Welcome to the Aemetis Third Quarter 2020 Earnings Review Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Mr. Todd Waltz, Executive Vice President and Chief Financial Officer of Aemetis, Inc. Mr. Waltz, you may begin.

Thank you, Melinda. Welcome to Aemetis' third quarter 2020 earnings review conference call. We suggest visiting our website at aemetis.com to review today's earnings press release, updated corporate presentation, filings with the Securities and Exchange Commission, recent press releases, and previous earnings conference calls. This presentation is available for review or download on the aemetis.com homepage. Before we begin our discussion today, I'd like to read the following disclosure statement. During today's call, we'll be making forward-looking statements, including, without limitation, statements with respect to our future stock performance, plans, opportunities, and expectations with respect to financing activity and the execution of our business plan. These statements must be considered in conjunction with the disclosures and cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements made on this call involve risk and uncertainties, and that future events may differ materially from the statements made. For additional information, please refer to the company's Securities and Exchange Commission filings, which are posted on our website and are available from the company without charge. Our discussion on this call will include a review of non-GAAP measures as a supplement to financial results based on GAAP. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is included in our earnings release for the quarter ended September 30, 2020, which is available on our website. Adjusted EBITDA is defined as net income or loss plus, to the extent deductible in calculating such net income, interest expense, loss on extinguishment, income tax expense, intangible and other amortization expense, accretion expense, depreciation expense, loss contingency on litigation, and share-based compensation expense. Now, I'd like to review the financial results for the third quarter 2020. Revenues were $40.9 million for the third quarter of 2020, compared to $57.4 million for the third quarter of 2019, driven by a reduction in the price of ethanol and delays in the India Government oil marketing companies biodiesel bidding process. Gross profit for the third quarter 2020 was $771,000, compared to a gross profit of $4 million during the third quarter of 2019. Selling, general, and administrative expenses remained flat at $4.6 million during the third quarter 2020, compared to $4.5 million during the third quarter 2019. Operating loss increased to $3.8 million for the third quarter of 2020, compared to an operating loss of $600,000 for the third quarter of 2019. Interest expense during the third quarter of 2020 was $6.5 million; excluding accretion in connection with the Series A preferred units in the Aemetis Biogas LLC subsidiary, compared to $6.3 million during the third quarter of 2019. The Aemetis Biogas LLC subsidiary recognized $1.8 million of accretion in connection with preference payments on its preferred stock units compared to $600,000 during the third quarter of 2019. Net loss was $12.2 million for the third quarter 2020 compared to a net loss of $7.2 million for the third quarter 2019. Adjusted EBITDA was negative $2.5 million for the three months ended September 30, 2020. Cash at the end of the third quarter of 2022 was $79,000 compared to $656,000 at the end of 2019. That completes our financial review for the third quarter 2020. Now, I'd like to introduce the Founder, Chairman, and Chief Executive Officer of Aemetis, Eric McAfee for a business update. Eric.

Thank you, Todd. Aemetis was founded in 2006. We have grown into four lines of business, which are focused on producing renewable fuels, including low carbon and below zero carbon intensity ethanol, biodiesel, waste wood ethanol and byproducts, including carbon dioxide and corn oil, renewable natural gas, including below zero carbon intensity dairy biogas for transportation fuel. Health safety products including high grade alcohol, refined glycerine, blended hand sanitizer gel and liquid, sanitizer wipes and other health safety products and technology development to maximize the value of our products and processes. We own and operate production facilities with more than 110 million gallons per year of capacity in the U.S. and India. Included in our production portfolio is a 65 million gallon per year high-grade alcohol, fuel ethanol, distillers grain, and corn oil plant located in Keyes, California, near Modesto. We also built, own and operate a 50 million gallon per year capacity refined glycerin and distilled biodiesel biorefinery on the East Coast of India near the port City of Kakinada. I encourage you to consider viewing our updated video and slide presentation about Aemetis, which can be found on the homepage of our website. During the third quarter of 2020, Aemetis achieved important milestones toward revenue growth and sustained profitability in each of our four lines of business. Let's start with a review of our new Aemetis health products business. In response to a national shortage of hand sanitizer which is recommended by the Centers for Disease Control to help slow the spread of the COVID-19 virus. In late March 2020, the FDA and the TTB issued temporary regulations allowing fuel ethanol plants to produce alcohol for hand sanitizers, responding to this approval and the spike in demand for sanitizer products, Aemetis delivered our first sanitizer alcohol within a few days after the announcement through a post processing arrangement that was formed with a local wine and spirits producer. Then we installed equipment, and process upgrades at our ethanol plant to produce higher quality ethanol for health safety and personal care markets. We quickly discovered that Aemetis has a sustainable advantage over Midwest ethanol producers. They have very high transportation costs and our facility is just a four hour drive to Los Angeles, where most bottlers and co-packers are located on the West Coast. Most Midwest plants were transporting alcohol for sanitizer from the Midwest to California using fuel ethanol trailers and rail cars. Fuel ethanol uses gasoline as a denaturant in the finished product, so producers who use fuel ethanol tankers and rail cars were tainting the product with benzene and other dangerous chemicals. We arranged a $2 million lease purchase of 15 new bulk tanker trailers to be used solely for the transport of Aemetis high grade alcohol. A lot of has to deliver up to 20 loads per day of our high grade alcohol to West Coast blenders and bottlers from our Central Valley plant and eliminating the risk of transportation contamination. In addition to using new uncontaminated bulk alcohol trailers, our California high grade alcohol plant location is about 2,000 miles closer to customers in the Western United States compared to Midwestern alcohol producers. Aemetis has a permanent transportation cost advantage with Western U.S. sanitizer alcohol customers over Midwest ethanol producers due to our California production plant location. During Q2 2020, we began shipping large quantities of hand sanitizer alcohol from our plant in California into the rapidly growing health safety and personal care markets. To expand our product line and support customers in the U.S. and Canada, we launched the Aemetis health products subsidiary to manage the development, production and marketing of our sanitizer products. Additionally, our India plant has supplied refined glycerin, a key ingredient in sanitizer products, into the health products market. We believe that year-to-date Aemetis has operated the largest production plant for high-quality sanitizer alcohol in the western U.S., while also owning and operating one of the largest Pharmacopoeia grade refined glycerin production plants in Asia. To expand our market position and maximize margins, during the third quarter, Aemetis health products filed FDA registrations to obtain National Drug codes for our own hand sanitizer product blends and began the production of Aemetis branded, gel hand sanitizer. Our one-gallon hand sanitizer sold under the Aemetis brand has been approved by a leading online marketplace and should be shipping soon, with additional sizes planned for production. We market the Aemetis brand to retailers and customers with 'Made in California' on the label. In contrast to imported products from Mexico and China, many of which were banned by the FDA due to toxic levels of methanol. We continue to invest in the upgrading of our production facilities that we believe will allow us to deliver U.S. Pharmacopoeia grade alcohol starting in Q2 2021. Our total investment and upgrades for the production and storage of USP medical grade alcohol is expected to be approximately $15 million, of which more than $12 million has already been funded or will be reimbursed by grant funding. Our expanding product line of high quality and medical grade alcohol, used for hand sanitizer, alcohol wipes, alcohol sprays, and other health safety products, is expected to meet the demands of the long-term market, driven by the adoption of antiviral products by governments, schools, private industry, and consumers. Even if the COVID-19 virus is, as an imminent health safety threat, resolved in the U.S. during the next year or two by a new vaccine, the health safety standards being widely adopted to reduce the transmission of viruses, including the common flu and colds, will expand the ongoing use of alcohol sanitizers as disinfectants, especially at schools, government buildings, offices, sports arenas, airports, stores, and other locations with groups of people in close proximity. Let's review our Aemetis Biogas dairy digester and pipeline project. At Aemetis, we are focused on significantly reducing the carbon content of our products, maximizing the value of carbon credits under the California Renewable Fuel Standard and the federal Renewable Fuel Standard, while reducing operating costs by using waste materials. Using our own waste products, or using waste products in the local area, that are generated by the use of the products we sell to local customers, the sustainability of our process can benefit all the parties in the value chain. An excellent example of this circular bio-economy is our dairy renewable natural gas business. In September 2020, we completed construction of the first two out of 18 dairy Biogas digesters in the Aemetis Biogas Central Valley dairy project, including on-site dairy biogas cleanup and pressurization, a four-mile pipeline owned by Aemetis and a boiler unit at the Keyes plant. We are now generating below-zero carbon intensity, renewable natural gas that is being used at our alcohol plant to displace petroleum natural gas. Methane, commonly known as natural gas, is a potent greenhouse gas that is up to 30 times more powerful than carbon dioxide at capturing Earth's heat. About 25% of California's methane emissions come from the waste ponds on dairy farms. To reduce damaging methane emissions, in late 2016 California passed the law, commonly known as Senate Bill 1383, that mandates a 40% reduction in methane emitted by dairy lagoons. Biomethane sourced from dairies can be used directly in the form of renewable compressed natural gas to replace gasoline or diesel fuel in cars, trucks, and buses to significantly reduce carbon emissions and air pollution. To support the State mandate, California has funded up to $75 million per year of matching grants to dairies to build biogas digesters and related systems. To date, Aemetis has applied for or been awarded about $22 million of grants for biogas and energy efficiency to support our conversion to low carbon and below zero carbon intensity power to operate our California biorefinery and related biogas operations. We believe that capturing biogas from dairies and converting it into renewable natural gas to generate negative carbon intensity transportation fuel is an excellent way to reduce climate change, great value for dairies, and reduce costs for diesel truck fleets and potential for electric vehicles by conversion of dairy renewable natural gas to electricity for transportation use. We're uniquely positioned as one of only two ethanol plants in California that can maximize the value of biogas; we are able to use biogas in our plant until our planned utility pipeline interconnection and gas upgrading is completed within the next six months. We received a $1 million grant to install our own renewable natural gas fueling system at our Keyes plant for CNG trucks. After more than a year of project development and financing work, last year we announced $30 million of equity financing to build biogas digesters at the first two dairies in our biogas project. Our institutional investors working with us to expand this funding with $25 million of additional equity funding to complete the total of 18 dairies within the next 18 months. We initially signed 18 participation agreements with dairies, the majority of which have now been converted into 25-year land lease and manure supply agreements. We plan to complete construction of the remaining 16 lagoon digesters again during the next 18 months. Aemetis owns 100% of the common stock of the Aemetis Biogas subsidiary. The dairy biogas project has been funded by a preferred stock issuance by the Aemetis Biogas subsidiary to a fund advantaged by Third Eye Capital, which we expect to expand to $55 million of funding along with grants from state and federal programs. There is no dilution to Aemetis parent company shareholders for the biogas project and Aemetis receives 25% of the cash generated by biogas project operations. The preferred stock is automatically repurchased at three times original issuance price, using 75% of biogas operating cash flow. After the preferred stock is redeemed, Aemetis, as the sole common shareholder, will own 100% of the cash flow and assets of the biogas digester and pipeline system for the remaining balance of the 25-year contracts with dairies. Let's discuss progress at our California ethanol plant. The global COVID-19 crisis that began during Q1 2020 and caused operational shutdowns for many businesses during Q2 and Q3 2020 has also provided challenges to our business, protecting the health of our employees while continuing to operate our California ethanol plant to supply animal feed to more than 75 local dairies, occurred during a time period in which the demand for biofuels in Q2 2020 decreased significantly due to the steep decline in gasoline consumption during California shelter in place orders. However, as the economy began to open up in June, fuel ethanol demand partially recovered during Q3 2020, resulting in an 11% increase in ethanol gallons delivered compared to Q2 2020 and an increase in Q3 distillers grain shipments for animal feed. Aemetis operates in three of the Federal essential critical infrastructures. We've been able to continuously operate our California ethanol plant this year in order to provide transportation fuel, alcohol for sanitizer products, and dairy feed. By implementing stringent PPE and worker safety policies, we were able to continue construction of plant upgrades and building our dairy renewable natural gas project without interruption, despite COVID shutdowns and operating restrictions that impacted many other companies in California. To increase the value of our high-grade and fuel ethanol and to reduce the cost of operation of our production plant, we are currently implementing several upgrade projects related to the California plant, including: one, building two new distillation columns and related systems to produce high purity U.S. Pharmacopoeia grade alcohol for sanitizers known as USP grade to begin operation in Q2 2021. Two, installing five new stainless steel tanks for USP and beverage high-grade alcohol storage and loadout, increasing our storage capacity by more than 250,000 gallons. Three, completing the installation of the new $7 million zeolite membrane dehydration unit from Mitsubishi to reduce natural gas use at the alcohol plant by replacing our molecular seeds with electrically powered equipment, which will reduce the carbon intensity of our fuel ethanol and is partially funded by a $1.5 million energy efficiency grant. Four, adding high efficiency heat exchangers to reduce natural gas use at the alcohol plant, reimbursed by a $1.3 million energy efficiency grant. Five, installing a solar panel micro grid array with battery backup to replace natural gas with solar electricity while optimizing energy use throughout the alcohol plant, primarily funded by an $8 million California Energy Commission grant. Six, designing and building a mechanical vapor recompression or MVR system to significantly reduce petroleum natural gas use, partially funded by a $6 million California Energy Commission grant. Seven, constructing the dairy biogas digester cluster and pipeline to deliver renewable natural gas to the alcohol plant from an initial two dairies this year with planned expansion to an additional 16 dairies next year, along with an interconnection to the utility gas pipeline. This biogas project is scheduled to generate approximately $40 million per year operating cash flow under 25-year dairy supply contracts, and is being primarily funded with $55 million of expected automatically redeemed preferred equity being issued by the Aemetis Biogas subsidiary. When completed, these upgrades are designed to eliminate nearly 85% of the petroleum natural gas use at the alcohol plant saving up to $7 million per year of natural gas pipeline costs. The California biorefineries will primarily operate using high-efficiency electric motors and pumps powered by renewable power sources. The construction of the $7 million membrane dehydration system financed by Mitsubishi Chemical, Japan, and a $1.5 million energy efficiency grant is currently in the installation process, but was delayed by the COVID-19 crisis due to international travel restrictions and local contractors stopping work under shelter-in-place orders. The ethanol dehydration unit is designed to significantly reduce petroleum natural gas usage and decrease the carbon intensity of our ethanol. Once implemented, it is expected to generate an estimated $3 million per year of increased cash flow. These projects at the Keyes plant are targeted to significantly reduce carbon intensity by reducing petroleum natural gas usage and costs, while increasing the number of California Low Carbon Fuel Standard credits generated each year. The potential combined impact of these projects is expected to be more than $20 million per year of increased operating cash flow at the Keyes plant, not including any expanded cash flow from Aemetis Health Products, sanitizer, and health safety products. Let's review our biodiesel business in India. This week our Universal Biofuels subsidiary in India bid on a portion of a newly issued $900 million biodiesel purchase order tender offer for about 200 million gallons by the three India government oil marketing companies to be delivered over the next six months. Our production capacity at the Indian plant is about 4 million gallons of biodiesel per month. This large oil marketing companies’ tender offer is an indication of the rapidly expanding government demand for biodiesel in India to reduce dependence on imported crude oil. The entire production capacity of the approximately five India biodiesel production plants is only about one-third of the amount of biodiesel requested to be purchased by the government oil marketing companies, signaling to the market that additional biodiesel capacity is needed to meet India's biofuels consumption goals. However, importing biodiesel into India is not allowed under the National Biofuels Policy, so only domestic production can meet the approximately 1.25 billion gallons per year of biodiesel blending in the goal set by the government. Currently, there's about 250 million gallons of India domestic biodiesel production capacity, and we believe that Aemetis produced and sold the largest amount of any operating biodiesel plant in India during 2020, while the industry waited for government oil marketing company purchasing, which was delayed for nine months due to the COVID-19 shutdowns in India. Though the global price of diesel has declined along with the price of crude oil, the domestic price of diesel in India has remained largely unchanged, due to increased India government taxes that offset crude oil price declines. Since our biodiesel is sold at a price linked to India domestic diesel prices, our biodiesel prices in India have remained steady, despite the significant decrease in the price of crude oil. The rising cost of feedstock relative to the price accepted by the government oil marketing companies is the primary barrier to operation of our India biodiesel plant at full capacity, which would generate more than $150 million of annual revenues. Due to the COVID related increase in demand, the refined glycerin prices received by our India plant have increased in response to the need for hand sanitizer and other consumer products. Let's discuss our low zero carbon intensity cellulosic ethanol project in Riverbank, California. We were pleased that the Aemetis biorefinery under development in Riverbank, California, near Modesto, was named as the number one waste to value project in the world by Biofuels Digest, the world's largest daily biofuels publication. The California Central Valley has about 1.5 million acres of almonds and walnut orchards; almond orchards have about a 20-year life and then must be removed, creating about 3 billion pounds per year of waste wood. They're usually burned in large piles in the field since there is no market for most of the waste material. The Aemetis Riverbank project earned its number one project ranking as a result of our 20-year fixed price, low-cost orchard wood waste contracts, planned production of high-value renewable fuel, and high-grade alcohol from wood waste feedstock, as well as valuable fishmeal and other byproducts, and using the patented LanzaTech gas microbe ethanol production technology. The LanzaTech technology has been in full commercial operation since 2018 at a plant in Asia, and additional plants using LanzaTech technology are being built in China, India, and Europe. In order to close the financing for the Riverbank plant construction, we're completing the final permitting and engineering of the plant required for the negotiation of the EPC contract that will include a bonded maximum construction cost. The Riverbank cellulosic ethanol plant is expected to generate more than $80 million of revenue and more than $50 million per year positive cash flow by producing cellulosic ethanol from low-cost waste, orchard, vineyard, and forest wood as feedstock. The circular bio-economy created by the Aemetis Riverbank waste wood renewable fuels and high-grade alcohol plant will provide benefits to the local environment and community by eliminating field burning of the 3 billion pounds per year of waste orchard wood in the California Central Valley, it will reduce air pollution and improve the health of residents while displacing carbon-intensive feedstock with below-zero carbon intensity waste orchard wood feedstock. We can easily use forest waste wood in the Riverbank plant, which has become a major issue for California as we create forest waste wood for managing our forests to reduce damaging wildfires. Let's wrap up with a quick review of a key milestone achieved by our technology development group in fueling an ethanol engine with waste wood ethanol. Our technology development team worked with the federally funded Joint BioEnergy Institute in Berkeley, California for three years in the development of processes to extract sugars from low-cost waste orchard and forest wood feedstocks to produce high-value cellulosic biofuels in our corn ethanol plant by displacing expensive and carbon-intensive cornstarch as feedstock. A $3 million California Energy Commission grant was awarded to JBEI and Aemetis, which partially funded the years of collaborative work and lab testing that in Q2 2020 resulted in the production of the first carbon-negative fuel ethanol from California orchard wood using ionic liquids. During the third quarter, our waste wood ethanol was used to fuel the operation of an ethanol engine that generated the same performance and low emissions as traditional ethanol used in the test. The engine technology was originally developed at Stanford University and is a modified diesel engine design that uses ethanol. The engine takes advantage of the high octane content of ethanol to generate about 30% more torque than an engine running on diesel while creating almost no particulate emissions and very low emissions since ethanol contains a low level of contaminants compared to petroleum. With high-cost emissions equipment such as diesel exhaust fluid required to meet increasing air pollution standards, the ethanol engine could more than double the size of the ethanol market in the U.S. to 30 billion gallons per year, with only a 20% share of the diesel engine market. Our patent-pending alcohol production process innovation allows the sugar component of low-cost waste wood to be used to replace cornstarch in an existing corn ethanol plant to produce both high-grade alcohol as well as cellulosic fuel alcohol, that are each currently valued at more than $5 per gallon. Importantly, this process innovation to use sugar from waste wood could be implemented at our existing California ethanol plant, decreasing the cost of corn feedstuff and substantially increasing the value of our alcohol. We expect to move forward with the pilot plant to extract sugars from locally sourced orchard and forest waste wood, thereby enabling the production of high-margin high-grade alcohol and cellulosic ethanol at the Keyes plant by displacing corn feedstock. In summary, Aemetis has a technology advantage, as well as geographic advantages in sanitizer alcohol production. It is expanding the production of a diversified range of low carbon renewable fuels in two attractive markets in California and India, generating $6 million of positive cash flow and 120% revenue growth at our India plant during 2019, and is now moving past the government’s COVID-19 delays in 2020 to be awarded bids and begin shipping another large government contract of biodiesel. Aemetis has begun the increased profit margins from plant upgrades related to the Keyes biorefinery that began in Q2 2020, has completed the first two Aemetis Biogas dairy digesters and 4-mile pipeline and are now powering our biorefinery with waste dairy biogas. Our planned deployment of the patented renewable fuels process technology at the Riverbank plant has positioned Aemetis to rapidly produce expanding positive cash flow from the production of high-grade sanitizer alcohol, as well as low carbon, clean-burning, high-performance renewable fuels from abundant low-cost waste biomass feedstocks. Aemetis is building below-zero carbon intensity products that create a sustainable circular bioeconomy, utilizing waste feedstocks to create valuable products by implementing innovative processes. Now, let's take a few questions from our call participants. Melinda?

Thank you. The floor is now open for questions. And first, we go to Ed Woo with Ascendiant Capital. Please, go ahead.

Yes. Thank you. Can you give us any updates on when the Riverbank project may begin construction and actually when it may become operational?

Currently, we're planning to do the project financing in 2021, and the construction cycle should be about 24 months.

Great. Congratulations on launching the biogas projects. When do you expect more dairies to be connected, and when will we start seeing a significant impact on your financials from this project?

The second quarter of next year should see some additional dairies come online. It's a ramp up over the next 18 months, with plans to bring online roughly five to six dairies per group. We've completed two so far, and we aim to complete another five to six, followed by yet another five or six, continuing until we reach a total of 18. Every couple of quarters, you'll see another cluster of dairies added. We're also building a pipeline along with dairy digesters. This means we extend the pipeline and gather the dairies in the area that have already signed the 25-year agreements to connect to it.

Great. My last question is about your overall outlook for oil and ethanol prices. With a new President coming in, what are your thoughts on his approach to renewable fuel standards and ethanol standards?

Ethanol is currently blended at 10%. The Trump administration had approved an increase to a 15% blend, leading to about a 50% increase, equating to around 7 billion gallons a year in additional demand. At a 15% blend, the visible cost difference at the fuel pump is quite minor; after subtracting taxes and adjusting the remaining balance, ethanol only accounts for about $0.25 to $0.30 of the total fuel cost. An increase of just 10% in ethanol would result in only a $0.02 to $0.03 change at the pump. The profit margin for ethanol plants ranges from $0.30 to $1. The ethanol business hinges on supply and demand dynamics. Since 2013, the federal government has granted 7.2 billion gallons of waivers against the renewable fuel standards. It's noteworthy for new investors that in the past 12 months of enforcing federal guidelines, our company generated $10 million per quarter, totaling $40 million in positive cash flow from our corn ethanol plant under strict federal law enforcement. The current Biden administration and recent court rulings seem favorable for reinstating these federal laws, potentially allowing us to maintain that $40 million yearly revenue, translating to about $0.60 per gallon in margin. At the pump, this could mean roughly a $0.06 difference for us to achieve the $40 million annually. Thus, it’s easy to envision a situation where, regardless of whether it’s under Trump or Biden, we could operate effectively within the legal framework, positioning ourselves favorably in the fuel ethanol market.

Great. Thank you for answering my questions, and good luck.

Thank you, Ed. I appreciate your call.

Next we go to Craig Irwin with ROTH Capital Partners. Please go ahead.

Hi. Good afternoon. Thank you for taking my questions. Eric, congratulations on the progress in your biogas business. It seems like it could become quite significant, potentially generating $40 million annually over 25 years, which totals $1 billion in profit, and that's impressive. I wanted to inquire about the key assumptions you're using to estimate the $40 million per year. Clearly, that figure assumes all 18 plants are operational. There is a cost of debt related to the $55 million from Third Eye. Additionally, there are fundamental assumptions to consider, such as the carbon intensity of these plants. Some pig slurry facilities have carbon intensities of negative 350, while dairy facilities generally fall within the $200 to $250 range. Are you planning to be within that range? Regarding LCFS credit values, are you considering the full $200, or have you incorporated a discounted value? Also, concerning green gas derived from landfill gas, developers often need to share some of the financial benefits with landfill owners to support the permitting process. Is there a significant economic-sharing agreement in place with the dairies that are adopting this innovative technology?

Excellent insights, Craig. Thank you very much. We're assuming current market price in LCFS, as you know that's been generally rising curve and under California State law increases every year by essentially a fixed amount. So we're assuming it does not increase and it frankly is not at its maximum. This year's maximum is $217 in our model. We're assuming approximately $195. So, CI score flat 185 over 25 years, ignoring cost of living index increases allowed by the state of California. Second is, we have the good fortune of being our own consumer. So we generate LCFS credits by putting biogas into our corn ethanol plants. We also generated it by putting it into our own CNG fueling stations. So your question about discount, we obviously captured the entire value chain by putting it in our own trucks and putting it into our own plant. If we went into the utility pipeline, the discounts we're seeing today are relatively small. And there's a proposal that they would capture more market value that offset much of that discount. It used to be the discount was pretty large. It was one of the reasons we drove to a building a model where we didn't actually have to use any outside trucks or parties. We have about 75 truckloads a day to go in and out of our plant and just feeling our own trucks could really be a built-in customer base. And then lastly, the 18 that we have on the schedule right now are what is already what's called part of our relationship with Third Eye Capital. We do anticipate we will be 30 or more dairies. We're just going to continue to grow the opportunity. It's just that these first two phases, Phase one is completed, the second phase is to be completed in the next 18 months, and this layout a full year picture, which should be in excess of $40 million per year using the numbers I've described for you.

Excellent. When we talk to some of the larger green gas developers in the market, there is a short list of names. They all describe the cow slurry or pig slurry opportunity, particularly in the dairy gas sector, as difficult to address. I know there are around 280 projects under development in California, but the major players often downplay the dairy gas market, indicating that it is challenging to serve due to the relatively small size of the plants. It seems that the issues you've encountered with farmers—who can provide half a dozen plants and make a commitment on one piece of paper—bring the scale closer to that of a landfill gas facility. Can you share from your experience in the dairy industry how Aemetis is approaching this differently? What factors are contributing to your success compared to other larger project developers who have chosen to downplay this area?

Right. Craig, you've obviously spent some time talking to large developers. California is the largest dairy shed in the world. They have over a million dairy cows in a very small area, really within about 100 to 150 miles of our plant is about 1,200 dairies. We feed dairy cows at about 75 of those dairies already. They’re existing customers. What most of the developers, even the two other major developers in California have trouble with, is they have no pre-existing relationship, credibility, or confidence frankly to enter into a 25-year relationship with some guy who shows up with a pickup truck and a cell phone and says he's a biogas developer, whereas we have $150 million of cash invested in the ground. We're feeding their cows every day and have very, very long-term well established relationships, not only through us but also through our grain supplier and market distillers' grain to them, and it goes back decades. We have a very simple relationship with dairies. They have a liability coming under Senate Bill 1383 in which they're going to have to start acting like little oil refiners that are emitting methane; they're going to have the be buyers of carbon credits unless they can find a way to spend literally tens of millions of dollars to build the system we're building, clean it up and sell it to somebody. What we offer is they don't have to invest anything; we actually are paying cash bonuses when they sign, and then they get positive cash flow for a 25-year span. It ends up being a very synergistic, sustainable, circular bioeconomy where we're selling them the animal feed that creates the manure. We're then turning that into biogas at our cost, cleaning it up, pipelining it, cleaning up again, selling it, and then giving them participation in that cash. So, that's accelerated our ability to attract dairies. Once we put a pipeline into the ground, as you probably know, if you bypass a dairy, they are the disadvantaged one because their neighbor can sell milk at a lower cost than they can, because they don't have the revenue from biogas. So we're sort of picking the winners, making the big, bigger is really what's happening to tell you the truth. When we put a pipeline in the ground, we just tend to talk to the neighbors and say that we're going right by your place, you want us to add you in? It doesn't take long for people to say, well if you don't add me in then I don't get the cash every month, do I, and then eventually going to have to start buying carbon credits. So, it's a monopoly business. I would say that directly to dairies. There's only one gas pipeline, there's only one owner of the gas pipeline. If you're the guy who put the gas pipeline in the ground and you do that by signing up the biggest dairies in an area, all the other dairies will end up interconnecting at very low cost. That's our strategy. It's worked very well. It takes only a couple, not a couple years, but maybe a decade to build relationships that can execute as quickly as we have.

So then, last question, if I may, I mean, knowing the weight of some of these regulations in California economically, what they mean and how they change behavior? Is it feasible for us to take the 18 that you've announced and maybe extrapolate there's an opportunity for that to get much bigger, over the next single-digit number of years?

The answer is yes, I will provide the next follow-up question in response as well. We are physically close to 75 dairies because we deliver water and animal feed to them daily, which is what distillers grain is, so they need to be relatively close to our plant. Our pipeline systems are designed to maximize the number of large dairies we can connect directly to our plant. We also have the capability to expand beyond just those connected to our plant by establishing smaller clouds or pipeline clusters farther away. With around 1,250 dairies in California, I estimate that about 300 of them are very attractive biogas customers. We expect to become the largest dairy biogas producer in the United States. This is achievable because California has the largest market in the U.S., and it would involve connecting 30 or possibly many more dairies. The scalability relies heavily on our partnership with our capital partners, a $3 billion company that has been funding us for 12 years. They have a strong interest in our ability to execute well and grow steadily. I wouldn't be surprised if we end up with more than 50 or even 100 dairies over time, given our capacity to deliver results while other competitors struggle to gain credibility with the dairies.

Great. Thanks for taking my questions.

Thank you, Craig.

Next, we go to the line of Marco Rodriguez with Stonegate Capital Partners. Please go ahead.

Good afternoon, Eric. Thanks for taking the question. I was wondering if maybe you could talk a little bit more on the health care product side of the business. It kind of sounded like in your press release and maybe you guys saw a little bit of pressure for some competitive environments, and maybe you can kind of provide a little color there and just kind of how we should be thinking about the competitive environment there as the year unfolds and into next?

I kind of expected there would be some questions about it. We had a tremendous second quarter in a booming market. What we saw as an industry is unrelated products coming in from Mexico, approximately 200 hand sanitizer brands got FDA warnings for violating methanol content. When you drink hand sanitizer, which you shouldn't do by the way, if it's Apple alcohol, it makes you drunk; if it's methanol, it actually causes paralysis, blindness, or death. Not a good thing. Over 200 brands came in from Mexico, and then China, again, largely not tested product coming in from China. Retailers and customers scrambled for product, they bought the product that didn't meet specification; the FDA then stepped in and started writing warnings and bans and recalls, and that cleaning up the market is what we're seeing now. The final cleanup is going to be when the temporary waiver ceases. The product has to meet the traditional good manufacturing practices facility, plus the U.S. Pharmacopoeia medical grade alcohol, which will significantly curtail the number of producers and largely that's what we're investing in. In the second quarter next year, there’s really only one large-scale sanitizer alcohol producer in the Western United States. Now what we decided is, not to sit here and sell a bulk alcohol product at commodity prices, but rather to take advantage of the geographical advantage that does not ever go away. That is up to $1 a gallon of cost to produce alcohol in the Midwest, ship it 2,000 miles to California and put it on the store shelf at Costco, right next to ours. It literally cost an extra dollar and that never goes away. By going to branded products and even private label products, you could go into Costco and see our Aemetis brand as well as you could see the Kirkland brand, which is Costco, both of which would be made by us. We've moved forward with a fully integrated process to take full advantage of what we believe to be an ongoing slightly growing market, but larger market than what it was certainly before COVID. Our customers are the full gamut of consumers, government, and corporate and academic customers that will need an ongoing supply of not just hand sanitizer but sanitizer wipes, sprays, and aerosols. All stuff that Lysol is 58% alcohol, that's what kills germs with Lysol. We've taken a long-term view, and we're upgrading our plant to be able to be 100% medical grade by the second quarter of next year. We’ve spent over $12 million of the $15 million required; we just have some additional equipment to arrive and install to be completed with it. I think it will be a sustainable competitive advantage we have as we all know, I think we're all kind of wondering how long COVID is going to last, but we certainly have seen people are much more attentive to the protocols of sanitization, and that's requiring alcohol supply to be increased.

Got it. I wanted to get an update on the expansion of your healthcare Pharmacopoeia hand sanitizer or alcohol. Is everything on track?

It is on track with the volatility we expected. What you probably saw was a lot of shelves getting filled after the second quarter, and then a lot of product that had to be pulled off the shelves. Costco, I mentioned, but they did massive recalls on several of their products, and now having to turn to their supply chain and look for more stable long-term direct relationships, preferably local relationships. Our product to both the private label, as well as the branded product have made in California stickers on them. The ability to end up with basically long-term relationships that are trusted relationships, with a customer that really spend the dollar a gallon no matter how they look at it, if they're not going to buy a product from us. There are about 80 million people on the West Coast United States and British Columbia who all would need to basically just buy our product. We believe we're making the investment because we think that there's not a good solution. If we don't do it, these people are stuck with buying products 2,000 miles away.

All right. Thanks, Todd. Really appreciate your time.

Sure. Thank you. Appreciate it.

Next, we go to Tom Welch, Private Investor. Please go ahead.

Hey, Eric. Thanks for taking my call. When the FDA's temporary alcohol waiver ends, whenever that may be, I'm guessing you're aiming to be producing USP grade alcohol by that time. Currently, I understand you're producing GNS grade alcohol. Do you anticipate needing any sort of waiver from the FDA that would allow you to keep producing food grade alcohol for use in sanitizers?

We're looking forward to the FDA ending the waiver. We think that we've got at least another six months past December before that waiver is going to happen. We would expect middle of next year that all hand sanitizer will go back to being an over-the-counter drug regulated product, which requires USP medical-grade alcohol. We are scheduled to be a producer of USP grade alcohol by the end of the second quarter in order to match up with that timeframe. I would not expect that we'd be submitting a request for waiver; we would have to pass the have in excess of 65 million gallons a year of sanitizer alcohol that we could ship at the time.

Thank you. My second question is about sanitizer. What percentage of your alcohol production is currently allocated to Aemetis branded sanitizer? In Q2, your goal was to essentially direct 100% of alcohol production towards your own branded Aemetis sanitizer. Can you provide an update on what percentage of your production is currently going towards the Aemetis branded sanitizer?

Yes. Just to clarify one point, our goal is to move toward sanitizer production, and to fully meet the bulk sanitizer, the branded Aemetis sanitizer, but also private-label sanitizer markets. We even frankly are blending the product; we're putting it together in what essentially is a hand sanitizer gel formula and then selling it in totes. Our goal is to just maximize our market position and not really have a reason for any producer, bottler, consumer, retailer, school, anybody west of Colorado to buy any product that doesn't have Aemetis alcohol on it. Because of our transportation cost advantage and very soon the fact that we're USP, and nobody else is, we see that as a logical outcome of this thing. For competitive reasons, we do not talk about what percentage we're shipping on a given month or given week or given day. We’ve to report the overall number of gallons of ethanol, so we definitely report that. But we will see a transition toward Aemetis branded product, because that is the highest margin product we are taking the full value chain and selling directly on the online marketplace, which I mentioned we'd been approved for one and we should be up and going. You'll see a press release from us on that, that is where we can maximize our margins. You will hopefully see emphasis on how governments can buy from us directly, just basically through the online marketplaces, as well as through a bidding process where we're bidding directly for government contracts.

Very good. Switching gears just a little bit, but really on the same track, but I just thought it was so brilliant on your part to be switching from a bulk commodity low margin fuel supplier to a retail supplier of finished products. I mean, that's just brilliant. Have you ever thought about doing that with your biodiesel sales? Let me just give you a for instance. Right now, when I go into Walmart, I typically will spend $15 to $20 on a diesel fuel additive, just to increase the lubricity and the cetane of the diesel's that I drive. Ninety percent of the stuff in that jug that I buy is essentially just diesel fuel, with a 10% of additive. It would be really exciting if you folks had ever entertained the idea of taking your biodiesel and doing a retail sanitizer move on it with the increased added value of being able to boil your own biodiesel based fuel at diesel fuel additive in India. Has that ever crossed the desk? Have you guys ever thought of that?

Not specifically as a fuel additive, but interestingly enough, you're right on target. I don't know, maybe it's your own personal experience that gets you got to here. But interestingly enough in India, you're dealing with a very poor population, where $3 or $4 is sometimes their entire day's income. We have begun the process of selling at retail in small one-liter pouches, essentially it's literally a pouch, not a can. It's enough to fuel a tractor for a few hours or for a day. It's quite fascinating that that's exactly what we ended up in India; it was in order to meet the needs of the population. We started packaging our product into small pouches and eventually could do half gallons or something that a person could walk out of a retail store with some biodiesel. What's interesting is the personal experience of the people, especially the tractors, is that you're dramatically reducing particulate emissions, and if you've been a tractor driver, it sounds like you've got a diesel vehicle. Having exhaust blown in your face with a bunch of black smoke is quite miserable. In India, one of the reasons our product is quite popular is it smells, not like petroleum but frankly smells a little bit like a food product, and the particular emissions are reduced by more than 90%. They're not getting smoke blown in their face, and there’s of what, 1.1 billion people in India. Over time, I think the channel of being able to supply through retail gas stations through packets at retail stores, as well as bulk to government, as well as directly to trucking companies, which is a major market for us, and the mining companies, mining companies have very large vehicles that might only get one mile per gallon, and they save a tremendous amount of money buying our product. We're well positioned. We are the leader in the market. We are the biggest supplier in India, and we're well positioned for very strong growth and even expanding beyond the $150 million of revenue by expanding our capacity to 100 million gallons a year. Our business plans to be over $300 million of revenue in India, and we're well positioned to do that; our capital costs for that are less than $20 million.

I know the quality of diesel fuel in India is very poor, reminiscent of the diesel we used to have in the 1950s, when we would drive on California highways with smoke from diesel trucks in our faces. Biodiesel burns cleanly, improves gas mileage, increases cetane levels, and lubricates engines, making them cleaner even with just a 5% to 10% blend. This presents a great opportunity to bypass the established bulk suppliers and government-controlled oil companies, reaching directly to consumers who may simply add a 5% or 10% blend. When I drove diesels in the 70s, we used additives; otherwise, we faced injector issues after about 60,000 miles. Just a thought, and I appreciate that.

We've discussed this before, but there is considerable enthusiasm in the Indian stock market regarding the national biofuels policy recently implemented by the Indian government. Currently, they are importing crude oil and spending roughly $50 billion annually on these imports. The national biofuels policy aims to use 5% biodiesel to reduce the need for crude oil imports, with plans to increase that to 10% and eventually to 20%. Consequently, their purchase orders are significantly higher than what the industry can produce. They are signaling a desire for Aemetis to invest in expanding our capacity from 50 million gallons to 100 million gallons. Notably, the Indian stock market has the potential to fund this expansion. We fully own the subsidiary and have had discussions with investment banking firms in the past regarding its valuation. Some of these valuations are exceptionally high, worth hundreds of millions, since we are the largest player in a rapidly growing market. Producing a billion gallons of biodiesel could lead to a $3 billion revenue company. Supporting rapid growth in India has been a key objective in establishing our position there. It has taken time, and while the progress may have been slower than anticipated, the potential valuation for our subsidiary's IPO in India could still allow us to retain 60% to 75% ownership, leading to a significant holding worth hundreds of millions.

And ladies and gentlemen, we are running short on time. We do have time for one more brief question. We go to the line of Massimo Fiorella, Private Investor. Please go ahead.

Hello, Eric. So, first of all, I appreciate that most of this quarter, your plant ran out more than 100% capacity. This is very good in a moment where 50% of ethanol plant in California are idled. I also appreciate that you are probably the only company in the sector without always not dilutive. The number you're sharing is around $20 million? I want to ask you one thing and then I want to do like a question about the electric cab sector. This time the result certainly that I was expecting that would be a bit better than it exceed. I think that this is a time where you should boost investor confidence. So, in this moment also seen the evaluation of the company's law, personally how you hope to see in the next days and weeks like commitment from you that is the founder and the Board of Director, I would appreciate if in the next weeks the Board can consider to buy shares on the open market feeling a spectrum fall? Then I want to do a question because, about the electric car because, what I see is like the Aemetis maybe is like the one perfect feature for company like Tesla and Nikola. These are very hot at the moment. I think these one because electric cars require a big moment dense biofuel to produce electricity in high volume onboard. For example, now is going out Nissan e-Bio van, which uses 8-gallon ethanol tank to fuel hydrogen, fuel cell to provide 400-mile range. High power long-range electric vessels require energy-dense, storable, transportable fuel and the electric cars will need head on the fuel cell for power and range. So I wanted to ask you, if you consider to enter like this market, and if you are maybe considering this opportunity to work close with the electric car, if you are in discussion with that, if you have thought about this opportunity?

We believe we play a crucial role in electric vehicles through our renewable natural gas business, which has a low carbon intensity score. This enables us to potentially generate electricity for heavy trucks and buses. In California, the incentives for producing carbon-negative fuels are significant, given the reliance on diesel—an extremely carbon-intensive fuel. Since batteries lack the capacity for long distances, using carbon-negative electricity to recharge them supports California's climate change initiatives. Our renewable natural gas business aligns perfectly with the shift toward carbon-negative electricity for vehicles. Additionally, the diesel engine, which operates on compression rather than spark plugs, can efficiently use ethanol due to its high octane rating. Research from Stanford University has led to technology that can replace traditional diesel engines in heavy-duty buses with engines that run on ethanol, providing 30% more torque than diesel. This ethanol engine could also serve as a generator for electric vehicles, enhancing their range significantly while producing minimal emissions compared to diesel engines. The prospect of generating electric power with on-board ethanol creates opportunities for vehicles with very low carbon emissions, especially if we utilize carbon-negative ethanol made from wood waste. Regulators are keen to eliminate diesel vehicles, and our solutions present an attractive alternative with lower emissions and less air pollution. We see strong industry support for transitioning to ethanol engines to replace diesel ones, with even a partial replacement potentially doubling the size of the ethanol market in the U.S. This shift could have a substantial financial impact on our business while contributing significantly to reducing pollution and carbon emissions across the country. We are at the forefront of the electric vehicle and hybrid vehicle revolution as we work toward replacing diesel engines with ethanol engines.

I have two brief questions. The first is regarding Amazon.com; as of today, are you selling on Amazon.com or not? If you're not selling, when do you plan to start? The second question is about India. I noticed that India has requested a significant amount of diesel, totaling 900 million. Last year, you secured a $23 million contract that generated around $6 million in EBITDA. This year, with nearly $1 billion on the table, I would like to know your projection for 2020: how much do you anticipate winning this year compared to last year's $23 million? I assume this will likely impact revenue for 2021 as well. Additionally, I would appreciate it if you consider the significant potential of the Indian market, where the factory could possibly be valued at around $200 million to $300 million. If you proceed with an IPO for 20%, that could yield around $50 million, which could be used to pay down high-interest debt. What options do you have to address the debt reduction strategy?

What’s the stickman in order, the online major marketplace has approved us and we should send out a press release as soon as you can buy our product on that online major marketplace. So, look for press releases. We have definitely an opportunity in India to IPO our subsidiary; we've had long discussions on it. We think that the $900 million tender offer from the government is in this case only for about six months actually; it's December, January, February, March, April, May. That's the entire period for the $900 million, that's not for the entire year. When we got the $23 million order last time, that was for the entire year. When we announced the bid process outcome here which should happen in just a couple weeks or less, we would be only in a six-month period, not a 12-month period, and would expect to see a much higher number. We're seeing very strong demand from the India government. Now we need to match that with pricing and we'll be fine. We're the largest producer in the country. There are only about four other producers. It's not a very large, fractured, fragmented industry. It's us and four other guys. We're looking to expand, and then take advantage of the market opportunity in the stock market when that happens.

There are no further questions at this time. I'd like to turn the floor back over to management for closing remarks.

Thank you, Melinda. I appreciate that. Thanks to the Aemetis shareholders, analysts, and others who joined us today. We look forward to talking with you to continue our dialogue about the growth opportunities at our company. Thank you for attending today's Aemetis Earnings Conference Call. Please visit the investor section of the Aemetis website, where we'll post a written version and an audio version of this Aemetis earnings review and business update. Melinda?

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.