BASIS OF PRESENTATION AND LIQUIDITY
|9 Months Ended|
Sep. 30, 2021
|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 continuing operations applicable to its common stockholders of $34.0 million during the nine months ended September 30, 2021, and has an accumulated deficit of $100.2 million at September 30, 2021. At September 30, 2021, the Company had working capital of
negative$50.1 million (which includes current restricted cash of $2.3 million) and a stockholders’ deficit of $53.4 million. The Company is progressing its Bakersfield Biorefinery retooling project and is on track to achieve its initial revenues from the production and sale of renewable diesel in early 2022.
Additionally, the Company must fund the $35 million contingency cash reserve account (described further in Note E) by November 19, 2021. The Company is not able to fund the $35 million reserve account absent an amendment or additional debt and/or equity financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least one year from the time the financial statements are issued. Management plans to close on an additional debt and/or equity financing in the short-term and believes that transaction is probable of closing. Therefore, management believes their plan alleviates the substantial doubt.
On May 4, 2020, a group of lenders agreed to provide a $300 million senior secured term loan facility to BKRF OCB, LLC, a wholly-owned subsidiary of Global Clean Energy Holdings, Inc., to enable that subsidiary to acquire the equity interests of BKRF and to pay the anticipated costs of the retooling of the Bakersfield Biorefinery owned by BKRF (the “Senior Credit Facility”). Concurrently with the Senior Credit Facility, a group of Mezzanine Lenders also agreed to provide a $65 million secured term loan facility to be used to pay the costs of repurposing and starting up the Bakersfield Biorefinery, (the “Mezzanine Credit Facility”). Although the cash provided by the senior and Mezzanine Lenders may only be used for the Bakersfield Biorefinery and servicing these debt obligations, Global Clean Energy Holdings, Inc. will nevertheless, realize a reduction in certain of its operating and general and administrative expenses as the Company shares certain personnel and related costs. The Company believes that these cost savings, plus the Company’s other financial resources, including, but not limited to, equity sales, sale and leaseback opportunities, financing or leasing arrangements for equipment or assets, etc., should be sufficient to fund the Company’s operations through the start-up of the Bakersfield Biorefinery, at which point the Company will begin to generate positive operating cash flow which should be enough to fund operations and liabilities through at least the term of the product offtake agreement discussed below. See “Note E - Debt”. In November 2020, the Company’s Senior Credit Facility and Mezzanine Credit Facility were increased by a total of $15 million for the Bakersfield Biorefinery and the Company’s upstream Camelina operations.
In April 2019, the Company entered into a binding Product Offtake Agreement (the “Offtake Agreement”) with ExxonMobil Oil Corporation (“ExxonMobil”) pursuant to which ExxonMobil has committed to purchase 2.5 million barrels per year of renewable diesel annually from the Bakersfield Biorefinery (with a right to purchase higher volumes as available), and the Company has committed to sell these quantities of renewable diesel to ExxonMobil. ExxonMobil’s obligation to purchase renewable diesel will last for a period of five years following the date that the Bakersfield Biorefinery commences commercial operations. ExxonMobil has the option to extend the initial five-year term. Either party may terminate the Offtake Agreement if the Bakersfield Biorefinery does not meet certain production levels by certain milestone dates following the commencement of the Bakersfield Biorefinery’s operations.
In April 2021, BKRF entered into a Term Purchase Agreement (“TPA”) with ExxonMobil under which ExxonMobil has the right to purchase additional quantities of renewable diesel from our Bakersfield Biorefinery, and the Company is obligated to sell such additional amounts of renewable diesel to ExxonMobil. Under the Offtake Agreement, signed in 2019, ExxonMobil committed to purchase 2.5 million barrels of renewable diesel per year (the “Committed Volume”) from the Bakersfield Biorefinery. However, the Bakersfield Biorefinery is designed to produce more than the Committed Volume. Under the TPA, ExxonMobil has the exclusive right to purchase all renewable diesel produced in excess of the Committed Volume that we sell to ExxonMobil under the Offtake Agreement. The Company also agreed to transfer title to ExxonMobil of the Renewable Identification Numbers (“RINs”) allocated to the quantities of renewable diesel purchased under the TPA. In the event that ExxonMobil does not purchase all of the renewable diesel that it can under the TPA and, as a result, our inventory levels exceed certain specified levels, the Company can sell that extra inventory to third parties. ExxonMobil will pay us a price for the renewable diesel purchased under the TPA based on a tiered formula reflecting the margins realized by ExxonMobil from its downstream resales of the TPA renewable diesel. The TPA has a five-year term. ExxonMobil has the option to extend the initial five-year term for a second five-year term if it elects to extend the Offtake Agreement.
Under both agreements, we retain 100% of the co-products, which include renewable naphtha, renewable propane and renewable butane. The Company is pursuing sales contracts for these products