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4. Notes Payable
 9 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
4. Notes Payable

 

    September 30, 2012     December 31, 2011  
Third Eye Capital senior secured term note   $ —     $ 7,092,514  
Third Eye Capital existing term note     6,913,544       5,756,344  
Third Eye Capital revolving credit facility     17,673,329       —  
Third Eye Capital revenue participation converted to term note     7,737,484       5,277,753  
Third Eye Capital acquisition term note     14,995,953       —  
Cilion shareholder Seller note payable     3,737,080       —  
State Bank of India secured term loan     5,767,941       5,161,191  
Revolving line of credit - related party     5,076,679       4,291,913  
Subordinated notes     2,647,827       —  
Unsecured working capital loans and short-term notes     1,482,626       2,066,720  
Total debt     66,032,463       29,646,435  
Less current portion     27,823,896       9,653,499  
Total long term debt   $ 38,208,567     $ 19,992,936  

 

Third Eye Capital.  On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (AAFK), entered into an Amended and Restated Note Purchase Agreement with Third Eye Capital Corporation, as agent for the Note holders. Third Eye Capital extended credit in the form of (i) senior secured revolving loans in an aggregate principal amount of $18 million (“Revolving Credit Facility”); (ii) senior secured term loans in the principal amount of $10 million to convert the Revenue Participation agreement to a Note; and (iii) senior secured term loans in an aggregate principal amount of $15 million (“Acquisition Term Note”) used to fund the cash portion of the Merger.

 

In connection with the Amended and Restated Note Purchase Agreement, the Company evaluated the credit agreement for modification and extinguishment accounting. Based on the terms of the agreement, the Company accounted for the amendment under extinguishment accounting. In aggregate $11.4 million in extinguishment losses resulted from fair valuing the Notes and expensing fees charged as part of the agreement.

 

 

 

A. Third Eye Capital Senior Secured Note.  Aemetis Inc. redeemed its Senior Secured Note on July 6, 2012 with a $7,336,671 draw on the Third Eye Capital Revolving Credit Facility. For the nine months ending September 30, 2012, the Company issued waiver and extension fee shares of 774,172.

 

 

B. Third Eye Capital Existing Term Note.  As of September 30, 2012 and December 31, 2011 Aemetis Advanced Fuels Keyes had $6,913,544 and $5,756,344 in principal and interest outstanding net of unamortized debt issuance costs of $0 and $513,943, respectively. As part of the amendment, the maturity of the Note changed to July 6, 2014.  Interest on the term notes accrues at 14% on the unpaid principal balance and is payable monthly in arrears. An amendment in early October 2012 deferred the payments of principal and interest until February 2013, subject to acceleration upon certain conditions. Per the October 2012 amendment, in February 2013 monthly principal payments will equal the greater of $200,000, $0.05 per gallon produced from the Keyes ethanol plant, or 50% of free cash flow.

 

 

  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 nine months ending September 30, 2012, the Company was in violation of certain covenants, which have been waived by the note holders and was required to issue stock to extend the maturity dates of the term notes.  As a result, during nine months ended September 30, 2012, the Company issued 1,925,000 shares of common stock with a fair value at time of issuance of $1,292,600 and, in addition, paid or accrued cash in the amount of $1,150,400 as waiver or extension fees to the note holders on this Note.

 

 

C. Revolving Credit Facility. On July 6, 2012 Aemetis Advanced Fuels Keyes entered into a Revolving Credit Facility with a commitment of $18 million. Interest on the credit facility accrues at the prime rate plus 13.75%, which was 17% as of September 30, 2012, and is payable monthly in arrears and matures on July 6, 2013. As of September 30, 2012 Aemetis Facility Keyes had $17,673,329 in principal and interest outstanding on the credit facility, net of unamortized debt issuance costs of $1,183,450. On October 18, 2012 an amendment increased the credit commitment to $24 million.

 

 

D. Third Eye Capital Revenue Participation Term Note. On July 6, 2012 Aemetis Advanced Fuels Keyes entered into a $10 million Revenue Participation Note and issued 15 million shares of Company common stock in exchange for the defeasance of the revenue participation arrangement under the Existing Term Notes agreement. The Revenue Participation Note bears interest at 5% per annum with an additional 6% default, if the Company is unable to comply with covenants, and matures on July 6, 2014. As of September 30, 2012 the Note’s unamortized fair value discount had a balance of $2,303,612.


 

E. Third Eye Capital Acquisition Term notes.  On July 6, 2012 Aemetis Advanced Fuels Keyes loaned $15 million to fund the cash portion of the merger and acquisition with Cilion, Inc. Interest on the Acquisition Term note accrues at the prime rate plus 10.75%, which was 14% as of September 30, 2012, and matures on July 6, 2014. As of September 30, 2012 Aemetis Facility Keyes had $14,995,953 in principal and interest outstanding net of unamortized fair value discount of $1,676,650.

 

The Third Eye Capital notes are secured by first-lien deeds of trust on all real and personal property, and assignment of proceeds of all government grants, guarantees from Aemetis, Inc. The Term Notes and the Senior Secured Notes contain cross-collateral and cross-default provisions. McAfee Capital, solely owned by Eric McAfee, provided a guaranty of payment and performance secured by shares owned by the Guarantor. In addition, Eric McAfee provided a $10 million personal guarantee plus reimbursement to the Note holders on any interest and expenses incurred enforcing the Guaranty.

 

Cilion Shareholder Seller note payable. As part of the Cilion merger on July 6, 2012, Aemetis Advanced Fuels Keyes provided $5 million in Seller note payable to Cilion shareholders as merger compensation.  In addition, Cilion shareholders received $16.5 million in cash and 20 million shares in Aemetis parent company common stock from the merger. The liability bears interest at 3% per annum and is due and payable after the Third Eye Capital Notes and Revolving Credit Facilities have been paid in full. The fair value rate on the deferred arrangement was calculated using a 22% effective interest rate to generate the unamortized balance of $1,298,262. As of September 30, 2012, $35,342 in interest has been accrued against the deferred agreement.

 

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.  As of September 30, 2012 the 12% interest rate under this facility is subject to adjustment every two years, based on 0.25% above the Reserve Bank of India advance rate.

 

The principal payments scheduled for June 2009 through September 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 and nine months ending September 30, 2012, UBPL recognized interest expense of $190,494 and $568,184, 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 September 30, 2012, UBPL was in default on thirty-four 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.  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. As of September 30, 2012 and December 31, 2011, the State Bank of India loan has accrued interest of $2,066,944 and $1,485,614 less unamortized issuance discount of $7,450 and $14,902, respectively.

  

Revolving line of credit – related party.  The Company has a subordinated Revolving Line of Credit Agreement with Mr. Cagan for $5 million includes accrued interest of $1,028,386 and $1,428,403 less unamortized issuance discount of $476,349 and $873,292 as of September 30, 2012 and December 31, 2011, respectively. The Revolving Line of Credit bears interest at the rate of 10% per annum and matures on July 1, 2014, after a two-year extension effective July 1, 2012. A five percent extension fee in the amount of $262,919 was accrued as part of the agreement. The extension fee has the same conversion right as accumulated interest on the credit arrangement. For nine months ended September 30, 2012 and 2011 cash interest payments of $155,612, and 94,186, respectively, were made against the outstanding loan balance. No shares were issued during the three and nine months ended September 30, 2012 based on the loan holder’s right to convert certain interest and fees into common stock of the Company based on the Company’s average trailing twenty-two days of stock price. As of September 30, 2012 and December 31, 2011 unpaid interest and fees of $787,840 and $524,921, respectively, remain convertible.

 

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. The agreement can be terminated by either party at any time without penalty.

 

During the three and nine months ended September 30, 2012, the Company made principal payments to Secunderabad of approximately $81,800 and $2,213,503, respectively, under the agreement and interest payments of approximately $58,900 and $175,050, respectively, for working capital funding.  During the three and nine months ended September 30, 2011, the Company made principal payments to Secunderabad of approximately $4,332,700 and $4,855,270, respectively, under the agreement and interest payments of $1,941 and $4,544 respectively, for working capital funding.  At September 30, 2012 and December 31, 2011 the Company had $1,042,094 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. entered into Note and Warrant Purchase Agreements with two accredited investors pursuant to which AAFK sold 5% Subordinated Promissory Notes in the aggregate principal amount of $3 million. As of  September 30, 2012 and December 31, 2011 Notes include accrued interest of $112,253 and $0 less unamortized issuance discount of $464,426 and $0, respectively. The Notes included 5-year warrants exercisable for 1 million 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 million; (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.

 

On May 31, 2012, Aemetis Advanced Fuels Keyes, Inc. (AAFK) entered into additional Notes and Warrant Purchase Agreements with an accredited investors and related party. AAFK sold 5% Subordinated Promissory Notes in the aggregate principal amount of $600,000 to the accredited investor and $110,000 to the related party Laird Cagan. The accredited investor received 5-year warrants exercisable at $0.001 per share for 200,000 shares of Aemetis common stock. Laird Cagan received one warrant for every three dollars of principal loaned or 36,667 warrants with 5-year exercise rights at $0.001 per share. Both the accredited investor Note and Laird Cagan Subordinated Promissory Note agreements mature on December 31, 2013.

 

 

At September 30, 2012 the Company had $2,647,827 in principal and interest outstanding, net of unamortized discount issuance costs of $464,426 under these agreements.

 

Scheduled Debt Repayments

 

Subsequent to September 30, 2012, the Third Eye Capital notes were amended to extend the maturities.  See Note 11, Subsequent Events for details.  Scheduled debt repayments for all loan obligations as of September 30, 2012, including the amended maturity dates, follows:

 

 

For the twelve months ending   Debt Repayments  
2013   $ 27,823,896  
2014     35,721,487  
2015     2,487,080  
Total   $ 66,032,463