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6. Notes Payable
 3 Months Ended
Mar. 31, 2013
Debt Disclosure [Abstract]  
6. Notes Payable

Debt consists of the notes from our senior lender, Third Eye Capital, acting as Agent for the Purchasers (Third Eye Capital) and other working capital lenders as well as certain subordinated lenders as follows:

   March 31, 2013  December 31, 2012
Third Eye Capital term note  $6,786,513   $6,679,466 
Third Eye Capital revolving credit facility   28,480,414    23,378,535 
Third Eye Capital revenue participation term note   7,618,055    7,406,224 
Third Eye Capital acquisition term note   15,178,941    14,768,846 
Cilion shareholder Seller note payable   4,225,370    4,011,430 
State Bank of India secured term loan   6,022,015    5,756,752 
Revolving line of credit (related party)   1,550,478    1,540,074 
Subordinated notes   3,888,685    3,338,114 
EB-5 long term promissory notes   1,014,260    1,006,863 
Unsecured working capital loans and short-term notes   2,042,672    2,159,291 
Total debt   76,807,403    70,045,595 
Less current portion of debt   66,587,834    34,523,591 
Total long term debt  $10,219,569   $35,522,004 

 

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.

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. To pay the January 1, 2013 $1 million fee, the Company issued 1,481,481 shares of common stock with a fair value of $1,007,407 at time of issuance. The remaining payments due on April 1, 2013 and July 1, 2013 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 as 1,481,481 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 750,000 common shares of the Company with a fair value of $414,712 at time of issuance. In addition, the interest rate on all outstanding indebtedness with Third Eye Capital increased 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 to require 50% of the net proceeds of any equity offering in excess of $1.5 million to repay Amendment No.2 advance and 100% of the net proceeds of any equity offering in excess of $7.0 million to repay Amendment No. 3, 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 19, 2013, Third Eye Capital also arranged Amendment No. 4 providing additional borrowings of $2,000,000 with the same terms as the existing Revolving Credit Facility, subject to customary closing conditions. In consideration for Amendment No. 4 financing, 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. Amendment No. 4 has been 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 Term Notes. As of March 31, 2013 Aemetis Advanced Fuels Keyes had $6,786,513 in principal and interest outstanding net of unamortized discounts of $657,023. As part of Amendment No. 1, the maturity of the Note changed to July 6, 2014. Interest on the term notes accrues at 14%, plus a 5% increase as a result of Amendment No. 2 on the unpaid principal balance, and is payable monthly in arrears. Subsequent to the end of the March 2013 quarter, Amendment No. 3 removed the additional 5% interest charge and the rate returned to 14%. 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 has 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. During the three months ending March 31, 2013, the Company violated certain covenants, which have been waived by the note as discussed above.
B.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% (17% as of March 31, 2013) plus 5% as of Amendment No.2, and then returned to 17% with Amendment No 3, subsequent to the March 2013 quarter end. 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 March 31, 2013 Aemetis Advanced Fuels Keyes had $28,480,414 in principal and interest outstanding on the credit facility, net of unamortized discounts of $1,356,671 with available credit set aside for the purpose of paying Third Eye Capital fees. 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. Subsequent to the end of the first quarter, on April 15, 2013 the Company entered into Amendment No 3 and No. 4 providing $2,000,000 in additional borrowings. See note 15 Subsequent Events.
C.Third Eye Capital Revenue Participation Term Notes. The Revenue Participation Note bears interest at 5% per annum plus an additional 5% interest as a result of Amendment No. 2, and then returned to 5% after Amendment No. 3. The Revenue Participation Note matures on July 6, 2014. As of March 31, 2013 Aemetis Advanced Fuels Keyes had $7,618,055 in principal and interest outstanding net of unamortized discounts of $2,722,345.
D.Third Eye Capital Acquisition Term Notes. As of March 31, 2013 interest on the Acquisition Term Note accrues at the prime rate plus 10.75% plus 5% (14% as of March 31, 2013) plus an additional 5% interest as a result of Amendment No. 2, and returned to 14% after Amendment No. 3. The Notes mature on July 6, 2014. As of March 31, 2013 Aemetis Facility Keyes had $15,178,941 in principal and interest outstanding net of unamortized discounts of $2,656,793.

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, the Company’s Chairman and CEO, 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. 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. As of Amendment No. 4, Third Eye Capital has a blank lien on the Chairman’s personal assets. See note 15 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 March 31, 2013, Aemetis Facility Keyes had $4,225,370 in principal and interest outstanding, net of unamortized debt discount of $884,767.

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 March 31, 2013, 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 March 2013 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 March 31, 2013, 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 March 31, 2013 and December 31, 2012, the State Bank of India loan had $3,610,279 in principal outstanding and accrued interest plus default interest of $2,414,218 and $2,188,693 and unamortized issuance discount of $2,482 and $4,966, 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 March 31, 2013 and December 31, 2012 the RLOC had a principal, interest and fees balance of $1,550,478 and $1,540,074. The Revolving Line of Credit bears interest at the rate of 10% per annum and matures on July 1, 2014.

On April 18, 2013, the Company issued 1,826,547 shares of common stock as payment for $991,946 of interest and fees outstanding under the Credit Agreement, return of an existing deposit held by Aemetis Advanced Fuels, Keyes, Inc in the amount of $170,000 and issued new term notes to two non-related parties in the amount of $560,612 for payment of the remaining principal, interest and fees. See note 15 Subsequent Events.

During the three months ended March 31, 2013 and 2012, Mr. Cagan’s investment group received $0 and $93,173 in cash interest payments, respectively. As of the publication of this report, no amounts remained available for future draw on the Revolving Loan Facility.

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 Subordinated Notes until all loans made by Third Eye Capital to AAFK are paid in full, except for a few exceptions where subordinated note investors will receive funds from EB-5 investments or sale of equipment.

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.

On January 10, 2013 the subordinated note investors agreed to Amendment No. 1 to the 5% subordinated $3,000,000 promissory notes originally dated January 6 and January 9, 2012, which allowed for i) extending the maturity date to July 1, 2014, ii) increasing the interest rate to 10% per annum, iii) paying a 10% fee on the outstanding principal and interest as of December 31, 2012 and adding the 10% fee to the principal amount of the note, and, iv) receiving 1,000,000 warrants exercisable at a price of $0.001 per share. We evaluated these January 10, 2013 amendments and the refinancing of the December 21, 2012 $300,000 note, which had a balance of $100,000 at the time of refinance, on December 21, 2013 and determined in accordance with ASC 470-50 Debt – Modification and Extinguishment the loans were extinguished during the period and accordingly recorded a loss on debt extinguishment of $956,480. At March 31, 2013 and December 31, 2012, the Company had $3,888,685 and $3,338,114 in principal and interest outstanding, net of unamortized issuance and fair value discounts of $675,033 and $612,365, respectively.

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 19, 2013 the note investor received new terms on the remaining $100,000 balance on his $300,000 5% Subordinated Promissory Note, originally dated December 21, 2012, with a maturity date of April 30, 2013 and conditions for repayment of (i) the completion of an equity or debt private placement by the Company or Aemetis in an amount of not less than Twenty Five Million Dollars ($25 million); (ii) the completion of a Initial Public Offering by the Company; and, (iii) The Company shall repay principal amount under the Note upon receipt of proceeds from the Heritage Bank escrow held under the EB-5 investor program in the amount of Five Hundred Thousand dollars ($500,000) and from the ethanol plant grant from the California Energy Commission in the amount of three million dollars ($3,000,000). As consideration for agreement, the note investor received 50,000 shares of 5 year term common stock warrants with $0.001 per share exercise price.

On January 24, 2013 an additional $300,000 in Promissory Notes were issued to an existing subordinated note investor with 150,000 warrants at $0.001 per share and 5 percent annual interest rate due April 30, 2013with conditions for repayment of (i) the completion of an equity or debt private placement by the Company or Aemetis in an amount of not less than Twenty Five Million Dollars ($25 million); (ii) the completion of a Initial Public Offering by the Company; and, (iii) The Company shall repay principal amount under the Note upon receipt of proceeds from the EB-5 investor program and from proceeds from California Energy Commission grants.

EB-5 long-term promissory notes. EB-5 is a US government program authorized by the Immigration and Nationality Act 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 March 31, 2013 $14,260 in accrued interest was 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 three months ended March 31, 2013 and March 31, 2012, the Company made principal payments of approximately $1,059,229 and $929,739, respectively, and interest payments of approximately $133,519 and $72,543, respectively. Included as current short-term borrowings on the balance sheet at March 31, 2013 and December 31, 2012, the Company had $1,584,238 and $1,709,773, 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.

A significant amount of the current portion of debt is made up of $28.5 million in Third Eye Capital’s Revolving Credit facility, subject to a six month extension provision, and State Bank of India’s $6.0 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 March 31,  Debt Repayments 
 2014   $ 74,035,094 
 2015    7,603,026 
 2016    3,000,000 
 2017    1,124,397 
 Total debt    85,762,517 
 Discounts    (8,955,114)
 Total debt, net of discounts   $ 76,807,403