UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-K
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x☒ | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2013 |
For the fiscal year ended December 31, 2015
o☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ______ to ______ |
Commission file number: 0-12627
GLOBAL CLEAN ENERGY HOLDINGS, INC.
(Exact name of Small Business Issuer as specified in its charter)
______________________
| Delaware | | 87-0407858 |
(State or other jurisdiction of
incorporation or organization)
| | (I.R.S. Employer
Identification Number)
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| | 2790 Skypark Drive, Suite 105 Torrance, California 90505 | |
| | (Address of principal executive offices) | |
| | | |
| | (310) 641-4234 | |
| | Issuer’sIssuer's telephone number: | |
Securities registered under Section 12(b) of the Act: None.
Securities registered under Section 12(g) of the Act: Common Stock, $0.001 par value.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o☐ No þ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o☐ No þ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and, (2) has been subject to such filing requirements for the past 90 days.
Yes o☑ No þ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ☑ No o☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§(Sec. 229.405 of this chapter) is not contained herein and, will not be contained, to the best of registrant’sregistrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large"large accelerated filer,” “accelerated filer”" "accelerated filer" and “smaller"smaller reporting company”company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o☐ | Accelerated filer o☐ | Non-accelerated filer o☐
(Do not check if a smaller reporting company) | Smaller reporting company þ☑ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o☐ No þ☑
The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 20132015 (the last business day of the registrant’sregistrant's most recently completed second fiscal quarter) was approximately $5,339,000.
$2,713,500.
The outstanding number of shares of common stock as of November 3, 2014March 30, 2016 was 339,187,545.341,405,545.
Documents incorporated by reference: None
Form 10-K
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| ITEM 1. | BUSINESS. | 1 |
ITEM 1A | RISK FACTORS | 13 |
| UNRESOLVED STAFF COMMENTS. | 13 |
ITEM 1.2. | PROPERTIES. | 13 |
| ITEM 3. | LEGAL PROCEEDINGS. | 14 |
| ITEM 4. | MINE SAFETY DISCLOSURES. | 14 |
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| MANAGEMENTMANAGEMENT’S'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 16 |
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PART III | | |
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PART IV | | |
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report, including any documents which may be incorporated by reference into this Annual Report, contains “Forward-Looking Statements”"Forward-Looking Statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “Forward-Looking Statements”"Forward-Looking Statements" for purposes of these provisions, including our plans to cultivate, produce and market non-food based feedstock for applications in the biofuels market, any projections of revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding the timing and size of Jatropha or Camelina harvests, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All Forward-Looking Statements included in this document are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any Forward-Looking Statement. In some cases, Forward-Looking Statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,”"may," "will," "expects," "plans," "anticipates," "intends," "believes," "estimates," "potential," or “continue,”"continue," or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the Forward-Looking Statements contained herein are reasonable, there can be no assurance that such expectations or any of the Forward-Looking Statements will prove to be correct, and actual results could differ materially from those projected or assumed in the Forward-Looking Statements. Future financial condition and results of operations, as well as any Forward-Looking Statements are subject to inherent risks and uncertainties, including any other factors referred to in our press releases and reports filed with the Securities and Exchange Commission. All subsequent Forward-Looking Statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional factors that may have a direct bearing on our operating results are described under “Risk Factors” and elsewhere in this report.
Introductory Comment
Throughout this Annual Report on Form 10-K, the terms “we,” “us,” “our,”"we," "us," "our," "our company," and “our company”"the Company" refer to Global Clean Energy Holdings, Inc., a Delaware corporation that was formerly a Utah corporation known as Global Clean Energy Holdings, Inc. and prior to its name change in 2008, was Medical Discoveries, Inc., and, unless the context indicates otherwise, also includes all of this company's U.S. and foreign wholly-owned subsidiaries through which this company conducts certain of its operations. To the extent applicable, depending on the context of the disclosure, the terms “we,” “us,” “our,”"we," "us," "our," and “our company”"our company" may also include GCE Mexico I, LLC (“("GCE Mexico”Mexico") a Delaware limited liability company, in which we own 50% of the common membership interests, our wholly-owned subsidiary, Sustainable Oils, Inc., a Delaware Corporation, our wholly-owned subsidiary, G.E.H. Dominicana, S.R.L., a company formed under the laws of the Dominican Republic, Globales Energia Renovables S DE RL DE CV as well as our other subsidiaries.
Global Clean Energy Holdings, Inc. is not related to, or affiliated in any manner with “Global"Global Clean Energy, Inc.”" Readers are cautioned to confirm the entity that they are evaluating or in which they are making an investment before completing any such investment.
Overview
Global Clean Energy Holdings, Inc. is a U.S.-based multi-national, energy agri-business focused on the development of ultra-low carbon non-food based bio-feedstocks.feedstocks for renewable fuels and chemicals in the U.S. Mexico and the Caribbean. We have full service in-house development and operations capabilities which provides support tothat supports our own biofuel energy farms and provides advisory services to third parties. With international experience and capabilities in eco-friendly biofuel feedstock management, cultivation, production and distribution, we believe that we are well suited to scale our existing business.
Since 2007, our business focus has been on the commercialization of non-food based oilseed plants and biomass. We began with the development of farms growing Jatropha curcas (“Jatropha”("Jatropha") - a non-edible plant indigenous to many tropical and sub-tropical regions of the world, including Mexico, the Caribbean and Central America. As a result of our acquisition on March 13, 2013 of Sustainable Oils, LLCAmerica and its assets, our biofuels operations now also includes the cultivation of Camelina sativa (“Camelina”("Camelina") – an annual plant from the brassica family traditionally grown in northerly regions of the United States, Europe and Asia. We arehave focused on these two plant species primarily because we feel they have the potential to produce oil seed crops economically, they generally require less water and fertilizer than many conventional crops, and they can be grown on land that is normally unsuitable for food production or is fallow or idle due to crop rotation.
Both Jatropha and Camelina oil are high-quality plant oils used as direct substitutes for fossil fuels and as feedstock for the production of high quality "ultra-low carbon"biofuels and other bio-based products. Both crops have been tested and proven to be highly desirable feedstocks capable of being converted into ASTM approved fuels.fossil fuel replacements. The term “biofuels”"biofuels" refers to a range of biological based fuels including bio-kerosene (a.k.a bio-jet fuel), biodiesel, renewable diesel, green diesel, synthetic diesel and biomass, most of which have environmental benefits that are the major driving force for their adoption. Using biofuels instead of fossil fuels reduces net emissions of carbon dioxide and other green-house gases, which are associated with global climate change. Both Jatropha and Camelina oil can also be used as a chemical feedstock to replace fossil and non-food based products that currently use edible oils in their manufacturing or production process. The residual material derived from the oil extraction process is called press-cake, which in the case of Jatropha is a high-quality biomass that has been proven and tested as a replacement for a number of fossil-based feedstocks, fossil fuels and other high value products such as renewable charcoal, fertilizers, and animal feed. Camelina press-cake or meal is high in Omega3 fatty acids and has already been approved by the FDA and sold by our wholly owned subsidiary Sustainable Oils as a livestock (animal) feed or enhancementingredient in the United States.
Our business plan and current principal business activities include the plant science development, planting, cultivation, harvesting and processing of these oil seed plants to generate plant based oils and biomass for use as replacements for fossil fuels and other high value products. Our strategy is to leverage our plant science, agriculture and energy knowledge, experience and capabilities through the following means:
| · | Own and operate biofuel energy farms for our own account. |
| · | Own, operate and manage farms in a joint venture (JV) with either strategic partners or financial investors. We currently own two Jatropha farms in Mexico under such joint ownership arrangements, and a third farm in Mexico that we acquired for the purpose of Jatropha cultivation, where we are currently cultivating an annual oil seed crop. |
| · | Contract with third party farmers (such as wheat, canola and barley farmers) for the cultivation of Camelina sativa on their farms in the United States, Latin America and Europe. |
| · | Produce and sell "certified" Camelina seeds that are based upon our patented, high-yielding elite varieties to farmers in the United states and internationally. |
| · | Provide energy farm development, advisory and management services to third parties, including to non-farming industrial companies who have a demand for biofuels, to owners of biofuel energy farms, and to non-energy crop farmers looking to utilize energy crops in rotation or inter-cropped with their existing crops. |
| · | Provide advisory services to farmers wishing to certify their farms under international sustainability or carbon certification standards specificallylike the Roundtable on Sustainable Biofuels (RSB) and Gold Standard Verified Emission Reductions (GS-VERs) |
| · | Provide turnkey franchise operations for individuals and/or companies that wish to establish purpose specific energy farms in suitable geographical areas. |
The development of agricultural-based energy projects, like plant oil and related biomass, may produce carbon credits through the sequestration (storing) of carbon and the displacement of fossil-based fuels. Accordingly, in addition to generating revenues from the sale of non-food based plant oils and biomass and related advisory and management services, our goal is to certify our farms, where practical, to generate and monetize carbon credits. See, “Business--Carbon"Business--Carbon Credits,”" below.
Organizational History
This company was originally incorporated under the laws of the State of Utah on November 20, 1991. On July 19, 2010, we changed the state of our incorporation from Utah to Delaware. Our principal executive offices are located at 2790 Skypark Drive, Torrance, California, Los Angeles County, California 90505, and our current telephone number at that address is (310) 641-GCEH (4234). We maintain a website at: www.gceholdings.com. Our annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"), and other information related to this company are available on our website as soon as we electronically file those documents with, or otherwise furnish them to, the Securities and Exchange Commission. Our Sustainable Oils subsidiary also maintains a website at www.susoils.com. Our Internet websites and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Annual Report on Form 10-K.
Sale of Three Mexico Jatropha Farms
In 2008, we launched our first Jatropha venture in Mexico through GCE Mexico I, LLC ("GCE Mexico") a Delaware limited liability company that we formed with two investors (one of whom sold his interest to the other investor). We owned 50% of the common membership interests of GCE Mexico, our investor owned the other 50% of the common membership interests and GCE Mexico's preferred units. During the first five years, GCE Mexico acquired three Jatropha farms in Mexico. The first farm comprised 5,149 acres; the second farm comprised 5,100 acres, and the third farm comprised 5,557 acres. The first two farms were developed and planted with various varieties of Jatropha; the third farm was not used for Jatropha and was, in 2014, eventually planted with non-Jatropha crops. Our first two Jatropha farms were planted with over 7.0 million Jatropha trees, consisting of over 25 varieties of Jatropha trees from around the world. The various varieties were tested to determine which varieties were most suitable for commercial production. While we have harvested significant quantities of Jatropha fruit and seed from this farm, the harvests did not meet our requirements for operating a commercial Jatropha seed farm. Accordingly, we stopped intense cultivation to allow the Jatropha trees in this farm to naturally grow and develop without commercial agricultural intervention. The second Jatropha farm was planted with fewer, more selective varieties of Jatropha trees. Based on our 2013, 2014 and 2015 crop year harvest results, the varieties planted in the second farm met our cumulative yield goals.
The acquisition costs and operating expenses of the three Mexico Jatropha farms were funded by our GCE Mexico joint venture partners. The total amount contributed by our joint venture partners to GCE Mexico since inception was approximately $22,600,000. Because our Jatropha farms (the first farm in particular) were not producing the quantities of Jatropha seeds that we had initially anticipated, the projected amount of funds our joint venture partner would have to fund to continue the operations of the three farms continued to increase. In addition, our business plan called for an expansion of the three Mexico farms. Due to our joint venture partner's other financial commitments, our partner was not able to invest the significant additional capital needed to expand the farms to the required 10,000 hectares needed to achieve commercial profitability. Accordingly, in 2015 we jointly decided to sell the three farms and to dispose of these operations in order to focus our resources on other Jatropha and camelina bio-fuel opportunities. Our GCE Mexico joint venture partner continues, through his family's investment in our common stock, to be a significant stockholder of this Company.
On December 2, 2015, we sold the three Jatropha farms to an unaffiliated, a Mexican agricultural operator in the region. The cash purchase price for the three farms was MXP $89 Million (approx. US$5,908,000). In addition, as a result of the structured transaction we extinguished approximately $4.7million of accrued interest and $12.1 million of preferred return. GCE Mexico assigned U.S. $5.1 million of the purchase price the our joint venture partner to repay the U.S. $5.1 million of mortgage loans made by the investor to GCE Mexico's operating subsidiaries. In addition, as part of the sale of the three farms and the repayment of the mortgage loans, the investor agreed to forgive and extinguish (i) approximately $4.7 million of unpaid interest that had accrued on the three mortgage loans, and (ii) the preferred return (approximately $12.1 million) that the preferred unit holders had accrued. We did not receive any cash from the sale of the three farms. However, as result of the repayment of the three mortgage loans, the forgiveness of the accrued interest on those loans, and the extinguishment of the accrued preferred return, approximately US$21.9 million of long term liabilities were extinguished from this Company's consolidated balance sheet.
GCE Mexico sold the three farms, but did not sell any of the Jatropha intellectual property that we developed on those farms (including the Jatropha varieties we developed on the farms). In addition, we retained the rights to complete some of our Jatropha research on portions of the three farms, and the sales agreements granted us access to our elite genetics on these farms for an extended period, allowing us to continue our Jatropha genetic development program. As a result, our Jatropha genetics are preserved as a core company asset, along with the significant institutional knowledge, experience and know-how we have acquired over the years. We also retain the proprietary delivery platform developed over the last seven years in Mexico. As part of the sale, we also retained access rights to our Certified Nursery and Research areas for an extended period of time.
The sale of the three farms significantly improved our balance sheet by eliminating $21.9 million of long-term liabilities and enables us to continue to pursue our biofuels operations. As a result of the sales, we eliminated 100% of our long term, high cost liabilities (the loans accrued interest at 12% per annum, and the preferred return accrued at a rate of 12% per annum) that we incurred during the initial research and development phase of the three farms our Mexico Jatropha operations, and we reduced our overall consolidated liabilities by approximately 77%. We believe that reducing debt is critical for us to be able to raise additional capital for the expansion phase of our business and to deploy the superior genetics we have spent years developing on a commercial scale.
Developments During 20132015 and Part of 2014
2016
During the fiscal year ended December 31, 20132015 and through the date of this Annual Report, we achieved the following milestones in the development of this company, which developments are further discussed below:
| · | We acquired assetshave been issued the first-of-its-kind Low Carbon Fuel Standard (LCFS) feedstock pathway through California's Air Resources Board for fuels based upon our patented Camelina varieties. The uniqueness is that only Sustainable Oils' Camelina oil can be supplied into the California market and qualify for LCFS credits; and |
| · | The EPA has recently issued a pathway for Jatropha oil from the companies application which was filed in 2011. This allows Jatropha oil to be used in the U.S. as a feedstock for advanced biofuels, qualifying it to generate Renewable Identification Numbers (RINs) under the Renewable Fuels Standard (RFS2). |
| · | We have been issued two new additional plant patents for Camelina which will allow us to continue our genetic development further improving our varieties; and |
| · | We have entered into plant research and/or materials transfer Agreements with University of California Davis, University of Colorado, Kansas University, University of Nebraska – Lincoln and University of Nevada – Reno. All of which are designed to either improve our plant genetics or sort through our extensive tilling library for high value Camelina varieties; and |
| · | We continued to expand our intellectual propertiesproperty necessary to develop and commercialize Jatropha and Camelina sativa as a biofuels feedstock; and |
| · | We completed the development of our research farm in the Caribbean, , which we are using to assess the growth of multiple varieties of Jatropha plants and, more recently, to explore the production of Camelina throughout the Caribbean, and; |
| · | We obtained financing to developfunding and began the development of a Certified Seed Nursery in the Caribbean to produce production seed for the future development of a commercial bio-fuel operations we are workign on developing in the region with a strategic partner, and; |
| · | We significantly expanded the amount and type of management and advisory services we provide to partners and/or third parties, and; |
| · | We raised an additional $1.6 million of financing fordivested our jointly owned Mexicothree Jatropha farms in Mexico, thereby reducing our long term debt by 98% and for this company’s other bio-fuel and other operating purposes.our overall liabilities by over 77%. |
Business Operations
Operations-Strategy
We are a multi-nationalan energy agri-business with development and operations capabilities.capabilities in the U.S., Mexico and the Caribbean. We maintain in-house staff for the development, management, cultivation, production and distribution of plant-based feedstock used to offset fossil fuels. Our business plan and current principal business activities include the plant science, planting, cultivation, harvesting and processing of non-food based plants to generate seed oils and biomass for use in the biofuels industry, including the production of bio-jet,ultra-low carbon renewable-jet, biodiesel, and greenrenewable diesel and renewable chemicals. As a co-product of our farming and production processes, we will also produce feedstocks and product streams that substitute and displace fossil- and edible oil-based inputs in many industrial processes, including fertilizer, paint and fossil fuel production.
SinceWith as much as 85% of the inceptionproduction cost of bio-fuels businessrenewable fuels being the feedstock, we made the decision in 2007 to focus our strategy has been to beon becoming a diversified bio-energy feedstock provider by growing and expanding our energy farming and processing business to include numerous bio-based feedstock crops. We plancontinue to push the plant science and operational platform to allow us to expand to the level where economies of scale and our methods of operations allow us to generate significant revenues and profits without the need for any government subsidies.
The processes and procedures we employ to plant and cultivate our crops for our business are being continually refined in order to produce “best practices”"best practices" for energy farm operations. By focusing on improving our farming practices and the technology we apply to our operations, we plan tocan operate economically, environmentallyeconomical, environmental and socially sustainable energy farms which can replace fossil fuels or food based feedstocks at a production cost well below the market price of their alternatives. By continuing to invest in research and development, and acquiring or strategically aligning with companies that possess leading-edge technology in plant genetics, we will continue to develop high-yielding energy crops that deliver renewable energy feedstock into the market at competitive prices.
Our strategy is to leverage our farming and energy knowledge, experience and capabilities through the following means:
Research Farms. InWe began our first research farms in early 2007 in Mexico and have continued that commitment. Our latest research farm was established in 2013, when we completed land preparation and planting, and began operations on an energy farm in the Caribbean. This farm is being used to test and research the growth of multiple varieties of Jatropha and other oil seed plants, and to adapt them to the local conditions for future commercial farm expansion in the CarribeanCaribbean region. We are also using this farm to perform a full trial of Camelina production in the Carribean,Caribbean.
Genetic Nursery Operation. We developed our first "Certified Germplasm Nursery" in Mexico in 2013 and arein 2015 developed another one in the process of expanding this research farmCaribbean to produce locally adapted Jatropha and Camelina seeds of the best varieties for this growing region. As our business progresses, we will continue to work on plant genetics, soil science and cultivation practices to improve short-, medium- and long-term yields.
Partnership Farms Owned Via Joint Ventures. We currently own three farms through joint venture arrangements with a third party financing source. Our first farm in Mexico (which we refer to as Asideros 1), consisting of approximately 5,149 acres of land near Tizimin, in the Yucatan Peninsula of Mexico. The second farm (which we refer to as Asideros 2), consisting of approximately 5,100 acres, is located adjacent to the first farm. In 2011, we acquired our third farm (which we refer to as Asideros 3), consisting of approximately 5,557 acres, that is located approximately five miles from the first two Mexican farms. Asideros 1 and 2 have been previously prepared and planted with over 6.0 million Jatropha trees. Asideros 1 was planted with more than 20 varieties of Jatropha trees from around the world. In part because of this diversity, the seed production capabilities of Asideros 1 are uncertain and have not met initial seed production estimates. As a result, we are currently focusing our operational efforts on Asideros 2, as this farm has more of the Jatropha varieties that, we believe, have the greatest potential for production. We plan to utilize the germplasm selections from some high-yield varieties growing on Asideros 2 or from our other breeding programs, to improve the varieties grown on Asideros 1. In 2014, we began cultivation on a portion of Asideros 3, with an annual oil seed crop, to determine the best agronomics and cultivation practices and to confirm yields. To date, we have acquired all the permits and certifications necessary to develop Asideros 3 as an energy farm but have not yet commenced commercial scale operations on that farm. On the first two farms, all the necessary roads and support infrastructure have been developed to support all necessary operations. The Jatropha trees on Asideros 2 are expected to gradually mature to become fruit bearing trees. Sales revenues generated from Asideros 1 and 2 to date have primarily consisted of the sale of Jatropha seeds for propagation, the production and sale of biomass used for specialty purposes, and limited quantities of oil and biomass for testing by potential customers.
For additional information regarding our joint venture operations, see “Jatropha Farming Operations—Tizimin--Mexico Farm,” below.
Jatropha Farm Development and Management Services. We continue to provide development and management services to unaffiliated companies and individuals who are planning the development and implementation of energy farms domestically and internationally. These services are provided on a fee-for-service basis. During the past four fiscal years, we have provided such advisory and management services for the evaluation of new Jatropha and Camelina farm operations based in Mexico, the Caribbean, South America Africa, and the United States. We have increased the level of these development and management services.Africa. The fees from these agreements will behave been used to fund corporate operations and the expansion of our technical services delivery platform. To date, our management services agreements have been short-term agreements that have to be renewed periodically or replaced with new agreements. As a result, revenues from development and management services fluctuate significantly.
Contract Farms. Our contract farming operations will focushave historically focused on the production of Camelina.our annual crops, Camelina, but we expect these same type of contracts can be used for our perennials, Jatropha. We willintend to continue with the relationships established by our wholly owned subsidiary, Sustainable Oils, which are expected to allow us to quickly expand contract farming operations on non-company owned farms. Under the existing contract farm arrangement, we sell our certified Camelina seeds to third party farmers who own or rent the land and have skills, labor and equipment to properly farm the land. We will also provide these farmers with previously proven “best practices”"best practices" for Camelina cultivation and with the support of our technical services team of agri-business professionals. The majority of the farmers that grow the Camelina plants are expected to enter into contracts to sell the Camelina seeds harvested from their farms to us, following the harvest (usually 90-100 days after planting). This procedure will allow us to quickly expand our business without the need to acquire land or any of the machinery, equipment or personnel to operate large farming operations.
Franchise Jatropha Farms. We have established a program for offering franchise operations for Jatropha farms. This program consists of all of the necessary programs and procedures to establish and operate a profitable Jatropha farm. The program also entails establishing and providing methods to obtain all necessary equipment and supplies. To date, we have not entered into any such franchise agreements.
Our core activities consist of planting, cultivating, harvesting and processing non-food based oil seeds to generate liquid and solid feedstocks used in the biofuels industry and other high value, energy intensive industries where fossil- or plant-based oils are used as primary feedstocks. These industries include those that produce biodiesel and renewable diesel, renewable jet, and other high value biofuels and renewable chemicals.
We have identified the Jatropha curcas and Camelina sativa plants as our primary feedstocks for producing biodiesel, other biofuels including renewable diesel and renewable jet fuel and renewable chemicals, but we continue to research and test other plant species. The seeds from these plants contain oil with beneficial properties for the production of biofuels or as direct, drop-in replacements for fossil fuels. We plan to utilize the seed oils for producing biofuels and bio-chemicals, the presscakepress-cake (the residue of oil seeds when the oil has been pressed out) from Jatropha as a solid fuel, and the presscakepress-cake (meal) from Camelina as a high value animal feed. TheWe have obtained regulatory approval from the FDA has approvedfor the use of Camelina presscake or meal as a protein-rich animal feed for cattle, poultry or swine. We currently use the fruit shell (hull) from the Jatropha fruit as aan ingredient in our soil amendment program fertilizer to reduce our fertilizer input and costs.
The Jatropha plant is a perennial tree that produces inedible fruit containing large seeds with a high percentage of high-quality inedible oil. Camelina is in the mustard seed family and produces small, very high oil content seeds that, like Jatropha, are well suited to the production of renewable fuels and bio-chemicals. Sustainable Oils’Oils' Camelina oil-based jet fuel has been tested, approved and certified for use in multiple military aircraft, including severalmany tactical combat planesjets and helicopters. It is among the most highly tested and approved feedstocks for renewable fuels and chemicals to date.
We have identified a number of strategic locations ideally suited to Jatropha or Camelina cultivation and processing. These locations have been selected for a number of key strategic reasons, including proximity to large customers who require the products, close to ports for logistics purposes, relatively stable democratic governments, favorable trade agreements with the United States, low-cost land, reasonably priced labor, favorable weather conditions and acceptable soil conditions. We presently maintain farm properties in the Yucatan Peninsula of Mexico, on which we have commenced planting Jatropha and where we conduct research and development activities focusing on plant genetics, soil sciences, plant breeding and other related activities. We also own and operate a research farm in the Caribbean which is used to acclimate various varieties to the region for future farm expansion. We also use these facilities for research conducted in collaboration with The Center for Sustainable Energy Farming (www.CfSEF.org). We continue to sponsor and support research to identify and develop improved Jatropha varieties, as well as to establish ideal growing conditions in order to maximize our output of Jatropha fruit, seed oil and biomass while reducing inputs and maximizing resistance to pests and diseases. We have executed collaboration agreements with a number of developers and researchers around the world and are in process with joint research programs to test various “elite” varieties for their applicability in the Latin American market. With the recent acquisition of Sustainable Oils, we will expand these research initiatives to include Camelina.
Our primary focus remains the ultra-low carbon renewable feedstock oil market, and we will continue expanding our operations, primarily in the areas of planting, harvesting and sale of feedstocks to end users in the energy and bio-chemical industries. In the short term, we will continue our farm development activities and prepare for large-scale harvests ofoperations which will include both Jatropha and Camelina seeds. We expect to generate short-term revenues through the sale of Jatropha and Camelina seeds for germination, and the sale of oil, biomass and presscake (meal) as a thermal fuel or approved animal feed. We continue to pursue the sale of our oil and biomass products into higher value, non-fuel, specialty markets like “green"green chemicals,” “green" "green plastics,”" and nutraceuticals. Some of these specialty sales could represent a significant source of future revenues at substantially higher profit margins than the renewable energy feedstock sales.
Our board, management, employees, partners, technical advisors and consultants are senior energy, agricultural and business professionals that possess extensive experience in the energy and alternative fuels market. The group has experience in the production of biofuels, renewable energy, and the agriculture businesses. Accordingly, we have the resident expertise to provide development and management services to other companies pursuing biofuels and/or feedstock development activities, on a fee for services basis. As described below, we currently provide such biofuel consulting services in locations, and for parts of the business, that are strategically beneficial to our existing or planned sites and businesses.
Jatropha Farming Operations
Mexico.
As described above, pursuant to agreements entered into on December 2, 2015 we sold our three farms in Mexico,. and ceased operations effective on December 31, 2015. This transaction allowed us to reduce high-cost debt by 98% and overall liabilities by 74%, which was mostly incurred during the initial research and development phase of our business. The mortgages on the land totaling $5,110,000 were paid in full. Additionally, as part of the structured transaction with our JV Partners, we eliminated the liability of the accrued interest of $4,734,000 and preferred return of $12,140,000. Reducing debt is critical for us to be able to raise additional capital for the expansion phase of our business and to deploy the genetics we have spent years developing on a commercial scale. We did not sell any of our Jatropha intellectual property (IP) rights to the buyer. As a result, our Jatropha genetics are preserved as a core GCEH asset along with the enormous amount of institutional knowledge, experience and know-how that we developed over the past 8+ years in Mexico. As we move forward with our long-term development plan, we need a stronger balance sheet to raise additional capital for our ongoing business expansions in both Latin America and the Caribbean , as well as domestically.
Caribbean.
We currently own 50% of the issued and outstanding common membership units of GCE Mexico, the limited liability company that, through its subsidiaries, owns the threeoperate two Jatropha farms in Mexico. The remaining 50% in common membership units were issued to five investors affiliated with one of our largest stockholders (Global Clean Energy Holdings and the other members of GCE Mexico holding the common membership unitsCaribbean on leased land which are collectively referred to as “Common Members.”) In addition, an aggregate of 1,000 preferred membership units were issued to investors also affiliated with one of our largest stockholders (the “Preferred Members”). During 2013, one of the Preferred Members acquired the Membership units of the other Preferred Members and,used as a result, is now the sole Preferred Member. As of November 3, 2014, the Preferred Members had provided a total of approximately $27 million to GCE Mexico for the purchase of the land underlying the three farmsresearch farm and for other operational purposes. It is expected that the sole Preferred Member will continue to fund the ongoing operations of GCE Mexico in in 2014 accordance with the approved 2014 budget. Additional funding will be necessary until the Jatropha farms generate adequate funds to sustain operations. The Preferred Member is entitled to a preferential return on his investment, the accrued cumulative amount of which was approximately $7.4 million as of December 31, 2013.
Included in the approximately $27 million that has been provided to date by the Preferred Members of GCE Mexico, the Preferred Members directly funded the purchase by GCE Mexico of the land in the State of Yucatan in Mexico on which the three GCE Mexico farms are located. The purchase of land for the three farms was funded by mortgage loans, which cumulatively had an initial principal balance of $5,110,000. Each parcel of land was acquired in the name of one of GCE Mexico’s Mexican subsidiaries and is secured by a mortgage in favor of the Preferred Member. The mortgages bear interest at the rate of 12% per annum, and interest is payable on a quarterly basis to the extent the borrower has sufficient cash flow. If the borrower does not have sufficient cash to repay the interest on a current basis, then the loan agreement states that the unpaid interest will continue to accrue and will be payable when the borrower determines that it has sufficient cash to make the interest payment. The three mortgages, including any unpaid interest, become due in April, 2018, February 2020, June 2021 and October 2021.
GCE Mexico is managed under the supervision of a board of directors comprising of four members, two of whom are appointed by us and two by the Preferred Member. However, we are the manager of the joint venture, and through our wholly owned Mexican subsidiary, we manage the day-to-day operations of GCE Mexico and the operations in Mexico. GCE Mexico reimburses us for the cost of management of the farms, which includes a portion of our U.S. administrative expenses that are related to those operations.
The following is a summary of certain factors relevant to an understanding of the operations of the three Mexico farms:
| · | We planted over 20 varieties of Jatropha trees from around the world in our first Mexico farm approximately four years ago in order to determine which varieties are most suitable for commercial production. These trees are being evaluated on the basis, of among other things, the amount of fruit/seeds that they produce, their resilience to pests and diseases, their compatibility to existing soil and climate conditions, and amount of maintenance and care required to maintain the trees. The first farm has demonstrated that many of the varieties we planted in the first farm are not suitable for commercial biofuel seed production. While we have to date harvested small quantities of Jatropha fruit from this farm, we are currently allowing the Jatropha trees in this farm to naturally grow and develop without commercial agricultural intervention to determine which trees will be retained for commercial production, which trees possess advanced attributes that will be used for breeding and which trees/areas will be replanted with the more successful, hardy varieties in 2014 and beyond. The second Jatropha farm was planted with fewer, more selective varieties of Jatropha trees. Although some of our trees produced fruit and seeds in 2013, we expect higher yields in subsequent years. Our plan is to continue to develop this second farm and to replace certain lower yielding varieties of trees in order to prepare this farm for commercial scale biofuel production. Jatropha seeds can be harvested throughout the year. Accordingly, as the trees that we planted during the past several years mature, our harvests of Jatropha seeds is expected to increase future revenues from our Mexican operations. |
| · | Our Tizimin, Mexico, operations have been eligible for agricultural and other subsidies provided to certain foreign owned farming operations by the federal government of Mexico. Through the year ending December 31, 2013, we received a total of $2,146,000 of subsidy payments. These subsidies have been used to defray some of the initial start-up and early adopter costs that we incurred in establishing these farms. We will continue to apply for any subsidies that we qualify for in future years. |
| · | Our Tizimin farms are being developed with the intent of providing non-food based feedstocks for the production of biofuels and to displace to use of food crops in the oleo-chemicals market. However, our development and cultivation of these farms has also enabled us to generate ancillary revenues from these operations. For example, we have received revenue from the sale of biomass (wood and agricultural waste removed from our farms as the land is cleared for Jatropha planting), which we expanded in 2014. Since July 2014 we have produced over 300 metric tons of biomass based charcoal. We have all the permits in place and expect the continue the charcoal operations for a minimum four more years. |
| · | The third farm that we own in Mexico through our GCE Mexico operations (known as Asideros 3) is expected to ultimately be planted with Jatropha trees once we complete the replanting of certain areas of Asideros 1 and Asideros 2. Until then, we plan to prepare and plant a significant portion of this land with other crops, primarily annuals, that can be commercially sold for a number of end uses, which may include biofuels.�� In 2014, we planted the first portion of the farm with an annual seed oil crop, which will be harvested and sold in November 2014. We expect that these other farming activities will generate revenues to help support our other farming costs and will also increase the underlying value of this farm should we decide to change its use or sell it in the future. |
| · | Total capital used for start-up expenses and operations, since inception, for the three farms in Mexico (through March 10, 2014) is approximately $26 million (excluding subsidies received from the government of Mexico). All such funding has to date been provided by the investing partners of GCE Mexico, the joint venture that indirectly owns the three Mexican farms. Our investment partner has a priority right to receive revenues generated from these farms until the cumulative amount of this investment, plus a preferred return, has been returned. We will share in revenues and profits generated by the three farms if/when the foregoing $27 million investment, plus the accumulated return, has been returned to the investor. |
certified seed nursery.
Camelina Farming Operations
On March 13, 2013, we completed the purchase of certain assets, patents, and other intellectual property and rights related to the development of Camelina sativa as a biofuels feedstock (the “Camelina Assets”"Camelina Assets") from Targeted Growth, Inc., a Washington corporation. Also on March 13, 2013, we purchasedand all of the membership interests of Sustainable Oils, LLC, (“SusOils”("SusOils") a Delaware limited liability company, from Targeted Growth, Inc. and the other, minority owner of that limited liability company. SusOils is a company that, since 2007, has been engaged in the development, production and commercialization of Camelina-based biofuels and FDA approved animal feed. Substantially all of the Camelina Assets were previously owned by SusOils and used in SusOils’ operations.
The Camelina Assets, include:at the time, included: three issued U.S. patents on Camelina Sativa varieties; a substantial portfolio of other IP assets, all of the seller’sseller's intellectual property related to the research, development, breeding and/or genetic development of Camelina; germplasm; licenses, consents, permits, variances, certifications and approvals granted by any governmental agencies relating to Camelina operations; machines, equipment, tractors and vehicles used in Camelina operations; the name “Sustainable Oils”"Sustainable Oils" and the Sustainable Oils logo; and certain trade secrets, know-how, and technical data. Our goal is to continue, and expand, the operations of Sustainable Oils (although such operations may be conducted under a new subsidiary), and to obtain additional funding for that subsidiary.
We paid for the Camelina Assets by issuing to Targeted Growth, Inc. (i) a secured promissory note in the principal amount of $1,300,000 (the “Promissory Note”) and (ii) an aggregate of 40,000,000 shares of our common stock. The Promissory Note was originally secured by certain of the machines, equipment, tractors and vehicles that we purchased to Targeted Growth, Inc. In September 2014, we renegotiated the terms fo the agreement and returned these machines, tractors, vehicle to Targeted Growth, Inc. in consideration for a reduction of outstanding balance of the Promissory Note and the extension of the maturity date of the Promissory Note to December 31, 2014. The current note is no longer secured by any assets.
The purchase price for the Sustainable Oils, LLC membership interests was $100. Sustainable Oils’ assets included 295,000 pounds of “certified” Camelina seeds to be used or sold for the production of Camelina feedstock. The liabilities of Sustainable Oils include an approximately $2.3 million liability to UOP LLC, which is secured by a lien on the three patents we acquired as part of the Camelina Assets. We did not, however, assume the foregoing $2.3 million liability.In order to facilitate our Camelina operations, we have also entered into a long-term license agreement with Targeted Growth, Inc. under which Targeted Growth granted us a world-wide, exclusive license for the use of certain of its patented intellectual property with our future Camelina operations. The license requires us to pay a royalty commencing with the commercialization of the covered intellectual properties. We have also subleased a portion of Targeted Growth’s Bozeman, Montana research facility, where SusOils had previously performed its research and development. We will continue Camelina research and development at that same facility with the support, as needed by certain employees of Targeted Growth, who will provide services to us under a separate Services Agreement, on an as needed, cost pass-through basis.
Since its formation, SusOils has, among other things, developed new Camelina products, been issued threefive U.S. plant protection patents on technologies it developed, arranged for the planting and harvesting of over 100,000 acres of Camelina in 10 states and Canadian provinces, performed Camelina research or field level trials in 34 US States and 6 Canadian provinces, as well as seven other countries (Spain, Italy, Portugal, Australia, New Zealand, Ukraine and Saudi Arabia). SusOils has contract processed Camelina oil into renewable jet fuel that they supplied to the U.S. Navy’sNavy's aircraft fleet. During the years 2010 through 2012, Sustainable Oils generated over $20 million of revenues from its operations and incurred net losses in part due to its research and business development activities of over $5.8 million (unaudited estimate). Although we intend to utilize SusOils’SusOils' technologies and to capitalize on that company’scompany's business development efforts, our business plan for the Camelina business differs from the Sustainable Oils business model. Specifically, at this time, we have no planned sales of oil to the U.S. military.
We are currently operating our Camelina business through a new subsidiary, SustainabelSustainable Oils Inc, a Delaware Corporation. We have capitalized that new subsidiary with certain of the Sustainable Oils intellectual properties and operating and intangible assets that we recently purchased. In order to fund the operations and expansion of the Camelina operations, we will need to raise additional capital through the sale of debt or equity in the newly formed Delaware Camelina subsidiary, Sustainable Oils, Inc. Sustainable Oils’Oils' research operations have been headquartered in Bozeman, Montana. We intend to continue to conduct our Camelina research operations in Montana. Accordingly, in March 2013, we entered into a sublease with Targeted Oils, Inc., a Washington based crop biotechnology company focused on developing products with enhanced yield and improved quality forMontana but manage the agriculture and energy industries, to sublease a portion of Targeted Growth’s research facilities and administrativebusiness from our offices in Bozeman, Montana. See, “Item 1.02. Properties.”Southern California.
In February 2013, the Environmental Protection Agency (“EPA”) issued a final rule that describes new fuel pathways to qualify Camelina oil (new feedstock) as an advanced biodiesel and renewable diesel (including jet fuel and heating oil). With the recent approval of Camelina oil by the EPA as an advanced biofuels feedstock under national renewable fuel standards, and the newrecent and unique California ARB Camelina pathway approval, the focus for Sustainable Oils is to quickly expand its footprint of planted acreage to achieve economies of scale and profitability. We plan to commercialize Camelina products and expand its products into areas where the highest value can be obtained. This includes for various biofuels, renewable chemicals, specialty chemicals and high value animal feed. We plan to continue to:
| 1. | Utilize established farmers with available land which is either fallow or idle due to crop rotation. By using their existing equipment and labor we will minimize capital costs and maximize resource utilization, increasing net revenue and profits to the farmers, and; |
| 2. | Utilize existing regional processing resources. This will add incremental revenue to existing processing facilities and allow us to utilize facilities during slower or idle times, further adding revenue and profit for oil and meal processers, and; |
| 3. | Expand research and development efforts to continue to increase yield from Camelina production. We will support our contract farmers with strong plant and soil science. This will further improve revenue and reduce unit production costs, generating additional revenue and profits to be shared with farmers and processers, and; |
| 4. | Strategically locate “Camelina"Camelina Farming Regions”Regions" near regional support services which include processing and logistics hubs, and; |
| 5. | Develop strategic partnerships and supply agreements near “Camelina"Camelina Farming Regions”Regions" throughout the U.S. and Europe to produce significant purpose-specific acreage, supplying more regional and local users. This will optimize logistics and processing costs and provide for higher revenue and profit, and; |
| 6. | In 2015, upon2016, subject to receiving adequate funding, our plan is to contract with sufficient farmers for over 32,000in order to increase the number planted acres of Camelina to a level that will eventually achieve the economies of scale and;that we believe we need to operate profitably. |
| 7. | By 2023, our business plan is to develop over 350,000 acres of Camelina growing annually in the US, with additional international acreage. |
In order to develop our Camelina business as set forth above, we will have to raise additional capital. While we have identified a number of sources of funding, we have not entered into any binding agreements for such financing. No assurance can be given that we will be able to obtain any funding for our Camelina operations, or if we do secure such funding, that the terms will be favorable to this company and our stockholders.
Principal Products
The Jatropha curcas and Camelina sativa plants will be our primary agricultural focus for the foreseeable future. Jatropha is a perennial, inedible tree, and all of its by-products can be used for either fuel, a vegetable oil substitute in non-food products of biomass-based energy production. It is a very efficient tree that produces high quality seed oil and high-energy content biomass. Camelina sativa is an annual plant grown primarily in northerly climates, including the United States, as a rotational crop with wheat and other food crops when land is either fallow or not being used. As a result, Camelina does not compete with food production or create direct land use change. We expect our principal products to include the biofuels oil feedstock, vegetable oil replacement and biomass derived from the cultivation and processing of the both plants. In addition, we expect to generate revenues from the sale of carbon credits earned from our agricultural operations.
Biofuels Oil Feedstock
The feedstock oil needed for the production of bio-jet,renewable jet fuel, biodiesel, renewable diesel and green diesel that is currently available on the market today is primarily supplied from edible seed oils, including soy, canola (rapeseed), sunflower and palm. There are other types of feedstock that can be converted into biofuels, like animal fats and recycled cooking grease, but while they currently make up a smallmeaningful portion of the market, supply.their preferential classification as a "waste" product may be short lived. When these "waste" feedstocks are re-classified as non-waste, many of their regulatory advantages would be significantly reduced, specifically their artificially low carbon intensity. Our primary source of biofuels feedstock will be from Jatropha and Camelina seed oil. OneThe significant advantageadvantages of Jatropha and Camelina over other traditional oil seed crops is that they are ultra-low carbon based and do not compete for resources with other crops grown primarily for food consumption.
Camelina sativa is a member of the mustard family, a distant relative to canola, and a relatively new and attractive entrant into the biofuels feedstock sector. Camelina plants are heavily branched, growing from one to three feet tall and have branched stems that become woody as they mature. As the reproductive cycle progresses, seed pods form which contain many relatively small, oily seeds. Because there is no seed dormancy in Camelina, it can be grown in multiple seasons and has a very short maturity curve.
Camelina can produce seeds with relatively little water and can be harvested early. It is classified as a low input crop and can survive on littlelow water/rainfall, and it requires less fertilizer than many other crops. Camelina can be seeded and harvested with conventional farm equipment, making it a perfect rotation crop for existing farmers.
Camelina seeds typically contain between 35-38% oil and are high in omega-3 fatty acids. This makes the oil very desirable for biofuels production and the meal left after the oil has been removed is a very good option for livestock feed—competing directly with soy and canola meal.
Biomass Feedstock
The Jatropha plant produces a fruit (about the size of a walnut) containing three large seeds that contain 32%-38% oil content by weight. The non-oil components of the fruit, which represents 62-68% of the total fruit, contain high energy biomass (carbon values) that is an excellent source of feedstock for a number of energy producing processes including direct combustion, gasification, power production, and cellulosic ethanol (alcohol) production. Fifty percent of the energy in the Jatropha seed resides in the biomass.
Camelina produces a co-product from the oil extraction process which is a high protein press-cake (meal) that has been tested and approved by the Food and Drug Administration (FDA) as a livestock (animal) feed for cattle, chickens and pigs. This provides additonal revenue and reduces the net production cost of the crude Camelina oil, further improving project economics.
Carbon CreditsEmissions Reduction Regulations
The production and use of biofuels reduces total global emissions – and correspondingIn response to anthropogenic climate change – by recyclingintergovernmental organizations like the United Nations and World Bank, as well as numerous governments, supranational organizations, like the European Union, and sub-national actors, like California and British Columbia, have implemented regulations to curtail the production of greenhouse gas emissions. Regulations are beginning to span and interlace cap-and-trade policies, low carbon fuel standards, renewable portfolio standards and carbon taxes, as well as others. The overarching objective is GHG reductions and associated climate change mitigation. With the exception of a carbon tax, GHG reduction schemes utilize tradable credit that has alreadyrepresent the reduction of a certain amount of carbon dioxide equivalent (CO2e) or the production of a certain volume of fuel.
Renewable energy and energy efficiency projects make up the bulk of mitigation and reduction strategies currently deployed around the world. Biofuels have been releasedthe cornerstone of renewable energy policies since the beginning and offer regulators, end users and consumers a unique set of attributes that include sustainability, meaningful emissions reductions and economic and energy security. Furthermore, as biofuel policies evolve, first generation feedstocks, those based on, or derived from food crops are being replaced with second generation, non-food based crops like Camelina and Jatropha. Both Camelina and Jatropha are grown on land that is fallow for one reason or another or otherwise unsuitable for food crop production and as a result, sidestep the controversial food versus fuel tradeoff currently hampering certain feedstocks development. Jatropha is grown on marginal land which would otherwise be unproductive or underutilized, while Camelina is grown on fallow rotational land or in other formats that do not displace food crops. This distinction between food and non-food is critical as regulated markets mature and policies shift to discourage the conversion of food into the atmosphere and preventing new, fossil-based carbon from being released.fuel.
| · | Growing perennial and annual crops, like Jatropha and Camelina, respectively, offsets the production and release of greenhouse gas intensive fuels and reduces total global emissions. |
| · | Jatropha and Camelina derived biofuels also produce significantly less Nitrous Oxide (“NOx”), Sulfur Oxide (“Sox”) and Particulate Matter of less than microns (“PM10”)9, all of which contribute to regional pollution and global climate change.
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| · | The development of agricultural-based energy projects, like plant oil and related biomass, may produce carbon credits through the sequestration (storing) of carbon and the displacement of fossil-based fuels. |
In the United States, federal legislation called the renewable fuel standard (RFS) mandates that a certain volume of Contentsbiofuels are blended into the fuel supply every year. In California, the low carbon fuel standard (LCFS) requires regulated parties to reduce the overall emissions of their fuels to a predefined ceiling. In both cases, renewable fuel producers generate tradable financial instruments, which represent either a volume of fuel or a set amount of CO2e reduction. These credits are then surrendered by regulated parties to demonstrate compliance. The RFS and LCFS require that fuels are made from approved pathways and feedstocks. Camelina has full EPA approval under the RFS and Jatropha is currently pending approval, which EPA has indicated will occur in mid-2015. On November 12, 2015 the EPA issued a feedstock pathway for Jatropha oil as a result of GCE'
s application which was filed on June 10, 2011. This approval provides for Jatropha oil to be used as a feedstock for Advanced Biofuels production, qualifying it to generate Renewable Identification Numbers (RINs) under the Renewable Fuels Standard (RFS2).
In March 2015, California ARB approved a first-of-its-kind feedstock-only pathway for Sustainable Oils patented Camelina oil. The pathway only applies to Sustainable Oils' US Patent and Trademark Office-registered seed varieties - no other Camelina seed or oil can be used to produce LCFS compliant fuel. At a cumulative carbon intensity (CI) of 7.58 g/MJ, final fuels can be produced at between 18.7 and 19.1, and with a co-product credit can be reduced to a CI of 6 or lower. The result is that fuel producers and obligated parties in California can meet their LCFS emissions reduction requirements with significantly less fuel that would otherwise be required using traditional feedstocks like soybean (83 g/MJ) or canola oil (63 g/MJ). LCFS credits are generated based upon the CI of the underlying fuel, which means Camelina-based fuels will generate significantly more value per gallon than any other virgin oil-based fuel. By example, if the LCFS credit price is $125 /MT of carbon, as it has been for the past 4 months, Camelina biodiesel produces up to $0.50 or more per gallon than soybean-based fuel.
| · | The international climate consensus that created the Kyoto Accord also prompted several state, regional and sub-regional climate initiatives, mandates and voluntary schemes that require or encourage entities to reduce overall emissions. |
Currently, California (LCFS), Oregon (LCFS) and British Columbia (RLCFRR) have LCFS-style regulations, as well as the European Union (FQD). Washington is close behind and the Northeast States for Coordinated Air Use Management (NESCAUM), which represents 11 states is considering a Northeast/Mid-Atlantic Clean Fuels Standard. Together, the U.S jurisdictions represent over 30 percent of all domestic transportation related fuel consumption. | · | Competing voluntary standards include the Voluntary Carbon Standard (VCS), the Gold Standard VER (GS-VER), Social Carbon (SC) and Climate Action Reserve (CAR). |
| · | California passed Assembly Bill 32 making it the only state in the U.S. that currently has a functioning cap-and-trade program to limit overall greenhouse gas emissions. |
| · | Through our Sustainable Oils, Inc. subsidiary, we have an application pending with the California Air Resources Board (ARB) for a unique Low Carbon Fuel Standard (LCFS) pathway for our Camelina oil as a low carbon feedstock. We expect this will be approved in November 2014, making Sustainable Oils’ Camelina the lowest carbon intense (CI) crop available for biofuels production for use in the State of California. This approval will provide an additional economic benefit for growers and processors of Camelina oil produced using Sustainable Oils’ patented seed varieties. |
| · | We continue to pursue the highest value market for our carbon credit development activities, and we anticipate our California Camelina operations will qualify for generating high-value, California compliant credits. |
In response to inaction atCalifornia has a history of implementing environmental policies that are subsequently adopted by the federal level on issues of global climate change,government. In 1967, Ronald Reagan signed legislation that established the California passed Assembly Bill 32 making itAir Resources Board (CARB), which was subsequently integrated into Cal EPA. California is the only state that currently hasis permitted to have such a functioning cap-and-trade programregulatory agency, since it is the only state that had one before the passage of the federal Clean Air Act and the establishment of US EPA in 1970. Other states are permitted to limit overall greenhouse gas emissions. Regulated parties, those emitting more than 25,000 metric tonsfollow CARB standards, or use the federal ones, but not set their own. More recently, California vehicle emissions standards were adopted by US EPA as federal standards, which will be enforced in 2016.
As LCFS-style regulations are adopted by other states, regions or nationally, the pathway review and adoption process is expected to be very similar to that of carbon dioxide equivalent (CO2e) per year, are requiredCalifornia, for the reasons stated above. In some cases, CARB pathways and associated fuel CIs maybe directly adopted by implementing state agencies. In all cases, GCEH expects the pathway work conducted to hold carbon allowances – those given out by the state to create the “cap” – or carbon credits – those generated from offsetting CO2 emissions – equal to total CO2e emissions.date on Camelina and Jatropha will provide a significant advantage in obtaining timely approval of our proprietary products into newly regulated markets.
As emissions reduction regulations change and evolve, GCEH will continue to evaluate which credit generating activities offer the compliancebest financial return for our products. The European Emissions Trading Scheme (EU ETS), the largest credit trading market Certified Emission Reductions (CERs) mayin the world, will continue to be generated through Clean Development Mechanism registered projectsmonitored for future opportunities. However, continued instability in non-Annex 1 nations, which include Mexico, the Caribbean, CentralEU ETS credit pricing has prompted GCEH to focus on domestic and South America. Our current business plan contemplatesregional credit generating activities in the cultivation of additional Jatropha energy farms. Assuming that our Jatropha operations increase as planned and that we operate a 20,000-hectare Jatropha farm, we have calculated that we will generate more than 250,000 metric tons of sellable carbon credits annually. If we include the potentialshort to use Jatropha trees as a carbon sink, we estimate this will increase the sellable carbon credits to over 350,000 metric tons per year.
medium term.
Technology and Patents
Camelina: On March 13, 2013, through the acquisition of SusOils we acquired three U.S. patents and two patent applications. The patents consist of the following:
(a) U.S. Patent Serial No. 12/945,420 entitled "Camelina Sativa Variety 'SO-40"
(b) U.S. Patent Serial No. 12/945,438 entitled "Camelina Sativa Variety 'SO-50"
(c) U.S. Patent Serial No. 12/945,455 entitled "Camelina Sativa Variety 'SO-60"
On July 15, 2014 we were issued an additional U.S. Patent, No, US 8,779,238 B2, for our “Floral Dip”"Floral Dip" method of (non-GMO) transformation of Camelina plants that can manipulate its agronomic qualities.
On May 19, 2015 we were issued an additional patent, U.S. Patent, No, US 9,035,131 B2, for a method to alter and/or improve the fatty acid composition of a Camelina plant cell has been approved for issuance. The issued patent is for a method of altering and/or improving fatty acid composition of a Camelina plant cell, plant part, tissue culture or whole plant, and the method comprising disrupting one, two, or three copies of FAD2 genes and/or one, two or three copies of FAE1 genes in the Camelina plant cell, plant part, tissue culture or whole plant. Also included is a method of breeding Camelina plants to produce altered levels of fatty acids in seed oil and/or meal.
Jatropha: We do not currently possess any patentable technology relating to our Jatropha operations, but we have developed considerable know-how, trade secrets, and proprietary processes and procedures for farm development and operations management. We are currently engaged in research and development activities focused on improved Jatropha varieties, and we continue to expand on technical know-how and proprietary processes for optimizing the quality of our Jatropha yields, reducing operating costs and improving production capacity and efficiency. These research and development activities currently consist of plant biology and molecular genetic research, and are being conducted primarily through in-house research and in joint development activities with the non-profit Center for Sustainable Energy Farming. We continue to develop our proprietary Sustainable Energy Farming Systems, and it is expectedbelieve that patentablesome of these technologies will result from our research activities.may become patentable. However, there can be no assurance that patentable technologies will be developed, or if they are developed, that we would be the sole owners of such patents.
Any technology we develop will be in one of three main categories: (i) plant and soil sciences, (ii) agricultural technology and procedure development, or (iii) material processing and end use applications. Such technologies developed are expected to assist in reducing costs, improving efficiency and allowing us to move our products higher up the value creation.
Market
According to both the International Energy Agency (“IEA”("IEA") and the U.S. Department of Energy’sEnergy's Energy Information Administration (“EIA”("EIA") estimates, the world demand for crude oil in 20132015 was approximately 8993.7 million barrels per day, with approximately 20%28% of that demand being diesel and fuel oil (distillate fuel oil). This equates to a global consumption of distillate fuel oil of approximately 22.027 million barrels per day, or 337408 billion gallons per year. At a 5% blend, the world market for biodiesel exceeds 16.820.4 billion gallons per year.
U.S. diesel fuel oil consumption for 20132014 was over 5760 billion gallons. At a 5% blend, the U.S. biodiesel market was over 2.853.04 billion gallons per year, which we expect will continue to grow.
As reported by the Environmental Protection Agency (EPA), U.S. biodiesel refineries produced over 1.0approximately 1.3 billion gallons of neat (100%) biodiesel fuel in 2013,2015 from a reported 100+ active producers with a total capacity of over 2 billion gallons. This is just over 50%under 60% of capacity and represents approximately 1.8%just over 2% of U.S. demand for diesel fuel.
The trend of production and consumption of biodiesel is growing. In 2005, U.S. refineries produced and sold approximately 75 million gallons; in 2006, approximately 250 million gallons; in 2007, approximately 450 million gallon; and in 2008, approximately 678 million gallons; in 2009 approximately 506 million gallons. The drop in production in 2009 is primarily due to increased feedstock costs. In both 2012 and 2013, U.S.2011, biodiesel production exceeded 1.0one billion gallons.gallons for the first time. In 2012, it rose to more than 1.1 billion gallons and by 2013 production was nearly 1.8 billion gallons, according to EPA figures. In 2014, production declined to approximately 1.3 billion gallons, due in large part of regulatory uncertainty.
| Year | Biodiesel Production Volume (million gallons) | Total Production Capacity (million gallons) |
| 2005 | 75 | - |
| 2006 | 250 | - |
| 2007 | 450 | 2,240 |
| 2008 | 678 | 1,759 |
| 2009 | 506 | 2,095 |
| 2010 | 343 | 1,994 |
| 2011 | 1,091 | 2,075 |
| 2012 | 1,105 | 2,117 |
| 2013 | 1,759 | 2,140 |
| 2014 | 1,270 | 2,090 |
| 2015 | 1,268 | 2,120 |
2016* | 1,900 | - |
2017* | 2,000 | - |
*EPA RFS Final Biodiesel Volume Requirements: 2016 – 2017 |
Our primary market is the direct sale of Jatropha and Camelina oil for biodiesel, renewable diesel, renewable jet fuel, green plastics and renewable chemicals. In addition we will sell biomass for energy production and animal feed and we will sell carbon credits we generate from our agricultural operations. Our primary customers are processors of biofuels and users of plant based oils for chemical production. We estimate that there are approximately over 10095 active biodiesel plants in the United States alone, which can utilize up to 100% of our crude or refined Jatropha and Camelina oil. However, we expect to generate our highest revenues and greatest margins from customers who have logistical capacity on a water port accessible from the Gulf of Mexico or those located in close proximity to strategic Camelina growing regions. This will reduce redundant transportation costs and allow us to ship large quantities economically. These customers have historically paid a higher price for feedstock oil, since the majority of feedstock oil supplies have been shipped from the Midwestern United States. We anticipate that our key customer profile will include well-financed, low-cost biodiesel refiners and specialty oleo chemical companies.
Camelina-based fuels have been flight tested by the U.S. military and by many commercial airlines. The U.S. Navy tested and certified Camelina biofuel provided by Sustainable Oils as a 50-percent blend with regular jet fuel in the A-10 Thunderbolt II, the F-15 Eagle, the C-17 Globemaster III, and the F-22 Raptor. Sustainable Oils has provided nearly 500,000 gallons of Camelina-based hydrotreated renewable jet fuel (HRJ) to multiple branches of the U.S. military for its certification programs, making it the most thoroughly tested alternative fuel feedstock. Jatropha oil has also been tested and approved by ASTM as an aviation biofuel feedstock. A number of airlines, including Air New Zealand, Japan Airlines, Continental Airlines, Aeromexico and the U.S. Department of Defense have successfully tested bio-jet fuel for commercial use, produced by Jatropha. GCEH has supplied Jatropha Oil as part of a number of tests for Interjet, Aeromexico and other. The ability of Jatropha oil to replace kerosene-based jet fuel is being studied to reduce the aviation industry’s dependence on traditional fossil fuels.
In February 2013, the EPA issued a final rule adding Camelina oil as an official advanced biofuel pathway for the production of biodiesel and renewable diesel (including renewable jet fuel and heating oil). We believe that this new rule will significantly expand the potential market for the Camelina feedstock that we intend to produce through our new Sustainable Oils/Camelina operations. This is a significant ruling as it is the first, and currently the only novel (non-food based) crop to be approved as a feedstock for the production of advanced biofuels under the national renewable fuel standards (RFS). This process took almost three years to complete.
In cooperation with Honeywell’sHoneywell's UOP and Emerald Biofuels, we submitted a pathway application for Jatropha oil to the EPA in June 2011. Based upon recent feedback provided by the EPA, the pathway is expected to be2011, which was published for public comment later in 2014October 2015 and is expected to be approved during the first quarter ofin November 2015.
As our business develops, we expect to utilize industry professionals and distributors for the sale of Jatropha and Camelina oil and biomass in order to strategically target certain specialty markets and reduce overall costs.
Environmental Impact
Biofuels have social, economic and environmental benefits that are a major driving force behind their adoption. Using biofuels instead of fossil fuels reduces net emissions of carbon dioxide and other greenhouse gasses, which are associated with global climate change and adverse regional health impacts. Biofuels are produced from renewable plant resources that “recycle”"recycle" the carbon dioxide created when biofuels are consumed. Life-cycle analyses consistently show that using biofuels produced in modern facilities results in net reductions of greenhouse gas compared to using fossil fuel-based petroleum equivalents. These life-cycle analyses include the well-to-wheel energy equivalent of farming and production of biomass, including harvesting, conversion, transportation and utilization. Biofuels help nations achieve their goals of reducing carbon emissions and reducing importation of foreign oil. They burn cleanly in vehicle engines and reduce emissions of unwanted products, particularly unburned hydrocarbons, carbon monoxide and particulate matter. These characteristics contribute to improvements in local air quality and all associated health benefits. In a life-cycle study published in October 2002, entitled “A"A Comprehensive Analysis of Biodiesel Impacts on Exhaust Emissions, 2002,”" the U.S. Environmental Protection Agency (“EPA”("EPA") analyzed biodiesel produced from virgin soy oil, rapeseed (canola) and animal fats. The study concluded that the emission impact of biodiesel potentially increased NOx emissions slightly while significantly reducing other major emissions.
We believe there is sufficient global demand for alternative, non-food based inedible biofuel feedstocks to allow a number of companies to successfully compete worldwide. In particular, we note that we are the only U.S.-based public company producing non-food based inedible oils for the production of biodiesel, which gives us a unique competitive advantage over many foreign competitors when competing in the U.S.
The price basis for our oil and biomass products will be comparable to their edible oil and biomass equivalents. To date, we have not identified any substantial effort being undertaken for the commercialization of other inedible oils that could compete with Jatropha or Camelina. With the growing demand for plant-based feedstocks, and the high price of oil and biofuels, we anticipate that we will be able to sell our plant oils and biomass profitably.
Employees.
As of December 31, 2013,2015, across all of our subsidiaries, we had 8410 full time employees, contract employees and consultants. The number of people we employ fluctuates depending on farm development, land preparation, planting and seasonal farm operations. Our first two farms have now been fully planted, so there are minimal development activities underway and we have not begun the full development of our third farm, for Jatropha, yet, We will continue to “right size”"right size" our work force to support our operational needs. Neither this company, nor any of our subsidiaries is a party to any collective bargaining agreements.
Not applicable.
1B.UNRESOLVED STAFF COMMENTS. Not applicable.
Executive Offices. Currently, we operate out of offices located at 2790 Skypark Drive, Suite 105, Torrance, CA 90505. Our leased offices consist of approximately 1,296 square feet and are leased at a monthly rate of $2,333$2,475 per month. The term of the lease expires on January 31, 2019.
Mexico Farms and Facilities: As of November 3December 2, 2014,2015, we own the followingsold our three Jatropha farms owned through our GCE Mexico I, LLC joint venture:
1. Our first farm consists of seven separate parcels of land collectively representing 2,084 hectares (approximately 5,149 acres). We purchased these parcels in 2008. The farm is located approximately 12 miles northeast of Tizimin, Yucatan, Mexico and is approximately 110 miles from Merida and the port of Progresso, and 75 miles from Cancun. All of the land has been improved andventure. As a result, we have completed planting several varieties of Jatropha on all of the planned farmland. We financed the purchase of this farm through a mortgage loan in the amount of $2,051,282, which bears interest at a rate of 12% per annum.
2. In March 2010 and June 2011, we purchased approximately 5,100, acres of additional land that is contiguous to our first farm. In 2012, we completed planting Jatropha on this farm. We financed the purchase of this farm through a mortgage loan in the amount of $963,382. That loan bear interest at a rate of 12% per annum.
3. In October 2011, we purchased approximately 5,557 acres of additional land for the development of a third Jatropha farm. This land is located in the same region, approximately five miles from our other two farms. We have planted a variety of Jatropha plants in our first two farms, and have used varying agricultural techniques to in order to ascertain which variety is best suited for the region. Wecurrently do not intend to plant Jatropha on this third farm until we obtain more information about Jatropha production from our first two farms. In the interim, we have commenced planting other fuel crops on the third farm on a test basis and may, if such tests prove successful, expand these alternate crops until a decision is made regarding the use of the third farm. We financed the purchase of this farm through a mortgage loanown or lease any properties in the amount of $ 2,095,525. That loan bears interest at a rate of 12% per annum. In 2014 we plan to test plant a portion of the farm with an annual oil seed crop to prove yields with the potential for a larger deployment.Mexico.
Montana Offices/Facilities. Our Sustainable Oils, Inc. field and research operations will be conducted primarily from Bozeman, Montana. In March 2013,Montana under a subcontract with a local seed research company.
Dominican Republic Nursery. On December 31, 2014, we entered intosigned a two-year subleasefive year lease with Targeted Growth, Inc.a third party in the Dominican Republic, for the useapproximately 125 acres of land where we have begun developing a portion of Targeted Growth’s facilitiesJatropha plant nursery. The total lease is approximately $80,900, due and payable as follows:
$40,500 due at signing and was paid in Bozeman, Montana. The leased space, consisting of a portion of the approximately 3,149 square feet building, may be used for bona fide biological research and for general office and administrative purposes only. The building includes a seed laboratory along with related equipment and storage facilities and greenhouse space required for a breeding program. We have agreed to pay our pro rata portion of the expenses of the building, including a portion of the rent, utilities, and insurance, which rental payments vary depending on how much of each portion of the building we utilize.January 2015
$9,900 was paid December 31, 2015
$9,900 due December 31, 2016
$9,900 due December 31, 2017
$9,900 due December 31, 2018
From time to time, the Company may become a party to other legal actions and complaints arising in the ordinary course of business, although itbusiness. As of December 31, 2015 we have no legal proceedings pending.
On February 19, 2016, Anton & Chia, LLP ("Anton & Chia") filed a complaint against Global Clean Energy Holdings, Inc. in the California Superior Court of Los Angeles County (Anton & Chia, LLP vs. Global Clean Energy Holdings, Inc., BC 611081). Anton & Chia is an accounting firm that we retained to audit our 2013 financial statements and to issue the audit report to be included with our audited financial statements in our 2013 Annual Report on Form 10-K. Anton & Chia claims that this company breached its contract with Anton & Chia by failing to pay $32,369 of fees incurred by that accounting firm. No audit report was ever issued and the audit of our financial statements by Anton & Chia was not currently involved in any such material legal proceedings.
completed. We dispute the demands made by Anton & Chia, and intend to vigorously defend this matter. In April 2014 we filed a formal complaint with the California Accountancy Board (CBA) against Anton Chia.
Not applicable.
Shares of our common stock are traded on the OTC Bulletin Board and on the OTCQB market under the symbol “GCEH.”"GCEH." The following table sets forth the range of closing prices for our common stock for the quarters indicated. Such quotations reflect inter-dealer prices, without retail mark-ups, markdowns or commissions, and may not represent actual transactions.
| Fiscal Year Ended December 31, 2013 | | High Bid | | | Low Bid | | |
| Fiscal Year Ended December 31, 2015 | | | High Bid | | | Low Bid | |
| First Quarter | | $ | .016 | | | $ | .016 | | | $ | .0147 | | | $ | .0147 | |
| Second Quarter | | $ | .016 | | | $ | .016 | | | $ | .008 | | | $ | .008 | |
| Third Quarter | | $ | .02 | | | $ | .018 | | | $ | .007 | | | $ | .007 | |
| Fourth Quarter | | $ | .014 | | | $ | .012 | | | $ | .0033 | | | $ | .0026 | |
| Fiscal Year Ended December 31, 2012 | | High Bid | | | Low Bid | | |
| Fiscal Year Ended December 31, 2014 | | | High Bid | | | Low Bid | |
| First Quarter | | $ | .04 | | | $ | .03 | | | $ | .013 | | | $ | .010 | |
| Second Quarter | | $ | .02 | | | $ | .02 | | | $ | .011 | | | $ | .0095 | |
| Third Quarter | | $ | .02 | | | $ | .01 | | | $ | .012 | | | $ | .012 | |
| Fourth Quarter | | $ | .01 | | | $ | .01 | | | $ | .0046 | | | $ | .0041 | |
Stockholders
As of November 3March 30, 2014,2016, we believe that there were approximately 1,500 holders of record of our common stock, not including any persons who hold the stock in “street"street name.”"
Dividends
We have not paid any dividends on our common stock to date and do not anticipate that we will pay dividends in the foreseeable future. Any payment of cash dividends on our common stock in the future will be dependent upon the amount of funds legally available, our earnings, if any, our financial condition, our anticipated capital requirements and other factors that the Board of Directors may think are relevant. However, we currently intend for the foreseeable future to follow a policy of retaining all of our earnings, if any, to finance the development and expansion of our business and, therefore, do not expect to pay any dividends on our common stock in the foreseeable future. NoWe have previously issued shares of Series B Convertible Preferred Stock. Under the terms of the Series B shares, no dividends are required to be paid to holders of the Series B shares. However, the Company may not declare, pay or set aside any dividends on shares of any class or series of the Company’sCompany's capital stock (other than dividends on shares of our common stock payable in shares of common stock) unless the holders of the Series B shares shall first receive, or simultaneously receive, an equal dividend on each outstanding share of Series B shares.
Securities Authorized For Issuance Under Equity Compensation Plans
The following table contains information regarding our equity compensation plans as of December 31, 2013:2015:
| Plan Category | | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in the First Column) | | | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in the First Column) |
| Equity compensation plans approved by security holders | | | | | | | | | | | | | | | | |
2002 Stock Incentive Plan (1) | | | 19,850,000 | | | $ | 0.03 | | | | 150,000 | | | | 13,700,000 | | | $ | 0.03 | | |
2010 Equity Incentive Plan | | | 19,950,000 | | | $ | 0.01 | | | | 50,000 | | | | 20,000,000 | | | $ | 0.01 | | |
Equity compensation plans not approved by security holders Options | | | 1,850,000 | | | $ | 0.02 | | | | | | | | 39,813,686 | | | $ | 0.01 | | |
Warrants | | | 29,645,311 | | | $ | 0.02 | | | | | | | | 22,778,643 | | | $ | 0.02 | | |
| | | | | | | | | | | | | | | | | | | | | | |
Total ____________________ | | | 69,375,311 | | | | | | | | 200,000 | | | | 96,292,329 | | | | | | - |
(1) TheseThis incentive plans haveplan has expired, and no additional options or awards can be granted under this plan.
Recent Issuances Of Unregistered Securities
We did not issue any unregistered securities duringIn September 2015, the three-month period ended December 31, 2013 that were not previously reported in a Current ReportCompany issued 2,118,000 shares, at $0.005 per share (based on Form 8-K.
an employee's accrued and unpaid compensation balance of $11,090 accumulated as of September 30, 2015.
Repurchase of Shares
We did not repurchase any of our shares during the fourth quarter of the fiscal year covered by this report.
Not applicable to a “smaller"smaller reporting company”company" as defined in Item 10(f)(1) of SEC Regulation S-K.
| ITEM 7. | MANAGEMENTMANAGEMENT’S'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Overview
DuringOn December 2, 2015, we sold the past four years, we have focused our efforts on acquiring, improving, and plantingthree Jatropha farms (which are locatedto an unaffiliated, a Mexican agricultural operator in Mexico)the region. The cash purchase price for the three farms was MXP $89 Million (approx. US$5,908,000). To date, mostIn addition, as a result of the Jatropha trees thatstructured transaction we planted in our new farms have not been mature enough to bear significant amountextinguished approximately $4.7million of Jatropha fruit from which we could produce commercial quantitiesaccrued interest and $12.1 million of Jatropha oil. Mostpreferred return. GCE Mexico assigned U.S. $5.1 million of the trees that we planted are now, however, maturing and should be ablepurchase price the our joint venture partner to produce a normal harvestrepay the U.S. $5.1 million of Jatropha seeds. However, our first farm, which was used largely as a test farm to determine which varieties of Jatropha are most suitable for commercial production in Mexico, has not produced many seeds. While certain varieties of Jatropha trees planted on the second farm have been more productive, the seeds being harvested from these trees on the second farm are being used to grow replacement trees for the less productive trees, and not for the purpose of producing oil. As a result, neither of these farms is expected to generate significant revenues in the near future. Pending the selection of the best variety of Jatropha trees to plant on our third farm in the region, we planted a portion of our third farm with a (non-Jatropha) annual oil seed crop and plan to expand that planting significantly in 2015. This alternative crop is expected to generate revenue and some profits, which will be used to defray the operating costs on the other two farms. Our intent is to develop agronomic best practices for the region and to prove yields for a future larger deployment. As a result, we do not expect to start cultivating and planting Jatropha trees on this third farm until we have obtained the results of the testing program we conducted on our first two farms. Because our farms are still young and developing and our agricultural practices are still evolving, we are unable to accurately predict the amount of fruit and Jatropha oil that our farms will produce in the future.
Our Mexican farming operations are managed by us through our wholly owned Mexican subsidiary, Global Energias Renovables, and the direct farm labor is employed through wholly owned Mexican companies owned by GCE Mexico, our majority-controlled subsidiary. GCE Mexico obtains its funding from on-going equity contributions from the affiliated investor of that entity. Revenues generated, and expected to be generated,mortgage loans made by the operations ofinvestor to GCE Mexico’s three farms will be used by that entity, and profits, if any, will be distributed to all owners of GCE Mexico (including this company, once the investor has recovered his investment and has been paid the accumulated preferred return).
We currently receive monthly payments from GCE Mexico to reimburse us for our expenses (including an allocation for overhead expenses) related to the management of the Mexico operations.'s operating subsidiaries. In addition, to the reimbursements we receive for managing GCE Mexico and the three Mexico farms, this company (Global Clean Energy Holdings, Inc.) generates revenues from fees received for providing advisory and consulting services to third parties regarding Jatropha farms and the uses of Jatropha biodiesel. Other than subsidies received from the Government of Mexico, these management/advisory service fees and the reimbursement payments from GCE Mexico have been our principal sources of cash flow.
In March 2013, we acquired the Camelina assets and operations of Sustainable Oils, LLC, a company that, since 2007, has been engaged in the development, production and commercialization of Camelina-based biofuels. Sustainable Oils has generated over $20 million of revenues during the past three years of its operations. However, our ability to operate the Camilina operations in North America is dependent upon receiving additional financing. No assurance can be given that our business plan for the Camelina business will result in profitable operations. Sustainable Oils is a wholly-owned subsidiary. Its liabilities include an approximately $2.3 million liability to UOP LLC, which debt is secured by a lien on three patents we acquired as part of the purchasesale of the Camelina assetsthree farms and the repayment of the mortgage loans, the investor agreed to forgive and extinguish (i) approximately $5.1 million of unpaid interest that had accrued on the three mortgage loans, and (ii) the preferred return (approximately $12.1 million) that the preferred unit holders had accrued. We did not receive any cash from Targeted Growth, Inc.
the sale of the three farms. However, as result of the repayment of the three mortgage loans, the forgiveness of the accrued interest on those loans, and the extinguishment of the accrued preferred return, approximately US$21.9 million of long term liabilities were extinguished from this Company's consolidated balance sheet.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States require management to make estimates and assumptions that affect the reported assets, liabilities, sales and expenses in the accompanying financial statements. Critical accounting policies are those that require the most subjective and complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain.
The Company’sCompany's most critical accounting policies and estimates that may materially impact the Company’sCompany's results of operations include:
Agricultural Producer. All costs incurred including the actual planting of the Jatropha trees are capitalized as plantation development costs, and are included in “Property"Property and Equipment”Equipment" on the balance sheet. Plantation development costs are being accumulated in the balance sheet during the development period and will be accounted for in accordance with accounting standards for Agricultural Producers and Agricultural Cooperatives. The direct costs associated with each farm and the production of the Jatropha revenue streams have been deferred and accumulated as a noncurrent asset and are included in “Deferred"Deferred Growing Costs”Costs" on the balance sheet. Other general costs without expected future benefits are expensed when incurred.
Certain other critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 to the Consolidated Financial Statements included in this Annual Report. However, we do not believe that there are any alternative methods of accounting for our operations that would have a material effect on our financial statements.
Results Of Operations
Revenues. During the year ended December 31, 20132015 and 20122014 we recognized revenue of $332,320$572,563 and $1,136,083,$1,299,075, respectively. The revenues that we generated in 20132015 were primarily derived from Camelina product sales, Jatropha related advisory and management services we rendered to a third parties, and government subsidies we received from agencies in Mexico. Most of our 2012 revenues represented (i) sales of Jatropha oil and Jatropha seeds and other products (waste wood, Jatropha seed husks, etc.), (ii) agricultural subsidies received from Mexican governmental agencies, and (iii) fees for Jatropha related advisory services we rendered to third parties.party. Revenues during the year ended December 31, 20132015 decreased by $803,763$726,512 from the comparable 20122014 fiscal period because a decrease in advisory and management revenues. Our current advisory agreements expire during 2016 and will have to be replaced or renewed. Accordingly, the amount of advisory service revenues that we only received $51,072may generate in agricultural subsidies from2016 will depend on new advisory agreements, if any, that we obtain to replace the Mexican government in the current fiscal period, compared to $768,272 of such subsidies in the same period last year. Additionally, advisory revenue decreased by $86,563 from the same period in 2012. Revenues received from agricultural subsidies and from the sale of Jatropha products are paid to our GCE Mexico subsidiary and are used in its operations in Mexico. Revenues we generate from Jatropha advisory services and from Camelina operations are used for this company’s operations. Advisory services revenue approximated $221,000 and $347,000 in 2013 and 2012, respectively.existing agreements.
Revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the seller’sseller's price to the buyer is fixed or determinable; collectability is reasonably assured; and title and the risks and rewards of ownership have transferred to the buyer. Value added taxes collected on revenue transactions are excluded from revenue and are included in accounts payable until remittance to the taxation authority. TheTo date, the most significant sources of revenue are Advisoryhave been advisory services and Agriculturalagricultural subsidies.
Advisory and management services revenue - The Company provides development and management services to other companies regarding their bio-fuels and/or feedstock-Jatropha and Camelina development operations, on a fee for services basis. The advisory services revenue is recognized upon completion of the work in accordance with the separate contract.
Agricultural subsidies revenue - the Company receiveshas in the past received agricultural subsidies from the Mexican government. Due to the uncertainty of thesegovernment, which payments the revenue iswere recognized as revenues when the payments arewere received.
In the short term, our goal is to increase the amount of advisory and management services that we render to third parties in order to generate revenues to fund our corporate working capital needs, and to generate Camelina-related revenues from the Camelina business that we acquired in March 2013. In the longer term, our goal is to substantially increase the revenues derived from the operations of our Jatropha farms, to rapidly ramp up our Camelina operations by increasing the amount of Camelina acreage, under plantation in North America, and to continue to generate fees from advisory services that we render to third parties. Now that we have obtained all permits necessary to produce charcoal from the biomass available at our Mexico farms, we expect to generate additional revenues in the fourth quarter of 2014 and thereafter from the sale of renewable charcoal in Mexico.
See Note 1 for further discussion on other expected sources of revenue.
General And Administrative Expenses. Our general and administrative expenses of $2,573,719$2,173,708 related to the year ended December 31, 2013 increased2015 decreased by 8%$176,422 from prior year’syear's expense of $2,069,309$2,350,130 due in part to the expansionseverance and other closing costs related to sale of our operations into the Camelina business.three farms in Mexico. General and administrative expenses principally consist of officer and employee compensation, outside services (such as legal, accounting, and consulting expenses), share-based compensation, and other general expenses (such as insurance, occupancy costs and travel). General and administrative expenses are, however, expected to increase as a result of our acquisition of the Camelina assets/business in March 2013. In connection with operating the new Camelina operations, we have increased the number of employees on our payroll, and have committed to sublease a facility in Bozeman, Montana.
Plantation and Operating Costs. For the year ended December 31, 20132015 and 20122014 we recorded Plantation Operating Costs from the operations of the farms of $786,300$17,402 and $826,227,$132,639, respectively. The decrease in the year ended in 20132015 from 20122014 was mostly due to a work force reduction in replanting and cultivation costs at our Mexico farms as we scaled back planting of new Jatropha trees at those Mexico farms.
Write Down of Impaired Long Lived Assets. During the year ended December 31, 20132015 we wrote down certain of our long term assets by $3,440,904 and$1,537,121 in the year ended 2012 by $1,639,815.accumulated plantation development costs related to the sale of the sale of our three Mexican farms. For 2013 and 2012,2014, this write off representsrepresented a reduction in the accumulated deferred growing cost balanceplantation development costs related to areas on our first two Jatropha farmfarms in Mexico which are consideredwere anticipated to be commercially unproductive because the trees on those portions have not produced adequate growth for the age of the trees, potentially have origins that have not adapted to the climatic region, are planted on inadequate or unsuitable land, or have limited resistance to local fungus and pests.replanted in 2015. The trees in certain areas areof these farms were not expected to produce enough yield or generate enough future revenues to offset the capital expended in a reasonable period of time and, accordingly, an impairment charge was recorded.
The Company regularly evaluates its property and equipment and other long-lived assets for impairment based on its classification as a) held for sale or b) to be held and used. Several criteria must be met before an asset is classified as held for sale, including that management with the appropriate authority commits to a plan to sell the asset at a reasonable price in relation to its fair value and is actively seeking a buyer. For assets held for sale, the Company recognizes the asset at the lower of carrying value or fair market value less costs to sell, as estimated based on comparable asset sales, offers received, or a discounted cash flow model. For assets to be held and used, the Company reviews for impairment whenever indicators of impairment exist. The Company then compares the estimated future cash flows, at an average growth rate of 30% after 2015, of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is recorded based on the fair value of the asset, typically measured using a discounted cash flow model with a discount rate of 65%. The projected cash flows used in the companies impairment test is over a 15 year period using approved forecasts. The company’scompany's assumptions related to the growth rate and the cash flow discount rate is management’smanagement's estimates based on historical trends in the farm development and growth in the yield from the trees. There is a risk the actual results will be much less than management’smanagement's assumptions used in the impairment test. Many factors, such as the weather, pest and disease control can cause the company’scompany's future cash flows to be less than expected.
If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses, whether for assets held for sale or assets to be held and used, are recorded as operating expenses. See Note 1 for information on recorded impairment charges.
Interest Income/Expense. In fiscal 2013,2015, we incurred $999,524approximately $1,010,000 of interest expense, compared to interest expense of $857,439approximately $1,187,000 in fiscal 2012.2014. This increasedecrease in interest expense is primarily due to the increasedecrease in debt associated with the acquisitionmortgages on the land which was sold as part of additional land for our farm operationsthree farms in Tizimin,Mexico. Since the three Mexico farms have been sold and with the acquisition ofmortgages have been repaid, we will no longer incur these interest expenses in the Camelina assets. We currently own approximately 15,000 acres of land in Mexico that is subject to interest bearing mortgages, compared to approximately 8,849 acres of such land owned in 2011.future.
Net loss attributable to thediscontinued operations, formerly non-controlling interestinterest. .Our three Mexico farms were sold December 2, 2015 and operations were ceased affective December 31, 2015. Our Mexico farm operations arewere owned through GCE Mexico. We own 50% of the common membership interests of GCE Mexico. A third party investor currently owns the other 50% of the common membership interests. The proceeds from the sale of the preferred membership units, and from subsequent capital contributions, have been used to fund the operations of Asideros Globales Corporativo 1 (“Asideros 1”) and Asideros Globales Corporativo 2 (“Asideros 2”), each of which have acquired land in Mexico that, collectively, constitute our first two Jatropha farms. Asideros Globales Corporativo 3 (“Asideros 3”) acquired our third farm in October 2011, but had no impact on the results of our operations. GCEH directly owns 1% of Asideros 1, Asideros 2 and Asideros 3, and the balance is owned by GCE Mexico. Accordingly, we own 50.5% of Asideros 1, Asideros 2 and Asideros 3 either directly or through our common membership interest in GCE Mexico. As such, our consolidated financial statements include the accounts of the Asideros farm entities. Under GCE Mexico’s LLC Agreement,Mexico's operating agreement, the net loss allocated from these entities to GCE Mexico is then further allocated to the members of GCE Mexico according to the investment balances. Accordingly, since the common membership interest did not make a capital contribution, all of the losses allocated to GCE Mexico have been furtherwere allocated to the preferred membership interest. TheIn 2014, the net loss attributable to the non-controlling interest in the accompanying Consolidated Statement of Operations representsrepresented the allocation of the net loss of GCE Mexico to the preferred membership interests. This netinterests was approximately $1,779,000. For the year ended December 31, 2015, the loss increased from $3,339,000 in 2012 tothe discontinued operations (formerly non-controlling interest) was approximately $5,677,000 in 2013 primarily$8,255,617, which loss was recognized as a result of the impairmentsale of the value of portions of thethree Mexico farms owned by GCE Mexico.and all related net assets.
Net income/loss attributable to Global Clean Energy Holdings, Inc.The Company recorded net losses of $1,921,760$9,018,352 and net income of $63,287$616,748 for the years ended December 31, 20132015 and 2012,2014, respectively. In fiscal 2012, we realizedThe net income attributable to Global Clean Energy Holdings, Inc. of $63,287losses mostly decreased from 2014, because of a $1,013,387 gain from the settlement and write off of liabilities. In fiscal 2013, we only realized $50,138 of gains from the settlement and write off of liabilities. In addition, we incurred a loss in fiscal 2013 compared to net income in fiscal 2012 because (i) of the $178,896 loss on the sale of our Belize land (which land was held for investment), and (ii) becauseinvestment of $178,000 recorded in the write down of long term assets in 2013 exceeded the amount of that write down in fiscal 2012 by $1,801,089.
year ended December 31, 2014.
Liquidity and Capital Resources
As of December 31, 2013,2015, we had $217,000approximately $252,000 in cash and a working capital deficit of $6,471,832,$6,268,354, as compared with $942,000approximately $238,000 in cash and a working capital deficit of $1,581,000$6,410,283 at December 31, 2012.
The amount of cash or cash equivalent balances held at December 31, 2013 represents cash held in our corporate accounts and our joint venture accounts. Of these amounts, only less than $10,000 was available and allocated for our general corporate purposes, with the remaining balance to be used in the operations of the Tizimin, Mexico farms owned by the GCE Mexico joint venture. As a result, the GCE Mexico funds will not be available to us for our corporate working capital or other purposes, and are not available to us to reduce our indebtedness. In order to fund our short-term working capital needs, we will have to obtain additional funding from the sale of assets, the sale of additional securities, additional borrowings, or from an increase in operating revenues. Outstanding indebtedness at December 31, 2013 totaled $22,629,432. The existence of the foregoing working capital deficit and total current and long term liabilities may negatively impact our ability to obtain future equity or debt financing and the terms on which such additional financing, if available, can be obtained. We incurred net losses of $7,598,406 and $3,275,915 for the years ended December 31, 2013 and 2012, repectively, and have an accumulated deficit applicable to its common stockholders of $28,338,875 at December 31, 2013.
2014.
To date, we have funded our corporate overhead and other public company costs and expenses primarily from (i) the sale of debt and equity securities, (ii) monthly payments we received from our GCE Mexico joint venture, and (iii)(ii) fees we received for providing Jatropha related advisory services to third parties. During the year ended December 31, 2013, we received overhead reimbursements of $214,734 from GCE Mexico. Since December 31, 2013, we have signed several advisory contracts and anticipate that that we will continue to receive such advisory service fees in the near term, although the amount of such fees will depend on our ability to enter into new service agreements. The amount of cash on hand and the anticipated cash receipts from GCE Mexico and the advisory service contracts currently in effect will not be sufficient to fund our total working capital needs for the next twelve months. Furthermore, we do not have sufficient financial resources to fund our business plan (which includes the expansion of our Camelina operations in the U.S., the purchase of additional biofuel farms and other capital outlays). Accordingly, unless we enter into additional advisory service agreements or otherwise receive cash proceeds, we will have to obtain additional funding in the near future from the sale of our securities to fund our cash needs. We are currently in discussions regarding futureOur principal existing advisory/management agreements withexpire in 2016, and we have not entered into any new replacement advisory agreements. Accordingly, our clients that, if executed, are expected to provide us with sufficient fees to fund our projected working capital needs for at least 2015. However, nocurrent revenue sources may run out during the year. No assurance can be given that we will be able to enter into these new advisory/management agreements or that we will be able to raise additional capital to fund our growth capital needs. If we are not able to raise additional capital, we may have to further reduce this company's operations. We have not identified any sources of the additional capital that we may need, and we cannot guarantee that such additional capital will be available and, if available, will be on terms favorable to the companyCompany and its stockholders.
Our business plan contemplates that with additional funding we will (i) continue to develop our Jatropha business and operations, (including possibly developing and cultivating our third Jatropha farm in Mexico), (ii) diversify our biofuel energy crop revenues from new revenues generated by our new Camelina operations, and(iii) increase our bio-fuel advisory and management services, as follows:
Jatropha Farm Operations. To date, revenues from our Jatropha farms located in Mexico have not been significantUntil December 2015, we owned and have not met our expectations for various reasons, including the numerous varieties of the Jatropha trees that we planted, weather and soil conditions and cultivation techniques. We are currently addressing these issues. However, because of the time involved in replanting portions of our farms and in allowing the new trees to mature, and we do not anticipate that we will generate net revenues from the two farms that have been planted with Jatropha in the near future. The operational expenses of the Jatrophaoperated three farms in Mexico are substantial(two of which were planted with Jatropha) through our GCE Mexico joint venture. All of the operating and exceed the amountcapital expenses of revenues that thethose farms are expected to generatewere funded by our joint venture partner and from operations in the near future.operating revenues. Our joint venture partner in GCE Mexico has committed to fundingfunded all of GCE Mexico's operating and capital requirements in 2015 and the cash requirementswind down expenses for the 2014 operating expensesfirst quarter of GCE Mexico. In addition, we the Mexico government has issued all required permits2016. Due to our Mexicopartner's other business commitments, however, our joint venture partner was not able to commit to the additional investment needed to operate and expand the farms. As a result, as disclosed in this Annual Report, GCE Mexico sold those farms in December 2015.
The sale of the three Mexico farms affected our Mexicobalance sheet because it allowed us to drastically reduce high-cost debt incurred in acquiring and operating the three farms. We did not receive any cash from the sale of the three farms (the proceeds received from the sale of the three farms was allocated to our joint venture has re-commencepartner who funded GCE Mexico). However, as result of the productionrepayment of the three mortgage loans, the forgiveness of the accrued interest on those loans, and salethe extinguishment of charcoalthe accrued preferred return, approximately US$21.9 million of long term liabilities were extinguished from the vegetationour consolidated balance sheet. We believe that reducing this debt will beneficially affect our ability to raise future debt or equity funding. Although we harvested during the cultivation of our farms. Sales of charcoal are expected to partially offset or operating expenses in Mexico. No assurance can, however, be given that the costs of operating the Mexico farms will not exceed our budget, that we will be able make the planned charcoal sales, or that our GCE Mexico investor will, in fact, fund the budgeted amounts.
Even if operations ofsold the three Jatropha farms, owned through GCE Mexico improve during the next year as expected, we do not project that these farms will generate sufficient cash to make cash distributions to Global Clean Energy Holdings, Inc. for at least several more years. Under our agreements with our GCE Mexico investors, all net cash generated fromdid retain the Jatropha operations that are conducted through GCE Mexico must first be usedgenetics we have spent years developing on a commercial scale. We did not sell any of our intellectual property rights to fund the operations of those farms, and any excess must thereafter be used to repay the capital contributed by our joint venture investors (plus their preferred return). The total amount of capital and the preferred return that must be paid to our joint venture investors before funds are distributed to us is in excess of $28,800,000 as of December 31, 2013.buyer. As a result, our Jatropha genetics are preserved as a core GCEH asset as is the improving operationsenormous amount of institutional knowledge, experience and know-how that we developed over the past several years in Mexico. As part of the Mexico farms will not produce short-term cash or improve our liquidity, nor willsale, we also retained access rights to the improving operationsCertified Nursery and R&D areas on the farm for an extended period of the Mexico farms generate funds that we can use for our business plan, for working capital purposes, or for the acquisition of additional Jatropha or other biofuel feedstock farms. Because of our negative working capital position, we currently do not have the funds necessary to acquire and cultivate additional Jatropha farms for our own account. Accordingly, in order to increase our farm ownership and operations, we will have to obtain significant additional capital through the sale of equity and/or debt securities, the forward sale of Jatropha oil and carbon offset credits, and from other financing activities, such as strategic partnerships and joint ventures.
time.
Camelina Operations. In March 2013, we acquired the business and assets of Sustainable Oils, LLC, a company that has been engaged in developing Camelina products since 2007. Sustainable Oils has generated over $20 million in revenues during the past three years preceding our acquisition, but hasalso incurred losses of approximately $5.8 million during that time.time, primarily due to research and development, patent, regulatory and business development costs. The new Camelina operations will require a significant amount of additional cash to scale up its operations and to reach profitable operations. Our goal is to operate the Camelina business that we acquired through a new subsidiary. Furthermore, our goal is to fund the operations and expansion of the Camelina operations with new debt or equity that we intend to raise specifically for the Camelina subsidiary. In the first quarter of 2014, our Camelina subsidiary raised $130,000 in bridge financing from three investors by issuing its unsecured convertible promissory notes. The promissory notes bear interest at a rate of 8% per annum, maturematured on December 31, 2014,2015, and are convertible into capital stock of our Camelina subsidiary. Management is currently in discussions with the note holders to extend the maturity dates of the promissory notes. In order to induce the investors to purchase the convertible notes, we issued to those investors warrants to purchase a total of 1,083,332 shares of our common stock at an exercise price of $.012 per share. In addition, we granted the three investors the right to “put”"put" (sell) the convertible note shares of our Camelina subsidiary to us commencing at the end of 2018 for the price equal to the price that they paid for their convertible notes. If the “put”"put" is exercised and we are required to purchase the shares of our subsidiary, we will have the right to pay for those shares in cash or in shares of our common stock having a fair market value equal to the cash price. The proceeds from the foregoing bridge financing will bewas used to fund the working capital needs of the Camelina subsidiary. While we have been in discussions with a number of sources for additional funding, we have not entered into any binding arrangements for the desired amount of new funding. No assurance can be given that we will obtain the additional capital necessary to operate and grow our new Camelina operations. In the event that we do not obtain the necessary amount of financing to properly operate and scale up our new Camelina operations, those operations are expected to continue to operate at a loss.
As partial consideration for the Camelina assets that we purchased in March 2013, we issued a $1,300,000 promissory note. The promissoryIn December 2014, we amended the note bears simple interest atby (i) making the rate of ten percent (10.0%) per annum, and was payable upon the earlier of the following: (a) to the extent of 35.1% of, and on the third business day after a Qualified (equity) Funding; or (b) September 13, 2014. The term “Qualified Funding” means all equity funding in excess of the $800,000, in the aggregate, received by us for our Camelina business. Our obligations under the promissory note are secured by a first priority lien on certain tangible assets included in the purchase of the Camelina assets. The promissory note is a full recourse obligation. However, the holder of the promissory note has agreed that if the holder has to pursue the collection of amounts due under the promissory note, the holder will not seize or take any action to collect any amounts due and owing against any of the Company’s assets (including its cash) related to a line of business other than the Camelina business. In September 2014, we renegotiated the terms of the notepayable on demand, and agreed to return certain tangible assets that constituted the collateral under the promissory note(ii) by returning to the holder the certain Camelina assets to Targeted Growth, Inc. at the book value of $190,500, that previously constituted as collateral for the repayment of the promissory note in exchange for a reduction of the amount owed under the promissory note and an extension of the maturity date to December 31, 21014. The promissory note is no longer secured by any tangible assets.note.
Bio-fuel Advisory and Management Services. We have recentlyThroughout 2015 and the first quarter of 2016, we entered into several bio-fuel advisory and management service agreements with third parties pursuant to which we are paid fees for providing Jatropha or Camelina bio-fuels development services. The fees that we have generated from these agreements have materially supplemented our other sources of revenues. Because of the longer lead times before our Jatropha and Camelina bio-fuel operations generate revenues for us, we need these advisory/management fees to supplement our revenues and to defray our overhead expenses. Accordingly, we are actively seeking additional advisory/management agreements.
agreements with the our current clients as well as others.
Other Potential Source of Liquidity.
We are entitled to receive royalty payments from the legacy pharmaceutical assets we sold in 2009 to Curadis GmbH. In February 2012, Curadis GmbH informed us that it has licensed certain of the technologies that we sold to it, and, as a result that we will be receiving a royalty of 4.5% of all net sales of products sold using the licensed technology. Certain of the intellectual property that we sold to Curadis will revert to us if royalties from those assets do not exceed 300,000 euros by December 31, 2014. In 2012, we received $24,921 from Curadis under this new licensing arrangement. Only $903 of royalty payments were received in 2013.
We presently do not have any available credit, bank financing or other external sources of liquidity. In the absence of additional outside funding (including proceeds from the sale of our securities, or entering into other joint venture relationships), we do not have the ability to expand our business or acquire additional Jatropha or other biofuel feedstock farms. If we issue additional equity or debt securities to fund our future capital needs, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. Should we fail to increase the amount of revenues we receive from our advisory services and/or raise additional debt or equity funding, we will have to materially scale back our current and proposed operations or take other actions to preserve our on-going operations. Any such action will have a materially adverse effect on an investment in our common stock.
Inflation and changing prices have had no effect on our continuing operations over our two most recent fiscal years.
We have no off-balance sheet arrangements as defined in Item 303(a) of Regulation S-K.
Not applicable to a “smaller"smaller reporting company.”"
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Financial Statements are referred to in Item 15, listed in the Index to Financial Statements and filed and included elsewhere herein as a part of this Annual Report on Form 10-K.
In connection with the reorganization of Hartley Moore Accountancy Corporation (the "Former Auditor"), its audit partners and staff have joined Hall and Company, Inc. ("Hall"). Due to the reorganization of the firm, the Former Auditor has resigned as the independent auditor of Global Clean Energy Holdings, Inc. (the "Company"), effective February 15, 2016. The Former Auditor has been the Company's auditor since September 2014.
As a result of the above, the Audit Committee of the Board of Directors (the "Audit Committee"), and the Board of Directors of the Company approved the resignation of the Former Auditor effective February 17, 2016, and the engagement of Hall as the Company's independent registered public accounting firm for the fiscal year ended December 31, 2015 effective February 17, 2016.
The change in accountants did not result from any dissatisfaction with the quality of professional services rendered by the Former Auditor.
The Company has not consulted with Hall for the fiscal year ended December 31, 2015, and the interim period ending February 18, 2016 regarding the application of accounting principles to any contemplated or completed transactions nor the type of audit opinion that might be rendered on the Company's financial statements, and neither written or oral advice was provided that would be an important factor considered by the Company in reaching a decision as to accounting, auditing or financial reporting issues. There were no matters that were either the subject of a disagreement (as defined in paragraph 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in paragraph 304(a)(1)(v) of Regulation S-K).
In connection with the audit of ourthe fiscal years ended December 31, 2015 and 2014, and through February 18, 2016, we have no disagreements with the Former Auditor on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement. The Former Auditor's reports on the Company's consolidated financial statements as of and for the fiscal year ended December 31, 2013, we had a disagreement with Anton & Chia regarding our fee arrangement and, as discussed below, with certain accounting principles or practices. Anton & Chia met with the audit committee of our Board of Directors, but2014 did not report oncontain any disagreements regarding any accounting matters. After Anton & Chia’s meeting with the audit committee, a dispute arose with Anton & Chia regarding our fee arrangement. Thereafter, Anton & Chia notified the Company that there were disagreements regarding our financial statements. On April 15, 2014, Anton & Chia informed us that it has resigned in an e-mail that read, in its entirety, as follows: “Take this email as our resignation.”
Because Anton & Chia was engaged in October 2013, Anton & Chia had not previously issued an accountant's report on any of our financial statements. Accordingly, during the past two years we did not receive any report from Anton & Chia that contained an adverse opinion or a disclaimer of opinion, or wasnor were they qualified or modified as to uncertainty, audit scope, or accounting principles. HBM’s accountant’s report on our financial statements for
During the priorCompany's two most recent completed fiscal years, ended December 31, 2012 did not contain an adverse opinion or disclaimer of opinion, and was not modified as to uncertainty, audit scope, or accounting principles, except that there was an explanatory paragraph relating to the Company’s ability to continue as a “going concern.” In addition,interim period through February 15, 2016, there were no reportable events of the type"reportable events" as such term is described in Item 304(a)(1)(v)(iv) of Regulation S-K.S-K with the Former Auditor.
The Company provided the Former Auditor with a copy of this Current Report on Form 8-K, and requested that the Former Auditor furnish the Company with a letter addressed to the U.S. Securities and Exchange Commission stating whether the Former Auditor agrees with the disclosure contained in this report, or, if not, stating the respects in which it does not agree. The Company has received the requested letter from the Former Auditor, and a copy of their letter is filed as Exhibit 16.1 to this Current Report on Form 8-K.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures which are designed to ensure that the information required to be disclosed in the reports it files or submits under the Securities Exchange Act of 1934 (as amended, the “Act”"Act") is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC's rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer (“("Certifying Officers”Officers"), to allow timely decisions regarding required financial disclosures.
In connection with the preparation of this Annual Report, our Certifying Officers evaluated the effectiveness of management’smanagement's disclosure controls and procedures, as of December 31, 2013,2015, in accordance with Rules 13a-15(b) and 15d-15(b) of the Exchange Act. Based on that evaluation, the Certifying Officers concluded that management’smanagement's disclosure controls and procedures were effective as of December 31, 2013.2015.
Management's Report on Internal Control Over Financial Reporting
Our managementManagement is responsible for establishing and maintaining adequate internal control over financial reporting as(as defined in Rule 15d-15(f)13a-15(f) under the Exchange Act, and for assessingas amended). Under the effectiveness of internal control over financial reporting.
Internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of our financial reportingsupervision and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use, or disposition of our assets that could have a material effect on our financial statements.
Management, with the participation of management, including our principal executiveChief Executive Officer and financial officers, conducted an evaluation ofChief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2010, based on2015. In making this assessment, management used the criteria established in Internal Control—Integrated Framework issuedset forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)("COSO") in Internal Control—Integrated Framework. Based on that evaluation,our assessment, management identified significant deficiencies related to: (i) our internal review functions, and (ii) a lack of segregation of duties within accounting functions. As a result, management concluded that, as of December 31, 2013, our2015, the Company's internal control over financial reporting was effective.
were not effective based on the criteria established in Internal Control–Integrated Framework. Due to our size, lack of funding, and the nature of our operations, segregation of all conflicting duties may not always be possible and may not be economically feasible. We are in the process of determining how best to change our current system and implement a more effective system. However there can be no assurance that implementation of any change will be completed in a timely manner, or that it will be adequate once implemented. To the extent possible, we try to implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions are be performed by separate individuals. We believe that the foregoing steps help remediate the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.
This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’sManagement's report was not subject to attestation by our independent registered public accounting firm as such attestation is not required for non-accelerated filers such as us pursuant to applicable SEC rules.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 20132015 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
The following table sets forth the name, age and position held by each of our current executive officers and directors. Directors are elected for a period of one year and thereafter serve until the next annual meeting at which their successors are duly elected by the stockholders.
| Name | | Age | | Position |
David R. Walker (1) | | | 71 | 73 | Chairman of the Board |
Richard Palmer Donna Reilly | | | 53 | 55 47 | President, Chief Executive Officer and Director DirectorChief Financial Officer
|
Martin Wenzel(1)
| | | 56 | | Director |
Donna Reilly | | | 45 | | Chief Financial Officer |
| (1) | Member of our Audit Committee |
Business Experience and Directorships
The following describes the backgrounds of current executive officers and directors. Our Board of Directors has determined that Mr. Walker and Mr. Wenzel areis an independent directors as defined in the Nasdaq rules governing members of boards of directors.
David R. Walker
David R. Walker joined the Board of Directors on May 2, 1996, and was appointed Chairman of the Board of Directors on May 10, 1998. He has served as Chairman of the Audit Committee since its establishment in 2001. For over 20 years, Mr. Walker has been the General Manager of Sunheaven Farms, the largest onion growing and packing entity in the State of Washington. In the capacity of General Manager, Mr. Walker performs the functions of a traditional chief financial officer. Mr. Walker holds a Bachelor of Arts degree in economics from Brigham Young University with minors in accounting and finance.
The Board believes that Mr. Walker’sWalker's experience regarding the operation and management of large-scale agricultural farms and his experience as a financial officer are valuable resources to our Board in formulating business strategy, addressing business opportunities and resolving operational issues that arise from time to time.
Richard Palmer
Richard Palmer was appointed as our President and Chief Operating Officer in September 2007, and been a member of the Board of Directors since September 2007. Mr. Palmer became our Chief Executive Officer on December 21, 2007. Mr. Palmer has over 25 years of hands-on experience in the energy field, holding senior level management positions with a number of large engineering, development, operations and construction companies. He is a co-founder of Mobius Risk Group, LLC, an energy risk advisory services consulting company, and was a principal and Executive Vice President of that consulting company from January, 2002 until September 2007. From 1997 to 2002, Mr. Palmer was a Senior Director at Enron Energy Services. Prior thereto, from 1995 to 1996 Mr. Palmer was a Vice President of Bentley Engineering, and a Senior Vice President of Southland Industries from 1993 to 1996. Mr. Palmer received his designation as a Certified Energy Manager in 1999, holds two Business Management Certificates from University of Southern California’sCalifornia's Business School, and is an active member of both the American Society of Plant Biologists, International Tropical Farmers Association and the Union of Concerned Scientists. Mr. Palmer is Trustee & President of the Center for Sustainable Energy Farming (CFSEF), a non-profit research institute dedicated to sustainable communities, fueled by socially-responsible clean energy. In February 2013, Mr. Palmer joined the RSB Services Foundation's Board of Directors and held the Chairman role from April until December 2013. RSB Services acted as the implementing entity of the Roundtable on Sustainable Biofuels (RSB) sustainability certification until December 2013.
Over the last 25 years, Mr. Palmer has held senior level management positions with a number of large engineering, development, operations and construction companies, and, as a result, he has garnered a wealth of experience in the energy field. Mr. Palmer’sPalmer's experience is important to the development and execution of the Company’sCompany's business plan. Mr. Palmer is the only member of management who serves as a director of the Company.
Martin Wenzel
Martin Wenzel joined our Board of Directors in April 2010, and serves on the Board’s audit committee. Mr. Wenzel is currently the President and Chief Executive Officer of Colorado Energy, the operating entity of Bicent Power, LLC, which is a privately owned limited liability company that owns and operates power generating stations in Colorado, Montana and California. From 2005 until August 2007, he served as the Senior Vice President (Sales and Marketing) of Miasole Inc. Prior thereto, from 2001 to 2004, Mr. Wenzel was President and Chief Executive Officer of Alpha Energy LLC. He is also a member of the Board of the Deming Center of Entrepreneurship at the University of Colorado. Mr. Wenzel holds an Executive MBA from Columbia Business School; a Master’s degree in Systems Management from the University of Southern California; and a Bachelor’s degree in Engineering and Management from the US Naval Academy.
Mr. Wenzel has an extensive background in the energy industry, including over 25 years of developing, constructing and operating energy projects, marketing energy commodities and operating energy assets in the U.S. and internationally. The Board concluded that Mr. Wenzel’s expertise in energy policy and alternative energy technologies is a valuable asset for the Board of Directors of the Company.
Donna Reilly
Donna Reilly was appointed as our Chief Executive Officer on March 19, 2014. Ms. Reilly joined Global Clean Energy Holdings, Inc. in January 2010 as our Accounting Manager and was later promoted to Controller in 2011.2011 and then to Chief Executive Officer on March 19, 2014. . From June 2005 to January 2010, Ms. Reilly was an Accounting Manager at Automotive Information Network. Additionally, Ms. Reilly was an auditor at Deloitte & Touch, LLP for over four years. Ms. Reilly received her B.S. in Accounting from National University and is a certified public accountant.
Richard Palmer and Donna Reilly currently also serve as the Chief Executive Officer and Chief Financial Officer, respectively, for each of our subsidiaries. Mr. Palmer is the sole director of our subsidiaries.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely on information provided to us by our officers and our review of copies of reporting forms received by us, we believe that during fiscal year ended December 31, 2013,2015, our current officers and directors complied with the filing requirements under Section 16(a).
Code of Ethics
Our Board of Directors has adopted a code of ethics that applies to our principal executive officers, principal financial officer or controller, or persons performing similar functions (“("Code of Ethics”Ethics"). A copy of our Code of Ethics will be furnished without charge to any person upon written request. Requests should be sent to: Secretary, Global Clean Energy Holdings, Inc., 2790 Skypark Drive, Suite 105, Torrance, California 90505.
Board Committees
Our Board of Directors has an Audit Committee, but does not currently have a Compensation Committee or a Nominating Committee.
The Audit Committee meets periodically with management and with our independent registered public accounting firm to, among other things, review the results of the annual audit and quarterly reviews and discuss the financial statements. The audit committee also hires the independent registered public accounting firm, and receives and considers the accountant’saccountant's comments as to controls, adequacy of staff and management performance and procedures. The Audit Committee is also authorized to review related party transactions for potential conflicts of interest. During the fiscal year ended December 31, 2013,2015, Dave Walker and Martin Wenzel constituted allwas the only member of the members of theour Audit Committee. Both Mr. Walker is a non-employee director and Dr. Wenzel were non-employee directors andis independent as defined under the Nasdaq Stock Market’sMarket's listing standards. Mr. Walker has significant knowledge of financial matters, and our Board has designated Mr. Walker as the “audit"audit committee financial expert”expert" of the Audit Committee. The Audit Committee met four times during fiscal 2013 in connection with this Annual Report and our Quarterly Reports on Form 10-QSB. The Audit Committee operates under a formal charter that governs its duties and conduct.
Summary Compensation Table.
The following table sets forth certain information concerning the annual and long-term compensation for services rendered to us in all capacities for the fiscal years ended December 31, 20132015 and 20122014 of all persons who served as our principal executive officer during the fiscal year ended December 31, 20132015 and for any other executive officer who earned annual compensation during the fiscal year ended December 31, 20132015 greater than $100,000. Since no other executive officer earned more than $100,000 in 2013, our Chief Executive Officer (who during part of 2013 also served as our Acting Chief Financial Officer) is the sole “Named Executive Officer” of this company. Donna Reilly, currently our Chief Financial Officer, was appointed on March 19, 2014 and, accordingly, was not an executive officer in 2013.
Summary Compensation Table
Name and
Principal Position | | Fiscal Year Ended 12/31 | | Salary Paid or Accrued ($) | | Bonus Paid or Accrued ($) | | Stock Awards ($) | | Option Awards ($) | | | All Other Compensation ($) | | Total ($) |
| Richard Palmer | | 2015 | | 250,000 | | | | | | 99,483 | | | | | 349,483 |
| | | 2014 | | 250,000 | | | | | | | | | | | 250,000 |
| Donna Reilly | | 2015 | | 135,000 | | | | 10,000 | | | | | | | 145,000 |
| | | 2014 | | 124,200 | | | | 10,000 | | | | | | | 134,200 |
Name and Principal Position | Fiscal Year Ended 12/31 | | Salary Paid or Accrued ($) | | Bonus Paid or Accrued ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | | Total ($) | |
| Richard Palmer | 2013 | | | 250,000 | | | | | | | | 250,000 | |
| | 2012 | | | 250,000 | | | | | | | | 250,000 | |
Stock Option Grant
The following table sets forth information as of December 31, 2013,2015, concerning unexercised options, unvested stock and equity incentive plan awards for our sole Named Executive Officer.
Officers.
OUTSTANDING EQUITY AWARDS AT YEAR ENDED DECEMBER 31, 20132015
| | | Option Awards | Stock Awards |
| Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| | | | | | | | | | | | | | | | |
| Richard Palmer | | | | | | 6,000,000 | | | | | 0.02 | | 3/16/2020 | | | | |
| | | | 3,250,000 | | | | 6,000,000 | | | | | 0.02 0.01 | | 3/16/2020 12/31/2012 | | | | |
| Option Awards | Stock Awards |
| Name | Number of Securities Underlying Unexercised Options
(#) Exercisable | Number of Securities Underlying Unexercised Options
(#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#) | Option Exercise Price
($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested
(#) | Market Value of Shares or Units of Stock That Have Not Vested
($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($) |
| | | | | | | | | |
| Richard Palmer | 8,000,000 | 6,359,766 | | 0.02 | 3/16/2020 | | | | |
| Donna Reilly | 250,000 500,000 1,500,000 1,000,000 1,000,000 | | | 0.02 0.01 0.01 0.01 0.01 | 04/01/2016 01/17/2018 07/08/2018 03/18/2019 01/30/2020 | | | | |
Director Compensation.
Pursuant to our Board of Directors’ theDirectors' Compensation Policy, non-employee directors are entitled to receive the following benefits, among others, in consideration for their services as directors of the Company:
| · | Monthly cash payments of $2,000; |
| · | Annual grants of non-qualified stock options to purchase up to 500,000 shares of the Company’sCompany's common stock; |
| · | Participation in the Company’sCompany's stock option plans; and |
| · | Reimbursement of certain expenses incurred in connection with attendance of meetings of the Board and Board Committee. |
The following table sets forth information concerning the compensation paid to each of our non-employee directors during fiscal 20132015 for their services rendered as directors. The compensation of Richard Palmer, who currently serves as a director and as our President and Chief Executive Officer, (and who servedis not compensated for his services as our Acting Chief Financial Officer during 2013),a director; his compensation as an officer is described above in the Summary Compensation Table.
DIRECTOR COMPENSATION FOR FISCAL YEAR 20132015
| Name | Fees Earned or Paid in Cash | Stock Awards | Option Awards(1)(2) | Non-Equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation | Total | | Fees Earned or Paid in Cash | | Stock Awards | | Option Awards(1)(2) | | Non-Equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation | | Total | |
| | | | | | | | | | | | | | | | | | | |
| David R. Walker | 24,000 | | 42,500 | | | | 66,500 | | $ | 24,000 | | | | $ | 4,500 | | | | | $ | 48,500 | |
| Richard Palmer | - | | - | | | | - | | | - | | | | | - | | | | | - | |
| Martin Wenzel | 24,000 | | 10,000 | | | | 34,000 | |
| Total | 48,000 | | 52,500 | | | | 100,500 | | $ | 24,000 | | | | $ | 4,500 | | | | | $ | 48,500 | |
| (1) | This column represents the aggregate grant date fair value of option awards computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the option grants, refer to Note 8 of our financial statements in this Annual Report. These amounts do not correspond to the actual value that will be recognized by the named directors from these awards. |
| (2) | Pursuant to the company’scompany's director compensation, each non-employee director is entitled to an annual grant of options to acquire 500,000 shares. Each director received options to acquire 500,000 shares of the company’scompany's common stock at an exercise price of $0.01$0.009 per share, effective July 1, 2013.2015. |
Employment Agreements
Richard Palmer. On September 7, 2007,Effective December 31, 2014, we entered into an employment agreement (the “Employment Agreement”"Employment Agreement") with Richard Palmer, our President and Chief Executive Officer. Mr. Palmer currently also served as our Acting Chief Financial Officer, from June 1, 2013 until March 19, 2014.for a term of five (5) years. Under the Employment Agreement, we granted Mr. Palmer an incentive option to purchase up to 12,000,00016,959,377 shares of our common stock at an exercise price of $0.03$0.0041 (the closing trading price on the date the agreement was signed)signed and approved), subject to our achievementwith 25% vesting immediately and the balance vesting in equal amounts over the next 48 months. In the event of certain market capitalization goals. On April 22, 2009, our Boarda proposed sale, merger or other proposed change in control of Directors approved accelerating the vesting of all 12,000,000 unvested shares under the option, which have expired as of December 31, 2013.
Company, Executives new stock options will immediately vest.
In addition, Mr. Palmer’sPalmer's compensation package includes a base salary of $250,000, and a bonus payment contingent on Mr. Palmer’sPalmer's satisfaction of certain performance criteria, which will not exceed 100%50% of Mr. Palmer’sPalmer's base salary. In the event that (i) we terminate Mr. Palmer’sPalmer's employment for reasons other than “cause”"cause" (as defined in the Employment Agreement to include material breaches by him of the agreement, fraud, misappropriation of funds or embezzlement), or if (ii) Mr. Palmer resigns because we breached the Employment Agreement, we will be obligated to pay Mr. Palmer an amount equal to one (1) times his then-current annual base salary plus fifty percent (50%) of the target bonus in effect on the datetwelve (12) months of his termination. However, if Mr. Palmer’s employment is terminated for death or disability, or if Mr. Palmer resigns or is terminated for “cause,” he will not be entitled to receive any severance payments or other post-employment benefits. The original term of the Employment Agreement commenced September 1, 2007, and was scheduled to expire on September 30, 2010.
On March 16, 2010, the Company and Richard Palmer entered into an amendment (the “Amendment”) to the Employment Agreement. Pursuant to the Amendment, the Company extended the term of Mr. Palmer’s employment for an additional two years, i.e., through September 30, 2013. The term of the Employment Agreement automatically renews for successive one-year periods unless otherwise terminated. In connection with the Amendment, the Company and Mr. Palmer entered into an option agreement (“Option Agreement”). Pursuant to the Option Agreement, the Company granted Mr. Palmer a new option to acquire up to 12,000,000 shares of the Company’s common stock at an exercise price of $0.02, subject to the Company’s achievement of certain market capitalization goals. The new option expires after ten (10) years.
base salary.
The following table sets forth certain information regarding beneficial ownership of our common stock as of November 3, 2014March 30, 2016 by (a) each person known by us to own beneficially 5% or more of each class of our outstanding voting shares (i.e. our common stock and our Series B Preferred Stock), (b) each of our named executive officers listed in the Summary Compensation Table and each of our directors and (c) all executive officers and directors of this company as a group. As of November 3, 2014,March 30, 2016, there were 339,187,545,341,405,545, shares of our common stock issued and outstanding. As of the same date, there were 13,000 shares of our Series B Preferred Stock issued and outstanding, which shares of preferred stock were convertible into an aggregate of 11,818,181 shares of common stock. Unless otherwise noted, we believe that all persons named in the table have sole voting and investment power with respect to all the shares beneficially owned by them.
Name and Address of Beneficial Owner (1)26 | | Shares Beneficially Owned (2)
| | Percent
of Class of Common Stock
|
Preferred Stock:
| | | | |
Corporativo LODEMO S.A DE CV
Calle 18, #201-B x 23 y 25,
Colonias Garcia Gineres, C.P. 97070
Merida, Yucatan, Mexico
| | 9,090,908(3)
| | 2.68% |
| | | | |
Greenrock Capital Holdings LLC
10531 Timberwood Circle, Suite D
Louisville, Kentucky 40223
| | 2,727,273(4)
| | .80% |
| | | | |
Common Stock: | | | | |
Targeted Growth, Inc. 2815 Eastlake Ave E, Suite 300 Seattle WA 98102 | | 40,000,000 | | 11.79% |
| | | | | |
Roll Energy Investments LLC 11444 West Olympic Boulevard, 10th Floor Los Angeles, California 90064 | | 33,044,500(5) | | 11.22% |
| | | | | |
Michael Zilkha 1001 McKinney, Suite 1900 Houston TX 77002 | | 42,755,690(6) | | 12.61% |
| | | | | |
| Directors/Named Executive Officers: | | | | |
| Richard Palmer | | 75,280,240(7) | | 22.19% |
| David R. Walker | | 5,153,539 (8) | | * |
| Martin Wenzel | | 2,000,000 (9) | | * |
| Donna Reilly | | _______ | | * |
| All Named Executive Officers and Directors as a group (4 persons) | | 83,433,779 (10) | | 24.60% |
Name and Address of Beneficial Owner (1) | | Shares Beneficially Owned (2) | | Percent
of Class of Common Stock |
Preferred Stock: | | | | |
Corporativo LODEMO S.A DE CV Calle 18, #201-B x 23 y 25, Colonias Garcia Gineres, C.P. 97070 Merida, Yucatan, Mexico | | 9,090,908(3) | | 2.10% |
| | | | | |
Greenrock Capital Holdings LLC 10531 Timberwood Circle, Suite D Louisville, Kentucky 40223 | | 2,727,273(4) | | .63% |
| | | | | |
| Common Stock: | | | | |
Targeted Growth, Inc. 2815 Eastlake Ave E, Suite 300
Seattle WA 98102 | | 40,000,000 | | 9.25% |
| | | | | |
Roll Energy Investments LLC 11444 West Olympic Boulevard, 10th Floor Los Angeles, California 90064 | | 33,044,500(5) | | 7.64% |
| | | | | |
Michael Zilkha 1001 McKinney, Suite 1900 Houston TX 77002 | | 42,755,690(6) | | 9.89% |
| | | | | |
| Directors/Named Executive Officers: | | | | |
| Richard Palmer | | 88,239,617(7) | | 20.41% |
| David R. Walker | | 6,153,539 (8) | | 1.4% |
| Donna Reilly | | 4,250,000 (9) | | 1.0% |
| All Named Executive Officers and Directors as a group (3 persons) | | 98,643,156 | | 22.81% |
* Less than 1%
(1) Unless otherwise indicated, the business address of each person listed is c/o Global Clean Energy Holdings, Inc., 2790 Skypark Drive, Torrance, California, 90505.
(2) For purposes of this table, shares of common stock are considered beneficially owned if the person directly or indirectly has the sole or shared power to vote or direct the voting of the securities or the sole or shared power to dispose of or direct the disposition of the securities. Shares of common stock are also considered beneficially owned if a person has the right to acquire beneficial ownership of the shares upon exercise or conversion of a security within 60 days of November 3, 2014.
(3) Consists of 9,090,908 shares of common stock that may be acquired upon the conversion of shares of Series B Preferred Stock. Corporativo LODEMO owns 10,000 shares of our Series B Preferred Stock, which represents approximately 76.92% of the issued and outstanding shares of that class of securities.
(4) Consists of 2,727,273 shares of common stock that may be acquired upon the conversion of shares of Series B Preferred Stock. Greenrock owns 3,000 shares of our Series B Preferred Stock, which represents approximately 23.08% of the issued and outstanding shares of that class of securities.
(5) Includes (i) 945,000 shares that may be acquired upon exercise of currently exercisable warrants, and (ii) 9,450,000 shares issuable upon conversion of an outstanding convertible promissory note. The common shares, warrants and convertible note disclosed herein are directly owned by Roll Energy Investments LLC (“("Roll LLC”LLC"). However, Stewart Resnick is the sole manager of Roll LLC and, as a result of his control over Roll LLC, he is deemed to beneficially own the securities held by Roll LLC.
(6) Includes (i) 945,000 shares that may be acquired upon exercise of currently exercisable warrants, and (ii) 9,450,000 shares issuable upon conversion of an outstanding convertible promissory note.
(7) Consists of 60,030,240 outstanding shares and 15,250,00028,209,377 shares that may be acquired upon the exercise of currently exercisable options. Mr. Palmer also has options to acquire 12,000,000 shares of common stock that are not currently exercisable and will not become exercisable unless certain conditions are met.
(8) Includes 4,750,0005,750,000 shares that may be acquired upon the exercise of options.
(9) Consists of 2,000,000 shares that may be acquired upon the exercise of options.
(10) Includes 22,000,0004,250,000 shares that may be acquired upon the exercise of options.
Certain Relationships and Related Transactions
Roll Energy Investments LLC (“Roll LLC”) and Michael Zilkha each presently owns more than 10% of our common stock. Stewart Resnick is the sole manager of Roll LLC and, as a result of his control over Roll LLC, he is deemed to beneficially own the securities held by Roll LLC.
Our principal asset, and ourthe three operating Jatropha farms arethat we owned until December 2015, were owned in a joint venture in which both Mr. Resnick and Mr. Zilkha, were principals during 2013.a major stockholder of this company, was a beneficial investor. As noted elsewhere in this report, we currently ownowned 50% of the issued and outstanding common membership units of GCE Mexico, with the remaining 50% currentlywas held by four other investors (the “Common Members”"Common Members"). Additionally, Mr. Zilkha (the “Preferred Member”"Preferred Member") currently ownsowned all of the preferred membership units of GCE Mexico. Until December 2013, Mr. Resnick was affiliated with one of the Common Members and one of the Preferred Members, and Mr. Zilkha was affiliated with four of the Common Members and the other Preferred Member. In December 2013, Mr. Zilkha acquired all of Mr. Resnick’s interests in GCE Mexico.Members. The Preferred Member is entitled to a preferential 12% per annum cumulative compounded return on their investment in GCE Mexico.
As of November 3, 2014, the Preferred Members have contributed a total of $22,112,000 to GCE Mexico. The Preferred Members also directly funded the purchase bydescribed elsewhere in this Annual Report, in December 2015 GCE Mexico sold all three farms. The proceeds from that sale were distributed to Mr. Zilkha, and Mr. Zilkha forgave his right to receive the preferential return and other payments. This Company did not receive any of the land inproceeds from the Statesale of Yucatan in Mexico on which the GCE Mexico three farms are located. The purchase of land for the three farms was funded by mortgage loans, which cumulatively had an initial principal balance of $5,110,189. The mortgages bear interest at the rate of 12% per annum, and interest is payable on a quarterly basis to the extent the borrower has sufficient cash flow. The three mortgages, including any unpaid interest, become due in April 2018, February 2020, June 2021 and October 2021.
farms.
Director Independence
Our common stock is traded on the OTC Bulletin Board and OTCQB Market. Neither the OTC Bulletin Board electronic trading platform nor the OTCQB Market maintains any standards regarding the “independence”"independence" of the directors on our company’scompany's Board of Directors, and we are not otherwise subject to the requirements of any national securities exchange or an inter-dealer quotation system with respect to the need to have a majority of our directors be independent.
In the absence of such requirements, we have elected to use the definition for “director independence”"director independence" under the Nasdaq Stock Market’sMarket's listing standards, which defines an “independent director”"independent director" as “a"a person other than an officer or employee of us or its subsidiaries or any other individual having a relationship, which in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.”" The definition further provides that, among others, employment of a director by us (or any parent or subsidiary of ours) at any time during the past three years is considered a bar to independence regardless of the determination of our Board of Directors.
Our Board of Directors has determined that Mr. Walker and Mr. Wenzel areis an independent directorsdirector as defined in the Nasdaq rules relating to director independence. Each of Mr. Walker and Mr. Wenzel areis a non-employee directors.director.
On October 7, 2013, we engaged Anton & Chia, LLP ("Anton & Chia") to serve as our new independent auditors for the quarter ended September 30, 2013 and for the year ending December 31, 2013.
In connection with the audit of our financial statements for the fiscal year ended December 31, 2013, we had a disagreement with Anton & Chia regarding our fee arrangement and, as discussed below, with certain accounting principles or practices. Anton & Chia met with the audit committee of our Board of Directors, but did not report on any disagreements regarding any accounting matters. After Anton & Chia's meeting with the audit committee, a dispute arose with Anton & Chia regarding our fee arrangement. Thereafter, Anton & Chia notified the Company that there were disagreements regarding our financial statements. On April 15, 2014, Anton & Chia informed us that it has resigned in an e-mail that read, in its entirety, as follows: "Take this email as our resignation."
Because Anton & Chia was engaged in October 2013, Anton & Chia had not previously issued an accountant's report on any of our financial statements. Accordingly, during the past two years we did not receive any report from Anton & Chia that contained an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope, or accounting principles. The accountant's report issued by Hansen, Barnett & Maxwell, P.C. ("HBM"), our prior independent registered public accounting firm, on our financial statements for the prior two years ended December 31, 2012 did not contain an adverse opinion or disclaimer of opinion, and was not modified as to uncertainty, audit scope, or accounting principles, except that there was an explanatory paragraph relating to the Company's ability to continue as a "going concern." In addition, there were no reportable events of the type described in Item 304(a)(1)(v) of Regulation S-K.
In connection with the preparation of our financial statements for the fiscal year ended December 31, 2013, we did disagree with Anton & Chia regarding the application of certain accounting principles or practices, financial statement disclosure, or auditing scope or procedure. These disagreements, including those resolved to the satisfaction of Anton & Chia, are as follows:
1. Anton & Chia initially disagreed with our intangible asset valuation as of the year ended December 31, 2013. After reviewing our explanations related to the valuation of the intangible assets (which valuations were in accordance with ASC 350-30), Anton & Chia agreed with management's original intangible asset valuation, and the disagreement was eliminated.
2. Anton & Chia disagreed with our valuation of our long-lived assets, Plantation Development Cost and Deferred Growing Costs, as of the year ended December 31, 2013. Management provided detailed explanations related to the valuation of this Company's long lived assets in accordance with ASC 360-10-25. Anton & Chia agreed with management's long lived asset valuation, with the exception of approximately $1.1 million in Plantation Development Cost. We provided Anton & Chia with supplemental information regarding these Plantation Development Costs. However, Anton & Chia resigned without addressing this issue.
Anton & Chia did not discuss any disagreements with the audit committee of our board of directors, or with the board of directors. In addition, due to the accountant's abrupt resignation, we do not know if the foregoing disagreements were resolved to the accountant's satisfaction prior to its resignation.
As disclosed in Item 3, Legal Proceedings, above, on February 19, 2016, Anton & Chia filed a complaint against us in the California Superior Court of Los Angeles County, claiming that this company breached its contract with Anton & Chia by failing to pay $32,369 of fees incurred by that accounting firm.
On n September 16, 2014, the audit committee appointed Hartley Moore Accountancy Corporation (“("Hartley Moore”Moore") as our independent registered public accounting firm for the year ended December 31, 2013.2015. Hartley Moore has audited our financial statements for the year ended December 31, 2013.2015.
The following is a summary of the fees billed, or expected to be billed, to the Company by Hartley Moore and Hansen, Barnett & Maxwell and Anton & Chia for professional services rendered for the years ended December 31, 20132015 and 2012.2014 (although we made partial payments to Anton & Chia, because Anton & Chia never issued an audit report, the payments to Anton & Chia are not included herein). These fees are for work performed related to the years indicated and, in some instances, we have estimated the fees for services rendered but not yet billed.
| 2013 | | Audit Fees | | | Audit Related Fees | | Tax Fees | | | Total Fees | | |
| 2015 | | | Audit Fees | | | Audit Related Fees | | | Tax Fees | | | Total Fees | |
| | | | | | | | | | | | | | |
| Hartley Moore/Hall & Company | | | $ | 55,650 | | | $ | - | | | | | | $ | 55,650 | |
| | | | | | | | | | | | | | | | | |
| 2014 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Hansen, Barnett & Maxwell | | $ | 62,329 | | | $ | - | | | $ | - | | | $ | 62,329 | | | $ | 7,900 | | | $ | - | | | $ | - | | | $ | 7,900 | |
| Anton & Chia | | $ | 10,000 | | | $ | - | | | $ | - | | | $ | 10,000 | | |
| Hartley Moore | | $ | 36,750 | | | $ | 800 | | | $ | - | | | $ | 37,550 | | | $ | 55,650 | | | $ | - | | | | | | | $ | 55,650 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| 2012 | | Audit Fees | | | Audit Related Fees | | Tax Fees | | | Total Fees | | |
| | | | | | | | | | | | | | | | | | |
| Hansen, Barnett & Maxwell | | $ | 76,772 | | | $ | - | | | $ | 7,100 | | | $ | 83,872 | | |
Audit Fees:
Consists of fees billed for professional services rendered for the audit of the Company’sCompany's annual financial statements and the review of the interim financial statements included in the Company’sCompany's Quarterly Reports (together, the “Financial Statements”"Financial Statements" ) and for services normally provided in connection with statutory and regulatory filings or engagements.
Audit-Related Fees:
Consists of fees billed for assurance and related services reasonably related to the performance of the annual audit or review of the Financial Statements (defined above).
Tax Fees:
Consists of fees billed for tax compliance, tax advice and tax planning.
All Other Fees:
Consists of fees billed for other products and services not described above.
Audit Committee Pre-Approval Policies and Procedures
Consistent with SEC policies, the Audit Committee charter provides that the Audit Committee shall pre-approve all audit engagement fees and terms and pre-approve any other significant compensation to be paid to the independent registered public accounting firm. No other significant compensation services were performed for us by Hall & Company, Hartley Moore Accountancy Corporation or Hansen, Barnett & Maxwell. P.C. during 20132014 and 2012.2015.
Our financial statements and related notes thereto are listed and included in this Annual Report beginning on page F-1. The following documents are furnished as exhibits to this Form 10-K. Exhibits marked with an asterisk are filed herewith. The remainder of the exhibits previously have been filed with the Commission and are incorporated herein by reference.
| Number | | Exhibit |
| 3.1 | | Amended and Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company’sCompany's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference). |
| 3.2 | | Amended Bylaws of the Company (filed as Exhibit 3.2 to the Company’sCompany's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference). |
| 4.1 | | Certificate of Designations of Preferences and Rights of Series A Convertible Preferred Stock of Medical Discoveries, Inc. (filed as Exhibit 4.1 to Registration Statement No. 333-121635 filed on Form SB-2 on December 23, 2004, and incorporated herein by reference). |
| 4.4 | | Amendment to Certificate of Designations of Preferences and Rights of Series A Convertible Preferred Stock of Medical Discoveries, Inc. (filed as Exhibit 4.2 to Registration Statement No. 333-121635 filed on Form SB-2 on December 23, 2004, and incorporated herein by reference). |
| 4.5 | | Certificate Of Designation of Preferences and Rights Series B Convertible Preferred Stock of Medical Discoveries, Inc. (filed as Exhibit 4.1 to the Company’sCompany's Current Report on Form 8-K filed November 13, 2007, and incorporated herein by reference) |
| 10.1 | | 2002 Stock Incentive Plan adopted by the Board of Directors as of July 11, 2002 (filed as Exhibit 10.5 to the Company’sCompany's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2002, and incorporated herein by reference). |
| 10.2 | | Employment Agreement dated September 7, 2007 between Medical Discoveries, Inc. and Richard Palmer (filed as Exhibit 10.3 to the Company’sCompany's Current Report on Form 8-K filed September 17, 2007, and incorporated herein by reference) |
| 10.3 | | Stock Purchase Agreement, dated October 30, 2008, between the Global Clean Energy Holdings, Inc. and the four stockholders of Technology Alternatives Limited, a Belizean Company formed under the Laws of Belize (filed as Exhibit 10.1 to the Company’sCompany's Quarterly Report on Form 10-QSB filed November 14, 2008, and incorporated herein by reference) |
| 10.4 | | Limited Liability Company Agreement of GCE Mexico I, LLC, a Delaware Limited Liability Company, dated April 23, 2008 (filed on December 31, 2009, as Exhibit 10.17 to the Company’sCompany's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2008, and incorporated herein by reference) |
| 10.5 | | Sale and Asset Purchase Agreement, dated November 16, 2009, between Global Clean Energy Holdings, Inc., MDI Oncology, Inc., and Curadis Gmbh (filed as an Exhibit 10.1 to the Company’sCompany's Quarterly Report on Form 10-Q filed on November 20, 2009, and incorporated herein by reference) |
| 10.6 | | Amendment to Employment Agreement, dated March 16, 2010, between Global Clean Energy Holdings, Inc. and Richard Palmer (filed as Exhibit 10.20 to the Company’sCompany's Annual Report on Form 10-K filed on March 31, 2010, and incorporated herein by reference) |
| 10.7 | | Stock Option Agreement, dated March 16, 2010, between Global Clean Energy Holdings, Inc. and Richard Palmer (filed as Exhibit 10.21 to the Company’sCompany's Annual Report on Form 10-K filed on March 31, 2010, and incorporated herein by reference) |
| | |
| 10.8 | | Stock Purchase Agreement, dated as of March 2009, among Global Clean Energy Holdings, Inc., and Technology Alternatives Limited and its stockholders listed therein (filed as Exhibit 10.1 to the Company’sCompany's Quarterly Report on Form 10-Q filed on May 20, 2009, and incorporated herein by reference) |
| 10.9 | | Office Lease, dated as of February 2, 2014, between Global Clean Energy Holdings, Inc. and Skypark Atrium, LLC* |
10.10 | | Asset Purchase Agreement, dated March 12, 2013, between Targeted Growth, Inc. and Global Clean Energy Holdings, Inc.* |
| 10.11 | | Secured Promissory Note, dated March 13, 2013, issued by Global Clean Energy Holdings, Inc. to Targeted Growth, Inc.* |
| 10.12 | | Security Agreement, dated March 13, 2013 between Targeted Growth, Inc. and Global Clean Energy Holdings Inc.* |
| 10.13 | | LLC Interest Purchase Agreement, dated March 12, 2013, between Global Clean Energy Holdings, Inc., Targeted Growth, Inc. and Green Earth Fuels, LLC |
| 10.14 | | Collateral Transfer and Note Amendment, betweenEmployment Agreement, Richard Palmer, with Global Clean Energy Holdings, Inc. and Targeted Growth, Inc., as of September 30,December 31, 2014 |
10-15 10-15a 10-15b | | Mexican Farm Land Sale agreement, GCE Mexico I, LLC's subsidiary Asideros Globales Corporativo Mexican Farm Land Sale agreement, GCE Mexico I, LLC's subsidiary Asideros 2 Mexican Farm Land Sale agreement, GCE Mexico I, LLC's subsidiary Asideros 3 |
| 14.1 | | Medical Discoveries, Inc. Code of Conduct (filed as Exhibit 14.1 to the Company’sCompany's Annual Report on Form 10-K filed on April 15, 2009, and incorporated herein by reference) |
2323.1 | | Consent of Hall & Company * |
| 23.2 | | Consent of Hartley Moore Accountancy Corporation *Corporation* |
| 31.1 | | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
| 31.2 | | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 32.2 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE | | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* XBRL Instance Document XBRL Taxonomy Extension Schema XBRL Taxonomy Extension Calculation XBRL Taxonomy Extension Definition XBRL Taxonomy Extension Label XBRL Taxonomy Extension Presentation |
*Filed herewith. |
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | GLOBAL CLEAN ENERGY HOLDINGS, INC. |
November, 2014March 30, 2016 | By: /s/ RICHARD PALMER Richard Palmer President and Chief Executive Officer |
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature | Title | Title | Date |
| | | |
/s/ RICHARD PALMER | | Chief Executive Officer | March 30, 2016 |
| Richard Palmer | | (Principal Executive Officer) and Director | |
/s/ DONNA REILLY | | Interim Chief Financial Officer | March 30, 2016 |
| Donna Reilly | | (Principal Financial Officer and Principal Accounting Officer) | |
| | | |
/s/ DONNA REILLYDAVID WALKER | Interim Chief Financial Officer | |
Donna Reilly | (Principal Financial Officer and Principal Accounting Officer) | |
| | |
/s/ DAVID WALKER | Chairman, the Board of Directors | March 30, 2016 |
| David Walker | | | |
| | | |
/s/ MARTIN WENZEL | Director | |
Martin Wenzel | | |
Index to Financial Statements |
| Page |
Financial Statements: | |
| | | | |
| | | |
Index to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm
To the Board of Directors and ShareholdersStockholders
Global Clean Energy Holdings, Inc.
Torrance, CA
We have audited the accompanying consolidated balance sheet of Global Clean Energy Holdings, Inc. and subsidiaries(the "Company") as of December 31, 2012,2015, and the related consolidated statements of operations, comprehensive income, changes in equity (deficit), and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Global Clean Energy Holdings, Inc. and subsidiaries as of December 31, 2012, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses from current operations, used a substantial amount of cash to maintain its operations and has a large working capital deficit. As discussed in Note 2 to the financial statements, these factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
HANSEN, BARNETT & MAXWELL, P.C.
Salt Lake City, Utah
March 27, 2013
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Global Clean Energy Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Global Clean Energy Holdings, Inc. and subsidiaries as of December 31, 2013, and the related statements of operations, comprehensive income, changes in equity (deficit) and cash flows for the year then ended. These consolidated financial statements are the responsibility of the entity’sCompany's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit providesprovide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Global Clean Energy Holdings, Inc. and subsidiaries as of December 31, 2013,2015, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company incurred net losses and used cash in operating activities for the yearsyear ended December 31, 2013 and 20122015 and has an accumulated deficit of approximately $28,300,000$34,000,000 and negative working capital at December 31, 2013.2015. These factors raise substantial doubt about its ability to continue as a going concern. Management’sManagement's plans in regard to these matters are also described in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustmentadjustments that might result from the outcome of this uncertainty.
/s/ Hall & Company Certified Public Accountants and Consultants, Inc.
Irvine, California
March 30, 2016
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Global Clean Energy Holdings, Inc.
We have audited the accompanying consolidated balance sheet of Global Clean Energy Holdings, Inc. (the "Company") as of December 31, 2014, and the related consolidated statements of operations, comprehensive income, changes in equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Global Clean Energy Holdings, Inc. as of December 31, 2014, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company incurred net losses and used cash in operating activities for the year ended December 31, 2014 and has an accumulated deficit of approximately $29,000,000 and negative working capital at December 31, 2014. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Hartley Moore Accountancy Corporation
Hartley Moore Accountancy Corporation
Anaheim,Irvine, California
November 7, 2014March 30, 2015
| GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES | |
| CONSOLIDATED BALANCE SHEETS | |
| | | | | | | |
| | | December 31, | | | December 31, | |
| | | 2015 | | | 2014 | |
| | | | | | | |
| ASSETS | | | | | | |
| | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 34,704 | | | $ | 191,544 | |
| Accounts receivable | | | 10,160 | | | | 211,195 | |
| Inventory | | | 26,544 | | | | 27,783 | |
| Other current assets | | | 36,846 | | | | 7,727 | |
| Current assets of discontinued operations | | | 218,015 | | | | 86,979 | |
| Total Current Assets | | | 326,269 | | | | 525,228 | |
| | | | | | | | | |
| PROPERTY AND EQUIPMENT, NET | | | 7,868 | | | | 456,319 | |
| | | | | | | | | |
| INTANGIBLE ASSETS, NET | | | 3,482,498 | | | | 3,727,724 | |
| | | | | | | | | |
| Noncurrent assets of discontinued operations | | | - | | | | 13,377,936 | |
| Other noncurrent assets | | | 2,626 | | | | 5,744 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 3,819,261 | | | $ | 18,092,951 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 3,041,612 | | | $ | 3,388,533 | |
| Accrued payroll and payroll taxes | | | 1,380,155 | | | | 1,231,519 | |
| Notes payable - current portion | | | 1,369,856 | | | | 1,337,089 | |
| Convertible notes payable | | | 697,000 | | | | 697,000 | |
| Derivative Liability | | | 106,000 | | | | - | |
| Current liabilities from discontinued operations | | | - | | | | 281,369 | |
| Total Current Liabilities | | | 6,594,623 | | | | 6,935,510 | |
| | | | | | | | | |
| | | | | | | | | |
| LONG-TERM LIABILITIES | | | | | | | | |
| Accrued interest payable | | | 455,029 | | | | 253,742 | |
| Noncurrent liabilities from discontinued operations | | | - | | | | 19,124,134 | |
| Total Long Term Liabilities | | | 455,029 | | | | 19,377,876 | |
| | | | | | | | | |
| STOCKHOLDERS' DEFICIT | | | | | | | | |
| Preferred stock - $0.001 par value; 50,000,000 shares authorized | | | | | | | | |
| Series B, convertible; 13,000 shares issued and outstanding(aggregate liquidation | | | | | | | | |
| preference of $1,300,000) | | | 13 | | | | 13 | |
| Common stock, $0.001 par value; 500,000,000 shares authorized; | | | | | | | | |
| 341,405,545 and 339,187,545 issued and outstanding, respectively | | | 341,405 | | | | 339,187 | |
| Additional paid-in capital | | | 30,533,184 | | | | 25,657,177 | |
| Accumulated deficit | | | (34,210,969 | ) | | | (28,946,103 | ) |
| Accumulated other comprehensive loss | | | 105,976 | | | | (66,586 | ) |
| Total Global Clean Energy Holdings, Inc. Stockholders' Deficit | | | (3,230,391 | ) | | | (3,016,312 | ) |
| Noncontrolling interests | | | - | | | | (5,204,123 | ) |
| Total Stockholders' Deficit | | | (3,230,391 | ) | | | (8,220,435 | ) |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | | $ | 3,819,261 | | | $ | 18,092,951 | |
| | | | | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements | | | | | | | | |
| GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES | |
| CONSOLIDATED STATEMENTS OF OPERATIONS | |
| | | | | | | |
| | | | | | | |
| | | For the Years Ended | |
| | | December 31, | |
| | | 2015 | | | 2014 | |
| | | | | | | |
| | | | | | | |
| Revenue | | $ | 537,807 | | | $ | 1,297,581 | |
| Subsidy Income | | | - | | | | - | |
| Total Revenue | | | 537,807 | | | | 1,247,581 | |
| | | | | | | | | |
| Operating Expenses | | | | | | | | |
| General and administrative | | | 1,701,431 | | | | 1,598,587 | |
| Gain (Loss) on disposal of Fixed Assets | | | 47 | | | | (23,957 | ) |
| Loss on Write down of long lived assets | | | 438,320 | | | | 110,665 | |
| Plantation operating costs | | | 6,065 | | | | 7,544 | |
| | | | | | | | | |
| Total Operating Expenses | | | 2,145,863 | | | | 1,692,839 | |
| | | | | | | | | |
| Operating Loss | | | (1,608,056 | ) | | | (445,258 | ) |
| | | | | | | | | |
| Other Income (Expenses) | | | | | | | | |
| Other income | | | 10 | | | | - | |
| Interest expense | | | (334,618 | ) | | | (209,063 | ) |
| Gain on settlement of liabilities | | | 376,157 | | | | 37,382 | |
| Change in fair value of devivative | | | (6,500 | ) | | | - | |
| Foreign currency transaction gain (loss) | | | (405 | ) | | | 191 | |
| | | | | | | | | |
| Other Expenses, Net | | | 34,644 | | | | (171,490 | ) |
| | | | | | | | | |
| Loss from Continuing Operations | | | (1,573,412 | ) | | | (616,748 | ) |
| | | | | | | | | |
| Less Net Loss from Discontinued Operations | | | (7,444,940 | ) | | | (1,778,536 | ) |
| | | | | | | | | |
| Net Loss | | $ | (9,018,352 | ) | | $ | (2,395,284 | ) |
| | | | | | | | | |
| | | | | | | | | |
| Basic and diluted Loss per Common Share: | | | | | | | | |
| Loss from Continuing Operations | | $ | (0.005 | ) | | $ | (0.002 | ) |
| Loss from Discontinued Operations | | $ | (0.021 | ) | | $ | (0.005 | ) |
| Net Loss per Common Share | | $ | (0.026 | ) | | $ | (0.007 | ) |
| | | | | | | | | |
| Basic and diluted Weighted-Average Common Shares Outstanding | | | 341,405,545 | | | | 339,187,545 | |
| | | | | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements | |
| GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES | |
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |
| | | | | | | |
| | | | | | | |
| | | For the Year Ended | |
| | | December 31, | |
| | | 2015 | | | 2014 | |
| | | | | | | |
| | | | | | | |
| Net Loss | | $ | (9,018,352 | ) | | $ | (2,395,284 | ) |
| | | | | | | | | |
| Other comprehensive income (loss)- foreign currency | | | | | | | | |
| translation adjustment | | | (1,150,651 | ) | | | (1,550,538 | ) |
| | | | | | | | | |
| Comprehensive Income (Loss) | | | (10,169,003 | ) | | | (3,945,822 | ) |
| | | | | | | | | |
| Add net loss attributable to the noncontrolling interest | | | 7,444,940 | | | | 1,778,536 | |
| | | | | | | | | |
| Add other comprehensive income (loss) attributable to noncontrolling interest | | | (2,368,241 | ) | | | 1,546,972 | |
| | | | | | | | | |
| Comprehensive Income (Loss) Attributable to | | | | | | | | |
| Global Clean Energy Holdings, Inc. | | $ | (5,092,304 | ) | | $ | (620,314 | ) |
| | | | | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements | |
| |
| CONSOLIDATED BALANCE SHEETS | |
| | |
| | | December 31, | | | December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| ASSETS | |
| | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 216,531 | | | $ | 941,579 | |
| Accounts receivable | | | 38,559 | | | | 2,100 | |
| Inventory | | | 37,296 | | | | 1,564 | |
| Other current assets | | | 157,469 | | | | 298,586 | |
| Total Current Assets | | | 449,855 | | | | 1,243,829 | |
| | | | | | | | | |
| PROPERTY AND EQUIPMENT, NET | | | 15,495,781 | | | | 14,559,002 | |
| | | | | | | | | |
| INVESTMENT HELD FOR SALE | | | - | | | | 288,536 | |
| | | | | | | | | |
| DEFERRED GROWING COST | | | - | | | | 3,378,990 | |
| | | | | | | | | |
| INTANGIBLE ASSETS, NET | | | 3,972,950 | | | | - | |
| | | | | | | | | |
| OTHER NONCURRENT ASSETS | | | 7,021 | | | | 11,372 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 19,925,607 | | | $ | 19,481,729 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |
| | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 3,807,646 | | | $ | 1,135,594 | |
| Accrued payroll and payroll taxes | | | 1,170,223 | | | | 1,018,894 | |
| Capital lease liability - current portion | | | 818 | | | | 42,829 | |
| Notes payable - current portion | | | 1,376,000 | | | | 60,800 | |
| Convertible notes payable | | | 567,000 | | | | 567,000 | |
| Total Current Liabilities | | | 6,921,687 | | | | 2,825,117 | |
| | | | | | | | | |
| | | | | | | | | |
| LONG-TERM LIABILITIES | | | | | | | | |
| Accrued interest payable | | | 3,154,826 | | | | 2,121,787 | |
| Accrued return on noncontrolling interest | | | 7,442,730 | | | | 4,963,582 | |
| Notes payable - long term portion | | | - | | | | 40,200 | |
| Mortgage notes payable | | | 5,110,189 | | | | 5,110,189 | |
| Total Long Term Liabilities | | | 15,707,745 | | | | 12,235,758 | |
| | | | | | | | | |
| STOCKHOLDERS' EQUITY (DEFICIT) | | | | | | | | |
| Preferred stock - $0.001 par value; 50,000,000 shares authorized | | | | | | | | |
| Series B, convertible; 13,000 shares issued (aggregate liquidation | | | | | | | | |
| preference of $1,300,000) | | | 13 | | | | 13 | |
| Common stock, $0.001 par value; 500,000,000 shares authorized; | | | | | | | | |
| 339,187,545 and 293,683,502 issued and outstanding | | | 339,187 | | | | 293,683 | |
| Additional paid-in capital | | | 25,600,050 | | | | 24,588,022 | |
| Accumulated deficit | | | (28,338,875 | ) | | | (26,599,007 | ) |
| Accumulated other comprehensive loss | | | (63,020 | ) | | | (56,121 | ) |
| Total Global Clean Energy Holdings, Inc. Stockholders' Deficit | | | (2,462,645 | ) | | | (1,773,410 | ) |
| Noncontrolling interests | | | (241,180 | ) | | | 6,194,264 | |
| Total Stockholders' equity (deficit) | | | (2,703,825 | ) | | | 4,420,854 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 19,925,607 | | �� | $ | 19,481,729 | |
| | | | | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements |
| GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES | |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) | |
| For the Years Ended December 31, 2014 and 2015 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | |
| | | | | | | | | | | | Additional | | | | | | Other | | | Non- | | | | |
| | | Series B | | | Common stock | | | Paid in | | | Accumulated | | | Comprehensive | | | controlling | | | | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Loss | | | Interests | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2013 | | | 13,000 | | | $ | 13 | | | | 339,187,545 | | | $ | 339,187 | | | $ | 25,600,050 | | | $ | (28,338,875 | ) | | $ | (63,020 | ) | | $ | (241,180 | ) | | | (2,703,825 | ) |
| Adjustment to Opening Reserves | | | | | | | | | | | | | | | | | | | | | | $ | 9,520 | | | | | | | | | | | | 9,520 | |
| Contributions from noncontrolling interests | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,030,435 | | | | 1,030,435 | |
| Share-based compensation from issuance of options and compensation-based warrants | | | - | | | | - | | | | - | | | | - | | | | 57,127 | | | | - | | | | - | | | | - | | | | 57,127 | |
| Accrual of preferential return for the noncontrolling interests | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,658,350 | ) | | | (2,658,350 | ) |
| Foreign currency translation loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,566 | ) | | | (1,556,492 | ) | | | (1,560,058 | ) |
| Net loss for the year ended December 31, 2014 | | | - | | | | - | | | | - | | | | - | | | | - | | | | (616,748 | ) | | | - | | | | (1,778,536 | ) | | | (2,395,284 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance for the year ended December 31, 2014 | | | 13,000 | | | $ | 13 | | | | 339,187,545 | | | $ | 339,187 | | | $ | 25,657,177 | | | $ | (28,946,103 | ) | | $ | (66,586 | ) | | $ | (5,204,123 | ) | | $ | (8,220,435 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2014 | | | 13,000 | | | $ | 13 | | | | 339,187,545 | | | | 339,187 | | | | 25,657,177 | | | | (28,946,103 | ) | | | (66,586 | ) | | | (5,204,123 | ) | | | (8,220,435 | ) |
| Contributions from noncontrolling interests | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 429,743 | | | | 429,743 | |
| Distribution to noncontrolling interests | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (250,000 | ) | | | (250,000 | ) |
| Issuance of common stock for services | | | - | | | | - | | | | 2,218,000 | | | | 2,218 | | | | 8,872 | | | | - | | | | - | | | | - | | | | 11,090 | |
| Share-based compensation from | | | | | | | | | | | | | | | | | | | 133,172 | | | | | | | | | | | | | | | | 133,172 | |
| Accrual of preferential return for the noncontrolling interests | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,039,224 | ) | | | (2,039,224 | ) |
| Write off of accrued interest and preferred return forgiven by partner | | | | | | | | | | | | | | | | | | | 4,733,963 | | | | - | | | | | | | | 12,140,304 | | | | 16,874,267 | |
| Foreign currency translation loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,691,454 | ) | | | 172,562 | | | | 2,368,240 | | | | (1,150,652 | ) |
| Net loss for the year ended December 31, 2015 | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,573,412 | ) | | | - | | | | (7,444,940 | ) | | | (9,018,352 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance for the year ended December 31, 2015 | | | 13,000 | | | $ | 13 | | | | 341,405,545 | | | $ | 341,405 | | | $ | 30,533,184 | | | $ | (34,210,969 | ) | | $ | 105,976 | | | $ | 0 | | | $ | (3,230,391 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements |
| |
| CONSOLIDATED STATEMENTS OF OPERATIONS | |
| | | | | | | |
| | | | | | | |
| | | For the Years Ended | |
| | | December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| | | | | | | |
| Revenue | | $ | 281,248 | | | $ | 367,811 | |
| Subsidy Income | | | 51,072 | | | | 768,272 | |
| Total Revenue | | | 332,320 | | | | 1,136,083 | |
| | | | | | | | | |
| Operating Expenses | | | | | | | | |
| General and administrative | | | 2,573,719 | | | | 2,069,309 | |
| Loss on sale of investment held for sale | | | 178,896 | | | | - | |
| Write down of impaired long lived assets | | | 3,440,904 | | | | 1,639,815 | |
| Plantation operating costs | | | 786,300 | | | | 826,227 | |
| | | | | | | | | |
| Total Operating Expenses | | | 6,979,819 | | | | 4,535,351 | |
| | | | | | | | | |
| Loss from Operations | | | (6,647,499 | ) | | | (3,399,268 | ) |
| | | | | | | | | |
| Other Income (Expenses) | | | | | | | | |
| Other income | | | 90 | | | | 121 | |
| Interest expense | | | (999,524 | ) | | | (857,439 | ) |
| Gain on settlement of liabilities | | | 50,138 | | | | 1,013,387 | |
| Foreign currency transaction gain (loss) | | | (1,612 | ) | | | (32,716 | ) |
| | | | | | | | | |
| Net Other Income (Expenses) | | | (950,908 | ) | | | 123,353 | |
| | | | | | | | | |
| Net Loss | | | (7,598,407 | ) | | | (3,275,915 | ) |
| | | | | | | | | |
| Less Net Loss Attributable to the Noncontrolling Interest | | | (5,676,647 | ) | | | (3,339,202 | ) |
| | | | | | | | | |
| Net Income (Loss) Attributable to Global Clean Energy Holdings, Inc. | | $ | (1,921,760 | ) | | $ | 63,287 | |
| | | | | | | | | |
| | | | | | | | | |
| Amounts attributable to Global Clean Energy | | | | | | | | |
| Holdings, Inc. common shareholders: | | | | | | | | |
| Net Income (Loss) | | $ | (1,921,760 | ) | | $ | 63,287 | |
| | | | | | | | | |
| Basic Income (Loss) per Common Share: | | | | | | | | |
| Net Basic Income (Loss) per Common Share | | $ | (0.0059 | ) | | $ | 0.0002 | |
| | | | | | | | | |
| Basic Weighted-Average Common Shares Outstanding | | | 327,107,796 | | | | 292,244,373 | |
| | | | | | | | | |
| Diluted Income (Loss) per Common Share: | | | | | | | | |
| Net Diluted Income (Loss) per Common Share | | $ | (0.0059 | ) | | $ | 0.0002 | |
| | | | | | | | | |
| Diluted Weighted-Average Common Shares Outstanding | | | 327,107,796 | | | | 318,962,355 | |
| | |
| The accompanying notes are an integral part of these consolidated financial statements | |
| |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |
| | | | | | | |
| | | | | | | |
| | | For the Years Ended | |
| | | December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| | | | | | | |
| Net Loss | | $ | (7,598,407 | ) | | $ | (3,275,915 | ) |
| | | | | | | | | |
| Other comprehensive income (loss)- foreign currency | | | | | | | | |
| translation adjustment | | | 114,765 | | | | 835,263 | |
| | | | | | | | | |
| Comprehensive Loss | | | (7,483,642 | ) | | | (2,440,652 | ) |
| | | | | | | | | |
| Add net loss attributable to the noncontrolling interest | | | 5,676,647 | | | | 3,339,202 | |
| | | | | | | | | |
| Add other comprehensive loss (income) attributable to noncontrolling interest | | | (121,664 | ) | | | (869,388 | ) |
| | | | | | | | | |
| Comprehensive Loss Attributable to | | | | | | | | |
| Global Clean Energy Holdings, Inc. | | $ | (1,928,659 | ) | | $ | 29,162 | |
| | | | | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements |
| |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) | |
| For the Years Ended December 31, 2012 and 2013 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | |
| | | | | | | | | | | | | | | Additional | | | | | | Other | | | Non- | | | | |
| | | Series B | | | Common stock | | | Paid in | | | Accumulated | | | Comprehensive | | | controlling | | | | |
| | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Deficit | | | Loss | | | Interests | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2011 | | | 13,000 | | | $ | 13 | | | | 285,062,812 | | | $ | 285,062 | | | $ | 24,260,628 | | | $ | (26,662,294 | ) | | $ | (21,996 | ) | | $ | 5,099,547 | | | $ | 2,960,960 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Contributions from noncontrolling interests | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 5,620,435 | | | | 5,620,435 | |
| Issuance of common stock for cash | | | - | | | | - | | | | 8,620,690 | | | | 8,621 | | | | 241,379 | | | | - | | | | - | | | | - | | | | 250,000 | |
| Exercise of warrants | | | - | | | | - | | | | | | | | | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Exercise of options | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock for services | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Share-based compensation from issuance of options and compensation-based warrants | | | - | | | | - | | | | - | | | | - | | | | 86,015 | | | | - | | | | - | | | | - | | | | 86,015 | |
Accrual of preferential return for the noncontrolling interests | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,055,904 | ) | | | (2,055,904 | ) |
| Foreign currency translation gain (loss) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (34,125 | ) | | | 869,388 | | | | 835,263 | |
| Net loss for the year ended December 31, 2012 | | | - | | | | - | | | | - | | | | - | | | | - | | | | 63,287 | | | | - | | | | (3,339,202 | ) | | | (3,275,915 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance for the year ended December 31, 2012 | | | 13,000 | | | $ | 13 | | | $ | 293,683,502 | | | $ | 293,683 | | | $ | 24,588,022 | | | $ | (26,599,007 | ) | | $ | (56,121 | ) | | $ | 6,194,264 | | | $ | 4,420,854 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2012 | | | 13,000 | | | $ | 13 | | | | 293,683,502 | | | $ | 293,683 | | | $ | 24,588,022 | | | $ | (26,599,007 | ) | | $ | (56,121 | ) | | $ | 6,194,264 | | | $ | 4,420,854 | |
| Contributions from noncontrolling interests | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,598,687 | | | | 1,598,687 | |
| Issuance of common stock | | | - | | | | - | | | | 40,000,000 | | | | 40,000 | | | | 760,000 | | | | - | | | | - | | | | - | | | | 800,000 | |
| Exercise of options | | | | | | | | | | | 1,477,089 | | | | 1,477 | | | | 13,294 | | | | | | | | | | | | | | | | 14,771 | |
| Exercise of warrants | | | - | | | | - | | | | 4,026,954 | | | | 4,027 | | | | 36,243 | | | | - | | | | - | | | | - | | | | 40,270 | |
| Issuance of common stock for services | | | - | | | | - | | | | | | | | | | | | - | | | | - | | | | - | | | | - | | | | - | |
Share-based compensation from issuance of options and compensation-based warrants | | | - | | | | - | | | | - | | | | - | | | | 202,491 | | | | - | | | | - | | | | - | | | | 202,491 | |
Accrual of preferential return for the noncontrolling interests | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,479,148 | ) | | | (2,479,148 | ) |
| Dissolution of TAL | | | | | | | | | | | | | | | | | | | | | | | 181,891 | | | | | | | | | | | | 181,891 | |
| Foreign currency translation loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (6,899 | ) | | | 121,664 | | | | 114,765 | |
| Net loss for the year ended December 31, 2013 | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,921,760 | ) | | | - | | | | (5,676,647 | ) | | | (7,598,407 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance for the year ended December 31, 2013 | | | 13,000 | | | $ | 13 | | | | 339,187,545 | | | $ | 339,187 | | | $ | 25,600,050 | | | $ | (28,338,876 | ) | | $ | (63,020 | ) | | $ | (241,180 | ) | | $ | (2,703,825 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements | | |
|
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | | | | | |
| | | For the years ended | |
| | | December 31, | |
| | | 2013 | | | 2012 | |
| Operating Activities | | | | | | |
| Net loss | | $ | (7,598,406 | ) | | $ | (3,275,915 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Foreign currency transaction gain | | | 1,612 | | | | 32,716 | |
| Gain on settlement of liabilities | | | (50,138 | ) | | | (1,013,387 | ) |
| Share-based compensation | | | 202,491 | | | | 86,015 | |
| Write down of deferred growing cost | | | 3,440,904 | | | | 1,183,991 | |
| Write down of long lived assets | | | 33,715 | | | | 455,824 | |
| Write down of inventory | | | - | | | | 130,038 | |
| Loss on sale of investment held for sale | | | 178,896 | | | | - | |
| Depreciation and amortization | | | 475,919 | | | | 267,807 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (35,970 | ) | | | - | |
| Inventory | | | 87,792 | | | | (22,124 | ) |
| Other current assets | | | 123,041 | | | | 73,646 | |
| Deferred growing costs | | | - | | | | (1,564,751 | ) |
| Accounts payable and accrued expenses | | | 1,522,101 | | | | 1,023,437 | |
| Deferred revenue | | | - | | | | (152,732 | ) |
| Other noncurrent assets | | | (1,302 | ) | | | (41,414 | ) |
| Net Cash Used in Operating Activities | | | (1,619,345 | ) | | | (2,816,849 | ) |
| Investing Activities | | | | | | | | |
| Plantation development costs | | | (881,221 | ) | | | (2,449,858 | ) |
| Purchase of property and equipment | | | (3,112 | ) | | | (259,978 | ) |
| Disposal of property and equipment | | | - | | | | - | |
| Proceeds from sale of property and equipment | | | 171,254 | | | | - | |
| Net Cash Used in Investing Activities | | | (713,079 | ) | | | (2,709,836 | ) |
| Financing Activities | | | | | | | | |
| Proceeds from issuance of common stock | | | - | | | | 250,000 | |
| Proceeds from exercise of options and warrants | | | 55,041 | | | | - | |
| Proceeds from issuance of preferred membership in GCE Mexico I, LLC | | | 1,598,688 | | | | 5,620,435 | |
| Payments on capital leases and notes payable | | | (47,776 | ) | | | (49,839 | ) |
| Net Cash Provided by Financing Activities | | | 1,605,953 | | | | 5,820,596 | |
| Effect of exchange rate changes on cash | | | 1,424 | | | | (29,112 | ) |
| Net change in Cash and Cash Equivalents | | | (725,048 | ) | | | 264,799 | |
| Cash and Cash Equivalents at Beginning of Period | | | 941,579 | | | | 676,780 | |
| Cash and Cash Equivalents at End of Period | | $ | 216,531 | | | $ | 941,579 | |
| | | | | | | | | |
| | | | | | | | | |
| Supplemental Disclosures of Cash Flow Information: | | | | | | | | |
| Cash paid for interest | | $ | 9,603 | | | $ | 75,967 | |
| Noncash Investing and Financing activities: | | | | | | | | |
| Accrual of return on noncontrolling interest | | $ | 2,479,148 | | | $ | 2,055,904 | |
| Acquisitions: | | | | | | | | |
| Intangible assets and equipment acquired | | $ | 4,359,341 | | | | - | |
| Inventory acquired | | | 123,599 | | | | - | |
| Other current assets assumed | | | 260 | | | | - | |
| Other current liabilities assumed | | | (2,383,100 | ) | | | - | |
| Net assets acquired | | $ | 2,100,100 | | | $ | - | |
| Notes payable issued | | $ | (1,300,000 | ) | | | - | |
| Common stock issued | | $ | (800,000 | ) | | | - | |
| | | | | | |
| The accompanying notes are an integral part of these consolidated financial statements | | | | | |
| GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | |
| | | For the Year ended | |
| | | December 31, | |
| | | 2015 | | | 2014 | |
| Operating Activities | | | | | | |
| Net Loss | | $ | (9,018,352 | ) | | $ | (2,395,284 | ) |
| Net loss from discontinued operations | | | (7,444,940 | ) | | | (1,778,536 | ) |
| Net loss from continued operations | | | (1,573,412 | ) | | | (616,748 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Foreign currency transaction gain | | | 28 | | | | - | |
| Gain on settlement of liabilities | | | (376,157 | ) | | | (58,978 | ) |
| Share-based compensation | | | 133,172 | | | | 57,127 | |
| Write down of long lived assets | | | 438,320 | | | | - | |
| Loss on disposal of fixed assets | | | - | | | | 23,957 | |
| Depreciation and amortization | | | 312,085 | | | | 454,350 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | 1,012,977 | | | | (174,720 | ) |
| Inventory | | | 1,239 | | | | 5,273 | |
| Other current assets | | | (15,665 | ) | | | 1,157 | |
| Accounts payable and accrued expenses | | | 341,741 | | | | (28,651 | ) |
| Other noncurrent assets | | | 5,760 | | | | 512,201 | |
| Net Cash Used in Operating Activities | | | 280,088 | | | | 174,968 | |
| Investing Activities | | | | | | | | |
| Proceeds from sale of property and equipment | | | - | | | | - | |
| Net Cash Provided by (Used in) Investing Activities | | | - | | | | - | |
| Financing Activities | | | | | | | | |
| Proceeds from notes payable | | | - | | | | 130,000 | |
| Payments on capital leases and notes payable | | | - | | | | (38,911 | ) |
| Net Cash Provided by Financing Activities | | | - | | | | 91,089 | |
| Cash Flows of discontinued operations: | | | | | | | | |
| Operating cash flows | | | (1,910,841 | ) | | | (350,485 | ) |
| Investing cash flows | | | 6,416,913 | | | | (436,122 | ) |
| Financing cash flows (including cash at year end) | | | (4,907,060 | ) | | | 672,435 | |
| Net Cash flows from discontinued operations | | | (400,988 | ) | | | (114,172 | ) |
| Effect of exchange rate changes on cash | | | (35,940 | ) | | | (1,972 | ) |
| Net change in Cash and Cash Equivalents | | | (156,840 | ) | | | 149,913 | |
| Cash and Cash Equivalents at Beginning of Period | | | 191,544 | | | | 41,631 | |
| Cash and Cash Equivalents at End of Period | | | 34,704 | | | | 191,544 | |
| Cash and Cash Equivalents for discontinued operations | | | 217,271 | | | $ | 46,941 | |
| Cash and Cash Equivalents at End of Period | | $ | 251,975 | | | $ | 238,485 | |
| | | | | | | | | |
| | |
| Supplemental Disclosures of Cash Flow Information: | | | | | | | | |
| Cash paid for interest | | $ | 18,550 | | | $ | - | |
| Cash paid for income tax | | $ | 5,345 | | | $ | 1,029 | |
| Noncash Investing and Financing activities: | | | | | | | | |
| Accrual of return on noncontrolling interest | | $ | 2,658,350 | | | $ | 1,977,862 | |
| Accrued return on noncontrolling interest forgiven by partner | | $ | 12,140,304 | | | | | |
| Write Down of debt and release of Fixed Assets | | | | | | $ | 190,500 | |
| Estimated fair value of derivative liability | | $ | 106,000 | | | | - | |
| Accrued Interest forgiven by Joint Venture lender | | $ | 4,733,963 | | | | | |
| Issuance of stock for compensation | | $ | 11,090 | | | | - | |
| The accompanying notes are an integral part of these consolidated financial statements | | | | | | | | |
Note 1 – History and Basis of Presentation
History
Global Clean Energy Holdings, Inc.(the “Company”"Company") is a U.S.-based, multi-national, energy agri-business focused on the development of non-food based bio-feedstocks.
The Company was originally incorporated under the laws of the State of Utah on November 20, 1991. On July 19, 2010, the reincorporation of the company from a Utah corporation to a Delaware corporation was completed, as approved by shareholders.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Global Clean Energy Holdings, Inc., its subsidiaries, andsubsidiaries. In the year ended December 31, 2014, the consolidated financial statements included the variable interest entities (VIE) of GCE Mexico I, LLC a Delaware limited liability company (“("GCE Mexico”Mexico"), and its Mexican subsidiaries (Asideros, Asideros 2 and Asideros 3). Since the Company sold the three farms held in Mexico on December 2, 2015, the operations of these subsidiaries were ceased as of the year ended December 31, 2015, and consolidation is no longer necessary for this previously classified VIE, GCE Mexico and subsidiaries (See Note2). All significant intercompany transactions have been eliminated in consolidation.
Generally accepted accounting principles require that if an entity is the primary beneficiary of a variable interest entity (VIE), the entity should consolidate the assets, liabilities and results of operations of the VIE in its consolidated financial statements. Global Clean Energy Holdings, Inc. considers itself to be the primary beneficiary of GCE Mexico, and it’s Mexican subsidiaries, and accordingly, has consolidated these entities since their formation beginning in April 2008, with the equity interests of the unaffiliated investors in GCE Mexico presented as Noncontrolling Interests in the accompanying condensed consolidated financial statements.
Under ASC 810-10 the Primary Beneficiary is the party that has both of the following:
1. The power to make decisions regarding the activities that most significantly impact the success of the VIE, and
2. The obligation to absorb losses or rights to receive benefits of the entity that could potentially be significant to the VIE.
When multiple parties make decisions over different activities of the entity, only the party with power to direct the activities that most significantly impacts the entity's economic performance will have satisfied the first condition. Global Clean Energy Holdings, Inc. exercises complete operational control over GCE Mexico and its subsidiaries, as these rights were specifically granted to Global Clean Energy Holdings, Inc. under the GCE Mexico’s Operating Agreement (the “LLC Agreement”).
Global Clean Energy Holdings, Inc. satisfies the second condition because as owner of a 50% profits interest, Global Clean Energy Holdings, Inc. is expected to receive the benefits or the largest amounts of profits and cash distributions allocated by GCE Mexico. The partners’ right to receive a preferred return on their investment does not qualify as a “right to receive residual returns” of GCE Mexico.
The guidance also states that “in a multi-tiered legal-entity structure, a reporting entity should generally begin its evaluation at the lowest-level entity. Each entity within the structure should then be evaluated on a consolidated basis. The attributes and variable interests of the underlying consolidated entities become those of the parent company upon consolidation”.
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
GCE Mexico holds, directly, 99% of the voting interest in the subsidiaries pursuant to the Agency Agreement. GCEH’s rights as Manager of GCE Mexico and as the sole Director of the subsidiaries enables GCEH to conclude that these powers, together with the 50% membership interest in GCE Mexico, gives Global Clean Energy Holdings, Inc. a controlling financial interest and therefore is the primary beneficiary.
GCE MEXICO I, LLC AND SUBSIDIARIES | |
| CONSOLIDATED BALANCE SHEETS | |
| | |
| | | December 31, | | | December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| CURRENT ASSETS | | $ | 363,358 | | | $ | 1,184,194 | |
| PROPERTY AND EQUIPMENT, NET | | | 14,720,296 | | | | 14,209,193 | |
| DEFERRED GROWING COST | | | - | | | | 3,378,990 | |
| OTHER NONCURRENT ASSETS | | | 3,522 | | | | 7,872 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 15,087,176 | | | $ | 18,780,249 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES | | $ | 1,008,651 | | | $ | 437,540 | |
| LONG-TERM LIABILITIES | | | 15,620,765 | | | | 12,186,218 | |
| | | | | | | | | |
| TOTAL LIABILITY | | $ | 16,629,416 | | | $ | 12,623,758 | |
In March 2013, the Company acquired 100% of all of the outstanding membership interests of Sustainable Oils, LLC, a Delaware limited liability company. Accordingly, the consolidated financial statements for periods after that acquisition include the assets, liabilities and results of operations of that entity.
Accounting for Agricultural Operations
All costs incurred until the actual planting of the Jatropha Curcas plant arewas capitalized as plantation development costs, and arewas included in “Property"Property and Equipment”Equipment" on the balance sheet. Plantation development costs arewere being accumulated in the balance sheet during the development period and arewas accounted for in accordance with accounting standards for Agricultural Producers and Agricultural Cooperatives. The direct costs associated with each farm and the production of the Jatropha revenue streams have been deferred and accumulated as a noncurrent asset, “Deferred Growing Costs”, on the balance sheet. These costs will be recognized as a Cost of Good Sold in the period the revenue is recognized. In 2013, the balance of the Deferred Growing Costs were related to our first Jatropha farm in Mexico and were written off. The trees in certain areas were not expected to produce enough yield or generate enough future revenues to offset the capital expended in a reasonable period of time and, accordingly, an impairment charge was recorded. Other general costs without expected future benefits are expensed when incurred.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.
Inventory
The Company uses the FIFO valuation method for its inventories. The Company's inventory consists of certified Camelina seeds to be used or sold for the production of Camelina feedstock. The Company records no inventories above their acquisition costs. There was no losses related to the valuation of inventory during the yearyears ended December 31, 20132015 and $130,038 in losses in 2012.December 31, 2014.
Concentration of Credit Risk
At December 31, 20132015 and 2012,2014, the Company had no cash and cash equivalents in the United States or Mexico in excess of federally-insured limits. The Company had $362,825 excess balances for bank deposits in Mexico at December 31, 2012. The Company has maintained its cash balances at what management considers to be high credit-quality financial institutions.
Accounts Receivable
The Company extends credit to its customers based on credit evaluations of such customers. The Company does not obtain collateral to secure its accounts receivable. The Company evaluates its accounts receivable on a regular basis for collectability and provides for an allowance for potential credit losses as deemed necessary. At December 31, 2015, the Company determined that no allowance for doubtful accounts was necessary and recorded approximately $142,000 in allowances at December 31, 2014.
For the years ended December 31, 2015 and 2014, one customer accounted for approximately 93% and 99% of total revenues, and 83% and 98% of accounts receivable, respectively.
Property and Equipment
Substantially all property and equipment relatewas related to plantation costs and related equipment to cultivate the Jatropha Curcas plant. Property and equipment arewas stated at cost. Depreciation of office equipment is computed using the straight-line method over estimated useful lives of 3 to 5 years. Plantation equipment iswas depreciated using the straight-line method over estimated useful lives of 5 to 15 years. Depreciation of plantation equipment has beenwas capitalized as part of plantation development costs through the date that the plantation becomes commercially productive. Plantation development costs have beenwas accumulated in the balance sheet during the development period and arewas being accounted for in accordance with generally accepted accounting principles, in the united states, for agricultural producers and agricultural cooperatives. The initial plantations were deemed to be commercially productive on October 1, 2009, at which datedepreciated over the Company commenced the depreciation of plantation development costs over estimated useful lives of 10 to 35 years, depending on the nature of the development. Developments and other improvements with indefinite lives arewere capitalized and not depreciated. Other developments that havehad a limited life and intermediate-life plants that have growth and production cycles of more than one year are depreciated over their respective lives once they arewere placed in service. During 2013,2015, the Company had land, plantation development costs, and plantation equipment located in Mexico Belize and the Dominican RepublicRepublic.
Except for costs incurred during the development period of the plantation, normal maintenance and repair items arewere charged to costs and expensed as incurred. During the development period, maintenance, repairs, and depreciation of plantation equipment have been capitalized as part of the plantation development costs. The cost and accumulated depreciation of property and equipment sold or otherwise retired are removed from the accounts and gain or loss on disposition is reflected in results of operations.
Impairment of Long-Lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount that the carrying amount of the assets exceeds the fair value of the assets. At December 31, 2013,2015, the Company reviewed its long-lived assets and determined there was no related impairment.
During the quarter ended September 30, 2015, the Company entered into negotiations with a portion of the Deferred Growing Cost and Plantation Development Coststhird party related to Asideros 1the potential sale of its farming operations in Mexico. Based on these negotiations, the Company determined that the recoverability of certain of its capitalized costs were impaired. See Note 10 for details.Accordingly, the Company recorded an impairment charge of approximately $6,700,000 based on the original expected proceeds from the transaction.
Income Taxes
The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and the carryforward of operating losses and tax credits, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized. Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the “more-likely-than-not”"more-likely-than-not" threshold based on the technical merits of the positions. Estimated interest and penalties related to uncertain tax positions are included as a component of general and administrative expense.
Income/Loss per Common Share
Income/Loss per share amounts are computed by dividing income or loss applicable to the common shareholders of the Company by the weighted-average number of common shares outstanding during each period. Diluted income or loss per share amounts are computed assuming the issuance of common stock for potentially dilutive common stock equivalents. The number of dilutive warrants and options is computed using the treasury stock method, whereby the dilutive effect is reduced by the number of treasury shares the Company could purchase with the proceeds from exercises of warrants and options.
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
| | | For the years ended December 31, | |
| | | 2013 | | | 2012 | |
| Net Income (loss) | | $ | (1,921,760 | ) | | $ | 63,287 | |
| | | | | | | | | |
| Basic Weighted-Average Common Shares Outstanding | | | 327,107,796 | | | | 292,244,373 | |
| Effect of dilutive securities | | | | | | | | |
| Convertible preferred stock - Series B | | | - | | | | 11,818,181 | |
| Warrants | | | - | | | | 9,306,783 | |
| Options | | | - | | | | 5,593,018 | |
| Diluted Weighted-Average Common Shares Outstanding | | | 327,107,796 | | | | 318,962,355 | |
| | | | | | | | | |
| Basic Income (loss) Per Common Share | | | | | | | | |
| Net Income (loss) | | | (0.0059 | ) | | | 0.0002 | |
| Diluted Income (loss) Per Common Share | | | | | | | | |
| Net Income (loss) | | | (0.0059 | ) | | | 0.0002 | |
The following instruments are currently antidilutive and have been excluded from the calculations of diluted income or loss per share at December 31, 2013,2015, as follows:
| | | December 31, | |
| | | 2015 | | | 2014 | |
| | | | | | | |
| Convertible notes and accrued interest | | | 25,000,000 | | | | 23,800,000 | |
| Convertible preferred stock - Series B | | | 11,818,181 | | | | 11,818,181 | |
| Warrants | | | 3,083,332 | | | | 3,083,332 | |
| Compensation-based stock options and warrants | | | 93,208,997 | | | | 72,645,311 | |
| | | | 133,110,510 | | | | 111,346,824 | |
| | | December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| Convertible notes | | | 18,900,000 | | | | 18,900,000 | |
| Convertible preferred stock - Series B | | | 11,818,181 | | | | - | |
| Warrants | | | 2,000,000 | | | | 1,708,184 | |
| Compensation-based stock options | | | 69,375,311 | | | | 54,860,000 | |
| | | | 102,093,492 | | | | 75,468,184 | |
Revenue Recognition
Revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the seller’sseller's price to the buyer is fixed or determinable; collectability is reasonably assured; and title and the risks and rewards of ownership have transferred to the buyer. Value added taxes collected on revenue transactions are excluded from revenue and are included in accounts payable until remittance to the taxation authority.
Jatropha and Camelina biofuel revenue - The Company’sCompany's long-term primary source of revenue currently is expected to be be the sale of seeds from elite lines of Jatropha and/or Camelina used for propagation and the sale of Jatropha oil and biomass in the form of charcoal and/or animal feed. Revenue will be recognized net of sales or value added taxes and upon transfer of significant risks and rewards of ownership to the buyer. Revenue is not recognized when there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. For the year ended December 31, 2013,2015, the Company had no significant Jatropha or Camelina biofuel revenue.
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Advisory services revenue - The Company provides development and management services to other companies regarding their bio-fuels and/or feedstock-Jatropha development operations, on a fee for services basis. The advisory services revenue is recognized upon completion of the work in accordance with each advisory contract.
Agricultural subsidies revenue - the Company receivesreceived agricultural subsidies from the Mexican government to supplementwhich supplemented the farm development and planting of new trees. Due to the uncertainty of these payments, the revenue iswas recognized when the payments are received. We recognize theserecognized those funds as revenue was due to these payments being disbursed to supplement the Company’sCompany's income and not as direct payments for any specified farming expense.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for accounts receivable and payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts reported for the various notes payable and the mortgage note payable approximate fair value because the underlying instruments are at interest rates which approximate current market rates. See note 119 for additional information regarding assets measured at fair value on a nonrecurring basis.
Estimates
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses. Significant estimates used in preparing these financial statements include a) those assumed in determining the valuation of common stock, warrants, and stock options, b) estimated useful lives and recoverability of plantation equipment and plantation development costs, and c) undiscounted future cash flows for purpose of evaluating possible impairment of long-termlong lived assets. It is at least reasonably possible that the significant estimates used will change within the next year.
Foreign Currency
During 2013,2015, the Company had operations located in the United States, Mexico and Dominican Republic and Belize.Republic. For these foreign operations, the functional currency is the local country’scountry's currency. Consequently, revenues and expenses of operations outside the United States of America are translated into U.S. dollars using weighted average exchange rates, while assets and liabilities of operations outside the United States of America are translated into U.S. dollars using exchange rates at the balance sheet date. The effects of foreign currency translation adjustments are included in equity (deficit) as a component of accumulated other comprehensive loss in the accompanying consolidated financial statements. Foreign currency transaction adjustments are included in other income (expense) in the Company’sCompany's results of operations.
The Company has not entered into derivative instruments to offset the impact of foreign currency fluctuations.
Stock Based Compensation
The Company recognizes compensation expense for stock-based awards expected to vest on a straight-line basis over the requisite service period of the award based on their grant date fair value. The Company estimates the fair value of stock options using a Black-Scholes option pricing model which requires management to make estimates for certain assumptions regarding risk-free interest rate, expected life of options, expected volatility of stock and expected dividend yield of stock. The Company recorded stock based compensation expense related to equity instruments granted as general and administrative expenses in the accompanying consolidated statements of operations.
F-12
Derivative Liabilities
The Company evaluates debt instruments, stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity's Own Equity . The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.
The Company has issued notes with embedded conversion features. Certain of the embedded conversion features contain price protection or anti-dilution features that result in these instruments being treated as derivatives. Accordingly, the Company has estimated the fair value of these embedded conversion features to settle outstanding contracts using Black-Scholes. The Company uses level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities.
Comprehensive Income
In June 2011, the FASB issued authoritative guidance requiring entities to report components of other comprehensive income in either a single continuous statement or in two separate, but consecutive statements of net income and other comprehensive income. The company has included a consolidated statement of comprehensive income for the years ended December 31, 2013 and 2012.
New Account Guidelines
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“("ASU 2014-09”2014-09"), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. ASU 2014-09 will be effective for the Company beginning in its first quarter of 2017. Early adoption is not permitted. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the impact of adopting the new revenue standard on its consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern". The amendments in this update provide guidance that requires managementin U.S. GAAP about management's responsibilities to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. The main provision of the amendments are for an entity's management, in connection with the preparation of financial statements, to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. Management's evaluation should be based on relevant conditions and events that are known or reasonably knowable at the date the consolidated financial statements are issued. When management identifies conditions or events that raise substantial doubt about an entity's ability to continue as a going concern. If such conditions or events exist, disclosures are requiredconcern, the entity should disclose information that enableenables users of the consolidated financial statements to understand the natureall of the following: (1) principal conditions or evens,events that raised substantial doubt about the entity's ability to continue as a going concern (before consideration of management's plans); (2) management's evaluation of the circumstancessignificance of those conditions or events in relation to the entity's ability to meet its obligations; and (3) management's plans that alleviated substantial doubt about the entity's ability to continue as a going concern or management's plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity's ability to continue as a going concern. The amendments in this update are effective for interim and annual reporting periods after December 15, 2015 and early application is permitted. The Company will be requiredis currently assessing this guidance for future implementation.
Note 2 – Discontinued Operations of GCE Mexico and subsidiaries
In July 2015, we were presented with a non-binding offer from a Mexican agricultural operator in the region to perform an annual assessmentpurchase our three Jatropha Farms.
In November 2015, we accepted the offer and closed the transaction on December 2, 2015. This transaction is good for the company and our shareholders because it allowed us to reduce high-cost debt incurred during the initial research and development phase of its abilityour business. We have not sold any of our Intellectual Property (IP) rights to continuethe buyer. As a result, our Jatropha genetics are preserved as a going concern when this standard becomes effectivecore Company asset as is the amount of institutional knowledge, experience and know-how that we developed over the past several years in Mexico. As part of the sale, we will retain access rights to the Certified Nursery and R&D areas on the farm for an extended period of time. As such, we retained our farm workers until December 18, 2015 to ensure the proper growth and well being of the Certified Nursery and R&D areas. The total serverance cost in December was approximately $27,000. The final lay off of the management staff was not complete until January 1, 2017; however,15, 2016.
The divesting of these three farms, improved the adoptioncompany's balance sheet by approximately $5,100,000 by reducing the company's debt by approximately $19,400,000.
The Company has recorded terminating it's operations of this guidance is not expected to impact our financial position,GCE Mexico and subsidiaries ("GCE Mexico") as of December 31, 2015, in accordance with Accounting Standards Codification (ASC) No. 205-20, Discontinued Operations. As such, the historical results of GCE Mexico have been adjusted to include discontinued-related costs and exclude corporate allocations with Global Clean Energy Holdings, Inc (GCEH) and have been classified as discontinued operations or cash flows.in all periods presented. As operations were discontinued as of the fiscal year end, no stub period is presented.
The following financial information presents the discontinued operations for the years ended December 31, 2015 and 2014, respectively.
| | | 2015 | | | 2014 | |
| | | | | | | |
| Major classes of line items constitution pretax profit (loss) of discontinue operations | | | | | | |
| Revenue | | $ | 34,755 | | | $ | 51,494 | |
| General and administrative | | | (338,278 | ) | | | (751,543 | ) |
| Gain (Loss) on disposal of Fixed Assets | | | (75,623 | ) | | | - | |
| Loss on Write down of long lived assets | | | (6,375,321 | ) | | | - | |
| Plantation operating costs | | | - | | | | (125,095 | ) |
| Interest expense | | | (821,098 | ) | | | (978,400 | ) |
| Gain on settlement of liabilities | | | 200,263 | | | | 24,653 | |
| Other income and expense | | | 2,706 | | | | 354 | |
| Pretax loss of discontinued operations | | | (7,372,597 | ) | | | (1,778,536 | ) |
| Pretax loss on the disposal of the discontinue operation | | | (72,343 | ) | | | - | |
| Total pretax loss on discontinue operations | | | (7,444,940 | ) | | | (1,778,536 | ) |
| Income tax benefit | | | - | | | | - | |
| Total loss on discontinued operations | | $ | (7,444,940 | ) | | $ | (1,778,536 | ) |
The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations:
| Reconciliation of the Carrying Amounts of Major Classes of Assets and LIabilities of the Discontinued Operations that are | |
| Disclosed in the Notes to Financial Statement to Total Assets and Liabilities of the Disposal Group classified as Property and Equipment | |
| that are presented in the Statement of Financial Position | |
| | | | | | | |
| Carrying amounts of major classes of assets included as part of discontinued operations | | 2015 | | | 2014 | |
| Cash and cash equivalents | | $ | 217,271 | | | $ | 46,941 | |
| Accounts receivable | | | - | | | | 2,767 | |
| Inventory | | | - | | | | 7,418 | |
| Other current assets | | | 397 | | | | 29,853 | |
| Property and Equipment, Net | | | - | | | | 13,377,936 | |
| Other noncurrent assets | | | - | | | | 3,118 | |
| Total Assets of the disposal group in the statement of financial position | | $ | 217,668 | | | $ | 13,468,033 | |
| | | | | | | | | |
| Carrying amounts of major classes of liabilities included as part of discontinue operations | | | | | |
| Accounts payable and accrued expenses | | $ | - | | | $ | 269,717 | |
| Accrued payroll and payroll taxes | | | - | | | | 11,652 | |
| Accrued interest payable | | | - | | | | 3,912,865 | |
| Accrued return on noncontrolling interest | | | - | | | | 10,101,080 | |
| Mortgage notes payable | | | - | | | | 5,110,189 | |
| Total Liabilities of the disposal group in the statement of fiancial position | | $ | - | | | $ | 19,124,134 | |
F-14
Note 23 – Going Concern Considerations
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying consolidated financial statements, the Company incurred losslosses from continuing operations applicable to its common shareholders of $7,598,406 and $3,275,915$1,573,412 for the year ended December 31, 2013,2015 and 2012, respectively,losses from continuing operations of $2,395,284 for the year ended December 31, 2014, and has an accumulated deficit applicable to its common shareholders of $28,338,875$34,210,969 at December 31, 2013.2015. The Company also used cash in operating activities of $1,619,345continuing operations of 280,088 and $2,816,849$174,968 during the years ended December 31, 20132015 and 2012,2014, respectively. At December 31, 2013,2015, the Company has negative working capital of $6,471,832 and a deficit attributable to its stockholders of $2,703,825.$6,268,354. These factors raise substantial doubt about the Company’sCompany's ability to continue as a going concern.
The Company commenced its new business related to the cultivation and production of oil from the seed of the Jatropha plant in September 2007. Management plans to meet its cash needs through various means including securing financing, entering into new joint ventures, through fees associated with managementOn December 2, 2016, the three Jatropha Mexican farms were sold and development agreements and fees and profit sharing from developingoperations were ceased as of December 31, 2015. As of the current business model. Inyear ended December 31, 2015, in order to fund its operations, the Company has to date received $21,159,391$22,619,569 in capital contributions from the preferred membership interest in GCE Mexico I, LLC (“("GCE Mexico”Mexico"), hasand issued mortgages in the total amount of $5,110,189 for the acquisition of land. The Company is developingintends to continue to provide the new business operation to participate in the rapidly growing bio-diesel industry. Whilerenewable fuels and renewable chemicals markets with novel non-food based feedstocks that are economically, environmentally and socially sustainable by continually improving our plant varieties through modern genetic techniques and traditional and marker-assisted breeding. Through this effort, the Company expectsplans to be successfulexpand both its Carribean and North American operations in this new venture, there is no assurance that its business plan will be economically viable.both Jatropha and Camelina feedstocks. The ability of the Company to continue as a going concern is dependent on that plan’splan's success. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Note 34 – Jatropha Business Venture
The Company entered into the bio-fuels business in 2007 by acquiring certain trade secrets, know-how, business plans, term sheets, business relationships, and other information relating to the cultivation and production of seed oil from the Jatropha plant for the production of bio-diesel, and by entering into certain employment agreements and property management agreements. Subsequent to entering into these transactions, the Company acquired certain real property in Mexico it believed to be suitable for cultivating the Jatropha plant. During 2008, GCE Mexico’sMexico's subsidiary acquired the land in Mexico for the cultivation of the Jatropha plant. In July 2009, the Company acquired Technology Alternatives, Limited (“TAL”), a company formed under the laws of Belize that had developed a farm in Belize for cultivation of the Jatropha plant and provided technical advisory services for the propagation of the Jatropha plant. In March 2010, the Company formed Asideros 2, a Mexican corporation, which has acquired additional land in Mexico adjacent to the land acquired by Asideros 1. In October 2011, the Company formed Asideros 3, a Mexican Corporation, which has acquired land in Mexico close to the land acquired by Asideros 1 and Asideros 2. However, in December 2015, the Company sold all three farming operations in Mexico. All of these transactions are described in further detail in the remainder of the notes.
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
LODEMO Agreement
On October 15, 2007, the Company entered into a service agreement with Corporativo LODEMO S.A DE CV, a Mexican corporation (the LODEMO Group), to provide services related to the establishment, development, and day-to-day operations of the Company’s Jatropha Business in Mexico. The Agreement had a 20-year term but could be terminated or modified earlier by the Company under certain circumstances. In June 2009, the scope of work previously performed by LODEMO was reduced and modified based upon certain labor functions being provided internally by the Company and by Asideros, the Company’s Mexican subsidiary, on a go-forward basis. This agreement was cancelled in 2009. As of December 31, 2013 and as of December 31, 2012, the Company’s financial statements reflect that it owes the LODEMO Group $251,500 for accrued, but unpaid, compensation and cost. The Company disputes the total of these charges.
GCE Mexico I, LLC and Subsidiaries
GCE Mexico was organized primarily to facilitate the acquisition of the initial 5,000 acres of farm land (the Jatropha Farm) in the State of Yucatan in Mexico to be used primarily for the (i) cultivation of Jatropha curcas, (ii) the marketing and sale of the resulting fruit, seeds, or pre-processed crude Jatropha oil, whether as biodiesel, feedstock, biomass or otherwise, and (iii) the sale of carbon value, green fuel value, or renewable energy credit value (and other similar environmental attributes) derived from activities at the Jatropha Farm.
Under GCE Mexico’s operating agreement, as amended (the “LLC Agreement”), the Company owns 50% of the issued and outstanding common membership units of GCE Mexico. The remaining 50% of the common membership units was initially issued to five investors. The Company and the other owners of the common membership interest were not required to make capital contributions to GCE Mexico.
In addition, two investors agreed to invest in GCE Mexico through the purchase of preferred membership units and through the funding of the purchase of land in Mexico. An aggregate of 1,000 preferred membership units were issued to these two investors who each agreed to make capital contributions to GCE Mexico in installments and as required, fund the development and operations of the Jatropha Farm. In November 2012,2013, one of the two investors transferred 100% of the interest to the other investor. The preferred members have made capital contributions of $1,598,688$429,743 and $5,620,435$1,030,435 during the years ended December 31, 20132015 and 2012,2014, respectively, and total contributions of $21,159,391$22,619,569 have been received by GCE Mexico from these investors since the execution of the LLC Agreement. The LLC Agreement calls for additional contributions from the investors, as requested by management and as required by the operation in 2013 and the following years. The holder of the preferred membership interest is entitled to earn a preferential 12% per annum cumulative compounded return on the cumulative balance of the preferred membership interest. The preferential return decreased by 12,140,304, and increased by $2,479,148, and $2,055,904$2,658,350 during the years ended December 31, 20132015 and 2012, respectively, and totals $7,442,730 since2014, respectively. The decrease in the execution ofpreferred return was related to the LLC Agreement.amount being forgiven by the investor in entirety on December 15, 2015.
The net income or loss of the three Mexican subsidiaries that own the Mexico farms iswas allocated to the shareholders based on their respective equity ownership; 99% of the equity of each subsidiary is owned by GCE Mexico and 1% is owned by the Company. GCE Mexico has no operations separate from its investments in the Mexican subsidiaries. According to the LLC Agreement of GCE Mexico, the net loss of GCE Mexico is allocated to its members according to their respective investment balances. Accordingly, since the common membership interest did not make a capital contribution, all of the losses have been allocated to the preferred membership interest. The noncontrolling interest presented in the accompanying consolidated balance sheets includes the carrying value of the preferred membership interests and of the common membership interests owned by the Investors, and excludes any common membership interest in GCE Mexico held by the Company.
Technology Alternatives, Limited
On July 9, 2009, the Company purchased 100% of the stock of Technology Alternatives, Limited (“TAL”), a company formed under the laws of Belize in Central America. TAL owned approximately 400 acres of land that was used as a Jatropha farm. The land was sold in May 2013.
The Company owed the former shareholders of TAL $526,462 Belize dollars, including capitalized interest of $10,322 Belize Dollars (US $280,170 based on exchange rates in effect on the funding date of May 17, 2013). The holders agreed to accept $195,747 USD as payment in full for the promissory notes when the land was sold on May 17, 2013 at a discounted sales price of $395,000 USD. The unpaid principal balance of $84,422 of the notes, plus accrued interest of $28,078, was forgiven by the shareholders and written off by the Company. The related gain on forgiveness is included in Loss on Sale of Investment Held for Sale on the statement of operations. The Gain on forgiveness was netted in our calculations for the Loss on Sale of Investment as the debt would not have been forgiven if the investment had not been sold. The debt forgiveness was conditional upon the sale of the investment.
The Company dissolved the wholly owned subsidiary, TAL on May 17, 2013. The prior accumulated decifit of TAL totaling $181,891 was netted out of the Stockholders’ equity as part of the transaction recording the Loss on Sale of Investment Held for Sale.
Note 45 – Property and Equipment
Property and equipment are as follows:
| | | December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| Land | | $ | 4,512,630 | | | $ | 4,539,314 | |
| Plantation development costs | | | 10,311,286 | | | | 9,229,638 | |
| Plantation equipment | | | 1,510,878 | | | | 1,546,971 | |
| Office equipment | | | 299,755 | | | | 108,598 | |
| | | | | | | | | |
| Total cost | | | 16,634,549 | | | | 15,424,521 | |
| Less accumulated depreciation | | | (1,138,768 | ) | | | (865,518 | ) |
| | | | | | | | | |
| Property and equipment, net | | $ | 15,495,781 | | | $ | 14,559,002 | |
| | | December 31, | |
| | | 2015 | | | 2014 | |
| | | | | | | |
| Land | | $ | - | | | $ | - | |
| Plantation development costs | | | - | | | $ | - | |
| Plantation equipment | | | 10,574 | | | $ | 404,026 | |
| Office equipment | | | 64,729 | | | $ | 62,830 | |
| | | | | | | | | |
| Total cost | | | 75,303 | | | | 466,856 | |
| Less accumulated depreciation | | | (67,435 | ) | | | (10,537 | ) |
| | | | | | | | | |
| Property and equipment, net | | $ | 7,868 | | | $ | 456,319 | |
Depreciation expense for property and equipment was $280,027$66,859 and $267,807$5,488 for the years ended December 31, 20132015 and 2012,2014, respectively.
Commencing in June 2008, Asideros I purchased certain equipment for purposes of rapidly clearing the land, preparing the land for planting, and actually planting the Jatropha trees. The Company has capitalized farming equipment and costs related to the development of land for farm use in accordance with generally accepted accounting principles for accounting by agricultural producers and agricultural cooperatives. Plantation equipment iswas depreciated using the straight-line method over estimated useful lives of 5 to 15 years. Depreciation expense has been capitalized as part of plantation development costs through the date that the plantation becomes commercially productive. The initial plantationsplantation were deemed to be commercially productive on October 1, 2009, at which date the Company commenced the depreciation of plantation development costs over estimated useful lives of 10 to 35 years, depending on the nature of the development. Developments and other improvements with indefinite lives are capitalized and not depreciated. Other developments that have a limited life and intermediate-life plants that have growth and production cycles of more than one year are being depreciated over their useful lives once they are placed in service. The land, plantation development costs, and plantation equipment arewere located in Mexico.Mexico prior to the sale of the farms on December 2, 2015 and such costs have been included in discontinued operations as of December 31, 2015.
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 56 – Intangible Assets
In March 2013, the Company purchased certain intangible assets related to the commercial production of Camelina. See further discussion on acquisition in Note 10. The intangible assets include three patents and the related intellectual property associated with these patents. These intangible assets acquired have an expected useful life of 17 years and are carried at cost less any accumulated amortization and any impairment losses.
Amortization is calculated using the straight-line method to allocate the cost of the intangible assets over their estimated useful lives of 17 years. Any future costs associated with the maintenance of these patents with indefinite lives will be capitalized and not amortized. The Intangible Assetsintangible assets as of the year ended December 31, 20132015 is shown in the following table:
| | | December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| Intangible Assets | | | 4,168,841 | | | | - | |
| Less accumulated amortization | | | (195,892 | ) | | | - | |
| | | | | | | | | |
| Intantigle Assets, net | | $ | 3,972,950 | | | $ | - | |
| | | December 31, | | | December 31, | |
| | | 2015 | | | 2014 | |
| | | | | | | |
| Intangible Assets | | | 4,168,841 | | | $ | 4,168,841 | |
| | | | | | | | | |
| Less accumulated amortization | | | (686,343 | ) | | | (441,117 | ) |
| | | | | | | | | |
| Intangible Assets, net | | $ | 3,482,498 | | | $ | 3,727,724 | |
Amortization expense for intangible assets was $195,892approximately $245,000 for both the year ended December 31, 20132015 and none in 2012.2014. The estimated amortization expense for the next five years approximates $229,000$245,000 annually.
Note 67 – Debt
Notes Payable
On November 1, 2012, the Company entered into a note payable to Mobius in the aggregate amount of $75,000. The note bearsbore interest at 5% and iswas unsecured. Principal and interest on this Note shall bewas payable monthly in the amount of $5,000, commencing on May 1, 2013 with the final payment due on September 1, 2014. This note was paid in full in October 2014.
Notes Payable to Shareholders
Included in notes payable on the accompanying consolidated balance sheet, the Company hashad notes payable to a certain shareholdersshareholder in the aggregate amount of $26,000 at December 31, 20132015 and December 31, 2012.2014. The notesnote originated in 1999, bearbears interest at 12%, arewere unsecured, and areis currently in default. Accrued interest on the notesnote totaled $52,643$58,865 and $49,540, respectively$55,754, at December 31, 20132015 and December 31, 2012,2014, respectively.
As more fully disclosed in Note 3 the Company had issued promissory notes to the former shareholders of TAL in the aggregate amount of $526,462 Belize dollars, (US $268,630 based on exchange rates in effect at December 31, 2012), including capitalized interest of $10,322 Belize Dollars. The notes were secured by a mortgage on the land and related improvements, all of which were sold on May 17, 2013 at a discounted price of $395,000. The holders agreed to accept $195,747 as payment in full for these mortgage notes when the land was sold on May 17, 2013. The balance of $84,422 in notes payable was forgiven by the holders and written off.
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Convertible Notes Payable
In March 2010, the Company entered into a securities purchase agreement with the preferred members of GCE Mexico pursuant to which the Company issued senior unsecured convertible promissory notes in the original aggregate principal amount of $567,000 and warrants to acquire an aggregate of 1,890,000 shares of the Company’sCompany's common stock. The Convertible Notes matured on the earlier of (i) March 16, 2012, or (ii) upon written demand of payment by the note holders following the Company’sCompany's default thereunder. The maturity date of the Convertible Notes havehad been extended until MarchSeptember 15, 2015.2016 Management is in discussion with the Note holders to extend these Notes. Interest accrues on the convertible notes at a rate of 5.97% per annum, and is payable quarterly in cash, in arrears, on each year anniversary of the issuance of the convertible notes. The Company may at its option, in lieu of paying interest in cash, pay interest by delivering a number of unregistered shares of its common stock equal to the quotient obtained by dividing the amount of such interest by the arithmetic average of the volume weighted average price for each of the five consecutive trading days immediately preceding the interest payment date. At any time following the first anniversary of the issuance of the Convertible Notes, at the option of the note holders, the outstanding balance thereof (including unpaid interest) may be converted into shares of the Company’sCompany's common stock at a conversion price equal to $0.03. The conversion price may be adjusted in connection with stock splits, stock dividends and similar events affecting the Company’sCompany's capital stock. The convertible notes rank senior to all other indebtedness of the Company, and thereafter will remain senior or pari passu with all accounts payable and other similar liabilities incurred by the Company in the ordinary course of business.
In January 2014, the Company entered into a securities purchase agreement with certain third party investors pursuant to which the Company issued senior unsecured contingently convertible promissory notes (the "Convertible Notes 2") an aggregate principal amount of $130,000 and warrants to acquire an aggregate of 1,083,332 shares of the Company's common stock. The Company may not prepayConvertible Notes matured on the December 31, 2015 and are currently in default. Management is currently in discussions with the note holders to extend the maturity date. Interest accrues on the Convertible Notes 2 at a rate of 8% per annum, and is payable quarterly in cash, in arrears, on each year anniversary of the issuance of the convertible notes withoutnotes. At any time following the prior consentfirst anniversary of the Investors.issuance of the Convertible Notes, at the option of the note holders, the outstanding balance thereof (including unpaid interest) may be converted into shares of the Sustainable Oils common stock at a conversion price equal to $1.448, subject to adjustment based on Sustainable Oils receiving alternative consideration from another investor. The conversion price may be adjusted in connection with stock splits, stock dividends and similar events affecting the Sustainable Oils's capital stock. The relative fair value of the warrants was considered insignificant.
Based on the down round feature in the conversion terms, such embedded conversion feature resulted in a derivative liability and a corresponding debt discount in the amount of $80,000 to be recorded upon issuance. The debt discount is being amortized over the life of the corresponding convertible promissory notes through December 31, 2015. The amortization of the debt discount for these derivative instruments is fully amortized as of the year ended December 31, 2015.
Mortgage Notes Payable
The investorsinvestor holding the preferred membership units of GCE Mexico also directly funded the purchase by Asideros I of approximately 5,000 acres of land in the State of Yucatan in Mexico by the payment of $2,051,282, The land was acquired in the name of Asideros I, and Asideros I issued a mortgage in the amount of $2,051,282 in favor of the two original investors. These two investorsThe investor also directly funded the purchase by Asideros 2 of approximately 4,500 acres, and a second parcel by Asideros 2 of approximately 600 acres of land adjacent to the land owned by Asideros by the total payment of $963,382. The land was acquired in the name of Asideros 2 and Asideros 2 issued mortgages in the amount of $963,382 in favor of these two investors.the investor. These mortgages bearbore interest at the rate of 12% per annum, payable quarterly. The parties have agreedNotes were paid in full December 2, 2015 and the accrued interest was forgiven by the note holder on December 15, 2015. The Company recorded an increase to accrue the interest until such time as the Board determines that there is sufficient cash flow to pay all accrued interest. The initial mortgage, including any unpaid interest, is dueequity in April 2018. The second mortgage, including any unpaid interest, is due in February 2020.connection with this forgiveness by a related party.
In October 2011, the two original investorsinvestor also directly funded the purchase by Asideros 3 of approximately 5,600 acres for a total $2,095,525. The land was acquired in the name of Asideros 3 and Asideros 3 issued mortgages in the amount of $2,095,525 in favor of these two investors.the investor. These mortgages bearbore interest at the rate of 12% per annum, payable quarterly. The Board has directed thatNotes were paid in full December 2, 2015 and the accrued interest was forgiven by the note holder on December 15, 2015. The Company recorded an increase to equity in connection with this interest shall continue to accrue until such time as the Board determines that there is sufficient cash flow to pay all accrued interest. The initial mortgage, including any unpaid interest, is due in October 2021.forgiveness by a related party.
In November 2012, one of the two holders of the preferred membership interests acquired all of the ownership interests of the other member. Accordingly, all of the foregoing obligations are now owed to the sole holder of GCE Mexico’s preferred membership interests.
Promissory Notes Payable
In March 2013, the Company issued a secured promissory note in the principal amount of $1,300,000 to Targeted Growth, Inc. for certain Camelina assets. The purchase occurred concurrently with the acquisition of Sustainable Oils, LLC. The note bears an interest rate of ten percent (10.0%) per annum, and is payable upon the earlier of the following: (a) to the extent of 35.1% of, and on the third business day after, the receipt by the Company of any Qualified Funding; or (b) September 13, 2014 (the “Maturity Date”"Maturity Date"). The term “Qualified Funding”"Qualified Funding" means all equity funding in excess of the $800,000, in the aggregate, received by the Company, its subsidiary or an affiliate after the date hereof for its Camelina business. In September 2014, we renegotiated the terms foof the agreement and returned thesecertain machines, tractors, and vehicles to Targeted Growth, Inc. in consideration for a reduction of outstanding balance ofaccrued interest related to the Promissory Note and the extension of the maturity date of the Promissory Note to December 31, 2014.Note. The current note is no longer secured by any assets.assets and is due on demand.
Settlement of Liabilities
The Company has settled certain liabilities previously carried on the consolidated balance sheet, which settlements resulted in gains from the extinguishment of liabilities. There was a $50,138$5,310,383 gain on settlement of liabilities for the year ended December 31, 2013,2015, and a gain on settlement of liabilities of $1,013,387$62,035 for the year ended December 31, 2012.2014. The three Mexican farms were sold and the mortgages were paid in full. The gains in 2013 and 20122014 were primarily from the settlement or expiration of historic liabilities primarily incurred by prior management in connection with the discontinued pharmaceutical operations. In addition, the Company wrote off certain liabilities that had been extinguished with the passage of time for collection under applicable statutes of limitation laws.
Note 78 - Equity (Deficit)
Series B Preferred Stock
The Series B Shares may, at the option of each holder, be converted at any time or from time to time into shares of the Company’sCompany's common stock at the conversion price then in effect. The number of shares into which one Series B Share shall be convertible is determined by dividing $100 per share by the conversion price then in effect. The initial conversion price per share for the Series B Shares is $0.11, which is subject to adjustment for certain events, including stock splits, stock dividends, combinations, or other recapitalizations affecting the Series B Shares.
Each holder of Series B Shares is entitled to the number of votes equal to the number of shares of the Company’sCompany's common stock into which the Series B Shares could be converted on the record date for such vote, and has voting rights and powers equal to the voting rights and powers of the holders of the Company’sCompany's common stock. In the event of the Company’sCompany's dissolution or winding up, each share of the Series B Shares is entitled to be paid an amount equal to $100 (plus any declared and unpaid dividends) out of the assets of the Company then available for distribution to shareholders.
No dividends are required to be paid to holders of the Series B shares. However, the Company may not declare, pay or set aside any dividends on shares of any class or series of the Company’sCompany's capital stock (other than dividends on shares of our common stock payable in shares of common stock) unless the holders of the Series B shares shall first receive, or simultaneously receive, an equal dividend on each outstanding share of Series B shares.
Common Stock
In April 2012,September 2015, the Company issued 8,620,6902,118,000 shares, to an accredited investor at a price of $.029$0.005 per share for cash proceeds paid to(based on the Company of $250,000. The proceeds from this sale were used for general corporate purposes.
In March 2013,closing market price on the Company issued 40,000,000 shares, at $.02 per sharemeasurement date) as partialfull considertion of the business purchase that included certain assets, patents,an employees accrued and other intellectual property and rights related to the developmentunpaid compensation balance of Camelina sativa$11,090 accumulated as a biofuels feedstock that it acquired.of September 30, 2015.
Note 89 – Stock Options and Warrants
Stock Options and Compensation-Based Warrants
The Company has an incentive stock option plan wherein 20,000,000 shares of the Company’sCompany's common stock are reserved for issuance thereunder.
No income tax benefit has been recognized for share-based compensation arrangements. The Company has recognized plantation development costs totaling $124,565 related to a liability that was satisfied by the issuance of warrants in 2008. Otherwise, no share-based compensation cost has been capitalized in the consolidated balance sheet.
A summary of the status of options and compensation-based warrants at December 31, 2013,2015, and changes during the year then ended is presented in the following table:
| | | | | | | | Weighted | | | |
| | | | | | Weighted | | Average | | | |
| | | Shares | | | Average | | Remaining | | Aggregate | |
| | | Under | | | Exercise | | Contractual | | Intrinsic | |
| | | Option | | | Price | | Life | | Value | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Outstanding at December 31, 2012 | | | 68,608,483 | | | $ | 0.02 | | 4.3 years | | $ | - | |
| | | | | | | | | | | | | | |
| Granted | | | 14,100,000 | | | | 0.01 | | | | | | |
| Exercised | | | (1,477,089 | ) | | | 0.01 | | | | | | |
| Forfeited | | | (6,280,000 | ) | | | 0.01 | | | | | | |
| Expired | | | (5,576,083 | ) | | | 0.03 | | | | | | |
| | | | | | | | | | | | | | |
| Outstanding at December 31, 2013 | | | 69,375,311 | | | | 0.02 | | 9.1 years | | $ | - | |
| | | | | | | | | | | | | | |
| Exercisable at December 31, 2013 | | | 51,346,144 | | | $ | 0.02 | | 3.1 years | | | - | |
| | | | | | | | Weighted | | | |
| | | | | | Weighted | | Average | | | |
| | | Shares | | | Average | | Remaining | | Aggregate | |
| | | Under | | | Exercise | | Contractual | | Intrinsic | |
| | | Option | | | Price | | Life | | Value | |
| | | | | | | | | | | |
| Outstanding at December 31, 2014 | | | 64,945,311 | | | | 0.01 | | 3.3 years | | $ | - | |
| | | | | | | | | | | | | | |
| Granted | | | 35,063,686 | | | | 0.01 | | | | | | |
| Exercised | | | - | | | | | | | | | | |
| Forfeited | | | (4,000,000 | ) | | | 0.02 | | | | | - | |
| Expired | | | (2,800,000 | ) | | | 0.03 | | | | | - | |
| | | | | | | | | | | | | | |
| Outstanding and expected to vest at December 31, 2015 | | | 93,208,997 | | | | 0.02 | | 3.2 years | | $ | 68,000 | |
| | | | | | | | | | | | | | |
| Vested and Exercisable at December 31, 2015 | | | 60,058,048 | | | $ | 0.02 | | 2.2 years | | $ | - | |
The fair value of other stock option grants and compensation-based warrants is estimated on the date of grant or issuance using the Black-Scholes option pricing model. Options to purchase 14,100,00035,063,686 shares of common stock were issued in the year ended December 31, 20132015 and 13,780,0004,700,000 in the year ended 2012.2014. The weighted average fair value of stock options issued during the years ended December 31, 20132015 and 20122014 as $0.015$0.02 and $.00916,$0.01, respectively. The weighted-average assumptions used for the stock options granted and compensation-based warrants issued during the years ended December 31, 20132015 and 20122014 were risk-free interest rate of 1.30%1.18% and .628%1.13%, volatility of 181%114% and 178%175%, expected life of 5.0 years, and dividend yield of zero. The expected life of stock options represents the period of time that the stock options granted are expected to be outstanding prior to exercise. The expected volatility is based on the historical price volatility of the Company’sCompany's common stock. The risk-free interest rate represents the U.S. Treasury constant maturities rate for the expected life of the related stock options. The dividend yield represents anticipated cash dividends to be paid over the expected life of the stock options. The intrinsic values are based on a December 31, 20132015 closing price of $0.01$0.003 per share.
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Share-based compensation from all sources recorded during the year ended December 31, 20132015 and 20122014 was $124,492approximately $133,000 and $86,015,$57,000, respectively, and is reported as general and administrative expense in the accompanying condensed consolidated statements of operations. As of December 31, 2013,2015, there is approximately $148,567$205,000 of unrecognized compensation cost related to stock-based payments that will be recognized over a weighted average period of approximately 0.291.43 years.
Stock Warrants
A summary of the status of the warrants outstanding at December 31, 2013,2015, and changes during the year then ended is presented in the following table:
| | | | | | Weighted | | Weighted | | | |
| | | Shares | | | Average | | Average | | Aggregate | |
| | | Under | | | Exercise | | Remaining | | Intrinsic | |
| | | Warrant | | | Price | | Contractual Life | | Value | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Outstanding at December 31, 2012 | | | 24,585,662 | | | $ | 0.01 | | .75 years | | $ | - | |
| | | | | | | | | | | | | 314184 | |
| | | | | | | | | | | | | | |
| Issued | | | 2,000,000 | | | | - | | | | | | |
| Exercised | | | (4,026,954 | ) | | | 0.01 | | | | $ | (40,270 | ) |
| Expired | | | (20,558,708 | ) | | | 0.01 | | | | $ | (205,587 | ) |
| | | | | | | | | | | | | | |
| Outstanding and exercisable at December 31, 2013 | | | 2,000,000 | | | | | | | | | | |
Note 9 - Acquisition of Camelina Assets and Sustainable Oils
On March 13, 2013, the Company completed a business purchase that included certain assets, patents, and other intellectual property and rights related to the development of Camelina sativa as a biofuels feedstock (the “Camelina Assets”) from Targeted Growth, Inc., a Washington based crop biotechnology company focused on developing products with enhanced yield and improved quality for the agriculture and energy industries. Also on March 13, 2013, we purchased all of the membership interests of Sustainable Oils, LLC, (SusOils) a Delaware limited liability company, from Targeted Growth, Inc. and the other, minority owner of that limited liability company. SusOils is a company that, since 2007, has been engaged in the development, production and commercialization of Camelina-based biofuels and FDA approved animal feed. Substantially all of the Camelina Assets were previously owned by SusOils and used in SusOils’ operations.F-20
The Camelina Assets include: three issued U.S. patents on Camelina Sativa varieties; a substantial portfolio of other intellectual property assets, all of the Seller’s intellectual property related to the research, development, breeding and/or genetic development of Camelina; germplasm; licenses, consents, permits, variances, certifications and approvals granted by any governmental agencies relating to Camelina operations; machines, equipment, tractors and vehicles used in Camelina operations; the name “Sustainable Oils” and the Sustainable Oils logo; and certain trade secrets, know-how, and technical data.
| | | | | | Weighted | | Weighted | | | |
| | | Shares | | | Average | | Average | | Aggregate | |
| | | Under | | | Exercise | | Remaining | | Intrinsic | |
| | | Warrant | | | Price | | Contractual life | | Value | |
| | | | | | | | | | | |
| Outstanding at December 31, 2014 | | | 3,083,332 | | | | 0.01 | | 6.31 years | | $ | - | |
| | | | | | | | | | | | | | |
| Issued | | | - | | | | | | | | | | |
| Exercised | | | - | | | | | | | | | | |
| Expired | | | - | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Outstanding and exercisable at December 31, 2015 | | | 3,083,332 | | | | 0.01 | | 5.34 years | | $ | - | |
Note 10 – Derivative Liabilities
We currently intendThe Company applies the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to operate our Camelina business throughan entity's own stock. The standard applies to any freestanding financial instrument or embedded features that have the characteristics of a new subsidiary. We intendderivative, and to capitalizeany freestanding financial instruments that new subsidiary with the Sustainable Oils intellectual properties and operating assets that we recently purchased. In order to fund the operations and expansion of the Camelina operations, we intend to raise additional capital through the sale of debt or equityare potentially settled in the newly formed Camelina subsidiary. Sustainable Oils’ operations have been headquartered in Bozeman, Montana. We intend to continue to conduct our Camelina operations in Montana. Accordingly, in March 2013, we entered into a sublease with Targeted Oils, Inc., to sublease a portion of Targeted Growth’s research facilities and administrative offices in Bozeman, Montana.
an entity's own common stock.
We paid forThe Company has estimated the Camelina Assets by issuingfair value of these embedded conversion features to Targeted Growth, Inc. (i) a secured promissory note insettle outstanding contracts using Black-Scholes using the principal amount of $1,300,000 (the “Promissory Note” – see note 6 for more details) and (ii)following assumptions:
| · | Expected volatility is based primarily on historical volatility of the Company. Historical volatility was computed using weekly pricing observations for recent periods. The Company believes this method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants and embedded conversion features. The Company currently have no reason to believe that future volatility over the expected remaining life of these embedded conversion features is likely to differ materially from historical volatility. |
| · | The expected life is based on the remaining term of the warrants and embedded conversion features. |
| · | The risk-free interest rate is based on U.S. Treasury securities consistent with the remaining term of the embedded conversion features. |
During the year ended December 31, 2015, the Company issued an aggregate of 40,000,000 shares$130,000 in principal of our common stock. Ofconvertible notes payable at an interest rate of 8% (See Note 6). Such convertible notes contained embedded conversion features in the 40,000,000 shares, 4,000,000 shares will be heldCompany's own stock and have resulted in an initial derivative liability value and a debt discount of $80,000 being recorded by an escrow agent for 15 months following the closing for the purpose of providing a partial security to support the indemnity provisions of the purchase agreement. All shares were issued in June 2014.Company.
TheDuring the year ended December 31, 2015, the Company recorded a loss of $26,000, related to the change in fair value of the consideration transferred to Targeted Growth, Inc.embedded conversion features which is included in change in fair value of derivative liabilities in the following table:accompanying condensed consolidated statements of operations.
Investment in Camelina Assets | | | |
N/P to Targeted Growth | | | 1,300,000 | |
Cash (paid out) | | | 100 | |
Common stock issued | | | 800,000 | |
| | | 2,100,100 | |
The purchase price forfollowing table presents the Sustainable Oils, LLC membership interests was $100. Sustainable Oils’ assets include 295,000 pounds of “certified” Camelina seeds that we intend to sell to farmers this year and/or next year for the production of Camelina feedstock. The liabilities of Sustainable Oils include an approximately $2.3 million liability to UOP LLC,embedded conversion features which is secured byhave no observable market data and are derived using Black-Scholes measured at fair value on a lien on the three patents we acquired as part of the Camelina Assets. The amounts recognizedrecurring basis, using Level 3 inputs, as of the acquisition date for each major class of assets acquired and liabilities assumed are as follows:December 31, 2015:
| | | Fair Values at | |
| | | Acquisition | |
| | | Date | |
| Prepaids and other assets | | $ | 260 | |
| Inventory | | | 123,585 | |
| Intangible Assets | | | 4,168,855 | |
| Equipment | | | 190,500 | |
| Accounts Payable to UOP | | | (2,286,727 | ) |
| Commitment for field testing | | | (54,034 | ) |
| Other accounts payable and accrued liabilities | | | (42,339 | ) |
| Total net assets of Sustainable Oils | | $ | 2,100,100 | |
The value of the acquired identifiable intangible assets of $4,168,855 has been recorded as of the acquisition date of March 13, 2013.
F-21| Embedded conversion features: | | | |
| | | |
| Annual dividend yield | | | 0 | % |
| Expected live (years | | | 1 - 0.75 | |
| Risk-free interest rate | | | 0.21% - 0.23 | % |
| Expected volatility | | | 113 | % |
The level 3 carrying value as of December 31, 2015:
| Embedded Conversion Features | | | $ | 106,000 | |
For accounting purposes,The following table presents the acquisitionchanges in fair value of the Camelina Assetsour warrants and all of the membership interests of Sustainable Oils, LLC is treated as the acquisition of Sustainable Oil’s business. The amounts of Sustainable Oils, LLC 's revenue and earnings included in the Company’s consolidated income statementembedded conversion features measured at fair value on a recurring basis for the year ended December 31, 2013, and the pro forma revenue and earnings of the combined entity had the acquisition date been January 1, 2013 and January 1, 2012, are as follows:
| | | Revenue | | | Net Losses | |
| Actual March 13, 2013 - December 31, 2013 | | $ | 61,588 | | | $ | (342,587 | ) |
| | | | | | | | | |
| 2013 Supplemental pro forma from | | $ | 332,320 | | | $ | (1,961,281 | ) |
| January 1 - December 31, 2013 | | | | | | | | |
| | | | | | | | | |
| 2012 Supplemental pro forma from | | $ | 2,843,917 | | | $ | 195,920 | |
| January 1 - December 31, 2012 | | | | | | | | |
| Fair value of warrants and embedded conversion features | | | |
| | | | |
| Balance as of January 1, | | $ | - | |
| Issuance of warrants and embedded conversion features | | | 80,000 | |
| Change in fair value | | | 26,000 | |
| Balance as of December 31, | | $ | 106,000 | |
The cost incurred related to the acquisition of Sustainable Oils, LLC includes approximately $21,500 in legal and $6,000 in valuation fees.
The foregoing pro forma data is subject to various assumptions and estimates, and is presented for informational purposes only. This pro forma data does not purport to represent or be indicative of the consolidated operating results that would have been reported had the transaction been completed as described herein, and the data should not be taken as indicative of future consolidated operating results.
Note 1011 – Impairment of assets and fair value measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, a hierarchy has been established by generally accepted accounting principles which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data.
Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
As of December 31, 20132015 and 2012,2014, the Company does not have any assets or liabilities measured at fair value on a recurring basis.
Fair valueAs the three farms in Mexico were sold in December 2015 there is used on a nonrecurring basis to measure certain assets when applying lower of cost or fair value accounting or when adjusting carrying values. Fair value is also used when evaluating impairment on certain assets, including deferred growing costs and property and equipment.
The following is a tabular presentation of assets measured at fair value on a nonrecurring basis along with the level within the hierarchy in which the fair value measurement falls as of December 31, 2013:
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
| | | | | | Fair Value of Measurements at Reporting | |
| | | December 31, | | | Date Using | |
| Description | | 2013 | | | Level 1 | | | Level 2 | | | Level 3 | |
| Deferred Growing Cost | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Plantation Development Cost | | | 10,311,286 | | | | - | | | | - | | | | 10,311,286 | |
| | | $ | 10,311,286 | | | $ | - | | | $ | - | | | $ | 10,311,286 | |
The Company performed an analysis of long-lived assets and has identified certain areas considered to be fallow based on the following condition of the trees: no vegetative growth for the age of the trees, bad origins, bad land preparation, and no resistance to fungus. The trees are not expected to produce a commercial yield or generate any future revenues.revenues from these. As such, the Company has identified the costs associated with these areas originally capitalized as Plantation Development Cost and Deferred Growing Cost, which capitalized costs are not expected to be recoverable, and has recognized the following impairment charges for the period ended December 31, 2013written off $1,537,121 and 2012.
As$101,145 of December 31, 2013 and 2012, deferred growingsuch capitalized costs with a carrying value of $3,440,904 and $4,562,981, respectively, were written down to the fair value of $0.00 and $3,378,990 resulting in impairment charges of $3,440,904 and $1,183,991, which were included in operating expenses for the respective periods. The Company estimated the fair value of these assets using the income based approach considering the cash flows that would be obtained as a result of distribution of product tied to those deferred growing costs. The income based approach utilizes unobservable inputs. Due to the use of unobservable inputs, we classify the fair value of these growing areas within Level 3.
The Company did not write down any plantation development costs induring the year ended December 31, 2013. During the year ended December 31, 2012, plantation development costs (included2015 and 2014, respectively. Such amounts are included in property and equipment), which had a carrying value of $9,685,462 were written downdiscontinued operations. See Note 1 above related to the fair valueImpairment of $9,229,638, resulting in an impairment charge of $455,824, which was included in loss from continuing operations for the period. The Company estimated the fair value of these assets using the income based approach considering the cash flows that Long Lived Assets.
F-22would be obtained as a result of the production and distribution of product in areas of continued production. The income based approach utilizes unobservable inputs. Due
Note 1112 - Income Taxes
Income taxes are provided for temporary differences between financial and tax bases of assets and liabilities. The following is a reconciliation of the amount of benefit that would result from applying the federal statutory rate to pretax loss with the benefit from income taxes for the years ended December 31, 20132015 and 2012:
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements2014:
| Rate Reconciliation | | | | | | | | | | | | |
| | | 2013 | | | 2012 | | | 2015 | | | 2014 | |
| Federal income tax (benefit) at statutory rate (34%) | | $ | (2,552,000 | ) | | $ | (1,114,000 | ) | | $ | (3,066,000 | ) | | $ | (814,000 | ) |
| State income tax (benefit) , net of federal benefit | | | (100,000 | ) | | | 12,000 | | | | (69,000 | ) | | | (7,000 | ) |
| Foreign income tax benefit | | | - | | | | 7,000 | | | | - | | | | - | |
| Losses allocated to preferred members of GCE Mexico | | | 1,971,000 | | | | 1,151,000 | | | | 2,616,000 | | | | 743,000 | |
| Losses allocated GEHD | | | 15,000 | | | | 22,000 | | | | 57,000 | | | | 34,000 | |
| Share-based compensation | | | 38,000 | | | | 54,000 | | | | 16,000 | | | | 66,000 | |
| Expiration of operating loss and research credit carryforwards | | | - | | | | 75,000 | | | | - | | | | - | |
| Other differences | | | 5,000 | | | | (2,000 | ) | | | 276,000 | | | | 4,000 | |
| Change in valuation allowance | | | 623,000 | | | | (205,000 | ) | | | 179,000 | | | | (26,000 | ) |
| Income tax benefit | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
The components of deferred tax assets and liabilities are as follows at December 31, 20132015 and 2012,2014, using a combined deferred income tax rate of 40%:
| Components of Net Deferred Taxes | | | | | | | | | | | | |
| | | 2013 | | | 2012 | | | 2015 | | | 2014 | |
| Net operating loss carryforward | | $ | 7,225,000 | | | $ | 6,839,000 | | | $ | 7,507,000 | | | $ | 7,188,000 | |
| Share-based compensation | | | 781,000 | | | | 692,000 | | | | 483,000 | | | | 752,000 | |
| Accrued compensation and other liabilities | | | 647,000 | | | | 499,000 | | | | 830,000 | | | | 701,000 | |
| Impairment of long lived assets | | | 58,000 | | | | 58,000 | | | | 42,000 | | | | 42,000 | |
| Other | | | (2,000 | ) | | | (2,000 | ) | | | - | | | | - | |
| Valuation allowance | | | (8,709,000 | ) | | | (8,086,000 | ) | | | (8,862,000 | ) | | | (8,683,000 | ) |
| Net deferred tax asset | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
The Company has available net operating losses of approximately $21,052,000$14,047,000 which can be utilized to offset future earnings of the Company. The utilization of the net operating losses are dependent upon the tax laws in effect at the time such losses can be utilized. The loss carryforwards expire between the years 20142015 and 2033.2035. Should the Company experience a significant change of ownership, the utilization of net operating losses could be reduced.
The Company and its subsidiaries file tax returns in the U.S. Federal jurisdiction and, in the state of California. The Company is no longer subject to U.S. federal tax examinations for tax years before and including December 31, 2009.2011. The Company is no longer subject to examination by state tax authorities for tax years before and including December 31, 2008.2010. During the years ended December 31, 20132015 and 2012,2014, the Company did not recognize interest and penalties.
Note 1213 – Commitments and Contingencies
Commitments
In February 2014, the Company entered into a lease agreement for 1,296 square feet of office space from February 1, 2014 to January 31, 2019. Rent payments range from $2,332.80$2,300 to $2,625.59$2,600 over the term. Rent expense, related to this lease agreement, for the years ended December 31, 20132015 and 20122014 was $42,982approximately $27,600 and $40,880,$26,400, respectively. The following represents approximate future annual minimum lease payments as of December 31, 2013:2015:
| Year Ending | | | |
| December 31, | | | |
| 2014 | | $ | 24,495 | |
| 2015 | | | 28,763 | |
| 2016 | | | 29,626 | |
| 2017 | | | 30,515 | |
| 2018 | | | 31,431 | |
| Thereafter | | | 2,626 | |
| Operating Lease Payable | | $ | 147,456 | |
The Company previously leased an office facility under a noncancelable operating lease, which had an expiration date of December 31, 2013, with $3500.00 due monthly until expiration.
| Year Ending | | | |
| December 31, | | | |
| 2016 | | | 40,000 | |
| 2017 | | | 41,000 | |
| 2018 | | | 42,000 | |
| 2019 | | | 3,000 | |
| Operating Lease Payable | | $ | 126,000 | |
Legal
In the ordinary course of business, the Company may face various claims brought by third parties and the Company may, from time to time, make claims or take legal actions to assert the Company’sCompany's rights, including intellectual property rights, contractual disputes and other commercial disputes. Any of these claims could subject the Company to litigation. Management believes the outcomes of currently pending claims will not likely have a material effect on the Company’sCompany's consolidated financial position and results of operations.operations.
Indemnities and Guarantees
In addition to the indemnification provisions contained in the Company’sCompany's organization documents, the Company generally enters into separate indemnification agreements with the Company’sCompany's directors and officers. These agreements require the Company, among other things, to indemnify the director or officer against specified expenses and liabilities, such as attorneys’attorneys' fees, judgments, fines and settlements, paid by the individual in connection with any action, suit or proceeding arising out of the individual’sindividual's status or service as the Company’sCompany's directors or officers, other than liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest, and to advance expenses incurred by the individual in connection with any proceeding against the individual with respect to which the individual may be entitled to indemnification by the Company. The Company also indemnifies its lessor in connection with its facility lease for certain claims arising from the use of the facility. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheets.
Note 13 – Subsequent EventEmployment Agreement
On July 1,Effective December 31, 2014, approved in January 2015, the Company entered into a Technical Servicesan employment agreement (the "Employment Agreement") with two distinct componentsRichard Palmer, our President and scopeChief Executive Officer, for a total contractedterm of five (5) years. Under the Employment Agreement, the Company granted Mr. Palmer an incentive option to purchase up to 16,959,377 shares of our common stock at an exercise price of $924,687. The two components are (1)$0.0041 (the closing trading price on the date the agreement was signed and approved), with 25% vesting immediatly and the balance vesting in equal amounts over the next 48 months. In the event of a proposed sale, merger or other proposed change in control of the Company, such stock options will completeimmediately vest.
In addition, Mr. Palmer's compensation package includes a comprehensive feasibilitybase salary of $250,000, and financial analysisa bonus payment contingent on Mr. Palmer's satisfaction of certain performance criteria, which will not exceed 50% of Mr. Palmer's base salary. In the buisness and economic viabilityevent that (i) we terminate Mr. Palmer's employment for reasons other than "cause" (as defined in the Employment Agreement to include material breaches by him of the agreement, fraud, misappropriation of funds or embezzlement), or if (ii) Mr. Palmer resigns because we breached the Employment Agreement, we will be obligated to pay Mr. Palmer an expanded Caribbean Energy farm for a contracted feeamount equal to twelve (12) months of $367,598, and; (2) the Company will independently develop and operate a certified germplasm nursery over a 12 month period for a contracted fee of $557,089.his base salary.