ITEM 2. MANAGEMENTS’MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Report, including any documents which may be incorporated by reference into this Report, contains “Forward-Looking Statements”"Forward-Looking Statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “Forward-Looking Statements”"Forward-Looking Statements" for purposes of these provisions, including our plans to cultivate, produce and market non-food based feedstock for applications in the bio-fuels market, any projections of the date and amount of our Jatropha or Camelina harvests, forecasts regarding our revenues or other financial items, any statements of the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. All Forward-Looking Statements included in this document are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any Forward-Looking Statement. In some cases, Forward-Looking Statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,”"may," "will," "expects," "plans," "anticipates," "intends," "believes," "estimates," "potential," or “continue,”"continue," or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the Forward-Looking Statements contained herein are reasonable, there can be no assurance that such expectations or any of the Forward-Looking Statements will prove to be correct, and actual results could differ materially from those projected or assumed in the Forward-Looking Statements. Future financial condition and results of operations, as well as any Forward-Looking Statements are subject to inherent risks and uncertainties, including any other factors referred to in our press releases and reports filed with the Securities and Exchange Commission. All subsequent Forward-Looking Statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto contained in Part I, Item 1 of this Quarterly Report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the U.S. Securities and Exchange Commission (the “SEC”"SEC"), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2014,2015, which discuss our business in greater detail.
Global Clean Energy Holdings, Inc. is not related to, or affiliated in any manner with “Global"Global Clean Energy, Inc.”", an unaffiliated public company. Readers are cautioned to confirm the entity that they are evaluating or in which they are making an investment before completing any such investment.
Global Clean Energy Holdings, Inc. is a U.S. based, multinational, agri-energy businessU.S.-based, multi-national, energy agri-business focused on the development of low carbon, non-food based feedstocks. Over the past 7+ years, webio-feedstocks. We have built anfull service in-house team of development and operations professionalscapabilities, which we provide support to support our own energy farms and provide advisory and operator services to third parties . We currently have a portfolio of intellectual property and extensiveparties. With international experience and capabilities in eco-friendly biofuel feedstock management, cultivation, production and distribution, both domestically and internationally. Recently,we believe that we are well suited to better control the process and maintain quality, we have expandedscale our expertise and reach further up the supply chain to include oil extraction and crude oil refining.existing business.
Both Jatropha and Camelina oil are high-quality plant oils used as direct substitutes for fossil fuels and as feedstock for the production of high quality biofuels and other bio-based products. Both crops have been tested and proven to be highly desirable feedstocks capable of being converted into ASTM specificationapproved fuels. The term “biofuels”"biofuels" refers to a range of biological based fuels including bio-kerosene (a.k.a bio-jet fuel) biodiesel, renewable diesel, green diesel, synthetic diesel and biomass, all of which have environmental benefits that are the major driving force for their adoption. Using biofuels instead of fossil fuels reduces net emissions of carbon dioxide and other green-house gases, which are associated with global climate change. Both Jatropha and Camelina oil can also be used as a chemical feedstock to replace fossil and non-food based products that use edible oils in their manufacturing or production process. The residual material derived from the oil extraction process is called press-cake or meal, which in the case of Jatropha is a high-quality biomass that has been proven and tested as a replacement for a number of fossil-based feedstocks, fossil fuels and other high value products such as renewable charcoal, fertilizers, and animal feed. Camelina meal is high in Omega3 and has already been approved by the FDA as a livestock (animal) feed or livestock feed ingredientenhancement in the United States.
Our business plan and current principal business activities include the planting, cultivation, harvesting and processing of these oil seed plants to generate plant based oils and biomass for use as replacements for fossil fuels and other high value products including renewable chemicals and high value livestock feed. Our strategy is to leverage our agriculture and energy knowledge, experience and capabilities through the following means:
| · | Own and operate biofuel energy farms for our own account. |
| · | Own, operate and manage farms in a joint venture (“JV”) with either strategic partners or financial investors. We currently own three Jatropha farms in Mexico under such joint ownership arrangements: |
| · | Contract with third party farmers (such as wheat and barley farmers) for the farming of significant acreage of Camelina sativa on their idle land which is in rotation with their other crops in the United States and many parts of Europe. |
| · | Produce and sell certified Camelina seed (which seed is based upon our patented, high-yielding elite varieties) to farmers in the United States and internationally. |
| · | Provide energy farm development and management services to third party owners of biofuel energy farms and to non-energy farmers looking to utilize energy crops in rotation or inter-cropped with their existing crops. |
· | Provide advisory services to farmers wishing to certify their farms under international sustainability or carbon certification standards, specifically the Roundtable on Sustainable Biomaterials (RSB) and Gold Standard Verified Emission Reductions (GS-VERs). We are currently managing a Jatropha farm in the Caribbean under a contract with a third party who wishes to significantly expand to provide large volumes of plant based oil and biomass to fuel their industrial operations.process. |
| · | Provide turnkey franchise operations for individuals and/or companies that wish to establish purpose specific energy farms in suitable geographical areas. |
| · | Provide development and operational expertise for oil seed processing (extraction) facilities and co-product refining and conversion processes to convert the crude products into higher value marketable products. |
The development of agricultural-based energy projects, which producelike plant oil and related biomass, may also produce carbon credits and/or renewable fuel credits through the sequestration (storing) of carbon and the displacement of fossil-based fuels. Accordingly, in addition to generating revenues from the sale of non-food based plant oils and biomass, we are seeking to certify our farms, and processing facilities, where practical, to be qualified to generate and be ablemonetize carbon credits. See, "Business-Carbon Credits," below.
Since 2008 we have owned/operated three Jatropha farms in Mexico through GCE Mexico I, LLC ("GCE Mexico") a Delaware limited liability company that we formed with two investors. We owned 50% of the common membership interests of GCE Mexico, our investors owned the other 50% of the common membership interests, and the GCE Mexico preferred units were owned by an affiliate of the investors. On December 2, 2015, we sold the three Jatropha farms to monetize federal and state emissions credits. The Renewable Fuel Standard (RFS) isEnerall Terra 2 S.A.P.I de C.V, a domestic federal program that requires transportation fuel soldMexican agricultural operator in the region. The purchase price for the three farms was MXP$89 Million (approx. US$5,908,000). GCE Mexico assigned U.S. $5.1 million of the purchase price the our joint venture partner to contain a minimum volumerepay the U.S.$5.1 million of renewable fuels. Camelina is fully compliant with RFSmortgage loans made by the investor to GCE Mexico's operating subsidiaries. In addition, as part of the sale of the three farms and can generate emissions reduction credits called RINs (renewable identification numbers), which have a very liquidthe repayment of the mortgage loans, the investor agreed to forgive and robust market. In California,extinguish (i) approximately $5.1 million of unpaid interest that had accrued on the Air Resources Board (CARB) has implemented a Low Carbon Fuel Standard (LCFS), which requires obligated parties to reducethree mortgage loans, and (ii) the carbon intensitypreferred return (approximately $12.1 million) that the preferred unit holders had accrued. We did not receive any cash from the sale of their fuels to a prescribed amount. CARB issued Sustainable Oils a unique pathway that applies only to its patented seed varieties. The very low CIthe three farms. However, as result of Camelina-based fuels allows obligated parties to meet certain emissions reduction targets with less fuel than would be required using conventional feedstocks. Like RINs, LCFS emissions reduction credits have a robust marketthe repayment of the three mortgage loans, the forgiveness of the accrued interest on those loans, and are actively traded.the extinguishment of the accrued preferred return, approximately US$22.3 million of long term liabilities were extinguished from this Company's consolidated balance sheet.
Organizational History
This company was originally incorporated under the laws of the State of Utah on November 20, 1991. On July 19, 2010, we changed the state of our incorporation from Utah to Delaware. Our principal executive offices are located at 2790 Skypark Drive, Suite 105, Torrance, CA 90505, and our current telephone number at that address is (310) 641-GCEH (4234). We maintain a website at: www.gceholdings.com. Our annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"), and other information related to this company are available on our website as soon as we electronically file those documents with, or otherwise furnish them to, the Securities and Exchange Commission. Our Sustainable Oils subsidiary also maintains a website at www.susoils.com. Our Internet websites and the information contained therein, or connected thereto, are not, and are not intended to be incorporated into the Annual Report on Form 10-K at December 31, 20142015 or into this quarterly report on Form 10-Q.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States require management to make estimates and assumptions that affect the reported assets, liabilities, sales and expenses in the accompanying financial statements. Critical accounting policies are those that require the most subjective and complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain.
Agricultural Producer. All costs incurred including the actual planting of Jatropha are capitalized as plantation development costs, and are included in “Property and Equipment” on the balance sheet. Plantation development costs are being accumulated in the balance sheet during the development period and will be accounted for in accordance with accounting standards for Agricultural Producers and Agricultural Cooperatives. The direct costs associated with each farm and the production of the Jatropha revenue streams have been deferred and accumulated as a noncurrent asset and are included in “Deferred Growing Costs” on the balance sheet. Other general costs without expected future benefits are expensed when incurred.
Certain other critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 1 to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2014.2015.
Results of Operations
Revenues. During the three and six months ended June 30,March 31, 2016 and 2015 we recognized revenue of $241,993$121,647 and $400,224 and $167,856 and 246,666 in the same periods in 2014.$158,231, respectively. The revenues that we generated in 20152016 and 20142015 were derived from energy farm management, development and advisory services, and biomass production.services. Revenues we generate from these services are used for this company’scompany's operations.
OurIn the short term, our goal is to continue to expand and increase the amount of advisory development and management services in order to generate revenues to fund our corporate working capital needs, and to generate Camelina-related revenues from the Camelina business that we acquired. Once ouracquired in March 2013. Our Camelina operations are properly funded, we expect these operationsexpected to generate revenues from the sale of Camelina seeds, the sale of Camelina oil, and the sale of the Camelina biomass for use as feed for livestock. In the longer term, we plan to substantially increase the revenues derived from the operations of our owned and/or managed Jatropha farms, and to rapidly ramp up our Camelina operations, and to continue to generate revenue from management, development, and advisory services. However, no assuance can be givenWe anticipate that werevenues for the remainder of 2016 will be ableincrease due to properly fundscale-up of our biomass processing project in the Dominican Republic and the Camelina operations or enter into future advisory agreements as our current agreements expire.
in the North Americas.
General and Administrative Expenses. OurFor the three months ended March 31, 2016 and 2015, we recorded general and administrative expenses of $466,892, including approximately $13,000 of discontinued operations expense and $593,615 (approximately $347,000 of discontinued operations expense), respectively. This decrease is related to the three and six months ended June 30, 2015 were substantially unchanged from last year’s periods ($583,310 and $1,075,666, respectively).operations in Mexico being discontinued as of December 31, 2015. General and administrative expenses principally consist of officer compensation, outside services (such as legal, accounting, and consulting expenses), share-based compensation, and other general expenses (such as insurance, occupancy costs and travel).
Plantation (Farm) Operating Costs. The majority of the costs associated with maintaining the farms are capitalized under plantation (farm) development costs as shown in Note 3 in the footnotes to the financials. For the three and six months ended June 30, 2015, we recorded Plantation Operating Costs from the operations of the farms of $28,034 and $58,410 and in 2014 we recorded $34,493 and $62,224 for the same periods. As the operations on the Mexican farm has remained consistent, there is no significant changefarms were discontinued as of December 31, 2015 we did not record any Plantation Operating Costs in the total costs incurred.quarter ended March 31, 2016. We recorded $30,376 for the three months ended March 31, 2015.
Other Income/Expense. Interest expense for the three and six months ended June 30, 2015March 31, 2016 increased slightlyby approximately $53,000 from the same periodsperiod in 20142015 due to larger outstanding principal balances.GCE Mexico's debt being extinguished upon the sale of the three Jatropha farms in Decemnber 2015 and the related interest expense of approximately $271,000 was classified as discontinued operations in December 2015.
Net loss attributable to thediscontinued operations, formerly non-controlling interestinterest. . Our three Mexico farms were sold December 2, 2015 and farming operations were ceased effective December 31, 2015. Our Mexico farm operations arewere owned through GCE Mexico I, LLC, a Delaware limited liability company (“GCE Mexico”). We own 50% of the common membership interests of GCE Mexico and one investor currently owns the other 50% of the common membership interests. The proceeds from the sale of the preferred membership units, and from subsequent capital contributions, have been used to fund the operations of Asideros Globales Corporativo 1 (“Asideros 1”) and Asideros Globales Corporativo 2 (“Asideros 2”), each of which have acquired land in Mexico that, collectively, constitute our first two Jatropha farms. Asideros Globales Corporativo 3 (“Asideros 3”) acquired our third farm in October 2011, but had no impact on the results of our operations. GCEH directly owns 1% of Asideros 1, Asideros 2 and Asideros 3, and the balance is owned by GCE Mexico. Accordingly, we own 50.5% of Asideros 1, Asideros 2 and Asideros 3 either directly or through our common membership interest in GCE Mexico. As such, our consolidated financial statements include the accounts of the Asideros farm entities. Under GCE Mexico’s LLC Agreement,Mexico's operating agreement, the net loss allocated from these entities to GCE Mexico is then further allocated to the members of GCE Mexico according to the investment balances. Accordingly, since the common membership interest did not make a capital contribution, all of the losses allocated to GCE Mexico have been furtherwere allocated to the preferred membership interest. TheIn the three months ended March 31, 2015, the net loss attributable to the non-controlling interest in the accompanying Consolidated Statement of Operations representsrepresented the allocation of the net loss of GCE Mexico to the preferred membership interests.interests was approximately $347,000. For the three months ended March 31, 2016, the loss from the discontinued operations (formerly non-controlling interest) was approximately $13,000, which related to costs incurred taxes and governmental fees for the closure of GCE Mexico and its subsidiaries.
Net income/loss attributable to Global Clean Energy Holdings, Inc.loss. The Company recorded net losses of $206,838$418,750 and $336,748$477,131 for the three and six months ended June 30,March 31, 2016 and 2015, and $347,268 and $675,735 in 2014, respectively. Our ability to generate net income in the future will depend on t hethe amount of advisory, development and management services that we render at the corporate level, the amount of revenues generated from our Jatropha farms in Mexico,the Dominican Republic, and on the amount of revenues we generate from our Camelina operations. In addition to incurring farm operating expenses in Mexico for our Jatropha operations, we will continue to accrue interest expense on the mortgages that encumber the Tizimin, Mexico, farms. Although we anticipate that we will generate new revenues from our Camelina and Jatropha and Camelinafarm operations, we are unable to forecast if, or when such revenues will exceed our operating expenses.
Liquidity and Capital Resources
As of June 30, 2015,March 31, 2016, we had $240,000approximately $66,000 (which included approximately $47,000 in our Mexican subsidiary) in cash or cash equivalents and had a working capital deficit of $6,329,000,$6,527,000, as compared with $238,000$252,000 in cash and a working capital deficit of $6,410,000$6,268,000 as of December 31, 2014.2015.
The amount of cash or cash equivalent balances held at June 30, 2015 represents cash held in our corporate accounts and our Mexico joint venture accounts. Of these amounts, more than $134,000 was available and allocated for our general corporate purposes, with the remaining balance to be used in the operations of the Tizimin, Mexico farms owned by the GCE Mexico joint venture. As a result, the GCE Mexico funds will not be available to us for our corporate working capital or other purposes, and are not available to us to reduce our indebtedness. In order to fund our short-term working capital needs, we will have to obtain additional funding from the sale of assets, the sale of additional securities, additional borrowings, or from an increase in operating revenues. Outstanding indebtedness at June 30, 2015March 31, 2016 totaled $27,991,735. Because$7,197,341. The existence of the foregoing working capital deficit may negatively impact our ability to obtain future equity or debt financing and the total indebtedness being so material we are looking at alternative funding strategies and ways to improve our financial position to attract new capital andterms on which such additional strategic partners, as is discussed below.financing, if available, can be obtained. We incurred losses of $548,422$418,750 and $1,025,553$477,131 for the three and six months ended June 30,March 31, 2016 and March 31, 2015 and $794,896 and $1,493,115 in 2014 respectively, and hadhave an accumulated deficit applicable to its common shareholders of $29,282,851$34,629,719 at June 30, 2015.
To date,In the fiscal quarters ended March 31, 2015 and 2016, our general and administrative expenses, including the professional costs of being a public company, have beenwere funded from (i) revenues that we have generated from Jatropha related advisory services, (ii) payments received from our GCE Mexico subsidiary, and (iii)(ii) funds received from the sale of our securities. The amount of fees we generated from advisory services fluctuates significantly. While we currently are providing advisory services under existing contracts, our ability to continue to generate revenue from these services will depend on our ability to enter into new advisory agreements when the current agreements expire. No assurance can be given that we will be able to enter into new agreements to replace or supplement the current advisory agreements. Because we have reduced the amount of services that we provide to our GCE Mexico subsidiary, that subsidiary no longer makes payments to us.agreements. As a result, we expect that we will have to raise capital in the near future, or find other sources of capital in the near future, in order to continue to fund our corporate general and administrative expenses. Unless we are able to obtain additional funding in the future, from the sale of our securities, from strategic partners, or otherwise, we will have to further reduce our operations or sell our principle assets, all of which will have a material negative impact on the value of our company and the price of our stock.
Our business plan contemplates that we will (i) continue to develop our Jatrophabiomass business and operations, which includes replanting portions of our existing farms in Mexico (including possibly developing and cultivating our third Jatropha farm in Mexico), and (ii) diversify our biofuel energy crop revenues from new revenues generated by our new Camelina operations, as follows:
FarmingJatropha Farm Operations. Until December 2015, we owned and operated three farms in Mexico (two of which were planted with Jatropha is a novel crop, and because manythe third was partially planted with an annual oil seed crop) through our GCE Mexico joint venture. All of the trees are still very young, we consideroperating and capital expenses of those farms were funded by our Jatropha operations to be in the development stage, despite having planted significant amounts of land over the past 7 years. For several years we have been working diligently on selectingjoint venture partner and breeding improved varieties (accessions) which have a natural architecture that does not require early pruning (which helps to protect the trees from disease infiltrations), have improved early yields and possesses a natural resistance to diseases known to attack Jatropha. This has produced a number of varieties (accessions) that are meeting and/or exceeding our multi-year yield projections. Utilizing clonal materials from our highest performing, regionally adapted “mother” trees we have developed a Certified Seed Nursery (CGN) to clonally propagate these new varieties. The seeds from the nursery will be the genetic basis for future planting on this and any other farms. We continue to update our Integrated Pest and Disease Management protocols, and have been aggressively testing plant protection materials and expanding our Standard Operating Procedures (SOPs) around pest and disease management. Ongoing testing has produced proven application protocols that can be consistently applied and closely monitored to protect the trees from pests and diseases.
As with all agricultural crops, we need to continually improve our Jatropha genetics to further improve yields, reduce inputs and make the trees heartier and more resistant to diseases and other environmental factors. It is worth noting, in spite of our significant and ongoing investment in R&D, and that of universities and other commercial entities, Jatropha is technically still an undomesticated crop comprised mostly of wild accessions. Over time, the genetics need to be stabilized and certain attributes enhanced and strengthened. Because of the long maturity cycle of Jatropha and other factors that affect the ability of it to produce seeds, we are unable to predict when our Mexico Jatropha farms will consistently produce commercial quantities of Jatropha seeds, in addition to how much revenue those seeds will generate. We have in place monitoring and testing protocols to track these factors.
These farms are still very young and the operational expenses will exceed the amount of revenues they are expected to generate from operations this year and beyond until we are able to grow the farm to sufficient commercial scale.operating revenues. Our joint venture partner in GCE Mexico is currently fundingfunded all of GCE Mexico's operating and capital requirements in 2015 and the wind down expenses for the first quarter of 2016. Due to our operating budget working capital needs atpartner's other business commitments, however, our joint venture partner was not able to commit to the additional investment needed to operate and expand the farms. As a result, as disclosed in this Annual Report, GCE Mexico Jatropha farms. Whilesold those farms in December 2015.
The sale of the three Mexico farms affected our actual costs have been very closebalance sheet because it allowed us to budgeted costs for the past 5 years, no assurance can be given that the costs ofdrastically reduce high-cost debt incurred in acquiring and operating the Mexicothree farms. We did not receive any cash from the sale of the three farms (the proceeds received from the sale of the three farms were allocated to our joint venture partner who funded GCE Mexico). However, as result of the repayment of the three mortgage loans, the forgiveness of the accrued interest on those loans, and the extinguishment of the accrued preferred return, approximately US$21.9 million of long term liabilities were extinguished from our consolidated balance sheet. We believe that reducing this debt will not exceed our budget, or that our GCE Mexico investor will, in fact, continue to fund the budgeted amounts. Should our partner in GCE Mexico reduce or terminate its funding,beneficially affect our ability to conduct our Mexico operations would be materially, and negatively impacted. For this reasonraise future debt or equity funding. Although we are looking at alternative funding strategies and ways to improve our financial position which will allow the company to attract new capital and additional strategic partners.
Even if operations ofsold the three Jatropha farms, owned through GCE Mexico were to improve, duewe did retain the Jatropha genetics we have spent years developing on a commercial scale. We did not sell any of our intellectual property rights to the costs expended to date and the structurebuyer of the JV, that requires us to repay advances made by our JV partners and to pay a 12% preferential return, we do not project that any cash distributions would be made to Global Clean Energy Holdings, Inc. in the near future.
Under our agreements with our GCE Mexico investors, all net cash generated from the Jatropha operations that are conducted through GCE Mexico must first be used to fund the operations of those farms, and any excess must thereafter be used to repay the capital contributed by our joint venture investors (plus their preferred return). The total amount of capital and the preferred return that must be paid to our joint venture investors before funds are distributed to us currently is in excess of $34,000,000 as of June 30, 2015.three farms. As a result, our Jatropha genetics are preserved as a core GCEH asset as is the improving operations of the Mexico farms will not produce short-term cash or improve our liquidity, nor will the improving operations of the Mexico farms generate fundsinstitutional knowledge, experience and know-how that we can use for our business plan, for working capital purposes, or for the acquisition of additional Jatropha or other biofuel feedstock farms. Because of our negative working capital position, we currently do not have the funds necessary to acquire and cultivate additional Jatropha farms for our own account. Accordingly, in order to increase our farm ownership and operations, we will have to obtain additional capital through the sale of equity and/or debt securities, the forward sale of products produced from our Jatropha or Camelina faming operations or from other financing activities, such as debt financing, strategic partnerships and/or joint ventures. For this reason we are looking at alternative funding strategies and ways to improve our financial position to attract new capital and additional strategic partners. We are considering multiple options including expanding the farms with new partners, divesting our three Jatropha Farms under this JV and monetizing under-utilized assts, or a combnation of any of the above. All of these options could signifantly reduce debt while preserving the Intellectual Property (IP) value createddeveloped over the past 7several years in Mexico. As part of researchthe sale, we also retained access rights to the Certified Nursery and commercial supply chain development.R&D areas on the farm for an extended period of time.
Camelina Operations. In March 2013, we acquired the business and assets of Sustainable Oils, LLC, a company that hashad been engaged in developing Camelina products since 2007. Sustainable Oils has generated over $20 million in revenues during the three years before we acquired that entity, but also incurred a loss of approximately $5.8 million during that same period. The Camelina operations will require a significant amount of additional cash to scale up its operations and to reach profitable operations. We will operate the Camelina business that we acquired through a subsidiary Sustainable Oils Inc.which we capitalized with the Sustainable Oils intellectual properties and operating assets that we recently purchased. Furthermore, our goal is to fund the operations and expansion of the Camelina operations with new debt or equity that we are in the process of raising specifically for the Camelina subsidiary. We have been in discussions with a number of sources for the additional funding, but we have not entered into any binding arrangements for the desired amount of new funding. No assurance can be given that we will obtain the additional capital necessary to operate and grow our new Camelina operations. In the event that we do not obtain the necessary amount of financing to properly operate and scale up our new Camelina operations, those operations are expected to continue to operate at a loss.
As partial consideration for the Camelina assets that we purchased in March 2013, we issued a $1,300,000 promissory note. In September 2014, we renegotiated the terms of the note and agreed to return certain tangible assets that constituted the collateral under the promissory note to the holder of the promissory note in exchange for a reduction of the amount of accrued interest owed under the promissory note and an extension of the maturity date. Since December 31, 2014, the foregoing promissory note is now an unsecured promissory note that is payable on demand. However, the amount of payable under the promissory note is limited to amounts generated from the Camelina business that we acquired.
Other Potential Source of Liquidity.
We presently do not have any available credit, bank financing or other external sources of liquidity. In the absence of additional outside funding (including proceeds from the sale of our securities, or entering into other joint venture relationships), we do not have the ability to expand our business or acquire additional Jatropha or other biofuel feedstock farms. If we issue additional equity or debt securities to fund our future capital needs, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. Should we not be able to increase the amount of revenues we receive from our advisory services and/or raise additional debt or equity funding, we will have to materially scale back our current and proposed operations or take other actions to preserve our on-going operations.
Inflation and changing prices have had no effect on our continuing operations over our two most recent fiscal years.
We have no off-balance sheet arrangements as defined in Item 303(a) of Regulation S-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file with, or submit to, the Securities and Exchange Commission (the “SEC”"SEC") under the Securities Exchange Act of 1934 (the “Exchange Act”"Exchange Act") 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 our management, including our chief executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive and financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our chief executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
There was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company may become a party to other legal actions and complaints arising in the ordinary course of business, although it is not currently involved in any such legal proceedings.
On April 18, 2016, the Company was served with a complaint filed in the District Court of Harris County, Texas, in a case identified as Tanglewood Receivables Company vs. Global Clean Energy Holdings, Inc., d/b/a GCE Holdings, Inc., Case No. 2015-53930. The plaintiff, a collection company, alleges that the Company failed to pay up to $74,000 of legal fees to John H. Bennett Jr., p.c. for legal services rendered from July 2010 to August 2011. Global Clean Energy Holdings Inc. did not engage John H. Bennett Jr. p.c., for services and never received any invoices from that attorney. The Company has answered the complaint and intends to vigorously defend itself in this action.
ITEM 1A. RISK FACTORS.
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
| 31.1 | Rule 13a-14(a) Certification, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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| 101.INS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Link base |
| 101.DEF | XBRL Taxonomy Extension Definition Link base Document |
| 101.LAB | XBRL Taxonomy Extension Label Link base Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Dated: July 31, 2015 | GLOBAL CLEAN ENERGY HOLDINGS, INC. |
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| By: /s/ RICHARD PALMERDated: May 13, 2016 GLOBAL CLEAN ENERGY HOLDINGS, INC.
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| Chief Executive Officer |
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| By: /s/ DONNA REILLY
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| Chief Financial Officer |
Chief Executive Officer
By: /s/ DONNA REILLY
Chief Financial Officer