UNITED STATES
SECURITIES AND EXCHANGE
COMMISSIONWASHINGTON, D.C. 20549
| FORM 10-Q |
Quarterly report pursuant to Section 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OFof the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2016
Commission file number 0-12627
GLOBAL CLEAN ENERGY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| 87-0407858 | ||
| (State or other jurisdiction of incorporation or organization) | ( Identification | |
| 2790 Skypark Drive, Suite 105 Torrance, California | 90505 | |
| (Address of principal executive offices) | (Zip Code) |
| (310) 641-4234 | ||||
| (Registrant’s telephone number, including area code) |
Securities registered under Section 12(b) of principal executive offices)
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
| N/A | N/A | N/A |
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 ☒☐ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,Website, 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 ☒☐ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.
| Large accelerated filer | ☐ | ☐ | ||
| Non-accelerated filer | ||||
| ☒ | Smaller reporting company | ☒ | ||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the number of shares outstanding of eachregistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the registrant's classes of common stock, as of the latest practicable date: As of May 13, 2016, the issuer had 341,405,545 shares of common stock issued and outstanding.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).: Yes ☐ No ☒
The number of shares of the issuer’s Common Stock, par value $0.001 per share, outstanding as of December 10, 2020 was 358,499,606.
Part I. FINANCIAL INFORMATION
| GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| March 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 2,256 | $ | 34,704 | ||||
| Accounts receivable | 13,595 | 10,160 | ||||||
| Inventory | 25,921 | 26,544 | ||||||
| Other current assets | 36,230 | 36,846 | ||||||
| Current assets of discontinued operations | 63,919 | 218,015 | ||||||
| Total Current Assets | 141,921 | 326,269 | ||||||
| PROPERTY AND EQUIPMENT, NET | 7,094 | 7,868 | ||||||
| INTANGIBLE ASSETS, NET | 3,421,191 | 3,482,498 | ||||||
| Noncurrent assets of discontinued operations | - | - | ||||||
| Other noncurrent assets | 2,626 | 2,626 | ||||||
| TOTAL ASSETS | $ | 3,572,832 | $ | 3,819,261 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 3,060,695 | $ | 3,041,612 | ||||
| Accrued payroll and payroll taxes | 1,435,216 | 1,380,155 | ||||||
| Deferred revenue | - | - | ||||||
| Accrued interest payable | 528,573 | 455,029 | ||||||
| Notes payable | 1,369,856 | 1,369,856 | ||||||
| Convertible notes payable | 697,000 | 697,000 | ||||||
| Derivative Liability | 106,000 | 106,000 | ||||||
| Current liabilities from discontinued operations | - | - | ||||||
| Total Current Liabilities | 7,197,340 | 7,049,652 | ||||||
| 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 issued and outstanding | 341,405 | 341,405 | ||||||
| Additional paid-in capital | 30,559,890 | 30,533,184 | ||||||
| Accumulated deficit | (34,629,719 | ) | (34,210,969 | ) | ||||
| Accumulated other comprehensive gain (loss) | 103,903 | 105,976 | ||||||
| Total Global Clean Energy Holdings, Inc. Stockholders' Deficit | (3,624,508 | ) | (3,230,391 | ) | ||||
| Total Stockholders' Deficit | (3,624,508 | ) | (3,230,391 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 3,572,832 | $ | 3,819,261 | ||||
Item 1: Financial Statements
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| ASSETS | (Unaudited) | (Audited) | ||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 3,870,499 | $ | 457,331 | ||||
| Restricted cash | 3,296,514 | — | ||||||
| Inventories | 22,942 | 22,942 | ||||||
| Investment in farming activities | 265,976 | — | ||||||
| Prepaid expenses and other current assets | 7,225,373 | — | ||||||
| Total Current Assets | 14,681,304 | 480,273 | ||||||
| DEBT ISSUANCE COSTS, NET | 840,211 | 500,000 | ||||||
| RIGHT-OF-USE ASSET | 67,103 | 82,450 | ||||||
| INTANGIBLE ASSETS, NET | 5,768,012 | 2,501,592 | ||||||
| DEPOSITS | 1,246,978 | 3,253,253 | ||||||
| PROPERTY AND EQUIPMENT, NET | 124,918,910 | — | ||||||
| PRE-ACQUISITION COSTS | — | 2,588,441 | ||||||
| ADVANCES TO CONTRACTORS | 19,440,631 | — | ||||||
| TOTAL ASSETS | $ | 166,963,149 | $ | 9,406,009 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 3,418,303 | $ | 1,778,434 | ||||
| Accrued compensation and related liabilities | 2,432,474 | 2,055,167 | ||||||
| Accrued interest | 3,096,990 | 1,734,527 | ||||||
| Lease liabilities | 68,053 | 82,882 | ||||||
| Notes payable including current portion of long-term debt, net | 4,142,582 | 1,369,856 | ||||||
| Convertible notes payable | 1,697,000 | 1,697,000 | ||||||
| Derivative liability | — | 24,767,000 | ||||||
| Total Current Liabilities | 14,855,402 | 33,484,866 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Mandatorily redeemable preferred equity of subsidiary | 939,000 | |||||||
| Long-term debt, net | 16,320,831 | |||||||
| Long-term debt, net (credit facility) | 76,045,162 | |||||||
| Asset retirement obligations | 40,740,700 | — | ||||||
| Environmental liabilities | 33,987,800 | — | ||||||
| Other liabilities | 377,331 | — | ||||||
| TOTAL LIABILITIES | 183,266,226 | 33,484,866 | ||||||
| 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; 358,499,606 and 344,029,434 shares issued and outstanding, respectively | 358,499 | 344,029 | ||||||
| Additional paid-in capital | 36,994,168 | 31,259,365 | ||||||
| Accumulated deficit | (53,655,757 | ) | (55,682,264 | ) | ||||
| Total Stockholders' Deficit | (16,303,077 | ) | (24,078,857 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 166,963,149 | $ | 9,406,009 | ||||
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements
-1-
| GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (unaudited) | ||||||||
| For the three months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Revenue | $ | 121,647 | $ | 150,220 | ||||
| Total Revenue | 121,647 | 150,220 | ||||||
| Operating Expenses | ||||||||
| General and administrative | 454,060 | 530,581 | ||||||
| Plantation operating costs | - | 7,172 | ||||||
| Total Operating Expenses | 454,060 | 537,753 | ||||||
| Operating Loss | (332,413 | ) | (387,533 | ) | ||||
| Other Income (Expenses) | ||||||||
| Interest expense, net | (73,517 | ) | (20,870 | ) | ||||
| Gain on settlement of liabilities | - | 270,323 | ||||||
| Change in fair value of derivative | - | 8,000 | ||||||
| Foreign currency transaction gain (loss) | - | 170 | ||||||
| Other Income (Expenses), Net | (73,517 | ) | 257,623 | |||||
| Loss from Continuing Operations | (405,930 | ) | (129,910 | ) | ||||
| Less Net Loss from Discontinued Operations | (12,820 | ) | (347,221 | ) | ||||
| Net Loss | $ | (418,750 | ) | $ | (477,131 | ) | ||
| Basic and diluted Loss per Common Share: | ||||||||
| Loss from Continuing Operations | $ | (0.001 | ) | $ | (0.001 | ) | ||
| Loss from Discontinued Operations | $ | (0.000 | ) | $ | (0.001 | ) | ||
| Net Loss per Common Share | $ | (0.001 | ) | $ | (0.002 | ) | ||
| Basic and diluted Weighted-Average Common Shares Outstanding | 341,405,545 | 339,187,545 | ||||||
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the three months | For the six months | |||||||||||||||
| ended June 30, | ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| REVENUE | — | — | — | — | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| General and Administrative | 1,820,933 | 937,765 | 2,064,040 | 1,965,342 | ||||||||||||
| Facilities expense | 709,305 | 775,282 | ||||||||||||||
| Depreciation expense | 27,031 | — | 27,031 | — | ||||||||||||
| Amortization of intangible assets | 95,023 | 61,306 | 156,330 | 122,613 | ||||||||||||
| Preliminary stage acquisition costs | — | 82,693 | — | 1,016,936 | ||||||||||||
| Total Operating Expenses | 2,652,292 | 1,081,764 | 3,022,683 | 3,104,891 | ||||||||||||
| OPERATING LOSS | (2,652,292 | ) | (1,081,764 | ) | (3,022,683 | ) | (3,104,891 | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest expense (net) | (759,225 | ) | (89,546 | ) | (939,173 | ) | (180,075 | ) | ||||||||
| Gain in derecognition of derivative liabilities | — | — | 512,363 | — | ||||||||||||
| Change in fair value derivative and finance charges related to derivative liability | — | 1,318,000 | 5,476,000 | (2,619,000 | ) | |||||||||||
| Total Other Income (Expense) | (759,225 | ) | 1,228,464 | 5,049,190 | (2,799,075 | ) | ||||||||||
| NET INCOME/(LOSS) | (3,411,517 | ) | 146,690 | 2,026,507 | (5,903,966 | ) | ||||||||||
| BASIC NET INCOME/(LOSS) PER COMMON SHARE | (0.01 | ) | 0.00 | 0.01 | (0.01 | ) | ||||||||||
| DILUTED NET INCOME PER COMMON SHARE | (0.01 | ) | 0.00 | 0.00 | (0.01 | ) | ||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | 355,889,716 | 341,529,434 | 353,860,445 | 341,529,434 | ||||||||||||
| DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING | 355,889,716 | 633,198,762 | 639,971,915 | 341,529,434 | ||||||||||||
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements
-2-
| GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (unaudited) | ||||||||
| For the three months ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Operating Activities | ||||||||
| Net Loss | $ | (418,750 | ) | $ | (477,131 | ) | ||
| Net loss from discontinued operations | (12,820 | ) | (347,221 | ) | ||||
| Net loss from continued operations | (405,930 | ) | (129,910 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Gain on settlement of liabilities | - | (270,323 | ) | |||||
| Share-based compensation | 26,705 | 87,279 | ||||||
| Depreciation and amortization | 62,096 | 65,210 | ||||||
| Amortization of debt discount | - | 18,250 | ||||||
| Change in fair value of derivative liability | - | (8,000 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | - | 200,384 | ||||||
| Inventory | 623 | (843 | ) | |||||
| Other current assets | (4,460 | ) | (38,240 | ) | ||||
| Accounts payable and accrued expenses | 150,185 | 1,024 | ||||||
| Other noncurrent assets | 140,263 | (72,235 | ) | |||||
| Net Cash Used in Operating Activities | (30,518 | ) | (147,404 | ) | ||||
| Cash Flows of discontinued operations: | ||||||||
| Operating cash flows | (152,677 | ) | 44,827 | |||||
| Investing cash flows | - | (75,996 | ) | |||||
| Financing cash flows (including cash at year end) | - | 127,000 | ||||||
| Net Cash flows from discontinued operations | (152,677 | ) | 95,831 | |||||
| Effect of exchange rate changes on cash | (2,605 | ) | 4,037 | |||||
| Net change in Cash and Cash Equivalents | (185,800 | ) | (47,536 | ) | ||||
| Cash and Cash Equivalents at Beginning of Period | 251,975 | 238,485 | ||||||
| Cash and Cash Equivalents at End of Period | 66,175 | 190,949 | ||||||
| Cash and Cash Equivalents for discontinued operations | 63,919 | $ | 156,245 | |||||
| Cash and Cash Equivalents at End of Period to continuing operations | $ | 2,256 | $ | 34,704 | ||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid for income tax | $ | 1,600 | $ | - | ||||
| Noncash Investing and Financing activities: | ||||||||
| Accrual of return on noncontrolling interest | $ | - | $ | 669,486 | ||||
| Estimated fair value of derivative liability | 73,000 | |||||||
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(Unaudited)
| Additional | ||||||||||||||||||||||||||||
| Series B | Common Stock | Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance at December 31, 2018 | 13,000 | $ | 13 | 341,529,434 | $ | 341,529 | $ | 30,669,220 | $ | (43,890,445 | ) | $ | (12,879,683 | ) | ||||||||||||||
| Share-based compensation from issuance of options and compensation-based warrants | — | — | — | — | 43,008 | — | 43,008 | |||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | — | — | |||||||||||||||||||||
| Net income for the quarter ended March 31, 2019 | — | — | — | — | — | (6,050,656 | ) | (6,050,656 | ) | |||||||||||||||||||
| Balance at March 31, 2019 | 13,000 | $ | 13 | 341,529,434 | 341,529 | 30,712,228 | (49,941,101 | ) | (18,887,331 | ) | ||||||||||||||||||
| Share-based compensation from issuance of options and compensation-based warrants | — | — | — | — | 460,395 | — | 460,395 | |||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | — | — | |||||||||||||||||||||
| Net income for the quarter ended June 30, 2019 | — | — | — | — | — | 146,690 | 149,690 | |||||||||||||||||||||
| Balance at June 30, 2019 | 13,000 | $ | 13 | 341,529,434 | $ | 341,529 | 31,172,623 | (49,794,411 | ) | (18,280,246 | ) | |||||||||||||||||
| Additional | ||||||||||||||||||||||||||||
| Series B | Common Stock | Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance at December 31, 2019 | 13,000 | $ | 13 | 344,029,434 | $ | 344,029 | $ | 31,259,365 | $ | (55,682,264 | ) | $ | (24,078,857 | ) | ||||||||||||||
| Share-based compensation from issuance of options and compensation-based warrants | — | — | — | — | 25,614 | — | 25,614 | |||||||||||||||||||||
| Exercise of stock options | — | — | 8,177,315 | 8,177 | 63,419 | — | 71,596 | |||||||||||||||||||||
| Net income for the quarter ended March 31, 2020 | — | — | — | — | — | 5,438,024 | 5,438,024 | |||||||||||||||||||||
| Balance at March 31, 2020 | 13,000 | $ | 13 | 352,206,749 | 352,206 | 31,348,398 | (50,244,240 | ) | (18,543,623 | ) | ||||||||||||||||||
| Share-based compensation from issuance of options and compensation-based warrants | — | — | — | — | 155,186 | — | 155,186 | |||||||||||||||||||||
| Exercise of stock options | — | — | 6,292,857 | 6,293 | 12,907 | — | 19,200 | |||||||||||||||||||||
| Option grants for investment in subsidiaries | — | — | — | — | 5,477,677 | — | 5,477,677 | |||||||||||||||||||||
| Net loss for the quarter ended June 30, 2020 | — | — | — | — | — | (3,411,517 | ) | (3,411,517 | ) | |||||||||||||||||||
| Balance at June 30, 2020 | 13,000 | $ | 13 | 358,499,606 | $ | 358,499 | 36,994,168 | (53,655,757 | ) | (16,303,077 | ) | |||||||||||||||||
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements
-3-
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
| GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||||||
| (unaudited) | ||||||||
| For the three months Ended | ||||||||
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Net Loss | $ | (418,750 | ) | $ | (477,131 | ) | ||
| Other comprehensive loss- foreign currency | ||||||||
| translation adjustment | - | (3,566 | ) | |||||
| Comprehensive Loss | $ | (418,750 | ) | $ | (480,697 | ) | ||
(Unaudited)
| For the six months ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| Operating Activities: | ||||||||
| Net Income/(Loss) | 2,026,507 | (5,903,966 | ) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Share-based compensation | 180,800 | 503,403 | ||||||
| Depreciation and amortization | 181,411 | — | ||||||
| Gain on settlement of liabilities | (512,363 | ) | 122,613 | |||||
| Change in fair value of derivative liability | (5,476,000 | ) | 2,619,000 | |||||
| Amortization of debt discount | 745,648 | |||||||
| Changes in operating assets and liabilities: | ||||||||
| Farming activities | (265,976 | ) | — | |||||
| Prepaid expenses | (2,900,691 | ) | — | |||||
| Deposits and other assets | (1,493,725 | ) | — | |||||
| Accounts payable and accrued expenses | 1,639,869 | 882,307 | ||||||
| Accrued compensation and related liabilities | 377,307 | (21 | ) | |||||
| Interest payable | 1,631,553 | 181,057 | ||||||
| Other liabilities | 377,331 | — | ||||||
| Other operating activities | 518 | — | ||||||
| Net Cash Used in Operating Activities | (3,487,811 | ) | (1,595,607 | ) | ||||
| Investing Activities: | ||||||||
| Pre-acquisition costs and deposit on refinery acquisition | — | (1,255,382 | ) | |||||
| Cash paid for acquisition of Alon Bakersfield Property, Inc. | (36,500,000 | ) | — | |||||
| Property plant & equipment | (5,487,828 | ) | — | |||||
| Intangible assets | — | — | ||||||
| Advances to contractors | (19,440,631 | ) | — | |||||
| Deposits | — | — | ||||||
| Net Cash Used in Investing Activities | (61,428,459 | ) | (1,255,382 | ) | ||||
| Financing Activities: | ||||||||
| Proceeds received from exercise of stock options | 90,796 | — | ||||||
| Payments on notes payable and long-term debt | (4,746,633 | ) | — | |||||
| Long-term debt (credit facility) | 80,500,000 | — | ||||||
| Payments on debt issuance costs | (4,218,211 | ) | — | |||||
| Debt issuance costs | — | (100,000 | ) | |||||
| Net Cash Provided by Financing Activities | 71,625,952 | (100,000 | ) | |||||
| Net Change in Cash, Cash Equivalents and Restricted Cash | 6,709,682 | (2,950,989 | ) | |||||
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 457,331 | 5,226,489 | ||||||
| Cash, Cash Equivalents and Restricted Cash at End of Period | 7,167,013 | 2,275,500 | ||||||
Supplemental Noncash Investing and Financing Activities
During the six months ended June 30, 2020, in connection with the Company’s purchase of Alon Properties, Inc., in addition to the cash paid, the Company assumed asset retirement obligations and environmental liabilities of $74.5 million, and issued options with a fair value of $5.5M. The purchase included the acquisition of property and equipment of $116.8 million and intangible assets of $3.4 million.
During the six months ended June 30, 2020, the Company converted a derivative liability of $19.3 million into a fixed payment obligation with a fair value of $18.8 million, and thereby recognized a gain on derecognition of the derivative liability of $0.5 million.
During the six months ended June 30, 2020, the Company issued warrants to a third-party to purchase an equity interest in its subsidiary, Sustainable Oils, Inc., which warrant had a fair value of approximately $9,000.
During the six months ended June 30, 2020, the Company financed its insurance premiums with a note payable of $4.3 million.
During the six months ended June 30, 2020, the Company converted $0.27 million of accrued interest on its credit agreement to additional principal.
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements
-4-
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A — ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Global Clean Energy Holdings, Inc., a Delaware corporation, and its wholly owned subsidiaries (collectively, the “Company,” “we”, “us” or “our”) is a U.S.-based integrated agricultural-energy biofuels company that holds assets across feedstocks and plant genetics, agronomics, cultivation, and regulatory approvals, commercialization, and downstream biorefining and storage. The Company is focused on the development and refining of non-food based bio-feedstocks and has a proprietary investment in camelina sativa (“Camelina”), a fast growing, low input and ultra-low carbon intensity crop used as a feedstock for renewable fuels. The Company holds its Camelina assets (including all related intellectual property related rights and approvals) and operates its Camelina business through a subsidiary, Sustainable Oils Inc., a Delaware corporation.
In 2018 and 2019 the Company pursued the acquisition of a crude oil refinery in Bakersfield, California with the objective of retrofitting it to Unaudited Condensed Consolidated Financial Statements
Basis of Presentation
The accompanying condensed and consolidated balance sheet of the Company at December 31, 2019, has been derived from audited condensed and consolidated financial statements, but does not include all disclosures required by accounting policies is presentedprinciples generally accepted in the United States of America (“U.S. GAAP”). The accompanying unaudited condensed and consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019, have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to assistForm 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the readerinformation and footnotes required by U.S. GAAP for complete financial statements, and should be read in understandingconjunction with the audited condensed and evaluatingconsolidated financial statements and related notes to the Company'sfinancial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the U.S. Securities and Exchange Commission (SEC). In the opinion of the Company’s management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made to the unaudited condensed and consolidated financial statements. The unaudited condensed and consolidated financial statements include all material adjustments (consisting of all normal accruals) necessary to make the condensed and notesconsolidated financial statements not misleading as required by Regulation S-X Rule 10-01. Operating results for the six months ended June 30, 2020 are the representationsnot necessarily indicative of the Company's management, which is responsibleresults that may be expected for their integrity and objectivity. the year ended December 31, 2020 or any future periods.
The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the consolidated financial statements.
Unaudited Interim Condensed Consolidated Financial StatementsRestricted Cash
In accordance with the Company’s senior credit agreement (see Note E - Debt), the Company pursuantis required to advance the calculated interest expense on its borrowings at the time of such borrowings to the rules and regulationsestimated commercial operational date of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these consolidated financial statements have been included and are of normal, recurring nature. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission. The results of operations for the three months ended March 31, 2016, may not be indicative of the results that may be expected for the year ending December 31, 2016.
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A — ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the Bakersfield Biorefinery. This interest is deposited into a designated account and the appropriate amount is paid to the lender at the end of each quarter. Additionally, the construction funds are deposited into its own designated account and deposited from that designated account into the Bakersfield Renewable Fuel, LLC account only upon approval by the lenders. These two accounts are restricted and not directly accessible by the Company, although these funds are credited to the Company’s balance sheet.
Property and Equipment
Property and equipment are stated at cost. Depreciation of office equipment is computed using the straight-line method over estimated useful lives of 3 to 5 years. Refinery assets and buildings are depreciated using the straight-line method over estimated useful lives of 10 to 25 years, however, the refinery will not begin to be depreciated until its retrofitting has been completed and it’s ready for operations. Normal maintenance and repair items are charged to operating costs and are expensed as incurred. 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 the statement of operations. Interest on borrowings related to the retrofitting of the Bakersfield Biorefinery is being capitalized, which will continue until the refinery is available for use. During the six months ended June 30, 2020, $1.6 million of interest has been capitalized, and is included in property and equipment, net on the accompanying June 30, 2020 balance sheet.
Long-Lived Assets
In accordance with U.S. GAAP for the impairment or disposal of long-lived assets, the carrying values of intangible assets and other long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the aggregate of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.
Pre-Acquisition Costs
We began capitalizing pre-acquisition costs once we determined that the acquisition of the Bakersfield Biorefinery project was probable, which was in April of 2019 when the product offtake agreement was signed. We capitalized those costs directly identifiable with the specific property and those costs that would be capitalized if the property were already acquired. Upon the acquisition of the Bakersfield Biorefinery, these capitalized pre-acquisition costs, which totaled $3.2 million, were reclassified to property and equipment.
For the full year of 2019 and for the year 2020 up to and including the acquisition date of May 7, 2020, we capitalized $2.6 million and $0.6 million of these costs, respectively. As of May 7, 2020, we allocated our accumulated pre-acquisition costs of $3.2 million to the acquired Bakersfield Biorefinery. See Note C - Property and Equipment, included herein.
Debt Issuance Costs
During 2018, we signed a letter of intent to acquire our Bakersfield Refinery. The acquisition of the refinery and the related $365 million of financing to fund the retrofit closed in May 2020. In connection with financing the refinery, we incurred $0.5 million of debt issuance costs in 2019 and $4.2 million of debt issuance costs in the second quarter of 2020 related to acquisition of the Bakersfield Biorefinery. Debt issuance costs are amortized over the term of the loan as interest: however, as
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A — ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
such interest relates to Unaudited Condensed Consolidatedretrofitting of the refinery, these costs will be capitalized as part of the refinery until the refinery is placed in service. The amortization of the debt issuance costs is classified as interest expense unless it meets the criteria to be capitalized. At March 31, 2020 and December 31, 2019, certain unamortized debt issuance costs are presented on the balance sheet as deferred costs. However, upon the closing of the Bakersfield biorefinery acquisition and as of June 30, 2020, these costs are classified as a direct deduction from the carrying amount of the debt liability of the financing to the extent that we borrow on the credit agreements.
Derecognition of Liabilities
The Company reviews its liabilities, including but not limited to, accounts payable, notes payable, accrued expenses, accrued liabilities and other legal obligations for a determination of the legal enforcement or settlement of these obligations. Upon conclusive evidence that an obligation may be extinguished, has expired, is discharged, is cancelled or otherwise no longer legally exists, then the Company will derecognize the respective liability on its balance sheet.
Asset Retirement Obligations
The Company recognizes liabilities which represent the fair value of a legal obligation to perform asset retirement activities, including those that are conditional on a future event, when the amount can be reasonably estimated. If a reasonable estimate cannot be made at the time the liability is incurred, we record the liability when sufficient information is available to estimate the liability’s fair value. We have asset retirement obligations with respect to our Bakersfield Biorefinery due to various legal obligations to clean and/or dispose of these assets at the time they are retired. However, the majority of these assets can be used for extended and indeterminate periods of time provided that they are properly maintained and/or upgraded. It is our practice and intent to continue to maintain these assets and make improvements based on technological advances. In the logistics segment, these obligations relate to the required cleanout of the pipeline and terminal tanks. In order to determine fair value, management must make certain estimates and assumptions including, among other things, projected cash flows, a credit-adjusted risk-free rate and an assessment of market conditions that could significantly impact the estimated fair value of the asset retirement obligations. We believe the estimates selected, in each instance, represent our best estimate of future outcomes, but the actual outcomes could differ from the estimates selected. See Note I for environmental liabilities, which are accounted for separately from asset retirement obligations.
Advances to Contractors
Upon the acquisition of the Bakersfield Biorefinery, the Company advanced $20.1 million to its primary engineering, procurement and construction contractor. These funds are credited against future invoices in accordance with an agreed schedule.
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 basis 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
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A — ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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” 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.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 using the following five-step model: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue. The Company did not recognize any revenues during the quarters ended June 30, 2020 and 2019. Based upon the Company’s Product Offtake Agreement (see Note B), the Company expects to recognize revenue from the sale of biofuel beginning in 2022.
Research and Development
Research and development costs are charged to operating expenses when incurred.
Fair Value Measurements and Fair Value of Financial Statements
As of June 30, 2020 and December 31, 2019, the carrying amounts of the Company’s financial instruments that are not reported at fair value in the accompanying consolidated balance sheets, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate their fair value due to their short-term nature. The Company’s derivative liability related to its derivative forward contract is reported at fair value.
U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy:
Level 1— Quoted prices for identical instruments in active markets;
Level 2— Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3— Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
At December 31, 2019, the Company had a derivative liability of $24.8 million related to a forward contract that also included a call option. The notional amount of the forward contract related to gallons of the commodity, Ultra Low Sulfur Diesel. Under the terms of the contract the Company was obligated to pay the equivalent of the notional amount multiplied by the market price of Ultra Low Sulfur Diesel at the settlement dates; however, the call option of the contract capped the market price of Ultra Low Sulfur Diesel.
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A — ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March of 2020 the Company settled the derivative contract by agreeing to a payment of $5.5 million due on April 30, 2020 and six equal payments beginning in October of 2021 totaling $17.6 million. The Company recognized $5.5 million of income from the decrease in fair value on the derivative contract from January 1, 2020 through March 19, 2020, and also recognized a gain of $512,000 on the derecognition of the derivative contract. The derivative forward contract was amended again in April 2020. Under the amendment, the contract was replaced with a fixed payment obligation, whereby the Company agreed to pay the counterparty a total of $24.8 million, which included a payment of $4.5 million that the Company paid in June 2020, and six equal installment payments in 2022 totaling $20.3 million.
The fair value of the derivative forward contract is primarily based upon the notional amount and the forward strip market prices of Ultra Low Sulfur Diesel, and is reduced by the fair value of the call option. The forward strip market prices are observable. However, to determine the fair value of the call option, Company used the Black’s 76 option pricing model. As a result, the contract as a whole is included in the Level 3 of the fair value hierarchy.
The derivative liability discussed herein was extinguished in the first quarter of 2020, and the Company had no derivative liabilities in the second quarter ending June 30, 2020. The following presents changes in the derivative liability through June 30, 2020:
| Six Months Ended | ||||||||
| June 30, 2020 | June 30, 2019 | |||||||
| Beginning Balance | $ | 24,767,000 | $ | 11,917,000 | ||||
| Conversion to note payable | (19,291,000 | ) | — | |||||
| Change in fair value recognized in earnings | (5,476,000 | ) | 2,619,000 | |||||
| Ending Balance | $ | — | $ | 14,536,000 | ||||
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) valuation of common stock, warrants, and stock options, b) those assumed in determining the value of the derivative transactions, c) estimated useful lives of equipment and intangible assets d) the estimated costs to remediate or clean-up the refinery site, and the inflation rate, discount rate and timing of payments to calculate the asset retirement obligations and environmental liabilities, and e) the allocation of the acquisition price of the Bakersfield Biorefinery to the various assets acquired. It is at least reasonably possible that the significant estimates used will change within the next year.
Income/Loss per Common Share
Income/Loss per share amounts are computed by dividing income or loss applicable to the common shareholdersstockholders of the Company by the weighted-average number of common shares outstanding during each period. Diluted income or loss per
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A — ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
The following table presents: 1) instruments are currently antidilutive and have been excluded from the calculations of diluted income or loss per share at March 31, 2016 and 2015, as follows:
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Convertible notes and accrued interest | 25,000,000 | 24,100,000 | ||||||
| Convertible preferred stock - Series B | 11,818,181 | 11,818,181 | ||||||
| Warrants | 3,083,332 | 3,083,332 | ||||||
| Compensation-based stock options and warrants | 91,558,997 | 88,682,003 | ||||||
| 131,460,510 | 127,683,516 | |||||||
| For the Three Months ended | For the Six Months ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Instruments | Instruments | Instruments | Instruments | |||||||||||||
| Excluded in | Included in | Included in | Excluded in | |||||||||||||
| Diluted EPS | Diluted EPS | Diluted EPS | Diluted EPS | |||||||||||||
| Convertible notes and accrued interest | 101,091,766 | 95,955,013 | 101,091,766 | 95,955,013 | ||||||||||||
| Convertible preferred stock - Series B | 11,818,181 | 11,818,181 | 11,818,181 | 11,818,181 | ||||||||||||
| Stock options and warrants | 173,282,235 | 183,896,134 | 173,201,523 | 177,534,870 | ||||||||||||
Stock Based Compensation
The Company recognizes compensation expenseexpenses 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. However, in the case of awards with accelerated vesting, the amount of compensation expense recognized at any date will be based upon the portion of the award that is vested at that date. 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.
Subsequent Events
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 ofhas evaluated subsequent events through the date of adoption. The Company is currently evaluating the impact of adopting the new revenue standard on its consolidated financial statements.
NOTE B — BASIS OF PRESENTATION AND SUBSIDIARIES
| March 31, | ||||||||
| 2016 | 2015 | |||||||
| Major classes of line items contitution pretax profit (loss) of discontinued operations | ||||||||
| Revenue | $ | - | $ | 8,011 | ||||
| General and administrative expenses | (12,832 | ) | (63,034 | ) | ||||
| Plantation operating costs | - | (23,204 | ) | |||||
| Interest Expense | - | (270,692 | ) | |||||
| Other Income and Expenses | 12 | 1,698 | ||||||
| Pretax loss from discontinued operations | (12,820 | ) | (347,221 | ) | ||||
| Pretax loss on disposal of the discontinue operations | - | - | ||||||
| Total pretax loss on discontinue operations | (12,820 | ) | (347,221 | ) | ||||
| Income Tax Benefits | - | - | ||||||
| Total loss on discontinued operations | $ | (12,820 | ) | $ | (347,221 | ) | ||
| Reconciliation of the Carrying Amounts of Major Classes of Assets and Liabilities of the Discontinued Operations that are Disclosed in the Notes to the Financial Statement to Total Assets and Liabilities of the Disposal Group classified as Property and Equipment that are presented in the Consolidated Balance Sheet | ||||||||
| March 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Carrying amounts of major classes of assets included as part of discontinued operations | (Unaudited) | |||||||
| Cash and cash equivalents | $ | 63,919 | $ | 217,271 | ||||
| Accounts receivable | - | - | ||||||
| Inventory | - | - | ||||||
| Other Current Assets | - | 744 | ||||||
| Property and Equipment, Net | - | - | ||||||
| Other noncurrent assets | - | - | ||||||
| Total Assets of the disposal group in the statement of financial position | $ | 63,919 | $ | 218,015 | ||||
| Carrying amounts of major classes of liabilities included as part of discontinued operations | ||||||||
| Total Liabilities of the disposal group in the statement of financial positon | $ | - | $ | - | ||||
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown inDuring the accompanying consolidated financial statements,year ended December 31, 2019 and six months ended June 30, 2020, the Company incurred losses from continuing operations applicable to its common stockholders of $405,930$4.9 million and $129,910 for the three months ended March 31, 2016, and 2015,$3.0 million, respectively, and has an accumulated deficit applicable to its common shareholdersstockholders of approximately $34,000,000$54 million, at March 31, 2016. The Company also used cash in operating activities of approximately $31,000 and $149,000 during the three months ended March 31, 2016 and 2015, respectively. At March 31, 2016, the Company has negative working capital of approximately $7,000,000. These factors raise substantial doubt about the Company's ability to continue as a going concern.June 30, 2020.
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE B — BASIS OF PRESENTATION AND LIQUIDITY (CONTINUED)
On May 4, 2020, a group of lenders agreed to provide a $300 million senior secured term loan facility to BKRF OCB, LLC, one of Global Clean Energy Holdings, Inc.’s subsidiaries, to enable that subsidiary to acquire the equity interests of Bakersfield Renewable Fuels, LLC and to pay the anticipated costs of the retooling of the Bakersfield Biorefinery owned by Bakersfield Renewable Fuels, LLC. Concurrently with the foregoing senior credit facility, a group of mezzanine lenders also agreed to provide a $65 million secured term loan facility to be used to pay the costs of repurposing and starting up the Bakersfield biorefinery. Although the funds provided by the senior and mezzanine lenders may only be used for the Bakersfield Biorefinery and servicing these debt obligations, since the Company shares facilities and personnel, Global Clean Energy Holdings, Inc. will realize a reduction in certain of its operating expenses. The Company believes that these cost savings, plus the Company’s other financial resources should be sufficient to fund the Company’s operations through the start-up of the Bakersfield Biorefinery. See “Note E - Debt.” On October 12, 2020 the group of lenders agreed to lend up to an additional $15 million for the Bakersfield Biorefinery and a portion to the upstream Camelina business. See, “Note J - Subsequent Events.”
In April of 2019, the Company executed a binding Product Offtake Agreement (the “Offtake Agreement”) with ExxonMobil Oil Corporation (“Purchaser”) pursuant to which Purchaser has committed to purchase a minimum of 85 million gallons per year of renewable diesel annually from the Bakersfield Biorefinery (with a right to purchase higher volumes as available), and the Company has committed to sell these quantities of renewable diesel to Purchaser. Purchaser’s obligation to purchase renewable diesel will last for a period of five years following the date that the Bakersfield Biorefinery commences commercial operations. Purchaser has the option to extend the initial five-year term. Either party may terminate the Offtake Agreement if the Bakersfield Biorefinery does not meet certain production levels by certain milestone dates following the commencement of the Bakersfield Biorefinery’s operations.
NOTE C – PROPERTY AND EQUIPMENT
On May 7, 2020 through its subsidiary BKRF OCB, LLC, the Company purchased all of the outstanding equity interests of Alon Bakersfield Property, Inc. a company that owned a refinery in Bakersfield, California from Alon Paramount Holdings, Inc. (“Alon Paramount”) for a total consideration of $120.2 million. Immediately prior to the purchase, Alon Bakersfield Property Inc. was converted into a limited liability company and renamed as “Bakersfield Renewable Fuels, LLC.” The Company is now retooling the acquired refinery into a biorefinery. In accordance with ASC Topic 805, Business Combinations, the Company determined that the purchase is an asset purchase and not a business combination based the following a) substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset group, b) that the existing crude oil based (very high carbon) refinery is not able to produce renewable diesel (very low carbon) fuel, c) no refinery in the U.S. has been designed specifically around the feedstock of Camelina seed, thus the technical aspect is new and unique to the Bakersfield Biorefinery and d) the Company did not acquire an assembled workforce. Thus, the acquired asset group does not have the full inputs or substantive process to produce outputs and does not have any acquired revenue generating contractual arrangements.
The total consideration for the purchase of the Bakersfield Biorefinery was $120.2 million, and consisted of $40 million of cash, an option right of $5.5 million to the seller, and an assumption of $74.7 million of liabilities. The liabilities assumed consist of $40.7 million of Asset Retirement Obligations (ARO) and $34 million of other environmental liabilities. These liabilities are the estimated costs of clean-up, remediation and associated costs of the acquired assets in accordance with current regulations. The total consideration of the purchase was allocated to the asset categories acquired based upon their relative fair value. The following summarizes this allocation of the purchase price and also the reclassification of the pre-acquisition costs:
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE C – Property and Equipment
| Asset Category | Capitalized Costs Based on Acquisition Valuation | Allocated Pre-Acquisition Costs | Total Capitalized Costs on Acquisition | |||||||||
| Property and Equipment | ||||||||||||
| Land | $ | 13,506,000 | — | $ | 13,506,000 | |||||||
| Buildings | 3,656,600 | — | 3,656,600 | |||||||||
| Refinery | 99,614,100 | 3,222,449 | 102,836,549 | |||||||||
| Intangible Assets | 3,420,700 | — | 3,420,700 | |||||||||
| Total | $ | 120,197,400 | $ | 3,222,449 | $ | 123,419,849 | ||||||
Property and equipment as of June 30, 2020 and December 31, 2019 are as follows:
| March 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Land | $ | - | $ | - | ||||
| Plantation development costs | - | $ | - | |||||
| Plantation equipment | 10,574 | $ | 10,574 | |||||
| Office equipment | 65,246 | $ | 64,729 | |||||
| Total cost | 75,820 | 75,303 | ||||||
| Less accumulated depreciation | (68,726 | ) | (67,435 | ) | ||||
| Property and equipment, net | $ | 7,094 | $ | 7,868 | ||||
| June 30, 2020 | December 31, 2019 | |||||||
| Land | $ | 13,506,000 | — | |||||
| Office Equipment | 61,078 | 61,078 | ||||||
| Buildings | 3,656,600 | — | ||||||
| Refinery Equipment | 102,836,549 | — | ||||||
| Construction in Process | 4,946,792 | — | ||||||
| Total Cost | $ | 125,007,019 | 61,078 | |||||
| Less accumulated depreciation | (88,109 | ) | (61,078 | ) | ||||
| Property and equipment, net | $ | 124,918,910 | — | |||||
Depreciation expense for property and equipment is depreciated usingwas approximately $27,000 for the straight-line method over estimated useful lives of 5 to 15 years. The Company recorded $1,291 in depreciation expense in the threequarter and six months ended March 31, 2016June 30, 2020. There was no depreciation for the quarter and $115,736 in the yearsix months ended December 31, 2015.
NOTE D – INTANGIBLE ASSETS
Intangible Assets
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE D – INTANGIBLE ASSETS (CONTINUED)
patents. These intangible assets acquiredthree patents have an expected useful life of 17 years and are carried at cost less any accumulated amortization and any impairment losses.
| March 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Intangible Assets | 4,168,841 | $ | 4,168,841 | |||||
| Less accumulated amortization | (747,650 | ) | (686,343 | ) | ||||
| Intangible Assets, net | $ | 3,421,191 | $ | 3,482,498 | ||||
| June 30, | June 30, | |||||||
| 2020 | 2019 | |||||||
| Patent license fees | 4,189,952 | 4,187,902 | ||||||
| Refinery permits | 3,420,700 | — | ||||||
| Less accumulated amortization | (1,842,640 | ) | (1,686,310 | ) | ||||
| Intangible Assets, Net | 5,768,012 | 2,501,592 | ||||||
Amortization expense for intangible assets was approximately $61,000$95,000 and $26,000$61,000 for the three monthsquarters ended March 31, 2016June 30, 2020 and 2015,2019, respectively.
NOTE E – DEBT
At June 30, 2020, notes payable and long-term debt consisted of the following:
| Convertible note payable to executive officer | $ | 1,000,000 | ||
| Other convertible notes payable | 697,000 | |||
| Fixed payment obligation, net of discount of $5,225,715 | 15,024,285 | |||
| Other notes | 5,439,128 | |||
| Senior credit facility | 80,769,090 | |||
| 102,929,503 | ||||
| Less: unamortized debt issuance costs | (4,723,928 | ) | ||
| $ | 98,205,575 |
Credit Facilities
On May 4, 2020, in order to fund the purchase and subsequent retrofitting of Bakersfield Renewable Fuels, LLC, BKRF OCB, LLC entered into a senior secured credit agreement with a group of lenders (the "Senior Lenders") pursuant to which the Senior Lenders agreed to provide a $300 million senior secured term loan facility to BKRF OCB, and to pay the costs of the retooling the Bakersfield Biorefinery. The estimated amortization expense forsenior loan bears interest at the next five years approximates $245,000 annually.rate of 12.5% per annum, payable quarterly, provided that the borrower may defer up to 2.5% interest to the extent it does not have sufficient cash to pay the interest, such deferred interest being added to principal. The principal of the senior loans matures in November, 2026, provided that BKRF OCB, LLC must offer to prepay the senior loans with any proceeds of such asset dispositions, borrowings other than
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE E – Debt
permitted borrowings, proceeds from losses, and excess net cash flow. BKRF OCB, LLC may also prepay the senior loan in notes payablewhole or in part with the payment of a prepayment premium. As additional consideration for the senior loans, the Senior Lenders are issued Class B Units in BKRF HCP, LLC, an indirect parent company of BKRF OCB, LLC, as the Company draws on the accompanying consolidated balance sheet, The Company has notes payable to certain shareholders infacility. As of June 30, 2020, 80.5 million Class B Units have been issued, and the aggregate amountfair value of $26,000 at March 31, 2016such units on the date of issuance totaled $939,000. The senior loans are secured by all of the assets of BKRF OCB, LLC (including its membership interests in Bakersfield Renewable Fuels, LLC), all of the outstanding membership interest in BKRF OCB, LLC, and December 31, 2015.all of the assets of Bakersfield Renewable Fuels, LLC. The notes originatedcredit facility contains certain covenants, and as of June 30, 2020, the Company was in 1999,compliance with all of the covenants.
On May 4, 2020, BKRF HCB, LLC, the indirect parent of BKRF OCB, LLC, entered into a credit agreement with a group of mezzanine lenders who agreed to provide a $65 million secured term loan facility to be used to pay the costs of repurposing and starting up the Bakersfield biorefinery. As of November 30, 2020, BKRF HCB, LLC has not drawn down on the credit facility. The mezzanine loans bear interest at 12%,the rate of 15.0% per annum on amounts borrowed, payable quarterly, provided that the borrower may defer interest to the extent it does not have sufficient cash to pay the interest, such deferred interest being added to principal. As additional consideration for the mezzanine loans, the mezzanine lenders will be issued Class C Units in BKRF HCP, LLC at such times as advances are unsecured,made under the mezzanine loans. The mezzanine loans will be secured by all of the assets of BKRF HCP, LLC, including all of the outstanding membership interest in BKRF HCB, LLC. The mezzanine loans mature in November 2027.
Promissory Notes
Prior to 2016 the Company invested in and are currentlypurchased various assets and is carrying a note, that is due upon demand, related to such assets in default. Accruedthe principal amount of $1.3 million. The promissory note is due upon demand, and has an interest rate of 18% per annum.
Convertible Note Payable to Executive Officer
On October 16, 2018, Richard Palmer, the Company’s Chief Executive Officer and President, entered into a new employment agreement with the Company and concurrently agreed to defer $1 million of his accrued unpaid salary and bonus for two years. In order to evidence the foregoing deferral, the Company and Mr. Palmer entered into a $1 million convertible promissory note (the “Convertible Note”). The Convertible Note is accruing simple interest on the notes totaled $59,641 and $58,865, respectively at March 31, 2016 and December 31, 2015, respectively.
Convertible Notes Payable
The conversion price may be adjusted in connection with stock splits, stock dividends and similar events affecting the Company's capital stock. TheCompany has several notes that are convertible notes rank senior to all other indebtedness ofinto the Company or the Company’s subsidiaries shares at different prices: ranging from $0.03 per share into the parent company’s stock 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. The Company may not prepay the convertible notes without the prior consent of the Investors.
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE E – DEBT (CONTINUED)
10%. On a combined basis, as of June 30, 2020 the principal amount of these notes is approximately $0.7 million.
Fixed Payment Obligation
As described in Note A, under “Fair Value Measurements and Fair Value of Financial Instruments”, the Company amended a derivative forward contract during the quarter ended March 31, 2020, with the counterparty. The amendment terminated the derivative forward contract and replaced it with a fixed payment obligation. Under the terms of the fixed payment obligation, the Company agreed to Unaudited Condensed Consolidated Financial Statements
Promissory Notes PayableInsurance Premium Financing
Upon the acquisition of the Bakersfield Biorefinery in May 2020, the Company bound numerous insurance contracts to cover its corporate, ownership and construction risks primarily to provide financial protection against various risks and to satisfy certain lender requirements. The Company paid 35% of the total premiums and financed the balance at 3.8% annual interest rate. The Company is obligated to make seventeen equal monthly payments totaling approximately $4.5 million beginning in July 2020. The insurance policies cover various periods from 12 to 60 months.
NOTE F – MANDATORILY REDEEMABLE PREFERRED EQUITY
As described above, during the quarter ended June 30, 2020, the Company issued its lenders on its senior debt 80.5 million Class B Units of its subsidiary, BKRF HCB, LLC. The Company is obligated to make certain distribution payments to holders of these preferred units, and after the distributions reach a certain limit the units are considered fully redeemed. As such, for accounting purposes, these preferred units are considered to be mandatorily redeemable and have been classified as liabilities in the accompanying June 30, 2020, balance sheet.
NOTE G – STOCKHOLDERS’ EQUITY
Common Stock
In March 2013,the second quarter of 2020, the Company issued a secured promissory note in the principal amounttotal of $1,300,000 to Targeted Growth, Inc. for certain Camelina assets. With the capitalized accrued interest, the note balance was $1,343,856 as6,292,857 shares of March 31, 2016 and December 31, 2015. The note bears an interest rate of eighteen percent (18.0%) per annum. In September 2014, we renegotiated the terms of the agreement and returned certain machines, tractors, and vehicles to Targeted Growth, Inc. in consideration for a reduction of accrued interestcommon stock related to the Promissory Note. The current note is no longer secured by any assetsexercise of stock options. These option exercises consisted of 5,542,857 and is due on demand.
Series B Preferred Stock
On November 6, 2007, the Company sold a total of 13,000 shares of Series B Convertible Preferred Stock (“Series B Shares”) to two investors for an aggregate purchase price of $1.3 million, less offering costs of $9,265. Each share of the Series B Shares has a stated value of $100.
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE G – STOCKHOLDERS’ EQUITY (CONTINUED)
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's common stockCompany’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's common stockCompany’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's common stock. In the event of the Company'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 stockCommon Stock payable in shares of common stock)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.
In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series B Preferred Stock shall be entitled to receive, prior to any distribution to the holders of the Common Stock, an amount equal to $100 per share, or $1,300,000 in the aggregate, plus an amount equal to any dividends declared and unpaid with respect to each such share.
NOTE H – Stock Options and Warrants
Stock Options and Compensation-Based Warrants2010 Equity Incentive Plan
In 2010, the Company’s Board of Directors adopted the Global Clean Energy Holdings, Inc. 2010 Equity Incentive Plan (the “2010 Plan”) wherein 40,000,00020,000,000 shares of the Company's common stock arewere reserved for issuance thereunder. As of March 31, 2019, there were no shares available for future option grants under the 2010 Plan. The 2010 Plan expired in April 2020 and was replaced with the 2020 Equity Incentive Plan. There were no grants of stock options in the first quarter of 2020.
2020 Equity incentive Plan
On April 10, 2020, the Company’s Board of Directors adopted the 2020 Equity Incentive Plan (“2020 Plan”) pursuant to which the Board of Directors reserved an aggregate of 20,000,000 shares of Common Stock for future issuance. The 2020 Plan became effective on April 10, 2020. As of November 30, 2020, options for the purchase of 7,170,000 shares have been granted under the 2020 Plan to attract and retain the necessary personnel to meet the Company’s objectives. The 2020 Plan will expire on April 9, 2030, and no further awards may be granted after such date. The 2020 Plan provides for the following types of awards: incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards, performance cash awards, and other stock-based awards. Stock awards may be granted under the 2020 Plan to employees (including officers) and consultants of the Company or affiliates, and to members of the Company’s Board of Directors.
During the second quarter ended June 30, 2020 the Company granted stock options for the purchase of a total of 15,030,000 shares of Common Stock under the 2020 Plan, of which 6,655,000 were to employees and 8,375,000 were non-qualified stock options to non-employees.
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE H – STOCK OPTIONS AND WARRANTS (CONTINUED)
During the six months ended June 30, 2020, the Company issued 5,542,857 shares, 7,677,315 shares, 500,000 shares and 750,000 shares upon exercises of outstanding options to an officer, consultant and director of the Company, and an attorney who provided services to the Company, respectively.
A summary of the status of optionsoption award activity in 2020 and compensation-based warrantsawards outstanding at March 31, 2016, and changes during the three months then endedJune 30, 2020 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, 2015 | 93,208,997 | 0.01 | 3.2 years | $ | 68,000 | ||||||||
| Granted | 3,068,182 | ||||||||||||
| Exercised | - | ||||||||||||
| Forfeited | (1,650,000 | ) | 0.01 | - | |||||||||
| Expired | - | ||||||||||||
| Outstanding at March 31, 2016 | 94,627,179 | 0.01 | 2.9 years | $ | 59,875 | ||||||||
| Vested and Exercisable at March 31, 2016 | 63,605,636 | $ | 0.02 | 2.4 years | $ | 938 | |||||||
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Shares | Average | Remaining | Aggregate | |||||||||||||
| Under | Exercise | Contractual | Intrinsic | |||||||||||||
| Option | Price | Life (Years) | Value | |||||||||||||
| Outstanding at December 31, 2019 | 199,027,315 | 0.016 | 3.6 | $ | 14,360,463 | |||||||||||
| Granted | 15,030,000 | 0.073 | — | |||||||||||||
| Exercised | (14,470,172 | ) | 0.006 | — | ||||||||||||
| Forfeited | (5,000,000 | ) | 0.090 | — | ||||||||||||
| Expired | (1,800,000 | ) | 0.01 | — | ||||||||||||
| Outstanding at June 30, 2020 | 192,787,143 | 0.021 | 3.5 | $ | 13,602,106 | |||||||||||
| Vested and exercisable at June 30, 2020 | 175,765,145 | 0.018 | 3.4 | $ | 12,897,568 | |||||||||||
The fair value of stock option grants and compensation-based warrantswith only continued service conditions for vesting is estimated on the grant date of grant or issuance using thea Black-Scholes option pricing model. 3,068,182 Options to purchase shares of common stock were issuedThe following table illustrates the assumptions used in estimating the three months ended March 31, 2016 and 10,777,315 in the three months ended March 31, 2015. The weighted average fair value of stock options issuedgranted during the threeperiods presented:
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE H – STOCK OPTIONS AND WARRANTS (CONTINUED)
| Quarter ended June 30, 2020 | Six months ended June 30, 2020 | |||||||
| Expected Term (in Years) | 2 to 5 | 2 to 5 | ||||||
| Volatility | 85 | % | 85 | % | ||||
| Risk Free Rate | 1.4 | % | 1.4 | % | ||||
| Dividend Yield | 0 | % | 0 | % | ||||
| Suboptimal Exercise Factor (1) | 1.3 | 1.3 | ||||||
| Exit Rate Pre-vesting (2) | 0 | % | 0 | % | ||||
| Exit Rate Post-vesting (3) | 0 | % | 0 | % | ||||
| Aggregate Grant Date Fair Value | $ | 499,935 | $ | 499,935 | ||||
| (1) | The suboptimal exercise factor estimates the value realized by the holder upon exercise of the option and the estimated point at which an option holder would exercise an in-the-money option. The Company estimated the suboptimal factor based on the holder realizing a pre-tax profit of $500,000. Used for lattice model purposes only. |
| (2) | Assumed forfeiture rate for market condition option awards prior to vesting. Used for lattice model purposes only. |
| (3) | Assumed expiration or forfeiture rate for market condition option awards after vesting. Used for lattice model purposes only. |
For the quarters ended June 30, 2020 and 2019 The Company recognized stock compensation expenses related to stock option awards for the quarters ended June 30, 2020 and 2019 of $155,186 and $460,395 respectively, and for the six months ended March 31, 2016June 30, 2020 and 2015 was $0.0049June 30, 2019 of $180,800 and $0.015,$503,403, respectively. The weighted-average assumptions used for the stock options granted and compensation-based warrants issued during the three months ended March 31, 2016 were risk-free interest rate of 1.75%, volatility of 113%, expected life of 5 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'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 March 31, 2016 closing price of $0.006 per share.
Stock Purchase Warrants and Call Option
In 2020, the Company issued, to a party interested in Camelina development, a non-transferable warrant for the purchase of an approximately eight-percent interest in its subsidiary, Sustainable Oils, Inc. for approximately $20 million. The warrant expires on June 1, 2021. The Company determined the fair value of the warrants to be approximately $9,000.
Concurrently with the closing of the acquisition of Bakersfield Renewable Fuels, LLC in May 2020, the Company entered into a Call Option Agreement with the seller, Alon Paramount, pursuant to which the Company granted to Alon Paramount an option to purchase from Global Clean Energy Holdings, Inc. up to 33 1/3% of the membership interests of a subsidiary that indirectly owns Bakersfield Renewable Fuels, LLC. The option exercise price is based on the cash purchase price that the Company paid for Bakersfield Renewable Fuels, LLC. The foregoing option can be exercised by Alon Paramount until the 90th day after the refinery meets certain operational criteria. Upon the exercise of the option, Alon Paramount will be allocated its share of the refinery’s assets and liabilities and profits and losses. Bakersfield Renewable Fuels, LLC is also responsible for all
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE H – STOCK OPTIONS AND WARRANTS (CONTINUED)
of the statusenvironmental liabilities and clean up costs associated with the Bakersfield Refinery.
NOTE I – COMMITMENTS AND CONTINGENCIES
Employment Agreements
The Company maintains an employment agreement with its Chief Executive Officer and Executive Vice-President that provide for the terms of their compensation, including bonuses and share-based compensation. See the Company’s December 31, 2019 Form 10-K (as amended) for further details.
Engineering, Procurement and Construction Contract
On April 30, 2020, GCE Acquisitions entered into an Engineering, Procurement and Construction Agreement with ARB, Inc. (“ARB”) pursuant to which ARB has agreed to provide services for the engineering, procurement, construction, start-up and testing of the warrants outstanding at March 31, 2016,Bakersfield Biorefinery. The agreement, which was assigned by GCE Acquisitions to BKRF OCB, LLC, the borrower under the senior credit facility, provides for ARB to be paid on a cost plus fee basis subject to a guaranteed maximum price of $201.4 million, subject to increase for approved change orders.
Environmental Remediation Liabilities
The Company recognizes its asset retirement obligation and changes duringenvironmental liabilities in accordance with ASC 410-30, and has estimated such liabilities as of its acquisition date. It is the three months endedCompany’s policy to accrue environmental and clean-up related costs of a non-capital nature when it is presented in the following table:
| Weighted | ||||||||||||||
| Weighted | Weighted | |||||||||||||
| Shares | Average | Average | Aggregate | |||||||||||
| Under | Exercise | Remaining | Intrinsic | |||||||||||
| Warrant | Price | Contractual life | Value | |||||||||||
| Outstanding at December 31, 2015 | 3,083,332 | 0.01 | 5.34 years | $ | - | |||||||||
| Issued | - | |||||||||||||
| Exercised | - | |||||||||||||
| Expired | - | |||||||||||||
| Outstanding at March 31, 2016 | 3,083,332 | 0.01 | 4.85 years | $ | - | |||||||||
Legal
On May 7, 2020 through BKRF OCB, LLC, one of the Company’s indirect subsidiaries, the Company purchased all of the outstanding equity interests of Bakersfield Renewable Fuels, LLC from Alon Paramount Holdings, Inc. (“Alon Paramount”) for $40 million in cash. Bakersfield Renewable Fuels, LLC owns an oil refinery in Bakersfield, California that the Company is retooling into a biorefinery. In connection with the acquisition, BKRF OCB, LLC agreed to undertake certain cleanup activities
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE H – Derivative Liabilities
at the accounting standard that provides guidancerefinery and provide a guarantee for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity's own stock. The standard applies to any freestanding financial instrument or embedded features that haveliabilities arising from the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity's own common stock.
Bakersfield Renewable Fuels, LLC, formerly Alon Bakersfield Property, Inc., is one of the parties to settle outstanding contracts using Black-Scholes using the following assumptions:
In August 2020, a complaint was filed against GCE Holdings Acquisitions, LLC for a claimed breach of a certain consulting agreement. The claim is included in change in fair value of derivative liabilitiesfor $1.2 million. On October 14, 2020, GCE Holdings Acquisitions, LLC filed an answer and denied all allegations in the accompanying consolidatedcomplaint. The Company does not believe that the ultimate resolution of this matter will have a material effect on its financial statements, of operations. The change in fair value of derivative liabilities for the three months ended March 31, 2016 was insignificant.
| Fair value of warrants and embedded conversion features | ||||
| Balance as of January 1, | 106,000 | |||
| Issuance of warrants and embedded conversion features | ||||
| Change in fair value | - | |||
| Balance as of December 31, | $ | 106,000 | ||
| Year Ending | ||||
| December 31, | ||||
| 2016 | 40,000 | |||
| 2017 | 41,000 | |||
| 2018 | 42,000 | |||
| 2019 | 3,000 | |||
| Operating Lease Payable | $ | 126,000 | ||
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.
Indemnities and Guarantees
In addition to the indemnification provisions contained in the Company's organization documents, the Company generally enters into separate indemnification agreements with the Company'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' fees, judgments, fines and settlements, paid by the individual in connection with any action, suit or proceeding arising out of the individual's status or service as the Company'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.
COVID-19
In December 2019, a novel strain of coronavirus diseases (“COVID-19”) was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. The extent of COVID-19’s effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. The Company also indemnifiesis currently analyzing the potential impacts to its lessor in connection with its facility lease for certain claims arising frombusiness. At this time, it is not possible to determine the usemagnitude of the facility. These guaranteesoverall impact of COVID-19 on the Company.
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GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE J – SUBSEQUENT EVENTS
On October 12, 2020 the Company’s senior and indemnities do not providemezzanine lenders agreed to make an additional $15 million available to the Company, if requested, to develop the Bakersfield Refinery and the feedstock program.
On October 12, 2020 the Company entered into a $1.5 million contract with a Mid-West seed company to manage up to 500 acres of Camelina seed production for any limitationthe specific purpose of harvesting, transporting, cleaning and packaging the finished Camelina seed, which is to be certified as the Company’s proprietary seed to the Company’s standards. This seed will be grown in 2021 for the purpose of providing the seed to growers for the 2022 growing season. The contract anticipates a total yield of certified seed of approximately 900,000 lbs. or enough seed to plant approximately 110,000 acres.
On November 17, 2020, the Company held its annual meeting of stockholders at which i) the 2020 Equity Incentive Plan and ii) the proposal to effect a reverse stock split of the maximum potential future paymentscommon shares at a ratio of 1-for-10, at the Company could be obligated to make. Historically,discretion of the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guaranteesBoard, were approved. The Board, while considering market conditions, anticipates completing the reverse split of the common shares in the accompanying consolidated balance sheets.early 2021.
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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Report, including any documents which may be incorporated by reference into this Report,report contains "Forward-Looking Statements" withinforward-looking statements. These statements relate to future events or 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" for purposes of these provisions, including our plans to cultivate, produce and market non-food based feedstock for applications in the bio-fuels market, any projections of the date and amount of our Jatropha or Camelina harvests, forecasts regarding our revenues or otherCompany’s future 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 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.performance. In some cases, Forward-Looking Statementsyou can be identifiedidentify forward-looking statements by the use of terminology such as "may," "will," "expects," "plans," "anticipates," "intends," "believes," "estimates," "potential,"“may,” “will,” “should,” “except,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or "continue," or“continue,” the negative thereofof such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
Although we believethe Company believes that the expectations reflected in the Forward-Looking Statements contained hereinforward-looking statements are reasonable, there can bethe Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company, nor any other person, assumes responsibility for the accuracy and completeness of the forward-looking statements. The Company is under no assurance that such expectations orobligation to update any of the Forward-Looking Statements will proveforward-looking statements after the filing of this Quarterly Report on Form 10-Q to be correct, andconform such statements to actual results could differ materially from those projected or assumedto changes 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.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with ourthe Company’s unaudited condensed consolidated financial statements and the related notes thereto contained in Part I, Item 1 of this Quarterly Report. Theand other financial information containedappearing elsewhere in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you10-Q. Readers are also urged to carefully review and consider the various disclosures made by usthe Company which attempt to advise interested parties of the factors which affect the Company’s business, including without limitation the disclosures made under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the caption “Risk Factors,” and the audited consolidated financial statements and related notes included in this Quarterlythe Company’s Annual Report and in our other reports filed with the U.S. Securities and Exchange Commission (the "SEC"), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which discuss our business in greater detail.
Overview
Since 2007, Global Clean Energy Holdings, Inc. and its subsidiaries (collectively, hereafter the “Company”, a Delaware corporation 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," and "our company" may also include GCE Mexico I, LLC, a Delaware limited liability“we”, “us” or “our”) has been an integrated agricultural-energy biofuels company that, we previously managed,directly or through its subsidiaries, acquired and in which we previously owned 50% of the common membership interests, and our wholly owned subsidiary, Sustainable Oils, Inc., a Delaware corporation, as well as our other subsidiaries.
In order to fund our operating and provenacquisition-related expenses, in October of 2018 we entered into a derivative contract (the “Derivative Contract”) with a commodity trading company for the delivery of ultra-low sulfur renewable diesel for settlement over a six-month period beginning in July 2020. Under the Derivative Contract, we received $6 million in cash. At the inception of the Derivative Contract, we recorded a $15.1 million liability and $9.1 million of financing costs. During the remaining portion of 2018, the derivative liability decreased by $3.1 million. In October 2019 we modified the Derivative Contract, entered into a new Derivative Contract, and received another $4 million of cash. The cash that we received from the Derivative Contract was used to be highly desirable feedstocks capable of beingfund our operating costs, our due diligence costs, our pre-acquisition costs, the purchase price down payment/deposit for the Bakersfield Biorefinery, our consulting and legal fees associated with the acquisition, and our payments to key vendors and suppliers. The Derivative Contract was amended in March 2020 and was converted into ASTM approved fuels. The term "biofuels" refersa fixed payment obligation. This fixed payment obligation was modified again in April 2020. Under the amended terms, the fixed payment obligation requires total payments of $24.8 million, including a payment of $4.5 million in June 2020, and six monthly installment payments beginning in May 2022.
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In May 2020 we completed the purchase of the Bakersfield Biorefinery. In order to a rangefund the purchase price of biological based fuels including bio-kerosene (a.k.a bio-jet fuel) biodiesel,the Bakersfield Biorefinery and the conversion of the facility into a renewable diesel green diesel, synthetic dieselrefinery, in May 2020 we also entered into a $300 million senior loan facility and biomass, all of which have environmental benefits thata $65 million mezzanine loan facility. We are currently converting the major driving force for their adoption. Using biofuels instead of fossil fuels reduces net emissions of carbon dioxideBakersfield Biorefinery from a crude oil refinery into a biorefinery, and other green-house gases, which are associated with global climate change. Both Jatropha and Camelina oil can also be used as a chemical feedstockwe do not expect to replace fossil and non-food based products that use edible oils in their manufacturing or production process. The residual material derived from the oil extraction process is called press-cake or meal, 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 meal is high in Omega3 and has already been approved by the FDA as a livestock (animal) feed or enhancement in the United States.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requirerequires 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’s most critical accounting policies and estimates that may materially impact the Company’s results of operations include:
Capitalization of Pre-Acquisition Costs. The Company capitalizes its pre-acquisition costs once management determines that it is probable that the project will occur. Probability is determined based on (i) whether management, having the requisite authority, has implicitly or explicitly authorized and committed to funding the acquisition or construction of a specific asset, (ii) the financial resources are available consistent with such authorization, and (iii) the ability exists to meet the necessary local and other governmental regulations. Cost capitalization occurs when the event is probable, but prior to the start of construction. We capitalize those costs that are directly identifiable with the specific property and those costs that would be capitalized if the property were already acquired. We expense general and administrative and overhead costs and costs, including payroll, that would be considered support functions.
Derecognition of Liabilities. The Company reviews its liabilities, including but not limited to, accounts payable, notes payable, accrued expenses, accrued liabilities and other legal obligations, for a determination of the legal enforcement or settlement of an obligation. Upon conclusive evidence that an obligation may be extinguished, has expired, is discharged, cancelled or otherwise no longer legally exists, then the Company will derecognize the respective liability on the Company's balance sheet.
Derivative Commodity Instruments. The Company uses derivative commodity instruments as a means of generating cash for its efforts in procuring a refinery to fulfill its business plan. The Company may use such instruments in the future to manage its exposures for its feedstocks or end products. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. While the Company may deliver refined products from its biorefinery in the future, at this time these derivative contracts are not considered normal sales contracts. The results of our derivative activities were material to the Company’s financial position, results of operations or cash flows in 2019 and 2020. The Company’s risk management practices and its compliance with policies are reviewed by the Company’s Board of Directors. Derivatives beyond those designated as normal purchase and normal sale contracts are recorded at fair value on the Consolidated Balance Sheet with resulting gains and losses reflected in income. Fair values are derived principally from published market quotes and other independent third-party quotes. The change in fair value of Company’s derivative commodity instruments in 2019 and 2020 was material to the Company’s results of operations.
Recoverability of Intangible Assets. The Company invests in the development of various plant-based feedstocks for conversion to fuel as part of its core business plan. The Company has purchased patents and associated know-how that relate directly to the development and growing of Camelina. The Company invests in the ongoing development of Camelina
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through research and additional patents as breakthroughs occur. The Company capitalizes all of its patent expenses and amortizes these costs over a 17-year period in conjunction with the life of the patent protection. As part of the Bakersfield Biorefinery we acquired certain operational permits which we amortize over an estimated life of 15 years. We evaluate the carrying costs of these assets on a periodic basis and will impair such value if deemed necessary. As of June 30, 2020, no impairment is necessary and the carrying value of our intangible assets remains a significant value and expected economic generator going forward.
Certain other critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Results of Operations
Three Months Ended June 30, 2020 vs. Three Months Ended June 30, 2019
Revenues. As discussed above, during 2019 and continuing until we purchased the Bakersfield Biorefinery on May 7, 2020, our activities were devoted solely to the acquisition and financing of the Bakersfield Biorefinery. Following the acquisition, we refocused our efforts on building our operations and management teams necessary and on putting the processes in place to accomplish the task of retrofitting the Bakersfield Biorefinery and we did not engage in any operating activities that generated revenues. Therefore, we had no operating revenues in the fiscal quarters ended June 30, 2019 (the “2019 fiscal quarter”) or June 30, 2020 (the “2020 fiscal quarter”).
General And Administrative Expenses and Facility Expenses. General and administrative expense consists of expenses generally involving corporate overhead functions and operations. Our general and administrative expenses increased by $0.9 million, or 100%, from $0.9 million in the 2019 fiscal quarter to $1.8 million in the 2020 fiscal quarter. This increase was primarily related to an increase in payroll costs, professional fees, legal fees and various vendor costs. In the period after we acquired the Bakersfield Biorefinery on May 7, 2020, our general and administrative expenses increased significantly, and these expenses are expected to continue to increase as the development of the refinery progresses. Facility expense primarily consists of maintenance costs to keep the Bakersfield assets, purchased in May 2020, in an operational mode and expenses normally related to operations. Our facility expenses were $0.7 million in the 2020 fiscal quarter and we incurred no such expenses in the 2019 fiscal quarter.
Other Income/Expense. In the 2020 fiscal quarter we had no impact from derivatives, whereas in the 2019 fiscal quarter we incurred a $1.3 million gain from our change in derivative liability.
Interest Income/Expense. Interest expense in the 2020 fiscal quarter and the 2019 fiscal quarter consisted of interest of $0.8 million and $0.1 million, respectively, from outstanding promissory notes and discount on our notes payable. Our incurred interest will increase significantly in the future as we draw down on the $300 million senior and $65 million mezzanine loans, and as the outstanding principal balances of those loans increases. However, construction period interest will be capitalized as part of the cost of the refinery and will be depreciated, and therefore, will not impact our interest expense.
Net losses. We incurred an operating loss of $2.7 million and $1.1 million in the 2020 and 2019 fiscal quarters respectively. We incurred a net loss of $3.4million in the 2020 fiscal quarter compared to a $0.2 million net income in the 2019 fiscal quarter. Our operating loss increased because of the increase in activity related to our purchase of the Bakersfield Biorefinery. We expect to incur losses for the remainder of 2020 and 2021 while our biorefinery is under construction and therefore not operational.
Six Months Ended June 30, 2020 vs. Six Months Ended June 30, 2019
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Revenues. As discussed above, during 2019 and during most of the threesecond quarter of 2020, our activities were devoted solely to the acquisition and financing of the Bakersfield Biorefinery, which acquisition was completed on May 7, 2020. Because we were focused on purchasing, and thereafter retrofitting, the Bakersfield Biorefinery during 2019 and 2020, we did not engage in any operating activities that generated revenues. Therefore, we had no operating revenues in the six months ended March 31, 2016June 30, 2019 (the “2019 fiscal period”) or June 30, 2020 (the “2020 fiscal period”).
General And Administrative Expenses and 2015Facility Expenses. Our general and administrative expenses increased by $0.1 million, or 5%, from $2.0 million in the 2019 fiscal period to $2.1 million in the 2020 fiscal period This increase was primarily related to an increase in payroll costs, professional fees, legal fees and various vendor costs. Since we recognized revenueacquired the Bakersfield Biorefinery in May 2020, our general and administrative expenses have increased in the second half of $121,6472020 and $158,231, respectively. The revenues thatare expected to continue to increase as the development of the refinery progresses. Our facility expenses were $0.8 million in the 2020 fiscal period and we incurred no such expenses in the 2019 period.
Other Income/Expense. In the 2020 fiscal period we had net income of $5.0 million compared to a net expense of $2.8 million in the 2019 fiscal period. In the 2020 fiscal period we generated a $5.5 million gain on the change of our derivative liability and a gain of $0.5 million on the settlement of the derivative liability compared to the 2019 fiscal period in 2016which we incurred a $2.6 million charge due to a change in our derivative liability.
Interest Income/Expense. Interest expense in the 2020 fiscal period and 2015 were derivedthe 2019 fiscal period consisted of interest of $0.9 million and $0.2 million, respectively, from energy farm management, developmentoutstanding promissory notes and advisory services. Revenuesdiscount on our notes payable. Our incurred interest will increase significantly in the future as we generatedraw down on the $300 million senior and $65 million mezzanine loans, and as the outstanding principal balances of those loans increases. As referenced above, our construction period interest will be capitalized.
Net Income/Losses. For the 2020 fiscal period, we had net income of $2.0 million compared to a net loss of $5.9 million in the 2019 fiscal period. Our net income was primarily generated by our $6.0 million gain resulting from these services arethe change in our derivative liability and the gain on the settlement of liabilities. We expect to incur losses for the remainder of 2020 and 2021 while our biorefinery is under construction and therefore not operational.
Liquidity and Capital Resources
As of June 30, 2020 and 2019, we had approximately $7.2 million (of which $3.9 million was unrestricted) and $0.5 million of cash, respectively, and a negative working capital of $0.2 million and $33 million, respectively. However, of the $7.2 million of cash, only $3.9 million is unrestricted and available to pay our current liabilities, while the remaining $3.3 million of cash is restricted and can only be used for this company's operations.
Our efforts to acquire the Bakersfield Biorefinery commenced in early 2018. Our operating costs, including the costs of the professionals that we engaged, exceeded our capital needs,resources. Accordingly, on October 15, 2018, we entered into a derivative contract with a commodities trading company whereby we received $6 million of cash in exchange for a contract for ultra-low sulfur diesel to be settled over a six-month time period beginning in July of 2020. This contract created a net fair value liability of $15.1 million. The purpose of this contract was to obtain the cash the Company needed to pursue the acquisition of the Bakersfield Biorefinery. The liability in excess of cash received is considered financing charges and recorded as an expense. Because of a delay in completing the purchase of the Bakersfield Biorefinery, we had to amend the original derivative contract. Accordingly, on October 29, 2019 we unwound the October 15, 2018 contract and entered into a new derivative transaction whereby we received an additional cash payment of $4 million. On March 19, 2020 we unwound the derivative contract and fixed the obligation with a cash payment of $5.5 million due on April 30th and six equal monthly payments of $2.928 million beginning on October 31, 2021. On April 28, 2020 this agreement with the commodities trading company was amended in terms to reduce and extend the short-term cash payment to $4.5 million in June 2020 (that we paid) and increased and deferred the six equal monthly payments of $3.375 million beginning on April 30, 2022. This payment stream is scheduled to coincide around the commencement of operations of the Bakersfield Biorefinery.
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The Bakersfield Biorefinery is currently being retooled and converted from a crude oil refinery into a biofuels refinery. The construction of the Bakersfield Biorefinery is expected to be completed, and the Bakersfield Biorefinery is expected to commence commercial operations in early 2022. Until the Bakersfield Biorefinery is operational, we do not expect to generate Camelina-related revenues fromany significant operating revenues. During the Camelina businessconstruction phase of the biorefinery, we will incur significant operating costs and capital expenditures to upgrade the existing equipment and facilities. The expenses that we acquiredexpect to incur include, among others, the purchase price of new biorefinery equipment, the payments to our primary contractor under a $201 million engineering, procurement and construction agreement, the costs of maintaining the existing facility, paying licensing fees, the costs of upgrading the refinery’s rail line and certain pipelines, and making interest and other payments under our senior and mezzanine credit facilities.
In order to fund the cost of acquiring the Bakersfield Biorefinery, converting the existing refinery into a biorefinery, and paying all operating expenses during the preoperational period, in March 2013.May 2020 we entered into a $300 million senior secured term loan facility and a $65 million secured term loan facility with various mezzanine lenders. Our Camelina operationssenior and mezzanine lenders have also recently agreed to make an additional $15 million available to us, if requested, to develop the Bakersfield Refinery and our feedstock program. As of November 30, 2020, we have borrowed $151 million under the senior credit facility, of which approximately $65 million is unspent; we have not yet utilized the mezzanine credit facility or the additional $15 million of available credit.
The senior loan bears interest at the rate of 12.5% per annum, payable quarterly. No principal payments are expectedrequired to generate revenues frombe made under the salesenior loan until maturity. The senior loan matures on November 4, 2026. The mezzanine loan will bear interest at the rate of Camelina seeds,15.0% per annum on amounts borrowed, payable quarterly, provided that we may defer up to 2.5% interest to the sale of Camelina oil, andextent we do not have sufficient cash to pay the saleinterest (any deferred interest will be added to principal). Principal of the Camelina biomassmezzanine loans is due at maturity. As additional consideration for use as feed for livestock. In the longer term,senior loans and mezzanine loans, the senior lenders were issued Class B units (and the mezzanine lenders will be issued Class C Units when we planborrow under the mezzanine loans) in our subsidiary that indirectly owns the Bakersfield Biorefinery. The Class B and C Units will not affect our liquidity until the Bakersfield Biorefinery commences operations in 2022. However, since the holders of the Class B and C Units will be entitled to increasecertain priority cumulative distributions, if any, that may be made in the revenues derivedfuture from the operations of our Jatropha farms,the Bakersfield Biorefinery, the Class B and C Units will reduce the amount of distributions that we may be entitled to rapidly ramp up our Camelina operations, and to continue to generate revenue from management, development, and advisory services. We anticipate that revenues for the remainder of 2016 will increase due to scale-up of our biomass processing project in the Dominican Republic and the Camelina in the North Americas.
Based on our construction budget (including the purchase orders we have issued for the required equipment) and on our internal projections of our future operating expenses, we anticipate that the $365 million available to us under the senior and mezzanine loans should be sufficient to fund our projected capital expenditures and operating expenses at the Bakersfield Biorefinery until the Bakersfield Biorefinery becomes operational. Although the funds provided under the senior and mezzanine loans may only be used for the Bakersfield refinery and servicing these debt obligations, since we share facilities and personnel, we will depend onrealize a reduction in certain of our operating expenses. We believe that these cost savings, plus our other financial resources should be sufficient to fund our operations through the amountcommercial start-up of advisory,the Bakersfield Biorefinery.
Our transition to profitability is dependent upon, among other things, the successful and timely development and management servicesconstruction of our biorefinery and the future commercialization of the products that we renderintend to produce at the corporate level,Bakersfield Biorefinery. In order to ensure that we have a buyer for the amountrenewable diesel produced at our biorefinery, we have entered into an offtake agreement with ExxonMobil Oil Corporation. Under that agreement, ExxonMobil has agreed to purchase a minimum of 85 million gallons per year of renewable diesel from the Bakersfield Biorefinery for a period of five years following the date that the Bakersfield Biorefinery commences commercial operations, with the right to acquire additional volumes. The revenues we expect to receive under the offtake agreement, together with our other projected sources of revenues, generatedare expected to fund our anticipated working capital and liquidity needs.
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Once completed, the Bakersfield Biorefinery will be able to produce renewable diesel from various renewable feedstocks, such as Camelina oil produced from our Jatropha farms inpatented Camelina varieties, soybean oil, used cooking oil, inedible animal fat, and other vegetable oils. We believe that one of our strategic advantages is that a significant portion of the Dominican Republic, and on the amount of revenues we generate fromfeedstock expected to be used at our biorefinery will be Camelina operations. Althoughgrain produced by third party farmers for us using our patented Camelina varieties. However, we anticipate that we will generate new revenues from our Camelina and Jatropha farm operations, we are unable to forecast if, or when such revenues will exceed our operating expenses.
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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Nothing to report.
Item 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to ensureassure that information required to be disclosed in the reports that we file with, or submit to, the Securities and Exchange Commission (the "SEC") under the Securitiesour Exchange Act of 1934 (the "Exchange Act")reports 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 our chief executiveChief Executive Officer and financial officers,our Chief Financial Officer (the “Certifying Officers"), as appropriate, to allow timely decisions regarding required disclosure. As required by SEC Rule 13a-15(b), we carried out an evaluation, underdisclosures.
In designing and evaluating the supervision and with the participation of our management, including our chief executive and financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide reasonable assurance only of achieving the desired control objectives, and management necessarily is required to apply its judgment in weighing the costs and benefits of possible new or different controls and procedures. Limitations are inherent in all control systems, so no evaluation of controls can provide absolute assurance that all control issues and any fraud within the company have been detected.
As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report. BasedQuarterly Report on that evaluation,Form 10-Q, management, under the supervision and with the participation of our chief executive and financial officers concluded thatCertifying Officers, evaluated the effectiveness of our disclosure controls and procedures were effectiveprocedures. Based on this evaluation, the Certifying Officers have concluded that, as of the end of the period covered by this report.
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(a) Since June 30, 2020, we have hired (i) a staff accountant who also is a CPA, and (iv) other members of a newly established clerical department;
(b) We began developing the accounting processes necessary to achieve effective controls, including more segregation of duties as our personnel allows;
(c) We have designed and are implementing more robust financial reporting, accounting and management controls over our accounting and financial reporting functions at our two facilities.
Except as described above, there has been no change in the Company’s internal control over financial reporting during our most recent fiscalthe quarter ended June 30, 2020 that has materially affected, or is reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
On August 24, 2020 Wood Warren & Co Securities, LLC filed a party to other legal actions and complaints arisingcomplaint in the ordinary courseSuperior Court of business, althoughCalifornia, Alameda County, against GCE Holdings Acquisitions, LLC titled “Wood Warren & Co Securities, LLC vs. GCE Holdings Acquisitions, LLC” (Case No. RG 20072242). The complaint alleges that GCE Holdings Acquisitions, LLC breached that certain Consulting Agreement, dated October 8, 2019, by failing to pay Wood Warren & Co Securities, LLC certain fees that Wood Warrant claims it is not currently involved in any such legal proceedings.
Item 1A. RISK FACTORS.
The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner.
Uncertain Impact of Covid-19 Coronavirus. The outbreak of coronavirus (also known as COVID-19) is not expected to materially impact our operations unless our workforce or our contractors cannot continue the development and construction of the Bakersfield Biorefinery. We are committed to ensuring the safety of our personnel, consultants and vendors who must work on site. There is no assurance that we will not have a COVID-19 exposure that may cause material delays in the development and/or commencement of commercial operations of the Bakersfield Biorefinery. Any material delay in completing the construction of the Bakersfield Biorefinery or commencing its operations could have a material negative impact on our future operations, cash flow and financial condition.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.Unregistered Sales of Equity Securities and Use of Proceeds
On April 29, 2020, an independent contractor of the Company purchased 750,000 shares of Common Stock upon the exercise of a stock option. The exercise price was $0.0056 per share.
On May 6, 2020, an executive officer of the Company purchased 5,542,857 shares of Common Stock upon the exercise of a stock option. The exercise price averaged approximately $0.0027 per share.
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All of the foregoing securities were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) or Regulation D under the Securities Act. No broker-dealers were used in connection with such sales of unregistered securities.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Nothing to report.
Item 4. MINE SAFETY DISCLOSURES.
Nothing to report.
Item 5. OTHER INFORMATION
Nothing to report.
Item 6. EXHIBITS
| Number | Description | |
| 31.1 | Certification | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of | |
| 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | XBRL Instance | |
| 101.SCH | XBRL Taxonomy | |
| 101.CAL | XBRL Taxonomy Extension Calculation | |
| 101.DEF | XBRL Taxonomy Extension Definition | |
| 101.LAB | XBRL Taxonomy Extension Label | |
| 101.PRE | XBRL Taxonomy Extension Presentation |
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SIGNATURES
In accordance with Section 13 or 15(d)the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GLOBAL CLEAN ENERGY HOLDINGS, INC. | ||
| Date: December 10, 2020 | By: | /s/ Richard Palmer |
Richard Palmer President and Chief Executive Officer | ||
| Date: December 10, 2020 | By: | /s/ Ralph Goehring |
Ralph Goehring Chief Financial Officer | ||
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