Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Dec. 10, 2020 | |
Document and Entity Information: | ||
Entity Registrant Name | Global Clean Energy Holdings, Inc. | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Amendment Flag | false | |
Entity Central Index Key | 0000748790 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 358,499,606 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Current Reporting Status | Yes | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Interactive Data Current | Yes | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity File Number | 0-12627 | |
Is Entity Incorporation State Country Code | DE |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 127,987 | $ 457,331 |
Inventory | 22,942 | 22,942 |
Total Current Assets | 150,929 | 480,273 |
PROPERTY AND EQUIPMENT, NET | ||
RIGHT-OF-USE ASSET | 74,847 | 82,450 |
INTANGIBLE ASSETS, NET | 2,440,286 | 2,501,592 |
DEBT ISSUANCE COSTS | 500,000 | 500,000 |
PRE-ACQUISITION COSTS | 3,171,075 | 2,588,441 |
DEPOSITS | 3,253,253 | 3,253,253 |
TOTAL ASSETS | 9,590,390 | 9,406,009 |
CURRENT LIABILITIES | ||
Accounts payable and accrued expenses | 2,229,494 | 1,778,434 |
Accrued compensation and related liabilities | 2,068,961 | 2,055,167 |
Accrued interest | 1,823,155 | 1,734,527 |
Lease liabilities | 75,538 | 82,882 |
Notes payable including current portion of long-term debt, net | 4,647,569 | 1,369,856 |
Convertible notes payable | 1,697,000 | 1,697,000 |
Derivative Liability | 24,767,000 | |
Total Current Liabilities | 12,541,717 | 33,484,866 |
LONG-TERM LIABILITIES | ||
Long-term debt, net | 15,592,296 | |
TOTAL LIABILITIES | 28,134,013 | 33,484,866 |
STOCKHOLDERS' DEFICIT | ||
Preferred stock - $0.001 par value; 50,000,000 shares authorized Series B, convertible; 13,000 shares issued and outstanding (aggregate liquidation preference of $1,300,000) | 13 | 13 |
Common stock, $0.001 par value; 500,000,000 shares authorized; 352,206,749 and 344,029,434 shares issued and outstanding, respectively | 352,206 | 344,029 |
Additional paid-in capital | 31,348,398 | 31,259,365 |
Accumulated deficit | (50,244,240) | (55,682,264) |
Total Stockholders' Deficit | (18,543,623) | (24,078,857) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 9,590,390 | $ 9,406,009 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred Stock, par or stated value | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred Stock, shares issued | 13,000 | 13,000 |
Preferred Stock, shares outstanding | 13,000 | 13,000 |
Preferred Stock, liquidation preference | $ 1,300,000 | $ 1,300,000 |
Common Stock, par or stated value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 500,000,000 | 500,000,000 |
Common Stock, shares issued | 352,206,749 | 344,029,434 |
Common Stock, shares outstanding | 352,206,749 | 344,029,434 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Revenue | ||
Operating Expenses | ||
General and administrative | 309,084 | 1,027,577 |
Amortization of intangible assets | 61,307 | 61,307 |
Prelliminary stage acquisition costs | 934,243 | |
Total Operating Expenses | 370,391 | 2,023,127 |
Operating Loss | (370,391) | (2,023,127) |
Other Income (Expenses) | ||
Interest expense, net | (179,948) | (90,529) |
Gain in derecognition of derivative liabilities | 512,363 | |
Change in fair value derivative and finance charges related to derivative liability | 5,476,000 | (3,937,000) |
Total Other Income (Expense) | 5,808,415 | (4,027,529) |
NET LOSS | $ 5,438,024 | $ (6,050,656) |
BASIC NET INCOME (LOSS) PER COMMON SHARE | $ 0.02 | $ (0.02) |
DILUTED NET INCOME (LOSS) PER COMMON SHARE | $ 0.01 | $ (0.02) |
WEIGHTED AVERAGE SHARES OUTSTANDING | 351,831,174 | 341,529,434 |
DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING | 640,774,858 | 341,529,434 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) (Unaudited) - USD ($) | Preferred StockSeries B Convertible Preferred Stock | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance at Dec. 31, 2018 | $ 13 | $ 341,529 | $ 30,669,220 | $ (43,890,445) | $ (12,879,683) | |
Beginning Balance, Shares at Dec. 31, 2018 | 13,000 | 341,529,434 | ||||
Share-based compensation from issuance of options and compensation-based warrants | 43,008 | 43,008 | ||||
Net Loss | (6,050,656) | (6,050,656) | ||||
Ending Balance at Mar. 31, 2019 | $ 13 | $ 341,529 | 30,712,228 | (49,941,101) | (18,887,331) | |
Ending Balance, Shares at Mar. 31, 2019 | 13,000 | 341,529,434 | ||||
Beginning Balance at Dec. 31, 2019 | $ 13 | $ 344,029 | 31,259,365 | (55,682,264) | (24,078,857) | |
Beginning Balance, Shares at Dec. 31, 2019 | 13,000 | 344,029,434 | ||||
Share-based compensation from issuance of options and compensation-based warrants | 25,614 | 25,614 | ||||
Exercise of stock options | $ 8,177 | 63,419 | 71,596 | |||
Exercise of stock options, Shares | 8,177,315 | |||||
Net Loss | 5,438,024 | 5,438,024 | ||||
Ending Balance at Mar. 31, 2020 | $ 13 | $ 352,206 | $ 31,348,398 | $ (50,244,240) | $ (18,543,623) | |
Ending Balance, Shares at Mar. 31, 2020 | 13,000 | 352,206,749 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating Activities | ||
Net Loss | $ 5,438,024 | $ (6,050,656) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Share-based compensation | 25,614 | 43,008 |
Depreciation and amortization | 61,306 | 61,306 |
Gain on settlement of liabilities | (512,363) | |
Change in fair value of derivative liability | (5,476,000) | 3,937,000 |
Accretion of note payable | 91,372 | |
Changes in operating assets and liabilities: | ||
Accounts payable and accrued expenses | 451,060 | 858,863 |
Accrued compensation and related liabilities | 13,794 | (21) |
Interest payable | 88,628 | 90,528 |
Other Operating Activities | 259 | |
Net Cash Used in Operating Activities | 181,694 | (1,059,972) |
Investing Activities | ||
Pre-acquisition costs and deposit on refinery acquisition | (582,634) | |
Net Cash Used in Investing Activities | (582,634) | |
Financing Activities | ||
Proceeds received from exercise of stock options | 71,596 | |
Net Cash Provided by Financing Activities | 71,596 | |
Net change in Cash and Cash Equivalents | (329,344) | (1,059,972) |
Cash and Cash Equivalents at Beginning of Period | 457,331 | 5,226,489 |
Cash and Cash Equivalents at End of Period | 127,987 | 4,166,517 |
Non-cash Financing Activities: | ||
During the quarter ended March 31, 2020, the Company amended the terms of a derivative contract, which had a balance of $19,291,000 and converted into a fixed payment obligation, which was recorded at its net present value of $18,778,637, and thereby recognized a gain on the derecognition of the derivative liability of $512,363. |
Unaudited Interim Condensed Con
Unaudited Interim Condensed Consolidated Financial Statements | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Unaudited Interim Condensed Consolidated Financial Statements | Note 1 – Unaudited interim condensed consolidated financial statements The accompanying unaudited condensed consolidated financial statements of Global Clean Energy Holdings, Inc. and its subsidiaries (collectively, hereinafter the “Company,” “we,” “us” or “our”) have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, which are normal and recurring, have been included in order to make the information not misleading. Information included in the consolidated balance sheet as of March 31, 2020 has been derived from, and certain terms used herein are defined in, the audited consolidated financial statements of the Company as of December 31, 2019 included in the Company’s Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2019 that was previously filed with the Securities and Exchange Commission (“SEC”). Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Principles of consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of Global Clean Energy Holdings, Inc. and its wholly-owned subsidiaries. As of March 31, 2020, the principal subsidiaries consisted of Sustainable Oils, Inc. and GCE Holdings Acquisitions, LLC. All intercompany balances and transactions have been eliminated in consolidation |
ORGANIZATION AND SIGNIFICANT AC
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | 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”) is a U.S.-based integrated agricultural-energy biofuels company that holds assets across feedstocks and plant genetics, agronomics, cultivation, and regulatory approvals, commercialization, and downstream biorefining and storage. The Company is focused on the development and refining of non-food based bio-feedstocks and has a proprietary investment in camelina sativa (“Camelina”), a fast growing, low input and ultra-low carbon intensity crop used as a feedstock for renewable fuels. The Company holds its Camelina assets (including all related intellectual property related rights and approvals) and operates its Camelina business through a subsidiary, Sustainable Oils Inc., a Delaware corporation. In 2018 and 2019 the Company pursued the acquisition of a crude oil refinery in Bakersfield, California with the objective of retrofitting it to produce renewable diesel from Camelina and other non-food feedstocks. On May 7, 2020, the Company completed the acquisition of the targeted refinery (the “Bakersfield Biorefinery”). The retrofitting of the Bakersfield Biorefinery is expected to be completed in the first quarter of 2022. The Company has entered into a product offtake agreement with a major oil company for the majority of the renewable diesel to be produced at the Bakersfield Biorefinery. See Note B which describes the off-take agreement in more detail. Basis of Presentation The accompanying condensed and consolidated balance sheet of Global Clean Energy Holdings, Inc. and its subsidiaries (collectively, hereinafter the “Company,” “we,” “us” or “our”) at December 31, 2019, has been derived from audited condensed and 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 and consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019, 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 unaudited condensed and 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, 2019 as filed with the U.S. Securities and Exchange Commission (SEC). In the opinion of the Company’s management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made to the unaudited condensed and consolidated financial statements. The unaudited condensed and consolidated financial statements include all material adjustments (consisting of all normal accruals) necessary to make the condensed and consolidated financial statements not misleading as required by Regulation S-X Rule 10-01. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020 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. Property and Equipment Property and equipment are stated at cost. Depreciation of office equipment is computed using the straight-line method over estimated useful lives of 3 to 5 years. Field equipment is depreciated using the straight-line method over estimated useful lives of 5 to 15 years. Normal maintenance and repair items are charged to operating costs and are expensed as incurred. The cost and accumulated depreciation of property and equipment sold or otherwise retired are removed from the accounts and gain or loss on disposition is reflected in results of operations. Long-Lived Assets In accordance with U.S. GAAP for the impairment or disposal of long-lived assets, the carrying values of intangible assets and other long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the aggregate of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. Pre-Acquisition Costs The Company capitalizes its pre-acquisition costs once management determines that it is probable that the project will occur. Probability is determined based on i) management, having the requisite authority, having implicitly or explicitly authorized and committed to funding the acquisition or construction of a specific asset, ii) the financial resources are available consistent with such authorization, and iii) the ability exists to meet the necessary local and other governmental regulations. Cost capitalization occurs when the event is probable, but prior to the start of construction. We capitalize those costs that are directly identifiable with the specific property and those costs that would be capitalized if the property were already acquired. We began capitalizing pre-acquisition costs in April 2019 after executing a product offtake agreement with a major oil company. We expense general administrative and overhead costs, including payroll, that would be considered support functions. For the quarter ended March 31, 2020 we capitalized $0.6 million, which included legal costs, pre-engineering costs and other contractual costs and expenses directly related to the purchase of the Bakersfield Biorefinery that was completed in May 2020. Debt Issuance Costs In 2018, we signed a letter of intent to acquire the Bakersfield Biorefinery. The acquisition of the Bakersfield Biorefinery and the related $365 million of debt financing we obtained to retrofit the refinery closed in May 2020. In connection with obtaining the foregoing financing, we incurred certain debt issuance costs. Debt issuance costs related to the Bakersfield Biorefinery are amortized using the effective interest rate method. 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 will be capitalized as part of the refinery until the refinery is placed in service. The amortization of the debt issuance costs is classified as interest expense. At March 31, 2020 and December 31, 2019, unamortized debt issuance costs are presented on the balance sheet as deferred costs. However, such costs will be classified as a direct deduction from the carrying amount of the debt liability after the closing of the financing to the extent that we borrow on the credit agreements. See Note I in Subsequent Events for more detail on the financing. Derecognition of Liabilities The Company reviews its liabilities, including but not limited to accounts payable, notes payable, accrued expenses, accrued liabilities and other legal obligations for a determination of the legal enforcement or settlement of these obligations. Upon conclusive evidence that an obligation may be extinguished, has expired, is discharged, is cancelled or otherwise no longer legally exists, then the Company will derecognize the respective liability on its balance sheet. 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. Revenue Recognition The Company recognizes revenue in accordance with ASC 606 using the following five-step model:(1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue. The Company did not recognize any revenues during the quarters ended March 31, 2020 and 2019. Based upon the Company’s Product Offtake Agreement (see Note B), the Company expects to recognize revenue from the sale of biofuel beginning in 2022. Research and Development Research and development costs are charged to operating expenses when incurred. Fair Value Measurements and Fair Value of Financial Instruments As of March 31, 2019 and 2020, the carrying value of certain financial instruments that are not reported at fair value in the accompanying consolidated balance sheets, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate their fair value due to their short-term nature. The Company’s derivative liability, which was derecognized during the first quarter of 2020, is reported at fair value on the accompanying December 31, 2019 balance sheet. U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy: Level 1— Quoted prices for identical instruments in active markets; Level 2— Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and Level 3— Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. At December 31, 2019, the Company had a derivative liability of $24.8 million related to a forward contract that also included a call option. The notional amount of the forward contract related to gallons of the commodity, Ultra Low Sulfur Diesel. Under the terms of the contract the Company was obligated to pay the equivalent of the notional amount multiplied by the market price of Ultra Low Sulfur Diesel at the settlement dates; however, the call option of the contract capped the market price of Ultra Low Sulfur Diesel. 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 $0.5 million on the derecognition of the derivative contract. The derivative forward contract was amended again in April 2020. See, “Note E, Fixed Payment Obligations” below. The fair value of the derivative forward contract is primarily based upon the notional amount and the forward strip market prices of Ultra Low Sulfur Diesel, and is reduced by the fair value of the call option. The forward strip market prices are observable. However, to determine the fair value of the call option, Company used the Blacks 76 option pricing model. As a result, the contract as a whole is included in the Level 3 of the fair value hierarchy. The following presents changes in the derivative liability: Quarter Ended Quarter Ended March 31, 2020 March 31, 2019 Beginning Balance $ 24,767,000 $ 11,917,000 Conversion to note payable (19,291,000 ) (Decrease) increase in fair value recognized in earnings (5,476,000 ) 3,937,000 Ending Balance $ $ 15,854,000 Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses. Significant estimates used in preparing these financial statements include a) valuation of common stock, warrants, and stock options, b) those assumed in determining the value of the derivative transactions, c) and estimated useful lives of equipment and patent costs. It is at least reasonably possible that the significant estimates used will change within the next year. Income/Loss per Common Share Income/Loss per share amounts are computed by dividing income or loss applicable to the common 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: 1) instruments that were dilutive for the quarter ended March 31, 2020 and included in the diluted earnings per share, and 2) instruments that were anti-dilutive for the quarter ended March 31, 2019 and excluded from diluted earnings per share as they would have been antidilutive: Instruments Included in Diluted EPS March 31, 2020 Instruments Excluded in Diluted EPS March 31, 2019 Convertible notes and accrued interest 100,075,503 94,938,750 Convertible preferred stock - Series B 11,818,181 11,818,181 Warrants — — Compensation-based stock options and warrants 177,050,000 171,631,482 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. For the quarters ended March 31, 2020 and 2019, charges related to stock-based compensation amounted to approximately $25,614 and $43,008 respectively. For the quarters ended March 31, 2020 and 2019, all stock-based compensation is classified in general and administrative expense. Subsequent Events The Company has evaluated subsequent events through the date these condensed consolidated financial statements were available to be issued. See Note I to these consolidated financial statements for a description of events occurring subsequent to March 31, 2020. |
BASIS OF PRESENTATION AND LIQUI
BASIS OF PRESENTATION AND LIQUIDITY | 3 Months Ended |
Mar. 31, 2020 | |
Notes to Financial Statements | |
BASIS OF PRESENTATION AND LIQUIDITY | 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 operations applicable to its common stockholders of $0.4 million and $2.0 million, during the quarters ended March 31, 2020 and 2019, respectively, and has an accumulated deficit applicable to its common stockholders of $50.2 million at March 31, 2020. The Company had net income of $5.4 million in the fiscal 2020 quarter compared to a $6.1 million net loss in the fiscal 2019 quarter. At March 31, 2020, the Company had negative working capital of $12.4 million and a total stockholders’ deficit of $18.5 million. On May 4, 2020, a group of lenders agreed to provide a $300 million senior secured term loan facility to one of Global Clean Energy Holdings, Inc.’s subsidiaries to enable that subsidiary to acquire the equity interests of Bakersfield Renewable Fuels, LLC and to pay the anticipated costs of the retooling of the Bakersfield Biorefinery owned by Bakersfield Renewable Fuels, LLC. Concurrently with the foregoing senior credit facility, a group of mezzanine lenders also agreed to provide a $65 million secured term loan facility to be used to pay the costs of repurposing and starting up the Bakersfield Biorefinery. See, “Note I Subsequent Events.” In April of 2019, the Company executed a binding Product Offtake Agreement (the “Offtake Agreement”) with ExxonMobil Corp. (“Purchaser”) pursuant to which Purchaser has committed to purchase a minimum of 85 million gallons per year of renewable diesel annually from the Bakersfield Biorefinery (with a right to purchase higher volumes as available), and the Company has committed to sell these quantities of renewable diesel to Purchaser. Purchaser’s obligation to purchase renewable diesel will last for a period of five years following the date that the Bakersfield Biorefinery commences commercial operations. Purchaser has the option to extend the initial five-year term of the Offtake Agreement. 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. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE C – PROPERTY AND EQUIPMENT Property and equipment for the periods ended March 31, 2020 and December 31, 2019 are as follows: For the Periods Ended March 31, 2020 December 31, 2019 Office Equipment $ 61,078 $ 61,078 Total Cost $ 61,078 $ 61,078 Less accumulated depreciation 61,078 61,078 Property and equipment, net $ $ For the quarters ended March 31, 2020 and 2019, the Company did not recognize any depreciation expense as its property and equipment were already fully depreciated. |
PATENT LICENSE FEES
PATENT LICENSE FEES | 3 Months Ended |
Mar. 31, 2020 | |
Notes to Financial Statements | |
PATENT LICENSE FEES | NOTE D - PATENT LICENSE FEES Through a 2013 acquisition, the Company acquired certain patents, intellectual property and rights related to the development of Camelina as a biofuels feedstock, as a result of which the Company continues to incur costs related to patent license fees and patent applications for Camelina sativa plant improvements. These acquired assets include three patents and the related intellectual property associated with these patents. These three patents have an expected useful life of 17 years and are carried at cost less any accumulated amortization and any impairment losses. Amortization is calculated using the straight-line method over their remaining patent life. The termination dates of these patents are all in 2029. Any future costs associated with the maintenance of these patents and patent and registration costs for any additional patents that are essential to the Company’s business will be capitalized and amortized over the life of the patent once issued. The patent assets as of the quarter ended March 31, 2020 and 2019 is shown in the following table: March 31, December 31, 2020 2019 Patent license fees 4,187,902 4,187,902 Less accumulated amortization (1,747,616 ) (1,686,310 ) Intangible Assets, Net 2,440,286 2,501,592 Amortization expense for intangible assets was approximately $61,000 for each of the quarters ended March 31, 2020 and 2019. |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2020 | |
Disclosure Text Block [Abstract] | |
DEBT | NOTE E –DEBT Promissory Notes Prior to 2016 the Company invested in and purchased various assets which were paid, in part, by the issuance of a promissory note having an initial principal balance of $1.3 million. The promissory note is due upon demand, and has an interest rate of 18% per annum. Convertible Note Payable to Executive Officer On October 16, 2018, Richard Palmer, the Company’s Chief Executive Officer and President, entered into a new employment agreement with the Company and concurrently agreed to defer $1 million of his accrued unpaid salary and bonus for two years. In order to evidence the foregoing deferral, the Company and Mr. Palmer entered into a $1 million convertible promissory note (the “Convertible Note”). The Convertible Note accrues simple interest on the outstanding principal balance 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, the Company is currently in default under the Convertible Note. As of quarters ended March 31, 2020 and 2019, the Company had recorded accrued interest payable of approximately $73,000 and $23,000 under the Convertible Note. 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 $0.0154 per share. Convertible Notes Payable The Company has several outstanding unsecured promissory notes that are convertible into the Company or the Company’s subsidiaries shares at different prices ranging from $0.03 per share into the parent company’s stock and up to $1.48 per share into a subsidiary’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 a combined basis, as of March 31, 2020 the principal amount of these notes is approximately $0.7 million. Fixed Payment Obligation As described in Note A, under “Fair Value Measurements and Fair Value of Financial Instruments”, the Company amended a derivative forward contract during the quarter ended March 31, 2020, with the counterparty. The amendment terminated the derivative forward contract and replaced it with a fixed payment obligation. This fixed payment obligation was subsequently amended in April 2020. Under the amended terms, the contract requires total payments of $24.8 million, including 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%. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2020 | |
Disclosure Text Block [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE F— STOCKHOLDERS’ EQUITY Common Stock In the first quarter of 2020, the Company issued a total of 8,177,315 shares of its Common Stock upon the exercise of stock options. These option exercises consisted of 7,677,315 and 500,000 shares issued to a consultant and one of the Company’s Directors, respectively. Series B Preferred Stock On November 6, 2007, the Company sold a total of 13,000 shares of Series B Convertible Preferred Stock (“Series B Shares”) to two investors for an aggregate purchase price of $1.3 million, less offering costs of $9,265. Each share of the Series B Shares has a stated value of $100. The Series B Shares may, at the option of each holder, be converted at any time or from time to time into shares of the Company’s Common Stock at the conversion price then in effect. The number of shares into which one Series B Share shall be convertible is determined by dividing $100 per share by the conversion price then in effect. The initial conversion price per share for the Series B Shares is $0.11, which is subject to adjustment for certain events, including stock splits, stock dividends, combinations, or other recapitalizations affecting the Series B Shares. Each holder of Series B Shares is entitled to the number of votes equal to the number of shares of the Company’s Common Stock into which the Series B Shares could be converted on the record date for such vote, and has voting rights and powers equal to the voting rights and powers of the holders of the Company’s Common Stock. No dividends are required to be paid to holders of the Series B Shares. However, the Company may not declare, pay or set aside any dividends on shares of any class or series of the Company’s capital stock (other than dividends on shares of our Common Stock payable in shares of Common Stock) unless the holders of the Series B Shares shall first receive, or simultaneously receive, an equal dividend on each outstanding share of Series B Shares. In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series B Shares shall be entitled to receive, prior to any distribution to the holders of the Common Stock, an amount equal to $100 per share, or $1,300,000 in the aggregate, plus an amount equal to any dividends declared and unpaid with respect to each such share. |
STOCK OPTIONS AND WARRANTS
STOCK OPTIONS AND WARRANTS | 3 Months Ended |
Mar. 31, 2020 | |
Disclosure Text Block [Abstract] | |
STOCK OPTIONS AND WARRANTS | NOTE G – STOCK OPTIONS AND WARRANTS 2010 Equity Incentive Plan In 2010, the Company’s Board of Directors adopted the Global Clean Energy Holdings, Inc. 2010 Equity Incentive Plan (the “2010 Plan”) wherein 20,000,000 shares of the Company's Common Stock were reserved for issuance thereunder. As of March 31, 2020 there were no shares available for future option grants under the 2010 Plan. The 2010 Plan expired in April 2020 and was replaced with the 2020 Equity Incentive Plan. See Note J for additional information The Company’s Board of Directors has granted stock options to certain officers, directors, employees, and non-employees, which options were not part of the 2010 Plan or any other formal equity incentive plan. During the first quarter ended March 31, 2020 the Company did not grant any stock options. A summary of the option award activity and awards outstanding at March 31, 2020 is as follows: Weighted Weighted Average Shares Average Remaining Aggregate Under Exercise Contractual Intrinsic Option Price Life(Years) Value Outstanding at December 31, 2019 199,027,315 0.016 3.6 $ 14,360,463 Granted Exercised (8,177,315 ) 0.009 Forfeited (5,000,000 ) 0.090 Expired (1,300,000 ) 0.01 Outstanding at March 31, 2020 184,550,000 0.016 3.6 $ 6,219,550 Vested and exercisable at March 31, 2020 176,171,212 0.016 3.6 $ 5,889,218 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 Company estimates the fair value of stock options that have both service and market conditions on the grant date using a lattice model. The following table illustrates the assumptions used in estimating the fair value of options granted during the periods presented: Quarter Ended March, 31 2019 Expected Term (in Years) 2 to 5 Volatility 123 % Risk Free Rate 2.8 % Dividend Yield 0 % Suboptimal Exercise Factor (1) 1.3 Exit Rate Pre-vesting (2) 0 % Exit Rate Post-vesting (3) 0 % Aggregate Grant Date Fair Value $ 120,278 (1) The suboptimal exercise factor estimates the value realized by the holder upon exercise of the option and the estimated point at which an option holder would exercise an in-the-money option. The Company estimated the suboptimal factor based on the holder realizing a pre-tax profit of $500,000. Used for lattice model purposes only. (2) Assumed forfeiture rate for market condition option awards prior to vesting. Used for lattice model purposes only. (3) Assumed expiration or forfeiture rate for market condition option awards after vesting. Used for lattice model purposes only. During the year ended December 31, 2018 the Company granted options to purchase 110,000,000 shares to the Company’s Chief Executive Officer. The options have both requisite service conditions and market conditions. The requisite service period for the market condition options granted in 2018 was five years and the options vest in three tranches: 28% of the award vests when the market cap exceeds $7 million for a thirty day period; 33% of the award vests when the market cap exceeds $15 million for a thirty day period; and 40% of the award vests when the market cap exceeds $25 million for a thirty day period. As of May 31, 2019, all of the outstanding market condition awards issued during 2018 were fully vested. For the quarters ended March 31, 2020 and 2019 the Company recognized stock compensation expenses related to stock option awards of $25,614 and $43,008 respectively. The Company recognizes all stock-based compensation in general and administrative expenses in the accompanying consolidated statements of operations. As of March 31, 2020, there was approximately $81,000 of unrecognized compensation cost related to option awards that will be recognized over the remaining service period of approximately 3.6 years. Stock Purchase Warrants In May, 2020, the Company issued, to a party interested in Camelina development, a non-transferable warrant for the purchase of an approximately eight-percent interest in its subsidiary, Sustainable Oils, Inc. for approximately $20 million. The warrant expires on June 1, 2021. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2020 | |
Disclosure Text Block [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE H – COMMITMENTS AND CONTINGENCIES Employment Agreements The Company maintains an employment agreement with its Chief Executive Officer and Executive Vice-President that provide for the terms of their compensation, including bonuses and share-based compensation. See the Company’s December 31, 2019 Form 10-K (as amended) for further details. Legal In August 2020, a complaint was filed against GCE Holdings Acquisitions, LLC for a claimed breach of a certain consulting agreement. The claim is for $1.2 million. On October 14, 2020, GCE Holdings Acquisitions, LLC filed an answer and denied all allegations in the complaint. The Company does not believe that the ultimate resolution of this matter will have a material effect on its financial statements, and no loss has been accrued regarding this claim. 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. COVID-19 In December 2019, a novel strain of coronavirus diseases (“COVID-19”) was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. The extent of COVID-19’s effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. The Company is currently analyzing the potential impacts to its business. At this time, it is not possible to determine the magnitude of the overall impact of COVID-19 on the Company. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE I – SUBSEQUENT EVENTS 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 Alon Bakersfield Property, Inc., a company that owned a refinery in Bakersfield, California, from Alon Paramount Holdings, Inc. (“Alon Paramount”) for $40 million. Coincident with the purchase, Alon Bakersfield Property Inc. was converted into a limited liability company and renamed as “Bakersfield Renewable Fuels, LLC”. The Company is now retooling the acquired refinery into a biorefinery. In 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. Bakersfield Renewable Fuels, LLC, formerly Alon Bakersfield Property, Inc., is a party 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 the Company and Paramount Petroleum Corporation (a parent company of Alon Bakersfield Property at the time of the award in 2019). Alon Paramount agreed to assume and be liable for (and to indemnify, defend, and save Bakersfield Renewable Fuels harmless from) this litigation. In addition, Paramount Petroleum has posted a bond to cover this judgment amount. All legal fees in this matter are being paid by Alon Paramount. Concurrently with the closing of the acquisition, the Company entered into a Call Option Agreement with Alon Paramount pursuant to which the Company granted to Alon Paramount an option to purchase from Global Clean Energy Holdings, Inc. up to 33 1/3% of the membership interests of another subsidiary that indirectly owns Bakersfield Renewable Fuels, LLC based on the Company’s purchase price. The foregoing option can be exercised by Alon Paramount until the 90th day after the refinery meets certain operational criteria. Upon the exercise of the option, Alon Paramount will be allocated its share of the refinery’s assets and liabilities and profits and losses. Bakersfield Renewable Fuels, LLC is also responsible for all of the environmental liabilities and clean up costs associated with the Bakersfield Refinery. On May 4, 2020, in order to fund the purchase of Bakersfield Renewable Fuels, LLC, BKRF OCB, LLC entered into a senior secured credit agreement with a group of lenders (the "Senior Lenders") pursuant to which the Senior Lenders agreed to provide a $300 million senior secured term loan facility to BKRF OCB, and to pay the costs of the retooling the Bakersfield Biorefinery. The senior loan bears interest at the rate of 12.5% per annum, payable quarterly. The principal of the senior loans is due on November 4, 2026, provided that BKRF OCB, LLC must offer to prepay the senior loans with any proceeds of such asset dispositions, borrowings other than permitted borrowings, proceeds from losses, and excess net cash flow. BKRF OCB, LLC may also prepay the senior loan in whole or in part with the payment of a prepayment premium. As additional consideration for the senior loans, the Senior Lenders were issued 80.5 million Class B Units in BKRF HCP, LLC, an indirect parent company of BKRF OCB, LLC, and will continue to be issued Class B Units as the Company receives funds drawn on the credit facility. The senior loans are secured by all of the assets of BKRF OCB, LLC (including its membership interests in Bakersfield Renewable Fuels, LLC), all of the outstanding membership interest in BKRF OCB, LLC, and all of the assets of Bakersfield Renewable Fuels, LLC. On May 4, 2020, BKRF HCB, LLC, the indirect parent of BKRF OCB, LLC, entered into a credit agreement with a group of mezzanine lenders who agreed to provide a $65 million secured term loan facility to be used to pay the costs of repurposing and starting up the Bakersfield Biorefinery. As of September 30, 2020 BKRF HCB, LLC has not drawn down on the credit facility. The mezzanine loans bear interest at the rate of 15.0% per annum on amounts borrowed, payable quarterly, provided that the borrower may defer interest to the extent it does not have sufficient cash to pay the interest, such deferred interest being added to principal. As additional consideration for the mezzanine loans, the mezzanine lenders will be issued Class C Units in BKRF HCP, LLC at such times as advances are made under the mezzanine loans. The mezzanine loans will be secured by all of the assets of BKRF HCP, LLC, including all of the outstanding membership interest in BKRF FHCB, LLC. The mezzanine loans mature in November 2027. On April 30, 2020 GCE Acquisitions entered into an Engineering, Procurement and Construction Agreement with ARB, Inc. (“ARB”) pursuant to which ARB has agreed to provide services for the engineering, procurement, construction, start-up and testing of the Bakersfield Biorefinery. The agreement, which was assigned by GCE Acquisitions to BKRF OCB, LLC, provides for ARB to be paid on a cost plus fee basis subject to a guaranteed maximum price of $201.4 million, subject to increase for approved change orders. On May 7, 2020, the Board of Directors of the Company amended the employment agreements of Richard Palmer, the Company’s Chief Executive Officer, and Noah Verleun, the Company’s Executive Vice President, to increase their annual base salaries to $350,000 and $310,000, respectively. On April 10, 2020, the Company’s Board of Directors adopted the 2020 Equity Incentive Plan (“2020 Plan”) pursuant to which the Board of Directors reserved an aggregate of 20,000,000 shares of Common Stock for future issuance. The 2020 Plan became effective on April 10, 2020. As of November 30, 2020 options for the purchase of 7,170,000 shares have been granted under the 2020 Plan to attract and retain the necessary personnel to meet the Company’s objectives. The 2020 Plan will expire on April 9, 2030, and no further awards may be granted after such date. The 2020 Plan provides for the following types of awards: incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards, performance cash awards, and other stock-based awards. Stock awards may be granted under the 2020 Plan to employees (including officers) and consultants of the Company or affiliates, and to members of the Company’s Board of Directors. In the second quarter of the Company issued 5,542,857 shares and 750,000 shares upon exercises of outstanding options to an officer of the Company and an attorney who provided services to the Company (who is also a family member of the CEO), respectively. On October 12, 2020 the Company’s senior and mezzanine lenders agreed to make an additional $15 million available to the Company, if requested, to develop both the Bakersfield Refinery and the feedstock program. On October 12, 2020 the Company entered into a $1.5 million contract with a Midwest seed company to manage up to 500 acres of Camelina seed production for the specific purpose of harvesting, transporting, cleaning and packaging the finished Camelina seed, which is to be certified as the Company’s proprietary seed to the Company’s standards. This seed shall be grown in 2021 for the purpose of providing certified Camelina seed to growers for the 2022 growing season. The contract anticipates a total yield of certified seed of approximately 900,000 lbs. On November 17, 2020, the Company held its annual meeting of stockholders at which (i) the 2020 Plan and (ii) the proposal to effect a reverse stock split of the common shares at a ratio of 1-for-10, at the discretion of the Board, were approved. Subject to market conditions, the Board has tentatively decided to effect the reverse stock split of common shares in early 2021. |
ORGANIZATION AND SIGNIFICANT _2
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business Global Clean Energy Holdings, Inc., a Delaware corporation, and its wholly owned subsidiaries (collectively, the “Company”) is a U.S.-based integrated agricultural-energy biofuels company that holds assets across feedstocks and plant genetics, agronomics, cultivation, and regulatory approvals, commercialization, and downstream biorefining and storage. The Company is focused on the development and refining of non-food based bio-feedstocks and has a proprietary investment in camelina sativa (“Camelina”), a fast growing, low input and ultra-low carbon intensity crop used as a feedstock for renewable fuels. The Company holds its Camelina assets (including all related intellectual property related rights and approvals) and operates its Camelina business through a subsidiary, Sustainable Oils Inc., a Delaware corporation. In 2018 and 2019 the Company pursued the acquisition of a crude oil refinery in Bakersfield, California with the objective of retrofitting it to produce renewable diesel from Camelina and other non-food feedstocks. On May 7, 2020, the Company completed the acquisition of the targeted refinery (the “Bakersfield Biorefinery”). The retrofitting of the Bakersfield Biorefinery is expected to be completed in the first quarter of 2022. The Company has entered into a product offtake agreement with a major oil company for the majority of the renewable diesel to be produced at the Bakersfield Biorefinery. See Note B which describes the off-take agreement in more detail. |
Basis of Presentation | Basis of Presentation The accompanying condensed and consolidated balance sheet of Global Clean Energy Holdings, Inc. and its subsidiaries (collectively, hereinafter the “Company,” “we,” “us” or “our”) at December 31, 2019, has been derived from audited condensed and 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 and consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019, 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 unaudited condensed and 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, 2019 as filed with the U.S. Securities and Exchange Commission (SEC). In the opinion of the Company’s management, all material adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been made to the unaudited condensed and consolidated financial statements. The unaudited condensed and consolidated financial statements include all material adjustments (consisting of all normal accruals) necessary to make the condensed and consolidated financial statements not misleading as required by Regulation S-X Rule 10-01. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020 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. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation of office equipment is computed using the straight-line method over estimated useful lives of 3 to 5 years. Field equipment is depreciated using the straight-line method over estimated useful lives of 5 to 15 years. Normal maintenance and repair items are charged to operating costs and are expensed as incurred. The cost and accumulated depreciation of property and equipment sold or otherwise retired are removed from the accounts and gain or loss on disposition is reflected in results of operations. |
Long-Lived Assets | Long-Lived Assets In accordance with U.S. GAAP for the impairment or disposal of long-lived assets, the carrying values of intangible assets and other long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the aggregate of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. |
Pre-Acquisition Costs | Pre-Acquisition Costs The Company capitalizes its pre-acquisition costs once management determines that it is probable that the project will occur. Probability is determined based on i) management, having the requisite authority, having implicitly or explicitly authorized and committed to funding the acquisition or construction of a specific asset, ii) the financial resources are available consistent with such authorization, and iii) the ability exists to meet the necessary local and other governmental regulations. Cost capitalization occurs when the event is probable, but prior to the start of construction. We capitalize those costs that are directly identifiable with the specific property and those costs that would be capitalized if the property were already acquired. We began capitalizing pre-acquisition costs in April 2019 after executing a product offtake agreement with a major oil company. We expense general administrative and overhead costs, including payroll, that would be considered support functions. For the quarter ended March 31, 2020 we capitalized $0.6 million, which included legal costs, pre-engineering costs and other contractual costs and expenses directly related to the purchase of the Bakersfield Biorefinery that was completed in May 2020. |
Debt Issuance Costs | Debt Issuance Costs In 2018, we signed a letter of intent to acquire the Bakersfield Biorefinery. The acquisition of the Bakersfield Biorefinery and the related $365 million of debt financing we obtained to retrofit the refinery closed in May 2020. In connection with obtaining the foregoing financing, we incurred certain debt issuance costs. Debt issuance costs related to the Bakersfield Biorefinery are amortized using the effective interest rate method. 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 will be capitalized as part of the refinery until the refinery is placed in service. The amortization of the debt issuance costs is classified as interest expense. At March 31, 2020 and December 31, 2019, unamortized debt issuance costs are presented on the balance sheet as deferred costs. However, such costs will be classified as a direct deduction from the carrying amount of the debt liability after the closing of the financing to the extent that we borrow on the credit agreements. See Note I in Subsequent Events for more detail on the financing. |
Derecognition of Liabilities | Derecognition of Liabilities The Company reviews its liabilities, including but not limited to accounts payable, notes payable, accrued expenses, accrued liabilities and other legal obligations for a determination of the legal enforcement or settlement of these obligations. Upon conclusive evidence that an obligation may be extinguished, has expired, is discharged, is cancelled or otherwise no longer legally exists, then the Company will derecognize the respective liability on its balance sheet. |
Income Taxes | 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. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in accordance with ASC 606 using the following five-step model:(1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue. The Company did not recognize any revenues during the quarters ended March 31, 2020 and 2019. Based upon the Company’s Product Offtake Agreement (see Note B), the Company expects to recognize revenue from the sale of biofuel beginning in 2022. |
Research and Development | Research and Development Research and development costs are charged to operating expenses when incurred. |
Fair Value Measurements and Fair Value of Financial Instruments | Fair Value Measurements and Fair Value of Financial Instruments As of March 31, 2019 and 2020, the carrying value of certain financial instruments that are not reported at fair value in the accompanying consolidated balance sheets, including cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate their fair value due to their short-term nature. The Company’s derivative liability, which was derecognized during the first quarter of 2020, is reported at fair value on the accompanying December 31, 2019 balance sheet. U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy: Level 1— Quoted prices for identical instruments in active markets; Level 2— Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and Level 3— Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. At December 31, 2019, the Company had a derivative liability of $24.8 million related to a forward contract that also included a call option. The notional amount of the forward contract related to gallons of the commodity, Ultra Low Sulfur Diesel. Under the terms of the contract the Company was obligated to pay the equivalent of the notional amount multiplied by the market price of Ultra Low Sulfur Diesel at the settlement dates; however, the call option of the contract capped the market price of Ultra Low Sulfur Diesel. 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 $0.5 million on the derecognition of the derivative contract. The derivative forward contract was amended again in April 2020. See, “Note E, Fixed Payment Obligations” below. The fair value of the derivative forward contract is primarily based upon the notional amount and the forward strip market prices of Ultra Low Sulfur Diesel, and is reduced by the fair value of the call option. The forward strip market prices are observable. However, to determine the fair value of the call option, Company used the Blacks 76 option pricing model. As a result, the contract as a whole is included in the Level 3 of the fair value hierarchy. The following presents changes in the derivative liability: Quarter Ended Quarter Ended March 31, 2020 March 31, 2019 Beginning Balance $ 24,767,000 $ 11,917,000 Conversion to note payable (19,291,000 ) (Decrease) increase in fair value recognized in earnings (5,476,000 ) 3,937,000 Ending Balance $ $ 15,854,000 |
Estimates | Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses. Significant estimates used in preparing these financial statements include a) valuation of common stock, warrants, and stock options, b) those assumed in determining the value of the derivative transactions, c) and estimated useful lives of equipment and patent costs. It is at least reasonably possible that the significant estimates used will change within the next year. |
Income/Loss Per Common Share | Income/Loss per 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: 1) instruments that were dilutive for the quarter ended March 31, 2020 and included in the diluted earnings per share, and 2) instruments that were anti-dilutive for the quarter ended March 31, 2019 and excluded from diluted earnings per share as they would have been antidilutive: Instruments Included in Diluted EPS March 31, 2020 Instruments Excluded in Diluted EPS March 31, 2019 Convertible notes and accrued interest 100,075,503 94,938,750 Convertible preferred stock - Series B 11,818,181 11,818,181 Warrants — — Compensation-based stock options and warrants 177,050,000 171,631,482 |
Stock Based Compensation | 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. For the quarters ended March 31, 2020 and 2019, charges related to stock-based compensation amounted to approximately $25,614 and $43,008 respectively. For the quarters ended March 31, 2020 and 2019, all stock-based compensation is classified in general and administrative expense. |
Subsequent Events | Subsequent Events The Company has evaluated subsequent events through the date these condensed consolidated financial statements were available to be issued. See Note I to these consolidated financial statements for a description of events occurring subsequent to March 31, 2020. |
ORGANIZATION AND SIGNIFICANT _3
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of changes in derivative liability | The following presents changes in the derivative liability: Quarter Ended Quarter Ended March 31, 2020 March 31, 2019 Beginning Balance $ 24,767,000 $ 11,917,000 Conversion to note payable (19,291,000 ) (Decrease) increase in fair value recognized in earnings (5,476,000 ) 3,937,000 Ending Balance $ $ 15,854,000 |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following table presents: 1) instruments that were dilutive for the quarter ended March 31, 2020 and included in the diluted earnings per share, and 2) instruments that were anti-dilutive for the quarter ended March 31, 2019 and excluded from diluted earnings per share as they would have been antidilutive: Instruments Included in Diluted EPS March 31, 2020 Instruments Excluded in Diluted EPS March 31, 2019 Convertible notes and accrued interest 100,075,503 94,938,750 Convertible preferred stock - Series B 11,818,181 11,818,181 Warrants — — Compensation-based stock options and warrants 177,050,000 171,631,482 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | Property and equipment for the periods ended March 31, 2020 and December 31, 2019 are as follows: For the Periods Ended March 31, 2020 December 31, 2019 Office Equipment $ 61,078 $ 61,078 Total Cost $ 61,078 $ 61,078 Less accumulated depreciation 61,078 61,078 Property and equipment, net $ $ |
PATENT LICENSE FEES (Tables)
PATENT LICENSE FEES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Notes to Financial Statements | |
Schedule of patent license assets | The patent assets as of the quarter ended March 31, 2020 and 2019 is shown in the following table: March 31, December 31, 2020 2019 Patent license fees 4,187,902 4,187,902 Less accumulated amortization (1,747,616 ) (1,686,310 ) Intangible Assets, Net 2,440,286 2,501,592 |
STOCK OPTIONS AND WARRANTS (Tab
STOCK OPTIONS AND WARRANTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Disclosure Text Block [Abstract] | |
Summary of option award activity and awards outstanding | A summary of the option award activity and awards outstanding at March 31, 2020 is as follows: Weighted Weighted Average Shares Average Remaining Aggregate Under Exercise Contractual Intrinsic Option Price Life(Years) Value Outstanding at December 31, 2019 199,027,315 0.016 3.6 $ 14,360,463 Granted Exercised (8,177,315 ) 0.009 Forfeited (5,000,000 ) 0.090 Expired (1,300,000 ) 0.01 Outstanding at March 31, 2020 184,550,000 0.016 3.6 $ 6,219,550 Vested and exercisable at March 31, 2020 176,171,212 0.016 3.6 $ 5,889,218 |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The following table illustrates the assumptions used in estimating the fair value of options granted during the periods presented: Quarter Ended March, 31 2019 Expected Term (in Years) 2 to 5 Volatility 123 % Risk Free Rate 2.8 % Dividend Yield 0 % Suboptimal Exercise Factor (1) 1.3 Exit Rate Pre-vesting (2) 0 % Exit Rate Post-vesting (3) 0 % Aggregate Grant Date Fair Value $ 120,278 (1) The suboptimal exercise factor estimates the value realized by the holder upon exercise of the option and the estimated point at which an option holder would exercise an in-the-money option. The Company estimated the suboptimal factor based on the holder realizing a pre-tax profit of $500,000. Used for lattice model purposes only. (2) Assumed forfeiture rate for market condition option awards prior to vesting. Used for lattice model purposes only. (3) Assumed expiration or forfeiture rate for market condition option awards after vesting. Used for lattice model purposes only. |
ORGANIZATION AND SIGNIFICANT _4
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Accounting Policies [Abstract] | ||
Beginning balance | $ 24,767,000 | $ 11,917,000 |
Conversion to note payable | (19,291,000) | |
(Decrease) increase in fair value recognized in earnings | (5,476,000) | 3,937,000 |
Ending balance | $ 15,854,000 |
ORGANIZATION AND SIGNIFICANT _5
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Details 2) - shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Convertible notes and accrued interest | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 100,075,503 | 94,938,750 |
Convertible Preferred Stock - Series B | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 11,818,181 | 11,818,181 |
Warrant | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | ||
Compensation Based Stock Options and Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 177,050,000 | 171,631,482 |
ORGANIZATION AND SIGNIFICANT _6
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | |
May 31, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | |
Capitalization of pre-acquisition costs | $ 600,000 | ||
Stock based compensation | $ 25,614 | $ 43,008 | |
Bakersfield Refinery | |||
Financing for retrofit | $ 365,000,000 | ||
Minimum | Office Equipment | |||
Property, Plant and Equipment, Useful Life | 3 years | ||
Minimum | Field Equipment | |||
Property, Plant and Equipment, Useful Life | 5 years | ||
Maximum | Office Equipment | |||
Property, Plant and Equipment, Useful Life | 5 years | ||
Maximum | Field Equipment | |||
Property, Plant and Equipment, Useful Life | 15 years |
BASIS OF PRESENTATION AND LIQ_2
BASIS OF PRESENTATION AND LIQUIDITY (Details Narrative) - USD ($) | 3 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Notes to Financial Statements | ||||
Accumulated deficit | $ 50,244,240 | $ 55,682,264 | ||
Operating losses | 370,391 | $ 2,023,127 | ||
Working capital deficit | (12,400,000) | |||
Stockholders' deficit | 18,543,623 | 18,887,331 | $ 24,078,857 | $ 12,879,683 |
Net Income Loss | $ 5,438,024 | $ (6,050,656) |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Property and equipment, cost | $ 61,078 | $ 61,078 |
Less accumulated depreciation | 61,078 | 61,078 |
Property and equipment, net | ||
Office Equipment | ||
Property and equipment, cost | $ 61,078 | $ 61,078 |
PATENT LICENSE FEES (Details)
PATENT LICENSE FEES (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Intangible Assets, Net | $ 2,440,286 | $ 2,501,592 |
Patents [Member] | ||
Patent license fees | 4,187,902 | 4,187,902 |
Less accumulated amortization | (1,747,616) | (1,686,310) |
Intangible Assets, Net | $ 2,440,286 | $ 2,501,592 |
PATENT LICENSE FEES (Details Na
PATENT LICENSE FEES (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2013 | |
Notes to Financial Statements | |||
Expected useful life, patent | 17 years | ||
Amortization of intangible assets | $ 61,000 | $ 61,000 |
DEBT (Details Narrative)
DEBT (Details Narrative) - Chief Executive Officer and President - USD ($) | 3 Months Ended | 25 Months Ended | |
Mar. 31, 2020 | Oct. 16, 2020 | Oct. 16, 2018 | |
Accrued salary and bonus | $ 1,000,000 | ||
Convertible note payable | $ 1,000,000 | ||
Interest rate | 5.00% | ||
Maturity date | Oct. 15, 2020 | ||
Debt conversion price | $ 0.0154 | ||
Debt conversion, description | The Company has several notes that are convertible into the Company or the Company’s subsidiaries shares at different prices: from $0.03 per share into the parent company’s stock and up to $1.48 per share into a subsidiary’s common stock | ||
Interest rate, description | These notes are past due their original maturity date and they continue to accrue interest at varying rates, from 8% to 10%. | ||
Derecognized outstanding liabilities | $ 700,000 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - Two Investors - Series B Convertible Preferred Stock | Nov. 06, 2007USD ($)$ / sharesshares |
Preferres stock shares sold | shares | 13,000 |
Proceeds from sale of stock | $ | $ 1,300,000 |
Offering cost | $ | $ 9,265 |
Sale of stock price per share | $ / shares | $ 100 |
Conversion price per share | $ / shares | $ 0.11 |
STOCK OPTIONS AND WARRANTS (Det
STOCK OPTIONS AND WARRANTS (Details) - Option [Member] | 3 Months Ended |
Mar. 31, 2020USD ($)$ / sharesshares | |
Options, Outstanding, Beginning Balance | shares | 199,027,315 |
Options, Granted | shares | |
Options, Exercised | shares | (8,177,315) |
Options, Forfeited | shares | (5,000,000) |
Options, Expired | shares | (1,300,000) |
Options, Outstanding, Ending Balance | shares | 184,550,000 |
Options Exercisable | shares | 176,171,212 |
Options, Outstanding, Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 0.016 |
Options, Granted, Weighted Average Exercise Price | $ / shares | |
Options, Exercise, Weighted Average Exercise Price | $ / shares | 0.009 |
Options, Forfeited, Weighted Average Exercise Price | $ / shares | 0.090 |
Options, Expired, Weighted Average Exercise Price | $ / shares | 0.01 |
Options, Outstanding, Weighted Average Exercise Price, Ending Balance | $ / shares | 0.016 |
Options Exercisable, Exercise Price | $ / shares | $ 0.016 |
Options, Outstanding, Weighted Average Remaining Contractual Term | 3 years 7 months 6 days |
Options, Vested and Exercisable, Weighted Average Remaining Contractual Life | 3 years 7 months 6 days |
Options, Outstanding, Intrinsic Value, Beginning Balance | $ | $ 14,360,463 |
Options, Outstanding, Intrinsic Value, Ending Balance | $ | 6,219,550 |
Options Exercisable, Intrinsic Value | $ | $ 5,889,218 |
STOCK OPTIONS AND WARRANTS (D_2
STOCK OPTIONS AND WARRANTS (Details 2) | 3 Months Ended | |
Mar. 31, 2019USD ($) | ||
Volatility | 123.00% | |
Risk free Rate | 2.80% | |
Dividend Yield | 0.00% | |
Suboptimal Exercise Factor | 1.30% | [1] |
Exit Rate Pre-Vesting | 0.00% | [2] |
Exit Rate Post Vesting | 0.00% | [3] |
Aggregate Grant Date Fair value | $ 120,278 | |
Minimum | ||
Expected Term (in Years) | 2 years | |
Maximum | ||
Expected Term (in Years) | 5 years | |
[1] | The suboptimal exercise factor estimates the value realized by the holder upon exercise of the option and the estimated point at which an option holder would exercise an in-the-money option. The Company estimated the suboptimal factor based on the holder realizing a pre-tax profit of $500,000. Used for lattice model purposes only. | |
[2] | Assumed forfeiture rate for market condition option awards prior to vesting. Used for lattice model purposes only. | |
[3] | Assumed expiration or forfeiture rate for market condition option awards after vesting. Used for lattice model purposes only. |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($) | Nov. 17, 2020 | Sep. 10, 2020 | May 07, 2020 | May 04, 2020 | Apr. 30, 2020 | Dec. 31, 2020 | Apr. 10, 2020 |
Options granted | 7,095,000 | ||||||
Stock Split | On November 17, 2020, the Company held its annual meeting of stockholders at which (i) the 2020 Plan and (ii) the proposal to effect a reverse stock split of the common shares at a ratio of 1-for-10, at the discretion of the Board, were approved. | ||||||
2020 Equity Incentive Plan | |||||||
Shares reserve for future issuance | 20,000,000 | ||||||
Senior Lenders | |||||||
Proceeds from senior secured loan | $ 300,000,000 | ||||||
Interest rate | 12.50% | ||||||
Mezzanine lenders | |||||||
Proceeds from senior secured loan | $ 65,000,000 | ||||||
Interest rate | 15.00% | ||||||
Maturity date | Nov. 30, 2027 | ||||||
Chief Executive Officer | |||||||
Annual base salary | $ 350,000 | ||||||
Shares issued upon exercise of options | 5,542,857 | ||||||
Executive Vice President | |||||||
Annual base salary | 310,000 | ||||||
Attorneys | |||||||
Shares issued upon exercise of options | 750,000 | ||||||
Bakersfield Renewable Fuels | |||||||
Purchase price of outstanding equity interests | 40,000,000 | ||||||
Plaintiffs value | $ 6,700,000 | ||||||
ARB, Inc. | |||||||
Services fees | $ 201,400,000 |