The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying condensed consolidated financial statements, the Company incurred losses from continuing operations applicable to its common stockholders of $34.9 million during the nine months ended September 30, 2022, and had an accumulated deficit of $152.5 million at September 30, 2022. At September 30, 2022, the Company had working capital of negative $158.8 million (which includes no current restricted cash) and a stockholders' deficit of $1.4 million. The retooling of the Bakersfield Renewable Fuels Refinery is ongoing and the refinery is expected to commence operations in the first half of 2023. Various scheduling issues experienced to date with our lead contractor and other factors beyond our control have delayed the completion of the project into 2023. While we believe that we will commence operations by July 1, 2023, there can be no assurance that operations will commence by then. Revenues from the refinery will commence with commercial operations. The Company’s primary source of liquidity is cash on hand and available borrowings under its credit facilities. However, because of the uncertainty around the cost of change orders to the refinery, the impact of the delayed timing of revenues and cash flows from the refinery arising from a delay in the completion of construction, and the amount and timing of certain credits due to us from CTCI (defined below), we believe that we may need additional capital to fund certain of our liquidity requirements, which includes completion of the refinery, upstream activities, operational and general and administrative costs, and repayment of financial obligations. Because of the uncertainty of the timing of the completion of the refinery and the initial revenues from the refinery, the above 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 is undertaking, or has undertaken, several initiatives to mitigate the conditions or events that raise substantial doubt about our ability to continue as a going concern.

Also in consideration for the upsizing of the Senior Credit Agreement, among other things, certain subsidiaries of the Company agreed to (i) undertake additional capital raises of at least $10 million prior to December 31, 2022, and aggregating to at least $20 million prior to March 31, 2023

.

 

 

 

BKRF OCB, LLC, an indirect, wholly-owned subsidiary of GCEH, is a party to a $397.6 million secured term loan facility (the “Senior Credit Facility”), and BKRF HCB, LLC, also an indirect, wholly-owned subsidiary of GCEH, is party to a $67.4 million intercompany secured term loan facility (the “Mezzanine Credit Facility”) to which GCEH is the lender (see Note F). The purpose of these facilities is to provide cash to facilitate the construction of the refinery.

On August 5, 2022, certain subsidiaries of the Company entered into Amendment No. 9 to the senior secured term loan Credit Agreement to, among other things, increase the Tranche B Commitments thereunder by $60 million to $397.6 million, extend the start date of the Bakersfield Renewable Fuels Refinery to March 31, 2023, and implement certain other commercial arrangements as described therein. Existing defaults and potential events of defaults under the Credit Agreement, if any, were also waived by the lenders in connection with the effectiveness of Amendment No. 9. As payment of an amendment and upsize premium, the Company issued to the lenders warrants to purchase up to 7,468,929 shares of the Company’s common stock, exercisable until December 23, 2028 at an exercise price of $2.25 per share.

 

 

On February 23, 2022, we issued 145,000 shares of our newly created Series C Preferred Stock (the “Series C Preferred”) and five-year warrants (the “GCEH Warrants”) to purchase up to an aggregate of 18,547,731 shares of our common stock (5,017,008 issued to settle the Warrant Commitment Liability) at an exercise price of $2.25 per share to ExxonMobil Renewables LLC (“ExxonMobil Renewables”), an affiliate of ExxonMobil, and 11 other institutional investors (all of whom are Senior Lenders under our existing Senior Credit Facility) for an aggregate purchase price of $145 million and the settlement of the Warrant Commitment Liability. As additional consideration for ExxonMobil’s investment, we also granted ExxonMobil Renewables additional warrants (the “GCEH Tranche II Warrants”) to purchase up to 6.5 million shares of common stock at an exercise price per share of $3.75 until February 22, 2028, and a warrant to acquire 33% (19,701,493 shares) of our SusOils subsidiary for $33 million ($1.675 per share) until February 22, 2027 (“SusOil Warrant”). On August 5, 2022, the GCEH Tranche II Warrants were amended to an exercise price of $2.25 per share and the exercise period for all of the ExxonMobil warrants were extended to December 23, 2028. Each of the GCEH Warrants, GCEH Tranche II Warrants and SusOil Warrant may be exercised for cash or by means of cashless exercise, however the GCEH Tranche II Warrants cannot be exercised until the earlier of (i) the date on which ExxonMobil extends the term of the five-year Offtake Agreement (as described below), which did occur on August 5, 2022, that we entered into with ExxonMobil effective April 10, 2019 (as amended), or (ii) a change of control, sale, or the dissolution of the Company. On August 5, 2022, the SusOil Warrant was amended to an exercise price of $1 million ($0.0507 per share). Under the Certificate of Designations of the Series C Preferred, the holders of the Series C Preferred are entitled to receive dividends at a rate of 15%, compounded quarterly provided that, until March 31, 2024, we may elect not to pay some or all of the accrued dividends in cash, in which case the unpaid dividends shall accrue and be added to the original issuance price of the shares of Series C Preferred. The shares of Series C Preferred have no voting rights, except as required by law or with respect to certain protective provisions in the Certificate of Designations. For such time as ExxonMobil holds any shares of Series C Preferred, ExxonMobil will have the right, exercisable at its option, to appoint two directors to GCEH’s Board of Directors. If the Series C Preferred shares have not been redeemed prior to the fifth anniversary of issuance, or upon an event of default under the Certificate of Designations, ExxonMobil will have the right to appoint a majority of the Board of Directors. The Certificate of Designations provides that we will have the right, at any time, to redeem/repurchase the outstanding shares of Series C Preferred (in increments of no less than $25 million), for an amount equal to the Corporate Redemption Price (as defined in the Certificate of Designations) at any time the Series C Preferred is outstanding. The Certificate of Designations of the Series C Preferred Stock provides for mandatory redemption upon a Change of Control or Event of Default (as defined therein) and are not convertible into shares of our common stock. GCEH may redeem the Series C Preferred Stock at any time within the first two years at 1.85 times, and the next three years at 2.0 times, the amount of the investment (including any accrued unpaid dividends).

 

 

In

April 2019, the Company entered into a binding Product Offtake Agreement (the “Offtake Agreement”) with ExxonMobil pursuant to which ExxonMobil has committed to purchase 2.5 million barrels per year of renewable diesel annually (the “Committed Volume”) from the Bakersfield Renewable Fuels Refinery (including the Renewable Identification Numbers (“RINs”) allocated to such quantities of renewable diesel), 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 Renewable Fuels Refinery commences commercial operations (“Start Date”). ExxonMobil has the option to extend the initial five-year term. Either party may terminate the Offtake Agreement if the Bakersfield Renewable Fuels Refinery does not meet certain production levels by certain milestone dates following the commencement of the Bakersfield Renewable Fuels Refinery’s operations or the Start Date has not occurred by the date set forth in the Offtake Agreement for reasons other than force majeure.

 

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 Renewable Fuels Refinery, and the Company is obligated to sell such additional amounts of renewable diesel to ExxonMobil. Under the Offtake Agreement, ExxonMobil committed to purchase the Committed Volume from the Bakersfield Renewable Fuels Refinery. However, the Bakersfield Renewable Fuels Refinery is designed to produce more than the Committed Volume. Under the TPA, following the Start Date, 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 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. 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.

 

In connection with the transactions contemplated by Amendment No. 9, the Company also entered into a transaction agreement with ExxonMobil Renewables and ExxonMobil, pursuant to which, among other things, certain subsidiaries of the Company and ExxonMobil entered into amendments to the Company’s Product Off-Take Agreement and Term Purchase Agreement in order to extend the initial terms thereof to 66 months, to increase certain committed volumes under the Product Off-Take Agreement from 105 million gallons per year (“MGPY”) to 135 MGPY, and to implement certain other commercial arrangements between the parties as described therein in exchange for issuing new immediately-vested warrants and modifying existing outstanding warrants (see Note H).