30, 2019, we generated 90% of our sales from biodiesel, 6% of our sales from refined glycerin, and 4% from other products compared to 78% of our sales from biodiesel and 22% of our sales from refined glycerin during the nine months ended September 30, 2018.

~~Cost of Goods Sold~~

~~Nine Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$113,440
$109,208
$4,232
  4%
India
  29,552
  16,171
  13,381
  83%





Total
$142,992
$125,379
$17,613
  14%

~~North America.~~ We ground 16.9 million bushels of corn at an average price of $5.37 per bushel during the nine months ended September 30, 2019, compared to 17.1 million bushels of corn at an average price of $4.91 per bushel during the nine months ended September 30, 2018. The increase in cost of goods sold was attributable to increased corn costs by 9% coupled with increases in natural gas costs by 4% offset by decreases in bushels of corn ground and chemicals costs in the nine months ended September 30, 2019 compared to the same period in 2018.

~~India.~~ The increase in cost of goods sold during the nine months ended September 30, 2019 compared to September 30, 2018 was attributable to an increase in the volume of biodiesel feedstock we ground by 158% to 31,936 metric tons compared to 12,394 metric tons during the nine months ended September 30, 2018 partially offset by a decrease in the average price of biodiesel feedstock by 10% to $683 compared to $757 in the same period in 2018. In addition, the volume of refined glycerin feedstock we ground also increased by 6% to 3,458 metric tons and the average price of the refined glycerin feedstock decreased by 36% to $583 per metric ton in the nine months ended September 30, 2019 compared to the same period in 2018.

~~Gross Profit~~

~~Nine Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$502
$6,172
$(5,670)
  -92%
India
  6,402
  1,130
  5,272
  467%





Total
$6,904
$7,302
$(398)
  -5%

~~North America.The~~decrease in gross profit was due to an increase in the average price of corn by 9% and a decrease in the average price of ethanol and sales volume of ethanol by 2%, offset by increases in the average price of WDG by 6% and sales volume of WDG by 1% in the nine months ended September 30, 2019 compared to the same period in 2018.

~~India.The increase in gross profit was attributable to an increase in overall sales volume of biodiesel and refined glycerin by 117% combined with a decrease in overall feedstock costs by 15% to $674.~~

~~Operating Expenses~~

~~R&D~~

~~Nine Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$160
$191
$(31)
  -16%
India
  -
  -
  -
  -





Total
$160
$191
$(31)
  -16%

The decrease in R&D expenses in our North America segment for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was due to decreases in rent, amortization of intangibles, other expenses of $137 thousand offset by increases in supplies and utilities of $46 thousand and professional fees of $60 thousand in the nine months ended September 30, 2019.

~~Selling, General & Administrative (SG&A)~~

~~Nine Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America
$9,972
$10,580
$(608)
  -6%
India
  2,743
  709
  2,034
  287%





Total
$12,715
$11,289
$1,426
  13%

SG&A expenses consist primarily of salaries and related expenses for employees, marketing expenses related to sales of ethanol and WDG in North America and biodiesel and other products in India, as well as professional fees, other corporate expenses, related facilities expenses and operational support fees paid to our working capital partner, Gemini and Secunderabad Oils, as part of an operating profit sharing arrangement.

~~North America~~. SG&A expenses as a percentage of revenue in the nine months ended September 30, 2019 were consistent at 9% as compared to the corresponding period of 2018. The decrease in SG&A expenses was primarily due to decreases in professional fees of $0.3 million, and salaries, supplies, and other expenses of $0.3 million, and other expenses of $0.5 million due to grant receipts charged against the expenses partially offset by increases in insurance and penalties on property taxes of $0.4 million for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.

~~India~~. SG&A expenses as a percentage of revenue in the nine months ended September 30, 2018 increased to 9% as compared to 4% in the corresponding period of 2018. Overall SG&A expenses increased period over period due to increases in operational support charges of $1.3 million, salaries of $146 thousand, supplies and other services of $270 thousand, utilities of $282 thousand, and marketing, professional fees and other expenses of $32 thousand.

~~Other Income and Expense~~

~~Other (Income)/Expense.~~Other (income) expense consists primarily of interest and amortization expense attributable to our debt facilities and those of our subsidiaries. The debt facilities include stock or warrants issued as fees. The fair value of stock and warrants are amortized as amortization expense, except when the extinguishment accounting method is applied, in which case refinanced debt costs are recorded as extinguishment expense.

~~Nine Months Ended September 30 (in thousands)~~

2019

2018

Inc/(dec)

% change

North America

Interest rate expense
$15,240
$12,949
$2,291
  18%
Debt related fees and amortization expense
  3,565
  6,395
  (2,830)
  -44%
Accretion of Series A preferred units
  1,509
  -
  1,509
  100%
Loss contingency on litigation
  6,200
  -
  6,200
  100%
Other income
  (228)
  (12)
  (216)
  1800%





India




Interest rate expense
  332
  446
  (114)
  -26%
Other (income) /expense
  (773)
  14
  787
  5621%





Total
$25,845
$19,792
$7,627
  39%

~~North America~~. Interest expense was higher during the nine months ended September 30, 2019 due to higher debt balances of principal and interest on our Senior Notes and Subordinated Notes. The decrease in amortization expense in the nine months ended September 30, 2019 was mainly due to an absence of immediate expense of fees compared to immediate expense of redemption fees of $3.1 million and $0.5 million waiver fees on Amendment No. 14 in the first quarter of 2018 due to troubled debt restructuring during the nine months ended September 30, 2018. According to accounting treatment for Series A Preferred Unit financing, we have to accrete the change in the redemption value over the estimated redemption period of six years. We recorded the accretion of $1.5 million for the nine months ended September 30, 2019. In addition, based on the judgment given in the EdenIQ litigation, we recorded a $6.2 million in loss on contingency during the nine months ended September 30, 2019. The increase in other income was due to increase in $120 thousand in sub rental income of the Cupertino office, recognition of $18 thousand income on excess penalties reversal, reversal of the change in fair value of SARs of $83 thousand, the receipt of $42 thousand refund on overpaid insurance, and $90 thousand of income for land usage in the CO2~~Project, offset by fully amortized guarantee fees of $125 thousand.~~

~~India.~~Interest expense decreased as a result of more payments than draws on two working capital loans in the nine months ended September 30, 2019. The increase in other income of $0.8 million was caused primarily by release of long-standing accounts payable and interest on these payables as matters closed legally.

~~Liquidity and Capital Resources~~

~~Cash and Cash Equivalents~~

Cash and cash equivalents were $0.9 million at September 30, 2019, of which $0.2 million was held in our North American entities and $0.7 million was held in our Indian subsidiary. Our current ratio at September 30, 2019 was 0.22 compared to a current ratio of 0.24 at December 31, 2018. We expect that our future available capital resources will consist primarily of cash generated from operations, Liquidity Reserve Notes, EB-5 program borrowings, senior debt, subordinated debt and any additional funds raised through sales of preferred units.

~~Liquidity~~

~~Cash and cash equivalents, current assets, current liabilities and debt at the end of each period were as follows (in thousands):~~

September 30,
2019

December 31,
2018

Cash and cash equivalents
$919
  $1,188
Current assets (including cash, cash equivalents, and deposits)
  12,605
  10,311
Current and long term liabilities (excluding all debt)
  47,897
  32,286
Current & long term debt
  195,538
  175,117

Our principal sources of liquidity have been cash provided by operations and borrowings under various debt arrangements. As of September 30, 2019, the EB-5 escrow account is holding funds in the amount of $0.5 million from one investor pending approval by the USCIS. The balance of $0.5 million is expected to be released from the escrow account in 2019.

We launched an EB-5 Phase II funding in 2016, under which we expect to issue $50.0 million in additional EB-5 Notes on substantially similar terms and conditions as those issued under our EB-5 Phase I funding. As of September 30, 2019, the EB-5 escrow funding of $2.5 million was released to the Company. Our principal uses of cash have been to refinance indebtedness, fund operations, and for capital expenditures. We anticipate these uses will continue to be our principal uses of cash in the future. Global financial and credit markets have been volatile in recent years, and future adverse conditions of these markets could negatively affect our ability to secure funds or raise capital at a reasonable cost, or at all.

We operate in a volatile market in which we have limited control over the major components of input costs and product revenues, and are making investments in future facilities and facility upgrades that improve the overall margin while lessening the impact of these volatile markets. As such, we expect cash provided by operating activities to fluctuate in future periods primarily because of changes in the prices for corn, ethanol, WDG, DCO, CDS, biodiesel, waste fats and oils, non-refined palm oil and natural gas. To the extent that we experience periods in which the spread between ethanol prices and corn and energy costs narrow or the spread between biodiesel prices and waste fats and oils or palm oil and energy costs narrow, we may require additional working capital to fund operations.

~~Management believes that through the following actions, the Company will have the ability to generate capital liquidity to carry out the business plan:~~

●

~~Monetize the CO~~2~~produced at the Keyes Plant by executing on the agreement with Linde for the delivery of gas to their neighboring facility to be built during 2019.~~

●

~~Construct and operate biogas digesters to capture and monetize biogas by 2020.~~

●

~~Secure higher volumes of shipments of fuels at the India plant by developing the sales channels and expanding the existing domestic markets.~~

●

At September 30, 2019, the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes equaled $102.5 million, not including the promissory note and GAFI Loans. The current maturity date for the Third Eye Capital Notes is April 1, 2020; provided, however, that pursuant to Amendment No. 14, we have the right to extend the maturity date of the Third Eye Capital Notes to April 1, 2021 upon notice and payment of a 5% extension fee which can be paid with cash from operations or with some other source of low cost debt, or can be added to debt as senior debt. In addition, we borrowed $2.1 million on promissory note with Third Eye Capital on Feb 27, 2019 and the outstanding balance was $2.8 million as of September 30, 2019. We intend to repay the Third Eye Capital Notes through operational cash flow, proceeds from the issuance of the EB-5 Notes, a senior debt refinancing and/or equity financing.

At September 30, 2019, GAFI’s outstanding balance of principal, interest and fees, net of discounts, on all GAFI Loans equaled $29.4 million. The current maturity date for the GAFI Loans is July 10, 2020 with an option to extend the maturity to July 10, 2021. GAFI intends to repay the GAFI Loans through proceeds from the issuance of a GAFI EB-5 offering. Our senior lender has provided a series of accommodating amendments to the existing and previous loan facilities in the past as described in further detail in “Part I, Item 1. Financial Statements – Note 4. Debt.” However, there can be no assurance that our senior lender will continue to provide further amendments or accommodations or will fund additional amounts in the future.

~~As of September 30, 2019, the Company has $8.0 million additional borrowing capacity to fund future cash flow requirements under the Reserve Liquidity Notes until April 1, 2020.~~

We also rely on our working capital lines with J.D. Heiskell in California, and Gemini and Secunderabad Oils in India to fund our commercial arrangements for the acquisitions of feedstock. J.D. Heiskell currently provides us with working capital for the Keyes plant, Gemini currently provides us with working capital for the Kakinada plant. The ability of J.D. Heiskell and Gemini to continue to provide us with working capital depends in part on both of their respective financial strength and banking relationships.

~~Change in Working Capital and Cash Flows~~

~~The below table describes the changes in current and long-term debt during the nine months ended September 30, 2019:~~

	~~Change in total debt~~	$~~20,421~~
~~Increases to debt:~~
~~Accrued interest~~	~~15,502~~
~~Amendment No.15 wavier fee added to redemption fee~~	~~1,000~~
~~Feb 2019 Promissory note including $0.1 million withheld as fees by TEC~~	~~2,782~~
~~Sub debt extension fees~~	~~680~~
~~India working capital draws and changes due to foreign currency~~	~~34,426~~
~~GAFI Amendment No. 2 draw~~	~~2,094~~
~~EB-5 Phase 2 investment received~~	~~1,000~~
~~GAFI debt renewal fee~~	~~500~~
~~Change in debt issuance costs, net of amortization~~	~~918~~
~~Total increases to debt~~		$~~58,902~~
~~Decreases to debt:~~
~~Principal and interest payments to senior lender~~	~~(173~~)
~~Interest payments to EB-5 investors~~	~~(105~~)
~~Principal, fees and interest payments on working capital loans in India~~	~~(36,063~~)
~~GAFI interest and principal payments~~	~~(2,140~~)
~~Total decreases to debt~~		$~~(38,481~~)

Working capital changes resulted in (i) a $4.3 million increase in accounts receivable due to increase in sales by India operations which caused the receivable balance in India to increase by $3.7 million and the $0.6 million increase in North America entities, (ii) a $2.6 million decrease in inventories was mainly due to conversion of $2.4 million of raw material in India operations and a $0.2 million decrease in the North America entities, (iii) a $0.4 million decrease in prepaid expenses mainly due to recognition of $0.1 million McAfee guarantee fees expensed and $0.3 million in insurance prepaid and other prepaid recognized in North America entities, and (iv) a $1.2 million increase in other assets consisting of a $0.4 million decrease in North America entities offset by a $1.7 million increase in India operations mainly due to bank guarantee deposits set aside for OMC contracts.

Net cash used by operating activities during the nine months ended September 30, 2019 was $1.1 million, net of non-cash charges of $9.0 million, net changes in operating assets and liabilities of $21.7 million and net loss of $31.8 million. The non-cash charges consisted of (i) $3.6 million in amortization of debt issuance costs and patents, (ii) $3.3 million in depreciation expenses, (iii) $0.6 million in stock-based compensation expense, (iv) $1.5 million in recognition of accretion on Series A preferred units, and (v) $80 thousand gain on fair value of SARs liability. Net changes in operating assets and liabilities consisted primarily of an increase in accounts receivable of $4.3 million and other assets of $0.2 million, partially offset by: (i) a $3.4 million increase in accounts payable, (ii) a $2.6 million decrease in inventories, (iii) a $6.6 million increase in other liabilities, (iv) a $0.4 million decrease in prepaids, and (v) a $13.3 million increase in accrued interest.

~~Cash used by investing activities consists of capital expenditures of $4.3 million from North America entities and $0.8 million from our UBPL operations.~~

Cash provided by financing activities was $5.9 million, consisting primarily of $1.7 million received from the Series A Preferred Unit issuance, $1.4 million received as grant awards, $2.7 million received from Third Eye Capital promissory note, $1.0 million received from EB-5 investments, and $34.5 million from working capital partners in India for their operations, partially offset by payments of $35.6 million in principal to working capital partners in India for their operations. GAFI had a $1.0 million of borrowings and $0.7 million in payments including maturity renewal fee of $0.5 million on GAFI notes.

~~Critical Accounting Policies~~

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. We believe that of our most significant accounting policies, the following represents our critical accounting policies, defined as those policies 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: revenue recognition; recoverability of long-lived assets, convertible notes, and extinguishment accounting. 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, 2018.

~~Recently Issued Accounting Pronouncements~~

~~None reported beyond those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.~~

~~Off Balance Sheet Arrangements~~

~~We had no off balance sheet arrangements during the three months ended September 30, 2019.~~

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk.~~

~~Not applicable.~~

~~Item 4.~~

~~Controls and Procedures.~~

~~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 weakness over financial reporting as identified in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, the disclosure controls and procedures along with the related 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~~

A new control and procedures around the new control were designed and implemented to address the material weakness identified as of December 31, 2018. Other than the new control design, there were no changes in our internal controls over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our 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 fiscal year ended December 31, 2018, we initiated a remediation plan to address the material weakness in our internal control over financial reporting identified as of the fiscal year then ended. Our efforts to improve our internal controls are ongoing.

For a more comprehensive discussion of the material weakness in internal control over financial reporting identified by management as of December 31, 2018, and the remedial measures undertaken to address this material weakness, investors are encouraged to review Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

~~PART II -- OTHER INFORMATION~~

~~Item 1.~~

Legal Proceedings

On August 31, 2016, the Company filed a lawsuit in Santa Clara County Superior Court against defendant EdenIQ, Inc. (“EdenIQ”). The lawsuit was based on EdenIQ’s wrongful termination of a merger agreement that would have effectuated the merger of EdenIQ into a new entity that would be primarily owned by Aemetis. The lawsuit asserted that EdenIQ had fraudulently induced the Company into assisting EdenIQ to obtain EPA approval for a new technology that the Company would not have done but for the Company’s belief that the merger would occur. The relief sought included EdenIQ’s specific performance of the merger, monetary damages, as well as punitive damages, attorneys’ fees, and costs. In response to the lawsuit, EdenIQ filed a cross-complaint asserting causes of action relating to the Company’s alleged inability to consummate the merger, the Company’s interactions with EdenIQ’s business partners, and the Company’s use of EdenIQ’s name and trademark in association with publicity surrounding the merger. Further, EdenIQ named Third Eye Capital Corporation (“TEC”) as a defendant in a second amended cross-complaint alleging that TEC had failed to disclose that its financial commitment to fund the merger included terms that were not disclosed. Finally, EdenIQ claimed that TEC and the Company concealed material information surrounding the financing of the merger. By way of its cross-complaint, EdenIQ sought monetary damages, punitive damages, injunctive relief, attorneys’ fees and costs. In November 2018, the claims asserted by the Company were dismissed on summary judgment and the Company filed a motion to amend its claims, which remains pending. In December 2018, EdenIQ dismissed all of its claims prior to trial. In February 2019, the Company and EdenIQ each filed motions seeking reimbursement of attorney fees and costs associated with the litigation. On July 24, 2019, the court awarded EdenIQ a portion of the fees and costs it had sought in the amount of approximately $6.2 million. The Company recorded the $6.2 million as loss contingency on litigation during the year ended December 31, 2019. The Company’s ability to amend its claims and present its claims to the court or a jury could materially affect the court’s decision to award EdenIQ its fees and costs. In addition to further legal motions and a potential appeal of the Court’s summary judgment order, the Company plans to appeal the court’s award of EdenIQ’s fees and costs. The Company intends to continue to vigorously pursue its legal claims and defenses against EdenIQ.

6. Biogas LLC – Series A Preferred Financing

On December 20, 2018, Aemetis Biogas LLC entered into a Series A Preferred Unit Purchase Agreement (the “Preferred Unit Agreement”) by selling Series A Preferred Units to Protair-X Americas, Inc. (the “Purchaser”), with Third Eye Capital acting as an agent for the purchaser (the “Agent”). ABGL plans to construct and collect biogas from dairies located near the Keyes Plant. Biogas is a blend of methane along with CO2 and other impurities that can be captured from dairies, landfills and other sources. After a gas cleanup and compression process, biogas can be converted into bio-methane, which is a direct replacement of petroleum natural gas and can be transported in existing natural gas pipelines.

ABGL is authorized to issue 11,000,000 common units, and up to 6,000,000 convertible, redeemable, secured, preferred membership units (the “Series A Preferred Units”). ABGL issued 6,000,000 common units to the Company. ABGL also issued 1,660,000 Series A Preferred Units to the Purchaser for $8,300,000 with the ability to issue an additional 4,340,000 Series A Preferred Units at $5.00 per Unit for a total of up to $30,000,000 in funding. Additionally, 5,000,000 common units of ABGL are held in reserve as potential conversion units issuable to the Purchaser upon certain triggering events discussed below.

The Preferred Unit Agreement includes (i) preference payments of $0.50 per unit on the outstanding Series A Preferred Units commencing on the second anniversary, (ii) conversion rights for up to 1,200,000 common units or up to maximum number of 5,000,000 common units (also at a one Series A Preferred Unit to one common unit basis) if certain triggering events occur, (iv) one board seat of the three available to be elected by Series A Preferred Unit holders, (iii) mandatory redemption value at $15 per unit payable at an amount equal to 75% of free cash flow generated by ABGL, up to $90 million in the aggregate (if all units are issued), (iv) full redemption of the units on the sixth anniversary, (v) minimum cash flow requirements from each digester, and (vi) $0.9 million paid as fees to the Agent from the proceeds.

Triggering events occur upon ABGL’s failure to redeem units, comply with covenants, any other defaults or cross defaults, or to perform representations or warranties. Upon a triggering event: (i) the obligation of the Purchaser to purchase additional Series A Preferred Units is terminated, (ii) cash flow payments for redemption payments increases from 75% to 100% of free cash flows, and (iii) total number of common units into which preferred units may be converted increases from 1,200,000 common units to 5,000,000 common units on a one for one basis. As of September 30, 2020, ABGL has not generated minimum quarterly operating cash flows by operating the dairies. As a result of the violation of this covenant, free cash flows, when they occur, may be applied for redemption payments at the increased rate of 100% instead of the initial rate of 75% of free cash flows.

From inception of the agreement to date, ABGL issued 3,200,000 Series A Preferred Units on first tranche for a value of $16.0 million and also issued 1,735,833 Series A Preferred Units on second tranche for a value of $8.7 million. The Company is accreting these two tranches to the redemption value of $74 million over the estimated future cash flow periods of six years using the effective interest method. In addition, the Company identified freestanding future tranche rights and the accelerated redemption feature related to a change in control provision as derivatives which required bifurcation. These derivative features were assessed to have minimal value as of September 30, 2020 and December 31, 2019 based on the evaluation of the other conditions included in the agreement.

During the quarter ended September 30, 2020, ABGL issued 732,372 of Series A Preferred Units for incremental proceeds of $3.7 million as part of the second tranche of the Preferred Unit Agreement. Consistent with the previous issuances, the units are treated as a liability as the conversion option was deemed to be non-substantive. The Company is accreting up to the redemption value of $11.0 million over the estimated future cash flow periods of six years from the original anniversary date using the effective interest method.

The Company recorded Series A Preferred Unit liabilities, net of unit issuance costs and inclusive of accretive preference pursuant to this agreement, classified as other current liabilities, of $1.2 million and none, and long-term liabilities of $28.5 million and $14.1 million as of September 30, 2020 and December 31, 2019, respectively.

7. Stock-Based Compensation

2019 Plan

On April 29, 2019, the Aemetis 2019 Stock Plan (the “2019 Stock Plan”) was approved by stockholders of the Company. This plan permits the grant of 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 as the Administrator of the plan may determine in its discretion. The 2019 Stock Plan’s term is 10 years and supersedes all prior plans. The 2019 Stock Plan authorized the issuance of 200,000 shares of common stock for the 2019 calendar year, in addition to permitting the transfer and grant of any available and unissued or expired options under the prior Amended and Restated 2007 Stock Plan in an amount up to 177,246 options.

Employee grants have a general vesting term of 1/12th every three months and are exercisable at any time after vesting subject to continuation of employment. Option grants for directors have immediate vesting with a 10-year term expiration.

With the approval of the 2019 Stock Plan, the Zymetis 2006 Stock Plan and the Amended and Restated 2007 Stock Plan (the “Prior Plans,” and together with the 2019 Stock Plan, the “Stock Plans”) are terminated for granting any options under either plan. However, any options granted before the 2019 Stock Plan approved will remain outstanding and can be exercised, and any expired options issued pursuant to the Prior Plans can be granted under the 2019 Stock Plan.

On January 9, 2020, 771,500 stock option grants were issued for employees and directors under the 2019 Stock Plan. On March 28, 2020, 1,075,500 stock options grant were approved by the Board for employees and directors under the 2019 Stock Plan.

On April 3, 2020, 450,000 stock option grants were issued for employees under the 2019 Stock Plan with 10 year term and immediate vesting.

On June 4, 2020, 10,000 stock option grants were approved by the Board for a director under the 2019 Stock Plan with 10 year term and 2 year vesting.

On August 27, 2020, 13,000 stock option grants were approved by the Board for new employees under the 2019 Stock Plan with 10 year term and 3 year vesting.

As of September 30, 2020, 5.8 million options are outstanding under the Stock Plans.

Common Stock Reserved for Issuance

The following is a summary of options granted under the Plans:

	Shares Available for Grant	Number of Shares Outstanding	Weighted-Average Exercise Price
Balance as of December 31, 2019	147	3,746	$1.38
Authorized	2,342	-	-
Granted	(2,320)	2,320	0.69
Exercised	-	(232)	1.27
Forfeited/expired	83	(83)	0.76

Balance as of September 30, 2020	252	5,751	$1.12

As of September 30, 2020, there were 3.9 million options vested under all the Plans.

Stock-based compensation for employees

Stock-based compensation is accounted for in accordance with the provisions of ASC 718, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.

For the three months ended September 30, 2020 and 2019, the Company recorded stock compensation expense in the amount of $191 thousand and $144 thousand, respectively. For the nine months ended September 30, 2020 and 2019, the Company recorded stock compensation expense in the amount of $826 thousand and $630 thousand, respectively.

Valuation and Expense Information

All issuances of stock options or other issuances of equity instruments to employees as the consideration for services received by us are accounted for based on the fair value of the equity instrument issued. The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model for stock based compensation expense requires us to make assumptions and judgments about the variables used in the calculation, including the fair value of our common stock, 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, and expected dividends. We also estimate forfeitures of unvested stock options. To the extent actual forfeitures differ from our estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. Compensation cost is recorded only for vested options. We use the simplified calculation of expected life described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, and volatility is based on an average of the historical volatilities of the common stock of four entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods 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 and the plan.

During the nine months ended September 30, 2020 and 2019, 2,320,000 and 399,000 options were granted respectively. The weighted average fair value calculations for options granted during the nine months ended September 30, 2020 and 2019 are based on the following assumptions:

	For the nine months ended September 30,
Description	2020	2019
Dividend-yield	0%	0%
Risk-free interest rate	0.94%	2.38%
Expected volatility	88.15%	88.54%
Expected life (years)	6.55	6.55
Market value per share on grant date	$0.69	$0.78
Fair value per share on grant date	$0.52	$0.59

As of September 30, 2020, the Company had $1.1 million of total unrecognized compensation expense for employees, which the Company will amortize over the 2.0 years weighted average remaining term.

8. Agreements

Working Capital Arrangement.Pursuant to a Corn Procurement and Working Capital Agreement with J.D. Heiskell, the Company agreed to procure whole yellow corn and grain sorghum, primarily from J.D. Heiskell. 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. The term of the Corn Procurement and Working Capital Agreement expires on December 31, 2020 and the term can be automatically renewed for additional one-year terms. J.D. Heiskell further agrees to sell all WDG the Company produces to A.L. Gilbert. The Company markets and sells DCO to A.L. Gilbert and other third parties under the J.D. Heiskell Purchasing Agreement. The Company’s relationships with J.D. Heiskell, and A.L. Gilbert are well established and the Company believes that the relationships are beneficial to all parties involved in utilizing the distribution logistics, reaching out to widespread customer base, managing inventory, and building working capital relationships. These agreements are ordinary purchase and sale agency agreements for the Keyes Plant. On May 13, 2020, J.D. Heiskell and the Company entered into Amendment No.1 to the J.D. Heiskell Purchasing Agreement to remove J.D. Heiskell’s obligations to purchase ethanol from the Company under the J.D. Heiskell Purchasing Agreement.

The J.D. Heiskell’s sales activity associated with the Corn Procurement and Working Capital Agreement for the three and nine months ended September 30, 2020 and 2019 are as follows:

	As of and for the three months ended September 30,		As of and for the nine months ended September 30,
	2020	2019	2020	2019
Ethanol sales	$-	$27,456	$26,049	$84,453
Wet distiller's grains sales	7,143	8,783	22,983	26,119
Corn oil sales	827	934	2,806	2,586
Corn purchases	25,513	30,446	77,268	90,426
Accounts receivable	161	1,066	161	1,066
Accounts payable	1,978	2,484	1,978	2,484

Ethanol and Wet Distillers Grains Marketing Arrangement.The Company entered into an Ethanol Marketing Agreement with Kinergy and a Wet Distillers Grains Marketing Agreement with A.L. Gilbert. Under the terms of the agreements, subject to certain conditions, the Ethanol Marketing Agreement matures on August 31, 2021 and the Wet Distillers Grains Marketing Agreement matures on December 31, 2020 with automatic one-year renewals thereafter. For the three months ended September 30, 2020 and 2019, the Company expensed marketing costs of $0.6 million for each period under the terms of both the Ethanol Marketing Agreement and the Wet Distillers Grains Marketing Agreement. For the nine months ended September 30, 2020 and 2019, the Company expensed marketing costs of $1.7 million and $1.9 million, respectively.

9. Segment Information

Aemetis recognizes two reportable geographic segments: “North America” and “India.” The “North America” operating segment includes the Keyes Plant, the Riverbank Cellulosic Ethanol Facility, the Biogas Project, the Goodland Plant and the research and development facility in Minnesota.

The “India” operating segment includes the Kakinada Plant, the administrative offices in Hyderabad, India, and the holding companies in Nevada and Mauritius. The Company’s biodiesel is marketed and sold primarily to customers in India through brokers and by the Company directly.

Summarized financial information by reportable segment for the three and nine months ended September 30, 2020 and 2019 follows:

	Three months ended September 30, 2020			Three months ended September 30, 2019
	North America	India	Total Consolidated	North America	India	Total Consolidated

Revenues	$33,131	$7,792	$40,923	$37,820	$19,569	$57,389
Cost of goods sold	33,534	6,618	40,152	37,990	15,417	53,407

Gross (loss) profit	(403)	1,174	771	(170)	4,152	3,982

Other Expenses
Research and development expenses	37	-	37	37	-	37
Selling, general and administrative expenses	4,340	223	4,563	2,716	1,813	4,529
Interest expense	6,461	9	6,470	6,293	49	6,342
Accretion of Series A preferred units	1,765	-	1,765	589	-	589
Other (income) expense	155	(2)	153	(265)	(24)	(289)

Income (loss) before income taxes	$(13,161)	$944	$(12,217)	$(9,540)	$2,314	$(7,226)

Capital expenditures	$6,187	$113	$6,300	$3,664	$351	$4,015
Depreciation	1,085	168	1,253	942	161	1,103

	For the nine months ended September 30, 2020			For the nine months ended September 30, 2019
	North America	India	Total Consolidated	North America	India	Total Consolidated

Revenues	$114,226	$14,001	$128,227	$113,942	$35,954	$149,896
Cost of goods sold	101,231	12,599	113,830	113,440	29,552	142,992

Gross profit	12,995	1,402	14,397	502	6,402	6,904

Other Expenses
Research and development expenses	175	-	175	160	-	160
Selling, general and administrative expenses	11,206	1,342	12,548	9,972	2,743	12,715
Interest expense	19,490	44	19,534	18,805	332	19,137
Accretion of Series A preferred units	4,087	-	4,087	1,509	-	1,509
Loss contingency on litigation	-	-	-	6,200	-	6,200
Other expense (income)	416	(23)	393	(228)	(773)	(1,001)

Income (loss) before income taxes	$(22,379)	$39	$(22,340)	$(35,916)	$4,100	$(31,816)


Capital expenditures	$13,571	1,350	14,921	$4,249	$804	$5,053
Depreciation	3,030	485	3,515	2,883	454	3,337

North America:During the three and nine months ended September 30, 2020, the Company amended the Corn Procurement and Working Capital Agreement and the J.D. Heiskell Purchasing Agreement to procure corn from J.D. Heiskell and sell all WDG and corn oil the Company produces to J.D. Heiskell. Sales of ethanol, WDG, corn oil, and high-grade alcohol to two customers accounted for 72% and 24% of the Company’s North America segment revenues for the three months ended September 30, 2020. Sales to three customers accounted for 45%, 32% and 11% of the Company’s North America segment revenues for the nine months ended September 30, 2020.

During the three and nine months ended September 30, 2019, the Company’s revenues from ethanol, WDG, and corn oil were made pursuant to the Corn Procurement and Working Capital Agreement. Sales of ethanol, WDG, and corn oil to J.D. Heiskell accounted for 98.3% and 99.3% of the Company’s North America segment revenues for the three and nine months ended September 30, 2019, respectively.

India.During the three months ended September 30, 2020, two biodiesel customers accounted for 56% and 26% of the Company’s consolidated India segment revenues while none of the refined glycerin customers accounted for more than 10%, compared to three biodiesel customers accounting for 41%, 16% and 15% of the Company’s consolidated India segment revenues and none of the refined glycerin customers accounting for more than 10% of such revenues during the three months ended September 30, 2019.

During the nine months ended September 30, 2020, two biodiesel customers accounted for 51% and 33%, of the Company’s consolidated India segment revenues while none of the refined glycerin customers accounted for more than 10% of such revenues, compared to three biodiesel customers accounted for 29%, 18% and 15% of the Company’s consolidated India segment revenues while none of the refined glycerin customers accounted for more than 10% of such revenues during the nine months ended September 30, 2019.

Total assets by segment consist of the following:

	As of
	September 30,	December 31,
	2020	2019

North America	$105,619	$82,990
India	16,551	16,906
Total Assets	$122,170	$99,896

10. Related Party Transactions

The Company owes Eric McAfee, the Company’s Chairman and CEO, and McAfee Capital LLC (“McAfee Capital”), owned by Eric McAfee, $0.4 million in connection with employment agreements and expense reimbursements previously accrued as salaries expense and accrued liabilities. The balance accrued related to these employment agreements was $0.4 million as of September 30, 2020 and December 31, 2019. For the three months ended September 30, 2020 and 2019, the Company expensed $7 thousand and $1 thousand, respectively, to reimburse actual expenses incurred by McAfee Capital and related entities. For the nine months ended September 30, 2020 and 2019, the Company expensed $7 and $22 thousand, respectively, to reimburse actual expenses incurred by McAfee Capital and related entities. The Company previously prepaid $0.2 million to Redwood Capital, a company controlled by Eric McAfee, for the Company’s use of flight time on a corporate jet. As of September 30, 2020, $0.1 million remained as a prepaid expense.

As consideration for the reaffirmation of guaranties required by Amendment No. 13 and 14 to the Note Purchase Agreement which the Company entered into with Third Eye Capital on March 1, 2017 and March 27, 2018 respectively, the Company also agreed to pay $0.2 million annually in consideration to McAfee Capital in exchange for its willingness to provide the guaranties. On May 7, 2020 the Audit Committee of the Company approved a guarantee fee of 0.4% on the outstanding balance of Third Eye Capital Notes annually. Based on this approval, we accrued $0.5 million in guarantee fee as of September 30, 2020. The balance of $627 thousand and $304 thousand for guaranty fee remained as an accrued liability as of September 30, 2020 and December 31, 2019 respectively.

The Company owes various members of the Board amounts totaling $1.2 million as of September 30, 2020 and December 31, 2019, for each period, in connection with board compensation fees, which are included in accounts payable on the balance sheet. For the three months ended September 30, 2020 and 2019, the Company expensed $94 thousand and $96 thousand respectively, in connection with board compensation fees. For the nine months ended September 30, 2020 and 2019, the Company expensed $256 thousand and $294 thousand respectively, in connection with board compensation fees.

11. Subsequent Events

Third Eye Capital Limited Waiver and Amendment No. 18

On November 5, 2020, Third Eye Capital agreed to Limited Waiver and Amendment No. 18 to the Note Purchase Agreement (“Amendment No. 18”) to provide for a waiver of the ratio of note indebtedness covenant for the quarter ended September 30, 2021. As consideration for such amendment and waivers, the borrowers also agreed to pay Third Eye Capital an amendment fee of $50 thousand in cash.

12. Management’s Plan

The accompanying financial statements have been prepared contemplating the realization of assets and satisfaction of liabilities in the normal course of business. The Company has a working capital deficit, which includes approximately $59.3 million of debt maturing within the next 12 months, and the Company has been required to remit substantially all excess cash from operations to its senior lender and is therefore reliant on its senior lender to provide additional funding when required. In order to meet its obligations during the next 12 months, the Company will need to either refinance the Company’s debt or receive the continued cooperation from its senior lender. This dependence on the senior lender raises substantial doubt about the Company’s ability to continue as a going concern. The Company plans to pursue the following strategies to improve the course of the business:

●

Operate the Keyes Plant and continue to improve operational performance at the Plant, including the expansion into new products, new markets for existing products, and adoption of new technologies or process changes that allow for energy efficiency, cost reduction or revenue enhancements.

●

Continue to develop and expand the markets for high-grade alcohol by extending the value chain to allow for higher margin sales to consumers.

●

Execute upon awarded grants at the Keyes Plant that improve operational efficiencies resulting in lower cost, lower carbon demands, and overall margin improvement.

●

Operate the existing biogas digesters to capture and monetize RNG as well as continue to build new dairy digesters and extend the existing pipeline in order to capture high value California LCFS credits and RFS RINs.

●

Secure higher fuel shipment volumes from the India plant by developing the sales channels and expanding the existing domestic markets.

●

Continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling the current offering for $50.8 million from the EB-5 Phase II funding, or by vendor financing arrangements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

●

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 and nine months ended September 30, 2020 to the three and nine months ended September 30, 2019.

●

Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition.

●

Critical Accounting Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes included elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. As discussed in further detail above, the 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, and in other reports we file with the SEC, specifically our most recent Annual Report on Form 10-K. All references to years relate to the calendar year ended December 31 of the particular year.

Overview

Headquartered in Cupertino, California, Aemetis is an international advanced renewable fuels and biochemicals company focused on the acquisition, development and commercialization of innovative technologies that replace traditional petroleum-based products through the conversion of second-generation ethanol and biodiesel plants into advanced biorefineries. We operate in two reportable geographic segments: “North America” and “India.”

Founded in 2006, we own and operate a 65 million gallon per year ethanol facility in California’s Central Valley in Keyes, California where we manufacture and produce renewable fuel ethanol, high-grade alcohol, WDG, CDS and DCO. We operate a research and development laboratory to develop efficient conversion technologies using waste feedstocks to produce biofuels and biochemicals. We also own and operate a 50 million gallon per year renewable chemical and advanced fuel production facility on the East Coast of India producing high quality distilled biodiesel and refined glycerin for customers in India and Europe.

We also lease a site in Riverbank, California, near the Keyes Plant, where we plan to utilize biomass-to-fuel technology that we have licensed from LanzaTech and InEnTec to build the Riverbank Cellulosic Ethanol Facility capable of converting local California surplus biomass–principally orchard waste–into ultra-low carbon renewable cellulosic ethanol. By producing ultra-low carbon renewable cellulosic ethanol, we expect to capture higher value D3 cellulosic RINs and California’s LCFS credits. D3 RINs have a higher value in the marketplace than D6 RINs due to D3 RINs’ relative scarcity and mandated pricing formula from the United States EPA.

In December 2018, we acquired a 5.2-acre parcel of land for the construction of a gas-to-liquid CO2 facility by Messer, to sell CO2 produced at the Keyes Plant, which will add incremental income for the North America segment. We commenced operations and began recognizing revenue from this project in the second quarter of 2020.

In 2018, we formed ABGL to construct biogas digesters at local dairies near the Keyes Plant, many of whom are already customers of the WDG produced at the Keyes Plant. The digesters are connected by a pipeline to a gas cleanup and compression facility to produce RNG. ABGL currently has signed participation agreements with 17 local dairies and fully executed leases with 3 dairies near the Keyes Plant in order to capture their methane, which would otherwise be released into the atmosphere, primarily from manure wastewater lagoons. We plan to capture methane from multiple dairies and pipe the gas to a centralized location at our Keyes Plant. The impurities of the methane will then be removed and cleaned into bio-methane for any number of applications including injecting into the local utility pipeline, operating a RCNG truck loading station that will service local trucking fleets to displace diesel fuel, or converting to clean electricity.

The bio-methane can also be used in our Keyes Plant to displace petroleum-based natural gas. The environmental benefits of the Biogas Project are potentially significant because dairy biogas has a negative CI under the California LCFS and will also receive D3 RINs under the federal RFS. ABGL has constructed and commenced operations of the first two digesters during the third quarter of 2020.

Additionally, we own the Goodland Plant through GAFI where we plan to deploy a cellulosic ethanol technology to the Goodland Plant.

North America Revenue

Our revenue development strategy in North America has historically relied on supplying renewable ethanol into the transportation fuel market in Northern California and supplying feed products to dairy and other animal feed operations in Northern California. We are actively seeking higher value markets for our ethanol in an effort to improve our overall margins and to add incremental income to the North America segment, including the development of the Riverbank Cellulosic Ethanol Facility, the sale of CO2 produced at the Keyes Plant to Messer, the construction of biogas digesters at local dairies near the Keyes Plant to produce RNG, and the implementation of the Aemetis Integrated Microgrid System, the Emission and Energy Efficiency Delivery Initiative, the Mitsubishi dehydration system and other technologies at our plants. We are also actively working with local dairy and feed potential customers to promote the value of our WDG product in an effort to strengthen demand for this product.

On March 18, 2020 the US Treasury Tobacco and Alcohol Tax and Trade Bureau (“TTB”) provided waivers allowing ethanol plants to produce high-grade alcohol for use in hand sanitizer. During the first week of April 2020, Aemetis received its permanent permit allowing for sales of fuel ethanol, industrial alcohol and spirits for potable alcohol beyond the waiver period. Accordingly, Aemetis began supplying alcohol as a component of hand sanitizer. During June 2020, Aemetis renamed Biofuels Marketing, Inc. to Aemetis Health Products, Inc., and began a sales and marketing strategy of blending, bottling and selling hand sanitizer into retail branded and white label markets. During the second quarter of 2020, the initial demand for high-grade alcohol as a component of hand sanitizer experienced a significant spike in demand from COVID-19 pandemic due to severe supply shortages, and accordingly, Aemetis was able to produce and supply high volumes of high-grade alcohol product. Market normalization will be dependent on external developments associated with the COVID-19 pandemic; however, management believes qualified procedures will continue to see opportunities for ongoing consumer demand beyond the pandemic’s timeframe. As a producer of high-grade alcohol, with plans to increase product quality to US Pharmacopeia (“USP”) grade, and with the necessary permits to permanently supply into this market, Aemetis expects to emerge well positioned to produce a high-quality product and develop marketing channels that close the gap between suppliers and end customers, albeit at lower volumes than experienced during the second quarter of 2020.

We produce five products at the Keyes Plant: denatured fuel ethanol, high-grade alcohol, WDG, DCO, and CDS. During the first quarter of 2020, we transitioned from selling 100% of the ethanol we produce to J.D. Heiskell, pursuant to a purchase agreement with J.D. Heiskell (“J.D. Heiskell Purchase Agreement”), to a model where 100% of the ethanol is sold directly to Kinergy Marketing LLC (“Kinergy”).The ethanol stored in our finished goods tank is 100% owned by Aemetis. WDG and DCO continue to be sold to A.L.Gilbert and other customers under the J.D.Heiskell Purchasing Agreement. Smaller amounts of CDS were sold to various local third parties. We began selling high-grade alcohol in March 2020 directly to various customers throughout the West Coast. Ethanol pricing is determined pursuant to a marketing agreement with Kinergy and is generally based on daily and monthly pricing for ethanol delivered to the San Francisco Bay Area, California, as published by Oil Price Information Service, as well as quarterly contracts negotiated by Kinergy with local fuel blenders. The price for WDG is determined monthly pursuant to a marketing agreement with A.L. Gilbert and is generally determined in reference to the local price of dried distillers grains and other comparable feed products. North American revenue is dependent on the price of ethanol, high-grade alcohol, WDG, and DCO. Ethanol pricing is influenced by local and national inventory levels, local and national ethanol production, corn prices and gasoline demand. WDG is influenced by the price of corn, the supply and price of distillers dried grains, and demand from the local dairy and feed markets. High-grade alcohol pricing is based on the supply and demand restrictions in the current market. Our revenue is further influenced by our decision to operate the Keyes Plant at various capacity levels, conduct required maintenance, and respond to biological processes affecting output.

Results of Operations

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Revenues

Our revenues are derived primarily from sales of ethanol, high-grade alcohol, and WDG in North America and biodiesel and refined glycerin in India.

Three Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$33,131	$37,820	$(4,689)	-12%
India	7,792	19,569	(11,777)	-60%

Total	$40,923	$57,389	$(16,466)	-29%

North America.The decrease in revenues during the three months ended September 30, 2020 was mainly due to a decrease in sales of ethanol and WDG. Gallons of ethanol sold decreased to 15.0 million gallons during the three months ended September 30, 2020 compared to 15.8 million gallons during the three months ended September 30, 2019. The average price of ethanol decreased by 9% to $1.59 per gallon during the three months ended September 30, 2020 compared to $1.74 per gallon during the three months ended September 30, 2019, primarily due to change in demand from COVID-19 shelter-in-place orders that reduced demand of gasoline. In addition, the sales volume of WDG decreased by 11% to 94 thousand tons during the three months ended September 30, 2020 compared to 106 thousand tons during the three months ended September 30, 2019 while the average sales price decreased by 8% to $75.81 per ton. For the three months ended September 30, 2020, we generated 72% of our revenues from sales of ethanol, 22% from sales of WDG, and 6% from sales of industrial alcohol, corn oil, CDS, and CO2 compared to 73% of our revenues from sales of ethanol, 23% from sales of WDG, and 4% from sales of corn oil and CDS for the three months ended September 30, 2019. During the three months ended September 30, 2020, plant production averaged 111% of the 55 million gallon per year nameplate capacity compared to 115% during the three months ended September 30, 2019.

India.For the three months ended September 30, 2020, we generated 94% of our sales from biodiesel, and 6% of our sales from refined glycerin compared to 87% of our sales from biodiesel, 5% of our sales from refined glycerin, and 8% from other sales for the three months ended September 30, 2019. The decrease in revenues was due to delay in the government tender contracts bidding and general slowness of sales due to COVID-19. The decrease in revenues of 60% was due to a decrease in biodiesel volumes by 58% to 8,133 metric tons during the three months ended September 30, 2020 compared to 19,343 metric tons during the three months ended September 30, 2019. The average price of biodiesel increased to $901 per metric ton during the three months ended September 30, 2020 compared to $882 per metric during the three months ended September 30, 2019. In addition, the refined glycerin volumes decreased by 72% to 556 metric tons during the three months ended September 30, 2020 compared to 2,023 metric tons during the three months ended September 30, 2019 while the average price increased by 72% to $807 per metric ton during the three months ended September 30, 2020 compared to $470 per metric ton in the same period in 2019.

Cost of Goods Sold

Three Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$33,534	$37,990	$(4,456)	-12%
India	6,618	15,417	(8,799)	-57%

Total	$40,152	$53,407	$(13,255)	-25%

North America.We ground 5.2 million bushels of corn during the three months ended September 30, 2020 compared to 5.6 million bushels during the three months ended September 30, 2019. Our cost of feedstock per bushel decreased by 11% to an average of $4.92 per bushel during the three months ended September 30, 2020 compared to $5.53 per bushel during the three months ended September 30, 2019.

India.The decrease in cost of goods sold was attributable to the decrease in revenues from biodiesel. The volume of biodiesel feedstock we consumed decreased by 52% to 7,783 metric tons compared to 16,374 metric tons in the same period last year. The average price of biodiesel feedstock decreased by 13% to $621 per metric ton during the three months ended September 30, 2020 compared to $717 per metric ton during the three months ended September 30, 2019. In addition, the volume of refined glycerin we consumed decreased by 64% to 632 metric tons during the three months ended September 30, 2020 compared to 1,777 metric tons in the same period in 2019 while the average price also decreased by 44% to $589 per metric ton compared to $408 per metric ton during the three months ended September 30, 2019.

Gross Profit

Three Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$(403)	$(170)	$(233)	137%
India	1,174	4,152	(2,978)	-72%

Total	$771	$3,982	$(3,211)	-81%

North America.Gross profit decreased due to lower prices and volumes sold of ethanol and WDG compared to the same period in 2019.

India.Gross profit decreased by 72% due to decreased volume of sales primarily due to COVID-19 delays for bidding of the OMC tender and decreased general demand by 58% to 8,133 metric tons, during the three months ended September 30, 2020 compared to 19,343 metric tons during the same period in 2019.

Operating Expenses

R&D

Three Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$37	$37	$-	0%
India	-	-	-	0%

Total	$37	$37	$-	0%

R&D expenses remained consistent during the three months ended September 30, 2020 and 2019.

Selling, General and Administrative Expenses (SG&A)

Three Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$4,340	$2,716	$1,624	60%
India	223	1,813	(1,590)	-88%

Total	$4,563	$4,529	$34	1%

North America.SG&A expenses as a percentage of revenue during the three months ended September 30, 2020 and 2019 increased to 13% compared to 7%. The increase was due to an increase in professional fees of $672 thousand, an increase in bad debt expense of $647 thousand, an increase in insurance, taxes, and penalties of $131 thousand, an increase in salaries and wages of $67 thousand, an increase of $49 thousand in supplies and services, and other expenses of $58 thousand during the three months ended September 30, 2020.

India. SG&A expenses as a percentage of revenue during the three months ended September 30, 2020 decreased to 3% from 9% compared to the corresponding period in 2019. The 88% decrease in SG&A expenses during the three months ended September 30, 2020 compared to the same period of 2019 was due to decrease in operation support charges of $984 thousand, a decrease in gas and electric of $221 thousand, a decrease in office maintenance of $213 thousand, a decrease in salaries of $155 thousand, and a decrease in water costs of $26 thousand.

Other Income and Expense

Three Months Ended September 30 (in thousands)

	2020	2019	Inc/dec	% change
North America
Interest rate expense	$5,787	$5,347	$440	8%
Debt related fees and amortization expense	674	946	(272)	-29%
Accretion of Series A preferred units	1,765	589	1,176	200%
Other (income)/expense	155	(265)	420	158%

India
Interest rate expense	9	49	(40)	-82%
Other income	(2)	(24)	22	92%

Total	$8,388	$6,642	$1,746	26%

Other (Income)/Expense.Other (income) expense consists primarily of interest rate and amortization expenses attributable to our debt facilities and those of our subsidiaries, and interest accrued on the judgments and accretion of Series A Preferred Units preference payments. The debt facilities include stock or warrants issued as fees. The fair value of stock and warrants is amortized as amortization expense, except when the extinguishment accounting method is applied, in which case refinanced debt costs are recorded as extinguishment loss or gain.

North America.Interest rate expense was higher during the three months ended September 30, 2020 due to higher debt balances. The decrease in amortization expense in the three months ended September 30, 2020 was mainly due to amortization of fees added during prior periods and reduction in extension fees added during the three months ended September 30, 2020 compared to the same period in 2019. Increase in accretion on the Series A Preferred Unit was due to issuance of additional shares. Guarantee fee of $0.2 million was added during the three months ending September 30, 2020.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Revenues

Our revenues are derived primarily from sales of ethanol, high-grade alcohol, and WDG in North America and biodiesel and glycerin in India.

Nine Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$114,226	$113,942	$284	0.2%
India	14,001	35,954	(21,953)	-61%

Total	$128,227	$149,896	$(21,669)	-14%

North America.For the nine months ended September 30, 2020, we generated 55% of our revenue from sales of ethanol, 21% from sales of high-grade alcohol, 20% from sales of WDG, and 4% from sales of corn oil, CCA credits and CDS. During the nine months ended September 30, 2020, plant production averaged 112% of the 55 million gallon per year nameplate capacity. The slight increase in revenues for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was due to the initial spike in demand that occurred when we entered into high-grade alcohol market. The increase in revenues was offset by a decrease in the average ethanol price of 11% to $1.55 while the ethanol sales volume decreased to 40.5 million gallons compared to 48.1 million gallons in the same period in 2019. The average price of WDG decreased by 4% to $79 per ton while WDG sales volume also decreased by 9% to 292 thousand tons in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

India.For the nine months ended September 30, 2020, we generated 88% of our sales from biodiesel, 6% of our sales from refined glycerin, and 6% from PFAD and other sales compared to 90% of our sales from biodiesel, 6% of our sales from refined glycerin and 4% from PFAD and other sales during the nine months ended September 30, 2019. The decrease in revenues for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was due to a 61% decrease in the sales volume of biodiesel to 14,346 metric tons. The decrease in biodiesel volumes was due to delay in obtaining and supplying production quantities under the OMCs tender contract. The average sales price of biodiesel decreased by 1% to $855 per metric ton during the nine months ended September 30, 2020 compared to $868 per metric ton in the same period in 2019. The sales volume of refined glycerin decreased by 72% to 1,112 metric tons while the average price of glycerin increased by 48% to $817 per metric ton in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Cost of Goods Sold

Nine Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$101,231	$113,440	$(12,209)	-11%
India	12,599	29,552	(16,953)	-57%

Total	$113,830	$142,992	$(29,162)	-20%

North America.We ground 15.8 million bushels of corn during the nine months ended September 30, 2020 compared to 16.9 million bushels in the same period in 2019. Our average cost of corn per bushel decreased by 9% to $4.87 per bushel in the nine months ended September 30, 2020 compared to the same period in 2019.

India.The decrease in cost of goods sold during the nine months ended September 30, 2020 compared to September 30, 2019 was attributable to a decrease in the volume of biodiesel feedstock we ground by 58% to 13,474 metric tons compared to 31,936 metric tons during the nine months ended September 30, 2019 coupled with an decrease in the average price of biodiesel feedstock by 7% to $637 compared to $683 in the same period in 2019. In addition, the volume of refined glycerin feedstock we ground decreased by 67% to 1,146 metric tons and the average price of the refined glycerin feedstock also decreased by 6% to $551 per metric ton in the nine months ended September 30, 2020 compared to the same period in 2019.

Gross Profit

Nine Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$12,995	$502	$12,493	2489%
India	1,402	6,402	(5,000)	-78%

Total	$14,397	$6,904	$7,493	109%

North America.Gross profit for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 increased due to entering the high-grade alcohol market coupled with the decreased price of corn.

India.The decrease in gross profit was attributable to decrease in the sales volume of all products of 62% to 15,458 metric tons and due to decreases in the biodiesel price per metric ton for the nine months ended September 30, 2020.

Operating Expenses

R&D

Nine Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$175	$160	$15	9%
India	-	-	-	0%

Total	$175	$160	$15	10%

R&D expenses increased in the nine months ended September 30, 2020 due to increases in professional fees of $23 thousand, offset by decrease in lab supplied and other of $8 thousand.

Selling, General and Administrative Expenses (SG&A)

Nine Months Ended September 30 (in thousands)

	2020	2019	Inc/(dec)	% change

North America	$11,206	$9,972	$1,234	12%
India	1,342	2,743	(1,401)	-51%

Total	$12,548	$12,715	$(167)	-1%

North America.SG&A expenses as a percentage of revenue in the nine months ended September 30, 2020 increased to 10% from 9% in the nine months ended September 30, 2019. SG&A expenses during the nine months ended September 30, 2020 increased by 12% compared to the nine months ended September 30, 2019. The increase in SG&A expenses was primarily due to increases in salaries, stock compensation and supplies of $515 thousand and utilities, penalties, and insurance of $554 thousand and provision for bad debt expense and other expenses of $682 thousand, offset by a decrease in professional fees of $517 thousand for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

India.SG&A expenses as a percentage of revenue in the nine months ended September 30, 2020 increased to 10% as compared to 8% in the corresponding period of 2019. SG&A expenses during the nine months ended September 30, 2020 decreased by 51% compared to the nine months ended September 30, 2019. The decrease was due to decrease in operating support charges of $1.4 million, utilities, insurance and other expenses of $260 thousand, offset by an increase in salaries of $61 thousand and professional fees of $244 thousand during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Other Income and Expense

Nine Months Ended September 30 (in thousands)

	2020	2019	Inc/dec	% change
North America
Interest rate expense	$16,912	$15,240	$1,672	11%
Debt related fees and amortization expense	2,578	3,565	(987)	-28%
Accretion of Series A preferred units	4,087	1,509	2,578	171%
Loss contingency on litigation	-	6,200	(6,200)	-100%
Other (income)/expense	416	(228)	644	282%

India
Interest rate expense	44	332	(288)	-87%
Other income	(23)	(773)	750	97%

Total	$24,014	$25,845	$(1,831)	-7%

Other (Income)/Expense.Other (income) expense consists primarily of interest rate and amortization expenses attributable to our debt facilities and those of our subsidiaries, and interest accrued on the judgments and accretion of Series A Preferred Units preference payments. The debt facilities include stock or warrants issued as fees. The fair value of stock and warrants are amortized as amortization expense, except when the extinguishment accounting method is applied, in which case refinanced debt costs are recorded as extinguishment loss or gain.

North America.Interest rate expense was higher during the nine months ended September 30, 2020 due to an increase in principal and interest on our senior notes and subordinated notes. The decrease in amortization expense in the nine months ended September 30, 2020 was mainly due to amortization of fees added during prior periods and reduction in extension fees added for nine months ended September 30, 2020 compared to the same period in 2019. Increase in accretion on the Series A Preferred Unit was due to issuance of additional units. Guarantee fees of $0.5 million were added during the first nine months ending September 30, 2020.

India.Interest rate expense decreased due to accruing on only one working capital line while the other line was treated as feedstock provider for working capital without interest accrual during the nine months ended September 30, 2020. The decrease in other income of $0.7 million was caused primarily by release of long-standing accounts payable and interest on these payables as matters closed legally during the nine months ended September 30, 2019.

Liquidity and Capital Resources

Cash and Cash Equivalents

Cash and cash equivalents were $0.1 million at September 30, 2020, all of which were held in our Indian subsidiary. Our current ratio at September 30, 2020 was 0.14 compared to a current ratio of 0.22 at December 31, 2019. We expect that our future available capital resources will consist primarily of cash generated from operations, Liquidity Reserve Notes, EB-5 program borrowings, senior debt, subordinated debt and any additional funds raised through sales of preferred units.

Liquidity

Cash and cash equivalents, current assets, current liabilities and debt at the end of each period were as follows (in thousands):

	September 30, 2020	December 31, 2019
Cash and cash equivalents	$79	$656
Current assets (including cash, cash equivalents, and deposits)	13,547	12,576
Current and long term liabilities (excluding all debt)	71,387	51,843
Current & long term debt	226,346	202,425

Our principal sources of liquidity have been cash provided by operations and borrowings under various debt arrangements. During the three months ended September 30, 2020, $0.5 million from one investor was released to the Company from the EB-5 escrow account, which completed the funding of Phase I under this program.

We launched an EB-5 Phase II funding in 2016, under which we expect to issue $50.8 million in additional EB-5 Notes on substantially similar terms and conditions as those issued under our EB-5 Phase I funding. On November 21, 2019, the minimum investment amount was raised from $500,000 per investor to $900,000 per investor. As of September 30, 2020, EB-5 Phase II funding in the amount of $4.0 million had been released from escrow to the Company. Our principal uses of cash have been to refinance indebtedness, fund operations, and for capital expenditures. We anticipate these uses will continue to be our principal uses of cash in the future. Global financial and credit markets have been volatile in recent years, and future adverse conditions of these markets could negatively affect our ability to secure funds or raise capital at a reasonable cost, or at all.

We operate in a volatile market in which we have limited control over the major components of input costs and product revenues, and are making investments in future facilities and facility upgrades that improve the overall margin while lessening the impact of these volatile markets. As such, we expect cash provided by operating activities to fluctuate in future periods primarily because of changes in the prices for corn, ethanol, high-grade alcohol, WDG, DCO, CDS, biodiesel, waste fats and oils, glycerin, non-refined palm oil and natural gas. To the extent that we experience periods in which the spread between ethanol/alcohol prices and corn and energy costs narrow or the spread between biodiesel prices and waste fats and oils or palm oil and energy costs narrow, we may require additional working capital to fund operations.

Management believes that through the following actions, the Company will have the ability to generate capital liquidity to carry out the business plan:

●

Continue to develop and expand the markets for high-grade alcohol by extending the value chain to allow for higher margin sales to consumers.

●

Execute upon awarded grants at the Keyes Plant that improve operational efficiencies resulting in lower cost, lower carbon demands, and overall margin improvement.

●

Operate the existing biogas digesters to capture and monetize biogas as well as continue to build new dairy digesters and extend the existing pipeline in order to capture the higher carbon credits available in California.

●

Secure higher volumes of shipments of fuels at the India plant by developing the sales channels and expanding the existing domestic markets.

●

Continue to locate funding for existing and new business opportunities through a combination of working with our senior lender, restructuring existing loan agreements, selling the current offering for $50.8 million from the EB-5 Phase II funding, or by vendor financing arrangements.

At September 30, 2020, the outstanding balance of principal, interest and fees, net of discounts, on all Third Eye Capital Notes equaled $155.5 million including the GAFI debt. The current maturity date for all of the Third Eye Capital financing arrangements, except the GAFI financing arrangements, is April 1, 2021; provided, however, that pursuant to Amendment No. 17, we have the right to extend the maturity date of the Third Eye Capital Notes to April 1, 2022 upon notice and payment of a 1% extension fee, which can be paid or added to senior debt. The current maturity date for all of the Third Eye Capital GAFI financing arrangements is July 10, 2021. GAFI intends to repay its Third Eye Capital Notes obligations through proceeds from the issuance of a GAFI EB-5 offering or other debt/equity offerings by an Aemetis subsidiary. We intend to repay rest of the Third Eye Capital Notes through operational cash flow, proceeds from the issuance of the EB-5 Notes and/or a senior debt refinancing and/or an equity financing.

As of September 30, 2020, the Company has $18.0 million additional borrowing capacity to fund future cash flow requirements under the Reserve Liquidity Notes due on April 1, 2021.

Our senior lender has provided a series of accommodating amendments to the existing and previous loan facilities as described in further detail inNote 4. Debtof the Notes to Consolidated Financial Statements of this Form 10-Q. However, there can be no assurance that our senior lender will continue to provide further amendments or accommodations or will fund additional amounts in the future.

We also rely on our working capital lines with Gemini and Secunderabad Oils in India to fund our commercial arrangements for the acquisitions of feedstock. We currently provide our own working capital for the Keyes Plant; Gemini and Secunderabad Oils currently provides us with working capital for the Kakinada Plant. The ability of Gemini, and Secunderabad Oils to continue to provide us with working capital depends in part on both of their respective financial strength and banking relationships.

Change in Working Capital and Cash Flows

The below table describes the changes in current and long term debt during the nine months ended September 30, 2020:

Increases to debt:
Accrued interest	$16,920
Maturity date extension fee added to senior debt and waiver fees	2,047
Feb 2019 Promissory note advances including fees	1,265
Sub debt extension fees	680
India working capital draws and changes due to foreign currency	9,227
Mitsubishi financing for Zebrex equipment term loan	5,652
PPP loan received	1,134
EB-5 Investment received	500
	Total increases to debt	$37,425
Decreases to debt:
Principal, fees, and interest payments to senior lender	$(2,800)
Interest payments to sub debtors	(250)
Interest payments to EB-5 investors	(288)
Principal, fees and interest payments on working capital loans in India	(9,414)
GAFI interest and principal payments	(362)
Change in debt issuance costs, net of amortization	(390)
	Total decreases to debt	$(13,504)

	Change in total debt	$23,921

Working capital changes resulted in (i) a $1.2 million increase in accounts receivable due to increase in alcohol sales in North America which caused the receivable balance to increase by $1.7 million, offset by a decrease of $0.5 million in India operations, (ii) a $1.7 million decrease in inventories mainly due to increase of $0.5 million in finished goods due to an amendment to the J.D. Heiskell Purchasing Agreement, whereby we are no longer obligated to sell certain inventory we produce to J.D. Heiskell, and $0.7 million increase in raw materials which are used in the alcohol and hand sanitizer production in North America entities offset by decreases of $0.3 million in work in process inventory in North America and $2.7 million in inventory in India operations, (iii) a $67 thousand decrease in prepaid expenses mainly due to regular amortization of prepaid insurance, (iv) a $1.6 million decrease in other assets consisting of a $0.2 million decrease in North America entities and a $1.4 million decrease in India operations, and (v) a $3.7 million increase in notes receiveable in India operations due to short-term loans made to a working capital partner.

Net cash provided by operating activities during the nine months ended September 30, 2020 was $7.0 million, consisting of non-cash charges of $11.4 million, net changes in operating assets and liabilities of $17.7 million and net loss of $22.1 million. The non-cash charges consisted of: (i) $2.6 million in debt related fees and other amortization, (ii) $3.5 million in depreciation expenses, (iii) $0.8 million in stock-based compensation expense, (iv) $0.3 million of deferred tax benefit, (v) $4.1 million in preferred unit accretion, and (vi) $0.6 million in provision for bad debts. Net changes in operating assets and liabilities consisted primarily of an increase in accounts receivable of $1.9 million offset by: (i) a decrease in other assets of $1.7 million, (ii) a $1.5 million increase in inventories, (iii) a $0.3 million increase in accounts payable, (iv) a $66 thousand decrease in prepaid expenses, and (v) a $16.0 million increase in accrued interest.

Cash used by investing activities consisted of capital expenditures of $13.6 million from U.S. operations, capital expenditures of $1.3 million from our India operations, and a note receivable of $3.7 million.

Cash provided by financing activities was $11.0 million, consisting primarily of $11.6 million received from the Series A Preferred Unit issuance, $1.2 million received from Third Eye Capital promissory note, $1.1 million received from PPP Loans, $0.5 million from EB-5 Phase I investors, $0.3 million for issuance of stock to option holders, $0.3 from grant proceeds received for capital expenditures, and $9.3 million from working capital partners in India for their operations, partially offset by payments of $9.3 million in principal to working capital partners in India for their operations, $2.2 million on Third Eye Capital promissory note, $0.3 million on Third Eye Capital renewal and waiver fees, $0.3 million on GAFI Third Eye Capital notes, and $1.1 million payments on finance lease assets.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each period. We believe that the following represents our critical accounting policies, defined as those policies 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: revenue recognition; recoverability of long-lived assets, convertible notes, and extinguishment accounting. 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, 2019.

Recently Issued Accounting Pronouncements

None reported beyond those disclosed in our Annual Report on form 10-K for the year ended December 31, 2019.

Off Balance Sheet Arrangements

We had no off balance sheet arrangements during the three months ended September 30, 2020.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not Applicable.

Item 4. Controls and Procedures.

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 weakness over financial reporting as identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the disclosure controls and procedures along with the related 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

There were no changes in our internal controls over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our 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, 2019, we initiated a remediation plan to address the material weakness in our internal control over financial reporting identified as of the fiscal year then ended. Our efforts to improve our internal controls are ongoing.

For a more comprehensive discussion of the material weakness in internal control over financial reporting identified by management as of December 31, 2019, and the remedial measures undertaken to address this material weakness, investors are encouraged to review Item 9A, Controls and Procedures, in our Annual Report on Form 10-K for the year ended December 31, 2019.

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings

On August 31, 2016, the Company filed a lawsuit in Santa Clara County Superior Court against defendant EdenIQ, Inc. (“EdenIQ”). The lawsuit was based on EdenIQ’s wrongful termination of a merger agreement that would have effectuated the merger of EdenIQ into a new entity that would be primarily owned by Aemetis. The lawsuit asserted that EdenIQ had fraudulently induced the Company into assisting EdenIQ to obtain EPA approval for a new technology that the Company would not have done but for the Company’s belief that the merger would occur. The relief sought included EdenIQ’s specific performance of the merger, monetary damages, as well as punitive damages, attorneys’ fees, and costs. In response to the lawsuit, EdenIQ filed a cross-complaint asserting causes of action relating to the Company’s alleged inability to consummate the merger, the Company’s interactions with EdenIQ’s business partners, and the Company’s use of EdenIQ’s name and trademark in association with publicity surrounding the merger. Further, EdenIQ named Third Eye Capital Corporation (“TEC”) as a defendant in a second amended cross-complaint alleging that TEC had failed to disclose that its financial commitment to fund the merger included terms that were not disclosed. Finally, EdenIQ claimed that TEC and the Company concealed material information surrounding the financing of the merger. By way of its cross-complaint, EdenIQ sought monetary damages, punitive damages, injunctive relief, attorneys’ fees and costs. In November 2018, the claims asserted by the Company were dismissed on summary judgment and the Company filed a motion to amend its claims, which remains pending. In December 2018, EdenIQ dismissed all of its claims prior to trial. In February 2019, the Company and EdenIQ each filed motions seeking reimbursement of attorney fees and costs associated with the litigation. On July 24, 2019, the court awarded EdenIQ a portion of the fees and costs it had sought in the amount of approximately $6.2 million and the Company recorded these fees based on the court order. The Company’s ability to amend its claims and present its claims to the court or a jury could materially affect the court’s decision to award EdenIQ its fees and costs. In addition to further legal motions and a potential appeal of the Court’s summary judgment order, the Company plans to appeal the court’s award of EdenIQ’s fees and costs. The Company intends to continue to vigorously pursue its legal claims and defenses against EdenIQ.

Item 1A.

Risk Factors.

Nevada	26-1407544
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

Title of each class of registered securities		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.001 par value		AMTX		NASDAQ

PART II--OTHER INFORMATION

Item 1.	Legal Proceedings	4945
Item 1A.	Risk Factors.	4945
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	5045
Item 3.	Defaults Upon Senior Securities.	5045
Item 4.	Mine Safety Disclosures.	5045
Item 5.	Other Information.	5045
Item 6.	Exhibits.	5046
~~SIGNATURES~~Signatures		5147

	September 30, 2019	December 31, 2018	September 30, 2020	December 31, 2019
Assets	(unaudited)		(unaudited)
Current assets:
Cash and cash equivalents	$919	$1,188	$79	$656
Accounts receivable	5,421	1,096
Accounts receivable, net of allowance for doubtful accounts of $647 and $0 as of September 30, 2020 and December 31, 2019			3,243	2,036
Notes receivable			3,746	-
Inventories	3,521	6,129	4,816	6,518
Prepaid expenses	558	942	727	794
Other current assets	2,186	956	936	2,572
Total current assets	12,605	10,311	13,547	12,576

Property, plant and equipment, net	80,843	78,492	103,050	84,226
Operating lease right-of-use assets	743	-	2,843	557
Other assets	2,492	3,018	2,730	2,537
Total assets	$96,683	$91,821	$122,170	$99,896

Liabilities and stockholders' deficit
Current liabilities:
Accounts payable	$17,453	$13,500	$15,023	$15,968
Current portion of long term debt	5,059	2,396	41,979	5,792
Short term borrowings	17,417	14,902	17,357	16,948
Mandatorily redeemable Series B convertible preferred stock	3,124	3,048	3,226	3,149
Accrued property taxes	4,234	3,337	5,356	4,095
Accrued contingent litigation fees	6,200	-	6,200
Current portion of operating lease liability			286	377
Other current liabilities	4,995	5,396	6,398	5,290
Total current liabilities	58,482	42,579	95,825	57,819
Long term liabilities:
Senior secured notes	102,463	89,884
Senior secured notes and revolving notes			120,781	107,205
EB-5 notes	35,500	36,500	34,500	36,500
GAFI secured and revolving notes	29,013	25,461	-	29,856
Long term subordinated debt	6,086	5,974
Other long term debt			11,729	6,124
Series A preferred units	10,239	7,005	28,494	14,077
Operating lease liability			2,662	200
Other long term liabilities	1,652	-	3,742	2,487
Total long term liabilities	184,953	164,824	201,908	196,449

Stockholders' deficit:
Series B convertible preferred stock, $0.001 par value; 7,235 authorized; 1,323 shares issued and outstanding each period, respectively (aggregate liquidation preference of $3,969 for each period respectively)	1	1	1
Common stock, $0.001 par value; 40,000 authorized; 20,570 and 20,345 shares issued and outstanding each period, respectively	21	20
Common stock, $0.001 par value; 40,000 authorized; 21,027 and 20,570 shares issued and outstanding each period, respectively			21
Additional paid-in capital	86,708	85,917	88,119	86,852
Accumulated deficit	(222,195)	(193,204)	(259,498)	(237,421)
Accumulated other comprehensive loss	(3,715)	(3,576)	(4,206)	(3,825)
Total stockholders' deficit attributable to Aemetis, Inc.	(139,180)	(110,842)
Non-controlling interest - GAFI	(7,572)	(4,740)
Total stockholders' deficit	(146,752)	(115,582)	(175,563)	(154,372)
Total liabilities and stockholders' deficit	$96,683	$91,821	$122,170	$99,896

	For the three months ended September 30,		For the nine months ended September 30,		For the three months ended September 30,		For the nine months ended September 30,
	2019	2018	2019	2018	2020	2019	2020	2019
Revenues	$57,389	$44,635	$149,896	$132,681	$40,923	$57,389	$128,227	$149,896

Cost of goods sold	53,407	41,967	142,992	125,379	40,152	53,407	113,830	142,992

Gross profit	3,982	2,668	6,904	7,302	771	3,982	14,397	6,904

Research and development expenses	37	74	160	191	37		175	160
Selling, general and administrative expenses	4,529	3,893	12,715	11,289	4,563	4,529	12,548	12,715

Operating loss	(584)	(1,299)	(5,971)	(4,178)
Operating income (loss)					(3,829)	(584)	1,674	(5,971)

Other (income) expense:

Interest expense
Interest rate expense	5,396	4,692	15,572	13,395	5,796	5,396	16,956	15,572
Debt related fees and amortization expense	946	719	3,565	6,395	674	946	2,578	3,565
Accretion of Series A preferred units	589	-	1,509	-	1,765	589	4,087	1,509
Loss contingency on litigation	-		6,200	-	-			6,200
Other (income) expense	(289)	(61)	(1,001)	�� 2	153	(289)	393	(1,001)

Loss before income taxes	(7,226)	(6,649)	(31,816)	(23,970)	(12,217)	(7,226)	(22,340)	(31,816)

Income tax expense	-		7	6

Income tax expense (benefit)					-		(263)	7
Net loss	$(7,226)	$(6,649)	$(31,823)	$(23,976)	$(12,217)	$(7,226)	$(22,077)	$(31,823)

Less: Net loss attributable to non-controlling interest	(900)	(792)	(2,832)	(2,386)	-	(900)	-	(2,832)

Net loss attributable to Aemetis, Inc.	$(6,326)	$(5,857)	$(28,991)	$(21,590)	$(12,217)	$(6,326)	$(22,077)	$(28,991)

Other comprehensive income (loss)
Foreign currency translation loss	(254)	(423)	(139)	(967)
Foreign currency translation gain (loss)					314	(254)	(381)	(139)
Comprehensive loss	$(7,480)	$(7,072)	$(31,962)	$(24,943)	$(11,903)	$(7,480)	$(22,458)	$(31,962)

Net loss per common share attributable to Aemetis, Inc.
Net loss per common share
Basic	$(0.31)	$(0.29)	$(1.42)	$(1.07)	$(0.59)	$(0.31)	$(1.06)	$(1.42)
Diluted	$(0.31)	$(0.29)	$(1.42)	$(1.07)	$(0.59)	$(0.31)	$(1.06)	$(1.42)

Weighted average shares outstanding
Basic	20,554	20,252	20,433	20,220	20,861	20,554	20,732	20,433
Diluted	20,554	20,252	20,433	20,220	20,861	20,554	20,732	20,433

PART I--FINANCIAL INFORMATION
Item 1	Financial Statements.	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	3633
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	4844
Item 4.	Controls and Procedures.	4844

	For the nine months ended September 30,		For the nine months ended September 30,
	2019	2018	2020	2019
Operating activities:
Net loss	$(31,823)	$(23,976)	$(22,077)	$(31,823)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Share-based compensation	630	783	826	630
Stock issued for services	-	22
Depreciation	3,337	3,457	3,515	3,337
Debt related fees and amortization expense	3,565	6,395	2,578	3,565
Intangibles and other amortization expense	36	105	36
Accretion of Series A preferred units	1,509	-	4,087	1,509
Change in fair value of Stock Appreciation Rights	(80)	(44)
Deferred tax benefit			(263)	-
Provision for bad debts			647	-
Change in fair value of stock appreciation rights			-	(80)
Changes in operating assets and liabilities:
Accounts receivable	(4,359)	670	(1,902)	(4,359)
Inventories	2,563	(2,588)	1,542	2,563
Prepaid expenses	384	1,551	66	384
Other assets	(154)	(344)	1,684	(154)
Accounts payable	3,429	2,999	330	3,429
Accrued interest expense and fees	13,272	8,451	16,011	13,272
Other liabilities	6,565	(835)	(24)	6,565
Net cash used in operating activities	(1,126)	(3,354)
Net cash provided by (used in) operating activities			7,056	(1,126)

Investing activities:
Capital expenditures	(5,053)	(2,498)	(14,921)	(5,053)

Note receivable			(3,687)	-
Net cash used in investing activities	(5,053)	(2,498)	(18,608)	(5,053)

Financing activities:
Proceeds from borrowings	38,203	16,484	12,135	39,246
Repayments of borrowings	(35,722)	(12,449)	(11,792)	(35,886)
GAFI proceeds from borrowings	1,043	1,500
GAFI repayments of borrowings	(164)	-
GAFI renewal fee payment	(530)	-
TEC debt renewal and waiver fee payments			(300)	(530)
Grant proceeds received for capital expenditures	1,364	-	256	1,364
Payments on finance leases			(1,137)	-
Proceeds from the exercise of stock options			260	-
Proceeds from Series A preferred units financing	1,725	-	11,564	1,725
Net cash provided by financing activities	5,919	5,535	10,986	5,919

Effect of exchange rate changes on cash and cash equivalents	(9)	(43)	(11)	(9)
Net change in cash and cash equivalents for period	(269)	(360)	(577)	(269)
Cash and cash equivalents at beginning of period	1,188	428	656	1,188
Cash and cash equivalents at end of period	$919	$68	$79	$919

Supplemental disclosures of cash flow information, cash paid:
Cash paid for interest, net of capitalized interest of $231 and $0 for the nine months ended September 30, 2019 and 2018, respectively	$1,836	$4,700
Cash paid for interest, net of capitalized interest of $291 and $231 for the nine months ended September 30, 2020 and 2019, respectively			$702	$1,836
Income taxes paid	-	6	8	-
Supplemental disclosures of cash flow information, non-cash transactions:
Subordinated debt extension fees added to debt	680		680
Fair value of warrants issued to subordinated debt holders	162	235	181	162
TEC debt extension, waiver fees, promissory notes fees added to debt	1,102	4,255	1,793	1,102
Capital expenditures in accounts payable	1,443	-	1,182	1,443
Operating lease liabilities arising from obtaining right of use assets	1,181	-	2,688	1,181
Stock Appreciation Rights issued for GAFI Amendment No. 1 added to GAFI debt	1,050	1,277

Financing lease liabilities arising from obtaining right of use assets			2,988	-
Stock Appreciation Rights issued for GAFI Amendment No. 1			-	1,050
Capital expenditures purchased on financing			5,652	-

For the three and nine months ended September 30, 2019
For the three and nine months ended September 30, 2020										For the three and nine months ended September 30, 2020
										Series B Preferred Stock		Common Stock		Additional	Accumulated	Accumulated Other Comprehensive	Total Stockholders'
Description	Series B Preferred Stock		Common Stock				Accumulated Other		Total	Shares	Dollars	Shares	Dollars	Paid-in Capital	Deficit	Income/(Loss)	deficit
					Additional	Accumulated	Comprehensive	Noncotrolling	Stockholders'
Balance at December 31, 2019										1,323	$1	20,570	$21	$86,852	$(237,421)	$(3,825)	$(154,372)
	Shares	Dollars	Shares	Dollars	Paid-in Capital	Deficit	Income/(Loss)	Interest	deficit
Stock-based compensation										-				310	-		310
Issuance and exercise of warrants										-		113	-	93	-		93
Foreign currency translation loss										-						(668)
Net loss										-					(12,052)	-	(12,052)

Balance at December 31, 2018	1,323	$1	20,345	$20	$85,917	$(193,204)	$(3,576)	$(4,740)	$(115,582)
Balance at March 31, 2020										1,323	$1	20,683	$21	$87,255	$(249,473)	$(4,493)	$(166,689)

Stock-based compensation										-				325	-		325
Foreign currency translation loss										-						(27)
Net income										-					2,192	-	2,192

Balance at June 30, 2020										1,323	$1	20,683	$21	$87,580	$(247,281)	$(4,520)	$(164,199)

Stock options exercised										-		232	-	260	-		260
Stock-based compensation	-				290	-			290	-				191	-		191
Issuance and exercise of warrants	-		30	-	67	-			67	-		112	-	88	-		88
Foreign currency translation gain	-						58	-	58	-						314
Net loss	-					(9,729)	-	(938)	(10,667)	-					(12,217)	-	(12,217)
						��
Balance at March 31, 2019	1,323	$1	20,375	$20	$86,274	$(202,933)	$(3,518)	$(5,678)	$(125,834)

Stock-based compensation	-				196	-			196
Foreign currency translation gain	-						57	-	57
Net loss	-					(12,936)	-	(994)	(13,930)

Balance at June 30, 2019	1,323	$1	20,375	$20	$86,470	$(215,869)	$(3,461)	$(6,672)	$(139,511)

Stock-based compensation	-				144	-			144
Issuance and exercise of warrants	-		195	1	94	-			95
Foreign currency translation loss	-						(254)	-	(254)
Net loss	-					(6,326)	-	(900)	(7,226)
Balance at September 30, 2019	1323	$1	20,570	$21	$86,708	$(222,195)	$(3,715)	$(7,572)	$(146,752)
Balance at September 30, 2020										1,323	$1	21,027	$21	$88,119	$(259,498)	$(4,206)	$(175,563)

North America (in thousands)
	For the three months ended September 30,		For the nine months ended September 30,
	2020	2019	2020	2019
Ethanol and high-grade alcohol sales	$24,825	$27,456	$86,387	$84,453
Wet distiller's grains sales	7,143	8,783	22,983	26,119
Other sales	1,163	1,581	4,856	3,370
	$33,131	$37,820	$114,226	$113,942

India (in thousands)
	For the three months ended September 30,		For the nine months ended September 30,		For the three months ended September 30,		For the nine months ended September 30,
	2019	2018	2019	2018	2020	2019	2020	2019
Biodiesel sales	$17,057	$5,206	$32,201	$13,548	$7,325	$17,057	$12,267	$32,201
Refined Glycerin sales	951	853	2,186	3,753
Refined glycerin sales					449	951	909	2,186
PFAD sales					-		774	-
Other sales	1,561	-	1,567	-	18	1,561	51	1,567
	$19,569	$6,059	$35,954	$17,301	$7,792	$19,569	$14,001	$35,954

	As of
	September 30, 2019	September 30, 2018

Series B preferred (post split basis)	132	132
Common stock options and warrants	3,910	2,990
Debt with conversion feature at $30 per share of common stock	1,255	1,228
SARs conversion if stock issued at $1.11 per share to cover $2.1 million	-	1,893
Total number of potentially dilutive shares excluded from the diluted net loss per share calculation	5,297	6,243

	Years
Plant and ~~Buildings~~buildings	~~20-30~~ 20 - 30
Machinery ~~& Equipment~~and equipment	~~5-7~~ 5 - 10
Furniture ~~& Fixtures~~and fixtures	~~3-5~~ 3 - 5

	Goodland Advanced Fuels, Inc.
	Statements of Operations
	Three months ended		For the nine months ended
	September 30, 2019	September 30, 2018	September 30, 2019	September 30, 2018
Other Expenses
Selling, general and administrative expenses	$103	$89	$315	$321

Operating loss	(103)	(89)	(315)	(321)

Interest expense
Interest rate expense	800	739	2,304	2,106
Debt related fees and amortization expense	167	168	694	493
Other income	(170)	(204)	(481)	(534)

Net loss	$(900)	$(792)	$(2,832)	$(2,386)

	Three months ended September 30, 2019	Nine months ended September 30, 2019	Three months ended September 30,		Nine months ended September 30,
			2020	2019	2020	2019
Operating lease cost
Operating lease expense	$219	$543	$201	$219	$561	$543
Short term lease expense	18	71	75	18	104	71
Variable lease expense	31	80	29	31	89	80
Sub lease income	(50)	(118)	-	(50)	-	(118)
Total operating lease cost			$305	$218	$754	$576

Total lease cost	$218	$576
Finance lease cost
Amortization of right-of-use assets			$94	$-	$155	$-
Interest on lease liabilities			26	-	44	-
Total finance lease cost			$120	$-	$199	$-

Weighted Average Remaining Lease Term
Operating ~~Leases~~leases	7.1 years
Finance leases	3.2 years
	~~1.6 years~~
Weighted Average Discount Rate
Operating ~~Leases~~leases	13.9%
Finance leases	~~14.7%~~ 5.2%

			As of
	September 30, 2019	December 31, 2018	September 30, 2020	December 31, 2019
Raw materials	$979	$3,647	$1,678	$2,566
Work-in-progress	1,285	1,327	1,365	1,455
Finished goods	1,257	1,155	1,773	2,497
Total inventories	$3,521	$6,129	$4,816	$6,518

~~As of~~
~~September 30, 2019~~
~~Operating lease right-of-use assets~~	$~~743~~

~~Operating lease liabilities:~~
~~Short term lease liability~~	$~~502~~
~~Long term lease liability~~	$~~288~~

Twelve months ended September 30,	Operating leases	Operating leases	Finance leases

2020	$593
2021	203	$666	$704
2022	88	613	577
2023		569	494
2024		586	290
2025		603	-
Thereafter		1,698	-
Total lease payments	$884	4,735	2,065

Less imputed interest	(94)	(1,787)	(174)

Total operating lease liability	$790
Total lease liability		$2,948	$1,891

	Three months ended September 30, 2019			Three months ended September 30, 2018
	North America	India	Total Consolidated	North America	India	Total Consolidated

Revenues	$37,820	$19,569	$57,389	$38,576	$6,059	$44,635
Cost of goods sold	37,990	15,417	53,407	36,147	5,820	41,967

Gross profit (loss)	(170)	4,152	3,982	2,429	239	2,668

Other Expenses
Research and development expenses	37	-	37	74	-	74
Selling, general and administrative expenses	2,716	1,813	4,529	3,645	248	3,893
Interest expense	6,293	49	6,342	5,261	150	5,411
Accretion of Series A preferred units	589	-	589	-	-	-
Other income	(265)	(24)	(289)	(55)	(6)	(61)

Income (loss) before income taxes	$(9,540)	$2,314	$(7,226)	$(6,496)	$(153)	$(6,649)

Capital expenditures	$3,664	$351	$4,015	$703	$24	$727
Depreciation	942	161	1,103	992	166	1,158

99.1	Limited Waiver and Amendment No. 18 to Amended and Restated Note Purchase Agreement, dated as of November 5, 2020 by and among Aemetis, Inc.; Aemetis Advanced Fuels Keyes, Inc.; Aemetis Facility Keyes, Inc.; Third Eye Capital Corporation, an Ontario corporation, as agent for Third Eye Capital Credit Opportunities Fund - Insight Fund, and Ninepoint - TEC Private Credit Fund.
31.1	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
31.2	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
32.1	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	AEMETIS, INC.


	By:	/s/ Eric A. McAfee
		Eric A. McAfee Chief Executive Officer (Principal Executive Officer)

	AEMETIS, INC.


	By:	/s/ Todd Waltz
		Todd Waltz Executive Vice President and Chief Financial Officer (Principal Financial Officer)