Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated filer”, “smaller" "accelerated filer" and "smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

 

On one or more occasions, we may make forward-looking statements in this Quarterly Report on Form 10-Q, including statements regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events or other statements that are not historical facts. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements regarding management’s plans; trends in demand for renewable fuels; trends in market conditions with respect to prices for inputs for our products versus prices for our products; our ability to leverage approved feedstock pathways; our ability to leverage our location and infrastructure; our ability to incorporate lower-cost, non-food advanced biofuels feedstock at the Keyes plant; our ability to adopt value-add by-product processing systems; our ability to expand into alternative markets for biodiesel and its by-products, including continuing to expand our sales into international markets; the impact of changes in regulatory policies on our performance, including the Indian government’s recent changes to tax policies, diesel prices and related subsidies; our ability to continue to develop new, and to maintain and protect new and existing, intellectual property rights; our ability to adopt, develop and commercialize new technologies; our ability to refinance our senior debt on more commercial terms or at all; our ability to continue to fund operations and our future sources of liquidity and capital resources; our ability to sell additional notes under our EB-5 note program and our expectations regarding the release of funds from escrow under our EB-5 note program; our ability to improve margins; and our ability to raise additional capital. Words or phrases such as “anticipates,” “may,” “will,” “should,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “will continue” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on current assumptions and predictions and are subject to numerous risks and uncertainties. Actual results or events could differ materially from those set forth or implied by such forward-looking statements and related assumptions due to certain factors, including, without limitation, the risks set forth under the caption “Risk Factors” below, which are incorporated herein by reference as well as those business risks and factors described elsewhere in this report and in our other filings with the Securities and Exchange Commission (the “SEC”), including without limitation, our most recent Annual Report on Form 10-K.

The accompanying consolidated condensed balance sheet as of SeptemberJune 30, 2017,2018, the consolidated condensed statements of operations and comprehensive loss for the three and ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, and the consolidated condensed statements of cash flows for the ninesix months ended SeptemberJune 30, 20172018 and 20162017 are unaudited. The consolidated condensed balance sheet as of December 31, 20162017 was derived from the 20162017 audited consolidated financial statements and notes thereto. The consolidated condensed financial statements in this report should be read in conjunction with the 20162017 audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2016.

In the opinion of management, the unaudited interim consolidated condensed financial statements for the three and ninesix months ended SeptemberJune 30, 20172018 and 20162017 have been prepared on the same basis as the audited consolidated statements as of December 31, 20162017 and reflect all adjustments, consisting primarily of normal recurring adjustments, necessary for the fair presentation of its statement of financial position, results of operations and cash flows. The results of operations for the three and ninesix months ended SeptemberJune 30, 20172018 are not necessarily indicative of the operating results for any subsequent quarter, for the full fiscal year or any future periods.

In India where the by-product is contemplatedwe sell product on purchase orders (written or verbal) or by contract with governmental or international parties, the performance obligation is satisfied by delivery and acceptance of the physical product. When the contracts are sufficiently similar in nature, we have assessed these contracts as a portfolio of similar contracts as allowed under the practical expedient. Doing so does not result in a materially different outcome compared to provide value,individually accounting for each contract. All domestic and international deliveries are subject to certain specifications as identified in contracts. The transaction price is recognizeddetermined based on reference market prices for biodiesel and refined glycerin every day net of taxes. There is no transaction price allocation needed.

In North America, we buy corn as feedstock in producing ethanol from our working capital partner J.D. Heiskell and we sell all ethanol, WDG, and corn oil produced in this process to J.D. Heiskell. Our finished goods tank is leased by J.D. Heiskell and they require us to transfer legal title to the product upon transfer of our finished ethanol to this location. We consider the purchase of corn as a cost of goods sold and the sale of ethanol upon transfer to the finished goods tank as revenue on the basis that (i) we control and bear the risk of gain or loss on the processing of corn which is purchased at market prices into ethanol and (ii) we have a legal title to the goods during the processing time. Revenues from sales of ethanol and its co-products are billed net of the related transportation and marketing charges. The transportation component is accounted for in cost of goods sold and the marketing component is accounted for in sales, general and administrative expense. Transportation and marketing charges are known within days of the transaction and are recorded at the quoted marketactual amounts. The Company has elected an accounting policy under which these charges have been treated as fulfillment activities provided after control has transferred. As a result, these charges are recognized as expenses when revenue is recognized. Revenues are recorded at the gross invoiced amount.

We have elected to adopt the practical expedient that allows for ignoring the significant financing component of a contract when estimating the transaction price when the transfer of thosepromised goods received or by-products.to the customer and customer payment for such goods are expected to be within one year of contract inception. Further, we have elected to adopt the practical expedient in which incremental costs of obtaining a contract are expensed when the amortization period would otherwise be less than one year.

The Company maintains an allowance for doubtful accounts for balances that appear to have specific collection issues. The collection process is based on the age of the invoice and it requires attempted contacts with the customer at specified intervals. If, after a specified number of days, the Company has been unsuccessful in its collection efforts, a bad debt allowance is recorded for the balance in question. Delinquent accounts receivable are charged against the allowance for doubtful accounts once un-collectability has been determined. The factors considered in reaching this determination are the apparent financial condition of the customer and the Company’s success in contacting and negotiating with the customer. If the financial condition of the Company’s customers were to deteriorate, additional allowances may be required. We did not reserve any balance for allowanceallowances for doubtful accounts as of SeptemberJune 30, 20172018 and December 31, 2016.2017.

The following table shows the number of potentially dilutive shares excluded from the diluted net income (loss)loss per share calculation as of SeptemberJune 30, 20172018 and 2016:2017:

The “North America” operating segment includes the Company’s 60 million gallons per year capacity Keyes plant in Keyes, California, the GAFI plant in Goodland, Kansas and the research and development facility.facility in St. Paul, Minnesota`.

The “India” operating segment encompasses the Company’s 50 million gallon per year capacity biodieselKakinada plant in Kakinada, India, itsthe administrative offices in Hyderabad, India, and the holding companies in Nevada and Mauritius.

For a complete summary of the Company’s significant accounting standard beginspolicies, please refer to Note 1, “Nature of Activities and Summary of Significant Accounting Policies,” included with the first quarter of fiscal year 2018. In MarchCompany’s audited financial statements and April 2016, the FASB issued further revenue recognition guidance amending principal vs. agent considerations regarding whether an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The Company is currently evaluating the impact of the adoption of this accounting standard update on its consolidated results of operations and financial condition and will be providing guidance in its Form 10-Knotes thereto for the yearyears ended December 31, 2017.2017 and 2016, filed with the Securities and Exchange Commission on March 29, 2018.

Inventory consistsInventories consist of the following:

Property, plant and equipment consist of the following:

Depreciation on the components of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:

For the three months ended SeptemberJune 30, 20172018 and 2016,2017, the Company recorded depreciation expense of $1.1 million and $1.2 million for each period.respectively. For the ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, the Company recorded depreciation expense of $3.5$2.3 million for each period.

Management is required to evaluate these long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Management determined there was no impairment ofon the long-lived assets during the three and ninesix months ended SeptemberJune 30, 20172018 and 2016.2017.

Debt consists of the following:

On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (“AAFK”)(AAFK), entered into an Amended and Restated Note Purchase Agreement with Third Eye Capital (the “NoteNote Purchase Agreement”)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”)Term Notes); (ii) senior secured revolving loans in an aggregate principal amount of $18.0 million (“Revolving(Revolving Credit Facility”)Facility); (iii) senior secured term loans in the principal amount of $10.0 million to convert the prior revenue participation agreement to a note (“Revenue(Revenue Participation Term Notes”)Notes); and (iv) senior secured term loans in an aggregate principal amount of $15.0 million (“Acquisition(Acquisition Term Notes”)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). After this financing transaction, Third Eye Capital obtained sufficient equity ownership in the Company to be considered a related party. The Original Third Eye Capital Notes have a maturity date of April 1, 2018.

On January 31, 2017,4, 2018, a Promissory Note (the “January 2017 Note”January 2018 Note) for $160 thousand 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 1, 2018. In consideration of the January 2018 Note, $10 thousand of the total proceeds were paid to Third Eye Capital as financing charges. As of June 30, 2018, the outstanding balance of principal and interest on the January 2018 note was $162 thousand. On April 1, 2018, the January 2018 Note was paid in full.

On February 27 2018, a Promissory Note (the February 2018 Note, together with the Original Third Eye Capital Notes, the “ThirdThird Eye Capital Notes”)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) MayApril 30, 2017. In addition, as part of the January 2017 Note agreement, Aemetis used $0.5 million of the total proceeds to buy back 275 thousand common shares that were held by Third Eye Capital.2018. In consideration of the January 2017February 2018 Note, $133 thousand$0.1 million of the total proceeds were paid to Third Eye Capital as financing charges. As of June 30, 2017, the outstanding balance on the January 2017 Note was $2.1 million. On July 10, 2017, the January 2017 Note was paid in full.

On April 28, 2017, a PromissoryMarch 27, 2018, Third Eye Capital agreed to Limited Waiver and Amendment No. 14 to the Note (the “April 2017 Note”, and together withPurchase Agreement, or Amendment No. 14, to: (i) extend the Originalmaturity date of the Third Eye Capital Notes two years to April 1, 2020 in exchange for an amendment fee consisting of 6% (3% per year) of the “Third Eye Capital Notes”) for $1.5 million was advanced byoutstanding 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 Aemetis, Inc.April 1, 2021 in exchange for an extension fee of 5%; (iii) provide for an optional quarterly 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.

On March 27, 2018, Third Eye Capital agreed to a one-year reserve liquidity facility governed by a promissory note, payable in the principal amount of up to $6.0 million dollars. 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, maturing onpaid monthly in arrears, or 40% if an event of default has occurred and continues. The outstanding principal balance of the earliestindebtedness 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 the Financing, (b) receipt of proceeds from any new debt or equity financing, refinancing or other similar transaction (c) extension of creditbetween Third Eye Capital or any fund or entity arranged by them and the Company or its affiliates, (b) receipt by the Lender,Company or Agent on behalfits affiliates of certain lendersproceeds from any sale, merger, equity or the Noteholders, to the Debtorsdebt financing, refinancing or their affiliates,other similar transaction from any third party and (d) June 15, 2017. In addition, $1.0 million of this(c) April 1, 2019. The promissory note represents fees payableis secured by Goodland Advanced Fuels, Inc.liens and security interests upon the closingproperty and assets of the Goodland transaction. On July 10, 2017,Company. If any amounts are drawn under the April 2017 Note was paidfacility, the Company will pay a non-refundable fee in fullthe amount of $0.2 million payable from the proceeds of the first drawing under the facility. As of June 30, 2018, no draws were outstanding on this Note.

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 Third Eye Capital Notes all contain cross-collateral and cross-default provisions. McAfee Capital, LLC (“McAfee Capital”)(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 forin the amount of $8.0 million.

Advanced BioEnergy, LP arranges investments with foreign investors, who each make loans to the Keyes plant in increments of $0.5 million. As of September 30, 2017, theThe 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 which $34.5this filing. As of June 30, 2018, $35.0 million havehas been released from the escrow accountamount to the Company with $1.0including $0.5 million released on April 26, 2018. As of June 30, 2018, $0.5 million is remaining in escrow and $0.5 million is to be funded to escrow. As of SeptemberJune 30, 2017, $34.52018, $35.0 million in principal and $1.3$1.7 million in accrued interest remained outstanding.was outstanding on the EB-5 Notes. Out of the $36.7 million total outstanding, $1.7 million will be due within a year.

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 for capital expenditures of Aemetis, Inc. and Goodland Advanced Fuels, Inc.

In October 2016,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 operational support charges 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 (“BP 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 six months ended June 30, 2018 and 2017, the Company made an agreement with a supplierprincipal and interest payments to Secunderabad Oils of palm stearin to its Kakinada plant to pay 12% interest on an unpaid balance under the raw material purchase agreement of $1.9 million.approximately $2.7 million and $2.3 million, respectively. As of SeptemberJune 30, 20172018 and December 31, 2016,2017, the Company had nil and $1.5$1.3 million outstanding onunder this raw material purchase agreement, respectively.

In March 2016, the Board of Directors of the Company approved an Inducement Equity Plan authorizing the issuance of 100 thousand non-statutory stock options to purchase common stock. As of SeptemberJune 30, 2017, 372018, 12 thousand options were outstanding.

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

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 theour estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensationCompensation cost is recorded only for options that do not vest.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.

There were no stock423 thousand options granted during the three months ended SeptemberJune 30, 2017.2018. The weighted average fair value calculations for options granted during the three months ended June 30, 2018 are based on the following assumptions:

As of SeptemberJune 30, 2017,2018, the Company had $1.1$1.2 million of total unrecognized compensation expense for employees, thatwhich the Company will amortize over the 1.812.0 years of weighted average remaining term.

The J.D. Heiskell sales activity associated with the Purchasing Agreement, Corn Procurement and Working Capital

TheAs of June 30, 2018, the Company entered into forward purchase contracts for approximately 0.9 million bushels36 thousand tons of corn, which is the principal raw material for ethanol production. The delivery of this grain will be expected through December 2017.September 2018.

Unrealized gains and losses on forward contracts and commitments, in which delivery has not occurred, are deemed “normal purchases and normal sales”, and therefore are not marked to market in the Company’s financial statements, but are subject to a lower of cost or market assessment.

Aemetis recognizes two reportable geographic operating segments: “North America” and “India.” The “North America” operating segment includes the Company’s owned ethanol plant in Keyes, California the GAFI plant in Goodland, Kansas and its technology research and development lab. As the Company’s technology gains market acceptance, this business segment will initially include its domestic commercial application of cellulosic ethanol technology, its plant construction projects and any acquisitions of ethanol or ethanol related technology facilities in North America.

The “India” operating segment includes the Company’s 50 million gallon per year nameplate capacity biodiesel manufacturing plant in Kakinada, 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 ninesix months ended SeptemberJune 30, 20172018 and 20162017 follows:

During the three and ninesix months ended SeptemberJune 30, 2016,2017, the Company’s revenues from ethanol, WDG, and corn oil were earnedmade pursuant to the Corn Procurement and Working Capital Agreement established between the Company and J.D. Heiskell. Sales of ethanol, WDG, and corn oil to J.D. Heiskell accounted for 93% and 94%99.6% of the Company’s North America segment revenues for the three and ninesix months ended SeptemberJune 30, 2016,2017, respectively.

During the ninesix months ended SeptemberJune 30, 2017,2018, two biodiesel customers accounted for 47% and 12% and no refined glycerin customers accounted for more than 10% of consolidated India segment revenues, compared to two biodiesel customers accounted for 55%54% and 11% 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 54% and 13% and no refined glycerin customers accounting for more than 10% of the Company’s consolidated India segment revenues during the ninesix months ended SeptemberJune 30, 2016.2017.

Total assets by segment consist of the following:

The Company owes Eric McAfee, the Company’s Chairman and CEO, and 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 SeptemberJune 30, 20172018 and December 31, 2016.2017. For the three months ended SeptemberJune 30, 20172018 and 2016,2017, the Company expensed $5$10 thousand and $16$6 thousand, respectively, to reimburse actual expenses incurred by McAfee Capital and related entities. For the ninesix months ended SeptemberJune 30, 20172018 and 2016,2017, the Company expensed $28$24 thousand and $57$23 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 SeptemberJune 30, 2017,2018, $0.1 million remained as a prepaid expense related to Redwood Capital.expense. As consideration for the reaffirmation of guaranties required by Amendment No. 1213 to the Note Purchase Agreement which the Company entered into with Third Eye Capital on March 21, 2016,1, 2017, the Company also agreed to pay $0.2 million in consideration to McAfee Capital in exchange for their willingness to provide the guarantees.guaranties. The balance of $156$284 thousand and $342 thousand for guaranteeguaranty fee remained as accrued liability as of SeptemberJune 30, 20172018 and December 31, 2016.2017 respectively.

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 reliant on their senior secured lender to provide additional funding and has been required to remit substantially all excess cash from operations to the senior secured lender. Management’s plans forlender 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 include, but are not limited to: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:

We also lease a site in Riverbank, CA, near the Keyes plant, where we plan to these efforts,utilize biomass-to-fuel technology that we are developing an advanced cellulosic ethanol project near our plant in Keyes, CA for the deployment of the combinedhave licensed from LanzaTech and InEnTec technologies using primarily orchard woodto build the Riverbank Cellulosic Ethanol Facility capable of converting local California surplus biomass – principally agricultural waste – into ultra-low carbon renewable cellulosic ethanol. The Riverbank Cellulosic Ethanol Facility plans to utilize the existing distillation and shells from the Central Valley as feedback. Technology agreements have been signed, the site location has been leased, and an Integrated Demonstration Unit is operating, whichlogistics infrastructure at our nearby Keyes plant. By producing ultra-low carbon intensity renewable cellulosic fuel ethanol, we expect will demonstrateto capture higher value D3 cellulosic renewable identification numbers (RINs) and California’s Low Carbon Fuel Standard (LCFS) carbon credits. Renewable fuels such as corn-based ethanol (D6 RIN) and cellulosic-based ethanol (D3 RIN) receive a higher price in the effectivenessmarketplace when RINs and LCFS incentives are sold with the renewable fuel based on the unique carbon score attributed to the plant generating the fuel. D3 RINs have a higher value in the marketplace than D6 RINs due to D3 RINs’ relative scarcity.

During 2017, GAFI was formed to acquire land, buildings and process equipment in Goodland, Kansas. At acquisition, the assets were valued at $15.4 million and provide a base for the construction and development of the technologiesGAFI plant. GAFI entered into the GAFI Note Purchase Agreement with Third Eye Capital. GAFI, the Company and its subsidiary Aemetis Advanced Product Keyes (AAPK) also entered into separate GAFI Intercompany Notes, pursuant to produce cellulosic ethanol at profitable yields.which GAFI may lend a portion of the proceeds of the GAFI Revolving Loan under the GAFI Note Purchase Agreement. The terms of the GAFI Intercompany Notes, in combination with the GAFI Limited Guaranty and the GAFI Option Agreement provide sufficient basis for Aemetis to direct the activities of GAFI.

Our revenue strategyWe also own and operate a biodiesel production facility in Kakinada, India with a nameplate capacity of 150 thousand metric tons per year, which is based on continuingequal to sell biodiesel to our bulk fuel customers, beginning sales to retail customers using recent regulatory changes in India that allow sales of biodiesel at retail fuel stations, pursuing tender offers placed by India government oil companies for bulk purchases of fuels, and delivering biodiesel under our agreement with British Petroleum Singapore for sales into the European markets. Recent changes in July 2017 in India's Goods and Services Tax (GST) raised the combined tax rate from 11% to 18% on our sales into the Indian domestic markets, though this higher tax rate is under review. This increase in GST taxation is expected to hamper domestic India revenue expansion and generate lower margins. Further increases in the price of crude oil, which sets a ceiling on the price we receive for our biodiesel, could offset the impact of the GST legislation.about 50 million gallons per year. We believe the deploymentKakinada plant is one of these strategies will allow for continuedthe largest biodiesel production facilities in India on a nameplate capacity basis. The Kakinada plant is capable of processing a variety of vegetable oil and animal fat waste feedstocks into biodiesel that meet international product standards. The Kakinada Plant also distills the crude glycerin byproduct from the biodiesel refining process into refined glycerin, and sells the valuable lubricant to the pharmaceutical, lotions, paint, adhesive and other industries. Our objective is to continue to capitalize on the substantial growth potential of the biodiesel industry in revenue throughIndia and address established markets in the fourth quarterEuropean Union (EU) and United States of 2017America (U.S.) by leveraging relationships with a large oil company and into 2018.trading partners.

Our revenues are derived primarily from sales of ethanol and Wet Distillers Grains (WDG)WDG in North America and biodiesel and refined glycerin in India.