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Risks Related to Economic Conditions, Governmental Action, and our Industry
−Removed: Our industry is greatly influenced by the overall global economy and as such adverse economic conditions have the potential to adversely affect our business, results of operations, or financial condition.
−Removed: 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, which can adversely impact our business.
+Added: Our industry is greatly influenced by the U.S.
+Added: and overall global economy and as such adverse economic conditions have the potential to adversely affect our business, results of operations, or financial condition.
+Added: We are subject to various U.S.
+Added: and global economic conditions, including our sourcing of certain raw materials for our chemicals segment internationally.
+Added: Accordingly, adverse changes in these conditions, including supply chain disruptions and price inflation for those raw materials, can adversely impact our business.
The impacts include, but are not limited to:
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suspension of renewable fuel and/or low carbon fuel policies;
−Removed: 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.
−Removed: Department of Homeland Security;
+Added: limitations on our ability to operate our business as a result of federal, state or local regulations including taxes and tariffs;
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.
−Removed: We operate within the biomass-based diesel industry, which is influenced by governmental programs requiring or incentivizing the consumption of biofuels, including the BTC and CFPC.
+Added: We operate within the biomass-based diesel industry, which is significantly influenced by governmental programs requiring or incentivizing the consumption of biofuels, including the BTC and CFPC.
The expiration or loss of mandates or incentives would have a material adverse effect on our business.
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The petroleum industry is opposed to many of these government incentives and can be expected to continue to challenge these incentives.
−Removed: The most significant tax incentive program in the biomass-based diesel industry has been the BTC.
−Removed: Under the BTC, the first person to blend pure biomass-based diesel with petroleum-based diesel fuel receives a one dollar per gallon refundable tax credit.
−Removed: The BTC was not in place during 2018 and not in place for the majority of 2019.
−Removed: However, in late December 2019, the BTC was retroactively reinstated from its expiry on January 1, 2018 through December 31, 2022.
−Removed: With the passage of the Inflation Reduction Act in August 2022, the BTC has been extended through December 31, 2024, but is to be replaced by the CFPC on January 1, 2025.
+Added: Historically, the most significant tax incentive program in the biomass-based diesel industry has been the BTC.
+Added: Under the BTC, the first market participant to blend pure biomass-based diesel with petroleum-based diesel fuel receives a one dollar per gallon refundable tax credit.
+Added: From time to time, the BTC has expired and been retroactively reinstated.
+Added: Most recently, the Inflation Reduction Act, adopted in August 2022, extended the BTC through December 31, 2024, but provided for its replacement by the CFPC on January 1, 2025.
The CFPC is structured on a sliding scale so that producers become eligible for larger credits as the GHG emissions of the fuels they produce approach zero.
For producers meeting prevailing wage and registered apprenticeship requirements, the maximum credit is $1.00 per gallon of biodiesel.
−Removed: However, the maximum credit would require zero GHG emissions which is unrealistic for almost every biodiesel producer.
−Removed: Guidance surrounding this credit have yet to be finalized.
−Removed: Our relative position to other biodiesel producers and our absolute position with regard to the value of that credit could have a material adverse effect on us and on the biodiesel industry in general.
−Removed: If biodiesel feedstock costs do not decrease significantly relative to biodiesel prices, we could realize a negative gross margin on biodiesel.
−Removed: As a result, we could cease producing biodiesel, which could have an adverse effect on our financial condition.
+Added: However, the maximum credit would require zero GHG emissions which is unrealistic for almost every biodiesel producer, including the Company.
+Added: Guidance surrounding this credit has yet to be finalized despite the effective date of the CFPC.
+Added: Given our relative position to other biodiesel producers and the importance of such incentives to our operations, a reduction or elimination of these governmental incentives could have a material adverse effect on us and on the biodiesel industry in general.
+Added: Specifically, if biodiesel prices decrease as a result of the expiration or significant reduction in these governmental incentives and biodiesel feedstock costs do not decrease proportionately, we could realize a negative gross margin on biodiesel.
+Added: As a result, we could be forced to cease production of biodiesel, which would have an adverse effect on our financial condition.
Our biofuels operations may be harmed if federal or state governments were to change current laws and regulations.
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adverse changes in this law or reductions in the value of LCFS credits would harm our revenues and profits.
−Removed: 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.
+Added: The LCFS is designed to reduce 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” (“CI”) score to each transportation fuel based on that fuel’s lifecycle assessment.
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As a result of the trading price of LCFS credits, California has become a desirable market in which to sell our biodiesel.
−Removed: If the value of LCFS credits were to materially decrease as a result of over-supply, as a result of reduced demand for our fuels, or if the fuel produced is deemed not to qualify for LCFS credits;
−Removed: or if the LCFS or the manner in which it is administered or applied were otherwise changed in a manner adverse to us, our revenues and profits could be seriously harmed.
+Added: If the value of LCFS credits were to materially decrease as a result of over-supply, as a result of reduced demand for our fuels, if the fuel produced is deemed not to qualify for LCFS credits, or if the LCFS or the manner in which it is administered or applied were otherwise changed in a manner adverse to us, our revenues and profits could be seriously harmed.
The industries in which we compete are highly competitive.
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We compete with large national and multi-national companies that have longer operating histories, greater financial, technical, and other resources, and greater name recognition than we do.
−Removed: In addition, we compete with several smaller companies capable of competing effectively on a regional or local basis, and the number of these smaller companies is increasing.
+Added: In addition, we compete with several smaller companies capable of competing effectively on a regional or local basis.
Our competitors may be able to respond more quickly to new or emerging technologies and services and changes in customer requirements.
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the price and level of foreign imports;
−Removed: domestic and foreign governmental regulations and taxes;
+Added: domestic and foreign governmental regulations and taxes and trade restrictions, including tariffs;
the ability of the members of the Organization of Petroleum Exporting Countries (OPEC) to agree to and maintain oil price and production controls;
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Risks Related to our Business
+Added: We are exposed to operating risks.
+Added: As a manufacturer of diversified chemical products and biofuels, our business is subject to operating risks common to chemical manufacturing, storage, handling, and transportation.
+Added: These risks include, but are not limited to, fires, explosions, inclement weather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, remediation, chemical spills, discharges or releases of toxic or hazardous substances or gases.
+Added: Significant limitation on our ability to manufacture products due to disruption of manufacturing operations or related infrastructure could have a material adverse effect on our sales revenue, costs, results of operations, and financial condition.
+Added: Disruptions could also occur due to internal factors such as computer or equipment malfunction (accidental or intentional), operator error, or process failures;
+Added: or external factors such as computer or equipment malfunction at third-party service providers, natural disasters, pandemic illness, changes in laws or regulations, war or other outbreak of hostilities or terrorism, cyber-incidents, or breakdown or degradation of transportation infrastructure used for delivery of supplies to the Company or for delivery of products to customers.
+Added: We have recently suffered increasingly frequent, unscheduled and extended service utility downtime as a result of supplier delays and quality issues beyond our control.
+Added: No assurances can be provided that any future disruptions due to these, or other, circumstances will not have a material effect on operations.
+Added: Such disruptions could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors, and the environment, and could have a negative impact on our results of operations.
We are reliant upon a relatively small number of customers.
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Sales in 2023 to our two largest customers represented 35% of total revenues (or $127,763,000).
−Removed: Sales to three largest biodiesel customers totaled 52% of total revenues in 2021 (or $133,231,000).
+Added: Sales to our two largest biodiesel customers totaled 27% of total revenues in 2022 (or $107,898,000).
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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Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly waste handling, storage, transport, disposal, or cleanup requirements could require us to make significant expenditures to attain and maintain compliance and may otherwise have a material adverse effect on our business segments in general and on our results of operations, competitive position, or financial condition.
−Removed: We are unable to predict the effect of additional environmental laws and regulations that may be adopted in the future, including whether any such laws or regulations would materially adversely increase our cost of doing business or affect our operations in any area.
+Added: We are unable to predict the effect of additional environmental laws and regulations that may be adopted in the future, including whether any such laws or regulations would materially increase our cost of doing business or adversely affect our operations in any area.
Under certain environmental laws and regulations, we could be held strictly liable for the removal or remediation of previously released materials or property contamination regardless of whether we were responsible for the release or contamination, or if current or prior operations were conducted consistent with accepted standards of practice.
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We hold a $75 million revolving credit facility with a commercial bank.
−Removed: This credit facility expires in March 2025.
+Added: This credit facility expires in February 2030.
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.
−Removed: 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 expect to have capital expenditure requirements, and we may be unable to obtain needed financing on satisfactory terms due to inflation and increased interest rates.
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The process of maintaining our internal controls may be expensive, and time consuming, and may require significant attention from management.
−Removed: Although we have concluded as of December 31, 2023, that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements.
+Added: We previously identified a material weakness in our internal control over financial reporting related to review controls of our cash flow statement.
+Added: We remediated this material weakness and have concluded as of December 31, 2024, that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
+Added: However, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements.
Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to fail to meet our reporting obligations.
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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.
−Removed: 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.
−Removed: Many biodiesel plants in the United States do not operate at full capacity.
+Added: There is disruption in supply in the renewable fuel market currently without clarity on the CFPT credit.
+Added: However, under normal conditions there is 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.
+Added: Many biodiesel plants in the United States are currently shutdown without clarity on the CFPT credit.
+Added: Most biodiesel plants, when running, do not operate at full capacity.
Further, a number of renewable diesel plants are under construction in the United States as of December 2024, and if completed, would add additional renewable fuel production capacity.
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Federal Deposit Insurance Corporation (the “FDIC”) and holdings in certain United States Government Select Funds.
−Removed: As of December 31, 2023, we maintained with such banks cash balances of approximately $90.8 million in excess of the amounts insured by the FDIC.
−Removed: We are exposed to operating risks.
−Removed: As a manufacturer of diversified chemical products and biofuels, our business is subject to operating risks common to chemical manufacturing, storage, handling, and transportation.
−Removed: These risks include, but are not limited to, fires, explosions, inclement weather, natural disasters, mechanical failure, unscheduled downtime, transportation interruptions, remediation, chemical spills, discharges or releases of toxic or hazardous substances or gases.
−Removed: Significant limitation on our ability to manufacture products due to disruption of manufacturing operations or related infrastructure could have a material adverse effect on our sales revenue, costs, results of operations, and financial condition.
−Removed: Disruptions could also occur due to internal factors such as computer or equipment malfunction (accidental or intentional), operator error, or process failures;
−Removed: or external factors such as computer or equipment malfunction at third-party service providers, natural disasters, pandemic illness, changes in laws or regulations, war or other outbreak of hostilities or terrorism, cyber-incidents, or breakdown or degradation of transportation infrastructure used for delivery of supplies to the Company or for delivery of products to customers.
−Removed: No assurances can be provided that any future disruptions due to these, or other, circumstances will not have a material effect on operations.
−Removed: Such disruptions could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors, and the environment, and could have a negative impact on our results of operations.
+Added: As of December 31, 2024, we maintained with such banks cash balances of approximately $18.8 m illion in excess of the amounts insured by the FDIC.
Risks Associated With Owning Our Shares
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Our stock price may change dramatically as the result of:
−Removed: (i) announcements of new products or innovations by us or our competitors; (ii) uncertainty regarding the viability of any of our product initiatives; (iii) significant customer contracts; (iv) significant litigation; (v) uncertainty with respect to changing laws and regulations that impact our business and our ability to take advantage of tax credits such as the BTC and CFPC; or (vi) other factors or events that would be expected to affect our business, financial condition, results of operations, and future prospects.
+Added: (i) announcements of new products or innovations by us or our competitors; (ii) uncertainty regarding the viability of any of our product initiatives; (iii) significant customer contracts; (iv) significant litigation; (v) uncertainty with respect to changing laws and regulations that impact our business and our ability to take advantage of tax credits such as the BTC and CFPC; or (vi) unscheduled and extended downtime at our facility;
+Added: or (vii) events that would be expected to affect our business, financial condition, results of operations, and future prospects.
The market price for our common stock may also be affected by various factors not directly related to our business or future prospects, including the following:
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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.