ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| 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, and together with its subsidiaries 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 currently holds the 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. Subsequent to year end 2019, the Company completed the acquisition of the targeted refinery. The retrofitting of the refinery 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 that it will produce. See Note B which describes the agreement in more detail. |
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| Basis of Presentation |
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Global Clean Energy Holdings, Inc., and its wholly owned subsidiaries, and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. |
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| Cash and Cash Equivalents; Concentration of Credit Risk |
Cash and Cash Equivalents; Concentration of Credit Risk
For purposes of the statement of cash flows, the Company had no cash and cash equivalents in excess of federally-insured limits. The Company considers all highly liquid debt instruments maturing in three months or less to be cash equivalents. The Company has maintained its cash balances at what management considers to be high credit-quality financial institutions. |
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| Accounts and Other Receivables |
Accounts and Other Receivables
Trade receivables are recorded at net realizable value. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. The Company reviews its allowance for doubtful accounts quarterly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. |
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| 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. |
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| Long-Lived Assets |
Long-Lived Assets
In accordance with U.S. GAAP 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. |
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| 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, has 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 acquisition is probable. 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 expense general and administrative and overhead costs and costs, including payroll, that would be considered support functions. In 2019, we capitalized $2.6 million of these costs which included financing costs, legal costs, pre-engineering costs and other contractual costs and expenses directly related to the purchase of the Bakersfield refinery in May 2020. In addition, we paid $3.2 million of deposits for the acquisition of the property. |
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| Debt Issuance Costs |
Debt Issuance Costs
During 2018, we signed a letter of intent to acquire our Bakersfield Refinery. The acquisition of the refinery and the related $365 million of financing to retrofit it closed in May 2020. During 2019, we incurred $0.5 million of costs related to obtaining financing for the Bakersfield Refinery. These debt issuance costs have been deferred and recorded on the balance sheet and will be amortized over the term of the financing. See Note J in Subsequent Events for more detail on the financing. |
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| 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 an obligation. Upon conclusive evidence that an obligation may be extinguished, has expired, is discharged, cancelled or otherwise no longer legally exists, then the Company will derecognize the respective liability on its balance sheet. |
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| 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 bases 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. |
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| Revenue Recognition |
Revenue Recognition
On January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”). ASC 606 creates a single framework for recognizing revenue from contracts with customers that fall within its scope. Under ASC 606 revenue is recognized using the five-step model, including (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. However, the Company has not recognized any revenue since the adoption of ASC 606. 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.
Prior to the adoption of ASC 606, the Company would recognize revenue when all of the following criteria were met: persuasive evidence of an arrangement exists; delivery occurred or services had been rendered; the seller's price to the buyer is fixed or determinable; collectability was reasonably assured; and title and the risks and rewards of ownership have transferred to the buyer. The Company’s revenues during 2015 – 2017 primarily consisted of contract advisory services, which included development and management services to other companies regarding their bio-fuels and/or feedstock development operations, on a fee for services basis. The advisory services revenue was recognized upon completion of the work in accordance with each advisory contract. |
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| Research and Development |
Research and Development
Research and development costs are charged to operating expenses when incurred. |
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| Fair Value Measurements and Fair Value of Financial Instruments |
Fair Value Measurements and Fair Value of Financial Instruments
The carrying amounts of the Company’s 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 carrying value due to their short-term nature. The Company’s derivative liability related to its derivative forward contract is reported at fair value.
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.
During October 2018, the Company entered into a derivative forward contract that also included a call option. This contract was used as a source of financing, and the Company received $6 million at the inception of the contract from the counterparty. 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. At the inception of the contract the fair value of the derivative liability exceeded the $6 million received by the Company, and as a result, the Company recognized a financing cost of $9.1 million. During October 2019, the derivative forward contract was amended, and the Company received an additional $4 million and the notional amount and liability increased accordingly.
The derivative forward contract was amended again in April 2020. Under the amendment, the contract was replaced with a fixed payment obligation, whereby the Company agreed to pay the counterparty a total of $24.8 million, which included a payment of $4.5 million in June 2020, and six installment payments in 2022 totaling $20.3 million.
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 Black’s 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:
During the quarter ended December 31, 2018, the Company recognized a charge in earnings of $5.9 million related to the derivative forward contract. This charge consisted of $9.1 million finance costs of the derivative, less a decrease in fair value of $3.2 million. |
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| 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) those assumed in determining the valuation of common stock, warrants, and stock options, b) those assumed in determining the value of the derivative transactions, c) estimated useful lives of equipment and patent costs, and d) undiscounted future cash flows for purpose of evaluating possible impairment of long-term assets. It is at least reasonably possible that the significant estimates used will change within the next year. |
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| 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 instruments are currently antidilutive and have been excluded from the calculations of diluted income or loss per share at December 31, 2016, 2017, 2018 and 2019, as follows:
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| 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 fiscal years ended December 31, 2019, 2018, 2017 and 2016, charges related to stock-based compensation amounted to approximately $577,645, $68,289, $33,560 and $33,311, respectively. For the fiscal years ended December 31, 2019, 2018, 2017 and 2016, all stock-based compensation is classified in general and administrative expense. |
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| Subsequent Events |
Subsequent Events
The Company has evaluated subsequent events through October 6, 2020, the date these consolidated financial statements were issued. See Note J to these consolidated financial statements for a description of events occurring subsequent to December 31, 2019. |
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| Recently Issued Accounting Statements |
Recently Issued Accounting Statements
Revenue Recognition
In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers. This new standard replaces most of the existing revenue recognition guidance in U.S. GAAP permits the use of either the retrospective or cumulative effect transition method. The new standard, as amended, became effective in the first quarter of fiscal year 2018. The Company adopted the standard using the modified retrospective method. There was no effect for any adjustments to retained earnings (accumulated deficit) upon adoption of the standard on January 1, 2018.
Leasing
Effective January 1, 2019 the Company adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Update No. 2016-02, Leases (Topic 842) which superseded previous lease guidance ASC 840, Leases. Topic 842 is a new lease model that requires a company to recognize right-of-use (“ROU”) assets and lease liabilities on the balance sheet. The Company adopted the standard using the modified retrospective approach that does not require the restatement of prior year financial statements. The adoption of Topic 842 did not have a material impact on the Company’s consolidated income statement or consolidated cash flow statement. The adoption of Topic 842 resulted in the recognition of a ROU asset and corresponding lease liability of $112,000 as of January 1, 2019 for leases classified as operating leases.
Stock Compensation
In June 2018, the FASB issued ASU No. 2018-07 Improvements to Non-employee Share-based Payment Accounting ("ASU 2018-07"). ASU 2018-07 amends ASC 718, Compensation - Stock Compensation ("ASC 718"), with the intent of simplifying the accounting for share-based payments granted to non-employees for goods and services and aligning the accounting for share-based payments granted to non-employees with the accounting for share-based payments granted to employees. The Company adopted ASU 2018-07 on January 1, 2019 using the modified retrospective approach as required. ASU 2018-07 replaced ASC 505-50, Equity-Based Payments to Non-employees ("ASC 505-50") which was previously applied by the Company for warrants granted to consultants and nonemployees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements. |
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