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4. Notes Payable
 3 Months Ended
Mar. 31, 2012
Debt Disclosure [Abstract]  
4. Notes Payable

 

Debt consists of the following:

 

 

   

March 31,

2012

    

December 31,

 2011

  
Third Eye Capital senior secured term notes, including accrued interest of $2,113,121 and revenue participation of $6,953,065 less unamortized issuance discount of $779,360 for March 31, 2012 and accrued interest of $1,593,378 and revenue participation of $5,277,753 less unamortized issuance discount of $513,943 for December 31, 2011. For the three months ending March 31, 2012, the Company issued 1,093,925 of debt discount shares.   $ 19,853,433     $ 18,126,611  
State Bank of India secured term loan, including accrued interest of $1,740,287 and $1,485,614 less unamortized issuance discount of $12,418 and $14,902, respectively.     5,574,849       5,161,191  
Revolving line of credit (related party), including accrued interest of $1,428,405 and $1,428,403 less unamortized issuance discount of $441,216 and $873,322, respectively.     4,723,990       4,291,913  
Sub-debt notes, including accrued interest of $37,500 and $0 less unamortized issuance discount of $619,334 and $0, respectively.     2,418,166       -  
Unsecured working capital loans and short-term notes, including accrued interest of $95,968 and $103,382, respectively.     2,048,700       2,066,720  
                 
Total debt     34,619,138       29,646,435  
                 
Less current portion of debt     13,067,303       9,653,499  
                 
Total long term debt   $ 21,551,835     $ 19,992,936  

 

 

Third Eye Capital Senior secured note.  The note had a principal and accrued interest balance outstanding as of March 31, 2012 and December 31, 2011 of $7,279,601 and $7,092,514, respectively.  The Note bears interest at 10% with an additional default interest of 8% for a total of 18% per year when payments are in arrears. The note matured in June 2011, but allowed for monthly extensions upon the payment of a $75,000 fee settled in stock or cash.  For the three months ended March 31, 2012, the Company issued 508,926 shares of common stock with a fair value of $387,932 for the extension of this Note.

 

The Note was 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 a guarantee of $1 million by McAfee Capital LLC (solely owned by Eric McAfee), and later amended as part of the Cilion merger subsequent event occurring on July 6, 2012, to 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.  In Aemetis Advanced Fuels Keyes , the subsidiary had $5,620,767 and $5,756,344 in principal and accrued interest outstanding, net of $779,361 and $513,943 in debt discounts on the term notes as of March 31, 2012 and December 31, 2011, respectively.  The term notes accrued interest at 12% per annum, and at 14% per annum subsequent to June 2011, on the unpaid principal balance and is payable monthly in arrears.  A default interest of 6% per annum is added to the 14% per annum rate when payments are in arrears. Monthly principal payments equal the greater of $200,000, $0.05 per gallon produced from the Keyes ethanol plant, or 50% of free cash flow.  During the three months ending March 31, 2012, the Company issued for this note 585,000 shares of stock with a fair value of $491,400 for the extension or payment of waiver fees associated with this note.

 

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.  As of March 31, 2012 and December 31, 2011, the 4% revenue participation fees had accumulated to $6,953,065 and $5,277,753, respectively. On July 6, 2012, the revenue participation fees accrued to date and all future revenue participation obligations were converted to a $10 million note.  The Term Notes and the Senior Secured Notes contain cross-collateral and cross-default provisions. See Note 10: Subsequent Events.

 

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 three months ending March 31, 2012, the Company was not able to comply with some of the covenants, but waivers by note holders through the payment of fees removed any violations. During the quarter ended March 31, 2012, the Company issued a total of 1,093,925 shares of common stock as waiver or extension fees at a fair market value on the dates of issuance of $879,332.  The payment requirements on the notes as of March 31, 2012 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 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, 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 secured term loan with the State Bank of India in the amount of approximately $6 million.  The term loan matures in March 2014 and is secured by UBPL’s assets, consisting of the biodiesel plant and land in Kakinada.

 

 

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 corresponding to the date of payment, 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 the three months ended March 31, 2012.

 

The principal payments scheduled for June, September and December in 2009, and quarters of 2010 through year-to-date 2012 were not made. The term loan provides for liquidating damages at a rate of 2% per annum for the period of default. For the three months ending March 31, 2012 and March 31, 2011, UBPL accrued interest of $194,196 and $189,671, respectively on the State Bank of India Secured term loan.

 

On October 7, 2009, UBPL received a demand notice from the State Bank of India.  The notice informs UBPL that an event of default has occurred for failure to make an installment payment on the loan due in June, 2009 and demands repayment of the entire outstanding indebtedness of 19.60 Crores (approximately $4 million) together with all accrued interest thereon and any applicable fees and expenses by October 10, 2009.  As of March 31, 2012, UBPL was in default on thirty-one months of interest, twelve 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 its director’s names as defaulter in any medium or media.  At the bank’s option, it may also demand payment of the 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 current. The 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. Laird 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. For the three months ended March 31, 2012 and March 31, 2011, cash interest payments of $93,163 and $0, respectively, were made against the outstanding loan balance.   As of March 31, 2012, no additional borrowings were available on the line. On September 30, 2011, Mr. Cagan transferred a portion of his ownership to McAfee Capital, LLC (62.35%), Clyde Berg (6.18%) and Mougins Capital LLC (5.11%).

 

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.

 

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 its Kakinada biodiesel facility.  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 profit. In the event that the Company’s biodiesel facility operates at a loss, Secunderabad owes the Company 30% of the losses. Either party can terminate the agreement at any time without penalty.

 

During the three months ended March 31, 2012 and 2011, the Company made principal payments to Secunderabad of approximately $929,739 and $2,426,015, respectively, under the agreement and $72,543 and $1,941 respectively, in interest for working capital funding.  At March 31, 2012 and December 31, 2011 the Company had $1,663,912 and $2,139,519 outstanding under this agreement, respectively, and included as current short-term borrowings on the balance sheet.

 

 

 

Subordinated Notes and Warrant Purchase Agreements. On January 6 and January 9, 2012, Aemetis Advanced Fuels Keyes, Inc. (AAFK) entered into Note and Warrant Purchase Agreements with two accredited investors where AAFK sold 5% Subordinated Promissory Notes in the aggregate principal amount of $3,000,000 and 5-year warrants exercisable at $0.001 per share for 1,000,000 shares of Aemetis common stock. Interest is due at maturity. The Promissory Notes are guaranteed by Aemetis and are due and payable upon the earlier of (i) December 31, 2013; (ii) completion of an equity financing by AAFK or Aemetis in an amount of not less than $25,000,000; (iii) the completion of an Initial Public Offering by AAFK or Aemetis; or (iv) after the occurrence of an Event of Default, including failure to pay interest or principal when due and breaches of note covenants. Neither AAFK nor Aemetis may make any principal payments under the Promissory Notes until all loans made by Third Eye Capital to AAFK are paid in full. At March 31, 2012 the Company reported a $2,418,166 balance on these subordinated note agreements, after netting out unamortized issuance costs of $619,334.

 

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 March 31, 2012 are:

 

 

For the 12 months ended   Debt Repayments  
March 31, 2013   $ 13,067,303  
March 31, 2014     10,404,013  
March 31, 2015     11,147,822  
Total   $ 34,619,138