Debt

2020

Notes

The following table sets forth information pertaining to the

2020

Notes which is included in the Company’s consolidated balance sheets (in thousands).

	Principal Amount of 2020 Notes		Debt Discount			Debt Issue Costs			Total 2020 Notes		2020 Notes Embedded Derivative			Total 2020 Notes and 2020 Notes Embedded Derivative
Balance - December 31, 2017	$	16,657	$	(2,501	)	$	(665	)	$	13,491	$	5,224		$	18,715
Amortization of debt discount		-		252			-			252		-			252
Amortization of debt issue costs		-		-			67			67		-			67
Paid-in-kind interest		83		-			-			83		-			83
Change in fair value of 2020 Notes embedded derivative		-		-			-			-		(2,858	)		(2,858	)
Balance - March 31, 2018	$	16,740	$	(2,249	)	$	(598	)	$	13,893	$	2,366		$	16,259

April 19, 2017,

the Company entered into an Exchange and Purchase Agreement (the “Purchase Agreement”) with WB Gevo, LTD, the holder of the

2017

Notes (the “Holder”) and Whitebox Advisors LLC, in its capacity as representative of the Holder (“Whitebox”). The

2020

Notes were issued under that certain Indenture dated as of

June 6, 2014,

by and among the Company, the guarantors party thereto, and Wilmington Savings Fund Society, FSB, as trustee and as collateral trustee (as supplemented, the

“2017

Notes Indenture”), and Whitebox. Pursuant to the terms of the Purchase Agreement, the Holder, subject to certain conditions, including approval of the transaction by the Company’s stockholders (which was received on

June 15, 2017),

agreed to exchange all of the outstanding principal amount of the

2017

Notes for an equal principal amount of the

2020

Notes, plus an amount in cash equal to the accrued and unpaid interest (other than interest paid in kind) on the

2017

Notes (the “Exchange”). Pursuant to the Purchase Agreement, the Company also granted the Holder an option (the “Purchase Option”) to purchase up to an additional aggregate principal amount of

$5.0

million of

2020

Notes (the “Option Notes”), at a purchase price equal to the aggregate principal amount of such Option Notes purchased, having identical terms (other than with respect to the issue date and restrictions on transfer relating to compliance with applicable securities law) to the

2020

Notes issued, at any time on or within

ninety

(

) days of the closing of the Exchange. The right to purchase Option Notes expired in the

third

quarter of

2017.

June 20, 2017,

the Company completed the Exchange, terminated the

2017

Notes Indenture and cancelled the

2017

Notes. The Company recognized an approximately

$4.0

million loss which has been recorded as loss on exchange or conversion of debt within the consolidated statements of operations.

The

2020

Notes will mature on

March 15, 2020.

The

2020

Notes bear interest at a rate equal to

12%

per annum (with

potentially payable as PIK Interest (as defined and described below) at the Company’s option), payable on

March 31,

June 30,

September 30,

and

December 31

of each year. Under certain circumstances, the Company has the option to pay a portion of the interest due on the

2020

Notes by either (a) increasing the principal amount of the

2020

Notes by the amount of interest then due or (b) issuing additional

2020

Notes with a principal amount equal to the amount of interest then due (interest paid in the manner set forth in (a) or (b) being referred to as “PIK Interest”). In the event the Company pays any portion of the interest due on the

2020

Notes as PIK Interest, the maximum aggregate principal amount of

2020

Notes that could be convertible into shares of the Company’s common stock will be increased. Additional shares of the Company’s common stock

may

also become issuable pursuant to the

2020

Notes in the event the Company is required to make certain make-whole payments as provided in the

2020

Notes Indenture.

The

2020

Notes are convertible into shares of the Company’s common stock, subject to certain terms and conditions. The initial conversion price of the

2020

Notes is equal to

$0.7359

per share of common stock, or

1.3589

shares of common stock per

principal amount of

2020

Notes (the “Conversion Price”). In addition, upon certain equity financing transactions by the Company, the Holders will have a

one

-time right to reset the Conversion Price (the “Reset Provision”) (i) in the

first

ninety

(

) days following the Exchange Date, at a

25%

premium to the common stock price in the equity financing and (ii) after

ninety

(

) and to and including

one hundred eighty

(

180

) days following the closing of the Exchange, at a

35%

premium to the common stock share price in the equity financing. Following an exercise of the Reset Provision, the Holders will also have a right to consent to certain equity financings by the Company during the

one hundred eighty

(

180

) days following the closing of the Exchange.

Each Holder has agreed

not

to convert its

2020

Notes into shares of Company common stock to the extent that, after giving effect to such conversion, the number of shares of common stock beneficially owned by such Holder and its affiliates would exceed

4.99%

of Company common stock outstanding at the time of such conversion (the

“4.99%

Ownership Limitation”); provided that a Holder

may,

at its option and upon

sixty-one

(

) days’ prior notice to the Company, increase such threshold to

9.99%

(the

“9.99%

Ownership Limitation”). If a conversion of

2020

Notes by Whitebox would exceed the

4.99%

Ownership Limitation or the

9.99%

Ownership Limitation, as applicable, the Purchase Agreement contains a provision granting the holder a fully funded prepaid warrant for such common stock with a term of

nine

months, subject to a

month extension, which it can draw down from time to time.

Other than as set forth in the Reset Provision, the

2020

Notes do

not

contain any anti-dilution adjustments for future equity issuances that are below the Conversion Price, and adjustments to the Conversion Price will only generally be made in the event that there is a dividend or distribution paid on shares of the Company’s common stock, a subdivision, combination or reclassification of the Company’s common stock, or at the discretion of the Board of Directors of the Company in limited circumstances and subject to certain conditions.

Under certain circumstances, we

may

file

one

or more registration statements on Form S-

or amend filings in order to register shares of common stock for sale or resale, as necessary in connection with the

2020

Notes.

2022

Notes

The following table sets forth information pertaining to the

2022

Notes which is included in the Company’s consolidated balance sheets (in thousands).

	Principal Amount of 2022 Notes
Balance - December 31, 2017	$	515
Exchange of 2022 Notes		(515	)
Balance – March 31, 2018	$	—

July 2012,

the Company sold

$45.0

million in aggregate principal amount of

2022

Notes, for net proceeds of

$40.9

million, after accounting for

$2.7

million and

$1.4

million of discounts and issue costs, respectively. The

2022

Notes bear interest at

7.5%

per annum, which is to be paid semi-annually in arrears on

January

and

July

of each year. The

2022

Notes were to mature on

July

2022,

unless earlier repurchased, redeemed or converted. During the

three

months ended

March 31, 2018

and

2017,

the Company recorded:

●

$0.0

million and

$0.08

million, respectively, of expense related to the amortization of debt discounts and issue costs,

●

$0.02

million and

$1.2

million, respectively, of expense related to the exchange of debt;

●

$0.0

million and

$0.02

million, respectively, of interest expense related to the

2022

Notes.

The amortization of debt issue costs, debt discounts and cash interest are included as a component of interest expense in the consolidated statements of operations. The Company amortized debt discounts and debt issue costs associated with the

2022

Notes using an effective interest rate of

40%

from the issuance date through

July

2017,

five

-year period, which represents the date the holders can require the Company to repurchase the

2022

Notes.

January 2018,

the Company entered into a private exchange agreement with a holder of the

2022

Notes to exchange the remaining

$0.5

million of outstanding principal amount of the

2022

Notes for

780,303

shares of common stock. Upon completion of this exchange, the

2022

Notes were satisfied in their entirety and there are

remaining obligations under the

2022

Notes.