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7. Agreements

9 Months Ended

Sep. 30, 2012

Working Capital Arrangement. On March 9, 2011, the Company entered into a Purchasing Agreement and Corn Procurement and Working Capital Agreement with J.D. Heiskell & Company. Pursuant to the terms of the agreement, J.D. Heiskell agrees to supply the Company with whole yellow corn for the ethanol plant commencing with the first delivery of corn to the Gilbert facility and currently ending December 31, 2012. Heiskell further agrees to sell all ethanol to Kinergy Marketing or other marketing purchaser designated by the Company. Heiskell agrees to sell all WDGS and Syrup to A.L. Gilbert as the primary customer and exclusive marketer for the WDGS. These Corn Supply, Working Capital and Purchasing agreements are ordinary purchase and sale agency agreements for an ethanol plant. See following for the J.D. Heiskell Purchasing Agreement, Corn Procurement, Working Capital Agreement activity as invoiced net of marketing and monthly true-up accounting for the three and nine months ending September 30, 2012 and 2011.

	3 months ending September 30, 2012		3 months ending September 30, 2011		9 months ending September 30, 2012		9 months ending September 30, 2011
Ethanol sales		37,386,793		42,333,207		100,504,700		64,236,601
Wet distiller's grains sales		10,665,481		7,742,711		26,606,536		11,857,903
Corn oil		501,991		-		668,500		-
Com purchases		46,299,261		43,016,152		120,730,538		69,309,030
Accounts receivable		1,414,625		538,143		1,414,625		538,143

Ethanol Marketing Arrangement. The Company entered into an Ethanol Marketing Agreement with Kinergy Marketing. Under the terms of the Amendment and subject to meeting certain conditions, the agreement to market ethanol for the Company extends until August 31, 2013 with an automatic one-year renewal thereafter.

Acquisition of Cilion. On July 6, 2012, the Company acquired Cilion, Inc. through a merger. Cilion, Inc. leased the Keyes ethanol plant to Aemetis prior to the merger.

At the effective time of the Merger, each issued and outstanding share of Cilion Preferred Stock was automatically converted into the right to receive an aggregate of (a) $16,500,000 and (b) 20 million shares of Aemetis common stock and (c) the right to receive an additional cash amount of $5 million plus interest at the rate of 3% per annum, which is payable upon the satisfaction by the Company of certain conditions set forth in the merger agreement.

The fair value of the Seller note payable was determined by discounting the anticipated cash flow stream at an estimated market rate of interest based on potential payment timing. The merger agreement is the basis for determining the amount of the payment. The $5 million Seller note payable is payable when the TEC loans have been satisfied. The Company anticipates the Seller note payable will be redeemed after satisfaction of amounts owed under senior secured debt arrangements with TEC. Management projects full satisfaction of the TEC obligations will occur within the next two to three years.

The preliminary acquisition date fair value of consideration for Cilion, Inc. is recapped below based on the trading value of the stock at the time of the acquisition and the expected fair value of the Seller note payable (in thousands):

Cash	$	16,500
Fair value of shares issued		15,600
Seller note payable		3,584
	$	35,684

The preliminary acquisition date fair value of the net assets acquired in the Cilion acquisition, based on their estimated fair values as of July 6, 2012, are set forth below (in thousands):

Tangible Assets:
Accounts receivable	$	3,114
Prepaid assets		5
Equipment held for resale		1,367
Property, plant and equipment		70,464
Other assets		147
Total Tangible Assets Acquired		75,097

Liabilities Assumed
Accounts payable		(6	)

Identified Intangible Assets
Permits		926
Total Enterprise Value	$	76,017

As of September 30, 2012, the purchase price allocation for all as property and equipment, Seller note payable and gain on bargain purchase price was provisional and had not yet been finalized due to final valuation reports not yet available. The amounts and final allocation will be completed in 2012. The Company believes the Cilion shareholders valued the equity component of the consideration higher than the current quoted market price. The Company believes the lower market share price is due to the recent lack of information available to the market and the Cilion shareholders valued Aemetis common stock at value higher than the current trading price on the OTC market, giving rise to the gain on bargain purchase accounting treatment of $40.3 million.