The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. As shown in the accompanying condensed consolidated financial statements, the Company has incurred a net loss applicable to its common stockholders of $60.0 million during the nine months ended September 30, 2023, and had an accumulated deficit of $231.7 million at September 30, 2023. At September 30, 2023, the Company had working capital deficit of $275.9 million and a stockholders’ deficit of $95.9 million. Our Bakersfield Renewable Fuels Refinery is still under construction, and we do not expect to generate any revenue from our Bakersfield Renewable Fuels Refinery until the commencement of commercial operations at the refinery.

Various scheduling issues experienced to date with CTCI Americas, Inc., a Texas corporation (“CTCI”), our lead contractor, and other factors beyond our control have delayed the completion of the project. Such factors have included, by way of example, poor planning and execution by the engineering, procurement and construction contractors for the project, the impact of the COVID-19 pandemic, unavailability of skilled labor, material shortages and other matters. Delays to engineering activities have resulted from, among other things, inadequate engineering staffing, and the failure or inability to progress engineering in a timely, efficient, and collaborative manner. The project has also experienced engineering, procurement and construction issues with our contractors, including lack of timely scheduling, untimely change order estimations, delay in ordering certain materials and unanticipated turnover of personnel to fully handle the workstreams of the project. We also experienced inefficiencies and delays from contracted engineering and specialty firms due to the unavailability of skilled labor, delays in contractors performing required material fabrication, labor inefficiencies, productivity issues, material shortages, supply chain disruption, and transportation delays. The project has experienced such delays despite steps taken by us to mitigate such delays. We have executed a change order with our lead contractor, CTCI, to accelerate the completion of the project, although further delays beyond estimated timelines, or unexpected construction costs including any unfavorable negotiation of change order claims, could increase the cost of completion beyond our budgeted costs. Based on the schedule provided to us by our lead contractor CTCI, and current work effort, we believe that the Bakersfield Renewable Fuels Refinery will commence initial operations during the fourth quarter of 2023, however, there can be no assurance that operations will commence within this time period (See Note I - Commitments and Contingencies - Legal).

In addition, ExxonMobil Renewables LLC (“Exxon”), in its capacity as a preferred stockholder of the Company, filed a complaint against the Company in the Court of Chancery of the State of Delaware to compel inspection of the Company’s books and records under Section 220 of the Delaware General Corporation Law in relation to alleged wrongdoing by the Company’s management (“Section 220 Demand”). The Company and Exxon have jointly filed a stipulation with the court on an agreed scope of voluntary document production by the Company. While we deny the allegations described in the complaint, it is possible that one or more additional stockholder suits could be filed pertaining to the subject matter of the Section 220 Demand. The Section 220 Demand and the potential risk of additional stockholder suits has created additional uncertainties around our ability to successfully obtain third party financing required to complete the Bakersfield Renewable Fuels Refinery and other commercial financing for working capital needs.

  

In addition, on May 19, 2023, ExxonMobil Oil Corporation (“EMOC”) notified the Company that it was terminating the Product Offtake Agreement (the “Offtake Agreement” or “POA”) effective as of that date as a result of EMOC’s views that the force majeure events described in the Company’s May

15, 2023

letter to EMOC had existed for 365 consecutive days or more - a contention that the Company vigorously denies. On May 21, 2023, the Company notified EMOC that it rejects its latest putative attempt to terminate the POA, disagrees with EMOC’s interpretation of the POA, and believes that its force majeure claims are valid and enforceable under the POA (See Note I - Commitments and Contingencies - Legal for further information).

The start date under the POA is June 30, 2023 (the “Start Date”), which may be extended under the terms of the POA upon the occurrence of a force majeure event. The Company believes, and notified EMOC on May 15, 2023, that a force majeure event had occurred, and the Start Date has been automatically extended pursuant to the terms of the POA until November 30, 2023, at the earliest. If the Start Date is extended under the Offtake Agreement and the Bakersfield Renewable Fuels Refinery commences operations prior to such extended Start Date, we believe that the parties’ obligations under the Offtake Agreement will not be terminated as indicated by EMOC. Notwithstanding, EMOC’s purported termination of the POA has created a condition that raises an uncertainty as to the POA and renewable diesel

revenues to be received pursuant to the POA. Termination of the POA may result in an Event of Default under our $484.7 million secured term loan agreement (the “Senior Credit Agreement”).

 

As of September 30, 2023, the Company’s primary source of liquidity is cash on hand and available borrowings under its Senior Credit Agreement. The Company estimates that it will require the following cash inflows to meet its obligations through November 1, 2024:

In addition, under the Senior Credit Agreement, the Company is required to raise $10 million by November 30, 2023 and an additional $170 million by July 5, 2024 to refinance a portion of the senior debt, and may require $99.5 million for cash interest payments (if not otherwise permitted) related to the senior debt.

Also, under the terms of the Series C Preferred Stock, the Company

will be 

required to pay dividend payments of $14.9 million through September 30, 2024.

There can be no assurance that sufficient liquidity can be obtained on terms acceptable to the Company, or at all. As a result, and given the high volatility in the capital markets, as well as our ongoing legal matters with Exxon, the Company has concluded that management’s plans do not alleviate the substantial doubt about our ability to continue as a going concern beyond one year from the date the financial statements are issued. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

 

 

 

BKRF OCB, LLC, an indirect, wholly-owned subsidiary of GCEH, is the primary borrower under our

$484.7 million

Senior Credit Agreement. The purpose of this facility is to provide cash to BKRF to facilitate the construction of the refinery.

 

On July 5, 2023, the Company entered into Amendment No. 13 to the Senior Credit Agreement that provides for, among other things, a new $110 million Tranche D term loan facility, which may be increased up to $140 million upon the consent of the Required Lenders (as defined within Amendment No. 13). As of the effective date of Amendment No. 13, $36 million of loans were committed, including $7 million of new funding and $29 million converted from Tranche C. As of November 13, 2023,

$84.6 million

is outstanding under Tranche D of the Senior Agreement. The remaining, uncommitted availability under Tranche D will be made available to the Company at the sole discretion of the Required Lenders. The availability period for which the Tranche D facility can be drawn may be extended from time to time by the Administrative Agent until November 30, 2023. The Company is required to complete a $10 million capital raise by July 31, 2023, which was subsequently extended to November 30, 2023, and a second $170 million capital raise by July 5, 2024 (See Note I - Commitments and Contingencies for further information).

 

 

Our primary offtake arrangement for our renewable diesel produced at the Bakersfield Renewable Fuels Refinery is the POA with Exxon. Exxon purportedly terminated the POA on May 19, 2023. While we have reserved and will enforce all of our rights under the POA, including without limitation those rights that automatically extend the Start Date, the termination of the POA will result in termination of our Term Purchase Agreement (“TPA”) with Exxon. If the termination of the POA and resultant termination of the TPA are effective, then the Company will need to enter into alternative offtake arrangements with third parties (See Note I - Commitments and Contingencies - Legal for further information).