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6. Notes Payable
 12 Months Ended
Dec. 31, 2012
Debt Disclosure [Abstract]  
6. Notes Payable

6. Notes Payable

 

    December 31, 2012     December 31, 2011  
Third Eye Capital senior secured term notes   $ —     $ 18,126,611  
Third Eye Capital term notes     6,679,466       —  
Third Eye Capital revolving credit facility     23,378,535       —  
Third Eye Capital revenue participation term notes     7,406,224       —  
Third Eye Capital acquisition term notes     14,768,846       —  
Cilion shareholder Seller note payable     4,011,430       —  
State Bank of India secured term loan     5,756,752       5,161,191  
Revolving line of credit (related party)     1,540,074       4,291,913  
Subordinated notes     3,338,114       —  
EB-5 long term promissory notes     1,006,863       —  
Unsecured working capital loans and short-term notes     2,159,291       2,066,720  
Total debt     70,045,595       29,646,435  
Less current portion of long-term debt     34,523,591       9,653,499  
Total long term debt   $ 35,522,004     $ 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 acquisition of Cilion, Inc. After this financing transaction, Third Eye Capital obtained enough equity ownership in the Company to be considered a related party.

 

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. To determine the fair value of the outstanding debt obligations, a 20% effective interest rate was applied to discount cash flows to their present value. In aggregate $9.1 million in extinguishment losses resulted from fair valuing the Notes and expensing fees charged as part of the agreement.

 

On October 18, 2012, Third Eye Capital agreed to  (i) extend the maturity date of the Term Notes to July 6, 2014; (ii) to increase the amount of the Revolving Loan Facility by $6 million, to a total of $24 million; (iii) to modify the redemption waterfall so that any payments would be applied first to the increase in the Revolving notes; (iv) granted waivers to the Borrowers’ obligation to pay or comply, and any event of default which has occurred or may occur as a result of such failures of the Borrowers to pay or comply with certain financial covenants and principal payments, including financial covenants for the quarter ended September 30 and December 31, 2012; and (v) agreed to defer interest payments until the earlier of certain events described in the Limited Waiver or February 1, 2013. In consideration for the Limited Waiver and Amendment No. 1 to Amended and Restated Note Purchase Agreement, the Borrowers, among other things, agreed to pay the Lenders a waiver fee in the amount of $4 million; and (ii) cash in the amount of $28,377 for certain unreimbursed costs. The $6 million increase in the Revolving Credit Facility may not be drawn upon due to the additional credit being set aside for fee payments. An immediate $1 million draw from the Revolving Credit Facility paid the first installment of the Amendment No. 1 $4 million waiver fee. The remaining waiver fees are due in $1 million increments on January 1, 2013, April 1, 2013 and July 1, 2013 and have been included in the outstanding balance on the Revolving Credit Facility.

 

On February 27, 2013, Third Eye Capital agreed to the Limited Waiver and Amendment No. 2 to (i) provide a Notional Paydown by pledging addition collateral on the Revolving Portion of the Revolving Notes in the amount of $3,100,000, such Notional Paydown was replaced in the Limited Waiver and Amendment No. 3 with an increase in the Revolver Note and the collateral substitution of a pledge of 6,231,159 shares of stock held by McAfee Capital LLC (ii) grant waivers to the Borrowers’ obligation to pay or comply, including financial and production covenants for the quarter ended March 31 and June 30, 2013; (iii) extend the date of the next interest payment until the earlier of certain events described in the Limited Waiver or May 1, 2013, and (iv) allow the Borrowers to pay the Partial Amendment Fee of $1,000,000 due January 1, 2013 in shares of the Company’s common stock. In consideration for the amendment, the Company agreed to: (i) pay a waiver fee comprised of $1,500,000 and (ii) issue to 750,000 common shares of the Company. In addition, the interest rate on all outstanding indebtedness with Third Eye Capital increases 5% until certain conditions are met.

 

On April 15, 2013, Third Eye Capital agreed to the Limited Waiver and Amendment No. 3 to waive the following covenants of the Borrower in their entirety:(i) Borrowers’ obligation to obtain an NASDAQ listing by April 1, 2013; (ii) Borrower’s obligation to cause the Chairman to enter into certain agreements; and (iii) the Company’s obligation to deliver an auditor opinion as of and for the period ended December 31, 2012 without a going concern qualification.  In addition, the Administrative Agent agreed to (i) extend the completion date of the conversion of the Keyes Plant to accommodate an 80:20 corn-to-milo ratio to May 31, 2013, (ii) amend the redemption provision in the event of an equity offering of Capital Stock up to $7,000,000, and (iii) increase the balance of the Revolving Credit Facility by an amount equal to the February 2013 $3.1 million advance and the $1.5 million waiver fee. In consideration for the Limited Waiver and Amendment, the Company agreed to: (i) pay a waiver fee comprised of $500,000 (which is added to the outstanding principal balance of the Revolving Notes) and (ii) require McAfee Capital, LLC to pledge an additional 6,231,159 Common Shares of the Parent to Agent, together with the delivery of stock certificates for such shares and stock powers. The $3.1 million advance, together with all accumulated interest, shall be repaid in full no later than September 30, 2013.

 

On April 15, 2013, Third Eye Capital also arranged a Special Bridge Advance providing additional borrowings of $2,000,000 with the same terms as the existing Revolving Credit Facility subject to customary closing condition.  In consideration for the Special Bridge Advance, the Company agreed to (i) pay the Lender a placement fee of $300,000 and (ii) issue the Lender 1,000,000 shares of common stock of Aemetis, Inc.  The Special Bridge Advance is secured by a blanket lien on the assets of Eric A. McAfee, the Company’s CEO and Chairman of the Board.

 

Details about each Third Eye Capital financing facility follows:

 

A. Third Eye Capital Senior Secured Term Notes.  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 twelve months ending December 31, 2012, the Company issued waiver and extension fee shares of 709,172, with a fair value at the time of issuance of $401,000, in association with this financing arrangement. As of December 31, 2011, senior secured term notes from Aemetis, Inc., Aemetis Advanced Fuels Keyes term notes and revenue participation agreement had an outstanding balances of $18,126,661, but were refinanced as part of the July 6, 2012 financing arrangements described in B., C., and D. following.

 

B. Third Eye Capital Existing Term Notes.  As of December 31, 2012 Aemetis Advanced Fuels Keyes had $6,679,466 in principal and interest outstanding net of unamortized debt issuance costs of $481,342. As part of No. 1, 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. Subsequent to year end, Amendment No. 2 deferred the payments of principal and interest until May 2013, subject to acceleration upon certain conditions. In May 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. Consideration for these subsequent changes have been reflected in the following Scheduled Debt Repayment schedule..

 

  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 twelve months ending December 31, 2012, the Company violated certain covenants, which have been waived by the note holders in exchange for the issuance of Company common stock.  As a result, during twelve months ended December 31, 2012, the Company issued 1,990,000 shares of common stock with a fair value at time of issuance of $1,080,000 and, in addition, paid or accrued cash in the amount of $588,000 as waiver or extension fees to the note holders on the Term Note.

 

C. Third Eye Capital Revolving Credit Facility. On July 6, 2012 Aemetis Advanced Fuels Keyes entered into a Revolving Credit Facility with a commitment of $18 million. On October 16, 2012, Amendment No. 1 increased the amount of the Revolving Loan Facility by $6 million, to a total of $24 million. Interest on the credit facility accrues at the prime rate plus 13.75% or 17% as of December 31, 2012. Interest is payable monthly in arrears. The Revolving Credit Facility matures on July 6, 2013 and may be extended with the payment of extension fees. As of December 31, 2012 Aemetis Advanced Fuels Keyes had $23,378,535 in principal and interest outstanding on the credit facility, net of unamortized debt issuance costs of $1,780,628 with available credit set aside for the purpose of paying Third Eye Capital fees.  Subsequent to year end, on February 27, 2013, Amendment No. 2 provided an additional $3.1 million in additional borrowings based on anticipated collateralized arrangements and waived certain covenants.  See note 17 Subsequent Events.

 

D. Third Eye Capital Revenue Participation Term Notes. 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 with a fair value at the time of issuance of $9,383,000 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. The Revenue Participation Note matures on July 6, 2014. As of December 31, 2012 Aemetis Advanced Fuels Keyes had $7,406,224 in principal and interest outstanding net of unamortized fair value discount of $2,763,994.

  

E. Third Eye Capital Acquisition Term Notes.  On July 6, 2012 Aemetis Facility 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%, or 14% as of December 31, 2012, and matures on July 6, 2014. As of December 31, 2012 Aemetis Facility Keyes had $14,768,846 in principal and interest outstanding net of unamortized fair value discount of $2,446,082.

 

The Third Eye Capital notes are secured by first-lien deeds of trust on all real and personal property, and assignment of proceeds from all government grants and guarantees from Aemetis, Inc. The Term Note, Acquisition Term Note, Revenue Participation Term Note, and Revolving Credit Facility contain cross-collateral and cross-default provisions. McAfee Capital, solely owned by Eric McAfee, provided a guaranty of payment and performance secured by Company shares owned by the Guarantor. In addition, Eric McAfee provided a $10 million personal guarantee plus reimbursement to the Note holders any interest and expenses incurred enforcing the Guaranty.  Subsequent to year end, on February 27, 2013, Amendment No. 2 stipulated an increase in Eric McAfee’s personal guarantee to $15 million, a 7.5 million Aemetis common stock pledge from Mr. McAfee personal assets, and an additional $8 million guaranty from McAfee Capital.  See note 18 Subsequent Events.

 

Cilion shareholder Seller note payable. As part of the Cilion merger on July 6, 2012, Aemetis Facility Keyes provided $5 million in Seller note payable to Cilion shareholders as merger compensation subordinated behind the senior secured Third Eye Capital Notes.  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. As of December 31, 2012, Aemetis Facility Keyes had $4,011,430 in principal and interest outstanding, net of unamortized debt discount of $1,061,721.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 December 31, 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 December 2012 were not made. The term loan provides for liquidating damages at a rate of 2% per annum for the period of default.

 

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 $3.6 million) together with all accrued interest thereon and any applicable fees and expenses by October 10, 2009.  As of December 31, 2012, UBPL was in default on interest and 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 December 31, 2012 and December 31, 2011, the State Bank of India loan had accrued interest plus default interest of $2,188,693 and $1,485,614 less unamortized issuance discount of $4,966 and $14,902, respectively.

 

Revolving line of credit (related party).  The Company has a subordinated Revolving Line of Credit Agreement (“RLOC”) with Laird Cagan and other related party investors for $5 million. As of December 31, 2012 and December 31, 2011 the RLOC had a principal, interest and fees balance of $1,540,074 and $4,291,913, respectively net of unamortized issuance discount costs from extension fees and beneficial conversion costs of $0 and $873,292, respectively. As of December 31, 2012 approximately $3.46 million of credit may be available through the RLOC dependent upon Mr. Cagan and his co-owner’s willingness to fund. On September 30, 2011 Mr. Cagan was given the right to convert future interest and fees on the Revolving Line of Credit into shares of Aemetis common stock at a conversion price based off the 22 trailing days average stock price prior to the conversion. Under the RLOC, as of December 31, 2012, none of the $1,540,074 outstanding balance had a conversion right at year end.

 

According to the original RLOC, only interest and fees were convertible to stock. Mr. Cagan approached the Board of Directors and provided the Company a notice of conversion under the RLOC, converting certain amounts of the outstanding interest and fees eligible for conversion to stock and a special request to convert outstanding principal. The Board of Directors accepted notice of conversion of $0.8 million of interest and fees and approved the special request to convert approximately $3.3 million in principal during the December 31, 2012 governance meeting. Mr. Cagan previously disclosed that the RLOC was owned by four note holders: Laird Cagan (27%); McAfee Capital, LLC (62%); Clyde Berg (6%) and Mougins Capital (5%). During the twelve months ended December 31, 2012 and 2011, Mr. Cagan’s investment group received 9,062,900 and 29,056,356 common stock shares in exchange for reduction in the RLOC outstanding balance.

 

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 July 2012 agreement. The July 2012 extension fee has the same conversion right as accumulated interest on the credit arrangement. For the twelve months ended December 31, 2012 and 2011, principal, interest and fees in the amount of $4,107,141and $1,611,258, respectively, were converted to stock.

 

Subordinated Notes. On January 6 and January 9, 2012, Aemetis Advanced Fuels Keyes, Inc. entered into $3 million in Note and Warrant Purchase Agreements with 5% annual interest rate with two accredited investors. An additional $600,000 and $800,000 in Notes were added to one of the existing accredited investor’s balance in May and December 2012, respectively. This same accredited investor received payments of $600,000 in principal and $3,288 in interest in July 2012. The Notes included 5-year warrants exercisable for 1,733,333 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. At December 31, 2012 the Company had $3,338,114 in principal and interest outstanding, net of unamortized issuance discount of $612,365 and $0, respectively.

 

On May 31, 2012, Aemetis Advanced Fuels Keyes, Inc. (AAFK) entered into an additional $110,000 in 5 percent annual interest rate, Notes and Warrant Purchase Agreements with a related party, Laird Cagan. Mr. 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. The full amount of the $110,000 Note and accrued interest was paid in full on July 6, 2012.

 

Subsequent to year end, on January 14, 2013, Laird Cagan loaned $106,201 through a Promissory note maturing on April 30, 2013 with a 5 percent annualized interest rate and the right to exercise 53,101 warrants exercisable at $0.001 per share. On January 24, 2013, an additional $300,000 in David Lies Promissory Notes were issued with 150,000 warrants at $0.001 per share and 5 percent annual interest rate due April 30, 2013.

 

EB-5 long-term promissory notes.  EB-5 is a US government program authorized by the Immigration and Nationality Act [8 U.S.C. §1153 (b)(5)(A)-(D); INA §203 (b)(5)(A)-(D)] designed to foster employment-based visa preference for immigrant investors to encourage the flow of capital into the U.S. economy and to promote employment of U.S. workers.

 

On March 4, 2011, and amended January 19, 2012, and July 24, 2012, the Company entered into a Note Purchase Agreement with Advanced BioEnergy, LP, a California limited Partnership authorized as a Regional Center to take EB-5 investments, for the issuance of up to 72 subordinated convertible promissory notes bearing interest at 3%, each note in the principal amount of $500,000 due and payable four years from the date of the note for a total aggregate principal amount of up to $36,000,000.  The notes are convertible after three years at a conversion price of $3.00 per share.

 

Advanced BioEnergy, LP arranges investments with foreign investors, who each make investments in the Keyes plant project in investment increments of $500,000. The Company sold notes in the amount of $1,000,000 to the first two investors during the fourth quarter of 2012. As of December 31, 2012 $6,863 in accrued interest remained outstanding on the notes. The availability of the remaining $35,000,000 will be determined by the ability of Advanced BioEnergy, LP to attract additional qualified investors.

 

Unsecured working capital loans.  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.

 

Associated with the Working Capital Agreement with Secunderabad, during the twelve months ended December 31, 2012 and 2011, the Company made principal payments of approximately $2,383,481 and $7,287,063, respectively, and interest payments of approximately $174,241 and $124,856, respectively.  Included as current short-term borrowings on the balance sheet at December 31, 2012 and 2011, the Company had $1,709,773 and $1,652,162, respectively, outstanding under this agreement.

 

Short-term notes.  Aemetis Technologies, formerly Zymetis, Inc., carries certain debt obligations associated with a series of grants issued by the Maryland Department of Business and Economic Development to Zymetis prior to the merger.  These grants were converted to promissory notes with interest upon the achievement of certain objectives.

 

Scheduled Debt Repayments

 

A significant amount of the current portion of debt is made up of $23.4 million in Third Eye Capital’s Revolving Credit facility, subject to an six month extension provision, and State Bank of India’s $5.8 million outstanding debt obligation, which is currently under discussion for restructured terms. Scheduled debt repayments for all loan obligations follow:

 

For the twelve months ending December 31,      
2013   $ 36,480,170  
2014     37,886,509  
2015     3,823,151  
2016     1,006,863  
Total   $ 79,196,693  
Debt discount at 12/31/12     (9,151,098 )
Carrying value of debt at 12/31/12   $ 70,045,595