AEMETIS, INC 10-K

Item 1. Business General Founded in 2006 and headquartered in Cupertino, California, Aemetis, Inc. (collectively with its subsidiaries on a consolidated basis, “Aemetis,” the “Company,” “we,” “our” or “us”) is an international renewable fuels and byproducts company focused on the acquisition, development and commercialization of innovative negative carbon intensity products and technologies that replace traditional petroleum-based products and reduce greenhouse gas emissions (“GHG”). We recognize three reportable segments which include “California Ethanol,” “Dairy Renewable Natural Gas,” and “India Biodiesel.” We have other operating segments, which we determined not to be reportable segments, collectively represented by the “All Other” category. For revenue and other information regarding our operating segments, see Note 12 - Segment Information, of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. In 2006, we incorporated in Nevada. In December 2021, we reincorporated in Delaware. We believe the reincorporation is a progression in the growth and development of the Company. The reincorporation moves us to a more accessible jurisdiction for debt financing and other transactions. We own and operate a 65 million gallon per year ethanol production facility located in Keyes, California (the “Keyes Plant”). In addition to low carbon renewable fuel ethanol, the Keyes Plant produces Wet Distillers Grains (“WDG”), Distillers Corn Oil (“DCO”), and Condensed Distillers Solubles (“CDS”), all of which are sold as animal feed to local dairies and feedlots. In the fourth quarter of 2021, an ethanol zeolite membrane dehydration system was installed, and is in process of being commissioned at the Keyes Plant. The installation is a key first step in the electrification of the Keyes Plant, which will significantly reduce the use of petroleum based natural gas as process energy. The electrification, along with the future installation of a two-megawatt zero carbon intensity solar microgrid system and a mechanical vapor recompression (MVR) system will greatly reduce GHG emissions and decreases the carbon intensity of fuel produced at the Keyes Plant, allowing us to realize a higher price for the ethanol we produce and sell. 3 Table of Contents During 2018, Aemetis Biogas, LLC (“ABGL”) was formed to construct bio-methane anaerobic digesters at local dairies near the Keyes Plant, many of whom also purchase WDG produced at the Keyes Plant. Our renewable natural gas segment, ABGL, has completed Phase 1 of our California biogas digester network and pipeline system that converts waste dairy methane gas into Dairy Renewable Natural Gas (“RNG”) and is now executing Phase 2 construction projects. The digesters are connected via an underground private pipeline owned by ABGL to a gas cleanup and compression unit being built at the Keyes Plant to produce RNG. During the third quarter of 2020, ABGL completed construction of the first two dairy digesters along with four miles of pipeline that carries bio-methane from the dairies to the Keyes Plant. Upon receiving the bio-methane from the dairies, impurities are removed, and the bio-methane is converted to negative carbon intensity RNG where it will be either injected into the statewide PG&E gas utility pipeline, supplied as compressed RNG that will service local trucking fleets, or used as renewable process energy at the Keyes Plant. The next phase, involving construction of ten dairy digesters, is planned for completion in 2022. When completed, our dairy digesters are expected to produce dairy renewable natural gas for use in trucks and buses to displace petroleum-based diesel fuel. The total planned 52 dairies in our Dairy Renewable Natural Gas segment are expected to be operating by Q4 of 2025 and are expected to capture more than 1.4 million MMBtu of dairy methane and reduce greenhouse gas emissions. During the first quarter of 2021, we announced our “Carbon Zero” biofuels production plants designed to produce biofuels, including sustainable aviation fuel (“SAF”) and diesel fuel utilizing renewable hydrogen and non-edible renewable oils sourced from our existing biofuels plants and other sources. The first plant to be built in Riverbank, California, “Carbon Zero 1”, is expected to utilize hydroelectric and other renewable power available onsite to produce 90 million gallons per year of SAF, renewable diesel, and other byproducts. The plant is expected to supply the aviation and truck markets with ultra-low carbon renewable fuels to reduce GHG emissions and other pollutants associated with conventional petroleum-based fuels. By producing ultra-low carbon renewable fuels, the Company expects to capture higher value D3 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 (“EPA”). Carbon Zero 1 is included in the All Other category and determined not to be a reportable segment. In 2021, the Company signed a 10-year, 250-million-gallon blended fuel (containing SAF) offtake agreement and a 10-year, 450-million-gallon renewable diesel supply agreement with an industry-leading travel stop company. On April 1, 2021, we established Aemetis Carbon Capture, Inc. to build Carbon Capture Sequestration (“CCS”) projects to generate LCFS and IRS 45Q credits by injecting CO₂ into wells which are monitored for emissions to ensure the long-term sequestration of carbon underground. California’s Central Valley has been identified as the state’s most favorable region for large-scale CO₂ injection projects due to the subsurface geologic formation that retains gases. The CCS projects are included in the All Other category and determined not to be a reportable segment. During 2021, a Stanford University study concluded that more than 2 million metric tonnes (MT) per year of CO₂ can be removed from the atmosphere and injected safely into the earth at ethanol plant sites in California. The study estimated that 1.0 million MT per year of CO₂ can be sequestered in the saline formations located deep underground at or near the Keyes Plant site. The study also noted that up to 1.4 million MT per year of CO₂ should be injectable at or near the Aemetis Riverbank site due to the favorable permeability of the saline formation and other factors. The conclusions from geologic formation and pre-drilling studies confirms the feasibility of our plans to construct two CO₂ injections wells at or near the Aemetis biofuels sites. We have completed the Front End Loading engineering and are now working on the Front End Engineering Design and obtaining permits for the carbon sequestration projects. Each MT of CO₂ is expected to generate approximately $200 per MT from the California Low Carbon Fuel Standard and $50 per MT of IRS 45Q tax credit. Legislation is pending in Congress to increase the federal tax credit to $80 per MT of CO₂ and to provide billions of dollars of grants and loans to finance CCS projects in the U.S. We operate a research and development laboratory to develop efficient conversion technologies using waste feedstocks to produce biofuels and biochemicals. We are continuing to develop a biomass-to-fuel technology to build a carbon zero production facility. The research and development laboratory is included in the All Other category and determined not to be a reportable segment. We also own and operate the Kakinada Plant with a nameplate capacity of 150 thousand metric tons per year, or about 50 million gallons per year, producing high quality distilled biodiesel and refined glycerin for customers in India and Europe. We believe the Kakinada Plant is one of the largest biodiesel production facilities in India on a nameplate capacity basis. The Kakinada Plant is capable of processing a variety of vegetable oils 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, which is sold to the pharmaceutical, personal care, paint, adhesive and other industries. 4 Table of Contents Strategy Key elements of our strategy include: California Ethanol Diversify and expand revenue and cash flow by continuing to develop and adopt value-added by-product processing systems and optimize other systems in our existing plants. In April 2012, we installed a DCO extraction unit at the Keyes Plant and began extracting corn oil for sale into the livestock feed market. During 2014, we installed a second oil extraction system to further improve corn oil yields from this process. During late 2017, we entered into agreements to sell substantially all of the CO₂ produced at the Keyes Plant to Messer Gas, which built a liquid CO₂ plant adjacent to the Keyes Plant that was operational in the second quarter of 2020. We have plans to install a mechanical vapor recovery (“MVR”) system that allows for the compression of process vapor to steam resulting in a significant reduction of natural gas consumption. Additionally, we are developing the Aemetis Integrated Solar Microgrid Systems (AIMS) with battery backup that allows for the displacement of natural gas electricity with zero carbon intensity electricity, which is expected to begin construction at the Keyes Plant in the second quarter of 2022. We continue to evaluate and, as allowed by available financing and free cash flow from operations, adopt additional value-added processes that decrease costs and increase the value of the ethanol, WDG, DCO, CDS, and CO₂ produced at the Keyes Plant. Dairy Renewable Natural Gas Leverage our position as owner/operator of dairy digesters and connected pipeline to expand the network thereby increasing revenues and profitability . In December 2018, we leveraged our relationship with California’s Central Valley dairy farmers by signing leases and raising funds to construct dairy digesters that collect bio-methane and pipelines that convey bio-methane to our Keyes Plant. We have constructed our first two digesters, installed eleven miles of pipeline, and commenced operations of the initial pipeline and digesters in the third quarter of 2020. In addition, we have signed agreements with over 25 additional dairies to construct additional dairy digesters. We plan on progressing our business plan by continuing to expand the dairy digesters and pipeline network. India Biodiesel Capitalize on recent policy changes by the Government of India. We plan to continue to pursue the traditional bulk, fleet, industrial, retail, and transportation biodiesel markets in India, which we believe have become more attractive as a result of potential changes to government tax structures and policies, as well as new marketing channels that may open as a result of changes to government policy changes. The rationalization of indirect taxation by the introduction of the Goods and Services Tax (the “GST”), the introduction of biodiesel sales under government oil marketing company (“Government Oil Marketing Company”) contracts and the execution of contracts with major oil consumers are expected to drive revenue and margins in our India Biodiesel segment. Pursue tender offers from Government Oil Marketing Companies. 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 such as Hindustan Petroleum, Bharat Petroleum, and Indian Oil Corporation and began supplying biodiesel in May 2019. These tenders open every six months, soliciting bids for the next six month period. The Company did not participate in tenders during 2021 due to low OMC offer price, coupled with very high feedstock prices as a result of COVID-19. We plan to pursue these tender offers made by the Government Oil Marketing Companies on economically reasonable terms. Diversify our feedstocks from India. We designed our Kakinada Plant with the capability to produce biodiesel from multiple feedstocks. In 2009, we began to produce biodiesel from non-refined palm oil (“NRPO”). Between 2014 and 2019, we further diversified our feedstock to include animal oils and fats, which we used for the production of biodiesel to be sold into the European markets, refined, bleached & deodorized Palm Stearin, crude palm stearin, and RBD palm stearin. The byproduct of using high fat RBD palm stearin and crude palm stearin is Palm Fatty Acid Distiller (“PFAD”), which can be further processed into biodiesel and sold, or sold directly into the market starting in the third quarter of 2019. Additionally, the Kakinada Plant is capable of producing biodiesel from used cooking oil (“UCO”); however, the importation of UCO is not currently allowed in India, and as a result, we are looking for a local supply source of UCO to expand our feedstock diversity. In 2018, we completed a pretreatment unit at the Kakinada Plant to convert up to 5% high free fatty acid (“FFA”) feedstocks into oil that can be used to produce biodiesel, which was further upgraded in 2019 to convert up to 20% high FFA feedstocks, both of which are available at lower cost than our traditional feedstocks. During 2021, the Company, after receiving approval from the Pollution Control Board of India for use of Refined Animal Tallow for production of biodiesel, began procuring Refined Animal Tallow. The Indian biodiesel industry is requesting the Indian government to allow the export of biodiesel to other countries. The Company is exploring the export of Animal Tallow based biodiesel to California to capture LCFS credits. 5 Table of Contents Develop and commercially deploy technologies to produce high-margin products. We plan to continue investing in the conversion of lower quality, waste oils into higher value biofuels, including renewable diesel. Additionally, we continue to evaluate improvements to the throughput capacity and efficiency of the plant. We plan to invest in those areas that allow for more efficient and higher throughput for the processing of biodiesel and refined glycerin. The technologies for these conversion process may be licensed from third parties or internally developed. Evaluate and pursue technology acquisition opportunities . We intend to evaluate and pursue opportunities to acquire technologies and processes that result in accretive earnings opportunities as financial resources and business prospects make the acquisition of these technologies and processes advisable. In addition, we may also seek to acquire companies, or enter into licensing agreements or form joint ventures with companies that offer prospects for the adoption of accretive earnings business opportunities. Other Initiatives Leverage technology for the development and production of additional advanced biofuels and renewable chemicals. We continue to evaluate new technology, develop technologies under our existing patents and conduct research and development to produce low or negative carbon intensity advanced biofuels from renewable feedstocks. Our objective is to continue to commercialize our portfolio of technologies and expand the adoption of these advanced biofuels and bio-chemicals technologies. We hold certain rights to technologies for the conversion of orchard, forest, dairy, and construction and demolition waste wood into low carbon renewable fuel. We intend to utilize this technology to produce renewable hydrogen for use in the production of SAF and diesel fuel at the Riverbank Carbon Zero 1 facility using agricultural biomass waste abundantly available from orchard waste wood in California ’ s Central Valley. Our planned first phase has an estimated 90 million gallons per year of nameplate capacity. We intend to expand production facilities to build additional plants in California to utilize the estimated 1.6 million tons of annual waste orchard wood in Central California, as well as other waste wood feedstocks. Acquire, license our technologies to, or joint venture with other ethanol and biodiesel plants . There are approximately 200 ethanol plants that are operational in the U.S., as well as biofuels plants in Brazil, Argentina, India and elsewhere in the world that could be upgraded to expand revenues and improve their cash flow using technology commercially deployed or licensed by us. After developing and commercially demonstrating technologies at the Keyes Plant, Kakinada Plant and the Riverbank Facility, we will evaluate on an opportunistic basis the benefit of acquiring ownership stakes in other biofuel production facilities and entering into joint venture or licensing agreements with other ethanol, renewable diesel or renewable SAF facilities. Evaluate and pursue technology acquisition opportunities . We intend to evaluate and pursue opportunities to acquire technologies and processes that result in accretive value opportunities as financial resources and business prospects make the acquisition of these technologies and processes advisable. In addition, we may also seek to acquire companies, enter into licensing agreements or form joint ventures with companies that offer prospects for the adoption of technologies that would be accretive to earnings. Additionally, we continue to evaluate technologies from our existing and planned operations for the development of the property in Goodland, Kansas. 6 Table of Contents 2021 Highlights California Ethanol During 2021, we produced five products: denatured fuel ethanol, WDG, DCO, CO₂, and CDS. During the first quarter of 2020, we transitioned from selling 100% of the ethanol we produce 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”). We terminated the Ethanol Marketing Agreement with Kinergy as of September 30, 2021. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC. Since May 2020, the ethanol stored in our finished goods tank is 100% owned by Aemetis. WDG continues to be sold to A.L.Gilbert and DCO is sold to other customers under the J.D.Heiskell Purchase Agreement. Smaller amounts of CDS were sold to various local third parties. We began selling CO₂ to Messer in the second quarter of 2020. We began selling high-grade alcohol for sanitizer in March 2020 directly to various customers throughout the West Coast and we also produced and sold Aemetis hand sanitizer under Aemetis Health Products, Inc. California Ethanol revenue is dependent on the price of ethanol, high-grade alcohol, WDG, CDS, and DCO. The following table sets forth information about our production and sales of ethanol and high-grade alcohol and WDG in 2021, 2020, and 2019: Years ended December 31, 2021 vs 2020 % 2021 2020 2019 Change Ethanol and High-Grade Alcohol Gallons Sold (in millions) 59.8 60.3 64.7 -0.8 % Average Sales Price/Gallon $ 2.72 $ 1.84 $ 1.77 47.8 % WDG Tons Sold (in thousands) 404 393 428 2.8 % Average Sales Price/Ton $ 103 $ 81 $ 81 27.2 % Dairy Renewable Natural Gas The following table sets forth information about our production and sales of Dairy Renewable Natural Gas in 2021, 2020, and 2019: Years ended December 31, 2021 vs 2020 % 2021 2020 2019 Change Dairy Renewable Natural Gas MMBtu intercompany sales 53,041 9,388 - 465.0 % India Biodiesel In 2021, we primarily produced two products at the Kakinada Plant: biodiesel and refined glycerin produced from further processing of the crude glycerin produced as a by‑product of the production of biodiesel. After the 2019 pretreatment unit upgrade, we can convert high-FFA oil into a renewable oil feedstock that that may be converted into biodiesel and sold to biodiesel market plants in India or exported to foreign plants to use for the production of biodiesel, renewable diesel and/or jet fuel. The byproduct of processing high-FFA oil into biodiesel is PFAD, which can be processed further into biodiesel or sold directly into the market. The following table sets forth information about our production and sales of biodiesel and refined glycerin in 2021, 2020, and 2019: Years ended December 31, 2021 vs 2020 % 2021 2020 2019 Change Biodiesel Tons sold (1) 455 15,987 46,971 -97.2 % Average Sales Price/Ton $ 1,024 $ 863 $ 904 18.7 % Refined Glycerin Tons sold 130 1,440 5,173 -91.0 % Average Sales Price/Ton $ 956 $ 814 $ 543 17.4 % (1) 1 metric ton is equal to 1,000 kilograms (approximately 2,204 pounds). 7 Table of Contents Competition California Ethanol – According to the U.S. Energy Information Agency (the “EIA”), there were approximately 200 commercial ethanol production facilities in the U.S. with a combined nameplate production of approximately 17.5 billion gallons per year as of January 1, 2021. A May 2021 annual U.S. ethanol production forecast, by the Renewable Fuels Association, was approximately 16.4 billion gallons. The production of ethanol is a commodity-based business where producers compete on the basis of price. We sell ethanol into the Northern California market. However, since insufficient production capacity exists in California to supply the state’s total fuel ethanol consumption (in excess of 1.5 billion gallons annually), we compete with ethanol transported into California from Midwestern producers. Similarly, our co-products, principally WDG and DCO, are sold into local California markets and compete with DDG and corn oil imported into the California markets as well as with alternative feed products. Dairy Renewable Natural Gas – Dairy renewable natural gas competes with petroleum based natural gas for the value of the gas molecule and competes with other biofuels for qualifying volumes of renewable biofuel volumes under the federal Renewable Fuel Standard and the California Low Carbon Fuel Standard. When used as a component of the energy inputs at our Keyes plant, the dairy renewable natural gas results in a lower pathway score, allowing us to sell ethanol into the market with the more valuable carbon attributes, and competing on the same basis as our California ethanol. India Biodiesel – With respect to biodiesel sold as fuel, we compete primarily with the producers of petroleum diesel, consisting of the three Government Oil Marketing Companies: Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum, and two private oil companies: Reliance Petroleum and Essar Oil, all of whom have significantly larger market shares than we do and control a significant share of the distribution network. These competitors also purchase our product for blending and further sales to their customers. We compete primarily on the basis of price, quality and reliable delivery, since our plant can produce distilled biodiesel and has historically been a more reliable and high-quality supplier than some other biodiesel producers in India. With respect to biodiesel sold directly to fleets and other customers, we supply logistics companies that operate fleets of trucks, ocean port facilities with extensive trucking activities, beverage distributors, cement ready-mix suppliers, mining companies, infrastructure companies, and other companies that use diesel for transportation. With respect to crude and refined glycerin, we compete with other glycerin producers and refiners selling products into the personal care, paints and adhesive markets primarily on the basis of price and product quality. Customers California Ethanol – During the first quarter of 2020, we transitioned from selling 100% of the ethanol we produce to J.D. Heiskell to selling the ethanol directly to Kinergy. Since May 2020, the ethanol stored in our finished goods tank is 100% owned by Aemetis. We terminated the Ethanol Marketing Agreement with Kinergy as of September 30, 2021. Effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC, who markets 100% of our fuel ethanol. WDG continues to be sold to A.L.Gilbert and DCO is sold to other customers under the J.D.Heiskell Purchasing Agreement. Smaller amounts of CDS were sold to various local third parties. We began selling CO₂ to Messer Gas in the second quarter of 2020. In response to the global COVID-19 pandemic, we began selling high-grade alcohol for sanitizer in March 2020 directly to various customers throughout the West Coast and we also produced and sold Aemetis hand sanitizer under the Aemetis Health Products, Inc. California Ethanol revenue is dependent on the price of ethanol, high-grade alcohol, WDG, CDS, and DCO. Dairy Renewable Natural Ga s – During 2021, we sold 100% of the biogas produced to the California Ethanol plant for use in the production of ethanol. The capability to interconnect with the regional pipeline in order to sell to a broader range of customers and to dispense fuel through a RNG station at or near the California Ethanol plant is in development. India Biodiesel – During 2021, we derived 67%, 18%, and 15% of our sales from biodiesel, refined glycerin, and other sales respectively. One biodiesel customer accounted for more than 10% of our consolidated India Biodiesel segment revenues at 66% and one refined glycerin customer accounted for 16% of our consolidated India Biodiesel segment revenues in 2021. During 2020, we derived 87%, 8%, and 5% of our sales from biodiesel, refined glycerin, and other sales, respectively. Two of our biodiesel customers accounted for more than 10% of our consolidated India Biodiesel segment revenues at 42% and 26%. None of our refined glycerin customers accounted for more than 10% of our consolidated India Biodiesel segment revenues in 2020. 8 Table of Contents Pricing California Ethanol – Revenue is dependent on the price of ethanol, WDG, high-grade alcohol, and DCO. Ethanol pricing is influenced by local and national inventory levels, local and national ethanol production, imported ethanol, corn prices and gasoline demand, and is determined pursuant to a marketing agreement with a single fuel marketing customer 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 (“OPIS”), as well as quarterly contracts negotiated by our marketing customer with local fuel blenders. The price for 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 and 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. High-grade alcohol pricing is based on the supply and demand restrictions in the current market. Our revenue is further influenced by the price of natural gas, our decision to operate the Keyes Plant at various capacity levels, conduct required maintenance, and respond to biological processes affecting output. Dairy Renewable Natural Gas – Revenue is dependent on the price of petroleum natural gas, the price of alternative sources of renewable gas in the market, the value of environmental attributes and the method for selling the gas. Renewable natural gas pricing is influenced by local and national inventory levels, local and national gas production, petroleum production, and value of the related environmental attributes. Further pricing is determined by the method of distribution, with each of the uses (replacement of natural gas at the California Ethanol plant, sell through the natural gas pipeline, or sell directly through renewable natural gas stations) providing separate pricing options. India Biodiesel – In India, the price of biodiesel is based on the price of petroleum diesel, which floats with changes in the price determined by the international markets. In 2019, India changed to a daily dynamic pricing model where diesel prices are changed on daily basis by the Government Oil Marketing Companies. Biodiesel sold into Europe is based on the spot market price, but a recent Indian government ban on exports closed this market for the Company for the time being. We sell our biodiesel primarily to Government Oil Marketing Companies, transport companies, resellers, distributors and private refiners on an as-needed basis. We have no long-term sales contracts. Our biodiesel pricing is related to the price of petroleum diesel, and the increase in the price of petroleum diesel is expected to favorably impact the profitability of our India operations. Raw Materials and Suppliers California Ethanol – We entered into a Corn Procurement and Working Capital Agreement with J.D. Heiskell in March 2011, which we amended in May 2020 (the “Heiskell Supply Agreement”). Under the Heiskell Supply Agreement, we agreed to procure number two yellow dent corn from J.D. Heiskell, with the ability to obtain corn from other sources subject to certain conditions. However, in 2020 and 2021, all our corn supply was purchased from J.D. Heiskell pursuant to the Heiskell Supply Agreement. Title to the corn and risk of loss pass to us when the corn is deposited into our weigh scale. The agreement is automatically renewed for additional one-year terms. The current term is set to expire on December 31, 2022, with automatic renewals for additional one-year terms. Dairy Renewable Natural Gas – Biogas is produced by anerobic digesters located on property that Aemetis leases from dairy operators. We construct and own the dairy digester and pipeline that connects the digesters together and feeds this gas to our gas clean up unit at our California Ethanol plant. Our dairy leases include a manure supply agreement with the dairy where the digester is located. Generally, these leases are for 20-25 years with options to renew and are based upon the value of environmental attributes and the size of the dairy. India Biodiesel – In 2021 and 2020, a significant amount of our biodiesel was derived from processing refined palm stearin, which was sourced locally. The byproduct of using high fat RBD/crude palm stearin is PFAD, which can be processed further into biodiesel or sold directly as a product into the market starting in the third quarter of 2019. During 2021, the Company, after receiving approval from the Pollution Control Board of India for use of Refined Animal Tallow for production of biodiesel, began procuring Refined Animal Tallow. The Indian biodiesel industry is requesting the Indian government to allow the export of biodiesel to other countries. The Company is exploring the export of Animal Tallow based biodiesel to California to capture LCFS credits. In addition to feedstock, the Kakinada Plant requires quantities of methanol and chemical catalysts for use in the biodiesel production process. These chemicals are also readily available and sourced from a number of suppliers surrounding the Kakinada Plant. We are not dependent on sole source or limited source suppliers for any of our raw materials or chemicals. Sales and Marketing California Ethanol – During the first quarter of 2020, we transitioned from selling the ethanol we produce to J.D. Heiskell pursuant to the J.D. Heiskell Purchase Agreement, to a model where the ethanol is sold directly to our fuel marketing customers. We own the ethanol stored in our finished goods tank. WDG continues to be sold to A.L. Gilbert and DCO is sold to other customers under the J.D. Heiskell Purchase Agreement. Smaller amounts of CDS were sold to various local third parties. We began selling CO₂ to Messer Gas in the second quarter of 2020. We began selling high-grade alcohol in March 2020 directly to various customers throughout the West Coast and we also produced and sold Aemetis hand sanitizer through our subsidiary, Aemetis Health Products, Inc., in the fourth quarter of 2020. 9 Table of Contents In March 2011, we entered into a WDG Purchase and Sale Agreement with A.L. Gilbert, pursuant to which A.L. Gilbert agreed to market, on an exclusive basis, all of the WDG we produce. The current term is set to expire on December 31, 2022 with automatic one-year renewals. In October 2010, we entered into an exclusive marketing agreement with Kinergy to market and sell our ethanol. Our marketing agreement with Kinergy was terminated as of September 30, 2021, and, effective October 1, 2021, we entered into Fuel Ethanol Purchase and Sale Agreement with Murex LLC, who now markets 100% of our fuel ethanol. The initial term of our agreement with Murex ends on October 31, 2023, with automatic one-year renewals thereafter. Dairy Renewable Natural Ga s – During 2021, we sold 100% of the biogas produced to the California Ethanol plant for use in the production of ethanol. The capability to interconnect with the regional pipeline in order to sell to a broader range of customers and to dispense fuel through a RNG station directly to end-users at or near the California Ethanol plant is in development. India Biodiesel - We sell our biodiesel and refined glycerin to (i) end-users utilizing our own sales force and independent sales agents, (ii) brokers who resell the product to end-users and (iii) Government Oil Marketing Companies. We pay a sales commission on sales arranged by independent sales agents. Commodity Risk Management Practices California Ethanol – The cost of corn and the price of ethanol are volatile and the correlation of the pricing of these commodities form the basis for the profit margin at our Keyes Plant. We are, therefore, exposed to commodity price risk. Our risk management strategy is to operate in the physical market by purchasing corn and selling ethanol on a daily basis at the then prevailing market price. We monitor these prices daily to test for an overall positive variable contribution margin. We periodically explore and utilize methods of mitigating the volatility of our commodity prices. Due to market volatility as a result of the COVID-19 pandemic in 2021 and 2020, we sold our WDG on a month-to-month basis to better manage commodity and pricing risk. Dairy Renewable Natural Gas – The cost of leasing and operating dairy digesters is dependent on the size of the dairy and the value of the environmental attributes. The price of renewable natural gas is volatile and uncorrelated with the cost of feedstock. We therefore are exposed to ongoing and substantial commodity price risk for our supply of dairy natural gas. Our risk management strategy is to arrange for the payment to dairy operators based, in part, upon the value of the environmental attributes in order to reduce this lack of market correlation. We monitor these prices daily to test for an overall positive variable contribution margin. We periodically explore and utilize methods of mitigating the volatility of our commodity prices. India Biodiesel – The cost of crude or refined palm stearin and the price of biodiesel are volatile and are generally uncorrelated. We therefore are exposed to ongoing and substantial commodity price risk at our Kakinada plant. Our risk management strategy is to produce biodiesel in India only when we believe we can generate positive gross margins and to idle the Kakinada Plant during periods of low or negative gross margins. Additionally, we are pursuing relationships with large oil companies and trading partners pursuant to which we may match the procurement of feedstocks with the production of biofuels for sales that provide a fixed margin. In addition, to minimize our commodity risk, we modified the processes within our facility to utilize lower cost crude palm stearin and palm based products with high FFA content, which enables us to reduce our feedstock costs. The price of our biodiesel is generally indexed to the local price of petroleum diesel, which floats with changes in the price determined by the international markets. We have in the past, and we may in the future, use forward purchase contracts and other hedging strategies. However, the extent to which we engage in these risk management strategies may vary substantially from time to time depending on market conditions and other factors. Research and Development Our research and development efforts consist of developing, evaluating, and commercializing technologies and expanding the production of SAF, renewable diesel fuel, and other renewable bio-chemicals in the United States and India. The objective of this development activity is to bring efficient conversion technologies using waste feedstocks to produce biofuels and biochemicals on a large-scale, commercial basis. Some of our innovations are protected by issued or pending patents. We are developing additional technology and expect to file additional patents that will further strengthen our intellectual property portfolio. We expect to continue to file and protect patents related to our business and future plans. 10 Table of Contents In 2018, in cooperation with a federally funded agency, we secured a grant from the California Energy Commission to optimize and demonstrate the effectiveness of ionic liquids technologies for breaking down biomass to produce SAF and renewable diesel fuel. After completion of technology development and pilot testing, this technology may be applied to the Carbon Zero production plants to commercialize this technology by converting the below zero carbon feedstocks such as waste wood and agricultural waste and renewable energy such as solar, RNG, biogas into energy dense liquid renewable fuels. A patent was awarded for this technology for the production of below zero carbon renewable fuel. Patents and Trademarks We filed a number of trademark applications within the U.S. We do not consider the success of our business, as a whole, to be dependent on these trademarks. In addition, we hold nine awarded patents in the United States. Our patents cover processes to break down plant biomass and a technology to convert carbon chain chemical structures. We intend to develop, maintain and secure further intellectual property rights and pursue new patents to expand upon our current patent base. We have acquired exclusive rights to patented technology in support of the development and commercialization of our products, and we also rely on trade secrets and proprietary technology in developing potential products. We continue to place significant emphasis on securing global intellectual property rights and we are pursuing new patents to expand upon our strong foundation for commercializing products in development. We have received, and may receive in the future, claims of infringement of other parties’ proprietary rights. See “Item 3. Legal Proceedings”. Infringement or other claims could be asserted or prosecuted against us in the future, which could harm our business. Any such claims, with or without merit, could be time-consuming, result in costly litigation and diversion of technical and management personnel, cause delays in the development of our products, or require us to develop non-infringing technology or enter into royalty or licensing arrangements. Such royalty or licensing arrangements, if required, may require us to license back our technology or may not be available on terms acceptable to us, or at all. In 2018, in cooperation with a federally funded agency, we secured a grant from the California Energy Commission to optimize and demonstrate the effectiveness of ionic liquids technologies for breaking down biomass to produce SAF and renewable diesel fuel. After completion of technology development and pilot testing, this technology may be applied to the Carbon Zero production plants to commercialize this technology by converting the below zero carbon feedstocks such as waste wood and agricultural waste and renewable energy such as solar, RNG, biogas into energy dense liquid renewable fuels. A patent was awarded for this technology for the production of below zero carbon renewable fuel. In January 2021, a U.S. patent was awarded for our exclusively licensed technology for the production of below zero carbon renewable fuel. This license enabled us to launch the “Carbon Zero” production plants that are designed to convert below zero carbon feedstocks such as waste wood and agricultural waste and renewable energy such as solar, RNG, and biogas into energy dense liquid renewable fuels. These renewable fuels can be utilized in hybrid electric cars or other electric engines which may create a below zero carbon greenhouse gas footprint across the entire life cycle of the fuel based on the Argonne National Laboratory’s GREET model, the leading lifecycle analysis measurement tool. Environmental and Regulatory Matters California Ethanol and Dairy Renewable Natural Gas – The final volumes requirements are set forth below and represent continued growth over historic levels. The final percentage standards meet or exceed the volume targets specified by Congress for total renewable fuel, biomass-based diesel and advanced biofuel. As of January 31, 2022, the EPA had not issued final Renewable Fuel Volume Requirements for calendar years 2020, 2021, and 2022, indicating that the Agency was extending the deadline for compliance until further notice. Renewable Fuel Volume Requirements for 2018-2022 Year 2018 2019 2020* 2021* 2022* Cellulosic biofuel (million gallons) 288 418 510 620 770 Biomass-based diesel (billion gallons) 2.1 2.1 2.43 2.43 2.76 Advanced biofuel (billion gallons) 4.29 4.92 4.63 5.20 5.77 Renewable fuel (billion gallons) 19.29 19.92 17.13 18.52 20.77 Source: Environmental Protection Agency *Proposed volume requirements 11 Table of Contents We are subject to federal, state and local environmental laws, regulations and permit conditions, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our employees. These laws, regulations and permits may, from time to time, require us to incur significant capital costs. These include, but are not limited to, testing and monitoring plant emissions, and where necessary, obtaining and maintaining mitigation processes to comply with regulations. They may also require us to make operational changes to limit actual or potential impacts to the environment. A significant violation of these laws, regulations, permits or license conditions could result in substantial fines, criminal sanctions, permit revocations and/or facility shutdowns. In addition, environmental laws and regulations change over time, and any such changes, more vigorous enforcement policies or the discovery of currently unknown conditions may require substantial additional environmental expenditures. We are also subject to potential liability for the investigation and cleanup of environmental contamination at each of the properties that we own or operate and at off-site locations where we arrange for the disposal of hazardous wastes. If significant contamination is identified at our properties in the future, costs to investigate and remediate this contamination as well as costs to investigate or remediate associated damage could be significant. If any of these sites are subject to investigation and/or remediation requirements, we may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) or other environmental laws for all or part of the costs of such investigation and/or remediation, and for damage to natural resources. We may also be subject to related claims by private parties alleging property damage or personal injury due to exposure to hazardous or other materials at or from such properties. While costs to address contamination or related third-party claims could be significant, based upon currently available information, we are not aware of any such material contamination or third-party claims. Based on our current assessment of the environmental and regulatory risks, we have not accrued any-amounts for environmental matters as of December 31, 2021 and 2020. The ultimate costs of any liabilities that may be identified or the discovery of additional contaminants could materially adversely impact our results of operation or financial condition. In addition, the production and transportation of our products may result in spills or releases of hazardous substances, which could result in claims from governmental authorities or third parties relating to actual or alleged personal injury, property damage, or damage to natural resources. We maintain insurance coverage against some, but not all, potential losses caused by our operations. Our general and umbrella liability policy coverage includes, but is not limited to, physical damage to assets, employer’s liability, comprehensive general liability, automobile liability and workers’ compensation. We do not carry environmental insurance. We believe that our insurance is adequate for our industry, but losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of events which result in significant personal injury or damage to our property, natural resources or third parties that is not covered by insurance could have a material adverse impact on our results of operations and financial condition. Our air emissions are subject to the federal Clean Air Act, and similar state laws, which generally require us to obtain and maintain air emission permits for our ongoing operations as well as for any expansion of existing facilities or any new facilities. Obtaining and maintaining those permits requires us to incur costs, and any future more stringent standards may result in increased costs and may limit or interfere with our operating flexibility. These costs could have a material adverse effect on our financial condition and results of operations. Because other ethanol manufacturers in the U.S. are and will continue to be subject to similar laws and restrictions, we do not currently believe that our costs to comply with current or future environmental laws and regulations will adversely affect our competitive position with other U.S. ethanol producers. However, because ethanol is produced and traded internationally, these costs could adversely affect us in our efforts to compete with foreign producers who are not subject to such stringent requirements. 12 Table of Contents New laws or regulations relating to the production, disposal or emission of carbon dioxide and other greenhouse gases may require us to incur significant additional costs with respect to ethanol plants that we build or acquire. We currently conduct our North American commercial activities exclusively in California. Climate change and reduction legislation is a topic of consideration by the U.S. Congress and California State Legislature, which may significantly impact the biofuels industry’s emissions regulations, as will the RFS, California’s LCFS, and other potentially significant changes in existing transportation fuels regulations. India Biodiesel - We are subject to national, state and local environmental laws, regulations and permits, including with respect to the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our employees. These laws may require us to make operational changes to limit actual or potential impacts to the environment. A violation of these laws, regulations or permits can result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or facility shutdowns. In addition, environmental laws and regulations (and interpretations thereof) change over time, and any such changes, more vigorous enforcement policies or the discovery of currently unknown conditions may require substantial additional environmental expenditures. Employees At December 31, 2021, we had a total of 158 employees, comprised of 14 full-time employees in our corporate offices, 42 full-time equivalent employees at the Keyes Plant, 5 full-time Aemetis Biogas employees, 3 full-time employees at the Riverbank site, and 94 full-time equivalent employees in India. We believe that our employees are highly skilled, and our success will depend in part upon our ability to retain our employees and attract new qualified employees, many of whom are in great demand. We have never had a work stoppage or strike, and no employees are presently represented by a labor union or covered by a collective bargaining agreement. We believe relations with our employees are positive. Available Information We file reports with the Securities and Exchange Commission (“SEC”). We make available on our website under “Investor” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such materials with or furnish them to the SEC. Our website address is www.aemetis.com. Our website address is provided as an inactive textual reference only, and the contents of that website are not incorporated in or otherwise to be regarded as part of this report. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may also obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.