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5. Notes Payable and Subsequent Events
 12 Months Ended
Dec. 31, 2011
Debt Disclosure [Abstract]  
Notes Payable and Subsequent Events

 

5. Notes Payable and Subsequent Events

 

   

December 31,

2011

    

December 31,

2010

  
                 
Third Eye Capital senior secured term notes, including accrued interest of $1,593,378 and revenue participation of $5,277,753 less unamortized issuance discount of $513,943 for 12/31/2011 and accrued interest of $653,376 less unamortized issuance discount of $733,924 for 12/31/2010. For the years ending 12/31/2011 and 12/31/2010, the Company issued debt discount shares of 4,589,360 and 2,250,000, respectively.   $ 18,126,611     $ 10,962,407  
State Bank of India secured term loan, including accrued interest of $1,485,614 and $949,336 less unamortized issuance discount of $14,902 and $24,838, respectively.     5,161,191       5,306,742  
Revolving line of credit (related party), including accrued interest and fees of $1,428,403 and $1,089,691 less unamortized issuance discount of $873,292 and $1,370,079, respectively.     4,291,913       4,574,603  
Unsecured working capital loans and short-term notes, including accrued interest of $103,382 and $10,931, respectively.     2,066,720       547,596  
Total debt     29,646,435       21,391,348  
Less current portion of debt     9,653,499       8,647,765  
Total long term debt   $ 19,992,936     $ 12,743,583  

 

Third Eye Capital Senior secured note.  The Company had $7,092,514, and $6,815,056 in principal and accrued interest outstanding net of $0 and $381,276 in debt discounts on a senior secured note as of December 31, 2011 and 2010, respectively.  The Note bears interest at 10% and matured in June 2011, but allowed for the continuation with the payment of monthly $75,000 extension fees settled in cash or stock.  During the year ending December 31, 2011, the Company issued 1,083,903 shares of stock for the extension or payment of waiver fees associated with this note.

 

The Note is secured by first-lien deeds of trust on real property located in Nebraska and Illinois (Danville, IL property was sold in May 2011), by a first priority security interest in equipment located in Montana, pledge and assignment of 50% of all cash dividends, cash royalties and all other proceeds received from Aemetis Advanced Fuels Keyes, Inc. and initially a guarantee of $1 million, and later as part of the Cilion merger subsequent event occurring on July 6, 2012, a $10 million guarantee by McAfee Capital LLC (solely owned by Eric McAfee), plus all interest accrued and expenses to enforce Guaranty.  The note restricts the payment of dividends by the Company and any of its subsidiaries.

 

Third Eye Capital Term notes.  The Company had $5,756,344 and $4,147,351 in principal and accrued interest outstanding, net of $513,943 and $352,649 in debt discounts, on the term notes as of December 31, 2011 and 2010, respectively.  The term notes accrues at 12% per annum, and at 14% per annum subsequent to June 2011, on the unpaid principal balance and is payable monthly in arrears.  The first two term notes provide for payment of an additional 2% of total revenues at the Keyes plant until repayment of the term notes after which time the amount was reduced to 1% over the lesser of 5 years or the term of the lease.  Upon the issuance of the additional term notes, in February 2011, the terms were revised to increase the additional payment to 4% of total revenues until repayment and 2% over the lesser of 7 years or the term of the lease.  In March 2011, the Company issued 1,750,000 shares of common stock to secure the sale of additional notes at a fair value of $175,000. As of December 31, 2011 and 2010, the 4% revenue participation fee totaled $5,277,753 and $0, respectively. The Term Notes and the Senior Secured Notes contain cross-collateral and cross-default provisions.

 

The Term notes contain various covenants, including but not limited to, minimum free cash flow and production requirements and restrictions on capital expenditures.  Throughout the year ending December 31, 2011, the Company was in violation of covenants, but was waived by the note holders through the payment of fees.  As a result during, the Company issued a total of 1,755,457 shares of common stock as waiver or extension fees at a fair market value on the dates of issuance of $964,436.  The payment requirements on the notes as of December 31, 2011 were $50,000 per week plus the greater of $0.05 per gallon of ethanol produced or 50% of free cash flows, as defined in the agreement.  In addition, a $300,000 principal payment shall be paid on the final business day of each fiscal quarter beginning the fourth quarter of 2011 until maturity.

 

The Term notes are secured by first-lien deeds of trust on all real and personal property, and assignment of proceeds of all government grants, and guarantee of Aemetis, Inc., a $5,000,000 guarantee from McAfee Capital and a personal guarantee from Eric McAfee equal to $2,400,000 in principal plus any interest and fees accrued.  Later as part of the Cilion merger subsequent event occurring on July 6, 2012, McAfee Capital LLC (solely owned by Eric McAfee) agreed to a $10 million guarantee against all Third Eye Capital debt, plus all interest accrued and expenses to enforce Guaranty.

 

As disclosed in the subsequent events footnote, the maturity of the Third Eye Capital Senior secured note and the Term notes were refinanced subsequent to year-end to extend the maturities of these agreements.  The Company has revised the maturities of the related debt agreements based on these subsequent events.

 

State Bank of India Secured Term Loan.  On July 17, 2008, Universal Biofuels Private Limited (“UBPL”), the Company’s India operating subsidiary, entered into a six year $6 million loan commitment with the State Bank of India.  The term loan matures in March 2014 and is secured by UBPL’s biodiesel plant and land in Kakinada with an asset value of approximately $15.6 million.

 

In July 2008, the Company drew approximately $4.6 million against the secured term loan.  The loan principal amount is repayable in 20 quarterly installments of approximately $270,000, using exchange rates as of December 31, 2009, with the first installment due in June 2009 and the last installment payment due in March 2014.  The interest rate under this facility is subject to adjustment every two years, based on 0.25% above the Reserve Bank of India advance rate of 7.5 percent during 2011.

 

The principal payments scheduled for June, September and December in 2009, and quarters of 2010 and 2011 were not made. The term loan provides for liquidating damages at a rate of 2% per annum for the period of default. As of December 31, 2011 and 2010, UBPL had accrued interest of $1,485,614 and $949,336, respectively.

 

On October 7, 2009, UBPL received a demand notice from the State Bank of India.  The notice informed UBPL an event of default had occurred for failure to make an installment payment on the loan due in June 2009 and demanded repayment of the entire outstanding indebtedness of 19.60 crores (approximately $4 million) together with all accrued interest and applicable fees and expenses.  As of December 31, 2011, UBPL is in default on over twenty-eight months of interest, eleven principal repayments, and all covenants, including asset coverage and debt service coverage ratios.  Additional provisions of default include the bank having the unqualified right to disclose or publish the Company’s name and the Company’s Directors’ names as defaulters on any communication media.  At the bank’s option, it may also demand payment of the entire balance of the loan, since the principal payments have been in default since June 2009.  As a result the Company has classified the entire loan amount as a current liability.  State Bank of India has filed a legal case before the Debt Recovery Tribunal (DRT), Hyderabad, for recovery of approximately $5 million against the company and also impleaded Andhra Pradesh Industrial Infrastructure Corporation (APIIC) to expedite the process of registration of Factory land for which counter reply is yet to be filed by APIIC.  In the case that the Company is unable to prevail with its legal case, DRT may pass a Decree for recovery of due amount, which will impact operations of the company including action up to seizing company property for recovery of their dues.

  

Revolving line of credit – related party.  The Company has a Revolving Line of Credit Agreement with Mr. Cagan, a significant shareholder and ex-board member, for $5,000,000 secured by certain accounts, investments, intellectual property, securities and other collateral of Aemetis, Inc., excluding the collateral securing the Company’s obligations with Third Eye Capital and the collateral securing the Company’s obligations with the State Bank of India.  The Revolving Line of Credit bears interest at the rate of 10% per annum and matured on July 1, 2012.  As of December 31, 2011, no additional borrowings were available on the line.

 

In September and October, 2010, Aemetis, Inc.’s Board of Directors and Mr. Cagan approved the terms of an agreement subordinating collateral on the Revolving Line of Credit behind Third Eye Capital.  As an inducement to accept this subordination risk, Mr. Cagan was given the right to convert accrued interest and fees on the Revolving Line of Credit into shares of Aemetis common stock at a conversion price of $0.05 per share.  Additionally, the Board of Directors approved a 5% subordination fee on the outstanding balance payable in cash or in stock.  On the maturity date of July 1, 2011, the Board of Directors approved the accrual of an additional 5% fee on the outstanding balance to extend the line of credit through July 2012.  For the years ending December 31, 2011 and 2010, the Company recorded a debt discount related to the conversion feature on this related party debt of $1,732,872 and $1,556,559, respectively.

 

On September 30, 2011, Mr. Cagan converted $1,452,818 of eligible accrued interest and fees into 29,056,356 shares of common stock. Future conversions of interest and fees are limited to a conversion price equal to the average closing stock price for the 22 trailing days prior to the date of conversion.

 

As disclosed in the subsequent events footnote, the maturity of the Revolving line of credit was extended and, as a result, the Company has revised the maturities schedule related to the line.

 

Note payable – related party.  On January 30, 2010, Aemetis Advanced Fuels Keyes, Inc., entered into an Unsecured Promissory Note with Mr. Cagan for $1,600,000 as bridge financing to repair and retrofit the Keyes plant.  The note bears no interest.  The Company repaid the $1,600,000 credit facility on May 11, 2010.  Fees in connection with this bridge financing were paid with the issuance of 600,000 shares of Aemetis, Inc.’s common stock to Mr. Cagan.

 

Working Capital Operating Agreement.  In November 2008, the Company entered into an operating agreement with Secunderabad Oils Limited (“Secunderabad”).  Under this agreement Secunderabad agreed to provide the Company with working capital, on an as needed basis, to fund the purchase of feedstock and other raw materials for the Company’s Kakinada biodiesel facility.  The working capital loans are unsecured. Secunderabad as the right to decide whether or not to extend additional loans. Working capital advances bear interest at the actual bank borrowing rate of Secunderabad of fifteen percent (15%).  In return, the Company agreed to pay Secunderabad an amount equal to 30% of the plant’s monthly net operating loss. In the event that the Company’s biodiesel facility operates at a loss, Secunderabad owes the Company 30% of the losses. The agreement can be terminated by either party at any time without penalty.

 

During the years ended December 31, 2011 and 2010, the Company paid Secunderabad $101,408 and $135,019, respectively, in connection with the profit sharing portion of this agreement. In addition, during the same periods  paid approximately $143,788 and $64,284 respectively, in interest for working capital funding. At December 30, 2011 and December 31, 2010 the Company had $1,652,162 and $547,596, respectively, outstanding under this agreement.

 

As noted above, the maturities schedule presented below have been adjusted for the subsequent amendments to the Third Eye Capital and Revolving loan agreements.  Scheduled debt repayments based on these amendments for the debt outstanding at December 31, 2011 are:

 

   

Debt

Repayments

  
       
2012   $ 9,653,499  
2013     9,964,111  
2014     10,028,825  
Total   $ 29,646,435