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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 
 
 
FORM 10-Q
 

 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2021
 
Commission file number:
000-12627
 
GLOBAL CLEAN ENERGY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
87-0407858
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
 
 
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 the Act:
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
x
No
¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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
x
No
¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
¨
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
x
Smaller reporting company
x
 
 
 
 
 
 
Emerging growth company
¨
 
If an emerging growth company, indicate by check mark if the registrant 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 Exchange Act.
¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
¨
No
x
 
The number of shares of the issuer’s Common Stock, par value $0.001 per share, outstanding as of November
15
, 2021 was 40,063,068.

 
 
 
 
 
3
 
 
3
 
 
4
 
 
5
 
 
6
 
 
30
 
 
37
 
 
37
 
 
 
 
 
38
 
 
38
 
 
54
 
 
54
 
 
54
 
 
54
 
 
55
 
-2-
 
Part I. FINANCIAL INFORMATION 
Item1: Condensed Consolidated Financial Information
 
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
 
ASSETS
 
September 30, 2021
 
 
December 31, 2020
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
16,186,669
 
 
$
3,370,519
 
Accounts receivable, net
 
 
-
 
 
 
143,823
 
Restricted cash
 
 
2,327,814
 
 
 
12,943,222
 
Inventories
 
 
2,477,248
 
 
 
846,197
 
Prepaid expenses and other current assets
 
 
3,377,884
 
 
 
5,431,552
 
Total Current Assets
 
 
24,369,615
 
 
 
22,735,313
 
 
 
 
 
 
 
 
 
 
RESTRICTED CASH, net of current portion
 
 
25,227,161
 
 
 
22,668,984
 
DEBT ISSUANCE COSTS, NET
 
 
1,508,211
 
 
 
840,211
 
RIGHT-OF-USE ASSET
 
 
520,552
 
 
 
51,611
 
INTANGIBLE ASSETS, NET
 
 
7,197,842
 
 
 
4,180,746
 
GOODWILL
 
 
1,355,077
 
 
 
-
 
LONG TERM DEPOSITS
 
 
627,589
 
 
 
628,382
 
PROPERTY, PLANT AND EQUIPMENT, NET
 
 
275,793,504
 
 
 
138,972,675
 
ADVANCES TO CONTRACTORS
 
 
16,256,472
 
 
 
16,000,000
 
 
 
 
 
 
 
 
 
 
TOTAL ASSETS
 
$
352,856,023
 
 
$
206,077,922
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
55,956,303
 
 
$
22,597,951
 
Current portion of operating lease obligations
 
 
192,946
 
 
 
52,653
 
Notes payable including current portion of long-term debt, net
 
 
17,341,122
 
 
 
4,198,113
 
Convertible notes payable
 
 
1,000,000
 
 
 
1,697,000
 
Total Current Liabilities
 
 
74,490,371
 
 
 
28,545,717
 
 
 
 
 
 
 
 
 
 
LONG-TERM LIABILITIES
 
 
 
 
 
 
 
 
Operating lease obligations, net of current portion
 
 
327,978
 
 
 
-
 
Mandatorily redeemable equity instruments of subsidiary
,
 
at fair value 
(Class B Units)
 
 
18,054,857
 
 
 
5,123,000
 
Long-term debt, net
 
 
3,603,106
 
 
 
16,155,138
 
Senior credit facility, net
 
 
275,245,821
 
 
 
146,769,225
 
Asset retirement obligations, net of current portion
 
 
15,773,318
 
 
 
17,762,977
 
Environmental liabilities, net of current portion
 
 
18,728,988
 
 
 
20,455,938
 
TOTAL LIABILITIES
 
 
406,224,438
 
 
 
234,811,995
 
 
COMMITMENTS AND CONTINGENCIES (NOTE H)
 
 
 
 
 
 
 
 
STOCKHOLDERS'
DEFICIT
 
 
 
 
 
 
 
 
Preferred stock - $0.001 par value; 50,000,000 shares authorized Series B, convertible;
 
0 and
13,000 shares issued and outstanding (aggregate liquidation preference of $1,300,000)
,
at September 30, 2021 and December 31, 2020 respectively
 
 
-
 
 
 
13
 
Common stock, $0.001 par value; 500,000,000 shares authorized; 40,063,068 and 35,850,089 shares issued and outstanding, at September 30,2021 and December 31, 2020 respectively
 
 
400,630
 
 
 
358,499
 
Additional paid-in capital
 
 
46,443,820
 
 
 
37,139,854
 
Accumulated deficit
 
 
(100,212,865
)
 
 
(66,232,439
)
Total Stockholders' Deficit
 
 
(53,368,415
)
 
 
(28,734,073
)
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
352,856,023
 
 
$
206,077,922
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
-3-
 
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
For the three months ended
September 30,
 
 
For the nine months ended
September 30,
 
 
2021
 
 
2020
 
 
2021
 
 
2020
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
Seed sales, net
 
$
(8,307
)
 
$
-
 
 
$
188,409
 
 
$
-
 
Cost of Goods Sold
 
 
(1,049
)
 
 
-
 
 
 
(137,515
)
 
 
-
 
Gross Profit (Loss)
 
 
(9,356
)
 
 
-
 
 
 
50,894
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
 
General and administrative
 
 
4,591,157
 
 
 
2,895,417
 
 
 
15,589,118
 
 
 
4,959,456
 
Facilities expense
 
 
3,180,394
 
 
 
1,618,013
 
 
 
9,732,562
 
 
 
2,393,296
 
Depreciation expense
 
 
34,825
 
 
 
45,708
 
 
 
88,541
 
 
 
72,739
 
Amortization expense
 
 
298,806
 
 
 
95,024
 
 
 
603,886
 
 
 
251,354
 
Total Operating Expenses
 
 
8,105,182
 
 
 
4,654,162
 
 
 
26,014,107
 
 
 
7,676,845
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING LOSS
 
 
(8,114,538
)
 
 
(4,654,162
)
 
 
(25,963,213
)
 
 
(7,676,845
)
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 
 
(732,232
)
 
 
(773,420
)
 
 
(2,157,487
)
 
 
(1,712,593
)
Other income
 
 
15,393
 
 
 
-
 
 
 
83,759
 
 
 
512,363
 
Change in fair value of Class B Units
 
 
(2,849,573
)
 
 
-
 
 
 
(5,943,485
)
 
 
 
-
 
Change in fair value of derivative and finance charges related to derivative liability
 
 
-
 
 
 
-
 
 
 
-
 
 
 
5,476,000
 
Total Other Income (Expense), net
 
 
(3,566,412
)
 
 
(773,420
)
 
 
(8,017,213
)
 
 
4,275,770
 
 
 
 
 
 
 
 
 
 
 
 
 
NET LOSS
 
$
(11,680,950
)
 
$
(5,427,582
)
 
$
(33,980,426
)
 
 
(3,401,075
)
BASIC NET LOSS PER COMMON SHARE
 
 
(0.29
)
 
 
(0.15
)
 
 
(0.89
)
 
 
(0.10
)
DILUTED NET LOSS PER COMMON SHARE
 
 
(0.29
)
 
 
(0.15
)
 
 
(0.89
)
 
 
(0.10
)
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING
 
 
40,062,329
 
 
 
35,849,961
 
 
 
38,273,694
 
 
 
35,541,812
 
DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING
 
 
40,062,329
 
 
 
35,849,961
 
 
 
38,273,694
 
 
 
35,541,812
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements

-4-

GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' 
DEFICIT
(Unaudited)
 
 
 
Preferred Stock Series B
Convertible Preferred Stock
 
 
Common Stock
 
 
 Additional Paid in
 
 
Accumulated 
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
Beginning Balance at Dec. 31, 2019
 
 
13,000
 
 
$
13
 
 
 
34,402,943
 
 
$
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
 
 
-
 
 
 
-
 
 
 
817,732
 
 
 
8,177
 
 
 
63,419
 
 
 
-
 
 
 
71,596
 
Net income
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
5,438,024
 
 
 
5,438,024
 
Ending Balance at Mar. 31, 2020
 
 
13,000
 
 
$
13
 
 
 
35,220,675
 
 
$
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
 
 
-
 
 
 
-
 
 
 
629,286
 
 
 
6,293
 
 
 
12,907
 
 
 
-
 
 
 
19,200
 
Option grants for investment in subsidiaries
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
5,477,677
 
 
 
-
 
 
 
5,477,677
 
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(3,411,517
)
 
 
(3,411,517
)
Ending Balance at Jun. 30, 2020
 
 
13,000
 
 
$
13
 
 
 
35,849,961
 
 
$
358,499
 
 
$
36,994,168
 
 
$
(53,655,757
)
 
$
(16,303,077
)
Share-based compensation from issuance of options and compensation-based warrants
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
9,138
 
 
 
-
 
 
 
9,138
 
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(5,427,582
)
 
 
(5,427,582
)
Ending Balance at Sep. 30, 2020
 
 
13,000
 
 
$
13
 
 
 
35,849,961
 
 
$
358,499
 
 
$
37,003,306
 
 
$
(59,083,339
)
 
$
(21,721,521
)
 
 
 
Preferred Stock Series B
Convertible Preferred Stock
 
 
Common Stock
 
 
Additional Paid in 
 
 
Accumulated 
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Total
 
Beginning Balance at Dec. 31, 2020
 
 
13,000
 
 
$
13
 
 
 
35,850,089
 
 
$
358,499
 
 
$
37,139,854
 
 
$
(66,232,439
)
 
$
(28,734,073
)
Share-based compensation from issuance of options and compensation-based warrants
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
102,000
 
 
 
-
 
 
 
102,000
 
Shares issued upon reverse split to avoid fractional shares
 
 
-
 
 
 
-
 
 
 
1,793
 
 
 
19
 
 
 
(19
)
 
 
-
 
 
 
-
 
Conversion of note payable to shares
 
 
-
 
 
 
-
 
 
 
1,586,786
 
 
 
15,868
 
 
 
460,168
 
 
 
-
 
 
 
476,036
 
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(8,221,174
)
 
 
(8,221,174
)
Ending Balance at Mar. 31, 2021
 
 
13,000
 
 
$
13
 
 
 
37,438,668
 
 
$
374,386
 
 
$
37,702,003
 
 
$
(74,453,613
)
 
$
(36,377,211
)
Share-based compensation from issuance of options and compensation-based warrants
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
154,244
 
 
 
-
 
 
 
154,244
 
Exercise of stock options
 
 
-
 
 
 
-
 
 
 
60,978
 
 
 
610
 
 
 
8,734
 
 
 
-
 
 
 
9,344
 
Purchase of
 
Agribody
Technologies, Inc.
 
 
-
 
 
 
-
 
 
 
830,526
 
 
 
8,305
 
 
 
4,991,695
 
 
 
-
 
 
 
5,000,000
 
Conversion of Series B Preferred to Common
 
 
(13,000
)
 
 
(13
)
 
 
1,181,819
 
 
 
11,818
 
 
 
(11,805
)
 
 
-
 
 
 
-
 
Conversion of convertible notes
 
 
-
 
 
 
-
 
 
 
53,723
 
 
 
537
 
 
 
308,352
 
 
 
-
 
 
 
308,889
 
Issuance of common stock for cash
 
 
-
 
 
 
-
 
 
 
496,000
 
 
 
4,960
 
 
 
3,095,040
 
 
 
-
 
 
 
3,100,000
 
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(14,078,302
)
 
 
(14,078,302
)
Ending Balance at Jun. 30, 2021
 
 
-
 
 
$
-
 
 
 
40,061,714
 
 
$
400,616
 
 
$
46,248,263
 
 
$
(88,531,915
)
 
$
(41,883,036
)
Share-based compensation from issuance of options and compensation-based warrants
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
194,076
 
 
 
-
 
 
 
194,076
 
Exercise of stock options
 
 
-
 
 
 
-
 
 
 
1,354
 
 
 
14
 
 
 
1,481
 
 
 
-
 
 
 
1,495
 
Net loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(11,680,950
)
 
 
(11,680,950
)
Ending Balance at Sep. 30, 2021
 
 
-
 
 
$
-
 
 
 
40,063,068
 
 
$
400,630
 
 
$
46,443,820
 
 
$
(100,212,865
)
 
$
(53,368,415
)
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
-5-
 
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited
)
 
 
 
For the nine months ended September 30,
 
 
 
2021
 
 
2020
 
Operating Activities
 
 
 
 
 
 
 
 
Net Loss
 
$
(33,980,426
)
 
$
(3,401,075
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
 
Share-based compensation
 
 
450,320
 
 
 
189,938
 
Depreciation and amortization
 
 
692,427
 
 
 
324,093
 
Accretion of asset retirement obligations
 
 
735,000
 
 
 
-
 
Gain on settlement of liabilities
 
 
-
 
 
 
(512,363
)
Change in fair value of derivative liability
 
 
-
 
 
 
(5,476,000
)
Change in fair value of Class B Units
 
 
5,943,485
 
 
 
-
 
Amortization of discount on fixed payment obligation
 
 
1,860,141
 
 
 
-
 
Amortization of debt issuance costs
 
 
-
 
 
 
1,300,679
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Accounts receivable
 
 
143,823
 
 
 
-
 
Inventories
 
 
(1,631,051
)
 
 
-
 
Prepaid expenses
 
 
2,053,668
 
 
 
(1,967,623
)
Deposits and other assets
 
 
793
 
 
 
(1,943,588
)
Accounts payable and accrued
liabilities
 
 
4,417,515
 
 
 
8,240,024
 
Asset retirement obligations
 
 
(2,724,659
)
 
 
-
 
Environmental liabilities
 
 
(1,726,950
)
 
 
-
 
Lease liabilities and assets
 
 
(670
)
 
 
-
 
Net Cash Used in Operating Activities
 
 
(23,766,584
)
 
 
(3,245,915
)
Investing Activities:
 
 
 
 
 
 
 
 
Cash paid for
the
Bakersfield
Biorefinery
 
 
-
 
 
 
(36,500,000
)
Cash received as part of acquisition of Agribody Technologies, Inc.
 
 
263,755
 
 
 
-
 
Intangible assets
 
 
(186,982
)
 
 
-
 
Property
,
plant
,
and equipment and advances to contractors
 
 
(106,240,316
)
 
 
(37,414,766
)
Net Cash Used in Investing Activities
 
 
(106,163,543
)
 
 
(73,914,766
)
Financing Activities:
 
 
 
 
 
 
 
 
Proceeds received from exercise of stock options
 
 
10,839
 
 
 
90,796
 
Payments on notes payable and long-term debt
 
 
(2,970,481
)
 
 
(5,242,617
)
Borrowings on other notes
 
 
1,240,317
 
 
 
-
 
Issuance of common stock for cash
 
 
3,100,000
 
 
 
-
 
Payments on debt issuance costs
 
 
-
 
 
 
(4,218,211
)
Borrowings on Senior Credit Facility
 
 
133,308,370
 
 
 
126,457,016
 
Net Cash Provided by Financing Activities
 
 
134,689,046
 
 
 
117,086,984
 
 
 
 
 
 
 
 
 
 
Net Change in Cash, Cash Equivalents and Restricted Cash
 
 
4,758,919

 
 
39,926,303
 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
 
 
38,982,725
 
 
 
457,331
 
Cash, Cash Equivalents and Restricted Cash at End of Period
 
$
43,741,644
 
 
$
40,383,634
 
 
 
 
 
 
 
 
 
 
Supplemental Disclosures of Cash Flow Information
 
 
 
 
 
 
 
 
Cash Paid for Interest
 
 
20,329,760
 
 
 
-
 
Cash Paid for Income Tax
 
 
-
 
 
 
-
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
-6-
 
S
upplemental Noncash Investing and Financing Activities

 
 
 
For the nine months ended September 30,
 
 
 
2021
 
 
2020
 
Supplemental Disclosures of Noncash Investing and Financing Activities
 
 
 
 
 
 
 
 
Issued options in Global Clean Energy Acquisitions subsidiary
 
$
 
-
 
 
$
 
5,468,900
 
Assumed asset retirement obligations
 
 
-
 
 
 
21,901,977
 
Assumed environmental liabilities
 
 
-
 
 
 
22,033,937
 
Conversion of derivative liability of $19.3 million into a fixed payment obligation with fair value of $18.8 million for a gain on derecognition of derivative liability
 
 
-
 
 
 
512,363
 
Issued warrants to a third-party for equity in Sustainable Oils, Inc.
 
 
-
 
 
 
8,777
 
Financed insurance premiums with note payable
 
 
-
 
 
 
4,315,905
 
Debt discount related to Class B units issued to lender
 
 
5,943,485
 
 
 
-
 
Accrued debt issuance costs related to amendment to Senior Credit Facility
 
 
3,132,000
 
 
 
-
 
Accrued debt issuance costs related to amendment to Mezzanine Credit Facility
 
 
668,000
 
 
 
-
 
Issued 1,640,509 shares for conversion of several notes payable and accrued interest
 
 
784,925
 
 
 
-
 
Issued 830,526 shares to acquire Agribody Technologies, Inc, in connection the Company recognized $5 million of net assets including intangible assets and goodwill of $4.9 million. See Note A for further details.
 
 
5,000,000
 
 
 
-
 
In-kind interest added to principal balance of Senior Credit Facility
 
 
3,912,099
 
 
 
983,693
 
Amounts
included
in
accounts
payable
and
accrued
liabilities
for
purchases
of
property,
plant,
and
equipment
 
 
25,345,484
 
 
 
8,996,960
 
Capitalized
interest
included
in
property,
plant,
and
equipment
 
 
20,126,261
 
 
 
5,461,540
 
 

The accompanying notes are an integral part of these condensed consolidated financial statements

-7-
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 nonfood-based bio-feedstocks and has an investment in several proprietary varieties of 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 its subsidiary, Sustainable Oils Inc., (“Susoils”) a Delaware corporation.
 
On May 7, 2020 the Company purchased a crude oil refinery in Bakersfield, California with the objective of retrofitting it to produce renewable diesel from Camelina and other non-food feedstocks (the “Bakersfield Biorefinery”). The Bakersfield Biorefinery is owned by Bakersfield Renewable Fuels, LLC, (“BKRF”) an indirect wholly-owned subsidiary of Global Clean Energy Holdings, Inc. The retrofitting of the refinery commenced promptly after the acquisition and is scheduled to be completed in early 2022. After necessary start-up procedures and testing are complete, we expect production to be approximately 10,000 barrels per day (420,000 gallons per day). Although the Bakersfield Biorefinery will have a nameplate capacity of 15,000 barrels per day, we do not expect to produce more than 10,000 barrels per day for at least the first year of production. The Company has entered into both a product offtake agreement and a term purchase agreement with a major oil company for the purchase by the oil company of all, or substantially all, of the renewable diesel to be produced at the Bakersfield Biorefinery for the first five years of production. See Note B - Basis of Presentation and Liquidity which describes the offtake agreement in more detail
.
 
Basis of Presentation
 
The accompanying condensed consolidated balance sheet of the Company at December 31, 2020, has been derived from audited
consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the
United States of America (“U.S. GAAP”). The accompanying unaudited condensed consolidated financial statements as of September
30, 2021 and for the three months and nine months ended September 30, 2021 and 2020, have been prepared in accordance with U.S.
GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and should be read in
conjunction with the audited consolidated financial statements and related notes to the financial statements included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2020 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
consolidated
financial
statements
include
all
material
adjustments
(consisting
of
all
normal
accruals)
necessary
to
make the condensed consolidated financial statements not misleading as required by Regulation S-X Rule 10-01. Operating results for
the three months and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the
year
ended
December
31,
2021
or
any
future
periods.
 
The accompanying condensed consolidated financial statements include the accounts of Global Clean Energy Holdings, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
 
Acquisitions
 
On April 15, 2021, the Company acquired Agribody Technologies, Inc., (“ATI”) a private agricultural biotechnology company.  The transaction was accomplished by acquiring a 100% controlling interest in ATI in an all-stock transaction for a total
fair
value of approximately $5 million. In consideration for the shares of ATI, the Company issued 830,526 shares of common stock at an approximate fair value of $6.02 per share. The primary reason for the combination was to leverage the expertise of ATI to speed the development of novel camelina varieties for Susoils. The Company hired the founder of ATI and will continue to monetize the pre-acquisition ATI
rev
e
nue
contracts.
 
-8-
 
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
 
NOTE
A
—
ORGANIZATION
AND
SIGNIFICANT
ACCOUNTING
POLICIES
 (C
ONTINUED)
 
Below is a table that shows the fair value of assets acquired and liabilities assumed by the Company as a result of the transaction:
 
Assets
 
As of April 15, 2021
 
Cash
 
$
263,755
 
Property,
plant,
and
equipment
 
 
185,445
 
Patents
 
 
3,450,000
 
Trade name
 
 
90,000
 
Goodwill
 
 
1,355,077
 
Liabilities
 
 
 
 
Accounts
payable
and
accrued
liabilities
 
 
(344,277
)
Total
fair
value
of
net
assets
acquired
 
 
5,000,000
 
Less:
Cash
acquired
 
 
(263,755
)
Total
fair
value
of
consideration
transferred,
net
of
cash
 
acquired
 
$
4,736,245
 
 
Per Share Information
 
On March 26, 2021, the Company effected a one-for-ten reverse stock split. All common stock and per share information (other than par value) contained in these condensed consolidated financial statements and footnotes have been adjusted to reflect the foregoing reverse stock split. Prior to the reverse stock split the Company had 358,499,606
common
shares outstanding and immediately after the stock split the Company had 35,850,089
 common
shares outstanding. The Company issued additional
 common
shares after the reverse stock split and the outstanding
 common
shares as of November 1
5
, 2021 was 40,063,068.
 
Restricted Cash
 
In accordance with the Company’s Senior Credit Facility agreement (see Note E - Debt), the Company is required to advance the calculated interest expense on its borrowings at the time of such borrowings to the estimated commercial operational date of the Bakersfield Biorefinery. This interest is deposited into a designated account and the appropriate amount is paid to the lenders 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 BKRF account only upon approval by the lenders to pay for specific construction, facility and related costs. These two accounts are restricted and not directly accessible by the Company for general use, although these funds are assets of the Company. The Company estimates how much of this cash is likely to be capitalized into the Bakersfield Biorefinery project in the form of a long-term asset, and classifies this amount as long-term. The Company makes this determination based on its budget, recent and near-term invoicing, and internal projections
.
 
Cash and Cash Equivalents; Concentration of Credit Risk
 
The Company considers all highly liquid debt instruments maturing in three months or less to be cash equivalents. The Company
maintains cash and cash equivalents at high quality financial institutions. However, deposits exceed the federally insured limits. At
September
30,
2021,
the
Company
had
approximately
$42.6
million
in
uninsured
cash.
 
-9-
 
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
 
NOTE
A
—
ORGANIZATION
AND
SIGNIFICANT
ACCOUNTING
POLICIES
 (CONTINUED)
 
Inventories
 
Inventories currently consist of Camelina seeds, grain, meal, and oil. Inventories are valued at the lower of cost or net realizable value. Cost is determined based on standard cost. There were no lower of cost or market adjustments made to the inventory values reported as of September 30, 2021 and December 31, 2020.
 
Property, Plant and Equipment
 
Property, plant and equipment are stated at cost. Depreciation of office equipment and transportation equipment are 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 5 to 25 years.
 
Ho
wever, the refinery will not begin to be depreciated until its retrofitting has been completed and it is 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, plant and equipment sold or otherwise retired are removed from the accounts and any 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 commercial use. During the three months ended September 30, 2021 and September 30, 2020, $8.2 million and $3.9 million, respectively, of interest was capitalized and is included in property, plant and equipment, net. During the nine months ended September 30, 2021, $20.1 million and $5.5 million, respectively, of interest was capitalized and is included in property, plant and equipment, net, for a total of $30.3 million of capitalized interest for the project.
 
 
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. During the three and nine months ended September 30, 2021 and 2020, there were no impairment losses recognized on long-lived assets.
 
Indefinite Lived Assets
The Company has two assets, goodwill and trade name, that are indefinite-lived assets. Goodwill represents the excess of the fair value of consideration over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business combination. Goodwill is not amortized, but is tested for impairment annually on December 31 of each year or more frequently if events or changes in circumstances indicate the asset may be impaired.  The trade name the Company acquired as part of the transaction with
ATI
 is an identified intangible asset. Trade names are not amortized and instead are tested annually for impairment, or more frequently if events or circumstances indicate a likely impairment.
 
Debt Issuance Costs
 
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 approximately $
7.1
 
million of debt issuance costs as of the date of the closing. Debt issuance costs are amortized over the term of the loan as interest: however, as such interest relates to retrofitting of the refinery, these costs are being capitalized as part of the refinery until the refinery is placed in service. The amortization of the debt issuance costs that are not capitalized is recorded as interest expense. At September 30, 2021 and December 31, 2020, unamortized debt issuance costs related to the Senior Credit Facility are classified as a direct deduction from the carrying amount of the credit facility; however, unamortized debt issuance costs related to the Mezzanine Credit Facility are presented on the balance sheets as an asset as there have not been any borrowings on the Mezzanine Credit Facility. See Note E - Debt for more detail on the financing.
 
-10-
 
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
 
NOTE
A
—
ORGANIZATION
AND
SIGNIFICANT
ACCOUNTING
POLICIES
 (C
ONTINUED)
 
Accounts Payable and Accrued Liabilities
 
For presentation purposes, accounts payable and accrued liabilities have been combined. As of September 30, 2021 and December 31, 2020, accounts payable and accrued liabilities consists of:
 
 
 
As of September
30, 2021
 
 
As of December
31, 2020
 
Accounts payable
 
$
14,845,855
 
 
$
9,724,136
 
Accrued compensation and related liabilities
 
 
3,358,408
 
 
 
3,034,688
 
Accrued interest payable
 
 
1,782,358
 
 
 
2,093,649
 
Accrued construction costs
 
 
25,345,484
 
 
 
-
 
Other accrued 
liabilities
 
 
4,623,331
 
 
 
3,146,478
 
Current portion of asset retirement obligations
 
 
4,478,948
 
 
 
3,716,000
 
Current portion of environmental liabilities
 
 
1,521,918
 
 
 
883,000
 
 
 
$
55,956,302
 
 
$
22,597,951
 
 
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. $
13.8
million of these obligations relate to the required cleanout of hydrocarbons previously used in the refinery’s pipelines and terminal tanks over the next 4 years. In order to determine the fair value of the obligations management must make certain estimates and assumptions including, among other things, projected cash flows, timing of such 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.
 
We estimate our escalation rate at 3.33% and our discount factor ranges from 3.62% in year one to 7.26% in year twenty, with the weighted average discount rate being 5.0%. See Note H - Commitments and Contingencies for more detail on environmental liabilities, which are accounted for separately from asset retirement obligations.
 
The following table provides a reconciliation of the changes in asset retirement obligations for the nine months ended September 30, 2021 and the year ended December 31, 2020
.
 
 
 
Nine months ended
September 30, 2021
 
 
Year ended December
31, 2020
 
Asset retirement obligations - beginning of period
 
$
21,478,977
 
 
$
-
 
Additions related to acquisition of refinery
 
 
-
 
 
 
21,901,977
 
Disbursements
 
 
(1,961,711
)
 
 
(135,000
)
Accretion
 
 
735,000
 
 
 
652,000
 
Revised obligation estimates
 
 
-
 
 
 
(940,000
)
Asset retirement obligations - end of period
 
$
20,252,266
 
 
$
21,478,977
 
 
-11-
 
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
 
NOTE
A
—
ORGANIZATION
AND
SIGNIFICANT
ACCOUNTING
POLICIES
 (CONTINUED)
 
The amounts shown as of September 30, 2021 and December 31, 2020, include $
4.5
million
 an
d $
3.7
million, respectively, which have been classified as current liabilities and included in accounts payable and accrued liabilities and $
15.8
million and $
17.8
million, respectively which have been classified as long term liabilities as of September 30, 2021 and December 31, 2020, respectively.
 
Advances to Contractors
 
Upon the acquisition of the Bakersfield Biorefinery, the Company advanced $20.1 million to its primary construction contractor for invoices to be billed against the Guaranteed Maximum Price for the Engineering, Procurement and Construction
 
(“EPC”)
 of the Bakersfield Renewable Fuels Project contract (“G-Max Contract”). These funds are credited against future invoices in accordance with an agreed schedule. In May 2021 we replaced our former contractor and entered into a new G-Max Contract with a new contractor. As of June 30, 2021, the $20.1
 
million advanced to the initial primary construction contractor has been reduced to zero and a new advance has been made to the new primary construction contractor in the amount of $17.8 million.  As of September 30, 2021, reductions of $
1.5
million to the contractor advance have been made, resulting in $
16.3
million reflected as advance to contractor as of September 30, 2021.
 
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 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.
 
The Company has recorded a
100
% valuation allowance against the deferred tax assets as of September 30, 2021 and December 31, 2020.
  
Revenue Recognition
 
The Company recognizes revenue in accordance
with ASC 606,
Revenue From Contracts With Customers
, 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 recognized $
0.0
million in revenues during the quarter ended September 30, 2021 and had no comparable sales in the quarter ended September 30, 2020. The Company recognized $
0.2
million in revenues during the nine months ended September 30, 2021 and had no comparable sales in the nine months ended September 30, 2020. The Company is engaged in contracting with farmers to grow camelina grain that will be processed into oil for use in Bakersfield Biorefinery. The Company will recognize revenues upon the sale of its patented camelina seed to the farmers and also for the crushed camelina meal that it plans to sell to third party livestock and poultry operators. Based upon the Company’s Product Offtake Agreement (see Note B - Basis of Presentation and Liquidity), 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, which were nominal for the three and nine months ended September 30, 2021 and September 30, 2020.
 
Fair Value Measurements and Fair Value of Financial Instruments
 
As of September 30, 2021 and December 31, 2020, the carrying amounts of the Company’s financial instruments that are not reported at fair value in the accompanying consolidated balance sheets, including cash, cash equivalents
,
and restricted cash, accounts receivable, accounts payable, and accrued liabilities, the Senior Credit Facility, and the convertible note payable to the executive officer  approximate their fair value due to their short-term nature. The Company’s Class B Units are 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:
 
-12-
 
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
 
NOTE
A
—
ORGANIZATION
AND
SIGNIFICANT
ACCOUNTING
POLICIES (CONTINUED)
 
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.
On 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.
 
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 beginning in May 2022 totaling $
20.3
million.
  
The fair value of the derivative forward contract was primarily based upon the notional amount and the forward strip market prices of Ultra Low Sulfur Diesel, and was 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, the Company used the Black-76 option pricing model, a variation of the Black-Scholes option pricing model. As a result, the contract as a whole is included in the Level 3 of the fair value hierarchy.
 
The Company’s Class B Units are also measured at fair value on a recurring basis. See Note E - Debt for more information
.
 
The derivative liability discussed herein was derecognized in the first quarter of 2020, and the Company had no derivative liabilities at
September
30,
2021
and
December
31,
2020.
 
The following is the recorded fair value of the Class B Units as of September 30, 2021:
 
 
 
Carrying
Value
 
 
Total Fair
Value
 
 
Quoted prices
in active
markets for
identical
 
assets
- Level
 
1
 
 
Significant
other
observable
inputs
 
- Level
 
2
 
 
Significant
unobservable
inputs - Level
 
3
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class B Units as of September 30, 2021
 
$
18,054,857
 
 
$
18,054,857
 
 
$
-
 
 
$
-
 
 
$
18,054,857
 
 
The following is the recorded fair value of the Class B Units as of December 31, 2020:
 
 
Carrying
Value
 
 
Total Fair
Value
 
 
Quoted prices
in active
markets for
identical
 
assets
- Level
 
1
 
 
Significant
other
observable
inputs
 
- Level
 
2
 
 
Significant
unobservable
inputs - Level
 
3
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class B Units as of December 31, 2020
 
 
$
 
5,123,000
 
 
$
 
5,123,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
 
5,123,000
 
 
 
-13-
 
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
 
NOTE
A
—
ORGANIZATION
AND
SIGNIFICANT
ACCOUNTING
POLICIES (CONTINUED)
 
The following presents changes in the Class B Units through the three months and nine months ended September 30, 2021:
 
 
 
Three months ended
September 30, 2021
 
 
Nine months ended
September 30, 2021
 
Beginning Balance
 
$
12,623,420
 
 
$
5,123,000
 
New unit issuances
 
 
2,581,864
 
 
 
6,988,372
 
Change in fair value recognized in earnings
 
 
2,849,573
 
 
 
5,943,485
 
Ending Balance
 
$
18,054,857
 
 
$
18,054,857
 
 
The
following
presents
changes
in
the
Class
B
Units
through
the
three
months
and
nine
months
ended
September
30,
2020:
 
 
 
 
Three months ended
September 30, 2020
 
 
 
Nine months ended
September
30,
2020
 
Beginning Balance
 
$
939,000
 
 
$
-
 
New unit issuances
 
 
537,000
 
 
 
1,476,000
 
Change in fair value recognized in earnings
 
 
-
 
 
 
-
 
Ending Balance
 
$
1,476,000
 
 
$
1,476,000
 
 
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) estimated useful lives of equipment and intangible assets, c) the estimated costs to remediate or clean-up the refinery site, and the inflation rate, credit-adjusted risk-free rate and timing of payments to calculate the asset retirement obligations, d) the estimated costs to remediate or clean-up identified environmental liabilities, e) the estimated future cash flows and the various metrics required to establish a reasonable estimate of the value of the Class B Units issued to the Company’s lenders under the credit agreement, and f) the allocation of the acquisition price of
ATI
. to the various assets acquired. It is 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 stockholders of the Company by the weighted-average number of common shares outstanding during each period. Diluted income or loss per share amounts are computed assuming the issuance of common stock for potentially dilutive common stock equivalents. The number of dilutive warrants and options is computed using the treasury stock method, whereby the dilutive effect is reduced by the number of treasury shares the Company could purchase with the proceeds from exercises of warrants and options.
The following table presents instruments that were anti-dilutive for the nine months ended September 30, 2021 and September 30, 2020 that were excluded from diluted earnings per share as they would have been antidilutive:
 
 
 
Nine
months
ended
September
30,
2021
 
 
 
Nine
months
ended
September
30,
2020
 
Convertible
notes
and
accrued
interest
 
$
7,453,968
 
 
$
10,214,164
 
Convertible
preferred
stock
-
Series
B
 
 
-
 
 
 
1,181,819
 
Stock
options
and
warrants
 
 
19,468,704
 
 
 
19,317,714
 
 
-14-
 
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
 
NOTE
A
—
ORGANIZATION
AND
SIGNIFICANT
ACCOUNTING
POLICIES (CONTINUED)
 
Stock Based Compensation
 
The Company recognizes compensation expenses 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.
 
Recent Accounting Pronouncements
 
In March 2020, the FASB issued ASU 2020-04,
Reference Rate Reform
(Topic 848). This ASU was issued in response to concerns about structural risks of interbank offer rates, and particularly the discontinuation of the  London Interbank Offered Rate (“LIBOR”).  These rates are used globally by all types of entities for a variety of purposes. ASU 2020-04 provides guidance to companies with optional expedients for contract modifications under Topics 310, 470, 842, and 815-15, excluded components of certain hedging relationships, fair value hedges, and cash flow hedges, as well as certain exceptions, which are intended to help ease the potential accounting burden associated with transitioning away from these reference rates. ASU 2021-01 clarifies certain optional expedients and exceptions for contract modifications and hedge accounting. Companies have the option to immediately apply the ASU. However, the guidance will only be available for a limited time (generally through December 31, 2022). The Company  is currently evaluating the impact of adopting this new accounting standard, but does not expect it to have a material impact on its consolidated condensed financial statements and related disclosures.
 
In October 2021, the FASB issued ASU 2021-08,
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
(Topic 805). This ASU amends ASC 805 to require acquiring entities in a business combination to recognize and measure contract assets and contract liabilities using the revenue recognition guidance under ASC T
opic
 606.  This differs from current GAAP rules where an acquirer generally recognizes these items at fair value on the date of acquisition. ASU 2021-08 is effective for financial statements issued for fiscal years beginning after December 15, 2022, however early adoption is permitted.  The Company is currently evaluating the potential impact of the adoption of this standard, but does not expect it to have a material impact on its consolidated condensed financial statements and related disclosures.
 
Subsequent Events
 
The
Company
has
evaluated
subsequent
events
through
the
date
these
condensed
consolidated
financial
statements
were
available
to
be
issued.
Where
applicable,
the
notes
to these condensed consolidated financial statements have been updated to discuss all
significant
subsequent
events
which
have
occurred.
 
-15-
 
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE B — BASIS OF PRESENTATION AND LIQUIDITY
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying consolidated financial statements, the Company incurred losses from continuing operations applicable to its common stockholders of $34.0 million during the nine months ended September 30, 2021, and has an accumulated deficit of $100.2 million at September 30, 2021. At September 30, 2021, the Company had working capital of
negative
$50.1 million (which includes current restricted cash of $2.3 million) and a stockholders’ deficit of $53.4 million. The Company is progressing its Bakersfield Biorefinery retooling project and is on track to achieve its initial revenues from the production and sale of renewable diesel in early 2022.
 
Additionally, the Company must fund the $35 million contingency cash reserve account (described further in Note E) by November 19, 2021. The Company is not able to fund the $35 million reserve account absent an amendment or additional debt and/or equity financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least one year from the time the financial statements are issued. Management plans to close on an additional debt and/or equity financing in the short-term and believes that transaction is probable of closing. Therefore, management believes their plan alleviates the substantial doubt.
 
On May 4, 2020, a group of lenders agreed to provide a $300 million senior secured term loan facility to BKRF OCB, LLC, a wholly-owned subsidiary of Global Clean Energy Holdings, Inc., to enable that subsidiary to acquire the equity interests of BKRF and to pay the anticipated costs of the retooling of the Bakersfield Biorefinery owned by BKRF (the “Senior Credit Facility”). Concurrently with the 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, (the “Mezzanine Credit Facility”). Although the cash provided by the senior and Mezzanine Lenders may only be used for the Bakersfield Biorefinery and servicing these debt obligations, Global Clean Energy Holdings, Inc. will nevertheless, realize a reduction in certain of its operating and general and administrative expenses as the Company shares certain personnel and related costs. The Company believes that these cost savings, plus the Company’s other financial resources, including, but not limited to, equity sales, sale and leaseback opportunities, financing or leasing arrangements for equipment or assets, etc., should be sufficient to fund the Company’s operations through the start-up of the Bakersfield Biorefinery, at which point the Company will begin to generate positive operating cash flow which should be enough to fund operations and liabilities through at least the term of the product offtake agreement discussed below. See “Note E - Debt”. In November 2020, the Company’s Senior Credit Facility and Mezzanine Credit Facility were increased by a total of $15 million for the Bakersfield Biorefinery and the Company’s upstream Camelina operations.
 
In April 2019, the Company entered into a binding Product Offtake Agreement (the “Offtake Agreement”) with ExxonMobil Oil Corporation (“ExxonMobil”) pursuant to which ExxonMobil has committed to purchase 2.5 million barrels 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 ExxonMobil. ExxonMobil’s obligation to purchase renewable diesel will last for a period of five years following the date that the Bakersfield Biorefinery commences commercial operations. ExxonMobil 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.
 
In April 2021, BKRF entered into a Term Purchase Agreement (“TPA”) with ExxonMobil under which ExxonMobil has the right to purchase additional quantities of renewable diesel from our Bakersfield Biorefinery, and the Company is obligated to sell such additional amounts of renewable diesel to ExxonMobil. Under the Offtake Agreement, signed in 2019, ExxonMobil committed to purchase 2.5 million barrels of renewable diesel per year (the “Committed Volume”) from the Bakersfield Biorefinery. However, the Bakersfield Biorefinery is designed to produce more than the Committed Volume. Under the TPA, ExxonMobil has the exclusive right to purchase all renewable diesel produced in excess of the Committed Volume that we sell to ExxonMobil under the Offtake Agreement. The Company also agreed to transfer title to ExxonMobil of the Renewable Identification Numbers (“RINs”) allocated to the quantities of renewable diesel purchased under the TPA. In the event that ExxonMobil does not purchase all of the renewable diesel that it can under the TPA and, as a result, our inventory levels exceed certain specified levels, the Company can sell that extra inventory to third parties. ExxonMobil will pay us a price for the renewable diesel purchased under the TPA based on a tiered formula reflecting the margins realized by ExxonMobil from its downstream resales of the TPA renewable diesel. The TPA has a five-year term. ExxonMobil has the option to extend the initial five-year term for a second five-year term if it elects to extend the Offtake Agreement.
 
Under both agreements, we retain 100% of the co-products, which include renewable naphtha, renewable propane and renewable butane. The Company is pursuing sales contracts for these products
.
 
-16-
 
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE C – PROPERTY, PLANT AND EQUIPMENT


On May 7, 2020, through its wholly-owned subsidiary BKRF OCB, LLC, the Company purchased all of the outstanding equity
interests
of
Alon
Bakersfield
Property,
Inc.
a
 
company that owned a crude oil refinery in Bakersfield, California, from Alon
Paramount
Holdings,
Inc.
(“Alon
Paramount”)
for
a
total
fair
value
of
$89.4
million
(excluding
acquisition
costs).
Immediately
prior
to
the
purchase,
Alon
Bakersfield
Propert
y I
nc.
was
converted
into a limited liability company and renamed as “Bakersfield
Renewable Fuels, LLC.” The Company is now retooling the acquired crude oil 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)
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 plant oil feedstock extracted from Camelina seeds, 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 fair value of consideration for the purchase of the Bakersfield Biorefinery was $89.4 million, which consisted of $40.0 million of cash, an option right to acquire a 33% equity interest in GCE Acquisitions granted to the seller that was valued at $5.5 million, and an assumption of $43.9 million of liabilities. The liabilities assumed consist of $21.9 million of asset retirement obligations (ARO) and $22.0 million of other environmental remediation liabilities. These liabilities are the estimated costs of clean-up, remediation and associated costs of the acquired assets in accordance with current regulations. The option right was valued using various inputs, including a volatility of 116%, a risk free rate of 0.14% and a marketability discount of 25%. The total consideration of the purchase was allocated to the asset categories acquired based upon their relative fair values, except that the fair value of the asset retirement obligations was allocated to the specific assets to which they relate.


The following summarizes this allocation of the fair value of the consideration and also the reclassification of the pre-acquisition costs: 
 
Asset Category
 
Capitalized Costs
Based on
Acquisition
Valuation
 
 
Allocated
Pre-Acquisition
Costs
 
 
Total
Capitalized
Costs on
Acquisition
 
Property and Equipment
 
 
 
 
 
 
 
 
 
Land
 
$
7,584,961
 
 
$
-
 
 
$
7,584,961
 
Buildings
 
 
2,053,570
 
 
 
-
 
 
 
2,053,570
 
Refinery
 
 
77,845,201
 
 
 
3,222,449
 
 
 
81,067,650
 
Intangible Assets
 
 
1,921,082
 
 
 
-
 
 
 
1,921,082
 
Total
 
$
89,404,814
 
 
$
3,222,449
 
 
$
92,627,263
 
 
-17-
 
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE C – PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
 
Property, plant, and equipment as of September 30, 2021 and December 31, 2020 are as follows:
 
 
 
September 30,
2021
 
 
December 31,
2020
 
Land
 
$
7,584,961
 
 
$
7,584,961
 
Office Equipment
 
 
62,506
 
 
 
61,078
 
Buildings
 
 
2,053,570
 
 
 
2,053,570
 
Refinery and Industrial Equipment
 
 
86,066,002
 
 
 
86,019,130
 
Transportation Equipment
 
 
136,237
 
 
 
-
 
Construction in Process
 
 
149,811,267
 
 
 
33,212,695
 
Construction Period Interest
 
 
30,347,027
 
 
 
10,220,766
 
Total Cost
 
$
276,061,570
 
 
$
139,152,200
 
Less Accumulated Depreciation
 
 
(268,066
)
 
 
(179,525
)
Property, plant and equipment, net
 
$
275,793,504
 
 
$
138,972,675
 
 
Depreciation expense for property and equipment was approximately $35,000 and $46,000 for the three months ended September 30, 2021 and September 30, 2020, respectively and $
89,000
and $
73,000
for the nine months ending September 30, 2021 and September 30, 2020, respectively
.
 
NOTE D - INTANGIBLE ASSETS AND GOODWILL
 
Intangible Assets
 
The Company holds certain patents, intellectual property and rights related to the development of Camelina as a biofuels feedstock and continues to incur costs related to patent license fees and patent applications for Camelina sativa plant improvements. In April of 2021, the Company acquired ATI primarily for its patent portfolio. The Company allocated approximately $3.5 million of the consideration to the patents held by ATI, which is included in our patent assets below and subject to amortization. Our patents generally have an expected useful life of approximately 20 years and are carried at cost less any accumulated amortization and any impairment losses. The Company also allocated $90,000 of the acquisition of ATI to its trade name.  The ATI tradename is a non-amortizable intangible asset with an indefinite life subject to any future impairment losses. Amortization is calculated using the straight-line method over their remaining patent life. The termination dates of our patents range from 2022 through 2040. Any future costs associated with the maintenance of these patents and patent and registration costs for any new patents that are essential to our business will be capitalized and amortized over the life of the patent once issued. Upon the Company’s acquisition of the Bakersfield Biorefinery, the Company acquired necessary permits for the operation of the facility. The permit cost of $
1.9
million is amortized on a straight-line basis over 15 years.
 
-18-
 
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE D - INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
 
The
intangible
assets
as
of
September
30,
2021
and
December
31,
2020
is
shown
in
the
following
table:
 
 
 
September 30,
2021
 
 
December 31,
2020
 
Non-amortizable Intangible Assets
 
 
 
 
 
 
 
 
Trade Name
 
$
90,000
 
 
$
-
 
Amortizable Intangible Assets
 
 
 
 
 
 
 
 
Patent licenses
 
 
7,973,535
 
 
 
4,442,553
 
Refinery permits
 
 
1,921,082
 
 
 
1,921,082
 
Less accumulated amortization
 
 
(2,786,775
)
 
 
(2,182,889
)
Intangible Assets, Net
 
$
7,197,842
 
 
$
4,180,746
 
 
Amortization expense for intangible assets were approximately $320,000 and $95,000 for the three months ended September 30, 2021 and September 30, 2020, respectively
,
and $699,000 and $251,000 for the nine months ending September 30, 2021 and September 30, 2020, respectively. 

 
The estimated intangible asset amortization expense for the remainder of 2021 through 2027 and thereafter is as follows:
 
 
 
 
Estimated Amortization
Expense
 
October 1, 2021 through December 31, 2021
 
$
320,126
 
2022
 
1,113,118
 
2023
 
 
855,987
 
2024
 
 
726,135
 
2025
 
 
625,644
 
2026
 
 
610,359
 
2027 and Thereafter
 
 
2,946,473
 
Total
 
$
7,197,842
 
 
-19-
 
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)

NOTE E – DEBT
 
 
The
table
below
summarizes
our
notes
payable
and
long-term
debt
at
September
30,
2021
and
at
December
31,
2020:
 
 
 
 
September
 
30,
 
2021
 
 
 
December
 
31,
 
2020
 
Notes
Payable
 
 
 
 
 
 
 
 
Senior
credit
facility
 
$
290,626,038
 
 
$
153,405,569
 
Fixed
payment
obligation
 
 
20,250,000
 
 
 
20,250,000
 
Other
notes
 
 
2,928,949
 
 
 
4,198,113
 
 
 
 
313,804,987
 
 
 
177,853,682
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less:
current
portion
of
long-term
debt
 
 
(17,341,122
)
 
 
(4,198,113
)
Less:
unamortized
debt
discount
and
issuance
costs
 
 
(17,614,939
)
 
 
(10,731,206
)
Subtotal
 
 
278,848,927
 
 
 
162,924,363
 
 
 
 
 
 
 
 
 
 
Convertible
Notes
Payable
 
 
 
 
 
 
 
 
Convertible
note
payable
to
executive
officer
 
 
1,000,000
 
 
 
1,000,000
 
Other
convertible
notes
payable
 
 
-
 
 
 
697,000
 
Subtotal
 
 
1,000,000
 
 
 
1,697,000
 
 
 
 
 
 
 
 
 
 
Total
 
$
279,848,927
 
 
$
164,621,363
 
 

Credit Facilities
 
On May 4, 2020, in order to fund the purchase of BKRF, BKRF OCB, LLC, a subsidiary of the Company, entered into the Senior Credit Facility 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 (which was increased to $313.2 million in November 2020) to pay the costs of the retooling the Bakersfield Biorefinery. The Senior Credit Facility bears interest at the 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, with such deferred interest being added to principal. The principal of the Senior Credit Facility matures in November 2026, provided that BKRF OCB, LLC must offer to prepay the Senior Credit Facility with any proceeds of such asset dispositions, borrowings other than permitted borrowings, proceeds
from condemnation, damages, or other events of loss, and
excess net cash flow. BKRF OCB, LLC may also prepay the Senior Credit Facility in whole or in part with the payment of a prepayment premium. As additional consideration for the Senior Credit Facility, 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 Senior Credit Facility. As of September 30, 2021, 284.8 million Class B Units have either been issued or are issuable, and the aggregate fair value of such units on the date of their issuances totaled approximately $10.1 million which were recorded as debt discount. The aggregate fair value of the earned units as of September 30, 2021 was approximately $18.1 million. The fair value of such units is remeasured at each new issuance and at each quarter end. The fair value of these Class B units on the date of issuance is recorded as a liability with an offsetting adjustment to debt discount. During the nine months ended September 30, 2021, $3.1 million of these costs were recognized. It is expected that the fair value will change based on relevant factors influencing future cash flows. The Senior Credit Facility is secured by all the assets of BKRF OCB, LLC (including its membership interests in BKRF), all the outstanding membership interest in BKRF OCB, LLC, and all the assets of BKRF. In March 2021, the Company and the Senior Lenders amended the credit agreements to address and remedy certain covenants of which the Company was not in full compliance, thereby bringing the Company into full compliance with all covenants as of the amendment date. As part of that amendment, the Company agreed to pay the Senior Lenders a 1% fee of the total available credit available under the Senior Credit Facility and the Mezzanine Credit Facility. Based on the credit available under the two facilities, the fee was $3.8 million and may be paid in common stock.
 

-20-
 

GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE E – DEBT (CONTINUED)
 
Effective March 26, 2021, the Company and its Senior Lenders entered into Amendment No. 3 to the Credit Agreement to, among other things, establish a contingency reserve account to fund the costs of the additional capabilities and equipment and to fund possible cost overruns at the Bakersfield Biorefinery. Concurrently, the Company and the Mezzanine Lenders entered into Consent No. 2 and Amendment No. 2 to Credit Agreement to amend the $65 million Mezzanine Credit Facility. Under these two amendments we agreed to establish a cash reserve of at least $35 million, which cash reserve would be used at the direction of the agent for the lenders to fund project costs of the Bakersfield Biorefinery to the extent that such costs exceed the amounts available under the two credit agreements. Funds remaining in the contingency reserve account after the completion of the Bakersfield Biorefinery will, with the approval of the lenders’ agent, be used to first make a $5 million principal payment on the Senior Credit Facility, and any remaining funds will be returned to us. In order to fund the new $35 million contingency cash reserve, the two amendments to the credit agreements required that we raise no less than $35 million in a public or private financing transaction by July 31, 2021 and that we deposit, by that date, at least $35 million into the new Bakersfield Biorefinery cash reserve account. As consideration for the amendments to the two credit agreements, we agreed to pay each Senior Lender and Mezzanine Lender an amendment and consent premium equal to 1.00% of the aggregate commitments and loans of such lenders. On July 29, 2021 the time period for funding the $35 million contingency reserve was extended to September 15, 2021 and has been further extended to November 19, 2021.
 
On May 4, 2020, BKRF HCB, LLC, the indirect parent of BKRF OCB, LLC, entered into a the Mezzanine Credit Facility 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 September 30, 2021, BKRF HCB, LLC has not drawn down on the Mezzanine Credit Facility. The Mezzanine Credit Facility bears interest at the rate of 15.0% per annum on amounts borrowed, 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 is added to principal. As additional consideration for the Mezzanine Credit Facility, the Mezzanine Lenders will be issued Class C Units in BKRF HCP, LLC at such times as advances are made under the Mezzanine Credit Facility. The Mezzanine Credit Facility 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 Credit Facility matures in November 2027.
 
On May 18, 2021 certain of our subsidiaries, including BKRF, entered into Amendment No. 4 to our Credit Agreement with the Senior Lenders. The Amendment was entered into primarily to consent to the replacement of the original EPC firm and agreement with the new EPC firm and agreement. See Note H - Commitments and Contingencies.
 
On July 29, 2021, the Company entered into an amendment to each of its Senior Credit Facility and Mezzanine Credit Facility with its lenders to extend the date of funding the $35 million contingency reserve to September 15, 2021, to increase the availability under the credit agreements by an aggregate of $5 million, and to convert its 1% fee payable under a prior amendment from a cash payment to a warrant to purchase $3.8 million in value of the Company's common stock. As of September 30, 2021, the warrant has not been issued, and subsequent to September 15, 2021 the date of funding for the $35 million contingency reserve has been extended to November 19, 2021.. The number of shares to be issued upon exercise of the warrant is to be determined based on the price at which the Company issues shares of its common stock in its next additional capital raise, which is defined as a minimum of $35.0 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 pay the counterparty a total of $23.1 million, which included a payment of $5.5 million in April 2020, and six equal installment payments in 2022 totaling $17.6 million. Under the subsequent revised terms of the fixed payment obligation in April 2020, the Company agreed to pay the counterparty a total of $24.8 million, which included a payment of $4.5 million in June 2020 (which was paid), and six equal monthly installment payments beginning in May 2022. For financial reporting purposes, the fixed payment obligation has been recorded at the present value of future payments, using a discount rate of 14.8%.

-21-
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE E – DEBT (CONTINUED)
Other Notes Payable
 
Included in “other notes” as of September 30, 2021, in the above table, is a note, that is due upon demand related to the Company’s business activities prior to 2019, in the principal amount of $1.3 million and an interest rate of 18% per annum. Also, included in other notes above, is a note payable that was used to finance the Company’s insurance policies. Upon the
 
acquisition of the Bakersfield Biorefinery in May 2020, the Company purchased 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 beginning in May 2020. As of September 30, 2021, the Company had six payments remaining for a total of $1.8 million.  In May, 2021, the Company entered into new insurance policies to replace the policies that were expiring in May 2020.  The Company paid 8.5% of the total premiums and financed the balance at a
3.85
% annual interest rate.  The Company is obligated to make 11 equal monthly payments totaling approximately $0.5 million beginning in June 2021. In March, 2021, the Company received a SBA Paycheck Protection Program loan for $0.6 million at a 1% interest rate.  The loan matures in March 2026, and the Company may have the opportunity to have the loan forgiven under the government program.
  
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 deferral, the Company and Mr. Palmer entered into a $1 million convertible promissory note (the “Convertible Note”). The Convertible Note accrues simple interest on the outstanding principal balance of the note at the annual rate of five percent (5%) and became due and payable on October 15, 2020, its maturity date. Under its existing credit agreements, the Company is restricted from repaying Mr. Palmer’s loan and, accordingly, is currently in default under the Convertible Note. The Company accrued interest expense of $12,500 and $37,500 on this note in each quarter and nine months respectively, ended September 30, 2021 and 2020. The Company had recorded accrued interest payable of approximately $148,000 and $110,000 as of September 30, 2021 and December 31, 2020 respectively. Under the Convertible Note, Mr. Palmer has the right, exercisable at any time until the Convertible Note is fully paid, to convert all or any portion of the outstanding principal balance and accrued and unpaid interest into shares of the Company’s Common Stock at an exercise price of $0.154 per share.
 
Convertible Notes Payable
The Company had several notes that were convertible into shares of the Company or the Company’s subsidiaries at different prices: ranging from $0.30 per share into the Company’s stock and up to $1.48 per share into Susoils’s common stock. These notes have passed their original maturity date and they continue to accrue interest at varying rates, from 8% to 10%. On March 26, 2021, we issued 1,586,786 shares of the Company’s common stock to the holder of a convertible promissory note upon the conversion of the entire outstanding balance, principal and accrued interest, for that note. During the quarter ending June 30, 2021, the Company paid the remaining notes and the accrued interest either by an agreed cash settlement or through the issuance of common shares at an agreed price of $5.75 per share. As of September 30, 2021, there are no remaining convertible notes payable to third parties.
 
-22-
 
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE E – DEBT (CONTINUED)
 
The following table summarizes the minimum required payments of notes payable and long-term debt as of September 30, 2021:
 
Year
 
 
Required
Minimum
 
Payments
 
2021
 
$
2,928,949
 
2022
 
 
21,250,001
 
2023
 
 
-
 
2024
 
 
-
 
2025
 
 
-
 
Thereafter
 
 
290,626,038
 
Total
 
$
314,804,988
 
Class B Units
 
As described above, during the year ended December 31, 2020 and through September 30, 2021, the Company issued or had issuable 151.5 million and 284.8 million, respectively, Class B Units of its subsidiary, BKRF HCB, LLC, to its Senior Lenders. To the extent that there is distributable cash, the Company is obligated to make certain distribution payments to holders of Class B Units, and after the distributions reach a certain limit the units will no longer require further distributions and will be considered fully redeemed. The Class B unit holders may receive a portion of the distributable cash, as defined under the Senior Credit Facility, available to BKRF HCB, LLC, but generally only up to 25% of the available cash after the required interest and principal payments, operating expenses and ongoing capital requirements have been paid. Such payments commence once the Bakersfield Biorefinery begins operations and will continue through the later of five years after operations of the refinery begins or until the cumulative distributions reach a certain threshold defined in the operating agreement of BKRF HCB, LLC. The aggregate total payments (including distributions to the Class B Units, all interest and principal payments) to the Senior Lenders cannot exceed two times the amount of the borrowings under the Senior Credit Facility, or approximately $635 million. As of September 30, 2021, 284.8 million Class B Units have either been issued or are issuable, and the aggregate fair value of such units on the date of their issuances totaled approximately $10.1 million which were recorded as debt discount. The aggregate fair value of the earned units as of September 30, 2021 was approximately $18.1 million. The fair value of such units is remeasured at each new issuance and at each quarter end. It is expected that the fair value will increase as the Company continues to de-risk the project through ongoing retooling activities. The fair value is largely based on the present value of the expected distributions that will be made to the Class B Unit holders, which consider various risk factors, including a market risk premium, project size, the uniqueness and age of the refinery, the volatility of the feedstock and refinery inputs, operational costs, environmental costs and compliance, effective tax rates, illiquidity of the units, etc. As completion of retrofitting the refinery progresses, the fair value is expected to increase, and further increases in fair value are expected when the refinery becomes operational and begins generating revenues. For accounting purposes, these Class B Units are considered to be mandatorily redeemable and have been classified as liabilities in the accompanying balance sheets and are remeasured at fair value at the end of each reporting period.
 
NOTE F - STOCKHOLDERS’ EQUITY
 
Common Stock
 
In the first nine months of 2021, the Company issued 62,332 shares of its common stock upon the exercise of stock options. These option exercises consisted of 50,000 and 12,332 shares issued to a director and employees, respectively.

On
March
26,
2021,
the
Company
issued
1,586,786
shares
of
its
common
stock
to
the
holder
of
a
convertible
promissory
note
upon
the conversion, on the original terms of the note, of the entire outstanding balance, principal and accrued interest, for that note, which
was
$476,036.
-23-
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE F - STOCKHOLDERS’ EQUITY (CONTINUED)
 
On April 15, 2021, the Company issued 830,526 shares of its common stock as consideration for the acquisition of ATI. The shares were valued at $5 million, based on an agreed formula based on the shares trading price.
 
On April 16, 2021 the Company issued 496,000 shares of its common stock and warrants to purchase an additional 19,840 shares of common stock, all for $3.1 million in a private sale to three accredited investors.
 
On June 1, 2021, the Company issued 53,723 shares of its common stock to various note holders upon the conversion of, or as payment for the entire outstanding balance, principal and accrued interest, of notes, all in accordance with the original terms of the notes, having an outstanding balance of $308,889 in the aggregate.
 
On June 30, 2021, 1,181,819 shares of its common stock became issuable upon the delivery to the Company of notices of conversion for the conversion of all the outstanding shares of the Company’s Series B Convertible Preferred Stock. The new shares of common stock and the new certificates will be issued to the former holders of the preferred stock upon the tender of lost certificate documentation by the holders.
 
Series B Convertible 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.
 
The Series B Shares were convertible into shares of the Company’s Common Stock.  As of June 30, 2021, the two holders of the shares of preferred stock tendered notices of conversion, and all of the outstanding shares of Series B Convertible Preferred Stock were converted into 1,181,819 shares of the Company’s common stock.  As a result, effective as of June 30, 2021, the Company had no outstanding Series B Convertible Preferred Stock.
 
NOTE G – STOCK OPTIONS AND WARRANTS
 
2020 Equity incentive Plan
 
In April 2020, the Company’s Board of Directors adopted the Global Clean Energy Holdings, Inc. 2020 Equity Incentive Plan (the “2020 Plan”) wherein 2,000,000 shares of the Company’s common stock were reserved for issuance thereunder. Options and awards granted to new or existing officers, directors, employees, and non-employees vest ratably over a period as individually approved by the Board of Directors generally over three years, but not in all cases. The 2020 Plan provides for a three-month exercise period of vested options upon termination of service. The exercise price of options granted under the 2020 Plan is equal to the fair market value of the Company’s common stock on the date of grant. Options issued under the 2020 Plan have a maximum term of ten years for exercise and may be exercised with cash consideration or through a cashless exercise in which the holder forfeits a portion of the award in exchange for shares of common stock of the remaining portion of the award. As of September 30, 2021, there were
561,177
shares available for future option grants under the 2020 Plan.
 
During the nine months ended September 30, 2021 the Company granted stock options for the purchase of a total of 424,740 shares of Common Stock under the 2020 Plan, of which 364,740 were to employees and 60,000 were to directors.

-24-

GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE G – STOCK OPTIONS AND WARRANTS (CONTINUED)

The Company previously granted stock options that were not issued under
the 2020 Plan which the terms and conditions are described within the Company's Form 10-K filed on April 13, 2021.
A summary of the option award activity in
2021 and awards outstanding at September 30, 2021 (includes 100,000, 18,809,026 and 559,678 options under the 2010 Equity
Incentive
Plan,
the
non-plan
and
the
2020
Plan,
respectively)
is
as
follows:
 
 
 
Shares Under
Option
 
 
Weighted
Average
Exercise
Price
 
 
Weighted
Average
Remaining
Contractual
Life (Years)
 
 
Aggregate
Intrinsic Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at December 31, 2020
 
 
19,230,214
 
 
$
0.16
 
 
 
2.81
 
 
$
30,044,649
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
 
424,740
 
 
 
5.61
 
 
 
 
 
 
 
-
 
Exercised
 
 
(61,770
)
 
 
0.17
 
 
 
 
 
 
 
319,433
 
Forfeited
 
 
(121,418
)
 
 
5.94
 
 
 
 
 
 
 
-
 
Expired
 
 
(3,062
)
 
 
5.51
 
 
 
 
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at September 30, 2021
 
 
19,468,704
 
 
$
0.33
 
 
 
2.34
 
 
$
58,046,239
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested and exercisable at September 30, 2021
 
 
18,597,978
 
 
$
0.23
 
 
 
2.27
 
 
$
56,549,516
 
 

The fair value of stock option grants with only continued service conditions for vesting is estimated on the grant date using a Black-Scholes option pricing model. The following table illustrates the assumptions used in estimating the fair value of options granted during the periods presented: 
 
 
 
 
Nine months ended
September 30, 2021
 
Expected Term (in Years)
 
 
2 to 5
 
Volatility
 
 
85.665
%
Risk Free Rate
 
 
0.401
%
Dividend Yield
 
 
0
%
Exit Rate Pre-vesting (
1
)
 
 
0
%
Exit Rate Post-vesting (
2
)
 
 
0
%
Aggregate Grant Date Fair Value
 
$
1,389,197
 
 

(
1
)
Assumed forfeiture rate for market condition option awards prior to vesting.
 
(
2
)
Assumed expiration or forfeiture rate for market condition option awards after vesting.

-25-

GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE G – STOCK OPTIONS AND WARRANTS (CONTINUED)

Stock Purchase Warrants and Call Option
 
In the nine months ended September 30, 2021, the Company issued warrants to investors that invested $3.1 million in a private transaction in April 2021 to purchase 19,840 shares of common stock. The warrants have an exercise price of $6.25 per share, a five-year term and are fully vested. If the warrants are exercised, the Company will receive additional proceeds of $124,000.
 
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, Susoils. for approximately $20 million. The warrant had an expiration date of June 1, 2021, and was not exercised. The value of the warrant upon issuance was determined to be immaterial.
 
Concurrently with the acquisition of the Bakersfield Biorefinery, the Company, through its subsidiary, GCE Acquisitions, issued an option right to the seller of the refinery to purchase up to 33 1/3% of the membership interests of GCE Acquisitions. The fair value of the option right on the date of issuance was $5.5 million and expires at ninety days after the refinery meets certain operational criteria.
 
NOTE H – COMMITMENTS AND CONTINGENCIES
 
Engineering, Procurement and Construction Contract
 
On April 30, 2020, GCE Acquisitions entered into an Engineering, Procurement and Construction Agreement with a national engineering firm pursuant to which this firm agreed to provide services for the engineering, procurement, construction, (“EPC”) start-up and testing of the Bakersfield Biorefinery. The agreement, which was assigned by GCE Acquisitions to BKRF OCB, LLC, the borrower under the Senior Credit Facility, provides for this engineering firm 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. As of May 17, 2021, the remaining balance of the contract was approximately $151 million. On May 19, 2021 we notified our original EPC firm that we were terminating the EPC Agreement, effective immediately. The cumulative billing on the EPC contract through June 30, 2021 was $63.2 million. The two major subcontracts for the Bakersfield Biorefinery were not terminated and were subsumed in the new replacement EPC agreement (see below). Accordingly, the two major subcontractors will continue to provide their services for the Bakersfield Biorefinery.
 
On May 18, 2021 our BKRF subsidiary and CTCI Americas, Inc., a Texas corporation (“CTCI”), entered into a Turnkey Agreement with a Guaranteed Maximum Price for the Engineering, Procurement and Construction of the Bakersfield Renewable Fuels Project (the “CTCI EPC Agreement”). CTCI Americas is a worldwide leading provider of reliable engineering, procurement and construction services, including for the refinery market. Under the CTCI EPC Agreement, CTCI has agreed to provide services to complete the engineering, procurement, construction, pre-commissioning, commissioning, start-up and testing of our renewable diesel production facility under construction in Bakersfield, California. CTCI’s fees and costs, including direct costs, overhead fees and the contractor’s fee, are guaranteed not to exceed $178 million (which maximum price is subject to adjustment for certain change orders). The obligations of CTCI have been guaranteed by CTCI Corporation, the Taiwanese parent company of CTCI

-26-

GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE H – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Environmental Remediation Liabilities
 
The Company recognizes its asset retirement obligation and environmental remediation liabilities and has estimated such liabilities as of its acquisition date. It is the Company’s policy to accrue environmental and clean-up related costs of a non-capital nature when it is both probable that a liability has been incurred and the amount can be reasonably estimated. Environmental remediation liabilities represent the current estimated costs to investigate and remediate contamination at our properties. This estimate is based on internal and third-party assessments of the extent of the contamination, the selected remediation technology and review of applicable environmental regulations, typically considering estimated activities and costs for 20 years, and up to 30 years if a longer period is believed reasonably necessary. Accruals for estimated costs from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study and include, but are not limited to, costs to perform remedial actions and costs of machinery and equipment that are dedicated to the remedial actions and that do not have an alternative use. Such accruals are adjusted as further information develops or circumstances change. We discount environmental remediation liabilities to their present value if payments are fixed and determinable. However, as the timing and amount of these costs were undeterminable as of September 30, 2021, these costs have not been discounted. Expenditures for equipment necessary for environmental issues relating to ongoing operations are capitalized. Changes in laws and regulations and actual remediation expenses compared to historical experience could significantly impact our results of operations and financial position. 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. At September 30 2021, accrued environmental remediation liability costs totaled $21.0 million of which $1.5 million have been classified as current liabilities. At December 31, 2020, accrued environmental liabilities totaled $21.3 million of which $0.9 million have been classified as current liabilities.
 
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 for a total consideration of $89.4 million, including $40 million in cash and assumption of liabilities of $43.9 million. 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 at the refinery and provide a guarantee for liabilities arising from the cleanup. The Company has assumed significant environmental and clean-up liabilities associated with the purchase of the Bakersfield Refinery.
 
Leases
 
On May 1, 2019, the Company amended its Torrance, California office lease to extend the lease term to July 31, 2022.
 
On January 1, 2021, the Company entered into a lease agreement for a storage facility in Montana. The storage facility will be used for SusOils operations and runs through December 31, 2022.
 
On April 20, 2021, the Company entered into a 36 month lease agreement for two Zephir electric railcar movers for use at the Bakersfield Biorefinery.
 
-27-
GLOBAL CLEAN ENERGY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE H – COMMITMENTS AND CONTINGENCIES (CONTINUED)
 
The table below represents the amounts due through the end of lease terms.
 
Period
 
 
Minimum
Payments
 
 
 
Discount
 
 
 
Minimum Payments
Less: Discount
 
October
1,
2021
through

December
31,
2021
 
$
40,767
 
 
 
 
$
1,480
 
 
 
 
$
39,287
 
 
2022
 
 
202,149
 
 
 
3,709
 
 
 
198,440
 
2023
 
 
162,616
 
 
 
1,111
 
 
 
161,504
 
2024
 
 
121,962
 
 
 
269
 
 
 
121,693
 
Total
 
$
527,494
 
 
$
6,569
 
 
$
520,924
 
 
On April 20, 2021, BKRF entered into a three-year lease beginning upon delivery of two railcar movers.  The equipment was delivered in August and the first monthly payment was made in September 2021.  The monthly payment is $13,551 and has an interest rate of 3%.
 
On September 24, 2021, SusOils entered into a five-year lease beginning on November 1, 2021 for its North American headquarters, a new state-of-the-art facility located in Great Falls, Montana. This new facility will consolidate SusOils crop innovation programs, commercial grower support and executive and administrative activities at one location and will be fully operational by November 1, 2021
.
 Under the lease, we will have to pay monthly rental payments of $18,531.
 
In addition, we have the right to purchase the facility at any time during the lease. In order to maintain the purchase option, we will have to make annual payments of $186,000
.

Legal
 
BKRF, formerly Alon Bakersfield Property, Inc., is one of the parties to an action pending in the United States Court of Appeals for the Ninth Circuit. In June 2019, the jury awarded the plaintiffs approximately $6.7 million against Alon Bakersfield Property, Inc. and Paramount Petroleum Corporation (a parent company of Alon Bakersfield Property, Inc. at the time of the award in 2019). Under the agreements pursuant to which we purchased BKRF,
Alon
Paramount
agreed
to
assume
and
be
liable
for
(and
to
indemnify,
defend,
and
hold BKRF harmless from) this litigation. In addition, Paramount Petroleum Corporation has posted a bond to cover this judgment
amount. All legal fees in this matter are being paid by Alon Paramount. As Paramount Petroleum Corporation and the Company are
jointly and severally liable for the judgement, and Paramount Petroleum Corporation has agreed to absorb all of the liability and has
posted a bond to cover the judgement amount, no loss has been accrued by the Company with respect to this matter. In August 2021,
the Ninth Circuit entered a limited remand to the district court to determine whether it properly exercised jurisdiction over Alon
Bakersfield Property, Inc. and Paramount Petroleum Corporation, and the district court has authorized jurisdictional discovery to
resolve
that
matter.
 
In August, 2020, Wood Warren & Co. Securities, LLC (“Wood Warren”) filed a complaint in the Superior Court of California,
Alameda County, against GCEH Acquisitions titled
Wood Warren & Co Securities, LLC vs. GCE Holdings Acquisitions, LLC
, Case
No. RG 20072242, alleging that GCEH Acquisitions breached a consulting agreement with it.
Wood Warren seeks damages of $1.2
million plus interest.
On October 14, 2020, GCEH Acquisitions filed an answer to Wood Warren’s complaint.
The parties are
currently
engaged
in
discovery
and
no
trial
date
has
yet
been
set.
We
are
unable
to
predict
the
outcome
of
the
matter.
-28-
GLOBAL
CLEAN
ENERGY
HOLDINGS,
INC.
AND
SUBSIDIARIES
NOTES
TO
CONDENSED
CONSOLIDATED
FINANCIAL
STATEMENTS
(UNAUDITED)
 
NOTE H – COMMITMENTS AND CONTINGENCIES (CONTINUED)
 
In December, 2020, Roll Energy Investments LLC (“Roll”) filed a complaint in the Superior Court of California, Los Angeles County, titled
Roll Energy Investments LLC v. Global Clean Energy Holdings, Inc.,
Case No. 20RTCV00921. Roll alleged that the Company breached a promissory note in the principal sum of $0.3 million. Roll sought $0.4 million for principal and interest as of December 4, 2020, plus prejudgment interest allegedly accruing thereafter. On or about May 12, 2021, the company wired $0.5 million as full settlement of the amount due. On or about June 7, 2021, the Company and Roll entered into a Settlement Agreement to fully resolve Roll’s claims, accepting the amount previously wired with no additional amounts due. On or about June 29, 2021, Roll dismissed the action in its entirety, with prejudice.
 
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’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’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. The Company also indemnifies its lessor in connection with its facility lease for certain claims arising from the use of the facility. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated nor incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities and guarantees in the accompanying condensed consolidated balance sheets.
 
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 is ongoing, but the Company believes that the pandemic to date has not materially impacted the Company’s operations and that the pandemic is not expected to be materially disruptive to its future plans and targeted date of beginning commercial operations, although certain supply chain disruptions could impact the completion date of the Bakersfield Biorefinery. The Company has implemented strict protocols on its on-site workforce and continues to monitor the potential impacts to its business. The extent of the impact of the COVID-19 pandemic on the Company’s operations, cash flows, liquidity and capital resources is highly uncertain, as information is evolving with respect to the duration and severity of the virus and its variants. However, based on its experience with the disease to date, the Company expects that the future impacts due to COVID-19 are not likely to be materially disruptive to its ongoing business.
 
Acquisitions
 
On July 20, 2021, the Company entered into a non-binding Letter of Intent to acquire an off-shore company that owns certain patents, feedstock pathway expertise and intellectual property related to camelina development. The consummation of the transaction is subject to the Company's completion of its due diligence review and the preparation of mutually acceptable transaction documents. The transaction is expected to close by November 30, 2021.
 
-29-
Item 2: Management’s
Discussion and
Analysis of
Financial
Condition
and Results of
Operations
 
The following discussion should be read in conjunction with the Company’s condensed consolidated financial statements and
the related notes and other financial information appearing elsewhere in this Form 10-Q. Readers are also urged to carefully review
and consider the various disclosures made by the 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 the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2020 and other
reports
and
filings
made
with
the
Securities
and
Exchange
Commission
(“SEC”).

Cautionary
Note
Regarding
Forward-looking
Statements

This report contains forward-looking statements. These statements relate to future events or the Company’s future financial
performance.
In
some
cases,
you
can
identify
forward-looking
statements
by
terminology
such
as
“may,”
“will,”
“should,”
“expect,”
“plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable
terminology.
These
statements
are
only
predictions.
Actual
events
or
results
may
differ
materially.

Although
the
Company
believes
that
the
expectations
reflected
in
the forward-looking statements are reasonable, the
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
obligation to update any of the forward-looking statements after the filing of this Quarterly Report on Form 10-Q to conform such
statements
to
actual
results
or
to
changes
in
its
expectations.

Overview
 
Global Clean Energy Holdings, Inc. and its subsidiaries (collectively, hereinafter the “Company,” “we,” “us,” or “our) is a
vertically integrated renewable fuels company. Our goal is to do our part in accelerating the global push to reduce greenhouse gas
emissions through sustainable, more environmentally friendly alternatives to conventional petroleum-based fuels.
Since 2013 our
principal focus has been on the development of our proprietary varieties of
Camelina sativa
(“Camelina”)
,
a fallow land rotation crop,
as a biofuels feedstock.
In 2020, we acquired a 500-acre crude oil refinery in Bakersfield, California, that we are converting into a
dedicated
renewable
diesel
refinery
(the
“Bakersfield
Biorefinery”).
 
Bakersfield Biorefinery
.
Commencing in April 2019, the date that we entered into an agreement to purchase the Bakersfield
Biorefinery, through the closing of the purchase of the Bakersfield Biorefinery in May 2020, we were exclusively engaged in
completing the purchase of the refinery and in obtaining the financing necessary to purchase and thereafter retool the Bakersfield
Biorefinery
into
a
renewable
fuels
facility.
Accordingly,
our
principal
expenses
prior
to
May
2020
consisted of general and
administrative expenses and costs incurred to obtain the financing required to purchase and retool the Bakersfield Biorefinery. After
the purchase of the Bakersfield Biorefinery on May 7, 2020, both our operating expenses and our capital expenditures increased
significantly.
 
Since most of our resources during the past two years have been dedicated to the purchase, financing and retooling of the
Bakersfield Biorefinery and to further developing our Camelina deployment platform, we did not generate any significant operating
revenues
in
either
2021
or
2020.
In
order
to
fund
our operating expenses during these periods, we obtained $10 million in the
aggregate under a derivative contract (the “Derivative Contract”) that we entered into with a commodity trading company. The
Derivative Contract was amended in 2020 and replaced by a fixed payment obligation that requires us to make total payments of $24.8
million, consisting of the $4.5 million payment we made in June 2020, and six equal monthly installment payments beginning in May
2022. The cash that we received from the Derivative Contract was used to fund development efforts, our operating costs, our due
diligence costs, our pre-acquisition costs, the purchase price down payment/deposit for the Bakersfield Biorefinery, our continued
Camelina trials in the Northwest and the Northern Plains, our consulting and legal fees associated with the acquisition, and our
payments
to
key
vendors
and
suppliers.
 
In May 2020 we completed the purchase of the Bakersfield Biorefinery. The total amount of cash consideration paid for the
refinery was $40 million and the total amount of all consideration and assumed liabilities was $89.4 million. In order to fund the
purchase price of the Bakersfield Biorefinery and the on-going conversion of the facility into a renewable diesel refinery, in May 2020
we
entered
into
the
(i)
Senior
Credit
Facility
that,
as
amended,
currently
provides
us
with
a
credit
facility
of
up
to
$317.6
million,
and
(ii)
a
Mezzanine
Credit
Facility
that,
as
amended,
currently
provides
us
with
$67.4
million
of
credit.
We
are
converting
the
Bakersfield
refinery from a crude oil refinery into a biorefinery, and are currently scheduled to commence our biofuel refinery operations in early
2022. Therefore, we do not anticipate generating revenues from the operations of the Bakersfield Biorefinery until 2022.
We have
spent
approximately
$230
million
on
our
Bakersfield
Biorefinery
project
through
September
30,
2021.

-30-
 
Camelina Development and Activities
. A key element of our business plan is to control the development and production of
the underlying base materials, or feedstock, required to produce renewable diesel at the Bakersfield Biorefinery. Our goal is to use the
oil
produced
from our enhanced proprietary varieties of Camelina as a significant component of the Bakersfield Biorefinery’s
feedstock.
Accordingly, we recently have contracted with numerous farmers for the planting of our Camelina certified seed, which
seed will be used for Camelina grain production for the 2022 crop years. To date, we have produced certified Camelina seed to plant
over 220,000 acres on our proprietary varieties of Camelina in 2022 (although we do not anticipate that we will be able to plant that
many acres in 2022).
Although farmers in six Western states are currently commercially producing Camelina for our use in the
Bakersfield
Biorefinery,
our
principal
focus
in
the
near
term
is
on
the
production
of
Camelina
in
Montana
and
Kansas.
 
The Company has relocated its Sustainable Oils, Inc.'s (its upstream subsidiary) headquarters to Great Falls, Montana, which
is at the southern portion of the rich farming area known as the Golden Triangle. This location is expected to serve both agronomy
support to our growers in Montana and to further our research and development activities on our proprietary Camelina development.
The Company has historically outsourced various agronomic and grower development efforts, and has recently determined that to
fulfill its goals of Camelina development, the Company will be better served to employ directly the expertise it needs to have its
employees
fully
engaged
in
such
Camelina
development.
To
that
end,
the
Company
is
pursuing
an
acquisition
to
fulfill
this
goal.
 
Our strategy for contracting more acres for Camelina production is a cost based model. We view our contracted growers (or
farmers) as partners and it is our goal to incentivize them economically to grow our proprietary Camelina seed. As our seed is grown
on fallow acres (or acres that can be double-cropped, but would not be double-cropped normally) any additional economic benefits
from growing Camelina will add revenues to these contracted growers. Most growers normally incur negative cash flows from their
fallow acres.
Thus, by providing growers with the opportunity to place those fallow acres into production by planting Camelina, we
provide the growers with the ability to generate additional revenues from land that otherwise would remain unproductive. Camelina is
a fast-growing (around 100 days) dryland crop that does not degrade the soil for the next crop, which attributes are very beneficial to
the growers. Another key factor in a grower’s willingness to plant and grow Camelina is that the equipment required for planting,
monitoring,
harvesting
and
storing
the
grain
(in
the
short-run)
is
the
same
as
is
used
for
other
grains
and,
therefore,
already
is
owned
or controlled by the grower.
Growing Camelina typically does not require additional capital investments by the grower. We believe
our value proposition for our contracted growers will benefit the growers by crop diversification, converting an “idle” asset into a
productive
asset
and
assisting
in
justifying
their
continuing
capital
investment
and improvements into their farms which should
provide them with long-term sustainable economics. We believe this will also have a positive economic multiplier effect in these
grower communities. We use our personnel and certain strategic partners to communicate with, and educate, potential growers about
the benefits of growing our Camelina varieties. This team provides agronomy support from planting to harvesting and is focused on
increasing
the
number
of
growers
and
the
overall
acreage
under
production.
 
Montana has recently experienced extreme heat and drought, which has reduced the normal-weather yields of Camelina and
most other crops.
However, despite the severe weather conditions, our Camelina varieties fared very well in Montana compared to
many other crops. We believe that the harsh 2021 growing season in Montana has demonstrated the sturdiness and stress tolerance of
our proprietary Camelina varieties, and is an indication of the economic viability of the crop even under such harsh conditions. We
have
targeted
Montana
and
Kansas
for
our
first
phase
of
our
commercial
Camelina
production
because
of
our
prior
operating
history
in
these
states
and
because
there
are
an
estimated
25
million
acres
of
farmland
that
can
potentially
grow
Camelina
in
these
two
states. Approximately one-third of this acreage may be available during any year, to grow Camelina, based on normal fallow rotations.
In
order to be able to produce and handle larger quantities of Camelina grain, we are currently engaged in establishing our first grain
aggregation center in Montana, which, when completed, will be used for the storage and cleaning of Camelina grain, and for loading
the
Camelina
grain
into
railcars
for
transport
to
downstream
oil
extraction
plants
located
near
the
Bakersfield
Biorefinery.
 
Camelina is also currently being grown for us under contracts we have entered into with independent farmers in Colorado,
Idaho,
Oregon
and
Washington.
These
states
represent
targeted
Camelina
growing
acres
of
over
12
million
acres
in
the
aggregate.
 
Due to the COVID-19 pandemic and adverse weather conditions that negatively impacted the commercial production of
Camelina, the number of acres of Camelina cultivated this year will be comparatively modest compared to 2020.
However, we
anticipate a significant increase in Camelina production in 2022 in Montana, Kansas and the other states that we are currently
targeting.
To date we have generated, and we will continue to generate revenues from the sale of certified Camelina seed to farmers,
which seed the farmers use to grow our proprietary varieties of Camelina. Revenues generated from those seed sales to date have not
been, and are not expected to be material in the future compared to our expected Camelina oil and refinery revenues. As the Company
expands its Camelina grain production, it will also generate revenues from the sale of its non-GMO Camelina meal to third parties for
use
as
animal
feed.
These
revenues
will
likely
be
immaterial
in
2022,
but
may
grow
significantly
in
future
years.
 
Our goal is to increase Camelina production by both increasing the number of acres planted and by increasing the yield
produced on each acre.
We hold patents on three proprietary Camelina plant varieties.
However, in order to further increase yields,
we
have
developed
six
new
Camelina
varieties,
which
varieties
are
covered
by
both
the
utility
patent
applications
that
we
filed
last year with the USPTO, and by applications filed this year under the Plant Variety Protection Act. We are also continuing our Camelina
research and development program to improve the yields and oil composition of our patented Camelina varieties and the tolerance and
other
characteristics
of
our
Camelina
varieties.

-31-
 

To supplement our efforts to improve our proprietary varieties of Camelina, on April 15, 2021 we acquired Agribody
Technologies, Inc., (“ATI”) a privately-held agricultural biotechnology company that owns 16 patents related to the use of genetics to
increase yield, shelf life and other sustainability traits in Camelina and many other crops. The acquisition was effected in an all-stock
transaction with a total fair value of approximately $5 million, and ATI is now a 100% owned subsidiary of the Company. In
consideration for ATI, we issued 830,526 shares valued at $6.02 per share. In April 2021, ATI was issued a new key utility patent with
broad claims for genome editing specific mutations in a gene present in all plants, including Camelina to confer higher yield, tolerance
to stress and longer shelf life. ATI has a history of working with various crops to improve certain plant characteristics, and we expect
ATI
to
continue
this
work
and
maximize
the
value
of
its
patent
portfolio.
 
Bakersfield Biorefinery’s Status
.
The Bakersfield refinery had significant infrastructure in place and on site at the time of
our acquisition - this includes grid power, natural gas pipeline access, steam generation, fiber and controls, rail access and railway
facilities, an 8-bay truck rack and storage tanks capable of storing up to 3.3 million barrels of feedstock and/or product. The
reconstruction
and
conversion
of
the
Bakersfield
petroleum
refinery
into
a
biorefinery
is
progressing,
and
testing
and
upgrades
to
many of the acquired infrastructure assets are being completed. We are scheduled to begin commercial operations in early 2022. The
proprietary
hydrotreating
reactor
vessels
that
will
be used to convert feedstock to renewable diesel and other products at the
Bakersfield
Biorefinery
have
been fabricated and are being installed (all reactors are expected to be installed by mid-November,
2021). We have upgraded the existing railroad track and related facilities at the Bakersfield Biorefinery to handle incoming feedstocks
and have leased two electric railcar movers on site in preparation of commercial operations. We continue to evaluate various facility
improvements and related investments that can lower our overall carbon intensity and/or costs in our operations. We are working with
our utility provider to add a 10MW solar facility on site to improve our economics and to lower our carbon footprint, and we expect
construction to begin in 2022. We are currently evaluating certain agricultural processing facilities at our Bakersfield site that, upon
implementation, will provide for more control over processing costs and allow for optimum scheduling of our feedstock deliveries.
Being able to deliver and handle shuttle or unit-trains (which consists of approximately 110 to 120 rail cars) will improve efficiency
and lower cost. Our midstream aggregation facilities are being sited along mainline BNSF railway lines which run directly from our
growing
zones
directly
into
the
Bakersfield
Biorefinery
site.
 
Critical
Accounting
Policies
and
Related
Estimates
 
There have been no substantial changes to our critical accounting policies and related estimates from those previously
disclosed
in
our
2020
Annual
Report
on
Form
10-K.
 
Results
of
Operations
 
Three
Months
Ended
September
30,
2021
vs.
Three
Months
Ended
September
30,
2020
 
Revenues.
On May 7, 2020 we purchased the Bakersfield Biorefinery. Following the acquisition, we focused our efforts on
building our operations and management teams and on putting the processes in place to accomplish the task of retrofitting the
Bakersfield Biorefinery. Therefore, we had no operating revenues in the three months ended September 30, 2020 (the “2020 fiscal
quarter”).
We
did
not
engage
in
any
operating
activities
that
generated
revenues
until
the
first
quarter
of
2021
when
we
started
selling
a limited amount of our certified Camelina seeds to farmers for the production of either Camelina seed and/or Camelina grain to be
used at our Bakersfield Biorefinery. Therefore, we had no operating revenues from the Bakersfield Biorefinery in the three months
ended
September
30,
2021
(the
“2021
fiscal
quarter”)
and
only
a
minimal
amount
of
seed
revenues/returns.
 
General
and Administrative Expenses and Facility Expenses
. General and administrative expenses consist of expenses
generally involving corporate overhead functions and operations. Most of our general and administrative expenses are incurred in the
operations of the Bakersfield Biorefinery. In the 2020 fiscal quarter, we were not fully staffed and were ramping up business for the
retooling
of
the
Bakersfield
Biorefinery
and,
as
a
result,
our
overhead
expenses
in
the
2020
fiscal
quarter
were
less
than
the
expenses
in
the
2021 fiscal quarter, a quarter in which were more appropriately staffed and fully engaged in retooling activities at the
Bakersfield Biorefinery. As a result, our administrative expenses increased by $1.9 million from the 2020 fiscal quarter to $4.6 million
in the 2021 fiscal quarter. This increase was primarily related to an increase in overall payroll costs and benefits, professional fees,
insurance costs, technology and communications costs and various vendor costs. We anticipate that our general and administrative
expenses will continue to increase as the development of the refinery progresses and operations commence. Facility expense primarily
consists of maintenance costs at the Bakersfield refinery, and expenses normally related to the operations of a refinery. Our facility
expenses increased by $1.6 million from $1.6 million in the 2020 fiscal quarter to $3.2 million in the 2021 fiscal quarter because we
were
increasing
our
activities
at
the
refinery.
 
-32-
  
Other Income/Expense.
In the 2021 fiscal quarter we recognized a charge of $2.8 million on the change in fair value of our
Class B Units.
We had no comparable charge in the 2020 fiscal quarter.
This increase in the fair value is a result of increased
borrowings
and
a
higher
estimated
value
of
the
outstanding
Class
B
Units
from
when
they
were
originally
issued.
 
Interest Income/Expense.
Interest expense in the 2021 fiscal quarter and the 2020 fiscal quarter consisted of interest of $0.7
million
and
$0.8
million,
respectively,
from
outstanding
promissory
notes.
Our
incurred
interest
will
increase
significantly
in
the
future
as we further draw down on the $317.6 million Senior Credit Facility and $67.4 million Mezzanine Credit Facility, and as the
outstanding principal balances of those loans increase. However, construction period interest is capitalized as part of the cost of the
refinery
and
therefore,
does
not
impact
our
interest
expense.
 
Net losses.
We incurred an operating loss of $8.1 million and $4.7 million in the 2021 and 2020 fiscal quarters, respectively,
and a net loss of $11.7 million in the 2021 fiscal quarter compared to a $5.4 million net loss in the 2020 fiscal quarter. Our operating
loss increased primarily as a result of the increase in activity related to our retooling of the Bakersfield Biorefinery. We expect to incur
losses for the remainder of 2021 while our biorefinery is under construction and, therefore, not operational. Operating losses and net
losses were lower in the fiscal 2020 quarter than in the 2021 fiscal quarter because we acquired the Bakersfield Biorefinery during
2020
and
after
that
time
we
began
building
our
staff
and
incurring
necessary
costs,
therefore,
our
general
and
administrative
costs
were
higher in the 2021 fiscal quarter.
In addition, our staffing and other costs related to the Bakersfield Biorefinery have significantly
increased
in
the
2021
fiscal
quarter
as
our
operating
activities
and
the
retooling
activities
have
increased.
 
Nine
Months
Ended
September
30,
2021
vs.
Nine
Months
Ended
September
30,
2020
 
Revenues.
As discussed above, during the second quarter of 2020 we transitioned our activities from the acquisition of the
Bakersfield Biorefinery to building the team necessary to properly retrofit the asset and implement the structure to accomplish the task
of
retooling
the Bakersfield Biorefinery on the planned schedule. Our activities necessary for the retooling of the Bakersfield
Biorefinery continued to grow in the third quarter of 2021. Therefore, we had no operating revenues in the nine months ended
September
30,
2020
(the
“2020
fiscal
period”)
and
only
$0.2
million
of
revenues
from
Camelina
certified
seed
sales
in
the
nine
months
ended
September
30,
2021
(the
“2021
fiscal
period”).
 
General
and Administrative Expenses and Facility Expenses
. General and administrative expense consists of expenses
generally involving corporate overhead functions and operations, mostly at the Bakersfield Biorefinery. In the 2020 fiscal period, we
did not own the Bakersfield Biorefinery for the full period and, as a result, we had fewer overhead expenses. In the 2021 fiscal period,
we
owned
the
Bakersfield
Biorefinery
for
the
full
period
and,
therefore,
had
significantly
higher
expenses. As a result, our
administrative expenses increased by $10.6 million from $5.0 million in the 2020 fiscal period to $15.6 million in the 2021 fiscal
period. This increase was primarily related to an increase in overall payroll costs and benefits, professional fees, insurance costs,
technology and communications costs and various vendor costs. We anticipate that our general and administrative expenses will
continue to increase as the development of the refinery progresses and when our refinery operations commence in 2022. Facility
expense
primarily
consists
of
maintenance
costs
to
keep
the
Bakersfield
assets,
that
we
purchased
in
May
2020,
in
an
operational
mode and expenses normally related to the operations of a refinery. Our facility expenses increased by $7.3 million in the 2020 fiscal
period
to
$9.7
million
in
the
2021
fiscal
period.
 
Other Income/Expense.
In the 2021 fiscal period we had no impact from derivatives, whereas in the 2020 fiscal period we
recognized $5.5 million of income from the decrease in fair value of the Derivative Contract and a gain of $0.5 million on the
derecognition of the Derivative Contract. In the 2021 fiscal period we recognized a charge of $5.9 million on the change in fair value
of our Class B Units; no such charge was incurred in the 2020 fiscal period
(as described in “Liquidity” below, Class B Units were
issued to the Senior Lenders).
The increase in the charge related to the Class B Units is a result of higher borrowings and a higher
estimated value of the outstanding Class B Units from when the units were originally issued.   We also had $0.1 million of other
income
in
the
2021
fiscal
period
with
no
similar
income
in
the
2020
fiscal
period.
 
Interest Income/Expense.
Interest expense in the 2021 fiscal period and the 2020 fiscal period consisted of interest of $2.2
million
and
$1.7
million,
respectively,
from
outstanding
promissory
notes.
Our
incurred
interest
will
increase
significantly
in
the
future
as we continue to further draw down on the $317.6 million Senior Credit Facility and $67.4 million Mezzanine Credit Facility, and as
the outstanding principal balances of those loans increase. However, construction period interest will be capitalized as part of the cost
of
the
refinery,
and
therefore,
will
not
impact
our
interest
expense.
 
Net losses.
We incurred an operating loss of $26.0 million and $7.7 million in the 2021 and 2020 fiscal periods, respectively.
We incurred a net loss of $34.0 million in the 2021 fiscal period compared to a $3.4 million net loss in the 2020 fiscal period. Our
operating loss increased in the 2021 fiscal period as a result of the increase in activity related to the retooling of the Bakersfield
Biorefinery
and
in
preparation
for
operations
in
2022.
We
expect
to
incur
losses
for
the
remainder
of
2021
while
our
biorefinery
is under
construction
and
therefore
not
is
not
conducting
operations.
Our
operating
loss
was
lower
in
fiscal
2020
than
in
the
2021
fiscal
period
because
we
did
not
own
the
Bakersfield
Biorefinery
for
a
significant
portion
of
the
2020
fiscal
period.
 
-33-
 
Liquidity
and
Capital
Resources
 
As
of
September
30,
2021
and December 31, 2020, we had approximately $43.7 million and $39.0 million of cash,
respectively,
of
which
$25.2
million
and
$22.7
million,
respectively,
is
considered
long-term
as
that
cash
is
restricted
to
be
spent
on
the Bakersfield Biorefinery. However, of the $43.7 million of cash as of September 30, 2021, only $16.2 million is unrestricted and
available to pay our current liabilities, while the remaining $27.5 million of cash is restricted and can only be used to fund our Senior
Credit Facility loan interest obligations and our biorefinery construction costs. On September 30, 2021 and December 31, 2020 we had
negative working capital of $50.1 million and $5.8 million, respectively. This working capital does not consider the long-term cash
identified
above.
 
In order to fund some of our working capital expenses, on April 16, 2021, we raised $3.1 million through the private sale of
496,000
shares
of our unregistered common stock at $6.25 per share to three accredited investors. In connection with the foregoing
sale
of
shares,
we
also
issued
to
the
investors
warrants
for
the
purchase
of
19,840
shares
(which
warrants
have
an
exercise
price
of $6.25).
 
In order to fund our working capital requirements and the third party costs and expenses related to our efforts to acquire the
Bakersfield refinery we entered into a derivative contract agreement pursuant to which we received an aggregate of $10 million of
funding. The derivative agreement was amended on April 20, 2020 and called for a cash payment of $4.5 million in June 2020 (that
was paid) and six equal monthly payments of $3.375 million beginning in May 2022. This payment stream is scheduled to coincide
near
the
date
of
the
commencement
of
commercial
operations
of
the
Bakersfield
Biorefinery.
 
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 scheduled to commence
commercial operations in early 2022. Until the Bakersfield Biorefinery is operational, we will not generate any refinery operating
revenues. We anticipate that we will generate some revenues during the remainder of 2021 from sales of our Camelina certified seed,
although such revenues are not expected to be significant. During the construction phase of the biorefinery, we will continue to incur
significant general and administrative, operating costs and capital expenditures to upgrade the existing equipment and facilities. The
expenses that we expect to incur include, among others, the purchase of new biorefinery equipment, the payments to our contractors
under the various engineering, procurement and construction agreements that we entered into, the costs of maintaining the existing
facility
during
the
construction
phase,
paying
engineering
fees
and
payroll
costs,
property
taxes,
labor
costs,
general
and
administrative costs, the costs of upgrading the refinery’s rail line and certain pipelines, and making interest and other payments under
our
Senior
Credit
Facility
and
Mezzanine
Credit
Facility.
 
In order to fund the cost of acquiring the Bakersfield oil refinery, converting the oil refinery into a biorefinery, and paying all
operating expenses during the preoperational period, in May 2020 we entered into (i) a $300 million senior secured term loan facility
with certain Senior Lenders which credit facility was upsized to $313.2 million in November 2020, and (ii) a $65 million secured term
loan facility with certain Mezzanine Lenders which was also upsized to $66.8 million in November 2020. Our credit facilities were
upsized by a total of $5 million as of July 29, 2021, whereby the borrowing capacity of our (i) Senior credit facility is $317.6 million
and (ii) our Mezzanine Credit Facility is $67.4 million. As of September 30, 2021, we have borrowed $284.9 million under the Senior
Credit Facility, of which approximately $60 million was unspent as of the end of September 30, 2021. As of September 30, 2021, we
have
not
yet
utilized
the
Mezzanine
Credit
Facility.
 
The Senior Credit Facility bears interest at the rate of 12.5% per annum, payable quarterly. No principal payments are
required to be made under the Senior Credit Facility until maturity. The Senior Credit Facility matures on November 4, 2026. The
Mezzanine
Credit
Facility
will
bear
interest
at
the
rate
of
15.0%
per
annum
on
amounts
borrowed,
payable
quarterly,
provided
that
we
may defer up to 2.5% interest to the extent we do not have sufficient cash to pay the interest (any deferred interest will be added to
principal). Principal of the Mezzanine Credit Facility is due at maturity. As additional consideration for the Senior Credit Facility
and
Mezzanine Credit Facility, the Senior Lenders were issued Class B units (and the Mezzanine Lenders will be issued Class C Units
when we borrow under the Mezzanine Credit Facility) in our BKRF HCB, LLC, the 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 certain priority cumulative distributions, if any, that may be
made
in
the
future
from
the
operations
of
the
Bakersfield
Biorefinery,
distributions
made
to
the
holders
of
the
Class
B
and
C
Units
will
reduce
the
amount
of
distributions
that
we
may
be
entitled
to
receive
in
the
future
from
the
operations
of
the
Bakersfield
Biorefinery.

-34-
 
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 anticipated that the $385 million available to us under the Senior Credit
Facility
and
Mezzanine
Credit
Facility
would
be
sufficient
to
fund
our
original
projected
capital
expenditures
and
operating
expenses at
the
Bakersfield
Biorefinery
until
the
Bakersfield
Biorefinery
becomes
operational.
However,
the
scope
of
the
Bakersfield
Biorefinery has both changed and expanded to include additional capabilities and equipment, which changes are increasing the cost of
installing, developing and constructing the Bakersfield Biorefinery. In order to fund the expected cost overruns and other additional
investments in, or related to the biorefinery, earlier this year we agreed with our Senior Lenders and Mezzanine Lenders to raise
additional third party funding and to establish a $35 million contingency reserve.
The date by which the reserve account has to be
funded
has
been
extended
to
November
19,
2021.
As
of
the
date
of
this
quarterly
report,
we
have
not
yet
established
the
foregoing $35 million contingency reserve and may not be able to do so by November 19, 2021. While our lenders have in the past amended the
credit agreements to provide us with additional time to establish the reserve account, no assurance can be given that the lenders will do
so in the future. The Company is not able to fund the $35 million reserve account absent an amendment or additional debt and/or
equity
financing.
These
conditions
raise
substantial
doubt
about
the
Company’s
ability
to
continue
as
a
going
concern
for
a
period
of
at
least one year from the time the financial statements are issued.
Management plans to close on an additional debt and/or equity
financing in the short-term and believes that transaction is probable of closing.
Therefore, management believes their plan alleviates
the
substantial
doubt.
 
We are a vertically integrated renewable fuels company with operations in both the farm and finished fuels lines of business.
Recently, our focus has been on the acquisition and construction of our Bakersfield Biorefinery. As the development of the refinery
nears its completion, we have decided to accelerate the development of our Camelina operations. The primary focus of the accelerated
growth of our Camelina operations consists of increasing the amount of Camelina that is produced for use at the Bakersfield
Biorefinery and, possibly, for sale to third party biofuel producers.
Increasing the number of acres of Camelina that our contracted
growers will cultivate requires a substantial up-front investment since we have to pay the growers for the Camlina grain that they
produce before we derive any revenues from that grain (the Camelina grain must first be converted into Camelina oil, which oil is then
used to produce renewable diesel and other renewable fuel products that can be sold to generate revenues).
As part of our efforts to
grow our Camelina operations, we have increased our efforts to recruit additional growers, have leased a state-of-the art headquarters
and research facility in Great Falls, Montana, and are pursuing the talent that we desire to expand our operations and commenced
negotiations to acquire a European Camelina company. These initiatives will require capital expenditures that significantly exceed our
current financial resources. Accordingly, in order to obtain the funds we need for the $35 million refinery contingency reserve, for
general corporate purposes, and our Camelina initiatives, we have been in discussions for debt and/or equity financing with certain
agri-finance companies, strategic partners, our existing lenders, and third party investors.
No assurance can be given that we will
obtain
some
or
all
of
the
funds
we
seek,
or
that
if
we
do
obtain
such
funding,
that
the
terms
under
which
we
obtain
such
funding
will
be beneficial to us. Furthermore, any funding that we obtain may result in issuance of a substantial number of shares of preferred or
common stock or common stock equivalents, which issuances could be dilutive to, or have priority over, the holders of our common
stock.
 
Our transition to profitability is dependent upon, among other things, the successful and timely development and construction
of our biorefinery and the commercialization of the products that we intend to produce at the Bakersfield Biorefinery. To ensure that
we have a buyer for the renewable diesel produced at our biorefinery, we have entered into an offtake agreement with ExxonMobil Oil
Corporation (ExxonMobil). Under that agreement, ExxonMobil has agreed to purchase 2.5 million barrels 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.
The
Bakersfield
Biorefinery
is
being
designed
for
a
capacity
of
15,000
barrels
per
day or an annual volume of
approximately 5.4 million barrels per year. On April 20, 2021 we entered into a second agreement, a term purchase agreement, with
ExxonMobil whereby ExxonMobil has the right to purchase additional quantities of renewable diesel above the original 2.5 million
barrels per year. The revenues we expect to receive under the offtake agreement and the term purchase agreement, together with our
other
projected
sources
of
revenues,
are
expected
to
fund
our
anticipated
working
capital
and
liquidity
needs.
 
Once completed, the Bakersfield Biorefinery will be able to produce renewable diesel from various renewable feedstocks,
such as Camelina oil produced from our patented Camelina varieties, soybean oil and other plant and animal sources. We believe that
one of our strategic advantages is that a significant portion of the feedstock expected to be used at our biorefinery will be Camelina
grain produced from our patented Camelina varieties for us by third party farmers for use in the Bakersfield Biorefinery or for sale to
third parties. However, we anticipate that we will need additional funding for general corporate purposes and to grow our certified
Camelina
seeds,
to
enter
into
agreements
with
farmers,
and
to
otherwise
ramp
up
the
cultivation
and
production
of
Camelina.
As
of
the
date
of
this
report,
we
have
only
secured
limited
funding
for
our
Camelina
production
plans.

-35-
 
To the extent that we raise additional funds through the issuance of equity securities, our stockholders will experience
dilution, and the terms of the newly issued securities could include certain rights that would adversely affect our stockholders’ rights.
In addition, we are also considering obtaining funding through the issuance of preferred stock, which preferred stock may require us to
make significant dividend and other payments to the investors. Payments on any new series of preferred stock may negatively affect
our future liquidity. Furthermore, if these new securities are convertible or are accompanied by the issuance of warrants to purchase
shares of our common stock, our current stockholders may experience substantial dilution. Over the last year we have moved the
listing of our common stock from the OTC Pink marketplace, which had limited liquidity, to our current trading platform on the
OTCQX,
which
has
better
liquidity
for
trading
our
shares.
Our
goal
is
to
list
our
shares
of
common
stock
on
one
of
the
NASDAQ markets, and while we do not currently meet NASDAQ’s listing requirements, we have filed a preliminary application in preparation
of becoming listed. Our ability to secure additional debt or equity financing could be significantly impacted by numerous factors
including the status, timing and cost of the conversion of the Bakersfield Biorefinery, positive or negative developments in the
environmental
regulations
and
the
demand
for
biofuels,
delay or inability to become listed on NASDAQ and general market
conditions. There can be no assurance that we will be successful in raising debt or equity funding or that any such financing will be
available, available on favorable or acceptable terms or at the times, or in the amounts needed. Additionally, while the potential
economic impact brought on by and the duration of the coronavirus pandemic is difficult to assess or predict, the significant impact of
the coronavirus pandemic on the global financial markets and on our own stock trading price, could reduce our ability to access
additional
capital,
which
would
negatively
impact
our
short-term
and
longer-term
liquidity.
 
We
have
no
off-balance
sheet
arrangements
as
defined
in
Item
303(a)
of
Regulation
S-K.

-36-
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
As a “smaller reporting company” as defined by Item 10 of Regulation S-K promulgated by the SEC under the U.S. Securities Act of 1933, as amended, we are not required to provide the information required by this Item 3.
 
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 assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer (the “Certifying Officers"), as appropriate, to allow timely decisions regarding required disclosures.
 
In designing and evaluating the 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 Quarterly Report on Form 10-Q, management, under the supervision and with the participation of our Certifying Officers, evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, the Certifying Officers have concluded that, as of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective because of the following material weaknesses in our internal control over financial reporting: (i) ineffective controls over period end financial disclosure and reporting processes, including not timely performing certain reconciliations, and lack of approval of adjusting journal entries, (ii) inadequate segregation of duties in various key processes including the information technology control environment, and (iii) we had not performed a risk assessment and mapped the accounting processes to control objectives. We are taking remedial steps to address the material weaknesses in our internal control over financial reporting. These remedial steps include the following:
 
(a) In 2021, the Company has hired additional financial and accounting personnel who are experienced in general accounting and financial reporting. The Company is also evaluating its accounting and information technology personnel as necessary to remediate the identified weaknesses;
 
(b) The Company is implementing more robust financial reporting, accounting and management controls over its accounting, disclosure, and financial reporting functions, including developing and implementing a supplemental approval procedure for costs and expenses in excess of budgeted line items. The Company continues to evaluate and modify, as necessary, its approval control procedures;
 
(c) The Company has engaged an independent consultant to assist the Company in improving its internal control over financial reporting, and the Company is evaluating the recommendations put forth by the consultant.
 
Changes in Internal Control Over Financial Reporting
.
 
Except as described above, there has been no change in the Company’s internal control over financial reporting during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

-37-
 
Part II. OTHER INFORMATION
 
Item 1. Legal Proceedings
 
The information required with respect to this item can be found under “Legal” in Note H to our condensed consolidated financial statements included elsewhere in this Form 10-Q and is incorporated by reference into this Item 1.
 
In the future, we may become party to legal matters and claims arising in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.
 
Item 1A. Risk Factors
 
RISK FACTORS
 
Investment in our stock involves a high degree of risk. You should consider carefully the risks described below, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC, before making investment decisions regarding our stock. If any of the following events actually occur, our business, operating results, prospects or financial condition could be materially and adversely affected. This could cause the trading price of our common stock to decline and you may lose all or part of your investment. Moreover, the risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business, operating results, prospects or financial condition.

These risk factors also contain forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

 
The risk factors set forth below with an asterisk (*) before the title are new risk factors or ones containing substantive changes from the risk factors previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.
 
Risks Related to Our Business and Industry
 
*   We have not completed the construction and commissioning of the Bakersfield Biorefinery. We may experience time delays, unforeseen expenses, increased capital costs, and other complications while developing the Bakersfield Biorefinery, which complications could delay the commencement of revenue-generating activities and increase our development costs.
 
We have entered into a binding turnkey agreement with guaranteed maximum price for the engineering, procurement and construction of the Bakersfield Biorefinery. Based on our updated construction timetable, the engineering and construction of the Bakersfield Biorefinery is currently scheduled to be completed, and to commence operations in early 2022. Although our primary contractors have agreed to complete the construction of the Bakersfield Biorefinery within a specified period at a maximum price to us, the construction of these kinds of facilities is inherently subject to the risks of unforeseen required change orders, regulatory issues, cost overruns and delays. In addition, the scope of the project has changed, which may also contribute to a delay in the completion of the project. Delays in the development beyond our estimated timelines, or amendments or change orders to the construction contract, could increase the cost of completion beyond the amounts that we have budgeted. Furthermore, while we believe that we currently hold all necessary environmental, regulatory, construction and zoning permissions that we need for the construction of the Bakersfield Biorefinery, no assurance can be given that we will not be required to obtain additional regulatory and land use approvals, which additional regulatory approvals may delay the commencement of operations of the Bakersfield Biorefinery or increase its development costs. If for any reason we are unable to construct and commission the Bakersfield Biorefinery within the financial and timing requirements, our business and our expected operating results, cash flows and liquidity could be materially and adversely affected.
 
We have a limited operating history in commercially refining and selling biofuels, and no history in operating a renewable diesel biorefinery. Accordingly, we have no history from which you can evaluate our business and prospects.
 
We have a limited operating history and track record in the biofuels market, and no history in the construction and operations of a renewable fuels biorefinery. Prior to the acquisition of the Bakersfield Biorefinery, we were an energy agri-business company focused on developing our ultra-low carbon nonfood-based feedstocks for renewable fuels and chemicals in the United States, Mexico and the Caribbean. In the near term, our growth strategy depends on our ability to successfully operate the Bakersfield Biorefinery and to provide the Bakersfield Biorefinery with sufficient feedstocks, particularly Camelina that is grown for the Bakersfield Biorefinery by third-party farmers. However, we have no history of owning, developing, constructing or operating a renewable fuels refinery. As a result, our prior operating history and our historical financial statements may not be a reliable basis for evaluating our business prospects or the future value of our common stock. We cannot give you any assurance that we will be able to implement our strategy in the manner we expect, if at all, or achieve our internal business projections, or that our assumptions regarding the operations of the Bakersfield Biorefinery or the Camelina feedstock production will be accurate. Our limited operating history also means that we may have to develop and implement various alternate policies and procedures related to Bakersfield Biorefinery’s development and future operations, to our feedstock supply chain, and to other matters.

-38-
 
Our
ability
to
implement
our
business
strategy
may
be
materially
and
adversely
affected
by
many
known
and
unknown
factors.
 
Our
business
strategy
relies
upon
our future ability to successfully operate the Bakersfield Biorefinery and to source
Camelina
and
other
feedstocks
in
a
cost-effective
manner.
Our
business
strategy
relies
on
numerous
assumptions
and
these
assumptions are subject to significant economic, competitive, regulatory and operational uncertainties, contingencies and risks, many
of which are beyond our control. Our future ability to execute our business strategy is uncertain and unproven, and it can be expected
that one or more of our assumptions will prove to be incorrect and that we will face unanticipated events and circumstances that may
adversely affect our business. Among the factors that could have a material adverse effect on our ability to implement our strategy and
achieve
our
targets
are
the
following:
 
●
inability
to
complete
the
construction
of
the
Bakersfield
Biorefinery
in
a
timely
manner;
 
●
inability to complete the construction of the Bakersfield Biorefinery for the anticipated cost and within our available
financial
resources;
 
●
inability to source feedstock for the Bakersfield Biorefinery, including Camelina, in sufficient quantities and/or at
economically
attractive
prices;
 
●
failure
to
manage
third-party
Camelina
cultivation
operations
at
the
expected
costs
and
in
the
projected
time
frame;
 
●
inability to enroll a sufficient number of third party farmers to grow Camelina our behalf in order to fulfill our
forecasted
Camelina
feedstock
requirements;
 
●
failure
of
our
proprietary
Camelina
varieties
to
produce
the
amount
and
quality
of
grain
as
expected;
 
●
changes in existing and future governmental laws and regulations affecting the energy markets in general, and the
renewable
energy
markets
in
particular;
 
●
changes in general economic, political and business conditions in the U.S., particularly those that affect the energy
and
renewable
fuels
markets;
 
●
increases in operating costs, including the need for additional or unexpected capital improvements, labor costs
transportation,
processing and storage costs, insurance premiums, general taxes, real estate taxes and utilities,
environmental
regulation
compliance
costs,
and
other
costs
affecting
our
profit
margins;
 
●
public health crises, such as the novel coronavirus outbreak that began in early 2020, which could impact global
economic
conditions;
or
 
●
inability,
or
failure,
of
any
customer
or
contract
counterparty
to
perform
their
contractual
obligations
to
us.
 
*   The termination of the ExxonMobil Oil Corporation Product Offtake Agreement would negatively affect our future marketing
and
sales
of
renewable
diesel
and
would
trigger
an
event
of
default
under
our
two
credit
facilities.
 
Under
the
Offtake
Agreement
that
we
entered
into
with
ExxonMobil
Oil
Corporation,
ExxonMobil
has
agreed
to
purchase
2.5
million barrels of renewable diesel per year from the Bakersfield Biorefinery for a period of five years following the date that the
Bakersfield Biorefinery commences operations. We have also entered into a Term Purchase Agreement with ExxonMobil pursuant to
which we granted ExxonMobil the right to purchase the renewable diesel produced at the Bakersfield Biorefinery in excess of the
amount of renewable diesel that we sell to ExxonMobil under the Offtake Agreement.
Either party may terminate the Offtake
Agreement if the Bakersfield Biorefinery does not meet certain production levels by the end of the first and second six-month periods
following
the
commencement
of
the
Bakersfield
Biorefinery’s
operations.
In
addition, ExxonMobil can terminate the Offtake
Agreement if the construction of the biorefinery is not completed by October 15, 2022. A termination of the Offtake Agreement will
also terminate the Term Purchase Agreement.
In addition, termination of the Offtake Agreement could constitute an event of default
under our credit agreements that provide us with $385 million of financing from our Senior Lenders and Mezzanine Lenders. Our
obligations under the credit agreements are secured by a security interest in all of the assets at the Bakersfield Biorefinery and by all of
the
assets
and
ownership
interests
of
our
subsidiaries
that
directly
or
indirectly
own
the
Bakersfield
Biorefinery.
 
-39-

We
are
dependent
on
our
contractors
for
the
successful
completion
of
the
Bakersfield
Biorefinery.
 
The construction of most of the Bakersfield Biorefinery has been outsourced to a primary contractor under a guaranteed
maximum price engineering, procurement and construction (EPC) contract, but certain other contractors have also been engaged by us
to,
among
other
things,
construct
and refurbish railroad tracks through the Bakersfield Biorefinery and to install underground
pipelines. Our business strategy is highly dependent on our contractors’ performance under their agreements with us. Our contractors’
ability
to
perform
successfully
under
their
contracts
is
dependent
on
a
number
of
factors,
including
their
ability
to:
 
●
design
and
engineer
the
Bakersfield
Biorefinery
to
operate
in
accordance
with
specifications;
 
●
engage
and
retain
third-party
subcontractors
and
procure
equipment
and
supplies;
 
●
respond to difficulties such as equipment failure, delivery delays, schedule changes and failure to perform by
subcontractors,
some
of
which
are
beyond
their
control;
 
●
attract,
develop
and
retain
skilled
personnel,
including
engineers;
 
●
post
required
construction
bonds
and
comply
with
the
terms
thereof;
 
●
manage the construction process generally, including coordinating with other contractors and regulatory agencies;
and
 
●
maintain
their
own
financial
condition,
including
adequate
insurance
coverage
and
working
capital.
 
Although our primary EPC contract provides for liquidated damages if the contractor fails to perform in the manner required
with respect to certain of its obligations, the events that trigger a requirement to pay liquidated damages may delay or impair the
operation of our Bakersfield Biorefinery, and any liquidated damages that we receive may not be sufficient to cover the damages that
we suffer as a result of any such delay or impairment. Furthermore, we may have disagreements with our contractors about different
elements of the construction process, which could lead to the assertion of rights and remedies under their contracts and increase the
cost of the project or result in a contractor’s unwillingness to perform further work on the project. If any contractor is unable or
unwilling to perform according to the negotiated terms and timetable of its respective agreement for any reason or terminates its
agreement, we would be required to engage a substitute contractor. Any of the foregoing events would likely result in significant
project
delays
and
increased
costs.
 
*   The
COVID-19
pandemic
may
adversely
impact
our
business.
 
The COVID-19 pandemic has negatively impacted the global economy. While we have to date not incurred significant,
unmanageable
operational
or
financial
disruptions
from
the
COVID-19
pandemic or from the measures that we implemented to
address
the
pandemic,
the
extent
to
which
the
COVID-19
pandemic
may
adversely
impact
our
business
depends
on
future
developments,
which
are
highly
unpredictable.
 
We cannot predict the degree to, or the time period over which our sales and operations will be affected by this outbreak, and
the
effects
could
be
material.
The
impacts
include,
but
are
not
limited
to:
 
●
a
significant
decline
in
demand
for
our
products
due
to
market
disruptions,
resulting
in
a
decline
in
sales
and
prices;
 
●
limitations
of
feedstocks,
price
volatility,
or disruptions
to
our
suppliers’
operations;
 
●
the
interruption
of
our
distribution
system,
or
temporary
or
long-term
disruption
in
our
supply
chains,
or
delays
in
the
delivery
of
our
products;
 
●
suspension
of
renewable
fuel
and/or
low
carbon
fuel
policies;
 
●
limitations on our ability to operate our business as a result of federal, state or local regulations, including any
changes
to
the
designation
of
our
business
as
“essential”
by
the
US
Department
of
Homeland
Security;
 
●
decreases in the demand for and price of Renewable Identification Numbers (“RINs”) and low carbon fuel standard
(LCFS)
credits
as
a
result
of
reduced
demand
for
petroleum-based
gasoline
and
diesel
fuel;
and
 
●
Our management of the impact of COVID-19 has and will continue to require significant investment of time and
may cause us to divert or delay the application of its resources toward other or new initiatives or investments, which
may
cause
a
material
adverse
impact
on
the
results
of
operations.
 
-40-
 
The extent of the impact of the COVID-19 pandemic on our business is highly uncertain, as information is evolving with
respect to the duration and severity of the pandemic. In addition, new coronavirus mutations and variants, which may be more
contagious or deadly than the original virus, continue to appear.
These new mutations or variants may, directly or indirectly, impact
our operations in the future in ways we cannot anticipate. We cannot reasonably estimate the duration and severity of the COVID-19
pandemic,
or
its
impact,
which
may
be
significantly
harmful
to
our
operations
and
profitability.
 
*   We may encounter difficulties in integrating the businesses or facilities we acquire, including any international businesses that
we
may
acquire
in
the
future.
 
As part of our business plan, we intend to acquire other businesses that enhance or supplement our biorefinery and camelina
production operations.
Earlier in 2021 we acquired an agricultural biotechnology company, and we are currently in discussions to
acquire one or more complementary businesses. We may face significant challenges in integrating any of the entities, businesses or
other facilities, including other refineries, that we acquire, and we may not realize the benefits anticipated from such acquisitions. Our
integration
of
future
acquisitions
involves
a
number
of
risks,
including:
 
●
difficulty
in
integrating
the
operations
and
retaining
of
personnel
of
any
acquired
company,
business
or
facility;
 
●
difficulty in effectively integrating the acquired technologies, products or services with our current technologies, products or
services;
 
●
demands on management related to the increase in our size after an acquisition and integration of the acquired business and
personnel;
 
●
failure
to
achieve
expected
synergies
and
costs
savings;
 
●
difficulties in the integration of departments, systems, including accounting systems, technologies, books and records and
procedures, as well as in maintaining uniform standards and controls, including internal control over financial reporting, and
related
procedures
and
policies;
 
●
the incurrence of acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating
results;
 
●
the
need
to
fund
significant
working
capital
requirements
of
any
acquired
production
facilities
or
businesses;
 
●
potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges
of an acquired company or technology, including but not limited to, issues with the acquired company’s intellectual property,
product quality, environmental liabilities, data back-up and security, revenue recognition or other accounting practices,
employee,
customer
or
partner
issues,
or
legal,
tax
and
financial
contingencies;
 
●
exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an
acquisition, including but not limited to, claims from terminated employees, customers, former stockholders or other third
parties;
and
 
●
the
incurrence
of
significant
exit
charges
if
products
or
services
acquired
in
business
combinations
are
unsuccessful.
 
We are also considering acquiring entities or businesses outside of the United States.
Any such foreign acquisitions will, in
addition
to
the
foregoing
risks,
also
be
subject
to
a
number
other
risks,
including:
 
●
challenges caused by distance, language, cultural differences, political economic and social instability, and the assimilation of
broad
and
geographically
dispersed
personnel
and
operations;
 
●
difficulties
in
protecting
and
enforcing
our
intellectual
property
rights
abroad;
 
●
the
inability
to
extend
proprietary
rights
in
our
technology
into
new
jurisdictions;
 
●
currency
exchange
rate
fluctuations
and
foreign
tax
consequences;
 
●
general
economic
and
political
conditions
in
foreign
jurisdictions;
 
●
foreign
exchange
controls
or
U.S.
tax
laws
in
respect
of
repatriating
income
earned
outside
the
United
States;
 
●
compliance with the U.S.'s Foreign Corrupt Practices
Act and other similar anti-bribery and anti-corruption
regulations,
and
 
-41-
 
●
higher
costs
associated
with
doing
business
internationally,
such
as
those
associated
with
complying
with
export,
import
regulations
and
trade
and
tariff
restrictions.
 
Loss
of
key
personnel
or
our
inability
to
attract,
train
and
retain
additional
key
personnel
could
harm
our
ability
to
meet
our
business
objectives.
 
Our Bakersfield Biorefinery operations and Camelina feedstock businesses involve complex operations spanning a variety of
disciplines that require a management team and employee workforce that is knowledgeable in the many areas necessary for our
operations. While we have been successful in attracting certain experienced, skilled professionals to our company, we will have to
identify, attract and retain a significant number of additional employees once the Bakersfield Biorefinery is operational and the
Camelina cultivation expands to our projected levels. Failure to hire the qualified employees that we will need could affect the
operations
and
the
future
profitability
of both our Bakersfield Biorefinery and our Cameliina operations. We are also heavily
dependent upon certain of our current senior executives and upon certain key independent contractors and advisors for supervising the
construction of the Bakersfield Biorefinery, the operations of the Bakersfield Biorefinery, and the implementation of our Camelina
cultivation and production plan. The loss of these key employees and contractors could have a significant detrimental impact on the
development and initial operations of the Bakersfield Biorefinery, on our Camelina research and development program, and on the
implementation of our Camelina cultivation operations. Hiring, training and successfully integrating qualified personnel into our
operation is a lengthy and expensive process. The market for qualified personnel is very competitive because of the limited number of
people available with the necessary skills to operate a renewable diesel refinery, to successfully source feedstock, to continue our
Camelina development program, and to commercialize the renewable fuels that the Bakersfield Biorefinery is designed to produce. If
we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience staffing
constraints
that
will
adversely
affect
our
future
operations.
 
Our
Camelina
patents
may
not
protect
us
against
competition
from
other
biofuel
competitors.
 
An important element of our plan of operations of our Bakersfield Biorefinery is the use of Camelina oil that is derived from
our
patented
varieties
of
Camelina
as
one
of
the
principal
feedstocks
at
the
Bakersfield
Biorefinery.
We
currently
have
three
issued U.S. utility patents for varieties of Camelina as well as another issued U.S. utility patent directed to methods for improving the
Camelina oil. We have also filed seven additional utility patent applications, including a patent application directed to methods for
improving Camelina oil, and applications for another six Camelina plant varieties (which varieties are also covered by six applications
that
we
have
filed under the Plant Variety Protection Act (PVPA)). We have acquired patents in our acquisition of Agribody
Technologies, Inc., and certain of those patents can enhance our existing intellectual property for Camelina. Interpreting the scope and
validity
of
patents
and
success
in
prosecuting
patent
applications
involves
complex
legal
and
factual
questions,
and
the
issuance,
scope,
validity
and enforceability of a patent cannot be predicted with any certainty. Patents issued to us may be challenged,
invalidated or circumvented. Accordingly, we cannot be certain that any of our patent applications will result in issued patents, or if
issued, we cannot be certain of the validity and/or enforceability of any newly issued patents. Moreover, we cannot be sure that any of
our patent rights will be broad enough in scope to provide commercial advantage and prevent circumvention, nor do our patents give
us the exclusive right to cultivate other varieties of Camelina.
Our patents do not limit the right of others to use the oil from other
Camelina varieties as a biofuels feedstock. No assurance can be given that other biofuel producers will not imitate our business plan
and use Camelina as a biofuel feedstock, nor do our existing patent rights prevent others from competing with us and developing
substantially
similar
business
plans.
 
*   Our
Camelina
operations
will
be
dependent
upon
the
availability
of
farmland,
our
relationship
with
third-party
farmers,
and
on
factors
affecting
agricultural
operations
in
general.
 
We do not own or control any farms or farmland on which we can grow our patented varieties of Camelina. Accordingly, we
are wholly dependent upon third party farmers to plant, cultivate, harvest and store the Camelina that we plan to use as feedstock for
the production of renewable diesel at the Bakersfield Biorefinery, and possibly elsewhere. Our ability to obtain the amount of
Camelina that we propose to use as feedstock at the Bakersfield Biorefinery therefore is dependent upon our ability to recruit a
sufficient number of farmers to grow Camelina for us, to enter into mutually acceptable financial and other arrangements with the
farmers that we recruit, and for those farmers to successfully grow, harvest and deliver that Camelina to us. While we have identified a
number of farmers and several farm cooperatives that have expressed an interest in producing Camelina in accordance with our
proposed arrangements, as of the date hereof we have not entered into a sufficient number of agreements with farmers for the
production of the amount of Camelina grain that we have planned for in the Bakersfield Biorefinery. Accordingly, no assurance can be
given that we will be able to develop and thereafter maintain the farming, storage and delivery arrangements necessary to produce the
quantities of Camelina that we plan to use at the Bakersfield Biorefinery. In addition to the risks associated with enrolling farmers in
our proposed Camelina production operations, the results of those farming operations may be adversely affected by numerous factors
over which we have little or no control and that are inherent in farming, including adverse weather (including but not limited to
drought, floods and storms, severe heat, frost, hail, and unusual temperature changes), changes in growing conditions, crop diseases or
pest infestations. Extreme drought conditions have recently occurred across much of the Western U.S., including in the states in which
our
Camelina
is
planted
and
is
expected
to
be
planted.
These
drought
conditions
may
negatively
impact
our
ability
to
produce
the amount of Camelina that we are currently planning to produce for our Bakersfield Biorefinery.
Changing weather patterns and
climatic conditions, such as global warming, have added to the unpredictability and frequency of natural disasters and have created
additional uncertainty.
Our Camelina operations will also be subject to any new government regulations regarding farming and the
marketing
of
agricultural
products.

-42-

*   Large
capital
projects
can
take
many
years
to
complete,
and
market
conditions
could
deteriorate
over
time,
negatively
impacting
project
returns.
 
We may engage in other capital projects based on the forecasted project economics and level of return on the capital to be
employed in the project. Large-scale projects take many years to complete, and market conditions can change from our forecast. As a
result, we may be unable to fully realize our expected returns, which could negatively impact our financial condition, results of
operations,
and
cash
flows.
 
*   Increased industry-wide production of renewable diesel due to potential utilization of existing excess production capacity,
announced plant expansions of renewable diesel and potential co-processing of renewable diesel by petroleum refiners, could
reduce
prices
for
our
fuel
and
increase
costs
of
feedstocks,
which
would
seriously
harm
any
future
revenues
and
operations.
 
If additional volumes of advanced biofuel RIN production come online and the EPA does not increase the renewable volume
obligation (RVO) under the Renewable Fuels Standard (RFS2) in accordance with the increased production, the volume of advanced
biofuel
RINs
generated
could
exceed
the
volume
required
under
the
RFS2.
In
the
event
this
occurs,
biomass-based
diesel
and
advanced biofuel RIN prices would be expected to decrease, potentially significantly, harming demand for our products and our
profitability.
 
According to the EPA, in 2018, 4.1 billion gallons per year of biomass-based diesel production capacity in the United States
were registered under the RFS2 program. This amount far exceeds both historic consumption of biomass-based diesel in the United
States
and
required
consumption
under
the
RFS2.
 
Additionally,
several
leading
biomass-based diesel companies have announced their intention to expand production of
renewable diesel for the U.S. market. World Energy has announced that it will expand capacity at its Los Angeles area biorefinery
from 45 mmgy to over 300 mmgy. Diamond Green Diesel, the largest U.S. producer of renewable diesel, is expanding its 275 mmgy
capacity by 400 mmgy as well as planning an additional 470 mmgy biorefinery in Texas. Neste, the largest global producer of
renewable
diesel,
has
announced
that
it
is
expanding
its
Singapore
facility
which
exports
a
significant
portion
of
its
production
to
the
U.S. West Coast. Traditional petroleum refiners are also planning to enter the renewable diesel market with Holly Frontier, Marathon
Petroleum and Phillips 66 announcing new biorefineries or the conversion of existing refineries to renewable diesel production
facilities.
 
Further,
due
to
economic
incentives
available,
several
petroleum
refiners
have
started
or
may
soon start to produce
co-processed renewable diesel, or CPRD. CPRD uses the same feedstocks to produce biomass-based diesel and it generates an
advanced
biofuel
RIN.
CPRD
may
be
more
cost-effective
to
produce
than
biomass-based
diesel.
 
If production of competitive advanced biofuels increases significantly as a result of utilization of existing excess production
capacity or new capacity as described above, competition for feedstocks would increase significantly, harming margins. Furthermore,
if supply of advanced biofuels exceeds demand, prices for renewable diesel and for RINs and other credits may decrease significantly,
harming
profitability
and
potentially
forcing
us
to
reduce
or
otherwise
limit
our
production.
 
*   We have previously failed to timely file our Annual and Quarterly Reports with the SEC, which has affected and may continue
to affect investor confidence, our stock price, our ability to raise capital in the future and our ability to have our securities accepted
for
listing
on
a
national
security
exchange.
 
We failed to timely file several Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q for the periods prior to
December 31, 2019.
In addition, during the past two years we have had difficulty in timely filing other periodic reports because,
among other reasons, we needed additional time to complete our financial statements and to obtain information regarding our purchase
of the Bakersfield Biorefinery. Although these quarterly and annual reports were filed within the time periods permitted by Rule
12b-25 of the Securities Exchange Act of 1934, as amended, these reports are treated by investors as untimely. Such failure to timely
file
our
Annual
and
Quarterly
Reports
with
the
SEC:
 
●
has
had,
and
may
continue
to
have
the
effect
of
eroding
investor
confidence
in
us
and
our
financial
reporting
and
accounting
practices
and
processes;
 
●
may
negatively
impact
the
trading
price
of
our
common
stock;
 
-43-

●
may
result
in
stockholder
litigation;
 
●
may make it more difficult, expensive and time consuming for us to raise capital, if necessary, on acceptable terms, if at
all,
pursue
transactions
or
implement
business
strategies
that
might
otherwise
be
beneficial
to
our
business;
and
 
●
may
negatively
impact
our
reputation
with
our
future
customers.
 
*   Our
future
financial
results
will
be
affected
by
volatile
margins,
which
are
dependent
upon
factors
beyond
our
control,
including
the
price
of
soybean,
canola,
and
other
feedstocks
and
the
market
price
at
which
we
can
sell
our
future
products.
 
The financial results of most renewable diesel producers are affected by the relationship, or margin, between their product
prices and the prices for oil, soybean, canola, and other feedstocks. Since refining margins have historically been volatile, the cost to
acquire feedstocks and the price at which the renewable diesel producers can ultimately sell their products may depend upon several
factors beyond their control, including regional and global supply of and demand for oil, soybean, canola, other feedstocks, gasoline,
diesel, other refined petroleum products, and renewable products. These in turn depend on, among other things, the availability and
quantity
of
imports,
the
production
levels
of
U.S.
and
international
suppliers,
levels
of
product
inventories,
productivity
and
growth
(or
the lack thereof) of U.S. and global economies, U.S. relationships with foreign governments, political affairs, and the extent of
governmental
regulation.
 
Refining and renewable diesel margins also can be significantly impacted by additional conversion capacity through the
expansion of existing facilities or the construction of new refineries or plants. Worldwide refining capacity expansions may result in
refining production capability exceeding refined petroleum product demand, which would have an adverse effect on future refining
margins.
 
Under the Term Purchase Agreement with ExxonMobil, ExxonMobil has the right to purchase the Bakersfield Biorefinery
renewable diesel that is not sold to ExxonMobil under the Offtake Agreement at a market-based formula price. Accordingly, we will
be subject to the risks related to fluctuating prices for all renewable diesel and other products that we sell to ExxonMobil under the
Term Purchase Agreement.
Our plan is to further limit our exposure to fluctuating feedstock prices by utilizing Camelina that is
purposefully grown for our Bakersfield Biorefinery.
Since the Camelina that we intend to use at our biorefinery is grown specifically
for us at pre-established costs, we have reduced much of the risks from the market/pricing volatility that exist with market-based
feedstocks.
No assurance can, however, be given that the Camelina that is produced for us can be produced at a favorable cost/price to
us,
or
that
it
can
be
produced
in
sufficient
quantities
to
materially
reduce
our
feedstock
risks.
 
*   Developments
with
respect
to
low-carbon
fuel
policies
and
the
market
for
alternative
fuels
may
affect
demand
for
our
renewable
fuels
and
could
adversely
affect
our
future
financial
performance.
 
Low-carbon fuel policies, blending credits, and stricter fuel efficiency standards to help reach greenhouse gas emissions
reduction targets help drive demand for our renewable fuels. Any changes to, a failure to enforce, or a discontinuation of any of these
policies, goals, and initiatives could have a material adverse effect on our renewable fuels businesses. Similarly, new or changing
technologies may be developed, consumers may shift to alternative fuels or alternative fuel vehicles (such as electric or hybrid
vehicles) other than the renewable fuels we produce, and there may be new entrants into the renewable fuels production industry that
could
meet
demand
for
lower-carbon
transportation
fuels
and
modes
of
transportation
in
a
more
efficient
or
less
costly
manner
than
our
technologies
and
products,
which
could
also
have
a
material
adverse
effect
on
our
renewable
fuels
businesses.
 
*   Once our refining operations commence, any significant interruption in our Bakersfield Biorefinery could adversely affect our
business.
 
Upon the completion of our refinery, our Bakersfield Biorefinery will be our principal operating asset. As a result, our
operations could be subject to significant interruption if it were to experience a major accident or mechanical failure, be damaged by
severe weather or other natural or man-made disaster, such as an act of terrorism, or otherwise be forced to shut down in the future.
Our Bakersfield Biorefinery also is subject to risks associated with earthquakes. The area near Bakersfield, California is considered to
be an earthquake zone, and the Bakersfield Biorefinery has recently experienced several moderate earthquakes that have not impacted
the refinery.
However, a major earthquake at the Bakersfield Biorefinery could result in significant additional costs, including, loss of
revenues due to unplanned temporary or permanent shutdown of the facility, loss of the ability to transport products or increased costs
to do so, cleanup costs, liability for damages or injuries, increased insurance expenses, and legal and reconstruction expenses. The
incurrence
of
significant
additional
costs
would
harm
our
results
of
operations
and
financial
condition.
 
*   We
may
incur
losses
and
additional
costs
if
we
engage
in
forward-contract
activities
and
derivative
transactions.
 
We currently do not use commodity derivative instruments, although we may do so in the future. If the instruments we use to
hedge our exposure to various types of risk are not effective, we may incur losses. In addition, we may be required to incur additional
costs
in
connection
with
future
regulation
of
derivative
instruments
to
the
extent
it
is
applicable
to
us.
 
-44-
 
*   We are subject to operational risks and our insurance may not be sufficient to cover all potential losses arising from operating
hazards.
Failure
by
one
or
more
insurers
to
honor
their
coverage
commitments
for
an
insured
event
could
materially
and
adversely
affect
our
financial
position,
results
of
operations,
and
liquidity.
 
Our operations are subject to various hazards common to the industry, including explosions, fires, toxic emissions, maritime
hazards, and natural catastrophes. As protection against these hazards, we maintain insurance coverage against some, but not all,
potential losses and liabilities. We may not be able to maintain or obtain insurance of the type and amount we desire at reasonable
rates. As a result of market conditions, premiums and deductibles for certain of our insurance policies could increase substantially.
Therefore, we may not be able to renew our existing insurance policies or procure other desirable insurance on commercially
reasonable terms, if at all. For some risks, we may not obtain insurance if we believe the cost of available insurance is excessive
relative to the risks presented. In some instances, certain insurance could become unavailable or available only for reduced amounts of
coverage.
For
example,
coverage
for
terrorism
risks
includes
very
broad
exclusions.
If
we
were
to
incur
a
significant
liability
for
which
we
were
not
fully
insured,
it
could
have
a
material
adverse
effect
on
our
financial
position,
results
of
operations,
and
liquidity.
 
Our insurance program includes a number of insurance carriers. Significant disruptions in financial markets could lead to a
deterioration in the financial condition of many financial institutions, including insurance companies. We can make no assurances that
we will be able to obtain the full amount of our insurance coverage for insured events. Although we intend to maintain insurance at
levels that we believe are appropriate for our business and consistent with industry practice, we will not be fully insured against all
risks. In addition, pollution, environmental risks and the risk of natural disasters generally are not fully insurable. Losses and liabilities
from uninsured and underinsured events and delay in the payment of insurance proceeds could have a material adverse effect on our
financial
condition
and
results
of
operations.
 
*   Our intellectual property is integral to our business. If we are unable to protect our intellectual property, or others assert that
our
operations
violate
their
intellectual
property,
our
business
could
be
adversely
affected.
 
A key element of our business model relies on our ability to produce feedstock from Camelina.
We have developed and
patented three varieties of Camelina that, we believe, have traits that make them more suitable and productive for biofuel feedstock
purposes.
In addition, we have recently developed several other new varieties that, we believe, will significantly improve the
productivity and sustainability of these varieties of Camelina.
We believe that our ability to produce Camelina from our proprietary
varieties will provide us with a significant competitive advantage in the biofuels market.
Accordingly, we attempt to protect our
Camelina-related intellectual property through a combination of intellectual property rights, including patents and trade secrets.
However, the patents on our Camelina varieties and our related patents for altering/improving traits of Camelina have only been issued
in the United States, although we have filed patent applications for certain of our patents in select foreign countries. The loss of our
rights
in
one
or
more
of
our
proprietary
Camelina
varieties
could
materially
impact
our
competitiveness.
 
It
may
be
difficult
to
protect
and
enforce
our
intellectual
property
and
litigation
initiated
to
enforce
and
determine
the
scope
of our proprietary rights can be costly and time-consuming. Adverse judicial decision(s) in any legal action could limit our ability to
assert our intellectual property rights, limit our ability to develop new products, limit the value of our Camelina varieties or otherwise
negatively
impact
our
business,
financial
condition
and
results
of
operations.
 
A competitor could seek to enforce intellectual property claims against us. Defending intellectual property claims asserted
against us, regardless of merit, could be time-consuming, expensive to litigate or settle, divert management resources and attention and
force us to acquire intellectual property rights and licenses, which may involve substantial royalty payments. Further, a third party
claim, if successful, could secure a judgment that requires us to pay substantial damages or that could otherwise limit our operations.
Moreover, should we be found liable for infringement, we may be required to enter into licensing agreements (which may not be
available on acceptable terms or at all) or to pay damages and cease making or selling certain products. Any of the foregoing could
cause us to incur significant costs and prevent us from manufacturing or selling our products and thereby materially adversely affect
our
business,
result
of
operations
and
financial
condition.
 
*   Litigation
or
regulatory
proceedings
may
materially
adversely
affect
our
business,
results
of
operations
and
financial
condition.
 
We are, or may become a party to various lawsuits, claims and loss contingencies arising in the ordinary course of business
and general liability claims, assertions by certain regulatory and governmental agencies related to permitting requirements and/or air,
wastewater and storm water discharges from our Bakersfield Biorefinery. We also may, from time to time, become subject to litigation
involving tort, contract, statutory, labor, employment, and other claims, and tax matters. The outcome of litigation, particularly class
action
lawsuits,
and
regulatory
proceedings
is
difficult
to
assess
or
quantify.
Plaintiffs
(including
governmental
agencies)
in
these
types of lawsuits and proceedings may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss
relating to such lawsuits or proceedings may remain unknown for substantial periods of time. The costs of responding to or defending
future litigation or regulatory proceedings may be significant and any future litigation or regulatory proceedings may divert the
attention
of
management
away
from
our
strategic
objectives.
There
may
also
be
adverse
publicity
associated
with
litigation
or regulatory proceedings that may decrease customer confidence in our business, regardless of whether the allegations are valid or
whether we are ultimately found liable. As a result, litigation or regulatory proceedings may have a material adverse effect on our
business,
results
of
operations
and
financial
condition.
 
-45-
 
*   Cyberattacks through security vulnerabilities could lead to disruption of business, reduced revenue, increased costs, liability
claims,
or
harm
to
our
reputation
or
competitive
position.
 
We rely upon our information systems and networks in connection with a variety of business activities, and we collect and
store
sensitive
data.
After
our
Bakersfield
Biorefinery
becomes
operational,
the
operations
of
that
facility,
as
well
as
our
transportation, processing and storage activities will be heavily dependent upon our computer systems and network.
Accordingly,
security threats to our computer and information systems pose a risk to our future operations and to the security and confidentiality,
availability and integrity of our data.
While we attempt to mitigate these security vulnerabilities, there can be no assurance these
measures will be sufficient to avoid cyberattacks. If any security breaches were to occur and we were unable to protect our production
and delivery facilities and systems, our operations could be negatively impacted, and even halted, until the security breaches are
remedied.
In addition, if any sensitive data of our partners or customers were to be breached, our relationships with our business
partners and customers could be materially damaged, our reputation could be materially harmed, and we could be exposed to a risk of
litigation
and
possible
significant
liability.
 
The State of California enacted the California Consumer Privacy Act of 2018, or CCPA, effective on January 1, 2020. Our
business partners’ or contractors’ failure to fully comply with the CCPA and other laws could lead to significant fines and require
onerous corrective action. In addition, data security breaches experienced by us or our business partners or contractors could result in
the loss of trade secrets or other intellectual property, public disclosure of sensitive commercial data, and the exposure of personally
identifiable
information
(including
sensitive
personal
information)
of
our
employees,
customers,
suppliers,
contractors
and
others.
 
Unauthorized use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through
breach of our systems, breach of the systems of our suppliers or vendors by an unauthorized party, or through employee or contractor
error, theft or misuse, or otherwise, could harm our business. If any such unauthorized use or disclosure of, or access to, such personal
information was to occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by
private parties, and investigations, related actions, and penalties by regulatory authorities. In addition, we could incur significant costs
in notifying affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and
regulations relating to the unauthorized access to, or use or disclosure of, personal information. Finally, any perceived or actual
unauthorized access to, or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract
and
retain
customers
and
have
an
adverse
impact
on
our
business,
financial
condition
and
results
of
operations.
 
Regulatory
Risks
 
*   We may incur significant costs complying with environmental laws and regulations, and failure to comply with these laws and
regulations
could
expose
us
to
significant
liabilities.
 
We believe that we currently hold the requisite regulatory approvals to construct and to thereafter operate the Bakersfield
Biorefinery. Although we have implemented safety procedures for the operation of the Bakersfield Biorefinery and the disposal of
waste products to comply with these laws and regulations, we cannot be sure that our safety measures are compliant or capable of
eliminating the risk of accidental injury or contamination from the use, generation, manufacture or disposal of hazardous materials. In
the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our insurance
coverage. There can be no assurance that violations of environmental, health and safety laws will not occur as a result of human error,
accident,
equipment
failure
or
other
causes.
 
Compliance with applicable environmental laws and regulations may be expensive, and the failure to comply with past,
present or future laws could result in the imposition of fines, regulatory oversight costs, third-party property damage, product liability
and
personal
injury
claims,
investigation
and
remediation
costs,
the
suspension
of
production
or
a
cessation
of
operations.
Environmental laws could become more stringent over time, requiring us to change our operations, or imposing greater compliance
costs and increasing risks and penalties associated with violations, which could impair our research, development or production efforts
and harm our business. Similarly, our business may be harmed if existing initiatives to further reduce emissions of greenhouse gases,
which improve the competitiveness of renewable fuels relative to petrochemicals, do not become legally enforceable requirements, or
if
existing
legally
enforceable
requirements
relating
to greenhouse gases are amended or repealed in the future. The costs of
complying with environmental, health and safety laws and regulations and any claims concerning noncompliance, or liability with
respect
to
contamination
in
the
future
could
have
a
material
adverse
effect
on
our
financial
condition
or
operating
results.
 
Furthermore, the loss of or failure to obtain necessary federal, state, provincial or local permits and registrations at our
Bakersfield Biorefinery or any future facility could halt or curtail operations, which could result in impairment charges related to the
affected
facility
and
otherwise
adversely
affect
our
future
operating
results.
In
addition,
our
failure
to
comply
with
applicable
rules, regulations and guidance, including obtaining or maintaining required operating certificates or permits, could subject us to: (i)
administrative penalties and injunctive relief; (ii) civil remedies, including fines, injunctions and product recalls; and/or (iii) adverse
publicity. There can be no assurance that we will not incur material costs and liabilities in connection with these rules, regulations and
guidance.
 
-46-
 
*   The Renewable Fuel Standard Program, a federal law requiring the consumption of qualifying biofuels, could be repealed,
curtailed or otherwise changed, which would have a material adverse effect on our revenues, operating margins and financial
condition.
 
We and other participants in the biomass-based diesel industry rely on governmental programs requiring or incentivizing the
consumption of biofuels. Biomass-based diesel has historically been more expensive to produce than petroleum-based diesel fuel and
these
governmental
programs
support
a
market
for
biomass-based
diesel
that
might
not
otherwise
exist.
 
One of the most important of these programs is the RFS2, a federal law that requires that transportation fuels in the United
States contain a minimum amount of renewable fuel. This program is administered by the U.S. Environmental Protection Agency
("EPA"). The EPA's authority includes setting annual minimum aggregate levels of consumption in four renewable fuel categories,
including the two primary categories in which our fuel competes with biomass-based diesel. The parties obligated to comply with this
RVO
are
petroleum
refiners
and
petroleum
fuel
importers.
 
Certain members of the petroleum industry are strongly opposed to the RFS2 and can be expected to continue to press for
changes both in the RFS2 itself and in the way that it is administered by the EPA. One key point of contention is the rate of growth in
the annual RVO. We believe that growth in the annual RVOs is likely to influence our ability to grow our business and support the
price
of
our
fuel
through
the
RINs.
The
EPA's
future
decisions
regarding
the
RVO
may
influence
our
revenues
and
profit
margins.
 
The RFS2 also grants to the EPA authority to waive a qualifying refiner's obligation to comply with RFS2, through a small
refinery exemption ("SRE"), based on a determination that the program is causing severe economic harm to that refinery. SREs can
significantly harm demand for biomass-based diesel and the value of RINs. In December 2019, the EPA issued a ruling on the
reallocation of the required volumes under RFS2 in an attempt to offset the effect of the SREs. The ruling detailed the intent to
redistribute the exempt volumes granted through the SRE to non-exempt obligated parties. This redistribution will be calculated on a
three-year rolling average, based on the U.S. Department of Energy ("DoE") recommended relief. The EPA has consistently granted
more
relief
through
small
refinery
waivers
than
recommended
by
the
DoE.
 
We believe that the increase in small refinery waivers previously granted significantly affected the demand and price of RINs
as the average price of D4 (Biomass-based diesel classification) RINs fell during 2019 according to OPIS data. If the EPA continues
this
practice,
it
may
harm
demand
and
price
of
RINs
and
thus
our
profitability.
 
Subsequent
to
the
EPA's
December
2019
ruling, in January 2020, the 10th Circuit Court of Appeals issued a ruling
invalidating the process the EPA had been using to grant SREs. The EPA also denied 54 retroactive waivers filed for periods
2011-2018. There are 14 remaining waivers that are still to be decided on by the EPA. We believe these actions have increased RIN
values. In January 2021, the Supreme Court of the United States agreed to review the 10th Circuit Court's ruling on the SRE matter.
There is no certainty of the outcome of the review at this time. The EPA could change their procedures to permit more SREs and that
has
the
potential
to
cause
further
harm
to
RIN
values.
 
The COVID-19 pandemic and measures to address the pandemic have severely affected demand for gasoline and diesel,
reducing demand for 2020 RINs for RFS compliance. RVO compliance obligations are based on the volume of sales of gasoline and
diesel
of
a
party
that
is
subject
to
RFS2's
volume
requirements,
or
obligated
party.
As
those
volumes
decrease,
there
is
a
corresponding
decrease in the volume of RINs required for RFS compliance. As such, if the effects of COVID-19 on fuel demand continue
throughout 2021, we expect that demand for the RINs we produce will decrease and for those RINs to have lower values, which would
harm
our
profitability.
 
Several Governors have petitioned the EPA to use its general waiver authority to reduce the 2020 RVO in response to
COVID-19 economic disruptions. Should the EPA use its general waiver authority to reduce RVO requirements, we expect that this
would
harm
demand for and the value of biomass-based diesel and RINs, which would harm our revenues and earnings.
As of the
date hereof, the EPA has not issued the 2022 RVO that will affect our operations once the Bakersfield Biorefinery commences
operations.
 
The U.S. Congress could repeal, curtail or otherwise change the RFS2 program in a manner adverse to us. Similarly, the EPA
could curtail or otherwise change its administration of the RFS2 program in a manner adverse to us, including by not increasing or
even decreasing the RVO, by waiving compliance with the RVO or otherwise. In addition, while Congress specified RFS2 volume
requirements
through
2022
(subject
to
adjustment
in
the
rulemaking
process),
beginning
in
2023
required
volumes
of
renewable
fuel 
will be largely at the discretion of the EPA (in coordination with the Secretary of Energy and Secretary of Agriculture). We cannot
predict what changes, if any, will be instituted or the impact of any changes on our business, although adverse changes could seriously
harm
our
revenues,
earnings
and
financial
condition.

-47-

*   Loss of or reductions in federal and state government tax incentives for renewable diesel production or consumption may have
a
material
adverse
effect
on
our
revenues
and
operating
margins.
 
Federal
and
state
tax
incentives
have
assisted
the
renewable
diesel
industry
by
making
the
price
of
renewable
diesel
more
cost
competitive with the price of petroleum-based diesel fuel to the end user. The expiration or termination of federal and/or state
governmental incentives could have a material adverse impact on the cost of our products, on the price at which we sell our products,
and
on
the
other
financial
incentives
that
affect
the
commercial
value
of
our
renewable
diesel
and
our
operations.
 
The most significant tax incentive program has been the federal biodiesel mixture excise tax credit, referred to as the
Biodiesel Tax Credit ("BTC"). Under the BTC, the first person to blend pure biomass-based diesel with petroleum-based diesel fuel
receives
a
$1.00-per-gallon
refundable
tax
credit.
 
The
BTC
was
established
on
January
1,
2005
and
has
lapsed
and
been
reinstated
retroactively
and
prospectively
several
times. Most recently in December 2019, the BTC was retroactively reinstated for 2018 and 2019 and is in effect from January 2020
through
December
2022.
Unlike
the
RFS2
program,
the
BTC
has
a
direct
effect
on
federal
government
spending
and
changes
in
federal budget policy could result in its elimination or in changes to its terms that are less beneficial to us. We cannot predict what
action, if any, Congress may take with respect to the BTC after 2022. There is no assurance that the BTC will be reinstated, that it will
be
reinstated
on
the
same
terms
or,
if
reinstated,
that
its
application
will
be
retroactive,
prospective
or
both.
Any
adverse
changes
in
the
BTC
can
be
expected
to
harm
our
results
of
operations
and
financial
condition.
 
-48-
 
Risks
Relating
to
Financial
Matters
 
We
are
a
development
stage
company
that
currently
has
no
revenues,
we
do
not
expect
to
generate
any
meaningful
revenues
until
the
Bakersfield
Biorefinery
commences
commercial
operations.
 
We are a development stage company with no revenues and no operations other than those related to the construction of the
Bakersfield Biorefinery and to the development of our Camelina cultivation operations. We do not expect to generate material
revenues, if any, until after the Bakersfield Biorefinery has commenced commercial operations, which is currently scheduled to occur
in
early
2022.
We will incur significant net losses and significant capital expenditures through completion of development of
Bakersfield Biorefinery. Any delays beyond the expected construction completion date for the Bakersfield Biorefinery would prolong,
and
could
increase
the
level
of,
our
operating
losses.
 
*   We
have
a
history
of
net
losses,
and
we
may
not
achieve
or
maintain
profitability.
 
We incurred net losses of $10.6 million and $11.8 million during the years ended December 31, 2020 and 2019, respectively,
and a net loss of $34.0 million during the nine months ended September 30, 2021. As of September 30, 2021, we had an accumulated
deficit of $100.2 million.
According to our internal budget, in the aggregate we expect to spend approximately $190 million between
the date hereof and the commencement of commercial operations on the development and construction of the Bakersfield Biorefinery,
on pre-operational and start-up costs, on our debt service obligations, on our upstream feedstock development operating costs, and on
general and administrative expenses. Furthermore, we do not expect to generate any revenues until the Bakersfield Biorefinery is fully
operational in the first quarter 2022. No assurance can be given that the Bakersfield Biorefinery and our related Camelina operations
will
be
profitable
once
the
Bakersfield
Biorefinery
does
commence
operations.
 
The
terms
of
our
Senior
Credit
Facility
and
Mezzanine
Credit
Facility
agreements
and
other
financing
arrangements
will
significantly
limit
the
amount
of
cash
that
is
available
to
GCEH
and
our
stockholders.
 
Under our Senior Credit Facility and Mezzanine Credit Facility agreements we can borrow an aggregate of $385 million of
financing. The Senior Credit Facility bears interest at the rate of 12.5% per annum, and the Mezzanine Loans will bear interest at the
rate of 15.0% per annum on amounts borrowed. The Senior Credit Facility and Mezzanine Credit Facility mature in November 2026
and 2027, respectively. In addition to the loan repayment obligations under both the Senior Credit Facility and Mezzanine Credit
Facility, one of our Bakersfield Biorefinery holding company subsidiaries, has issued membership interests (Class B Units) to the
Senior Lenders and will issue membership interests (Class C Units) to the Mezzanine Lenders. The Class B Units and Class C Units
membership interests provide the holders of the Class B and Class C Units with preferential cash distribution rights over the Class A
Units owned by GCEH. Under the Credit Agreements and the limited liability agreement of the financing subsidiary, any excess cash
from operations that the Bakersfield Biorefinery generates will first be used to make the debt service payments under the Senior Credit
Facility and Mezzanine Credit Facility, and then any excess cash available after making those loan payments will be allocated among
the
holders
of
the
Class
A,
Class
B
and
Class
C
Units.
The
holders
of
the
Class
B
Units
are
entitled
to
receive
quarterly
distributions
of
25% of the Bakersfield Biorefinery’s free cash flow until the Senior Lenders have received (collectively, from these cash distributions
plus principal and interest on the Senior Credit Facility) an amount equal to a 2X multiple of invested capital (“MOIC”), or two times
the amount of the Senior Credit Facility. Since we expect that the Senior Lenders will lend us $317.6 million, the Senior Lenders will
have preferential rights to receive a total of up to $635 million, and under certain circumstances for a limited period, an additional 5%
of the free cash flow. The cash available for distribution after payment of the Class B Units 25% allocation will be divided among the
holders of the Class C Units and the Class A Units. The holders of the Class C Units will be entitled to receive 80.0% of cash
distributions until the Mezzanine Lenders have received cumulative payments (cash distributions plus principal and interests on the
Mezzanine Credit Facility) equal to 2.0x MOIC, which percentage decreases to 65.0% (after they have received 3.0x MOIC), 50.0%
(after they have received 4.0x MOIC) and 30.0% of all cash distributions thereafter. As a result of the large debt payment obligations
and the foregoing preferential cash distribution allocations to the holders of the Class B and Class C Units, the amount of cash
available
for
distribution
to
GCEH
and
our
stockholders
will
be
significantly
reduced.
Accordingly,
even
if
the
Bakersfield
Biorefinery’s operations generate significant profits, the amount of cash available to GCEH from the Bakersfield Biorefinery will be
very
limited
for
at
least
five
years.
 
If
we
are
unable
to
comply
with
the
restrictions
and
covenants
in
our
two
credit
facility
agreements,
our
lenders
could
declare
an
event
of
default
under
the
terms
of
these
agreements.
 
The two credit agreements with our Senior Lenders and our Mezzanine Lenders each contain extensive restrictions and
covenants, including construction milestones, limitations on the use of the loan proceeds, lender consent requirements, and extensive
financial and other reporting requirements.
The credit agreements, as amended, currently also require the Company to establish a
contingency
reserve by November 19, 2021.
Although we have not been in full compliance with all of these covenants and
requirements
in
the
past,
to
date
our
lenders
have
either
waived
these
violations
or
otherwise
not
declared
an
event
of
default.
 
-49-
 
However, no assurance can be given that we will be able to fully comply with all of the credit agreement provisions, or if we fail to
remain in compliance that our lenders will not declare an event of default.   In the event of a default under these agreements, our
lenders could terminate their commitments to lend or accelerate the loans and declare all amounts borrowed due and payable. If any of
these events occur and our lenders do not provide additional waivers, we could be forced to enter into unfavorable amendments to our
credit agreements, could be required to pay additional fees and costs, and could lose some or all of our investment in the Bakersfield
Biorefinery.
 
*
 
 
Our Bakersfield Biorefinery subsidiaries are subject to various restrictions under the Senior Credit Facility and Mezzanine Credit
Facility agreements, and substantially all of the assets of the Bakersfield Biorefinery subsidiaries are held as security under the
terms
of
such
credit
agreements.
 
The obligations under the Senior Credit Facility and Mezzanine Credit Facility agreements are secured by a security interest
in all of the assets of the BKRF, and by all of the assets and securities issued by the limited-purpose, wholly owned indirect
subsidiaries of the Company. The two credit agreements contain certain customary events of default, including events relating to
non-payment
of
required
interest,
principal
or other amounts due on or with respect to the Senior Credit Facility, failure to comply
with covenants within specified time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of
security interests to be effective, and certain judgments. In addition, on March 26, 2021 we amended the two credit agreements to
require
GCEH
to
establish
an
additional
cash
reserve
of
at
least
$35
million
for
BKRF.
Our
inability
to
raise
at
least
$35
million
within
the time limits specified in the amendments, and to properly fund the new contingency reserve will constitute an event of default under
the two credit agreements. A breach of any of the covenants under either of the credit agreements could result in an event of default.
Cross-default provisions in the two credit agreements mean that an event of default under one of the credit agreements will trigger an
event of default under the other credit agreement. Upon the occurrence of an event of default under any of our debt agreements, the
lenders could elect to declare all outstanding debt under the credit agreements to be immediately due and payable, and the secured
lenders could foreclose against all of the Bakersfield Biorefinery’s assets and the ownership interests of the various subsidiaries. A
foreclosure
could
result
in
the
loss
of
our
refinery
and
our
refining
business,
and
we
could
be
forced
into
bankruptcy
or
liquidation.
 
*   We have a substantial level of indebtedness which could materially and adversely affect our financial condition and restrict our
ability
to
incur
additional
indebtedness
or
engage
in
transactions
 
We have incurred significant indebtedness that could have a material adverse effect on our business and on returns to our
stockholders.
We
cannot
guarantee
that
our
business
will
generate
sufficient
cash
flow from operations once the Bakersfield
Biorefinery commences operations and the Camelina cultivation operations commence to enable us to make the required payments on
our debt, to fund other liquidity needs, to make necessary future capital expenditures or to pursue other business opportunities. The
agreements and related documents that govern our indebtedness, including but not limited to, the two credit agreements that our
subsidiaries entered into on May 4, 2020, contain covenants that place restrictions on us and our subsidiaries. The credit agreements
restrict
among
other
things,
our
subsidiaries’
ability
to:
 
●
merge,
consolidate
or
transfer
all,
or
substantially
all,
of
their
assets;
 
●
incur
additional
debt;
 
●
make
certain
investments
or
acquisitions;
 
●
create liens
on
our
subsidiaries’
assets;
 
●
sell
assets;
 
●
alter
the
businesses
our
subsidiaries
conduct;
 
●
make
distributions;
and
 
●
enter
into
transactions
with
our
other
affiliated
entities.
 
These
covenants could impair our ability to grow our business, take advantage of attractive business opportunities or
successfully compete. In addition, these covenants could restrict our ability to optimize our capital structure with asset-level debt or
equity
financings.
 
Our Senior Credit Facility and Mezzanine Credit Facility agreements used to finance our acquisition of the Bakersfield
Biorefinery bear interest at a high rate (12.5% and 15.0%, respectively). In addition, they grant certain lenders membership interests,
which
will
provide
the
Senior
Lenders
and
Mezzanine
Lenders
with
an
interest
in
excess
cash
flows
from
the
Bakersfield
Biorefinery’s operations. These membership interests provide the lenders with an indirect financial interest in the Bakersfield Biorefinery, which is
prior
to
any
distribution
that
would
otherwise
be
available
to
our
stockholders.
 
-50-
 
Risks
Related
to
Our
Common
Stock
 
*   There
is
a
limited
public
trading
market
for
our
Common
Stock,
and
you
may
not
be
able
to
resell
your
shares.
 
Currently there has been a limited public market for our common stock. Our common stock is traded on the OTCQX Best
marketplace, an inter-dealer, over-the-counter market that provides significantly less liquidity than national securities exchanges, such
as The Nasdaq Stock Market. Furthermore, we are a relatively small company which is relatively unknown to stock analysts,
stockbrokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if
we came to the attention of such persons, they tend to be risk averse and would be reluctant to follow a company such as ours or
purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there is
currently a limited public trading market for our securities. We cannot assure you that a regular trading market will develop or that if
developed, will be sustained. If an active trading market does not develop, you may have difficulty selling your shares of common
stock
at
an
attractive
price,
or
at
all,
which
will
result
in
the
loss
of
your
investment.
 
*   
We
have
a
stockholders’
deficit.
 
We have a history of losses and have a stockholders’ deficit of $28.7 million and $41.9 million as of December 31, 2020, and
June 30, 2021, respectively. Additionally, we had negative working capital of $50.1 million (which includes current short-term
restricted cash of $2.3 million) at September 30, 2021. We had long-term restricted cash of $25.2 million as of September 30, 2021
that is excluded from our working capital calculation. Our history of losses and our negative working capital position could negatively
impact
the
value
of
our
common
stock.
 
*   We
cannot
assure
you
that
the
Common
Stock
will
be
listed
on
the
Nasdaq
Capital
Market
or
any
other
securities
exchange.
We
do
not
currently
satisfy
the
listing
requirements
of
the
Nasdaq
Capital
Market.
 
We have applied to have our common stock to be listed on the Nasdaq Capital Market. However, we cannot assure you that
we will be able to meet the initial listing standards of that stock exchange and that our application will be approved. We do not
currently
comply
with
certain
Nasdaq
listing
standards,
including
in
particular
the
minimum
stockholder’s
equity
requirements.
 
Further, there can be no assurances that, if listed on the Nasdaq Capital Market, we will be able to remain in compliance with
the Nasdaq Stock Market LLC’s listing standards or if we do later fail to comply and subsequently regain compliance with Nasdaq’s
listing requirements, that we will be able to continue to comply with the applicable listing standards. If we are unable to maintain
compliance
with
these
Nasdaq
requirements,
our
common
stock
will
be
delisted
from
the
Nasdaq
Capital
Market.
 
We are currently a “smaller reporting company” and we have elected to comply with certain reduced reporting and disclosure
requirements
which
could
make
our
Common
Stock
less
attractive
to
investors.
 
We are a “smaller reporting company,” as defined in the Regulation S-K of the Securities Act of 1933, as amended, which
allows us to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that
are
not
smaller
reporting companies, including (i) not being required to comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act of 2002, and (ii) reduced disclosure obligations regarding executive compensation in our
periodic reports and proxy statements. In addition, we are only required to provide two years of audited financial statements in our
SEC reports. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If
some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and
our stock price may be more volatile. Our independent registered public accounting firm is not required to formally attest to the
effectiveness of our internal control over financial reporting until we are no longer a “smaller reporting company”. We cannot assure
you
that
there
will
not
be
material
weaknesses
or
significant
deficiencies
in
our
internal
controls
in
the
future.
 
The application of the SEC’s “penny stock” rules to our Common Stock could limit trading activity in the market, and our
stockholders
may
find
it
more
difficult
to
sell
their
stock.
 
If our common stock trades at a price of less than $5.00 per share while we are still traded on the OTCQX Best Market, our
common
stock
will
be
subject
to
the
SEC’s
penny
stock
rules.
Penny
stocks
generally
are
equity
securities
with
a
price
of
less
than $5.00. Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver
a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the
broker-dealer
and
its
salesperson
in
the
transaction
and monthly account statements showing the market value of each penny stock
held
in
the
customer’s
account.
The
broker-dealer
must
also
make
a
special
written
determination
that
the
penny
stock
is
a
suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect
of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules.
The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions
in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the
ability
of
broker-dealers
to
sell
our
common
stock
and
may
affect
your
ability
to
resell
our
common
stock.
 
-51-
 
The Company has material weaknesses in internal controls. If we are unable to establish appropriate internal financial reporting
controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial
statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our
reported
financial
information
and
have
a
negative
effect
on
the
market
price
for
shares
of
our
Common
Stock.
 
Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. As a
public company, we have significant additional requirements for enhanced financial reporting and internal controls. We are required to
document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of
2002,
which
requires
annual
management
assessments
of
the
effectiveness of our internal controls over financial reporting. The
process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to
changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of
internal
controls
that
is
adequate
to
satisfy
our
reporting
obligations
as
a
public
company.
 
As of December 31, 2020 and September 30, 2021, we had several material weaknesses in our financial reporting, these consisted of (i) ineffective controls over period end financial disclosure and reporting processes, including not timely performing certain reconciliations, and lack of approval of adjusting journal entries, (ii) inadequate segregation of duties in various key processes including the information technology control environment, and (iii) we had not performed a risk assessment and mapped the accounting processes to control objectives. We have recently implemented changes to our system of internal control over financial reporting, which we are currently implementing. However, we cannot assure you that, when fully implemented, our policies and procedures will adequately mitigate our existing weaknesses or that we will not, in the future, identify other areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.
 
*   The
market
price
of
our
common
stock
may
continue
to
be
volatile.
 
The
market
price
of
our
common
stock
may
be
highly
volatile
because,
among
other
reasons,
investors
are
unfamiliar
with
our operations and financial condition. You should consider an investment in our common stock to be risky, and you should invest in
our common stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. In
addition, if the market for shares of companies in our industry or industries related to our industry, or the stock market in general,
experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business,
financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to
lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. Lastly, we acquired the Bakersfield
Biorefinery in May 2020 and are currently retooling and converting the refinery into a renewable diesel refinery. Since we will not
generate revenues until the construction of the Bakersfield Biorefinery is completed in 2022, our stock price will not be based on
quantifiable investment criteria used by certain investors in valuing shares. As a result, the uncertainty of our future operations and
profitability
could
result
in
investor
speculation
and
in
increased
volatility
in
our
stock
price.
 
*   Because certain of our directors and executive officers are among our largest stockholders, they can exert significant control
over
our
business
and
affairs
and
have
actual
or
potential
interests
that
may
depart
from
those
of
investors.
 
Our officers and directors owned approximately 5,904,000 shares (or 14.7% of our outstanding voting shares), and options
and convertible notes to purchase approximately 24,932,000 additional shares as of September 30, 2021. The holdings of our directors
and executive officers may increase substantially in the future upon exercise rights under any of the options, convertible promissory
notes or warrants they may hold or in the future be granted or if they otherwise acquire additional shares of common stock. The
interests of such persons may differ from the interests of our other stockholders, including purchasers of our securities. As a result, in
addition to their influence as members of our Board of Directors or as executive officers, such persons will have significant influence
over and control all corporate actions requiring stockholder approval, irrespective of how the Company’s other stockholders, including
purchasers
in
the
future
financings,
may
vote,
including
the
following
actions:
 
●
to
elect
or
defeat
the
election
of
our
directors;

-52-

●
to
amend
or
prevent
amendment
of
our
Certificate
of
Incorporation
or
By-laws;
 
●
to
effect
or
prevent
a
merger,
sale
of
assets
or
other
corporate
transaction;
and
 
●
to
control
the
outcome
of
any
other
matter
submitted
to
our
stockholders
for
vote.
 
This concentration of ownership by itself may have the effect of impeding a merger, consolidation, takeover or other business
consolidation, or discouraging a potential acquirer from making a tender offer for the common stock which in turn could reduce our
stock
price
or
prevent
our
stockholders
from
realizing
a
premium
over
our
stock
price.
 
Our
Board
of
Directors
is
authorized
to
issue
Preferred
Stock
without
obtaining
stockholder
approval.
 
Our Certificate of Incorporation authorizes the issuance of up to 50,000,000 shares of Preferred Stock, all of which remain available for issuance by our Board of Directors. These shares may be issued with such designations, rights and
preferences as our Board of Directors may from time to time determine. Accordingly, our Board of Directors is empowered, without
stockholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting, or other rights which could adversely
affect the voting power or other rights of the holders of the common stock. In the event of issuance, the Preferred Stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.
Although we have no present intention to issue any additional shares of Preferred Stock, there can be no assurance that the Company
will
not
do
so
in
the
future.
 
*   We
do
not
intend
to
pay
dividends
for
the
foreseeable
future
and,
as
a
result,
your
ability
to
achieve
a
return
on
your
investment
will
depend
on
appreciation
in
the
price
of
our
Common
Stock.
 
We do not intend to pay any cash dividends for the foreseeable future. We anticipate that we will retain all of our future
earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the
future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price
appreciation,
which
may
never
occur,
as
the
only
way
to
realize
any
future
gains
on
their
investments.
 
*   Future securities issuances could result in significant dilution to our stockholders and impair the market price of our Common
Stock.
 
As of September 30, 2021, we had outstanding, immediately exercisable options, warrants and convertible promissory notes
for the issuance of approximately 24,952,000 additional shares of common stock. In addition, we also had outstanding unvested
options for the purchase of approximately 871,000 additional shares of common stock. Future issuances of shares of our common
stock, or the perception that these sales may occur, could depress the market price of our common stock and result in dilution to
existing
holders
of
our
common
stock.
Also,
to
the
extent
outstanding
options
to
purchase
shares
of
our
common
stock
are
exercised
or
options or other stock-based awards are issued or become vested, there will be further dilution. The amount of dilution could be
substantial depending upon the size of the issuances or exercises. Furthermore, we may issue additional equity securities that could
have rights senior to those of our common stock. As a result, purchasers of our common stock bear the risk that future issuances of
debt
or
equity
securities
may
reduce
the
value
of
our
common
stock
and
further
dilute
their
ownership
interest.
 
*   If
securities
analysts
do
not
publish
research
or
reports
about
our
business
or
if
they
downgrade
our
stock
or
our
core
market,
our
stock
price
and
trading
volume
could
decline.
 
The trading market for our common stock will rely in part on the research and reports that industry or financial analysts
publish about us or our business or industry. We do not control these analysts. Furthermore, if one or more of the analysts who do
cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research
about our business or industry, the price of our stock could decline. If one or more of these analysts ceases coverage of us or fails to
publish reports on us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to
decline.
 
*   Our
common
stock
is
an
equity
security
and
is
subordinate
to
our
existing
and
future
indebtedness.
 
Shares
of
our
common
stock are equity interests and do not constitute indebtedness. As such, the shares of common stock
will rank junior to all of our indebtedness, including our trade debt, and to other non-equity claims on us and our assets available to
satisfy
claims
on
us,
including
claims
in
a
bankruptcy,
liquidation
or
similar
proceedings.
 
Unlike indebtedness, where principal and interest customarily are payable on specified due dates, in the case of common
stock,
(i)
dividends
are
payable
only
when
and
if
declared
by
our
board
of
directors
or
a
duly
authorized
committee
of
the
board
and (ii)
as
a
corporation,
we
are
restricted
under
applicable
Delaware
law
to
making
dividend
payments
and
redemption
payments
only from legally available assets. Further, under our certificate of incorporation, there are no restrictions on our business or operations or
on our ability to incur indebtedness or engage in any transactions arising as to our common stock, subject only to the voting rights
available
to
stockholders
generally.
 
-53-
 
Item
2.
Unregistered
Sales
of
Equity
Securities
and
Use
of
Proceeds
 
Nothing
to
report.
 
Item
3.
Defaults
upon
Senior
Securities
 
In order to fund the cost of acquiring the Bakersfield oil refinery, converting the oil refinery into a biorefinery, and paying all
operating expenses during the pre-operational period, the Company in May 2020 entered into (i) a $300 million senior secured term
loan facility with certain senior lenders (which credit facility has been amended to increase the loan facility to $313.2 million), and (ii)
a $65 million secured term loan facility with certain mezzanine lenders (which credit was amended to increase the mezzanine facility
to $66.8 million). Both credit agreements contain extensive restrictions and covenants, including construction milestones, limitations
on the use of the loan proceeds, lender consent requirements, and extensive financial and other reporting requirements.
The credit
agreements, as amended, currently also require the Company to establish a contingency reserve. See, “Item 5. Other Information,”
below. While the Company has not been in full compliance with all of these covenants and requirements, to date the Company’s
lenders
have
either
waived
these
violations
or
otherwise
not
declared
an
event
of
default.
 
Item
4.
Mine
Safety
Disclosures
 
Nothing
to
report.
 
Item
5.
Other
Information
 
As previously disclosed, on July 28, 2021, certain indirect subsidiaries of Global Clean Energy Holdings, Inc. entered into an
amendment to both the senior Credit Agreement and the mezzanine Credit Agreement with Orion Energy Partners TP Agent, LLC, as
the administrative agent, and the lenders who agreed to provide financing under that senior secured term loan facility and the
mezzanine secured term loan facility. Under these two amendments, the Company agreed to raise additional capital and to use that
capital to establish a cash contingency reserve of $35 million by September 15, 2021. The $35 contingency reserve was to be
established to fund any additional or unanticipated costs of construction, installing, equipping, completing, starting up, and operating
the Company’s Bakersfield Biorefinery. The Company has not raised additional capital and has not funded the $35 million reserve
fund. To date, the Company’s lenders have not declared an event of default and, on November 9, 2021, the lenders issued a waiver to
the
Company
and
agreed
to
extend
the
date
by
which
the
$35
million
reserve
must
be
established
to
November
19,
2021.
 
-54-

Item
6.
Exhibits
 
Exhibit
 
 
Number
 
Description
 
 
 
 
 
 

 
 
 

 
 
 

 
 
 
101.INS
 
XBRL
Instance
Document.
 
 
 
101.SCH
 
XBRL
Taxonomy
Schema.
 
 
 
101.CAL
 
XBRL
Taxonomy
Extension Calculation
Linkbase.
 
 
 
101.DEF
 
XBRL
Taxonomy
Extension Definition
Linkbase.
 
 
 
101.LAB
 
XBRL
Taxonomy
Extension Label
Linkbase.
 
 
 
101.PRE
 
XBRL
Taxonomy
Extension Presentation
Linkbase.
 
 
 
104
 
Cover
Page
Interactive
Data
File
formatted
as
Inline
XBRL
and
included
in
Exhibit
101
 
-55-
 
SIGNATURES
 
In
accordance
with
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:
November
15,
2021
By:
/s/
Richard
Palmer
 
 
Richard
Palmer
 
 
President
and
Chief
Executive
Officer
 
 
 
Date:
November
15,
2021
By:
/s/
Ralph
Goehring
 
 
Ralph
Goehring
 
 
Chief
Financial
Officer
 
-56-
 
Global Clean Energy (QB) (USOTC:GCEH)
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