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4. Debt

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

4. Debt

Debt consists of the following:

		September 30, 2018				December 31, 2017
Third Eye Capital term notes		$	7,022			$	6,931
Third Eye Capital revolving credit facility			43,807				35,371
Third Eye Capital revenue participation term notes			11,792				11,636
Third Eye Capital acquisition term notes			23,661				20,048
Third Eye Capital promissory note			2,080				-
Cilion shareholder seller notes payable			5,936				5,824
Subordinated notes			9,640				8,725
EB-5 long term promissory notes			36,847				36,039
Unsecured working capital loans			5,835				4,861
GAFI Term and Revolving loans			25,018				24,351
Total debt			171,638				153,786
Less current portion of debt			19,402				15,625
Total long term debt		$	152,236			$	138,161

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 (the Note Purchase Agreement). Pursuant to the Note Purchase Agreement, Third Eye Capital extended credit in the form of (i) senior secured term loans in an aggregate principal amount of approximately $7.2 million to replace existing notes held by Third Eye Capital (the Term Notes); (ii) senior secured revolving loans in an aggregate principal amount of $18.0 million (Revolving Credit Facility); (iii) senior secured term loans in the principal amount of $10.0 million to convert the prior revenue participation agreement to a note (Revenue Participation Term Notes); and (iv) senior secured term loans in an aggregate principal amount of $15.0 million (Acquisition Term Notes) used to fund the cash portion of the acquisition of Cilion, Inc. (the Term Notes, Revolving Credit Facility, Revenue Participation Term Notes and Acquisition Term Notes are referred to herein collectively as the Original Third Eye Capital Notes).

On January 4, 2018, a Promissory Note (the January 2018 Note) for $160 thousand was advanced by Third Eye Capital to Aemetis, Inc., as a short-term credit facility for working capital and other general corporate purposes with an interest rate of 14% per annum maturing on the earlier of (a) receipt of proceeds from any financing, refinancing, or other similar transaction, (b) extension of credit by payee, as lender or as agent on behalf of certain lenders, to the Company or its affiliates, or (c) April 1, 2018. In consideration of the January 2018 Note, $10 thousand of the total proceeds were paid to Third Eye Capital as financing charges. On April 1, 2018, the January 2018 Note was paid in full.

On February 27 2018, a Promissory Note (the February 2018 Note, together with the Original Third Eye Capital Notes, the Third Eye Capital Notes) for $2.1 million was advanced by Third Eye Capital to Aemetis, Inc., as a short-term credit facility for working capital and other general corporate purposes with an interest rate of 14% per annum maturing on the earlier of (a) receipt of proceeds from any financing, refinancing, or other similar transaction, (b) extension of credit by payee, as lender or as agent on behalf of certain lenders, to the Company or its affiliates, or (c) April 30, 2018. In consideration of the February 2018 Note, $0.1 million of the total proceeds were paid to Third Eye Capital as financing charges. The maturity date of the note was September 30, 2018 with $84 thousand in fees due and payable at the time of the redemption of the Note. As of September 30, 2018, the outstanding balance of principal and interest on the February 2018 note was $2.1 million.

On March 27, 2018, Third Eye Capital agreed to Limited Waiver and Amendment No. 14 to the Note Purchase Agreement (Amendment No. 14), to: (i) extend the maturity date of the Third Eye Capital Notes two years to April 1, 2020 in exchange for an amendment fee consisting of 6% (3% per year) of the outstanding note balance in the form of an increase in the fee payable in the event of a redemption of the Third Eye Capital Notes (as defined in the Note Purchase Agreement); (ii) provide that the maturity date may be further extended at our election to April 1, 2021 in exchange for an extension fee of 5%; (iii) provide for an optional quarterly waiver of the ratio of note indebtedness covenant until January 1, 2019 with the payment of a waiver fee of $0.25 million; and (iv) remove the redemption fee described in (i) above from the calculation of the ratio of note indebtedness covenant. In addition to the fee discussed in (i), as consideration for such amendment and waiver, the borrowers also agreed to pay Third Eye Capital an amendment and waiver fee of $0.5 million to be added to the outstanding principal balance of the Revolving Credit Facility.

We evaluated Amendment No. 14 in accordance with ASC 470-60 Troubled Debt Restructuring. According to guidance, we considered Amendment No. 14 to be a troubled debt restructuring. We assessed all the terms to confirm if there is a concession granted by the creditor. The maturity date of the Third Eye Capital Notes was extended to April 1, 2020 for a 6% fee, compared to the extension fee of 5% provided by Amendment No. 13 to the Note Purchase Agreement (Agreement No. 13), for a one-year extension. No interest is accrued on these fees. In order to assess whether the creditor granted a concession, we calculated the post-restructuring effective interest rate by projecting cash flows on the new terms and solved for a discount rate equal to the carrying amount of pre-restructuring of debt, and by comparing this calculation to the terms of Amendment No. 13, we determined that Third Eye Capital provided a concession in accordance with the provisions of ASC 470-60 Troubled Debt Restructuring and thus applied troubled debt restructuring accounting. The extension fee, due at maturity, was discounted at the effective interest rate of the Third Eye Capital Notes, and an immediate charge was taken to recognize the fees into amortization expense on the income statement related to the troubled debt restructuring of $3.1 million and amendment fees of $0.5 million. Using the effective interest method of amortization, the remaining extension fee of $1.4 million will be amortized over the stated remaining life of the Third Eye Capital Notes.

On September 30, 2018, the Company requested and received an optional waiver of the ratio of note indebtedness covenant with the payment of a waiver fee of $0.25 million, which was added to the Revolving Credit Facility for the quarter ended September 30, 2018. The Company may request additional optional waiver of the ratio of note indebtedness covenant for the quarter ended December 31, 2018, but there are no waivers available for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019. According to ASC 470-10-45 debt covenant classification guidance, if it is probable that the Company will not be able to cure the default at measurement dates within the next 12 months, the related debt needs to be classified as current. To assess this guidance, the Company performed ratio and cash flow analysis using the forecast and debt levels. Based on this analysis, the Company believes that it is reasonably possible that through a combination of cash flow from operations, new projects that provide additional liquidity, and sales of EB-5 investments, it will be able to meet the ratio of the note indebtedness covenant over the next 12 months, hence the notes are classified as long term debt.

On March 27, 2018, Third Eye Capital agreed to a one-year reserve liquidity facility governed by a promissory note, payable in the principal amount of up to $6.0 million dollars. Borrowings under the facility are available from March 27, 2018 until maturity on April 1, 2019. Interest on borrowed amounts accrues at a rate of 30% per annum, paid monthly in arrears, or 40% if an event of default has occurred and continues. The outstanding principal balance of the indebtedness evidenced by the promissory note, plus any accrued but unpaid interest and any other sums due thereunder, shall be due and payable in full at the earlier to occur of (a) the closing of any new debt or equity financing, refinancing or other similar transaction between Third Eye Capital or any fund or entity arranged by them and the Company or its affiliates, (b) receipt by the Company or its affiliates of proceeds from any sale, merger, equity or debt financing, refinancing or other similar transaction from any third party and (c) April 1, 2019. The promissory note is secured by liens and security interests upon the property and assets of the Company. If any amounts are drawn under the facility, the Company will pay a non-refundable fee in the amount of $0.2 million payable from the proceeds of the first drawing under the facility. As of September 30, 2018, no draws were outstanding on this Note.

Terms of Third Eye Capital Notes

A.	Term Notes. As of September 30, 2018, the Company had total of $7.0 million in principal and interest outstanding under the Term Notes. The Term Notes accrue interest at 14% per annum. The Term Notes mature on April 1, 2020.

B.

Revolving Credit Facility. The Revolving Credit Facility accrues interest at the prime rate plus 13.75% (19.00% as of September 30, 2018), payable monthly in arrears. The Revolving Credit Facility matures on April 1, 2020. As of September 30, 2018, AAFK had $43.8 million in principal, interest, and waiver fees outstanding under the Revolving Credit Facility net of $0.3 million unamortized discount issuance costs, of which $0.5 million were interest-accruing waiver fees added on March 27, 2018 as part of Amendment No. 14 and $0.3 million were interest-accruing covenant waiver fees added on each period ended June 30, 2018 and September 30, 2018 to the Revolving Credit Facility.

C.	Revenue Participation Term Notes. The Revenue Participation Term Notes bear interest at 5% per annum and mature on April 1, 2020. As of September 30, 2018, the Company had a total of $11.8 million in principal and interest outstanding on the Revenue Participation Term Notes.

D.

Acquisition Term Notes. The Acquisition Term Notes accrue interest at the prime rate plus 10.75% (16.00% per annum as of September 30, 2018) and mature on April 1, 2020. As of September 30, 2018, Aemetis Facility Keyes, Inc. had $23.7 million in principal, interest and redemption fees outstanding net of unamortized discount issuances costs of $1.1 million. The outstanding balance includes the present value of the redemption fee of $3.1 million which was added to the Acquisition Term Notes on March 27, 2018 as part of Amendment No. 14.

The Third Eye Capital Notes contain various covenants, including but not limited to, debt to plant value ratio, minimum production requirements, and restrictions on capital expenditures. The terms of the Third Eye Capital Notes allow the lender to accelerate the maturity in the occurrence of any event that could reasonably be expected to have a material adverse effect, such as any change in the business, operations, or financial condition.

The Third Eye Capital Notes are secured by first priority liens on all real and personal property of, and assignment of proceeds from all government grants and guarantees from Aemetis, Inc. The Third Eye Capital Notes all contain cross-collateral and cross-default provisions. McAfee Capital, LLC (McAfee Capital), owned by Eric McAfee, the Company’s Chairman and CEO, provided a guaranty of payment and performance secured by all of its Company shares. In addition, Eric McAfee provided a blanket lien on substantially all of his personal assets, and McAfee Capital provided a guarantee in the amount of $8.0 million.

Cilion shareholder seller notes payable. In connection with the Company’s merger with Cilion, Inc., (Cilion) on July 6, 2012, the Company issued $5.0 million in notes payable to Cilion shareholders as merger compensation subordinated to 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 have been paid in full. As of September 30, 2018, Aemetis Facility Keyes, Inc. had $5.9 million in principal and interest outstanding under the Cilion shareholder seller notes payable.

Subordinated Notes. On January 6 and January 9, 2012, AAFK entered into Note and Warrant Purchase Agreements with two accredited investors pursuant to which it issued $0.9 million and $2.5 million in original notes to the investors (Subordinated Notes). The Subordinated Notes mature every six months. Upon maturity, the Subordinated Notes are generally extended with a fee of 10% added to the balance outstanding plus issuance of warrants exercisable at $0.01 with a two-year term. Interest accrues at 10% and is due at maturity. 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.

On July 1, 2018, the Subordinated Notes were amended to extend the maturity date until the earlier of (i) December 31, 2018; (ii) completion of an equity financing by AAFK or Aemetis in an amount of not less than $25.0 million; or (iii) after the occurrence of an Event of Default, including failure to pay interest or principal when due and breaches of note covenants. A 10% cash extension fee was paid by adding the fee to the balance of the new note and warrants to purchase 113 thousand shares of common stock were granted with a term of two years and an exercise price of $0.01 per share. We evaluated the July 1, 2018 amendment and the refinancing terms of the Subordinated Notes and applied modification accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.

At September 30, 2018 and December 31, 2017, the Company had, in aggregate, $9.6 million net of unamortized of discount costs of $0.3 million and $8.7 million in principal and interest outstanding, respectively, under the Subordinated Notes.

EB-5 long-term promissory notes. EB-5 is a U.S. 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. The Company entered into a Note Purchase Agreement dated March 4, 2011 (as further amended on January 19, 2012 and July 24, 2012) with Advanced BioEnergy, LP, a California limited partnership authorized as a Regional Center to receive EB-5 investments, for the issuance of up to 72 subordinated convertible promissory notes (the EB-5 Notes) bearing interest at 3%. Each note was issued in the principal amount of $0.5 million and due and payable four years from the date of each note, for a total aggregate principal amount of up to $36.0 million (the EB-5 Phase I funding). The original maturity date on the promissory notes can be extended automatically for a one or two year period initially and is eligible for further one-year automatic extensions as long as there is no notice of non-extension from investors and the investors’ immigration process is in progress. The notice of non-extension should be given at 12 month period to take effect for the next maturity date. As a result, the notes have been recognized as non-current. The EB-5 Notes are convertible after three years at a conversion price of $30 per share.

Advanced BioEnergy, LP arranges investments with foreign investors, who each make loans to the Keyes plant in increments of $0.5 million. The Company has sold an aggregate principal amount of $36.0 million of EB-5 Notes under the EB-5 Phase I funding since 2012 to the date of this filing. As of September 30, 2018, $35.0 million has been released from the escrow amount to the Company. As of September 30, 2018, $0.5 million is remaining in escrow and $0.5 million is to be funded to escrow. As of September 30, 2018, $35.0 million in principal and $1.8 million in accrued interest was outstanding on the EB-5 Notes. Out of the $36.8 million total outstanding, $1.8 million will be due within a year.

On October 16, 2016, the Company launched its EB-5 Phase II funding, with plans to issue $50.0 million in additional EB-5 Notes on substantially similar terms and conditions as those issued under the Company’s EB-5 Phase I funding to refinance indebtedness and for capital expenditures of Aemetis, Inc. and Goodland Advanced Fuels, Inc.

Unsecured working capital loans. On April 16, 2017, the Company entered into an operating agreement with Gemini Edibles and Fats India Private Limited (Gemini). Under this agreement, Gemini 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 Kakinada plant. Working capital advances bear interest at 12%. In return, the Company agreed to pay Gemini an amount equal to 30% of the plant’s monthly net operating profit and recognized these as operational support charges in the financials. In the event that the Company’s biodiesel facility operates at a loss, Gemini owes the Company 30% of the losses as operational support charges. Either party can terminate the agreement at any time without penalty. Additionally, Gemini received a first priority lien on the assets of the Kakinada plant. The Company made principal and interest payments to Gemini of approximately $10.4 million and $6.2 million during the nine months ended September 30, 2018 and 2017. As of September 30, 2018 and December 31, 2017, the Company had $4.7 million and $3.5 million outstanding on this agreement.

In November 2008, the Company entered into an operating agreement with Secunderabad Oils Limited (“Secunderabad Oils”). The 2008 agreement provided the working capital and had the first priority lien on assets in return for 30% of the plant’s monthly net operating profit. These expenses were recognized as operational support charges by the Company in the financials. All terms of the 2008 agreement with Secunderabad Oils were terminated to amend the agreement as below. On July 15, 2017, the agreement with Secunderabad Oils was amended to provide the working capital funds for British Petroleum business operations (“BP Operations”) only in the form of inter-corporate deposit for an amount of approximately $2.3 million over a 95 days period at the rate of 14.75% per annum interest rate. The term of the agreement continues until the either party terminates it. Secunderabad Oils has a second priority lien on the assets of the Company’s Kakinada plant after this agreement. On April 15, 2018, the agreement was amended to purchase the raw material for business operations at 12% per annum interest rate. During the nine months ended September 30, 2018 and 2017, the Company made principal and interest payments to Secunderabad Oils of approximately $3.0 million and $2.3 million, respectively. As of September 30, 2018 and December 31, 2017, the Company had $1.1 million and $1.3 million outstanding under this agreement, respectively.

Variable Interest Entity (GAFI) Term loan and Revolving loan. On July 10, 2017, GAFI entered into the GAFI Note Purchase Agreement with Third Eye Capital and the noteholders made a party thereto from time to time (the GAFI Noteholders). See “Part I, Item 1. Financial Statements – Note 5. Variable Interest Entity.” Pursuant to the GAFI Note Purchase Agreement, the GAFI Noteholders agreed, subject to the terms and conditions of the GAFI Note Purchase Agreement and relying on each of the representations and warranties set forth therein, to make (i) the GAFI Term Loan in an aggregate amount of $15.0 million dollars and (ii) the GAFI Revolving Loan in an amount not to exceed ten million dollars in the aggregate. The interest rate per annum applicable to the GAFI Term Loan is equal to 10%. The interest rate per annum applicable to the GAFI Revolving Loan is the greater of the Prime Rate plus seven and three quarters percent (7.75%) and twelve percent (12%). The maturity date of the GAFI Loans is July 10, 2019. The maturity date may be extended at the option of GAFI for up to two additional one-year periods upon prior written notice and upon satisfaction of certain conditions and the payment of a renewal fee for such extension. An initial advance under the GAFI Revolving Loan was made for $2.2 million as a prepayment of interest on the GAFI Term Loan for the first eighteen months of interest payments. In addition, a fee of $1.0 million was paid in consideration to the Noteholders.

On June 28, 2018, GAFI entered into Amendment No.1 to the GAFI Term Loan with Third Eye Capital for an additional amount of $1.5 million with a fee of $75 thousand added to the loan from Third Eye Capital at a 10% interest rate. The fee of $75 thousand was recognized as expense on the Amendment date. Pursuant to Amendment No.1, Aemetis, Inc. entered into a Stock Appreciation Rights Agreement to issue 1,050,000 Stock Appreciation Rights (SARs) to Third Eye Capital on August 23, 2018, with an exercise date of one year from the issuance date with a call option for the Company at $2.00 per share during the first 11 months of the agreement either to pay $2.1 million in cash or issue common stock worth of $2.1 million based on 30-day weighted average price of the stock on the call date, and a put option for the Third Eye Capital at $1.00 per share during the 11th month of the agreement where the Company can redeem the SARs for $1.1 million in cash. In the event that none of the above options is exercised, the SARs will be automatically exercised one year from the date of the issuance date based upon the 30-day weighted average price of the stock price and paid in cash and cash equivalents. We used an outside valuation expert to value the SARs using the Monte Carlo method. We recorded the fair value of the SARs of $1.3 million as fees on Amendment No. 1 and will be amortized over the term of the loan according to ASC 470-50 Debt – Modification and Extinguishment. The Company also recorded a liability for the fair value of $1.3 million which will be re-measured at every quarter end until the SARs are exercised.

As of September 30, 2018 and December 31, 2017, GAFI had $16.6 million outstanding on the term loan and $10.0 million outstanding on the revolving loan with $0.1 million in interest paid in arrears.

GAFI, the Company and its subsidiary Aemetis Advanced Products Keyes, Inc. (AAPK) also entered into separate intercompany revolving promissory notes (the GAFI Intercompany Notes), dated July 10, 2017, pursuant to which GAFI may, from time to time, lend a portion of the proceeds of the GAFI Revolving Loan borrowed under the Amended GAFI Note Purchase Agreement to the Company. The Company borrowed $1.5 million on June 28, 2018. As of September 30, 2018 and December 31, 2017, the Company and AAPK had $6.5 million and $5.7 million outstanding on the GAFI Intercompany Notes. The outstanding balances are eliminated upon consolidation.

Debt repayments for the Company’s loan obligations follow:

Twelve months ended September 30,		Debt Repayments
2019		$	19,402
2020			140,108
2021			12,500
2022			2,686
Total debt			174,696
Debt issuance costs			(3,058	)
Total debt		$	171,638