What changed in this filing

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Item 1A. Risk Factors

2023-03-14 compared with 2022-03-15 · 53 added, 42 removed, 304 unchanged (24% of the section changed)

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Risks Related to Economic Conditions, Governmental Action, and our Industry

Our industry is greatly influenced by the overall global economy and as such we have the potential to be adversely affected by the potential COVID-19  

public health pandemic and the resultant impact on our business, results of operations or financial condition.

The global outbreak of the COVID-19 pandemic has caused governments and industry to take measures to mitigate the spread of the virus.  We source certain raw materials for our chemicals segment internationally and as such we are subject to potential supply chain disruptions and price inflation for those raw materials.

We have so far absorbed those impacts in our business, however, our ability to competitively source these raw materials after such time is uncertain given the unknown impacts of COVID-19 and potentially more disruptive future variants.

Additionally, any further spread of COVID-19, which may negatively impact on our customers and thus on our business remains highly unpredictable and as such, we cannot predict the degree to, or the time period over, which our sales and operations will be affected by this outbreak, and the effects could be material.

Our industry is greatly influenced by the overall  

global economy and as such we have the potential to be adversely  

affected by the COVID-19  

public health pandemic and the resultant impact on  

our business, results of operations or financial condition.

The global outbreak of the COVID-19 pandemic caused governments and industry to take measures to mitigate the spread of the virus.  We source certain raw materials for our chemicals segment internationally, and as such we are subject to supply chain disruptions and price inflation for those raw materials.

We have so far absorbed those impacts in our business;

however, our ability to competitively source these raw materials after such time is uncertain given the unknown impacts of COVID-19 and potentially more disruptive future variants.

Additionally, any further spread of COVID-19, which may negatively impact on our customers and thus on our business still remains unpredictable and as such, we cannot predict the degree to, or the time period over, which our sales and operations will be affected by this outbreak, and the effects could be material.

The impacts include, but are not limited to:

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suspension of renewable fuel and/or low carbon fuel policies;

limitations on our ability to operate our business as a result of federal, state or local regulations, including any changes to the designation of our business as “essential” by the US Department of Homeland Security;

limitations on our ability to operate our business as a result of federal, state or local regulations, including any changes to the designation of our business as “essential” by the U.S.

Department of Homeland Security;

decreases in the demand for and price of RINs and LCFS credits as a result of reduced demand for petroleum-based gasoline and diesel fuel;

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However, in late December 2019, the BTC was retroactively reinstated from its expiry on January 1, 2018 through December 31, 2022.

The BTC has not been extended past December 31, 2022.

There is no guarantee that the BTC will be reinstated after 2022, which could have a material adverse effect on us and on the biodiesel industry in general.

With the passage of the Inflation Reduction Act in August 2022, the BTC has been extended through December 31, 2024.

There is no guarantee that the BTC will be extended after 2024, which could have a material adverse effect on us and on the biodiesel industry in general.

We operate within the biomass-based diesel industry, which relies on governmental programs requiring or incentivizing the consumption of biofuels.

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As a result, we could cease producing biodiesel, which could have an adverse effect on our financial condition.

Our biofuels operations may be harmed if the federal or state governments were to change current laws and regulations.

Our biofuels operations may be harmed if federal or state governments were to change current laws and regulations.

Alternative fuels businesses benefit from government subsidies and mandates.

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If federal or state agency determinations, laws, and regulations relating to the application and use of alternative energy are changed, the marketability and sales of biodiesel production could be materially adversely affected.

We derive a significant portion of our revenues from sales of our biofuels in the State of California primarily as a result of California ’

s Low Carbon Fuel Standard ("LCFS");

We have historically derived a significant portion of our revenues from sales of our biofuels in the State of California primarily as a result of California ’

s Low Carbon Fuel Standard ( “

LCFS ”

adverse changes in this law or reductions in the value of LCFS credits would harm our revenues and profits.

The LCFS is designed to reduce greenhouse gas ("GHG") emissions associated with transportation fuels used in California by ensuring that the total amount of fuel consumed meets declining targets for such emissions.

The LCFS is designed to reduce greenhouse gas (“GHG”) emissions associated with transportation fuels used in California by ensuring that the total amount of fuel consumed meets declining targets for such emissions.

The regulation quantifies lifecycle GHG emissions by assigning a “carbon intensity”

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production capacity for biodiesel is in excess of the current RFS2 mandate for 2022 and 2023.

Excess of production capacity over the annual mandates could result in a decline in biodiesel prices and profitability, negatively impacting our ability to maintain the profitability of our biofuels segment and recover capital expenditures in this business segment.

Excess production capacity over the annual mandates could result in a decline in biodiesel prices and profitability, negatively impacting our ability to maintain the profitability of our biofuels segment and recover capital expenditures in this business segment.

Biodiesel is encountering increased competition from renewable diesel, which is produced via hydrotreating a biomass-based feedstock.

Renewable diesel can be used interchangeably with conventional petroleum diesel, is not limited in blends, and can be transported via existing fuel pipeline infrastructure.

A significant capital investment would be required for FutureFuel to produce renewable diesel, and the current economics and business uncertainty do not support this level of investment.

A significant capital investment would be required for the Company to produce renewable diesel, and the current economics and business uncertainty do not support this level of investment.

Fluctuations in commodity prices may cause a reduction in the demand or profitability of the products or services we produce.

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There can be no assurance, however, that such measures will result in cost savings or supply stability or that all market fluctuation exposure will be eliminated.

In addition, natural disasters, changes in laws or regulations, war or other outbreak of hostilities, or other political factors in any of the countries or regions in which we operate or do business, or in countries or regions that are key suppliers of strategic raw materials, could affect availability and costs of raw materials.

In addition, inflation, natural disasters, changes in laws or regulations, war or other outbreak of hostilities, or other political factors in any of the countries or regions in which we operate or do business, or in countries or regions that are key suppliers of strategic raw materials, could affect availability and costs of raw materials.

While temporary shortages of raw materials may occasionally occur, these items have historically been sufficiently available to cover current requirements.

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The sale of large quantities of biodiesel necessitates that we transport our biodiesel to other markets, since the Batesville, Arkansas regional market is not expected to absorb all of our contemplated production.

Common carrier pipelines do not transport biodiesel or biodiesel/ petrodiesel blends.

This leaves trucks, barges, and rail cars as the means of distribution of our product from the plant to these storage terminals for further distribution.

Common carrier pipelines do not transport biodiesel or biodiesel/ petrodiesel blends, which means trucks, barges, and rail cars are the potentially available means of distribution of our product from the plant to these storage terminals for further distribution.

However, the availability of rail cars is limited and at times unavailable because of repairs or improvements, or as a result of priority transportation agreements with other shippers.

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If transportation is restricted or is unavailable, we may not be able to sell into more lucrative markets, and consequently our cash flow from sales of biodiesel could be restricted.

The biodiesel industry also faces several challenges to wide biodiesel acceptance, including cold temperature limitations, storage stability, fuel quality standards, and exhaust emissions.

If the industry does not satisfy consumers that these issues have been resolved or are being resolved, biodiesel may not gain widespread acceptance, which may have an adverse impact on our cash flow from sales of biodiesel.

If automobile manufacturers and other industry groups express reservations regarding the use of biodiesel, our ability to sell biodiesel will be negatively impacted.

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fuel.”

Though our biodiesel is sourced from non-food grade feedstocks, this is a concern to the biodiesel industry because biodiesel demand is heavily influenced by government policy and, if public opinion were to erode, it is possible that these policies would lose political support.

Though our biodiesel is sourced from non-food grade feedstocks, this is a concern to the biodiesel industry because biodiesel demand is heavily influenced by government policy, and if public opinion was to erode, it is possible that these policies would lose political support.

These views could also negatively impact public perception of biodiesel.

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The second triennial report was published June 29, 2018.

The 2018 report reaffirms the findings of the 2011 report and reflects the current understanding about biofuel production using data gathered through May 2017. The third triennial report is currently in progress. The EPA is assembling a group to peer review the report. No indication has been given on when the third triennial report will be issued.

The 2018 report reaffirms the findings of the 2011 report and reflects the current understanding about biofuel production using data gathered through May 2017. On January 3 2023, the USEPA released for public comment an external review draft of its third triennial report to Congress on biofuels and environment.

A 60-day public comment period was open through March 6, 2023.

The USEPA is required to report to Congress on the environmental and resource conservation impacts of the Renewable Fuel Standard program under Section 2004 of the Energy Independence and Security Act of 2007.

We expect the third report will build on the previous two reports and provide an update of the impacts to date of the RFS program on the environment.

To the extent that state or federal laws are modified, or public perception turns against biodiesel, use requirements, such as RFS2, may not continue, which could materially harm our ability to operate profitably.

Climate change regulations may impact our ability to operate at a profit and 

harm our operating margins.

Climate change regulations may impact our ability to operate at a profit and harm our operating margins.

Future regulations may impose new operational burdens, require investment in additional emission control technology, or result in unfavorable market changes.

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The scope and timing of any infrastructure expansion are generally beyond our control.

Also, we compete with other biofuel companies for access to some of the key infrastructure components, such as pipeline and terminal capacity.

Also, we compete with other biofuel companies for access to some of the key infrastructure components, such as terminal capacity.

As a result, increased production of biodiesel or other biofuels will increase the demand and competition for necessary infrastructure.

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In some instances, biodiesel may increase emissions of nitrogen oxide as compared to petrodiesel, which could harm air quality.

Nitrogen oxide is a contributor to ozone and smog.

Nitrogen oxide is a contributor to ozone depletion and smog.

These emissions may decrease the appeal of biodiesel to environmental groups and agencies who have been historic supporters of the biodiesel industry, potentially harming our ability to market our biodiesel.

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Although this business is contracted in longer-term production agreements, the loss of any of these strategic customers could have a material adverse effect on our chemicals business.

Additionally, our biofuels segment has three large customers.

Sales to these biodiesel customers totaled approximately 52% of total revenues in 2021 (or $133,231).

Sales to one biodiesel customer totaled 12% of total revenues in 2020 (or $25,460), 11% of total revenues in 2019 (or $22,352).

Additionally, our biofuels segment has two large customers.

Sales to these biodiesel customers totaled approximately 27% of total revenue (or $107,898) in 2022.

Sales in 2021 to our three largest customers represented 52% of total revenues (or $133,231).

Sales to one biodiesel customer totaled 12% of total revenues in 2020 (or $25,460).

We do not have a contract with these customers but rather sell based on monthly or short-term, multi-month purchase orders placed with us by the customers at prices based upon then-prevailing market rates.

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Although as of the date of this report we have no outstanding borrowings under the existing facility, if and when we do borrow, the restrictions governing this type of indebtedness (such as total debt to EBITDA limitations) could reduce our ability to incur additional indebtedness, engage in certain transactions, or capitalize on acquisition or other business opportunities.

We do not expect the transition from LIBOR (London Inter-Bank Offered Rate) to have a material impact on our credit facility.

On March 1, 2023, the credit facility was amended to transition it from LIBOR to the secured overnight financing rate (“SOFR”) and to reflect other conforming changes.

We do not expect the transition from LIBOR to have a material impact on our credit facility.

We expect to have capital expenditure requirements, and we may be unable to obtain needed financing on satisfactory terms.

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s financial results.

The Company has information and information processing assets, including intellectual property, trade secrets, and other sensitive, business critical information as well as on-premise and cloud-based business applications critical to conducting business.

The Company has information and information processing assets, including intellectual property, trade secrets, and other sensitive, business critical information as well as on-premises and cloud-based business applications critical to conducting business.

In addition, our chemical manufacturing facilities are highly automated using modern computer systems. 

Cyber-attacks affecting the Company, its supply chain or customers could compromise confidential, business critical information, cause a disruption in the Company’s operations, harm the Company's reputation, or endanger the environment if the Company, its suppliers or customers do not effectively prevent, detect and recover from these or other security breaches.

FutureFuel, like many companies today, is the target of industrial espionage, including cyber-attacks.

The Company, like many companies today, is the target of industrial espionage, including cyber-attacks.

The Company has determined that these attacks have resulted, and could result in the future, in unauthorized parties gaining access to certain confidential business information. 

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As these threats continue to evolve, particularly around cybersecurity, the Company may be required to expend significant resources to enhance its control environment, processes, practices, and other protective measures.

Despite these efforts, such events could have a material adverse effect on FutureFuel’s business, results of operations, financial condition and cash flows.  

Despite these efforts, such events could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.  

Confidentiality agreements with customers, employees, and others may not adequately prevent disclosures of confidential information, trade secrets, and other proprietary information.

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There can be no assurance that we will be able to maintain or establish additional necessary strategic relationships, in which case the opportunity to grow our business may be negatively affected.

There is currently excess renewable fuel production capacity and low utilization in the industry and if non-operational and underused facilities commence or increase operations, our results of operations may be negatively affected.

There is currently excess renewable fuel  

production capacity and low utilization in the  

industry and if non-operational and underused facilities commence or increase operations, our results of operations may be negatively affected.

Many biodiesel plants in the United States do not operate at full capacity.

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If this excess production capacity was used, it would increase competition for our feedstocks, increase the volume of renewable fuels on the market, and may reduce our biodiesel gross margins, harming our revenues and profitability.

Several biofuels companies throughout the United States have filed for bankruptcy over the last several years due to industry and economic conditions.

Several biofuel companies throughout the United States have filed for bankruptcy over the last several years due to industry and economic conditions.

Unfavorable worldwide economic conditions, lack of financing, and volatile biofuel prices and feedstock costs have likely contributed to the necessity of bankruptcy filings by biofuel producers.

Our business may be negatively impacted by the industry conditions that influenced the bankruptcy proceedings of other biofuel producers, or we may encounter new competition from buyers of distressed biodiesel properties who enter the industry at a lower cost than original plant investors.

We are exposed to credit risk and fluctuations in market values of our investments.

We could experience significant declines in the market value of our investment portfolio.

We are exposed to credit risk and fluctuations in market values of our investments and cash and cash equivalent portfolio.

We could experience significant declines in the market value of our investment or cash and cash equivalent portfolio.

Credit ratings and pricing of these investments can be negatively affected by liquidity, credit deterioration, financial results, economic risk, political risk, sovereign risk, or other factors.

As a result, the value and liquidity of our cash, cash equivalents, and marketable securities could decline and result in impairment losses.

In addition, at various times, we have deposits with certain U.S.

banks in excess of the maximum amounts insured by the U.S.

Federal Deposit Insurance Corporation (the “FDIC").  As of December 31, 2022, we maintained with such banks cash balances of approximately $173.7 million in excess of the amounts insured by the FDIC.

The impact of the COVID-19 pandemic and any future variants still has the potential to disrupt trade and create significant volatility in global financial markets. 

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Novelly or his designees exercises his registration rights, such exercise may have an adverse effect on the market price of our shares of common stock.

Novelly, our executive chairman of the board, or affiliates of him are entitled to demand that we register under the Securities Act of 1933, as amended (or the “Securities Act”), the resale of certain shares of our common stock beneficially owned by Mr.

Novelly or his affiliates (including St.

Albans Global Management, Limited Partnership, LLLP).

Novelly or his affiliates exercise their registration rights with respect to all of their shares of our common stock, there will be an additional 17,725,100 available for trading in the public market.

The registration and availability of such a significant number of shares for trading in the public market may have an adverse effect on the market price of our shares.

Albans Global Management, LLC (“St.

Albans”), an entity affiliated with Mr.

Novelly II, a member of the board, is entitled to demand that the Company register under the Securities Act of 1933, as amended (the “Securities Act”), the resale of all shares of the Company’s common stock beneficially owned by it.

Albans exercises its registration rights with respect to all 17,085,100 shares of the Company’s common stock currently owned by it, there will be an additional 6,637,600 registered shares of common stock available for trading in the public market, which may have an adverse effect on the market price of our common stock.

We may be suspended or delisted from the New York Stock Exchange if we do not satisfy their continued listing requirements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors