v2.4.0.6

Note 5. Long Term Debt and Related Party Notes Payable | 12 Months Ended
--- | ---
Mar. 31, 2012
Long-term Debt [Text Block] | 5. LONG-TERM DEBT AND RELATED PARTY NOTES PAYABLE JP Morgan Chase loan agreements Acquisition of the Westwego Terminal and subsequent construction projects In connection with the purchase of the Westwego Terminal in December 2008, BWNO entered into a credit agreement (the “BWNO Credit Agreement” or the “Loan”) with JPM to finance the purchase price of the storage terminal. Beginning on April 30, 2009, we made monthly principal installments on the Loan, plus accrued monthly interest. All unpaid principal and accrued and unpaid interest is finally due and payable on September 30, 2014. The JPM Loan is secured by a mortgage on the Westwego Terminal property. The BWNO Credit Agreement includes customary events of default including, but not limited to, the failure of BWNO to pay any principal or interest when due, the breach of any representation or warranty in any of JPM’s loan documents, or insolvency or bankruptcy. Upon the occurrence of an event of default, the JPM Loan will become due and payable automatically and without notice. Since the original BWNO Credit Agreement and Loan, the Company has entered into additional loan agreements with JPM on February 12, 2010 (which were both incorporated into an agreement on September 27, 2010), on June 24, 2010, on August 16, 2010, and on October 29, 2010. With the October 29, 2010 agreement, we entered into the Fourth Amendment to the BWNO Credit Agreement with JPM in the principal amount of $4,695,456 with JPM consolidating our previous loans as follows: BWNO Credit Agreement of September 27, 2010, as amended = $3,689,796 Line of Credit Note of June 24, 2010 = $500,000 Non-Revolving Line of Credit of August 16, 2010 = $131,500, and An advance, pursuant to the October 29, 2010 BWNO Credit Agreement = $374,160 The October 2010 Note bears interest at the annual rate of 1.50% above the Prime Rate, subject to certain minimum rate requirements. The October 2010 Note provides for consecutive monthly installments of principal in the amount of $97,822, commencing October 31, 2010 and continuing until maturity on September 30, 2014; along with related interest. In January 2011, we requested and JPM approved a revised payment schedule. Under the revised plan, the next six subsequent monthly payments were delayed approximately one month. Acquisition of the Salisbury Terminal. In connection with the purchase and acquisition of the Salisbury Terminal on December 22, 2011, BWMD entered into a term loan with JPM in the principal amount of $1,600,000 to finance the purchase price of the terminal. The term loan bears interest at the annual fixed rate of 4.50%. Beginning on January 21, 2012 and continuing on the last day of each calendar month thereafter, BWMD will pay consecutive monthly installments of interest only on the loan. In addition, beginning on July 21, 2012 and continuing on the last day of each calendar month thereafter BWMD will pay monthly principal installments of $26,667. All unpaid principal and accrued and unpaid interest is finally due and payable on July 21, 2017. The BWMD loan includes customary events of default including, but not limited to, the failure of BWMD to pay any principal or interest when due, the breach of any representation or warranty in any of JPM’s loan documents, or insolvency or bankruptcy. Upon the occurrence of an event of default, the BWMD loan will become due and payable automatically and without notice. Additionally, in connection with the closing of the acquisition, BWMD entered into the following with JPM: a credit agreement, a continuing security agreement covering all of BWMD’s personal property, and a Subordination Agreement. As additional collateral for the BWMD loan, BWNO agreed to secure the BWMD loan with the existing collateral mortgage encumbering BWNO’s right, title and interest in the immovable property, buildings, structures, machinery, equipment and improvements on the premises located at 660 LaBauve Drive, Westwego, Jefferson Parish, Louisiana. Blackwater Midstream Corp. entered into a continuing guaranty and the Subordination Agreement with JPM, and guaranteed the obligations of BWMD under the terminal Purchase Agreement with NuStar. Storage Tank Construction at the Brunswick Terminal In connection with the construction of a 60,000 barrel storage tank at the Brunswick Terminal, on February 28, 2012, BWGA entered into a term loan with JPM in the principal amount of $1,380,000 to finance the construction of the new storage tank. As of March 31, 2012, BWGA has received advances on this loan in the amount of $408,072. The loan bears interest at the annual fixed rate of 4.50%. Beginning on March 31, 2012 and continuing on the last day of each calendar month thereafter, BWGA will pay consecutive monthly installments of interest only on the loan. In addition, beginning on October 31, 2012 and continuing on the last day of each calendar month thereafter BWGA will pay monthly principal installments of $23,000. All unpaid principal and accrued and unpaid interest is finally due and payable on August 31, 2017. The BWGA loan includes customary events of default including, but not limited to, the failure of BWGA to pay any principal or interest when due, the breach of any representation or warranty in any of JPM’s loan documents, or insolvency or bankruptcy. Upon the occurrence of an event of default, the BWGA loan will become due and payable automatically and without notice. Additionally, in connection with the closing of the acquisition, BWGA entered into the following with JPM: a credit agreement, a continuing security agreement covering all of BWGA’s personal property, and a Subordination Agreement. As additional collateral for the BWMD loan, BWNO agreed to secure the BWGA loan with the existing collateral mortgage encumbering BWNO’s right, title and interest in the immovable property, buildings, structures, machinery, equipment and improvements on the premises located at 660 LaBauve Drive, Westwego, Jefferson Parish, Louisiana. Blackwater Midstream Corp. entered into a continuing guaranty and the Subordination Agreement with JPM, and guaranteed the obligations of BWGA under the terminal Purchase Agreement with NuStar. Convertible Notes Relatives of the Company’s CEO and current members on the Company’s Board of Directors, together with others, participated in the private offering of convertible debt described below. As of March 31, 2012 and 2011, the outstanding balance of these loans to related parties was $675,000 and $250,000, respectively. Private Offering of Convertible Debt. October 2009 convertible debt offering On October 15, 2009, we issued $3,001,033 of convertible notes. The convertible notes originally set a maturity date on October 15, 2011 (the date was later extended, see below) and have a stated annual interest rate of 10%. The principal is payable at maturity but interest is paid quarterly beginning January 15, 2010. The Company incurred interest expense of $75,026 and $300,104, respectively for the three-month and twelve-month periods ending March 31, 2012 and March 31, 2011. In addition, the notes are convertible at any time into restricted shares of the Company’s common stock at $0.50 per share. Related party investors as of March 31, 2012 and March 31, 2011 accounted for $430,000 and $180,000, respectively of the aggregate amount of convertible debt funds collected. The $250,000 increase is due to the appointment in June 2011 of two members to the Company’s Board of Directors, Mr. Philip Tracy and Mr. William Gore, who hold October 2009 convertible debt notes in the amounts of $100,000 and $150,000, respectively. Mr. Gore and Mr. Tracy were elected to the Company’s Board of Directors in September 2011. On March 28, 2011, the convertible note agreements were amended to reduce the conversion price to $0.40 per share upon a change in control of the Company. This change in the conversion feature was evaluated under ASC 815-40. As a result of the new provision, the conversion feature now qualifies for derivative accounting pursuant to ASC 815. (see Note 6) In June 2011, the Company contacted the holders of the Company’s 2009 Convertible Promissory Note to extend the note’s maturity date from October 15, 2011 to October 15, 2013. All of the 2009 Convertible Promissory Notes have been amended to reflect the new maturity date. As per accounting standards, this change in the maturity date was evaluated under ASC 470 “EITF 96-19” “Debtor’s Accounting for Modification or Exchange of Debt Instruments.” As a result of the maturity date extension amendment, the convertible debt notes then qualified as a debt extinguishment and therefore were treated as if the Company settled the debt prior to the maturity date and then entered into an entirely new debt agreement after the amendment. (see Note 6) In connection with the offering, we incurred cash fees of $265,103 and issued 700,000 shares of restricted common stock, valued at $203,000 based on the grant-date fair value of our common stock. These fees were included in the deferred financing costs in our consolidated balance sheet and were being amortized over the original term of the convertible notes using the effective interest rate method. During the twelve-month period ended March 31, 2012 and the twelve-month period ended March 31, 2011, we amortized $73,314 and $249,000, respectively, of deferred financing cost. During the three-month period ended March 31, 2012, due to the extinguishment of the debt in June 2011, we did not amortize any expenses. During the three-month period ended March 31, 2011 we expensed $62,198. On June 24, 2011, as per ASC 815-40, we evaluated the fair value of the derivative liability (using the BWMS closing share price of $0.55) and recorded a net “non-cash” loss of $115,378, which represents the change in the fair value of the derivative from March 31, 2011 through June 24, 2011. Per the applicable accounting standards, the amendment of the convertible debt notes was required to be treated as an extinguishment of the original convertible debt notes and related accounts, as of June 24, 2011. Therefore, we wrote off and expensed the remainder of the unamortized deferred financing asset of $61,449 and decreased the derivative liability by $820,800. These transactions resulted in a net “non-cash” gain of $759,351. Additionally as per ASC 470, we evaluated the fair value of the derivative related to the amended convertible debt notes as of June 24, 2011 (using the BWMS closing share price of $0.55) and recorded a new derivative liability of $2,870,987. This amount was recorded as a discount to the debt and will be amortized over the new remaining life of the notes, until October 15, 2013. As a result of the First Amendment to the BWNO Credit Agreement with JPM, the maturity and conversion dates of the convertible debt notes issued pursuant to the Company’s September 2009 Convertible Debt Offering were to be extended by certain intervals. As of June 24, 2011, the maturity and conversion dates have been extended until October 15, 2013 but still do not meet the maturity date of September 30, 2014, as requested by JPM. However, JPM is aware of the maturity date extension that was achieved and has not requested any action from the Company. March 2010 convertible debt offering On March 31, 2010, we issued $1,750,000 of convertible notes. The convertible notes originally set a maturity date on March 31, 2012 (the date was later extended, see below) and have a stated annual interest rate of 10%. The principal is payable at maturity but interest is paid quarterly beginning June 30, 2010. The Company incurred interest expense of $43,750 and $175,000, respectively for the three-month and twelve-month periods ended March 31, 2012 and March 31, 2011. In addition, the notes are convertible at any time into restricted shares of the Company’s common stock at $0.50 per share. Related party investors as of March 31, 2012 and March 31, 2011 accounted for $245,000 and $70,000, respectively of the aggregate amount of convertible debt funds collected. The $175,000 increase is due to the appointment in June 2011 of two members to the Company’s Board of Directors, Mr. Philip Tracy and Mr. Gore, who hold March 2010 convertible debt notes in the amount of $100,000 and $75,000, respectively. Mr. Gore and Mr. Tracy were elected to the Company’s Board of Directors in September 2011. On March 28, 2011, the convertible note agreement was amended to reduce the conversion price to $0.40 per share upon a change in control of the Company. This change in the conversion feature was evaluated under ASC 815-40. As a result of the new provision, the conversion feature now qualifies for derivative accounting pursuant to ASC 815. (see Note 6) In June 2011, the Company contacted the holders of the Company’s 2010 Convertible Promissory Note to extend the note’s maturity date from March 31, 2012 to September 30, 2013. All of the 2010 Convertible Promissory Notes have been amended to reflect the new maturity date. As per accounting standards, this change in the maturity date was evaluated under ASC 470 “EITF 96-19” “Debtor’s Accounting for Modification or Exchange of Debt Instruments.” As a result of the maturity date extension amendment, the convertible debt notes then qualified as a debt extinguishment and therefore were treated as if the Company settled the debt prior to the maturity date amendment and then entered into an entirely new debt agreement after the amendment. (see Note 6) In connection with the offering, we incurred cash fees of $164,750 and issued 659,000 shares of restricted common stock, valued at $171,340 based on the grant-date fair value of our common stock. These fees were included in the deferred financing costs in our consolidated balance sheet and were being amortized over the original term of the convertible notes using the effective interest rate method. During the twelve-month period ended March 31, 2012 and the twelve-month period ended March 31, 2011, we amortized $49,878 and $180,150, respectively, of deferred financing cost. During the three-month period ended March 31, 2012, due to the extinguishment of the debt in June 2011, we did not amortize any expenses. During the three-month period ended March 31, 2011 we expensed $45,038. On June 24, 2011, as per ASC 815-40, we evaluated the fair value of the derivative liability (using the BWMS closing share price of $0.55) and recorded a net “non-cash” loss of $78,371, which represents the change in the fair value of the derivative from March 31, 2011 through June 24, 2011. Per the applicable accounting standards, the amendment of the convertible debt notes was required to be treated as an extinguishment of the original convertible debt notes and related accounts, as of June 24, 2011. Therefore, we wrote off and expensed the remainder of the unamortized deferred financing asset of $130,271 and decreased the derivative liability by $770,860. These transactions resulted in a net “non-cash” gain of $640,589. Additionally as per ASC 470, we evaluated the fair value of the derivative related to the amended convertible debt notes as of June 24, 2011 (using the BWMS closing share price of $0.55) and recorded a new derivative liability of $1,645,253. This amount will be amortized over the new remaining life of the notes, until September 30, 2013. In summary, during the twelve-month period ending March 31, 2012, the Company recorded a net “non-cash” gain of $2,201,935 related to the 2009 and 2010 Notes; approximately $1,400,000 due to the extinguishment of the original convertible debt notes and deferred financing charges; and $801,995 related to changes in the fair market value of the convertible debt notes derivative liabilities. Future minimum payments related to our JPM credit facilities and our convertible debt notes as of March 31, 2012, for the next five years and the total amount thereafter are as follows; assuming none of the convertible debt notes are converted.
Year ending March 31, |  |  |
2013 |  | $ | 1,551,864 |
2014 |  |  | 6,514,969 |
2015 |  |  | 906,932 |
2016 |  |  | 320,000 |
2017 |  |  | 320,000 |
Thereafter |  |  | 80,000 |
|  | $ | 9,693,765 |
The following table reconciles our various debt instruments to the balance sheet line items for March 31, 2012 and March 31, 2011. Of special note, in June 2011, we extended the maturity date of our convertible debt loans; thus removing them for current liabilities to long-term liabilities.
|  | For the Year Ended March 31, 2012 |
|  | Consolidated |  |  | JPM CHASE |  |  | 2009 |  |  | 2010 |
|  | Balance Sheet |  |  | Bank Loans |  |  | CD Loans |  |  | CD Loans |
Current portion of related party long-term convertible debt loans |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Current portion of long-term convertible debt loans |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Related party long-term convertible debt loans *1 |  | $ | 675,000 |  |  | $ | - |  |  | $ | 430,000 |  |  | $ | 245,000 |
Long-term convertible debt loans *2 |  | $ | 4,076,033 |  |  | $ | - |  |  | $ | 2,571,033 |  |  | $ | 1,505,000 |
Current portion of long-term bank loans |  | $ | 1,551,864 |  |  | $ | 1,551,864 |  |  |  |  |  |  |  |  |
Long-term bank loans |  | $ | 3,390,868 |  |  | $ | 3,390,868 |  |  | $ | - |  |  | $ | - |
|  | $ | 9,693,765 |  |  | $ | 4,942,732 |  |  | $ | 3,001,033 |  |  | $ | 1,750,000 |
*1 - Shown on Consolidated Balance Sheet as of March 31, 2012 as Net of CD Discount: Related party long-term convertible debt loans of $675,000 less CD Discounts of $620,291 = Net of $54,709 *2 - Shown on Consolidated Balance Sheet as of March 31, 2012 as Net of CD Discount: Long-term convertible debt loans of $4,076,033 less CD Discounts of $3,745,668 = Net of $330,365
|  | For the Year Ended March 31, 2011 |
|  | Consolidated |  |  | JPM CHASE |  |  |  | 2009 |  |  |  | 2010 |
|  | Balance Sheet |  |  | Bank Loans |  |  | CD Loans |  |  | CD Loans |
Current portion of related party long-term convertible debt loans |  | $ | 250,000 |  |  | $ | - |  |  | $ | 180,000 |  |  | $ | 70,000 |
Current portion of long-term convertible debt loans |  | $ | 4,501,033 |  |  | $ | - |  |  | $ | 2,821,033 |  |  | $ | 1,680,000 |
Related party long-term convertible debt loans *1 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Long-term convertible debt loans *2 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Current portion of long-term bank loans |  | $ | 1,271,686 |  |  | $ | 1,271,686 |  |  | $ | - |  |  | $ | - |
Long-term bank loans |  | $ | 2,934,660 |  |  | $ | 2,934,660 |  |  | $ | - |  |  | $ | - |
|  | $ | 8,957,379 |  |  | $ | 4,206,346 |  |  | $ | 3,001,033 |  |  | $ | 1,750,000 |

X
- Definition The entire disclosure for long-term debt. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 22 -Article 5 + Details
Name: | us-gaap_LongTermDebtTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration