UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 001-35073
GEVO, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | |
Delaware | | | 87-0747704 |
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification No.) |
| | | | | | | | | | | |
345 Inverness Drive South, Building C, Suite 310 Englewood, CO | | | 80112 |
(Address of principal executive offices) | | | (Zip Code) |
(303) 858-8358
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Common Stock, par value $0.01 per share | GEVO | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| | | | | | | | | | | |
Large accelerated filer | ☒☐ | Accelerated filer | ☐ |
| | | |
Non-accelerated filer | ☐☒ | Smaller reporting company | ☐☒ |
| | | |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 5,November 7, 2022, 235,165,951237,221,732 shares of the registrant’s common stock were outstanding.
GEVO, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNESEPTEMBER 30, 2022
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
GEVO, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share and per share amounts)
| | | Note | | As of June 30, 2022 | | As of December 31, 2021 | | Note | | As of September 30, 2022 | | As of December 31, 2021 |
Assets | Assets | | | | | | Assets | | | | | |
Current assets | Current assets | | | | | Current assets | | | | |
Cash and cash equivalents | Cash and cash equivalents | | $ | 172,984 | | | $ | 40,833 | | Cash and cash equivalents | | $ | 200,564 | | | $ | 40,833 | |
Marketable securities (current) | Marketable securities (current) | 5 | | 297,631 | | | 275,340 | | Marketable securities (current) | 5 | | 222,012 | | | 275,340 | |
Restricted cash (current) | Restricted cash (current) | 12 | | 5,894 | | | 25,032 | | Restricted cash (current) | 6 | | 1,024 | | | 25,032 | |
Accounts receivable, net | Accounts receivable, net | | 188 | | | 978 | | Accounts receivable, net | | 352 | | | 978 | |
Inventories | Inventories | 7 | | 2,649 | | | 2,751 | | Inventories | 9 | | 4,135 | | | 2,751 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 4 | | 5,275 | | | 3,607 | | Prepaid expenses and other current assets | 7 | | 3,635 | | | 3,607 | |
Total current assets | Total current assets | | 484,621 | | | 348,541 | | Total current assets | | 431,722 | | | 348,541 | |
Property, plant and equipment, net | Property, plant and equipment, net | 8 | | 176,054 | | | 139,141 | | Property, plant and equipment, net | 10 | | 166,004 | | | 139,141 | |
Long-term marketable securities | 5 | | — | | | 64,396 | | |
Long-term restricted cash | 12 | | 70,256 | | | 70,168 | | |
Marketable securities (long-term) | | Marketable securities (long-term) | 5 | | — | | | 64,396 | |
Restricted cash (long-term) | | Restricted cash (long-term) | 6 | | 76,842 | | | 70,168 | |
Operating right-of-use assets | Operating right-of-use assets | 6 | | 2,098 | | | 2,414 | | Operating right-of-use assets | 8 | | 1,671 | | | 2,414 | |
Finance right-of-use assets | Finance right-of-use assets | 6 | | 27,477 | | | 27,297 | | Finance right-of-use assets | 8 | | 27,012 | | | 27,297 | |
Intangible assets, net | Intangible assets, net | 9 | | 8,364 | | | 8,938 | | Intangible assets, net | 11 | | 7,995 | | | 8,938 | |
Deposits and other assets | Deposits and other assets | | 5,741 | | | 5,581 | | Deposits and other assets | 12 | | 18,165 | | | 5,581 | |
Total assets | Total assets | | $ | 774,611 | | | $ | 666,476 | | Total assets | | $ | 729,411 | | | $ | 666,476 | |
Liabilities | Liabilities | | | | | Liabilities | | | | |
Current liabilities | Current liabilities | | Current liabilities | |
Accounts payable and accrued liabilities | Accounts payable and accrued liabilities | 11 | | $ | 18,750 | | | $ | 28,288 | | Accounts payable and accrued liabilities | 13 | | $ | 14,916 | | | $ | 28,288 | |
Operating lease liabilities (current) | Operating lease liabilities (current) | 6 | | 423 | | | 772 | | Operating lease liabilities (current) | 8 | | 430 | | | 772 | |
Finance lease liabilities (current) | Finance lease liabilities (current) | 6 | | 6,293 | | | 3,413 | | Finance lease liabilities (current) | 8 | | 2,125 | | | 3,413 | |
Loans payable - other (current) | Loans payable - other (current) | 12 | | 158 | | | 158 | | Loans payable - other (current) | 14 | | 158 | | | 158 | |
Total current liabilities | Total current liabilities | | 25,624 | | | 32,631 | | Total current liabilities | | 17,629 | | | 32,631 | |
2021 Bonds payable (long-term) | 2021 Bonds payable (long-term) | 12 | | 66,853 | | | 66,486 | | 2021 Bonds payable (long-term) | 14 | | 67,038 | | | 66,486 | |
Loans payable - other (long-term) | Loans payable - other (long-term) | 12 | | 238 | | | 318 | | Loans payable - other (long-term) | 14 | | 199 | | | 318 | |
Operating lease liabilities (long-term) | Operating lease liabilities (long-term) | 6 | | 1,786 | | | 1,902 | | Operating lease liabilities (long-term) | 8 | | 1,734 | | | 1,902 | |
Finance lease liabilities (long-term) | Finance lease liabilities (long-term) | 6 | | 16,342 | | | 17,797 | | Finance lease liabilities (long-term) | 8 | | 16,349 | | | 17,797 | |
Other long-term liabilities | Other long-term liabilities | | — | | | 87 | | Other long-term liabilities | | 1,520 | | | 87 | |
Total liabilities | Total liabilities | | 110,843 | | | 119,221 | | Total liabilities | | 104,469 | | | 119,221 | |
Stockholders' Equity | Stockholders' Equity | | | | | Stockholders' Equity | | | | |
Common stock, $0.01 par value per share; 500,000,000 and 250,000,000 shares authorized at June 30, 2022, and December 31, 2021, respectively; 235,165,951 and 201,988,662 shares issued and outstanding at June 30, 2022, and December 31, 2021, respectively. | | 2,353 | | | 2,020 | | |
Common stock, $0.01 par value per share; 500,000,000 and 250,000,000 shares authorized at September 30, 2022, and December 31, 2021, respectively; 237,221,732 and 201,988,662 shares issued and outstanding at September 30, 2022, and December 31, 2021, respectively. | | Common stock, $0.01 par value per share; 500,000,000 and 250,000,000 shares authorized at September 30, 2022, and December 31, 2021, respectively; 237,221,732 and 201,988,662 shares issued and outstanding at September 30, 2022, and December 31, 2021, respectively. | | 2,372 | | | 2,020 | |
Additional paid-in capital | Additional paid-in capital | | 1,249,880 | | | 1,103,224 | | Additional paid-in capital | | 1,254,733 | | | 1,103,224 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (2,256) | | | (614) | | Accumulated other comprehensive loss | | (2,168) | | | (614) | |
Accumulated deficit | Accumulated deficit | | (586,209) | | | (557,375) | | Accumulated deficit | | (629,995) | | | (557,375) | |
Total stockholders' equity | Total stockholders' equity | | 663,768 | | | 547,255 | | Total stockholders' equity | | 624,942 | | | 547,255 | |
| Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | | $ | 774,611 | | | $ | 666,476 | | Total liabilities and stockholders' equity | | $ | 729,411 | | | $ | 666,476 | |
See the accompanying Notes to the Consolidated Financial Statements.
GEVO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share amounts)
| | | Note | | Three months Ended June 30, | | Six Months Ended June 30, | | Note | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2022 | | 2021 | | 2022 | | 2021 |
Revenue and cost of goods sold | Revenue and cost of goods sold | | | | | | | | | | Revenue and cost of goods sold | | | | | | | | | |
Ethanol sales and related products, net | Ethanol sales and related products, net | 2 | | $ | 71 | | | $ | — | | | $ | 240 | | | $ | — | | Ethanol sales and related products, net | 2 | | $ | — | | | $ | 16 | | | $ | 240 | | | $ | 16 | |
Hydrocarbon revenue | Hydrocarbon revenue | 2 | | 18 | | | 346 | | | 81 | | | 359 | | Hydrocarbon revenue | 2 | | — | | | 104 | | | 81 | | | 463 | |
Renewable natural gas commodity | | Renewable natural gas commodity | 2 | | 309 | | | — | | | 309 | | | — | |
| Total revenues | Total revenues | 2, 18 | | 89 | | | 346 | | | 321 | | | 359 | | Total revenues | 2, 20 | | 309 | | | 120 | | | 630 | | | 479 | |
Cost of production (including stock-based compensation) | 13 | | 2,640 | | | 1,617 | | | 5,730 | | | 2,518 | | |
Cost of production | | Cost of production | 15 | | 318 | | | 2,378 | | | 5,242 | | | 4,896 | |
Idle facility costs | | Idle facility costs | | 2,330 | | | — | | | 2,330 | | | — | |
Depreciation and amortization | Depreciation and amortization | 8, 9 | | 1,088 | | | 1,177 | | | 2,179 | | | 2,270 | | Depreciation and amortization | 10, 11 | | 1,250 | | | 1,104 | | | 3,429 | | | 3,374 | |
Total cost of goods sold | Total cost of goods sold | | 3,728 | | | 2,794 | | | 7,909 | | | 4,788 | | Total cost of goods sold | | 3,898 | | | 3,482 | | | 11,001 | | | 8,270 | |
Gross loss | Gross loss | | (3,639) | | | (2,448) | | | (7,588) | | | (4,429) | | Gross loss | | (3,589) | | | (3,362) | | | (10,371) | | | (7,791) | |
Operating expenses | Operating expenses | | | | | | | | | Operating expenses | | | | | | | | |
Research and development expense (including stock-based compensation) | 13 | | 1,966 | | | 1,332 | | | 3,158 | | | 2,710 | | |
Selling, general and administrative expense (including stock-based compensation) | 13 | | 9,209 | | | 4,846 | | | 18,576 | | | 8,660 | | |
Research and development expense | | Research and development expense | 15 | | 1,562 | | | 1,495 | | | 4,720 | | | 4,205 | |
Selling, general and administrative expense | | Selling, general and administrative expense | 15 | | 11,144 | | | 9,287 | | | 29,205 | | | 17,947 | |
Preliminary stage project costs | Preliminary stage project costs | | 314 | | | 5,472 | | | 821 | | | 8,199 | | Preliminary stage project costs | 15 | | 915 | | | 313 | | | 1,736 | | | 8,512 | |
Other operations (including stock-based compensation) | 13 | | 601 | | | — | | | 1,190 | | | — | | |
Other operations | | Other operations | 15 | | 1,303 | | | — | | | 3,814 | | | — | |
Impairment loss | | Impairment loss | 3 | | 24,749 | | | — | | | 24,749 | | | — | |
Loss on disposal of assets | Loss on disposal of assets | | — | | | 4,954 | | | — | | | 4,954 | | Loss on disposal of assets | | — | | | 183 | | | — | | | 5,137 | |
Depreciation and amortization | Depreciation and amortization | 8, 9 | | 386 | | | 46 | | | 737 | | | 104 | | Depreciation and amortization | 10, 11 | | 407 | | | 94 | | | 1,144 | | | 198 | |
Total operating expenses | Total operating expenses | | 12,476 | | | 16,650 | | | 24,482 | | | 24,627 | | Total operating expenses | | 40,080 | | | 11,372 | | | 65,368 | | | 35,999 | |
Loss from operations | Loss from operations | 18 | | (16,115) | | | (19,098) | | | (32,070) | | | (29,056) | | Loss from operations | 20 | | (43,669) | | | (14,734) | | | (75,739) | | | (43,790) | |
Other income (expense) | Other income (expense) | | | | | | | | | Other income (expense) | | | | | | | | |
Gain (loss) from change in fair value of derivative warrant liability | Gain (loss) from change in fair value of derivative warrant liability | | — | | | 43 | | | 16 | | | (10) | | Gain (loss) from change in fair value of derivative warrant liability | | — | | | 6 | | | 16 | | | (4) | |
Interest expense | Interest expense | | (2) | | | (6) | | | (4) | | | (11) | | Interest expense | | (712) | | | (67) | | | (716) | | | (78) | |
Investment income (loss) | Investment income (loss) | 5 | | 78 | | | — | | | 330 | | | — | | Investment income (loss) | 5 | | 874 | | | 233 | | | 1,204 | | | 354 | |
Gain on forgiveness of SBA loan | Gain on forgiveness of SBA loan | | — | | | 641 | | | — | | | 641 | | Gain on forgiveness of SBA loan | | — | | | — | | | — | | | 641 | |
Other income (expense), net | Other income (expense), net | | 2,878 | | | 167 | | | 2,894 | | | 126 | | Other income (expense), net | | (279) | | | 182 | | | 2,615 | | | 187 | |
Total other income (expense), net | Total other income (expense), net | | 2,954 | | | 845 | | | 3,236 | | | 746 | | Total other income (expense), net | | (117) | | | 354 | | | 3,119 | | | 1,100 | |
Net loss | Net loss | | $ | (13,161) | | | $ | (18,253) | | | $ | (28,834) | | | $ | (28,310) | | Net loss | | $ | (43,786) | | | $ | (14,380) | | | $ | (72,620) | | | $ | (42,690) | |
Net loss per share - basic and diluted | Net loss per share - basic and diluted | 3 | | $ | (0.06) | | | $ | (0.09) | | | $ | (0.14) | | | $ | (0.15) | | Net loss per share - basic and diluted | 4 | | $ | (0.19) | | | $ | (0.07) | | | $ | (0.34) | | | $ | (0.22) | |
Weighted-average number of common shares outstanding - basic and diluted | Weighted-average number of common shares outstanding - basic and diluted | | 209,809,994 | | | 198,137,420 | | | 205,889,651 | | | 190,892,223 | | Weighted-average number of common shares outstanding - basic and diluted | 4 | | 236,649,805 | | | 199,341,519 | | | 216,255,710 | | | 193,739,605 | |
See the accompanying Notes to the Consolidated Financial Statements.
GEVO, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands)
| | | Note | | Three months Ended June 30, | | Six Months Ended June 30, | | Note | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 | | | 2022 | | 2021 | | 2022 | | 2021 |
Net loss | Net loss | | | $ | (13,161) | | | $ | (18,253) | | | $ | (28,834) | | | $ | (28,310) | | Net loss | | | $ | (43,786) | | | $ | (14,380) | | | $ | (72,620) | | | $ | (42,690) | |
Other comprehensive income (loss) | Other comprehensive income (loss) | | Other comprehensive income (loss) | |
Unrealized gain (loss) on available-for-sale securities, net of tax | 5 | | (669) | | | (307) | | | (1,643) | | | (307) | | |
Adjustment for net gain (loss) realized on available-for-sale securities and included in net income, net of tax | 5 | | — | | | — | | | 1 | | | — | | |
Total change in other comprehensive income (loss) | | (669) | | | (307) | | | (1,642) | | | (307) | | |
Unrealized gain (loss) on available-for-sale securities | | Unrealized gain (loss) on available-for-sale securities | 5 | | 88 | | | 11 | | | (1,554) | | | (296) | |
Comprehensive loss | Comprehensive loss | | $ | (13,830) | | | $ | (18,560) | | | $ | (30,476) | | | $ | (28,617) | | Comprehensive loss | | $ | (43,698) | | | $ | (14,369) | | | $ | (74,174) | | | $ | (42,986) | |
See the accompanying Notes to the Consolidated Financial Statements.
GEVO, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, in thousands, except share amounts)
| | | For the three months ended June 30, 2022 and 2021 | | For the three months ended September 30, 2022 and 2021 |
| | Common Stock | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Stockholders’ Equity | | Common Stock | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Stockholders’ Equity |
| | Note | | Shares | | Amount | | | Note | | Shares | | Amount | |
Balance, March 31, 2022 | | | 201,752,722 | | | $ | 2,019 | | | $ | 1,107,051 | | | $ | (1,587) | | | $ | (573,048) | | | $ | 534,435 | | |
Issuance of common stock and common stock warrants, net of issuance costs | 17 | | | 33,333,336 | | | 333 | | | 138,675 | | | — | | | — | | | 139,008 | | |
June 30, 2022 | | June 30, 2022 | | | 235,165,951 | | | $ | 2,353 | | | $ | 1,249,880 | | | $ | (2,256) | | | $ | (586,209) | | | $ | 663,768 | |
| Non-cash stock-based compensation | Non-cash stock-based compensation | 13 | | | — | | | — | | | 4,220 | | | — | | | — | | | 4,220 | | Non-cash stock-based compensation | 15 | | | — | | | — | | | 4,361 | | | — | | | — | | | 4,361 | |
Issuance of common stock under stock plans, net of taxes | Issuance of common stock under stock plans, net of taxes | 17 | | | 79,893 | | | 1 | | | (66) | | | — | | | — | | | (65) | | Issuance of common stock under stock plans, net of taxes | 19 | | | 2,055,781 | | | 19 | | | 492 | | | — | | | — | | | 511 | |
Other comprehensive loss | Other comprehensive loss | | — | | | — | | | — | | | (669) | | | — | | | (669) | | Other comprehensive loss | | — | | | — | | | — | | | 88 | | | — | | | 88 | |
Net loss | Net loss | | — | | | — | | | — | | | — | | | (13,161) | | | (13,161) | | Net loss | | — | | | — | | | — | | | — | | | (43,786) | | | (43,786) | |
Balance, June 30, 2022 | | 235,165,951 | | | $ | 2,353 | | | $ | 1,249,880 | | | $ | (2,256) | | | $ | (586,209) | | | $ | 663,768 | | |
September 30, 2022 | | September 30, 2022 | | 237,221,732 | | | $ | 2,372 | | | $ | 1,254,733 | | | $ | (2,168) | | | $ | (629,995) | | | $ | 624,942 | |
| Balance, March 31, 2021 | | 198,050,449 | | | $ | 1,981 | | | $ | 1,101,939 | | | $ | — | | | $ | (508,229) | | | $ | 595,691 | | |
June 30, 2021 | | June 30, 2021 | | 197,964,476 | | | $ | 1,980 | | | $ | 1,100,932 | | | $ | (307) | | | $ | (526,482) | | | $ | 576,123 | |
Issuance of common stock and common stock warrants, net of issuance costs | Issuance of common stock and common stock warrants, net of issuance costs | 17 | | | — | | | — | | | (45) | | | — | | | — | | | (45) | | Issuance of common stock and common stock warrants, net of issuance costs | 19 | | | — | | | — | | | (162) | | | — | | | — | | | (162) | |
Issuance of common stock upon exercise of warrants | 17 | | | 3,700 | | | — | | | 4 | | | — | | | — | | | 4 | | |
| Non-cash stock-based compensation | Non-cash stock-based compensation | 13 | | | — | | | — | | | 858 | | | — | | | — | | | 858 | | Non-cash stock-based compensation | 15 | | | — | | | — | | | 1,880 | | | — | | | — | | | 1,880 | |
Issuance of common stock under stock plans, net of taxes | Issuance of common stock under stock plans, net of taxes | 17 | | | (89,673) | | | (1) | | | (1,824) | | | — | | | — | | | (1,825) | | Issuance of common stock under stock plans, net of taxes | 19 | | | 3,915,502 | | | 39 | | | (3,711) | | | — | | | — | | | (3,672) | |
Other comprehensive loss | Other comprehensive loss | | — | | | — | | | — | | | (307) | | | — | | | (307) | | Other comprehensive loss | | — | | | — | | | — | | | 11 | | | — | | | 11 | |
Net loss | Net loss | | — | | | — | | | — | | | — | | | (18,253) | | | (18,253) | | Net loss | | — | | | — | | | — | | | — | | | (14,380) | | | (14,380) | |
Balance, June 30, 2021 | | 197,964,476 | | | $ | 1,980 | | | $ | 1,100,932 | | | $ | (307) | | | $ | (526,482) | | | $ | 576,123 | | |
September 30, 2021 | | September 30, 2021 | | 201,879,978 | | | $ | 2,019 | | | $ | 1,098,939 | | | $ | (296) | | | $ | (540,862) | | | $ | 559,800 | |
See the accompanying Notes to the Consolidated Financial Statements. | See the accompanying Notes to the Consolidated Financial Statements. |
See the accompanying Notes to the Consolidated Financial Statements. |
GEVO, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, in thousands, except share amounts)
| | | For the six months ended June 30,2022 and 2021 | | For the nine months ended September 30, 2022 and 2021 |
| | Common Stock | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Stockholders’ Equity | | Common Stock | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Stockholders’ Equity |
| | Note | | Shares | | Amount | | | Note | | Shares | | Amount | |
Balance, December 31, 2021 | | | 201,988,662 | | | $ | 2,020 | | | $ | 1,103,224 | | | $ | (614) | | | $ | (557,375) | | | $ | 547,255 | | |
December 31, 2021 | | December 31, 2021 | | | 201,988,662 | | | $ | 2,020 | | | $ | 1,103,224 | | | $ | (614) | | | $ | (557,375) | | | $ | 547,255 | |
Issuance of common stock and common stock warrants, net of issuance costs | Issuance of common stock and common stock warrants, net of issuance costs | 17 | | | 33,333,336 | | | 333 | | | 138,675 | | | — | | | — | | | 139,008 | | Issuance of common stock and common stock warrants, net of issuance costs | 19 | | | 33,333,336 | | | 333 | | | 138,675 | | | — | | | — | | | 139,008 | |
Issuance of common stock upon exercise of warrants | Issuance of common stock upon exercise of warrants | 17 | | | 4,677 | | | — | | | 3 | | | — | | | — | | | 3 | | Issuance of common stock upon exercise of warrants | 19 | | | 4,677 | | | — | | | 3 | | | — | | | — | | | 3 | |
Non-cash stock-based compensation | Non-cash stock-based compensation | 13 | | | — | | | — | | | 8,264 | | | — | | | — | | | 8,264 | | Non-cash stock-based compensation | 15 | | | — | | | — | | | 12,625 | | | — | | | — | | | 12,625 | |
Issuance of common stock under stock plans, net of taxes | Issuance of common stock under stock plans, net of taxes | 17 | | | (160,724) | | | — | | | (286) | | | — | | | — | | | (286) | | Issuance of common stock under stock plans, net of taxes | 19 | | | 1,895,057 | | | 19 | | | 206 | | | — | | | — | | | 225 | |
Other comprehensive loss | Other comprehensive loss | | — | | | — | | | — | | | (1,642) | | | — | | | (1,642) | | Other comprehensive loss | | — | | | — | | | — | | | (1,554) | | | — | | | (1,554) | |
Net loss | Net loss | | — | | | — | | | — | | | — | | | (28,834) | | | (28,834) | | Net loss | | — | | | — | | | — | | | — | | | (72,620) | | | (72,620) | |
Balance, June 30, 2022 | | 235,165,951 | | | $ | 2,353 | | | $ | 1,249,880 | | | $ | (2,256) | | | $ | (586,209) | | | $ | 663,768 | | |
September 30, 2022 | | September 30, 2022 | | 237,221,732 | | | $ | 2,372 | | | $ | 1,254,733 | | | $ | (2,168) | | | $ | (629,995) | | | $ | 624,942 | |
| Balance, December 31, 2020 | | 128,138,311 | | | $ | 1,282 | | | $ | 643,269 | | | $ | — | | | $ | (498,172) | | | $ | 146,379 | | |
December 31, 2020 | | December 31, 2020 | | 128,138,311 | | | $ | 1,282 | | | $ | 643,269 | | | $ | — | | | $ | (498,172) | | | $ | 146,379 | |
Issuance of common stock, net of issuance costs | Issuance of common stock, net of issuance costs | 17 | | | 68,170,579 | | | 682 | | | 456,963 | | | — | | | — | | | 457,645 | | Issuance of common stock, net of issuance costs | 19 | | | 68,170,579 | | | 682 | | | 456,801 | | | — | | | — | | | 457,483 | |
Issuance of common stock upon exercise of warrants | Issuance of common stock upon exercise of warrants | 17 | | | 1,866,758 | | | 18 | | | 1,103 | | | — | | | — | | | 1,121 | | Issuance of common stock upon exercise of warrants | 19 | | | 1,866,758 | | | 18 | | | 1,103 | | | — | | | — | | | 1,121 | |
Non-cash stock-based compensation | Non-cash stock-based compensation | 13 | | | — | | | — | | | 1,420 | | | — | | | — | | | 1,420 | | Non-cash stock-based compensation | 15 | | | — | | | — | | | 3,300 | | | — | | | — | | | 3,300 | |
Issuance of common stock under stock plans, net of taxes | Issuance of common stock under stock plans, net of taxes | 17 | | | (211,172) | | | (2) | | | (1,823) | | | — | | | — | | | (1,825) | | Issuance of common stock under stock plans, net of taxes | 19 | | | 3,704,330 | | | 37 | | | (5,534) | | | — | | | — | | | (5,497) | |
Other comprehensive loss | Other comprehensive loss | | — | | | — | | | — | | | (307) | | | — | | | (307) | | Other comprehensive loss | | — | | | — | | | — | | | (296) | | | — | | | (296) | |
Net loss | Net loss | | — | | | — | | | — | | | — | | | (28,310) | | | (28,310) | | Net loss | | — | | | — | | | — | | | — | | | (42,690) | | | (42,690) | |
Balance, June 30, 2021 | | 197,964,476 | | | $ | 1,980 | | | $ | 1,100,932 | | | $ | (307) | | | $ | (526,482) | | | $ | 576,123 | | |
September 30, 2021 | | September 30, 2021 | | 201,879,978 | | | $ | 2,019 | | | $ | 1,098,939 | | | $ | (296) | | | $ | (540,862) | | | $ | 559,800 | |
See the accompanying Notes to the Consolidated Financial Statements.
GEVO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| | | Note | | Six Months Ended June 30, | | Note | | Nine Months Ended September 30, |
| | | 2022 | | 2021 | | | 2022 | | 2021 |
Operating Activities | Operating Activities | | | | | | Operating Activities | | | | | |
Net loss | Net loss | | $ | (28,834) | | | $ | (28,310) | | Net loss | | $ | (72,620) | | | $ | (42,690) | |
Adjustments to reconcile net loss to net cash used in operating activities: | Adjustments to reconcile net loss to net cash used in operating activities: | | Adjustments to reconcile net loss to net cash used in operating activities: | |
Impairment loss | | Impairment loss | 3 | | 24,749 | | | — | |
Loss on disposal of assets | Loss on disposal of assets | | — | | | 4,954 | | Loss on disposal of assets | | — | | | 5,137 | |
(Gain) on forgiveness of SBA Loans | (Gain) on forgiveness of SBA Loans | | — | | | (641) | | (Gain) on forgiveness of SBA Loans | | — | | | (641) | |
Stock-based compensation | Stock-based compensation | 13 | | 7,945 | | | 1,617 | | Stock-based compensation | 15 | | 12,624 | | | 5,823 | |
Depreciation and amortization | Depreciation and amortization | 8, 9 | | 2,916 | | | 2,372 | | Depreciation and amortization | 10, 11 | | 4,452 | | | 3,572 | |
Noncash interest expense | | 2,637 | | | — | | |
Amortization of marketable securities premium | | Amortization of marketable securities premium | | 2,755 | | | — | |
Other noncash (income) expense | Other noncash (income) expense | | 352 | | | (41) | | Other noncash (income) expense | | (153) | | | 77 | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
Accounts receivable | Accounts receivable | | 790 | | | (320) | | Accounts receivable | | 626 | | | 14 | |
Inventories | Inventories | 7 | | 102 | | | 275 | | Inventories | 9 | | (338) | | | 150 | |
Prepaid expenses and other current assets, deposits and other assets | Prepaid expenses and other current assets, deposits and other assets | 4 | | (1,828) | | | (3,142) | | Prepaid expenses and other current assets, deposits and other assets | 7, 12 | | (8,445) | | | (4,459) | |
Accounts payable, accrued expenses and long-term liabilities | Accounts payable, accrued expenses and long-term liabilities | 5, 6, 11, 12, 13 | | (1,194) | | | 3,768 | | Accounts payable, accrued expenses and long-term liabilities | 13, 14 | | (420) | | | 4,324 | |
Net cash used in operating activities | Net cash used in operating activities | | (17,114) | | | (19,468) | | Net cash used in operating activities | | (36,770) | | | (28,693) | |
Investing Activities | Investing Activities | | | | | Investing Activities | | | | |
Acquisitions of property, plant and equipment | Acquisitions of property, plant and equipment | 8 | | (46,165) | | | (14,167) | | Acquisitions of property, plant and equipment | 10 | | (68,535) | | | (30,955) | |
Acquisition of patent portfolio | Acquisition of patent portfolio | 9 | | (10) | | | — | | Acquisition of patent portfolio | 11 | | (10) | | | — | |
Proceeds from sale and maturity of marketable securities | Proceeds from sale and maturity of marketable securities | 5 | | 169,082 | | | — | | Proceeds from sale and maturity of marketable securities | 5 | | 243,817 | | | 34,332 | |
| Purchase of patents and license | | Purchase of patents and license | | — | | | (9,000) | |
Purchase of marketable securities | Purchase of marketable securities | 5 | | (131,257) | | | (422,362) | | Purchase of marketable securities | 5 | | (130,402) | | | (422,362) | |
| Net cash used in investing activities | | (8,350) | | | (436,529) | | |
Net cash provided by (used in) investing activities | | Net cash provided by (used in) investing activities | | 44,870 | | | (427,985) | |
Financing Activities | Financing Activities | | | | | Financing Activities | | | | |
Proceeds from issuance of 2021 Bonds | Proceeds from issuance of 2021 Bonds | 12 | | — | | | 68,995 | | Proceeds from issuance of 2021 Bonds | 14 | | — | | | 68,995 | |
Debt and equity offering costs | Debt and equity offering costs | 17 | | (10,993) | | | (34,757) | | Debt and equity offering costs | 19 | | (10,993) | | | (34,919) | |
Proceeds from issuance of common stock and common stock warrants | Proceeds from issuance of common stock and common stock warrants | 17 | | 150,000 | | | 487,549 | | Proceeds from issuance of common stock and common stock warrants | 19 | | 150,000 | | | 487,549 | |
Proceeds from exercise of warrants | Proceeds from exercise of warrants | 17 | | 3 | | | 1,119 | | Proceeds from exercise of warrants | 19 | | 3 | | | 1,119 | |
Net settlement of common stock under stock plans | Net settlement of common stock under stock plans | 13 | | (286) | | | — | | Net settlement of common stock under stock plans | 15 | | (285) | | | (5,137) | |
Payment of loans payable - other | Payment of loans payable - other | 12 | | (72) | | | (53) | | Payment of loans payable - other | 14 | | (112) | | | (98) | |
Payment of finance lease liabilities | Payment of finance lease liabilities | 6 | | (87) | | | — | | Payment of finance lease liabilities | 8 | | (4,316) | | | (2,996) | |
Net cash provided by financing activities | Net cash provided by financing activities | | 138,565 | | | 522,853 | | Net cash provided by financing activities | | 134,297 | | | 514,513 | |
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | | 113,101 | | | 66,856 | | Net increase (decrease) in cash and cash equivalents | | 142,397 | | | 57,835 | |
Cash, cash equivalents and restricted cash at beginning of period | Cash, cash equivalents and restricted cash at beginning of period | | 136,033 | | | 78,338 | | Cash, cash equivalents and restricted cash at beginning of period | | 136,033 | | | 78,338 | |
Cash, cash equivalents and restricted cash at end of period | Cash, cash equivalents and restricted cash at end of period | | 249,134 | | | 145,194 | | Cash, cash equivalents and restricted cash at end of period | | $ | 278,430 | | | $ | 136,173 | |
| | | Six Months Ended June 30, | | Nine Months Ended September 30, |
Schedule of cash, cash equivalents and restricted cash | Schedule of cash, cash equivalents and restricted cash | 2022 | | 2021 | Schedule of cash, cash equivalents and restricted cash | 2022 | | 2021 |
Cash and cash equivalents | Cash and cash equivalents | $ | 172,984 | | | $ | 17,085 | | Cash and cash equivalents | $ | 200,564 | | | $ | 16,201 | |
Restricted cash (current) | Restricted cash (current) | 5,894 | | | 57,645 | | Restricted cash (current) | 1,024 | | | 49,804 | |
Long-term restricted cash | Long-term restricted cash | 70,256 | | | 70,464 | | Long-term restricted cash | 76,842 | | | 70,168 | |
Total cash, cash equivalents and restricted cash | Total cash, cash equivalents and restricted cash | $ | 249,134 | | | $ | 145,194 | | Total cash, cash equivalents and restricted cash | $ | 278,430 | | | $ | 136,173 | |
See the accompanying Notes to the Consolidated Financial Statements.
GEVO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| | | Six Months Ended June 30, | | Nine Months Ended September 30, |
Supplemental disclosures of cash and non-cash investing and financing transactions | Supplemental disclosures of cash and non-cash investing and financing transactions | 2022 | | 2021 | Supplemental disclosures of cash and non-cash investing and financing transactions | 2022 | | 2021 |
Cash paid for interest | $ | 757 | | | $ | 9 | | |
Cash paid for interest capitalized to construction in progress | $ | 752 | | | $ | — | | |
Non-cash interest capitalized to construction in progress | $ | 511 | | | $ | — | | |
Cash paid for interest, net of amounts capitalized | | Cash paid for interest, net of amounts capitalized | $ | 770 | | | $ | 11 | |
Non-cash purchase of property, plant and equipment | Non-cash purchase of property, plant and equipment | $ | 11,643 | | | $ | 5,052 | | Non-cash purchase of property, plant and equipment | $ | 11,136 | | | $ | 12,164 | |
Right-of-use asset purchased with financing leases | Right-of-use asset purchased with financing leases | $ | 834 | | | $ | 27,775 | | Right-of-use asset purchased with financing leases | $ | 834 | | | $ | 28,416 | |
Right-of-use asset purchased with operating lease | Right-of-use asset purchased with operating lease | $ | — | | | $ | 1,562 | | Right-of-use asset purchased with operating lease | $ | — | | | $ | 1,611 | |
See the accompanying Notes to the Consolidated Financial Statements.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
1.Nature of Business, Financial Condition and Basis of Presentation
Nature of business. Gevo, Inc. (Nasdaq: GEVO) ("Gevo" or the "Company," which, unless otherwise indicated, refers to Gevo, Inc. and its subsidiaries), a Delaware corporation founded in 2005, is a growth-oriented company with the mission of solving greenhouse gas emissions for those sectors of the transportation industry that are not amenable to electrification or hydrogen.
The Company is focused on transforming renewable energy into energy-dense liquid drop-in hydrocarbons that can be used as renewable fuels, such as sustainable aviation fuel ("SAF") and other fuels and chemicals, with the potential to achieve a “net-zero” greenhouse gas ("GHG") footprint. The Company uses the Argonne National Laboratory’s GREET (Greenhouse gases, Regulated Emissions, and Energy use in Transportation) model (the "GREET Model") to measure, predict and verify GHG emissions across the life-cycle of its products. The “net-zero” concept means Gevo expects that by using sustainably grown feedstock (i.e., low till, no-till and dry corn cultivation), renewable and substantially decarbonized energy sources, drop-in hydrocarbon fuels can be produced that have a net-zero, full life cycle footprint measured from the capture of renewable carbon through the burning of the fuel.
Gevo's primary market focus, given current demand and growing customer interest, is SAF. The Company believes it also has commercial opportunities for other renewable hydrocarbon products, such as (i) renewable natural gas (“RNG”), (ii) hydrocarbons for gasoline blendstocks and diesel fuel, and (iii)(ii) plastics, materials and other chemicals.chemicals, and (iii) renewable natural gas (“RNG”).
Net-Zero Projects
In early 2021, we announced the concept of “Net-Zero Projects” as a series of planned facilities to produce energy dense liquid hydrocarbons using renewable energy and our proprietary technology. The Company believes it has the technology and know-howconcept of a Net-Zero Project is to convert various carbohydrate feedstocks throughrenewable energy (e.g., photosynthetic, wind, RNG, biogas) from a variety of sources into energy dense liquid hydrocarbons that, when burned in traditional engines, have the potential to achieve net-zero GHG emissions across the whole lifecycle of the liquid fuel: from the way carbon is captured from the atmosphere, processed to make liquid fuel products, and burnt as a fuel for cars, planes, trucks and ships.
Our initial Net-Zero Project, Net-Zero 1 (“NZ1"), is located in Lake Preston, South Dakota, and is being currently designed to produce approximately 62 million gallons per year ("MGPY") of total hydrocarbon volumes, including 55 MGPY of SAF. Along with the hydrocarbons, NZ1 is being currently designed to produce approximately 475 million pounds per year of high-value protein products for use in the food chain and more than 30 million pounds per year of corn oil. Our products will be produced in three steps; the first step is milling the corn and the production of protein, oil, and carbohydrates, the second step produces alcohols using fermentation process into alcohols and then transformthe third step is the conversion of the alcohols into renewable fuels and materials. While the Company expects its major capital deployments to focus on the production of SAF, Gevo recognizes there are opportunities to operate in several different markets, and it will pursue those opportunities when appropriate based on customer interest, access to capital and expected investment returns.hydrocarbons.
Gevo currently operates a wholly-owned development plant in Luverne, Minnesota (the "Luverne Facility"). The Luverne Facility was originally constructed in 1998 and is located on approximately 55 acres of land, which contains approximately 50,000 square feet of building space. Our Luverne Facility is a scale up and development site. Gevo intends to use the Luverne Facility to prove our processes, process concepts, unit operations and for other purposes in order to optimize feedstocks and the processes used for producing hydrocarbons from alcohols.Renewable Natural Gas Projects
Gevo's renewable natural gas ("RNG")RNG project in Northwest Iowa ("NW Iowa RNG") is owned by Gevo NW Iowa RNG, LLC, generatesand produces RNG captured from dairy cow manure. The manure is supplied by 3three local dairies that have over 20,000 milking cows in total with additional milking cows expected pursuant to agreements executed during the second quarter of 2022. Animal manure can be digested anaerobically to produce biogas, which is then upgraded to pipeline quality gas referred to as RNG. Gevo NW Iowa RNG, LLC then sells the produced RNG to the California market through an agreement with BP Canada Energy Marketing Corp. and BP Products North America Inc. (collectively, "BP").
In 2021, Gevo began construction on NW Iowa RNG under a self-perform project delivery format. Most of the construction efforts were completed at the end of 2021, and in January 2022, Gevo began the process of commissioning the project. One of the three digesters is fully operational, and the others are currently in the start-up phase.Luverne Facility
Ultimately,Gevo's development plant in Luverne, Minnesota (the "Luverne Facility") was originally constructed in 1998 and is located on approximately 55 acres of land, which contains approximately 50,000 square feet of building space. Gevo may use the Luverne Facility in the future to prove our processes, process concepts, unit operations and for other purposes in order to optimize feedstocks and the processes used for producing hydrocarbons from alcohols. Currently, the activities at the Luverne Facility are minimized to care and maintenance, as the Company believes thathas shifted focus to the attainment of profitable operations is dependent upon future events, including, but not limited to (i) the successful development of the Company's initial Net-Zero Project (the "Net-Zero 1 Project"); future projects for the production of energy-dense liquid hydrocarbons using renewable energy and our proprietary technology; and (ii) the achievement of a level of revenues adequate to support its cost structure.Projects.
Basis of presentation. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared without audit, pursuantin accordance with U.S. generally accepted accounting principles (“GAAP”) along with the instructions to Form 10-Q and
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
Article 10 of Regulation S-X assuming the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).Company will continue as a going concern. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States (“GAAP”)GAAP for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company as of, and for the sixnine months ended, JuneSeptember 30, 2022, and are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the Company’s audited consolidated financial
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
statements and notes thereto included under the heading “Financial Statements and Supplementary Data” in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The financial statements at December 31, 2021, have been derived from the audited financial statements as of that date. For further information, refer to our audited financial statements and notes thereto included for the year ended December 31, 2021 (the "2021 Annual Report").
Environmental Attribute Inventory. The Company generates D3 RINs Renewable Identification Numbers ("RINs") and Low Carbon Fuel Standard ("LCFS") credits (collectively, "environmental attributes") through the production of RNG used for transportation purposes as prescribed under the Renewable Fuels Standard program ("RFS"). The Company considers environmental attributes to be a distinguishable product that is generated as an integral component of the production process of RNG as the environmental attributes that are generated can be separated from the underlying commodity and may be sold independently from the RNG produced. As such, the Company considers environmental attributes to be a co-product of the production of RNG and accordingly allocates the costs of production based on the relative sales value of all revenue items for the NW Iowa RNG operations. Revenue is recognized on these environmental attributes when there is an agreement in place to monetize the credits at an agreed upon price with a customer based upon defined third party market prices and a transfer of control has occurred.
Reclassifications. The Company reclassified certain prior period amounts to conform to the current period presentation, includingpresentation. The reclassifications included the categorization of depreciation and amortization on the Consolidated Statements of Operations. These reclassificationsOperations and had no impact on total revenues, total cost of goods sold, total operating expenses, net loss or stockholders' equity for any period.
2.Revenues from Contracts with Customers and Other Revenues
The Company'sCompany’s revenues are primarily comprised of the sale of RNG and related environmental attributes produced at the NW Iowa RNG facility under long-term contracts with customers. Revenue is recognized at a point in time when the Company transfers the product to its customer as the customer obtains control of the product upon delivery. The Company generally has a single performance obligation in our arrangements with customers. The Company’s performance obligation related to the sales of RNG and related environmental attributes are satisfied at a point in time upon delivery to the customer.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring its products. There is no variable consideration present in the Company’s performance obligations. Consideration for each transaction is based upon quoted market prices at the time of delivery. The Company recognized $0.3 million of revenue from the sale of RNG during each of the three and nine months ended September 30, 2022, and recognized no revenue from the sale of environmental attributes during each of the three and nine months ended September 30, 2022, due to the timing of governmental approval for the issuance of such environmental attributes.
The Company recorded limited revenues are derived from its development-scale plant, the Luverne Facility.Facility, during the three and nine months ended September 30, 2022, and 2021. These revenues arewere promotional in nature and from customer contracts for ethanol sales and related products and hydrocarbon revenues, which includeincluded SAF, isooctene, and isooctane. These products arewere sold mostly on a free-on-board, shipping point basis (recognized at a point in time), arewere independent transactions, do did not provide post-sale support or promises to deliver future goods, and arewere single performance obligations.
3.Asset Impairment
During the three and nine months ended September 30, 2022, the Company recorded a $24.7 million impairment loss on long-lived assets, to reduce the carrying value of certain property, plant, and equipment, and a leased right of use ("ROU") asset, at the Agri-Energy, LLC ("Agri-Energy") segment to its fair value. The impairments recorded to date relate to the determination to suspend production at the Luverne Facility and shift the plant into an idled, care and maintenance
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
status during the three months ended September 30, 2022. As a result of this change in use, combined with a sustained history of operating losses, the Company assessed that indicators of impairment were present for long-lived assets within its Agri-Energy reporting segment. The Company therefore performed impairment testing and determined that, as of September 30, 2022, the carrying amounts of certain property plant and equipment, and the leased ROU asset exceeded estimated fair values. The Company estimated the fair value of these asset groups generally using a cost approach which is based on replacement or reproduction costs of the assets and is considered a Level 2 measurement and recorded a corresponding impairment loss under Operating Expenses within the Consolidated Statements of Operations.
4.Net loss Per Share
Basic net loss per share is calculated based on the weighted average number of common shares outstanding for the period. Diluted net loss per share is calculated based on the assumption that stock options and other dilutive securities outstanding, which have an exercise price less than the average market price of the Company's common shares during the period, would have been exercised on the later of the beginning of the period or the date granted, and that the funds obtained from the exercise were used to purchase common shares at the average market price during the period. None of the Company's stock options or other dilutive securities are considered to be dilutive in periods with net losses.
The effect of the Company’s dilutive securities is calculated using the treasury stock method and only those instruments that result in a reduction in net income per common share are included in the calculation. Diluted net loss per share for the six months ended June 30, 2022, and 2021 excluded 22,464,715 and 202,356, respectively, of common stock equivalents because the effect of their inclusion would be anti-dilutive or would decrease the reported net loss per share. Therefore, the following number of potentially dilutive common stock equivalents have been excluded 1,193,436 and 1,716,010 for the three and nine months ended September 30, 2022, respectively, and 4,835,752 and 4,835,752, for the three and nine months ended September 30, 2021, respectively.
Basic and diluted net loss per share is calculated as follows (net loss in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net loss | $ | (13,161) | | | $ | (18,253) | | | $ | (28,834) | | | $ | (28,310) | |
Basic weighted-average shares outstanding | 209,809,994 | | | 198,137,420 | | | 205,889,651 | | | 190,892,223 | |
Basic net loss per share | $ | (0.06) | | | $ | (0.09) | | | $ | (0.14) | | | $ | (0.15) | |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
4.Prepaid and Other Current Assets
The following table sets forth the components of the Company’s prepaid and other current assets (in thousands) as of:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
Prepaid insurance | $ | 1,543 | | | $ | 805 | |
Interest receivable | 1,022 | | | 1,530 | |
Prepaid engineering (1) | 900 | | | 409 | |
Tax refunds | 401 | | | — | |
Prepaid other | 1,409 | | | 863 | |
Total Prepaid and other current assets | $ | 5,275 | | | $ | 3,607 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net loss | $ | (43,786) | | | $ | (14,380) | | | $ | (72,620) | | | $ | (42,690) | |
Basic weighted-average shares outstanding | 236,649,805 | | | 199,341,519 | | | 216,255,710 | | | 193,739,605 | |
Net loss per share - basic and diluted | $ | (0.19) | | | $ | (0.07) | | | $ | (0.34) | | | $ | (0.22) | |
(1)The impact of the one-time impairment charge of $24.7 million, discussed in Note 3 above, was $0.10 and $0.11 of basic and diluted impairment loss per share for the three and nine months ended September 30, 2022Related to the Net-Zero 1 Project development., respectively.
5.Marketable Securities
The Company's investments in marketable securities are stated at fair value and are available-for-sale. The following table summarizes the Company's investments in marketable securities (in thousands) as of:
| | | | June 30, 2022 | | | September 30, 2022 |
| | Maturity | | Amortized Cost Basis | | Gross Unrealized Losses | | Fair Value | | Maturity | | Amortized Cost Basis | | Gross Unrealized Losses | | Fair Value |
| Short-term marketable securities | Short-term marketable securities | | | | | | | | Short-term marketable securities | | | | | | | |
U.S. Treasury notes | U.S. Treasury notes | Within one year | | $ | 162,238 | | | $ | (800) | | | $ | 161,438 | | U.S. Treasury notes | Within one year | | $ | 109,327 | | | $ | (729) | | | $ | 108,598 | |
U.S. Government-sponsored enterprise securities | U.S. Government-sponsored enterprise securities | Within one year | | 137,649 | | | (1,456) | | | 136,193 | | U.S. Government-sponsored enterprise securities | Within one year | | 114,853 | | | (1,439) | | | 113,414 | |
Total short-term marketable securities | Total short-term marketable securities | | $ | 299,887 | | | $ | (2,256) | | | $ | 297,631 | | Total short-term marketable securities | | $ | 224,180 | | | $ | (2,168) | | | $ | 222,012 | |
|
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2021 |
| Maturity | | Amortized Cost Basis | | Gross Unrealized Losses | | Fair Value |
| | | | | | | |
Short-term marketable securities | | | | | | | |
U.S. Treasury notes | Within one year | | $ | 226,136 | | | $ | (344) | | | $ | 225,792 | |
U.S. Government-sponsored enterprise securities | Within one year | | 49,618 | | | (70) | | | 49,548 | |
Total short-term marketable securities | | | $ | 275,754 | | | $ | (414) | | | $ | 275,340 | |
| | | | | | | |
Long-term marketable securities | | | | | | | |
U.S. Government-sponsored enterprise securities | Within two years | | 64,596 | | | (200) | | | 64,396 | |
Total long-term marketable securities | | | $ | 64,596 | | | $ | (200) | | | $ | 64,396 | |
The cost of securities sold is based upon the specific identification method. Interest receivable related to the marketable securities of $1.0$0.7 million was included within "Prepaid expenses and other current assets" on the Consolidated Balance Sheets as of JuneSeptember 30, 2022.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
Interest income from marketable securities totaled $1.2 million and $2.7$3.9 million for the three and sixnine months ended JuneSeptember 30, 2022, respectively and nil for both the three and sixnine months ended JuneSeptember 30, 2021. Interest income from marketable securities is included in "Investment income (loss)" in the Consolidated Statements of Operations.
Future maturities of the Company's marketable securities are $131.4$55.8 million in 2022 and $168.6 million in 2023.
6.Restricted Cash
Short-term and long-term restricted cash of $77.9 million consists of amounts held as collateral for letters of credit to provide financing support for development and construction of the NW Iowa RNG and NZ1 projects.
The Company entered into an irrevocable direct pay letter of credit (the "Bond Letter of Credit") with Citibank N.A ("Citibank") in April 2021 to support the 2021 Bonds for the development and construction of NW Iowa RNG. See Note 14, Debt, for additional information on the 2021 Bonds. The Bond Letter of Credit has a 0.5% annual fee and expires April 4, 2024 (unless terminated earlier). The Company deposited $71.2 million with Citibank as restricted cash to secure any amounts drawn under the Bond Letter of Credit. The Company is entitled to receive interest income on the restricted cash. As of September 30, 2022, no amounts have been drawn under the Bond Letter of Credit.
The proceeds from issuance of the 2021 Bonds recorded as restricted cash are maintained by the Trustee under the Indenture and are released to the Company to pay costs of the construction of NW Iowa RNG. The Company has used all bond proceeds for the project as of September 30, 2022.
In September 2022, the Company entered into a Pledge and Assignment agreement with Citibank to provide credit support in the form of a letter of credit (the “Power Letter of Credit”) from Citibank to the local electric utility company in order to induce the utility company to design and construct the power transmission and distribution facilities that will serve NZ1. The Company deposited $6.6 million of restricted cash in an account with Citibank to collateralize the Power Letter of Credit, which has a 0.3% annual fee and expires September 30, 2024 (unless terminated earlier). As of September 30, 2022, no amounts have been drawn under the Power Letter of Credit.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
7.Prepaid and Other Current Assets
The following table sets forth the components of the Company’s prepaid and other current assets (in thousands) as of:
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Prepaid insurance | $ | 906 | | | $ | 805 | |
Interest receivable | 688 | | | 1,530 | |
Prepaid engineering | 900 | | | 409 | |
Tax refunds | 195 | | | — | |
Prepaid other | 946 | | | 863 | |
Total Prepaid and other current assets | $ | 3,635 | | | $ | 3,607 | |
8.Leases, Right-of-Use Assets and Related Liabilities
The Company is party to an operating lease contract for the Company’s office and research facility in Englewood, Colorado, which expires in January 2029. The lease contains an option to extend the lease which management does not reasonably expect to exercise, so it is not included in the length of the term. The Company also has one production line piece of equipment with an operating lease that expires in 2024. As of JuneSeptember 30, 2022, right-of-use assets under operating leases totaling $2.1$1.7 million are included in "Operating right-of use assets," and the related lease liabilities totaling $2.2 million ($0.4 million in current and $1.8$1.7 million in long-term) are included in the Consolidated Balance Sheets.
The Company also has 4four finance leases for land under arrangements related to NW Iowa RNG. Under these contracts, the Company leases land from dairy farmers on which it has built 3three anaerobic digesters, and related equipment and pipelines to condition raw biogas from cow manure provided by the farmers. The partially conditioned biogas is transported from the 3three digester sites to a central gas upgrade system located at the fourth site that will upgradeupgrades the biogas to pipeline qualitypipeline-quality RNG for sale. These leases expire at various dates between 2031 and 2050. The Company amended one of its leases in June 2022, which the Company treated as an existing lease modification due to an increase in the price per unit, resulting in an increase of the lease liability and right-of-use-asset by $0.8 million.
Since the Company elected the practical expedient to combine lease and non-lease components, all amounts paid to the lessors under these arrangements for cow manure and non-lease services are classified as lease payments and are included in the calculation of the right-of-use assets and lease liabilities. This results in significantly higher right-of-use assets and lease liabilities than if the Company did not elect this practical expedient. As of JuneSeptember 30, 2022, right-of-use assets under finance leases totaling $27.5$27.0 million are included in "Finance right-of-use assets," and related lease liabilities totaling $22.6$18.5 million are included in the Consolidated Balance Sheets.
The following four tables present the (a) costs by lease category, (b) other quantitative information, and (c) future minimum payments under non-cancelable financing and operating leases as they relate to the Company’s leases (in thousands), except for weighted averages:
| | | Three months Ended June 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
Finance lease cost: | Finance lease cost: | | | | Finance lease cost: | | | | | | | |
Amortization of right-of-use assets (1) | Amortization of right-of-use assets (1) | $ | 488 | | | $ | 447 | | Amortization of right-of-use assets (1) | $ | 470 | | | $ | 464 | | | $ | 1,395 | | | $ | 930 | |
Interest on lease liabilities (1) | Interest on lease liabilities (1) | 251 | | | 316 | | Interest on lease liabilities (1) | 423 | | | 297 | | | 948 | | | 627 | |
Operating lease cost | Operating lease cost | 139 | | | 67 | | Operating lease cost | 139 | | | 64 | | | 416 | | | 192 | |
Short-term lease cost | Short-term lease cost | 572 | | | 495 | | Short-term lease cost | — | | | 377 | | | 1,449 | | | 1,003 | |
Variable lease cost (2) | Variable lease cost (2) | 73 | | | 31 | | Variable lease cost (2) | — | | | 94 | | | 951 | | | 164 | |
Total lease cost | Total lease cost | $ | 1,523 | | | $ | 1,356 | | Total lease cost | $ | 1,032 | | | $ | 1,296 | | | $ | 5,159 | | | $ | 2,916 | |
1.Amortization and interest on finance lease liabilities of $0.7 million and $0.8 million was capitalized as construction-in-progress for the three months ended June 30, 2022, and June 30, 2021, respectively.
2.Represents amounts incurred in excess of minimum payments, including payments for common area expenses under our office and research facility lease, and additional amounts due under our NW Iowa RNG leases based on the number of cows maintained by the owners above the minimum required by the contracts of the respective facilities.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
Finance lease cost: | | | |
Amortization of right-of use assets (1) | $ | 949 | | | $ | 458 | |
Interest on lease liabilities (1) | 525 | | | 316 | |
Operating lease cost | 277 | | | 67 | |
Short-Term lease cost | 1,449 | | | 495 | |
Variable lease cost (2) | 951 | | | 31 | |
Total lease cost | $ | 4,151 | | | $ | 1,367 | |
1.(1)$1.5Amortization and interest on finance lease liabilities capitalized as construction-in-progress totaled $0.3 million and $2.0 million during the three and nine months ended September 30, 2022, respectively, and nil and $0.8 million of amortizationduring the three and interest expense for the sixnine months ended JuneSeptember 30, 2022, and 2021, respectively, were capitalized as part of construction in progress. The accumulatedrespectively. Total capitalized amounts of $3.7$2.8 million isare included in "Property, plant and equipment, net" in the Consolidated Balance Sheets as the related to NW Iowa RNG facilities were still under construction on Juneas of September 30, 2022.
2.(2)Represents amounts incurred in excess of minimum payments, including payments for common area expenses under our office and research facility lease, and additional amounts due under our NW Iowa RNG leases based on the number of cows maintained by the owners above the minimum required by the contracts of the respective facilities.
| | | Six Months Ended June 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Other Information | Other Information |
| |
| Other Information |
| |
|
Cash paid for amounts included in the measurement of lease liabilities: | Cash paid for amounts included in the measurement of lease liabilities: | | | | Cash paid for amounts included in the measurement of lease liabilities: | | | |
Operating cash flows from finance leases | Operating cash flows from finance leases | $ | 241 | | $ | 321 | Operating cash flows from finance leases | $ | 627 | | $ | 627 |
Operating cash flows from operating leases | Operating cash flows from operating leases | $ | 359 | | $ | 128 | Operating cash flows from operating leases | $ | 431 | | $ | 192 |
Finance cash flows from finance leases | Finance cash flows from finance leases | $ | 87 | | $ | 3,046 | Finance cash flows from finance leases | $ | 4,316 | | $ | 5,975 |
Right-of-use asset obtained in exchange for new finance lease liabilities | Right-of-use asset obtained in exchange for new finance lease liabilities | $ | 834 | | $ | 27,775 | Right-of-use asset obtained in exchange for new finance lease liabilities | $ | 834 | | $ | 28,416 |
Right-of-use asset obtained in exchange for new operating lease liabilities | Right-of-use asset obtained in exchange for new operating lease liabilities | $ | — | | $ | 1,562 | Right-of-use asset obtained in exchange for new operating lease liabilities | $ | — | | $ | 1,611 |
Weighted-average remaining lease term, finance lease (months) | Weighted-average remaining lease term, finance lease (months) | 216 | | 218 | Weighted-average remaining lease term, finance lease (months) | 208 | | 225 |
Weighted-average remaining lease term, operating leases (months) | Weighted-average remaining lease term, operating leases (months) | 68 | | 91 | Weighted-average remaining lease term, operating leases (months) | 66 | | 88 |
Weighted-average discount rate - finance leases (1) | Weighted-average discount rate - finance leases (1) | 10% | | 5% | Weighted-average discount rate - finance leases (1) | 10% | | 5% |
Weighted-average discount rate - operating leases (1) | Weighted-average discount rate - operating leases (1) | 5% | | 5% | Weighted-average discount rate - operating leases (1) | 5% | | 5% |
(1)Our leases do not provide an implicit interest rate, we calculate the lease liability at lease commencement as the present value of unpaid lease payments using our estimated incremental borrowing rate. The incremental borrowing rate represents the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and is determined using a portfolio approach based on information available at the commencement date of the lease.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
| | | | | | | | | | | |
Year ending December 31, | Operating Leases | | Finance Leases |
2022 (remaining) | $ | 376 | | | $ | 7,282 | |
2023 | 529 | | | 1,554 | |
2024 | 306 | | | 2,730 | |
2025 | 315 | | | 1,744 | |
2026 | 325 | | | 1,760 | |
2027 and thereafter | 707 | | | 29,583 | |
Total | 2,558 | | | 44,653 | |
Less: Amounts representing present value discounts | 349 | | | 22,018 | |
Total lease liabilities | 2,209 | | | 22,635 | |
Less: current portion | 423 | | | 6,293 | |
Long-term portion | $ | 1,786 | | | $ | 16,342 | |
7.Inventories
The following table sets forth the components of the Company’s inventory balances (in thousands) as of:
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
Raw materials: | | | |
Corn | $ | 179 | | | $ | 301 | |
Enzymes and other inputs | 57 | | | 186 | |
Palladium | 203 | | | 265 | |
Finished goods: | | | |
SAF, Isooctane, Isooctene and other | 504 | | | 335 | |
Isobutanol | 124 | | | 223 | |
Ethanol | 146 | | | 96 | |
Work in process: | | | |
Agri-Energy | 51 | | | 83 | |
Gevo | 71 | | | — | |
Spare parts | 1,314 | | | 1,262 | |
Total inventories | $ | 2,649 | | | $ | 2,751 | |
Work in process inventory includes unfinished SAF, isooctane, and isooctene inventory.
During the six months ended June 30, 2022, the Company adjusted its finished goods and work in process inventory to net realizable value and recorded a $0.8 million loss in cost of goods sold. There were no net realizable losses recorded during the six months ended June 30, 2021, as the Luverne Facility was temporarily shut down due to the COVID-19 pandemic. | | | | | | | | | | | |
Year ending December 31, | Operating Leases | | Finance Leases |
2022 (remaining) | $ | 303 | | | $ | 1,772 | |
2023 | 528 | | | 1,576 | |
2024 | 305 | | | 2,730 | |
2025 | 315 | | | 1,744 | |
2026 | 324 | | | 1,760 | |
2027 and thereafter | 706 | | | 30,499 | |
Total | 2,481 | | | 40,081 | |
Less: Amounts representing present value discounts | 317 | | | 21,607 | |
Total lease liabilities | 2,164 | | | 18,474 | |
Less: current portion | 430 | | | 2,125 | |
Long-term portion | $ | 1,734 | | | $ | 16,349 | |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
8.9.Inventories
The following table sets forth the components of the Company’s inventory balances (in thousands) as of:
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Raw materials: | | | |
Corn | $ | — | | | $ | 301 | |
Enzymes and other inputs | 31 | | | 186 | |
Catalyst materials | 203 | | | 265 | |
Finished goods: | | | |
SAF, Isooctane, Isooctene and other | 221 | | | 335 | |
Isobutanol | 124 | | | 223 | |
Ethanol | — | | | 96 | |
Work in process: | | | |
Isobutanol | — | | | 83 | |
Jet fuel | 51 | | | — | |
Spare parts | 1,432 | | | 1,262 | |
RNG - environmental attributes | 2,073 | | | — | |
Total inventories | $ | 4,135 | | | $ | 2,751 | |
Environmental attributes represent distinguishable and material output from our RNG operations. The Company started allocating the joint cost of production to the sales value of RNG, credits from California's LCFS program and U.S. Environmental Protection Agency ("EPA") RIN credits. The value of the environmental attributes is reviewed for potential write-downs based on the net realizable value methodology.
During the three and nine months ended September 30, 2022, the Company adjusted its finished goods and work in process inventory to net realizable value and recorded a nil and $0.8 million loss, respectively, in cost of goods sold, as compared to $1.2 million and $2.0 million during the three and nine months ended September 30, 2021, respectively.
10.Property, Plant and Equipment
The following table sets forth the Company’s property, plant and equipment by classification (in thousands) as of:
| | | Useful Life (in years) | | June 30, 2022 | | December 31, 2021 | | | September 30, 2022 | | December 31, 2021 |
Land | Land | | | $ | 410 | | | $ | 410 | | Land | | $ | 6,452 | | | $ | 410 | |
Plant facilities and infrastructure | Plant facilities and infrastructure | 5 | to | 20 | | 84,117 | | | 84,117 | | Plant facilities and infrastructure | | 76,310 | | | 84,117 | |
Machinery and equipment | Machinery and equipment | 5 | to | 10 | | 25,416 | | | 25,369 | | Machinery and equipment | | 89,797 | | | 25,369 | |
Furniture and office equipment | Furniture and office equipment | 3 | to | 7 | | 2,606 | | | 2,550 | | Furniture and office equipment | | 2,699 | | | 2,550 | |
Software | Software | 3 | to | 6 | | 1,621 | | | 1,564 | | Software | | 2,134 | | | 1,564 | |
Construction in progress | Construction in progress | | | 128,080 | | | 88,990 | | Construction in progress | | 56,713 | | | 88,990 | |
Total property, plant and equipment | Total property, plant and equipment | | 242,250 | | | 203,000 | | Total property, plant and equipment | | 234,105 | | | 203,000 | |
Less accumulated depreciation and amortization | Less accumulated depreciation and amortization | | (66,196) | | | (63,859) | | Less accumulated depreciation and amortization | | (68,101) | | | (63,859) | |
Property, plant and equipment, net | Property, plant and equipment, net | | $ | 176,054 | | | $ | 139,141 | | Property, plant and equipment, net | | $ | 166,004 | | | $ | 139,141 | |
The Company recorded depreciation expenseexpenses of $1.2$1.3 million and $2.3$3.6 million for the three and sixnine months ended JuneSeptember 30, 2022, respectively, as compared with $1.2 million and $2.4$3.6 million for the same periods ended JuneSeptember 30, 2021.
At JuneSeptember 30, 2022, construction in progress included accruals of $11.5$9.2 million.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
Construction in progress includes $0.8$0.3 million for Gevo, $13.4$12.0 million for our subsidiary, Agri-Energy LLC ("Agri-Energy") $75.5related to a fractionation and hydrocarbon skid, $2.1 million for NW Iowa RNG and $38.4$42.3 million for the Net-Zero 1 ProjectNZ1 at JuneSeptember 30, 2022. Construction in progress includes $0.4 million for Gevo, $9.1 million for Agri-Energy, $56.9 million for NW Iowa RNG and $22.5 million for the Net-Zero 1 ProjectNZ1 at December 31, 2021. Construction in progress is not subject to depreciation until the assets are placed into service.
Borrowing costs. Borrowing costs directly attributable to acquisition and construction of an asset are capitalized until it is completed and ready for its intended use, and thereafter are recognized in profit or loss for the current period. The Company capitalized $0.8$1.2 million and nil of interest expense for the sixnine months ended JuneSeptember 30, 2022, and JuneSeptember 30, 2021, respectively.
9.11.Intangible Assets
Intangible assets consist of patents, which management evaluates to determine whether they (i) support current products, (ii) support planned research and development, or (iii) prevent others from competing with Gevo's products.
The following table sets forth the Company’s identifiable intangible assets by classification (in thousands) as of:
| | | June 30, 2022 | | September 30, 2022 |
| | Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, Net | | Weighted-Average Useful Life (Years) | | Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, net | | Weighted-Average Useful Life (Years) |
Patents | Patents | $ | 4,580 | | | $ | (664) | | | $ | 3,916 | | | 7.3 | Patents | $ | 4,580 | | | $ | (888) | | | $ | 3,692 | | | 7.4 |
Defensive assets | Defensive assets | 4,900 | | | (452) | | | 4,448 | | | 8.4 | Defensive assets | 4,900 | | | (597) | | | 4,303 | | | 8.4 |
Identifiable intangible assets | Identifiable intangible assets | $ | 9,480 | | | $ | (1,116) | | | $ | 8,364 | | | 7.9 | Identifiable intangible assets | $ | 9,480 | | | $ | (1,485) | | | $ | 7,995 | | | 7.9 |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, Net | | Weighted-Average Useful Life (Years) |
Patents | $ | 4,575 | | | $ | (368) | | | $ | 4,207 | | | 7.3 |
Defensive assets | 4,895 | | | (164) | | | 4,731 | | | 8.4 |
Identifiable intangible assets | $ | 9,470 | | | $ | (532) | | | $ | 8,938 | | | 7.9 |
The Company recorded amortization expense of $0.4 million and $1.0 million for the three and nine months ended September 30, 2022, respectively, as compared with nil for each of the three and nine months ended September 30, 2021.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Gross Carrying Amount | | Accumulated Amortization | | Identifiable Intangible Assets, Net | | Weighted-Average Useful Life (Years) |
Patents | $ | 4,575 | | | $ | (368) | | | $ | 4,207 | | | 7.3 |
Defensive assets | 4,895 | | | (164) | | | 4,731 | | | 8.4 |
Identifiable intangible assets | $ | 9,470 | | | $ | (532) | | | $ | 8,938 | | | 7.9 |
The Company recorded amortization expense of $0.3 million and $0.6 million for the three and six months ended June 30, 2022, respectively, as compared with nil and nil for the same periods ended June 30, 2021.
The following table details the estimated amortization of identifiable intangible assets as ofJune September 30, 2022 (in (in thousands):
| Year ending December 31, | Year ending December 31, | Patents | | Defensive Assets | | Total | Year ending December 31, | Patents | | Defensive Assets | | Total |
2022 (remaining) | 2022 (remaining) | $ | 304 | | | $ | 297 | | | $ | 601 | | 2022 (remaining) | $ | 151 | | | $ | 153 | | | $ | 304 | |
2023 | 2023 | 599 | | | 586 | | | 1,185 | | 2023 | 578 | | | 586 | | | 1,164 | |
2024 | 2024 | 601 | | | 588 | | | 1,189 | | 2024 | 580 | | | 588 | | | 1,168 | |
2025 | 2025 | 599 | | | 586 | | | 1,185 | | 2025 | 578 | | | 586 | | | 1,164 | |
2026 | 2026 | 585 | | | 586 | | | 1,171 | | 2026 | 578 | | | 586 | | | 1,164 | |
2027 and thereafter | 2027 and thereafter | 1,228 | | | 1,805 | | | 3,033 | | 2027 and thereafter | 1,227 | | | 1,804 | | | 3,031 | |
Total | Total | $ | 3,916 | | | $ | 4,448 | | | $ | 8,364 | | Total | $ | 3,692 | | | $ | 4,303 | | | $ | 7,995 | |
10.12.Deposits and Other Assets
The following table sets forth the components of the Company's Depositsdeposits and other assets (in thousands) as of:
| | | June 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 |
Deposits (1) | Deposits (1) | $ | 991 | | | $ | 831 | | Deposits (1) | $ | 276 | | | $ | 831 | |
Equity interest (2) | Equity interest (2) | 1,500 | | | 1,500 | | Equity interest (2) | 1,500 | | | 1,500 | |
Exclusivity fees (3) | Exclusivity fees (3) | 3,250 | | | 3,250 | | Exclusivity fees (3) | 8,087 | | | 3,250 | |
Deposits receivable (4) | | Deposits receivable (4) | 8,302 | | | — | |
Total Deposits and Other Assets | Total Deposits and Other Assets | $ | 5,741 | | | $ | 5,581 | | Total Deposits and Other Assets | $ | 18,165 | | | $ | 5,581 | |
(1)Deposits for legal services and productproducts for the Net-Zero 1 Project.NZ1.
(2)The Company directly holds a 4.6% interest ofin the Series A Preferred Stock inof Juhl Clean Energy Assets, Inc. ("Juhl"), which is not a publicly listed entity with a readily determinable fair value. The Company therefore measures the securities at cost, which is deemed to be the value indicated by the last observable transaction in Juhl's stock, subject to impairment. The equity interest in Juhl is also pledged as collateral against two future obligations to Rock County Wind Fuel, LLC ("RCWF"), a Juhl subsidiary, see Footnote 15,Note 17, Commitments and Contingencies, for additional information.
(3)Axens North America, Inc. ("Axens") will provide certain alcohol-to-SAF services exclusively to the Company which may be offset against future license fees subject to the delivery of a process design package. On October 14, 2022, the Company entered into a licensing agreement with Axens to support development of the Company's alcohol-to-SAF process, incurring $4.2 million of licensing fees which will be offset against these prepaid exclusivity fees.
(4)Deposits provided to a developer of certain wind-farm projects and power utility contractor to induce to design and construct the power generation, transmission and distribution facilities that will serve NZ1, $5.5 million of which will be either reimbursed or used as an investment into wind generation facility and the remaining $2.8 million is expected to be fully reimbursed upon completion of the project. Gevo has contractual priority liens against the equipment and constructed facilities under the contracts.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
11.13.Accounts Payable and Accrued Liabilities
The following table sets forth the components of the Company's accounts payable and accrued liabilities (in thousands) as of:
| | | June 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 |
Accounts payable | Accounts payable | $ | 3,378 | | | $ | 4,830 | | Accounts payable | $ | 1,449 | | | $ | 4,830 | |
Accrued liabilities | Accrued liabilities | 11,519 | | | 18,345 | | Accrued liabilities | 8,800 | | | 18,345 | |
Accrued payroll and related benefits | Accrued payroll and related benefits | 3,454 | | | 4,678 | | Accrued payroll and related benefits | 4,189 | | | 4,678 | |
Other accrued liabilities | Other accrued liabilities | 399 | | | 435 | | Other accrued liabilities | 478 | | | 435 | |
Total accounts payable and accrued liabilities | Total accounts payable and accrued liabilities | $ | 18,750 | | | $ | 28,288 | | Total accounts payable and accrued liabilities | $ | 14,916 | | | $ | 28,288 | |
12.14.Debt
2021 Bond Issuance
On April 15, 2021, on behalf of Gevo NW Iowa RNG, LLC, the Iowa Finance Authority ("the(the "Authority") issued $68,155,000 of its non-recourse Solid Waste Facility Revenue Bonds (Gevo NW Iowa RNG, LLC Renewable Natural Gas Project), Series 2021 (Green Bonds) (the "2021 Bonds") for NW Iowa RNG. The bond proceeds are being used as a source of construction financing alongside equity from the Company. The bonds were issued under a Trust Indenture dated April 1, 2021 (the "Indenture") between the Authority and Citibank, N.A. as trustee (the "Trustee"). The 2021 Bonds mature April 1, 2042. The bonds initially bear interest at 1.50%1.5% per annum during the Initial Term Rate Period, (as defined in the Indenture), payable semi-annually on January 1 and July 1 of each year. The effective interest rate is 1%1.0%. The bonds are supported by athe $71.2 million irrevocable direct pay letter of credit (the "Letter of Credit") with a 1/2% annual fee, paid quarterly. TheBond Letter of Credit expires April 4, 2024 (unless terminated earlier), and was issued by Citibank N.A.Credit; see Note 6, Restricted Cash. The Trustee can draw sufficient amounts on the Bond Letter of Credit to pay the principal and interest until the first mandatory tender date of April 1, 2024. The bonds are callable and re-marketable on or after October 1, 2022. If the bonds have not been called and re-marketed by the first mandatory tender date, the Trustee may draw on the Bond Letter of Credit to repay the bonds in their entirety at the purchase price. Gevo deposited $71.2 million with the Trustee as restricted cash to secure any amounts drawn under the Letter of Credit. As of JuneSeptember 30, 2022, no amounts have been drawn under the Letter of Credit.
Gevo anticipates re-marketing the 2021 Bonds in the fall of 2022 under revised terms that will include a long-term maturity date and be non-recourse to Gevo. Upon a successful remarketing, Gevo anticipates that the Letter of Credit, the associated reimbursement agreement and the associated pledge of cash will be terminated, with a concurrent release of the restricted cash securing theBond Letter of Credit.
The 2021 Bonds were issued at a premium of $0.8 million and debt issuance costs were $3.0 million. The bond debt is classified as long-term debt and is presented net of the premium and issuance costs, which are being amortized over the life of the bonds using the interest method. As of JuneSeptember 30, 2022, the premium balance and the debt issuance cost net of amortization were $0.5 million and $1.9$1.5 million, respectively.
Restricted cash and cash equivalents. The Company’s restricted cash and cash equivalents consists of unused proceeds from the issuance of the 2021 Bonds and are restricted for the purpose of constructing NW Iowa RNG projects as well as amounts pledged and assigned to the Trustee in its capacity as provider of the Letter of Credit as collateral for the reimbursement obligations of Gevo.
The proceeds from issuance of the 2021 Bonds are maintained by the Trustee under the Indenture and are released to the Company only to pay costs of the construction of NW Iowa RNG. The Company has used $63.8 million for the project. As of June 30, 2022, unused bond proceeds of $5 million are included in restricted cash and classified as current since the proceeds will be distributed within 12 months.
As ofJune 30, 2022, $71.2 million is held in restricted cash as collateral for the Letter of Credit. The Company is entitled to receive interest income on the restricted cash.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
The restricted cash held by the Trustee is made up of the following (in thousands), which amounts are reflected since inception and as of, as applicable:
| | | | | | | |
| June 30, 2022 | | |
Bond proceeds | $ | 68,995 | | | |
Disbursement of funds | (63,809) | | | |
Interest paid on bonds | (727) | | | |
Funds transferred to current restricted assets (to pay interest on bonds) | 413 | | | |
Interest income | — | | | |
Total restricted bond cash held by Trustee | 4,872 | | | |
Restricted cash for bond collateral held by Trustee | 71,278 | | | |
Total restricted cash held by Trustee | 76,150 | | | |
Current restricted cash held by Trustee | (5,894) | | | |
Long-term restricted cash held by Trustee | $ | 70,256 | | | |
Loans Payable - Other
The equipment loans are secured by the related equipment.
In April 2020, the Company and Agri-Energy each entered into a loan agreement with Live Oak Banking Company, pursuant to which the Company and Agri-Energy obtained loans from the Small Business Administration's Paycheck Protection Program (“SBA PPP”) totaling $1.0 million in the aggregate (the "SBA Loans").
In April 2021, the Small Business Administration forgave the entire balance of $0.5 million of the Company's and $0.1 million of Agri-Energy's loans and accrued interest obtained through the SBA PPP.PPP were forgiven. The remaining SBA Loan for Agri-Energy totals $0.3 million, bears interest at 1.0% per annum and matures in April 2025. Monthly payments of $8,230, including interest, began on June 5, 2021, and are payable through April 2025.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
The summary of the Company's long-term debt is as follows (in thousands) as of:
| | | Interest Rate | | Maturity Date | | June 30, 2022 | | December 31, 2021 | | Interest Rate | | Maturity Date | | September 30, 2022 | | December 31, 2021 |
2021 Bonds | 2021 Bonds | 1.5% | | January 2042 | | $ | 66,853 | | | $ | 66,486 | | 2021 Bonds | 1.5% | | January 2042 | | $ | 67,038 | | | $ | 66,486 | |
SBA Loans | SBA Loans | 1.0% | | April 2025 | | 272 | | | 320 | | SBA Loans | 1.0% | | April 2025 | | 248 | | | 320 | |
Equipment | Equipment | 4% | to | 5% | | February 2022 | to | December 2024 | | 124 | | | 156 | | Equipment | 4% | to | 5% | | February 2022 | to | December 2024 | | 109 | | | 156 | |
Total loans payable - other | Total loans payable - other | | 67,249 | | | 66,962 | | Total loans payable - other | | 67,395 | | | 66,962 | |
Less current portion | Less current portion | | (158) | | | (158) | | Less current portion | | (158) | | | (158) | |
Long-term portion | Long-term portion | | $ | 67,091 | | | $ | 66,804 | | Long-term portion | | $ | 67,237 | | | $ | 66,804 | |
Future principal payments for the Company's long-term debt are as follows (in thousands):
| Year Ending December 31, | Year Ending December 31, | Total Debt | Year Ending December 31, | Total Debt |
2022 (remaining) | 2022 (remaining) | $ | 78 | | 2022 (remaining) | $ | 39 | |
2023 | 2023 | 159 | | 2023 | 159 | |
2024 | 2024 | 66,983 | | 2024 | 67,167 | |
2025 | 2025 | 29 | | 2025 | 30 | |
2026 | — | | |
| Total loans payable - other | Total loans payable - other | $ | 67,249 | | Total loans payable - other | $ | 67,395 | |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
13.15.Stock-Based Compensation
Equity incentive plans. In February 2011, the Company’s stockholders approved the Gevo, Inc. 2010 Stock Incentive Plan (as amended and restated to date, the "2010 Plan"), and the Employee Stock Purchase Plan (the "ESPP").
The 2010 Plan provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units and other equity awards to employees and directors of the Company. OnIn June 9, 2021, upon approval of stockholders at the 2021 Annual Meeting of Stockholders, the 2010 Plan was amended and restated, which increased the number of shares of common stock reserved for issuance under the 2010 Plan to 22,980,074 shares. On JuneSeptember 30, 2022, 7,645,467 shares4,113,735 shares remained available for awards under the 2010 Plan.
Restricted common stock and non-qualified stock option activity during the six months ended June 30, 2022,consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
Period | Total Number of Restricted Shares Issued
| | Total Number of Non-qualified Stock Options Granted | | Vesting Periods Years |
January 1, 2022 to March 31, 2022 (1)
| (340,502) | | | — | | | N/A |
April 1, 2022 to June 30, 2022 (1)
| (165,174) | | | — | | | N/A |
Total | (505,676) | | | — | | | | | |
(1)Includes shares of common stock cancelled in relation to unvested restricted stock awards.
Employee Stock Purchase Plan ("ESPP"). The offering periods for the ESPP are from January 1 to June 30 and from July 1 to December 31 of each calendar year. The Company has reserved 190 shares of common stock for issuance under the ESPP, of which 190 shares as of June 30, 2022, are available for future issuance. The purchase price of the common stock under the ESPP is 85% lower than the fair market value of a share of common stock on the first or last day of the purchase period. There were no purchases of common stock under the ESPP during the six months ended June 30, 2022,or 2021.
Stock Appreciation Rights. The Company granted 67,739 stock appreciation rights valued at an aggregate of $0.1 million on the respective grant dates of grant during the year ended December 31, 2018.2018, with exercise prices ranging from $3.45 to $138.00 per share, expiring in 2028. The vesting period for stock appreciation rights granted areis based uponon a service period. The stock appreciation rights have the potential to be cash settled in the event there are insufficient shares available from the 2010 Plan and are therefore classified as a liability and remeasured at each reporting period based on the price of the Company's common stock.
Stock-based compensation expense. The Company records stock-based compensation expense during the requisite service period for share-basedstock-based payment awards granted to employees and non-employees. Our stock-based compensation is classified as either an equity award or a liability award in accordance with generally accepted accounting principles. The fair value of an equity-classified award is determined at the grant date and is amortized on a straight-line basis over the vesting life of the award. The fair-value of a liability-classified award is determined on a quarterly basis through the final vesting date and is amortized based on the current fair value of the award and the percentage of vesting period incurred to date.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
The following table sets forth the Company’s stock-based compensation expense for the periods indicated (in thousands):
| | | Three months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
Equity Classified Awards | Equity Classified Awards | | | | | | | | Equity Classified Awards | | | | | | | |
Stock options | | | | | |
Cost of goods sold | Cost of goods sold | $ | 89 | | | $ | — | | | $ | 174 | | | $ | — | | Cost of goods sold | $ | 208 | | | $ | 188 | | | $ | 599 | | | $ | 188 | |
Research and development | 83 | | | — | | | 134 | | | — | | |
Selling, general and administrative | Selling, general and administrative | 1,625 | | | — | | | 3,069 | | | — | | Selling, general and administrative | 3,910 | | | 1,419 | | | 10,992 | | | 2,593 | |
Preliminary stage projects | 3 | | | — | | | 8 | | | — | | |
Other | 99 | | | — | | | 193 | | | — | | |
Restricted stock | | |
Cost of goods sold | 109 | | | — | | | 217 | | | — | | |
Research and development | 95 | | | 121 | | | 153 | | | 246 | | |
Selling, general and administrative | 1,963 | | | 737 | | | 4,013 | | | 1,174 | | |
Preliminary stage projects | 13 | | | — | | | 24 | | | — | | |
Other | Other | 141 | | | — | | | 279 | | | — | | Other | 243 | | | 273 | | | 1,034 | | | 519 | |
Total equity classified awards | Total equity classified awards | 4,220 | | | 858 | | | 8,264 | | | 1,420 | | Total equity classified awards | 4,361 | | | 1,880 | | | 12,625 | | | 3,300 | |
Liability Classified Awards | Liability Classified Awards | | | | | | | | Liability Classified Awards | | | | | | | |
Restricted stock | | |
Selling, general and administrative | Selling, general and administrative | (381) | | | — | | | (188) | | | — | | Selling, general and administrative | (267) | | | 2,366 | | | (460) | | | 2,374 | |
Stock appreciation rights | | |
Research and development | (126) | | | (159) | | | (126) | | | 189 | | |
Selling, general and administrative | (26) | | | (7) | | | (5) | | | 8 | | |
Other | | Other | 126 | | | (40) | | | — | | | 149 | |
Total liability classified awards | Total liability classified awards | (533) | | | (166) | | | (319) | | | 197 | | Total liability classified awards | (141) | | | 2,326 | | | (460) | | | 2,523 | |
Total stock-based compensation | Total stock-based compensation | $ | 3,687 | | | $ | 692 | | | $ | 7,945 | | | $ | 1,617 | | Total stock-based compensation | $ | 4,220 | | | $ | 4,206 | | | $ | 12,165 | | | $ | 5,823 | |
Stock option award activity. Stock option activity under the Company’s stock incentive plans and changes during the sixnine months ended JuneSeptember 30, 2022, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Options | | Weighted-Average Exercise Price (1) | | Weighted-Average Remaining Contractual Term (years) | | Aggregate Intrinsic Value |
Options outstanding at December 31, 2021 | 4,746,368 | | | $ | 5.11 | | | 9.6 | | $ | — | |
Granted | 16,791 | | | $ | 3.68 | | | | | $ | — | |
Canceled or forfeited | (220,255) | | | $ | 5.56 | | | | | $ | — | |
Exercised | — | | | 0 | | | | $ | — | |
Options outstanding at June 30, 2022 | 4,542,904 | | | $ | — | | | 9.1 | | $ | — | |
Options vested and expected to vest at June 30, 2022 | 18,186 | | | $ | 39.69 | | | 0.5 | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Options | | Weighted-Average Exercise Price (1) | | Weighted-Average Remaining Contractual Term (years) | | Aggregate Intrinsic Value |
Options outstanding at December 31, 2021 | 4,746,368 | | | $ | 5.11 | | | 9.6 | | $ | — | |
Granted | 1,620,183 | | | $ | 3.46 | | | | | $ | — | |
Canceled or forfeited | (353,169) | | | $ | 5.62 | | | | | $ | — | |
Exercised | — | | | $ | — | | | | | $ | — | |
Options outstanding at September 30, 2022 | 6,013,382 | | | $ | 4.66 | | | 9.1 | | $ | — | |
Options vested and expected to vest at Options vested at September 30, 2022 | 1,510,728 | | | $ | 5.33 | | | 0.5 | | $ | — | |
(1)Exercise price of options outstanding range from $2.73$2.42 to $19,620.00$11,340 as of JuneSeptember 30, 2022. The higher range end of the range is due to historicalthe impact of reverse stock reverse splits.splits subsequent to grants.
As of September 30, 2022, the total unrecognized compensation expense, net of estimated forfeitures, relating to stock options was $15.7 million, which is expected to be recognized over the remaining weighted-average period of approximately 2.4 years.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
As of June 30, 2022, the total unrecognized compensation expense, net of estimated forfeitures, relating to stock options was $14.6 million, which is expected to be recognized over the remaining weighted-average period of approximately 3.3 years.
Restricted stock. Non-vested restricted stock awards and the changes during the sixnine months ended JuneSeptember 30, 2022, were as follows:
| | | Number of Shares | | Weighted-Average Grant-Date Fair Value | | Number of Shares | | Weighted-Average Grant-Date Fair Value |
Outstanding at December 31, 2021 | Outstanding at December 31, 2021 | 6,882,502 | | | $ | 3.77 | | Outstanding at December 31, 2021 | 6,882,502 | | | $ | 3.77 | |
Granted | Granted | 165,174 | | | $ | 4.45 | | Granted | 2,348,105 | | | $ | 2.58 | |
Exercised | (209,398) | | | $ | 2.63 | | |
Vested and issued | | Vested and issued | (3,484,585) | | | $ | 2.85 | |
Canceled or forfeited | Canceled or forfeited | (252,801) | | | $ | 4.87 | | Canceled or forfeited | (374,842) | | | $ | 4.90 | |
Vested | (364) | | | $ | 2.30 | | |
Non-vested at June 30, 2022 | 6,585,113 | | | $ | 4.01 | | |
| Non-vested at September 30, 2022 | | Non-vested at September 30, 2022 | 5,371,180 | | | $ | 3.95 | |
The total fair value of restricted stock that vested during the sixnine months ended JuneSeptember 30, 2022, was $0.6 million. As of JuneSeptember 30, 2022, the total unrecognized compensation expense, net of estimated forfeitures, relating to restricted stock awards was $17.2$19.4 million, which is expected to be recognized over the remaining weighted-average period of approximately 2.72.3 years. As of JuneSeptember 30, 2022, we had recorded a liability of $0.5 million for earned andhave no unvested liability-classified restricted stock awards based on the fair value of our common stock as of June 30, 2022.
14.16.Income Taxes
The Company has incurred operating losses since inception, therefore no provision for income taxes was recorded and all related deferred tax assets are fully reserved. We continue to assess the impact of a deferred tax asset as it relates to income taxes.
15.17.Commitments and Contingencies
Legal matters. From time to time, the Company has been, and may again become, involved in legal proceedings arising in the ordinary course of its business. The Company is not presently a party to any litigation and is not aware of any pending or threatened litigation against the Company that it believes could have a material adverse effect on its business, operating results, financial condition or cash flows.
Indemnifications. In the ordinary course of its business, the Company makes certain indemnities under which it may be required to make payments in relation to certain transactions. As of JuneSeptember 30, 2022, the Company did not have any liabilities associated with indemnities.
In addition, the Company as permitted under Delaware law and in accordance with its amended and restated certificate of incorporation and second amended and restated bylaws, in each case, as amended to date, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity.limitations. The duration of these indemnifications, commitments, and guarantees varies and, in certain cases, is indefinite. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid. The Company accrues for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable. No such losses have been recorded to date.
Environmental liabilities. The Company’s operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdictions in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its locations. Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, occupational health and the production, handling, storage and use of hazardous materials to prevent material environmental or other damage, and to limit the financial
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
liability which could result from such events. Environmental liabilities are recorded when the Company’s liability is probable, and the costs can be reasonably estimated. No environmental liabilities have been recorded as of JuneSeptember 30, 2022.
In June 2021 the Company contracted with a manufacturer in India to build a fractionation and hydrocarbon skid for $10.2 million, the remaining commitment for the contract is $3.5 million as of September 30, 2022.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
In February 2022, an incident occurred at one of the anaerobic digesters that is part of NW Iowa RNG that resulted in the accidental discharge of a mixture of water and manure into the environment. We promptly notified the Iowa Department of Natural Resources (the "DNR") and began mitigation work to minimize the impact of the discharge. The DNR has issued a notice of violation in connection with the discharge. This matter was resolved with the DNR in July 2022 through an administrative consent order and damages of $10,000 were assessed.
In April 2022, 2two separate incidents occurred at 2two of the anaerobic digesters that are part of NW Iowa RNG that resulted in the accidental discharge of very small amounts of water and manure into the environment. The DNR has issued notices of violation in connection with the 2two discharges.
There is a possibility that the DNR will initiate an enforcement action with respect to the April 2022, discharges described above that could result in a monetary sanction being levied against Gevo for the accidental discharges. We do not believe that any such monetary sanctions would behave a material impact on the financial statements.
Juhl Commitment.
In September 2022, the Company entered into a Development Agreement with Juhl to construct and operate a wind project for the provision of electric energy for the NZ1. Pursuant to the Company.agreement, the Company has committed to pay Juhl a total development charges of $8.6 million, comprised of advanced development fee payments of $0.9 million, certain reimbursable costs of $1.2 million, and $6.5 million upon completion of the project. The Company has paid $0.6 million pursuant to the agreement as of September 30, 2022. The Company is not contractually obligated for the specified development charges until certain milestones are met in future periods, and upon completion of the project.
The Company's investment in Juhl is pledged as a collateral for 2two commitments related to a purchase of wind electricity for the Luverne Facility, as well as 100% of RCWF's renewable energy credits. Gevo has a commitment to purchase all of RCWF's electricity. The portion not used by the Luverne Facility is charged to the Company at a lower price. The estimated commitments as of JuneSeptember 30, 2022, and thereafter are shown below:below (in thousands):
| Year ending December 31, | Year ending December 31, | Electricity Above Use (estimated) | | Renewable Energy Credits | Year ending December 31, | Electricity Above Use (estimated) | | Renewable Energy Credits |
2022 (remaining) | 2022 (remaining) | $ | 257 | | | $ | 150 | | 2022 (remaining) | $ | 117 | | | $ | 37 | |
2023 | 2023 | 440 | | | 150 | | 2023 | 474 | | | 149 | |
2024 | 2024 | 440 | | | 150 | | 2024 | 485 | | | 149 | |
2025 | 2025 | 440 | | | 150 | | 2025 | 163 | | | 149 | |
2026 | 2026 | — | | | 150 | | 2026 | — | | | 149 | |
2027 and thereafter | 2027 and thereafter | — | | | 1,900 | | 2027 and thereafter | — | | | 1,985 | |
Total commitments | Total commitments | $ | 1,577 | | | $ | 2,650 | | Total commitments | $ | 1,239 | | | $ | 2,618 | |
|
16.18.Fair Value Measurements
Accounting standards define fair value, outline a framework for measuring fair value, and detail the required disclosures about fair value measurements. Under these standards, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. Standards establish a hierarchy in determining the fair market value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. Standards require the utilization of the highest possible level of input to determine fair value.
Level 1 – inputs include quoted market prices in an active market for identical assets or liabilities.
Level 2 – inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data.
Level 3 – inputs are unobservable and corroborated by little or no market data.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
Level 3 – inputs are unobservable and corroborated by little or no market data.
The carrying value and fair value, by fair value hierarchy, of the Company's financial instruments at JuneSeptember 30, 2022, and December 31, 2021, respectively, are as follows (in thousands):
| | | | | Fair Value Measurements at June 30, 2022 | | | | Fair Value Measurements at September 30, 2022 |
| | Fair Value at June 30, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Fair Value at September 30, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Recurring | Recurring | | | | | | | | Recurring | | | | | | | |
Marketable securities | Marketable securities | | | | | | | | Marketable securities | | | | | | | |
U.S. Treasury notes | U.S. Treasury notes | $ | 161,438 | | | $ | 161,438 | | | $ | — | | | $ | — | | U.S. Treasury notes | $ | 108,598 | | | $ | 108,598 | | | $ | — | | | $ | — | |
U.S. Government-sponsored enterprise securities | U.S. Government-sponsored enterprise securities | 136,193 | | | 136,193 | | | — | | | — | | U.S. Government-sponsored enterprise securities | 113,414 | | | 113,414 | | | — | | | — | |
Other | | |
Liability-classified restricted stock awards | 514 | | | 514 | | | — | | | — | | |
Total recurring | Total recurring | $ | 298,145 | | | $ | 298,145 | | | $ | — | | | $ | — | | Total recurring | $ | 222,012 | | | $ | 222,012 | | | $ | — | | | $ | — | |
| | | Fair Value Measurements at December 31, 2021 | | Fair Value Measurements at December 31, 2021 |
| | Fair Value at December 31, 2021 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Fair Value at December 31, 2021 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Recurring | Recurring | | | | | | | | Recurring | | | | | | | |
Marketable securities | Marketable securities | | Marketable securities | |
U.S. Treasury notes | U.S. Treasury notes | $ | 225,792 | | | $ | 225,792 | | | $ | — | | | $ | — | | U.S. Treasury notes | $ | 225,792 | | | $ | 225,792 | | | $ | — | | | $ | — | |
U.S. Government-sponsored enterprise securities | U.S. Government-sponsored enterprise securities | 113,944 | | | 113,944 | | | — | | | — | | U.S. Government-sponsored enterprise securities | 113,944 | | | 113,944 | | | — | | | — | |
Other | Other | | Other | |
Liability-classified restricted stock awards | Liability-classified restricted stock awards | 894 | | | 894 | | | — | | | — | | Liability-classified restricted stock awards | 702 | | | 702 | | | — | | | — | |
Total recurring | Total recurring | $ | 340,630 | | | $ | 340,630 | | | $ | — | | | $ | — | | Total recurring | $ | 340,438 | | | $ | 340,438 | | | $ | — | | | $ | — | |
There were The Company had no transfers toof assets or from Level 2 or Level 3 in the six months ended Juneliabilities between fair value hierarchy levels between December 31, 2021, and September 30, 2022.
For the 2021 Bonds, the fair values are estimated using the Black-Derman-Toy interest rate lattice framework. The effective maturity of the 2021 Bonds was assumed to be April 1, 2024 (three years from issuance) with repayment of 100% of principal on that date. The impact of the Company's optional redemption feature, effective October 1, 2022, is appropriately captured by the Black-Derman-Toy interest rate lattice. The carrying values and estimated fair values of the 2021 Bonds as of JuneSeptember 30, 2022, are summarized as follows:
| | | | | | | | | | | |
| June 30, 2022 |
| Carrying Value | | Estimated Fair Value |
| | | |
2021 Bonds | $ | 66,853 | | | $ | 65,994 | |
| | | | | | | | | | | |
| September 30, 2022 |
| Carrying Value | | Estimated Fair Value |
| | | |
2021 Bonds | $ | 67,038 | | | $ | 64,910 | |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
17.19.Shareholders' Equity
Share Issuances
In February 2018, the Company commenced an at-the-market offering program, which allows it to sell and issue shares of its common stock from time to time. In 2021, the at-the-market offering program was amended to provide a total capacity of $500.0 million. As of JuneSeptember 30, 2022, the Company has remaining capacity to issue up to approximately $360.6 million of common stock under the at-the-market offering program.
On June 8, 2022, the Company completed a registered direct offering pursuant to a securities purchase agreement with certain institutional investors providing for ("the issuance and sale by the CompanyJune 2022 Offering") of an aggregate of 33,333,336 shares of the Company’s common stock at a price of $4.50 per share, accompanied by 33,333,336 Series 2022-A warrants to purchase an aggregate of 33,333,336 shares of the Company’s common stock (each, a “Series 2022-A Warrant”) (the “June 2022 Offering”).pursuant to a securities purchase agreement with certain institutional and accredited investors. The Series 2022-A Warrants are exercisable for a term of five years from the date of issuance at an exercise price of $4.37 per Series 2022-A Warrant.share. As of JuneSeptember 30, 2022, none of the Series 2022-A Warrants had been exercised.
The net proceeds to the Company from the June 2022 Offering were $139.0$139.2 million, after deducting placement agentagent's fees, advisory fees and other estimated offering expenses payable by the Company, and not including any future proceeds from the exerciseassuming none of the Series 2022-A Warrants.Warrants issued in the June 2022 Offering are exercised for cash. The Company intends to use the net proceeds from the June 2022 Offering to fund future operationscapital projects, working capital and capital projectsfor general corporate purposes.
Warrants
In addition to the Series 2022-A Warrants, the Company has warrants outstanding that were issued in conjunction with a registered direct offering in August 2020 (the “Series 2020-A Warrants”). The Company evaluated the Series 2022-A Warrants and Series 2020-A Warrants for liability or equity classification and determined that equity treatment was appropriate because both the Series 2022-A Warrants and Series 2020-A Warrants do not meet the definition of liability instruments.
The Series 2022-A Warrants and Series 2020-A Warrants are classified as component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable and will expire five years from the date of issuance, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the Series 2022-A Warrants and Series 2020-A Warrants do not provide any guarantee of value or return. The Company valued the Series 2022-A Warrants and Series 2020-A Warrants at issuance using the Black-Scholes option pricing model and determinedmodel. The fair value at the fair valueissuance date of the Series 2022-A Warrants to purchasewas $92.9 million with the Company’s common stock at $92.9 million. The key inputs to the valuation model includedincluding a weighted average volatility of 151.1%, a risk-free rate of 2.86% and an expected term of five years. The fair value at the issuance date of the Series 2020-A Warrants was $8.3 million with the key inputs to the valuation model including a weighted average volatility of 130%, a risk-free rate of 0.30% and an expected term of five years.
While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
On February 17, 2022, the remaining Series K warrants expired with 7,126 unexercised warrants.
The following table sets forth information pertaining to shares issued upon the exercise of warrants:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance Date | | Expiration Date | | Exercise Price as of June 30, 2022 | | Shares Underlying Warrants on Issuance Date | | Shares Issued upon Warrant Exercises as of June 30, 2022 | | Shares Underlying Warrants Outstanding as of June 30, 2022 |
Series 2020-A Warrants (1) | 7/6/2020 | | 7/6/2025 | | $ | 0.60 | | | 30,000,000 | | | 29,914,069 | | | 85,931 | |
Series 2022-A Warrants (1) | 6/8/2022 | | 6/7/2027 | | $ | 4.37 | | | 33,333,336 | | | — | | | 33,333,336 | |
Total Warrants | | | | | | | 63,333,336 | | | 29,914,069 | | — | | 33,419,267 | |
(1) Equity-classified warrants.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
The following table sets forth information pertaining to shares issued upon the exercise of warrants:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance Date | | Expiration Date | | Exercise Price as of September 30, 2022 | | Shares Underlying Warrants on Issuance Date | | Shares Issued upon Warrant Exercises as of September 30, 2022 | | Shares Underlying Warrants Outstanding as of September 30, 2022 |
Series 2020-A Warrants (1) | 7/6/2020 | | 7/6/2025 | | $ | 0.60 | | | 30,000,000 | | | 29,914,069 | | | 85,931 | |
Series 2022-A Warrants (1) | 6/8/2022 | | 6/7/2027 | | $ | 4.37 | | | 33,333,336 | | | — | | | 33,333,336 | |
Total Warrants | | | | | | | 63,333,336 | | | 29,914,069 | | | 33,419,267 | |
(1)Equity-classified warrants.
During the sixnine months ended JuneSeptember 30, 2022, common stock was issued as a result of the exercise of warrants as shown below (dollars in thousands):
| | | | | | | | | | | |
| Common Stock Issued | | Proceeds |
Series 2020-A Warrants | 4,677 | | | $ | 3 | |
18.20.Segments
Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, management has determined that the Company has organized its operations and activities into 3three reportable segments: (i) Gevo segment; (ii) Agri-Energy segment; (iii) Renewable Natural Gas segment. Transactions between segments are eliminated in consolidation.
Gevo segment. The Gevo segment is responsible for all research and development activities related to the future production of SAF, commercial opportunities for other renewable hydrocarbon products, such as hydrocarbons for gasoline blendstocks and diesel fuel; ingredients for the chemical industry, such as ethylene and butenes; plastics and materials; and other chemicals. The Gevo segment also develops, maintains and protects its intellectual property portfolio, provides corporate oversight services, and responsible for development and construction of our Net-Zero projects.
Agri-Energy segment. The Agri-Energy segment is currently responsible for the operation of the Company’s Luverne Facility, development and optimization of the production of isobutanol, ethanol and related products.
Renewable Natural Gas segment. The Renewable Natural Gas segment produces low-carbonproduces-pipeline quality methane gas captured from manure for the production of RNG.dairy cow manure.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
| | | Three Months Ended June 30, 2022 | | Three Months Ended September 30, 2022 |
| | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Revenues | Revenues | $ | 18 | | | $ | 71 | | | $ | — | | | $ | 89 | | Revenues | $ | — | | | $ | — | | | $ | 309 | | | $ | 309 | |
Loss from Operations | Loss from Operations | $ | (13,025) | | | $ | (3,113) | | | $ | 23 | | | $ | (16,115) | | Loss from Operations | $ | (15,480) | | | $ | (27,948) | | | $ | (241) | | | $ | (43,669) | |
Acquisitions of patents, plant, property and equipment | Acquisitions of patents, plant, property and equipment | $ | 11,870 | | | $ | 328 | | | $ | 8,275 | | | $ | 20,473 | | Acquisitions of patents, plant, property and equipment | $ | 17,458 | | | $ | 4,351 | | | $ | 6,305 | | | $ | 28,114 | |
| | | Three Months Ended June 30, 2021 | | Three Months Ended September 30, 2021 |
| | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Revenues | Revenues | $ | 346 | | | $ | — | | | $ | — | | | $ | 346 | | Revenues | $ | 104 | | | $ | 16 | | | $ | — | | | $ | 120 | |
Loss from Operations | Loss from Operations | $ | (11,915) | | | $ | (7,183) | | | $ | — | | | $ | (19,098) | | Loss from Operations | $ | (10,968) | | | $ | (3,548) | | | $ | (218) | | | $ | (14,734) | |
Acquisitions of patents, plant, property and equipment | Acquisitions of patents, plant, property and equipment | $ | 588 | | | $ | 1,898 | | | $ | 11,932 | | | $ | 14,418 | | Acquisitions of patents, plant, property and equipment | $ | 15,511 | | | $ | 3,154 | | | $ | 14,450 | | | $ | 33,115 | |
| | | Six Months Ended June 30, 2022 | | Nine Months Ended September 30, 2022 |
| | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Revenues | Revenues | $ | 81 | | | $ | 240 | | | $ | — | | | $ | 321 | | Revenues | $ | 81 | | | $ | 240 | | | $ | 309 | | | $ | 630 | |
Loss from Operations | Loss from Operations | $ | (25,149) | | | $ | (6,921) | | | $ | — | | | $ | (32,070) | | Loss from Operations | $ | (40,629) | | | $ | (34,869) | | | $ | (241) | | | $ | (75,739) | |
Acquisitions of patents, plant, property and equipment | Acquisitions of patents, plant, property and equipment | $ | 16,308 | | | $ | 4,275 | | | $ | 18,668 | | | $ | 39,251 | | Acquisitions of patents, plant, property and equipment | $ | 33,766 | | | $ | 8,626 | | | $ | 24,973 | | | $ | 67,365 | |
| | | Six Months Ended June 30, 2021 | | Nine Months Ended September 30, 2021 |
| | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Revenues | Revenues | $ | 359 | | | $ | — | | | $ | — | | | $ | 359 | | Revenues | $ | 465 | | | $ | 14 | | | $ | — | | | $ | 479 | |
Loss from Operations | Loss from Operations | $ | (19,678) | | | $ | (9,310) | | | $ | (68) | | | $ | (29,056) | | Loss from Operations | $ | (30,697) | | | $ | (12,807) | | | $ | (286) | | | $ | (43,790) | |
Acquisitions of patents, plant, property and equipment | Acquisitions of patents, plant, property and equipment | $ | 841 | | | $ | 1,908 | | | $ | 17,101 | | | $ | 19,850 | | Acquisitions of patents, plant, property and equipment | $ | 16,352 | | | $ | 5,062 | | | $ | 31,551 | | | $ | 52,965 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2022 |
| Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Total assets | $ | 601,313 | | | $ | 64,940 | | | $ | 108,358 | | | $ | 774,611 | |
| | | | | | | |
| December 31, 2021 |
| Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Total assets | $ | 484,528 | | | $ | 64,008 | | | $ | 117,940 | | | $ | 666,476 | |
19.Subsequent Events
On July 21, 2022, the Company entered into a Water Purchase Agreement with Kingbrook Rural Water System (“Kingbrook”) to construct and operate a rural water distribution system for the Net-Zero 1 Project. Pursuant to the
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
Agreement, the Company will pay Kingbrook a one-time system development charge of $6.7 million, with 50% of such payment due in August 2022 and the remaining 50% due over the 24 months following execution.
On July 25, 2022, the Company closed on the purchase of approximately 245 acres near Lake Preston, South Dakota for the Net-Zero 1 Project. The total net purchase price for the land was approximately $6.0 million. | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Total assets | $ | 579,984 | | | $ | 38,473 | | | $ | 110,954 | | | $ | 729,411 | |
| | | | | | | |
| December 31, 2021 |
| Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Total assets | $ | 484,528 | | | $ | 64,008 | | | $ | 117,940 | | | $ | 666,476 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used anywhere in this Report, the words “expect,” “believe,” “anticipate,” “estimate,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements. These statements relate to future events or our future financial or operational performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. These forward-looking statements include, among other things, statements about: the impact of the novel coronavirus ("COVID-19") pandemic on our business, our financial condition, our results of operation and liquidity, our ability to finance and construct our Net-Zero 1 Projectproject (as defined below), our ability to produce our products at our demonstration facility in Luverne, Minnesota (the “Luverne Facility”) or elsewhere, our ability to meet production, financial and operational guidance, our strategy to pursue low-carbon or "net-zero" carbon renewable fuels for sale into California and elsewhere, our ability to replace our fossil-based energy sources with renewable energy sources at our Net-Zero 1 Project, our Luverne Facilityproject and elsewhere, our ability and plans to construct greenfield commercial hydrocarbon facilities to produce sustainable aviation fuel ("SAF") and renewable premium gasoline/isooctane,other products, our ability to raise additional funds to finance our business, our ability to perform under our existing off-take agreements and other supply agreements we may enter into in the future, our ability to successfully construct and operate our renewable natural gas ("RNG") project in Iowa, our ability to produce renewable hydrocarbon products at a commercial level and at a profit, the availability of, and market prices for, government economic incentives to the renewable energy market, achievement of advances in our technology platform, the availability of suitable and cost-competitive feedstocks, our ability to gain market acceptance for our products, the expected cost-competitiveness and relative performance attributes of our products, our strategy to pursue alcohol-to-SAF, additional competition and changes in economic conditions and the future price and volatility of petroleum and products derived from petroleum. Important factors could cause actual results to differ materially from those indicated or implied by forward-looking statements such as those contained in documents we have filed with the U.S. Securities and Exchange Commission (the “SEC”), including this Report in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Annual Report”), including Item 1A. "Risk Factors" of our 2021 Annual Report and subsequent reports on Form 10-Q. All forward-looking statements in this Report are qualified entirely by the cautionary statements included in this Report and such other filings. These risks and uncertainties or other important factors could cause actual results to differ materially from results expressed or implied by forward-looking statements contained in this Report. These forward-looking statements speak only as of the date of this Report. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and readers should not rely on the forward-looking statements as representing the Company’s views as of any date subsequent to the date of the filing of this Report.
Unless the context requires otherwise, in this Report the terms “we,” “us,” “our” and the “Company” refer to Gevo, Inc. and its subsidiaries.
The following discussion should be read in conjunction with our unaudited consolidated financial statements and the related notes and other financial information appearing elsewhere in this Report. Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including, without limitation, the disclosures in our 2021 Annual Report.
Company Overview
Gevo, Inc. (Nasdaq: GEVO), a Delaware corporation founded in 2005, is a growth-oriented company with the mission of solving the problem of greenhouse gas emissions for those sectors of the transportation industry that are not amenable to electrification or hydrogen. We believe that the market size for hydrocarbon fuels will continue to remain significant in the long-term even with the rapid adoption of electric vehicles and hydrogen technologies. We also believe that we can achieve at least one billion gallons per year of hydrocarbon production and sales by 2030.
We are focused on transforming renewable energy into energy-dense liquid hydrocarbons that can be used as renewable fuels, such as SAF, with the potential to achieve a “net-zero” greenhouse gas ("GHG") footprint. We believe
that this addresses the global need of reducing GHG emissions with "drop in" sustainable alternatives to petroleum fuels. We use Argonne National Laboratory’s GREET (Greenhouse gases, Regulated Emissions, and Energy use in Transportation) model (the "GREET Model") to measure, predict and verify GHG emissions across the life cycle of our products. The "net-zero" concept means we expect to produce fuels that could have a carbon neutral or a net-zero GHG footprint across the whole of the life cycle of the fuel, from the capture of renewable carbon, through production, and the subsequent burning of the fuel in, for example, a jet engine.
Our primary market focus, given current demand and growing customer interest, is SAF. We believe we also have commercial opportunities for other renewable hydrocarbon products, such as RNG,RNG; hydrocarbons for gasoline blendstocks and diesel fuel; ingredients for the chemical industry, such as ethylene and butenes; plastics and materials; and other chemicals. The global fuel consumption by commercial airlines was an all-time high of 95 billion gallons in 2019. However, due to the COVID-19 pandemic, fuel consumption dropped to 52 billion gallons in 2020 and then reached 57 billion gallons in 2021.2021, but the 2022 fuel consumption trend is nearly back to pre-COVID levels.
We believe that there is a growing and significant market demand for SAF production generally based on a number of factors, including:
| | | | | | |
| ● | The International Air Transport Association ("IATA") 77th Annual General Meeting approved a resolution for the global air transport industry to achieve net-zero carbon emissions by 2050. IATA has 288 airline members, including Alaska Airlines, American Airlines, Delta Air Lines, FedEx Express, United Airlines and UPS Airlines. |
| ● | Starting onIn March 1, 2020, Delta Air Lines committed to spending $1 billion over the next 10 years on its objective aroundto mitigating emissions from its global business going forward. Delta will invest in driving innovation, advancing clean air travel technologies, accelerating the reduction of carbon emissions and waste, and establishing new projects to mitigate the balance of emissions. |
| ● | The oneworld® alliance committed to a target of 10% SAF use across the alliance by 2030 and plans to reach net zero emissions by 2050. |
We believe that we possess the ability to convert various carbohydrate feedstocks through a fermentation process into alcohols and then transform the alcohols into renewable fuels and materials, through a combination of our own technology, know-how, engineering, and licensing of technology and engineering from Axens North America, Inc. ("Axens"). While we expect our major capital deployments to focus on the production of SAF, we recognize there are opportunities to operate in several different renewable fuels and materials markets and we will pursue those opportunities when appropriate based on customer interest, access to capital, and expected investment returns.
Our SAF production processes useprocess uses carbohydrates as a feedstock. Carbohydrates are plant matter that result from photosynthesis. Photosynthesis is the natural process by which carbon dioxide is captured from the air by plants. The carbon in carbohydrates is therefore renewable because it is already in the atmosphere. The carbohydrates are fermented to produce alcohol intermediate products (e.g.(e.g., ethanol or isobutanol). The alcohol-based intermediates are then chemically processed to make renewable hydrocarbons. To achieve net-zero carbon intensity ("CI") across the whole life cycle of the products, we believe:
| | | | | | |
| ● | carbohydrates with a low CI score must be used in production; |
| ● | the energy (electricity and heat source) used in production must be de-fossilized; and |
| ● | the products cannot contain fossil-based carbon. |
We believe sustainably grown industrial field corn (i.e.(i.e., corn that is grown with precision agricultural techniques and low-till or no till cultivation to conserve nutrients, prevent water runoff, and erosion) is the best feedstock to commercialize for SAF initially because:
| | | | | | |
| ● | it produces a significant amount of protein and vegetable oil for nutritional products on a per acre basis while also producing an abundance of low CI carbohydrates that can be captured and used as a feedstock for fuels and chemicals; |
| | | | | | |
| ● | the protein and oil that are produced can be easily separated and sold as co-products into the food chain markets. The protein and oil revenue serves to offset the cost of the corn feedstock; |
| | | | | | |
| ● | we believe the carbon footprint of growing corn can be negative, according to calculations completed with the GREET Model, when a full suite of climate-smart agricultural practices is employed on appropriate acres of cropland; |
| ● | we believe the corn can achieve lower CI scores when grown with climate-smart agricultural techniques than waste raw materials or wood; and |
| ● | we believe that residual carbohydrates from corn are the lowest cost carbohydrates available as a renewable raw material, and the production is proven and scalable. |
We believe utilizing sustainable agriculture practices to help solve GHG problems is a breakthrough that addresses the problem of GHGs without compromising sustainability or food supply. We also believe that it will be possible to create an incentive structure that rewards farmers to lower the CI score of their agricultural products and create a cycle of continuous improvement to their overall sustainability footprint.
Net-Zero Projects
In early 2021, we announced the concept of “Net-Zero Projects” as a series of planned facilities to produce energy dense liquid hydrocarbons using renewable energy and our proprietary technology. The concept of a Net-Zero Project is to convert renewable energy (e.g.(e.g., photosynthetic, wind, renewable natural gas,RNG, and/or biogas) from a variety of sources into energy dense liquid hydrocarbons that, when burned in traditional engines, have the potential to achieve net-zero GHG emissions across the whole lifecycle of the liquid fuel: from the way carbon is captured from the atmosphere, processed to make liquid fuel products, and burnt as a fuel for cars, planes, trucks and ships.
We announced ourOur initial Net-Zero Project, Net-Zero 1 (“NZ1"), is planned to be constructed atlocated in Lake Preston, South Dakota. NZ1Dakota, and is expectedbeing currently designed to produce approximately 5562 million gallons per year ("MGPY") of SAF or 62 MGPY of total hydrocarbon volumes, including 55 MGPY of SAF, which would satisfyfulfill part of theour more than 350375 MGPY of financeable SAF and hydrocarbon supply agreements that are currently in place.agreements. The liquid hydrocarbons when burned are expected to have a “net-zero” GHG footprint. Along with the hydrocarbons, we expectNZ1 is expected to produce approximately 420475 million pounds per year of high-value protein products for use in the food chain and more than 30 million pounds per year of corn oil. Our products will be produced in three stages;steps; the first stagestep is the milling of the corn and the production of protein, oil, and carbohydrates, the second stage involvesstep produces alcohols production byusing fermentation and the third stagestep is the conversion of suchthe alcohols into hydrocarbons. We have an exclusive license in the United States from Axens to the technology and plant designs to convert alcohols to hydrocarbon fuels. Axens will also provide certain process guarantees for theour production process. Additionally, Axens has extensive commercial experience in the technology, design, and deployment of the unit operations needed to convert alcohols to hydrocarbon fuels, based on their experience in the petrochemical industry. The fermentation side of the facility is being engineered with companies that haveFluid Quip Technologies who has extensive experience in fermentation and agriculture-based facilities. We believe that by using known commercial technologies, the plant design is substantially de-risked.
The transition to an ethanol-to-SAF design from Gevo’sour original isobutanol-to-SAF and isooctane design for NZ1 has at NZ1 resulted in an expected increase ofimproved design output capacity, which should result in an increased cash flow. Gevo’s ethanol-to-SAF engineering design work to date has resulted in a significant uplift in volumes and cash flows per unit of capital invested.
TheIn July 2022, the purchase of the land for NZ1 projectin Lake Preston, South Dakota was completed. This was followed by a groundbreaking ceremony in Lake Preston and we believe NZ1 is on schedule with initial volumes of SAF expected to be delivered in 2025. KeyWater and wind energy development agreements were executed in the third quarter of 2022, and other key milestones are on track for completion in accordance with our comprehensive project plan. Based on the ongoing engineering work, the installed cost for NZ1 development milestones are:
Through year-end 2022:
| | | | | | |
| ● | Complete the purchase of the land for NZ1 in Lake Preston, South Dakota. (this purchase was completed in July 2022) |
| ● | Execute commercial development, build, own and operate agreements for water, wind energy and green hydrogen |
| ● | Select engineering, procurement, and construction ("EPC") contractor |
| ● | Select fabricator for hydrocarbon plant modules |
| ● | Substantial completion of front-end engineering design ("FEED") |
| ● | Break ground and begin site preparation at Lake Preston |
| ● | Order long lead equipment |
Through the first-half 2023:
| | | | | | |
| ● | Close the construction financing, including non-recourse debt |
is currently forecasted to be approximately $850 million, excluding certain contingencies and financing costs.
Gevo is also in the process of identifying and performing early site development work for additional SAF production locations. These sites include several greenfield locations that are particularly advantageous in terms of potential economics, opportunities to decarbonize, and time to market. In addition, we are pursuing prospects with several existing ethanol plant sites. Existing ethanol plants need to be decarbonized with renewable energy or de-fossilized energy and/or carbon sequestration. Gevo has developed a preferred list of partners and sites with decarbonization in mind and is engaged
in preliminary feasibility and development discussions with several of them. We plan to give priority to existing industrial plant sites that have attractive potential economics and high predictability of timeline for decarbonization.
Luverne Facility
The Luverne Facility continues to provide valuable knowledge and experience for the future strategic growth of the Company and its billion-gallon initiative. As a development site, operations will continue to be tailored to support a focus on advancing our technology, testing, and optimizing alternative feedstocks, yeast strains, and unit operations as well as partnership development for integrated GHG reductions. It is well equipped and positioned for optimization of the decarbonization and business cycle from feedstock to energy solutions. The site provides a unique opportunity to showcase our decarbonization and business systems and raise awareness for future partnerships, investors, and local communities. As a development site, the Luverne plant may operate intermittently between projects and activities.
Renewable Natural Gas Projects
In 2019, we began developing RNG projects. Manure can be digested anaerobically to produce biogas, which is then upgraded to pipeline qualitypipeline-quality RNG. RNG has environmental credit value when sold in markets such as California when injected and shipped through a natural gas pipeline.California. There is also value to Gevo’s hydrocarbon production process by giving us another option to achieve carbon negative GHG emissions on our renewable hydrocarbon products. The hydrocarbon products resulting from such a decarbonization process have lower CI scores and increased market value, in addition to having a more positive impact on the environment.
Gevo’s RNG project in Northwest Iowa (the “RNG Project”) has been producing biogas and is now upgrading and injecting RNG into a natural gas pipeline. The RNG Project generatesproduces renewable natural gas captured from dairy cow manure. The manure for the RNG Project is supplied by three dairy farms located in Northwest Iowa totaling over 20,000 milking cows. When at full operational capacity, the RNG Project is expected to generate approximately 355,000 MMBtu of RNG per year. Gevo's revenue from the RNG Project is expected to come from sales of RNG and from the environmental attributes associated with theits RNG sales, including the attributes available from California's Low Carbon Fuel Standard ("LCFS") program and the U.S. Environmental Protection Agency'sAgency ("EPA") Renewable Fuels Standard program ("RFS") to receive renewable identification numbers ("RINs"). Gevo has been granted registration approval by the EPA, allowing us to participate in its RFS program and expects to be able to getreceive approval for Renewable Identification Numbers (“RINs”) through RFS and carbon credits from LCFS later this year or early next year.
In the third quarter of 2022, the RNG Project ramped up production of biogas, raw biogas upgrading and injection of RNG into the interconnected natural gas pipeline. Our biogas commodity sales were $0.3 million in the three months ended September 30, 2022, with some of the associated revenue from its environmental attributes expected later this year. The majority of the revenue from environmental attributes, however, is expected to occur in 2023 due to the timing of the approval and documentation process for the related LCFS credits.
We have been makingmade incremental improvements and incremental expansions to theoptimizations at our RNG Project by investing in capital projects that may significantlyare expected to improve its CI score and revenue, which in turn strengthen the overall economics of the project.
expand capacity. Gevo’s current estimated share of the capital cost for thosethese improvements is approximately $1.9 million, which are 40% complete through the second quarter of 2022.million. The improvement and expansionoptimization work is on budget and expected to bewas completed early in the third quarter of 2022. In addition, in June 2022, we amended our lease with athe expanding dairy to provide the RNG Project with additional manure, which mayis expected to increase our RNG production in the future.production.
We have strong relationships throughout the industry supply chain from technology and equipment providers to feedstock owners and RNG off-takers. We believe the trust and reputation we have attained, in combination with our understanding of the various and complex environmental attributes, gives us a competitive advantage. We leverage our relationships to identify and execute new project opportunities. Typically, new development opportunities come from our existing relationships with dairy owners who value our reputation in the industry.
We exercise financial discipline in pursuing projects by targeting attractive risk-adjusted project returns, whether selling RNG into the markets or using it to lower CI scores at our Net-Zero Projects. We will monitor biogas supply availability across our portfolio and seek to maximize our production at existing projects by expanding operations when economically feasible.
Verity and Carbon Tracking
Capturing and accurately counting carbon data across the whole of the business system is a critical part of Gevo’s business model, and the CI scores across the whole of the carbon life cycle, from feedstock through the burning of fuels. Through the use of the GREET Model and a field level tracking approach, our goal is to obtain carbon credits for the improved agricultural practices related to climate-smart agriculture such as precision agriculture and tillage practices (i.e., low till and no-till cultivation). We believe there is an opportunity to document, verify, and monetize that carbon value which is not otherwise counted and reward value chain partners, including farmers, for improving sustainability. Gevo’s current economic projections do not take into account this upside in value.
Verity Tracking ("Verity") is a joint venture between Gevo and Blocksize Capital GmbH ("Blocksize") to develop and commercialize carbon value and other sustainable attributes. Verity is developing the tools, techniques, software, data access to track carbon scores and other sustainability attributes using “blockchain” technology. The benefit is having audited, transparent, immutable sustainability data attached to biofuels and is expected to be valuable to our customers, colleague companies, and partners. Gevo and Blocksize have identified a series of internal milestones that Verity will need to achieve over the next few quarters to expand the joint venture into a stand-alone business unit, either as part of Gevo or as a separate entity.
Verity has continued to develop third-party partnerships that will contribute to its development objectives over the coming quarters. Verity and Gevo partnered with Farmers Edge Inc. ("Farmers Edge"), a company dedicated to helping farmers track data and improve agricultural decision making. As of March 31 2022, Farmers Edge reported over 17.3 million subscribed acres having implemented their solutions.
Gevo has begun to develop the agricultural Climate-Smart Data for some of the key farms that would supply its NZ1 plant. Gevo intends to work with Verity to accurately account for and determine value for the carbon reductions captured in feedstocks, both during fuel production and in final products, to help our customers and value chain partners achieve their sustainability goals.
Market Development
Gevo now has more than 350 MGPY of financeable SAF and hydrocarbon fuel supply agreements, which are expected to support project debt financing. This level of demand would require three additional plants equal in size to the expected capacity of NZ1 to be built over the next four years to satisfy those agreements. Based on current market projections and operating assumptions, these agreements collectively represent approximately $2.1 billion in expected
revenue per year, inclusive of the environmental benefits value. A list of the recently announced supply agreements is noted below:Luverne Facility
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Recently Announced Supply Agreements |
Date Signed | | | | Customer | | Product | | Volume (MGPY) | | Term (Years) |
June 2022 | | | | Finnair | | SAF | | 7.0 | | 5 |
June 2022 | | | | Japan Airlines | | SAF | | 5.3 | | 5 |
July 2022 | | | | Aer Lingus | | SAF | | 6.3 | | 5 |
July 2022 | | | | Alaska Airlines | | SAF | | 37.0 | | 5 |
July 2022 | | | | American Airlines | | SAF | | 100.0 | | 5 |
The activities at our Luverne Facility have been transitioned to care and maintenance, as we have shifted focus to our Net Zero Projects. The workforce adjustment resulted in us retaining key personnel and redeploying some resources to our NZ1 and RNG projects to provide valuable knowledge and experience for the future strategic growth of the Company. As a potential development site, future operations, if any, will be tailored to support a focus on advancing our technology, testing, and optimizing alternative feedstocks, yeast strains, and unit operations as well as partnership development for integrated GHG reductions. The Luverne Facility is well equipped and positioned as a development site. The Luverne Facility also provides a unique opportunity to showcase our decarbonization and business systems and raise awareness for future partnerships, investors, and local communities, even though operations at the site have been minimized.
In the third quarter of 2022, we recorded an impairment of long-lived assets, to reduce the carrying value of certain property, plant, and equipment, and a leased right of use ("ROU") asset, at the Luverne Facility to its fair value. The impairments recorded to date relate to the determination to suspend production at the Luverne facility and shift the plant into an idled, care and maintenance status during the three months ended September 30, 2022. See Note 3 to the Consolidated Financial Statements for additional information.
RecentOther Developments
Equity Offering.U.S. Department of Agriculture. On June 8,September 19, 2022, the Company completed a registered direct offering pursuantU.S. Department of Agriculture ("USDA") tentatively selected Gevo’s Climate-Smart Farm to a securities purchase agreement with certain institutional investors and received net proceeds of $139.0 million (after placement agent fees, advisory fees and estimated offering expenses) to fund future operations and capital projects. As part of the offering, the Company issued 33,333,336 Series 2022-A warrantsFlight proposal for funding with an exercise priceaward ceiling of $4.37 per share and a five-year term. If all 33,333,336 Series 2022-A warrants wereup to be exercised in cash at the exercise price$30 million, subject to negotiation of 4.37 per share, the Company would receive additional net proceeds of approximately $145.7 million.
The recent offering has further strengthened the Company’s balance sheet, which is expected to facilitate the financing of the Company’s NZ1 project and to provide financial resources for the Company’s numerous growth opportunities. Gevo isdefinitive award agreements in the processcoming months. The project aims to create critical structural climate-smart market incentives for low carbon-intensity corn as well as to accelerate the production of determining additional plant sitessustainable aviation fuel to meetreduce the demand under its existing SAF and hydrocarbon supply agreements, and some of the proceeds are expected to be used to advance those efforts.
Chevron. The letter of intent between Gevo and Chevron signed in September of 2021 and scheduled to expiresector’s dependency on March 31, 2022, has been extended until August 31, 2022. Chevron and the Company mutually agreed upon the extension, which allows discussions and negotiations to continue.fossil-based fuels.
COVID-19
The COVID-19 pandemic continues to impactsignificantly impacted global commercial activity, including the global transportation industry and its supply chain, and has contributed to significant volatility in financial markets. It is possible that the impacts of the COVID-19 pandemic on general economic activity could negatively impact our revenue and operating results for 2022 and beyond. In light of the current and potential future disruption to our business operations and those of its customers, suppliers and other third parties with whom we do business, we considered the impact of the COVID-19 pandemic on our business. The impactongoing impacts of the COVID-19 pandemic on the global transportation industry may result in less demand for our transportation fuel products in the future, which could have a material adverse effect on our business, financial condition, and our prospects for the foreseeable future.
There is also a risk that COVID-19 could have a material adverse impact on the development of our NZ1, project, customer demand and cash flow, depending on the extent of our future production activities.
Results of Operations
Comparison of the Three Months Ended JuneSeptember 30, 2022 and 2021 (in thousands):
| | | Three months Ended June 30, | | | Three Months Ended September 30, | |
| | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change |
Revenue and cost of goods sold | Revenue and cost of goods sold |
| | | | | Revenue and cost of goods sold |
| | | | |
Ethanol sales and related products, net | Ethanol sales and related products, net | $ | 71 | | | $ | — | | | $ | 71 | | Ethanol sales and related products, net | $ | — | | | $ | 16 | | | $ | (16) | |
Hydrocarbon revenue | Hydrocarbon revenue | 18 | | | 346 | | | (328) | | Hydrocarbon revenue | — | | | 104 | | | (104) | |
Renewable natural gas commodity | | Renewable natural gas commodity | 309 | | | — | | | 309 | |
Total revenues | Total revenues | 89 | | | 346 | | | (257) | | Total revenues | 309 | | | 120 | | | 189 | |
Cost of production | Cost of production | 2,640 | | | 1,617 | | | 1,023 | | Cost of production | 318 | | | 2,378 | | | (2,060) | |
Idle facility costs | | Idle facility costs | 2,330 | | | — | | | 2,330 | |
Depreciation and amortization | Depreciation and amortization | 1,088 | | | 1,177 | | | (89) | | Depreciation and amortization | 1,250 | | | 1,104 | | | 146 | |
Total cost of goods sold | Total cost of goods sold | 3,728 | | | 2,794 | | | 934 | | Total cost of goods sold | 3,898 | | | 3,482 | | | 416 | |
Gross loss | Gross loss | (3,639) | | | (2,448) | | | (1,191) | | Gross loss | (3,589) | | | (3,362) | | | (227) | |
Operating expenses | Operating expenses | | Operating expenses | |
Research and development expense | Research and development expense | 1,966 | | | 1,332 | | | 634 | | Research and development expense | 1,562 | | | 1,495 | | | 67 | |
Selling, general and administrative expense | Selling, general and administrative expense | 9,209 | | | 4,846 | | | 4,363 | | Selling, general and administrative expense | 11,144 | | | 9,287 | | | 1,857 | |
Preliminary stage project costs | Preliminary stage project costs | 314 | | | 5,472 | | | (5,158) | | Preliminary stage project costs | 915 | | | 313 | | | 602 | |
Other operations | Other operations | 601 | | | — | | | 601 | | Other operations | 1,303 | | | — | | | 1,303 | |
Impairment loss | | Impairment loss | 24,749 | | | — | | | 24,749 | |
Loss (gain) on disposal of assets | | Loss (gain) on disposal of assets | — | | | 183 | | | (183) | |
Depreciation and amortization | Depreciation and amortization | 386 | | | 46 | | | 340 | | Depreciation and amortization | 407 | | | 94 | | | 313 | |
Total operating expenses | Total operating expenses | 12,476 | | | 16,650 | | | $ | (4,174) | | Total operating expenses | 40,080 | | | 11,372 | | | $ | 28,708 | |
Loss from operations | Loss from operations | (16,115) | | | (19,098) | | | 2,983 | | Loss from operations | (43,669) | | | (14,734) | | | (28,935) | |
Other income (expense) | Other income (expense) | | | | | | Other income (expense) | | | | | |
Gain (loss) from change in fair value of derivative warrant liability | — | | | 43 | | | (43) | | |
Gain from change in fair value of derivative warrant liability | | Gain from change in fair value of derivative warrant liability | — | | | 6 | | | (6) | |
Interest expense | Interest expense | (2) | | | (6) | | | 4 | | Interest expense | (712) | | | (67) | | | (645) | |
Interest and dividend income | Interest and dividend income | 78 | | | — | | | 78 | | Interest and dividend income | 874 | | | 233 | | | 641 | |
Other income (expense), net | Other income (expense), net | 2,878 | | | 167 | | | 2,711 | | Other income (expense), net | (279) | | | 182 | | | (461) | |
Total other income (expense), net | Total other income (expense), net | 2,954 | | | 845 | | | 2,109 | | Total other income (expense), net | (117) | | | 354 | | | (471) | |
Net loss | Net loss | $ | (13,161) | | | $ | (18,253) | | | $ | 5,092 | | Net loss | $ | (43,786) | | | $ | (14,380) | | | $ | (29,406) | |
Revenue. During the three months ended JuneSeptember 30, 2022, we sold 9 thousand gallons41,791 MMBtu of SAF, isooctane, and isoocteneRNG from our Luverne Facility.RNG Project. Revenue decreased $0.3increased $0.2 million during the three months ended JuneSeptember 30, 2022, compared to the three months ended JuneSeptember 30, 2021, due towhich consisted of ethanol, isobutanol and hydrocarbon originating from our Luverne Facility. In the third quarter of 2022, our RNG production began ramping up resulting in biogas commodity sales of $0.3 million, while the activities at our Luverne Facility being operated for the Company's development projects on awere minimized to care and maintenance, as needed basis.we have shifted focus to our Net Zero projects.
Cost of goods sold.production. Cost of goods increased $1.0production decreased $2.1 million during the three months ended JuneSeptember 30, 2022, compared to the three months ended JuneSeptember 30, 2021, primarily due to an increase in direct labor and utility expenses asmoving the Luverne Facility was not fully staffedto care and maintenance status.
Idle facility costs. We incurred $2.3 million of idle facility costs during the secondthree months ended September 30, 2022, due to putting our Luverne Facility into care and maintenance status in the third quarter of 2021 due2022. Included in idle facility costs are charges related to removing flammable and other hazardous items from the COVID-19 pandemic. The majority of oursite, writing off certain patents related
to production at the Luverne Facility and costs are related to the workforce adjustments. We plan to utilize the Luverne Facility to advance our technology and operational knowledge to help us in achieving operational success as we scale up the production and delivery of SAF isooctane,for our customers through our Net-Zero Projects.
Depreciation and isooctene as we continue to developamortization. Depreciation and tailor our Luverne Facility demonstration operations to support our focus on advancing technology, testing and optimizing alternative feedstocks, yeast strains, and unit operations as well as partnership development for integrated GHG reductions. Costamortization in cost of goods sold also includes a $2.1increased $0.1 million net realizable gain adjustment made to our finished goods and work in process inventory. There were no inventory net realizable value adjustments recorded during the three months ended JuneSeptember 30, 2022, compared to the three months ended September 30, 2021, as the Luverne Facility was temporarily shut downmainly due to placing the COVID-19 pandemic.RNG Project assets into service in third quarter of 2022.
Research and development expense. Research and development expense increased $0.6 million duringwas relatively flat for the three months ended JuneSeptember 30, 2022, compared to the three months ended JuneSeptember 30, 2021,2021. These costs are primarily due to an increase of laboratoryemployee and consultant related expenses, along with some patent and additional stock-based compensation expense.lab supply costs.
Selling, general and administrative expense. Selling, general and administrative expense increased $4.4$1.9 million during the three months ended JuneSeptember 30, 2022, compared to the three months ended JuneSeptember 30, 2021, primarily due to increases in personnel costs related to strategic new hiring and professional fees, as well as non-cash stock-based compensation and professional fees.which reflects higher amortization expense for the stock awards issued in the prior period with higher market values, see Note 15 to the Consolidated Financial Statements for additional information.
Preliminary stage project costs. Preliminary stage project costs are related to our Verity and future Net-Zero Projects and Verity project and consist primarily of employee expenses, preliminary engineering and technical consulting costs. Preliminary stage project costs decreased $5.2increased $0.6 million during the three months ended JuneSeptember 30, 2022, compared to the three months ended JuneSeptember 30, 2021, primarily because we began capitalizingdue to increases in personnel costs, consulting, and professional fees for our RNGNet-Zero Projects and NZ1 project costs in 2021.Verity project.
Other operations. Other operations expense increased $0.6$1.3 million during the three months ended JuneSeptember 30, 2022, compared to the three months ended JuneSeptember 30, 2021, primarily relateddue to unallocatedincreases in engineering personnel and consulting services.other non-capitalizable costs for NZ1.
Impairment loss. The Company recorded a $24.7 million impairment loss on long-lived assets, which reduced the carrying value of certain property, plant, and equipment, and a leased ROU asset, at the Agri-Energy segment to its fair value. The impairments recorded to date relate to the determination to suspend production at the Luverne Facility and shift the plant into an idled, care and maintenance status during the third quarter of 2022. See Note 3 to the Consolidated Financial Statements for additional information.
Depreciation and amortization expense. Depreciation and amortization expense increased $0.3 million during the three months ended JuneSeptember 30, 2022, compared to the three months ended JuneSeptember 30, 2021, primarily due to the amortization of our patents.
Gain (loss)Loss from change in fair value derivative warrant liability.operations We incurred no gain (loss). Excluding the one-time charge of $24.7 million for impairment, our loss from the change in the fair value of the derivative warrant liability inoperations increased by $4.2 million during the three months ended JuneSeptember 30, 2022. The last of2022, compared to the liability warrants expired in February 2022.three months ended September 30, 2021, primarily due to the increased activities for our Net-Zero Projects and Verity project, as well as non-capitalizable cost for NZ1.
Interest expense. There were no significant changes in interestInterest expense increased $0.6 million during the three months ended JuneSeptember 30, 2022, compared to the three months ended JuneSeptember 30, 2021.2021, primarily due to the interest on the RNG bonds and the imputed interest on our RNG-related dairy leases, both of which were capitalized into construction in process during the construction phase of our RNG Project in the previous periods.
Interest and dividend income. Interest and dividend income increased $0.1$0.6 million during the three months ended JuneSeptember 30, 2022, compared to the three months ended JuneSeptember 30, 2021, primarily due to the interest earned on our investments partially offset by the amortization of the bond premiums.investments.
Other income (expense). Other income (expense) increased $2.7 million duringfor the three months ended JuneSeptember 30, 2022, compared to the three months ended June 30, 2021,consists primarily due to our receipt of $2.9 million from the US Departmentlosses on disposal of Agriculture's Biofuel Producer Program to support biofuel producers who faced unexpected losses due to the COVID-19 pandemic. The Biofuel Producer Program grants are not tax-exempt.fixed assets.
Comparison of the SixNine Months Ended JuneSeptember 30, 2022 and 2021 (in thousands):
| | | Six Months Ended June 30, | | | Nine Months Ended September 30, | |
(in thousands) | (in thousands) | 2022 | | 2021 | | Change | (in thousands) | 2022 | | 2021 | | Change |
Revenue and cost of goods sold | Revenue and cost of goods sold | | | | | | Revenue and cost of goods sold | | | | | |
Ethanol sales and related products, net | Ethanol sales and related products, net | $ | 240 | | | $ | — | | | $ | 240 | | Ethanol sales and related products, net | $ | 240 | | | $ | 16 | | | $ | 224 | |
Hydrocarbon revenue | Hydrocarbon revenue | 81 | | | 359 | | | (278) | | Hydrocarbon revenue | 81 | | | 463 | | | (382) | |
Renewable natural gas commodity | | Renewable natural gas commodity | 309 | | | — | | | 309 | |
Total revenues | Total revenues | 321 | | | 359 | | | (38) | | Total revenues | 630 | | | 479 | | | 151 | |
Cost of production | Cost of production | 5,730 | | | 2,518 | | | 3,212 | | Cost of production | 5,242 | | | 4,896 | | | 346 | |
Idle facility costs | | Idle facility costs | 2,330 | | | — | | | 2,330 | |
Depreciation and amortization | Depreciation and amortization | 2,179 | | | 2,270 | | | (91) | | Depreciation and amortization | 3,429 | | | 3,374 | | | 55 | |
Total cost of goods sold | Total cost of goods sold | 7,909 | | | 4,788 | | | 3,121 | | Total cost of goods sold | 11,001 | | | 8,270 | | | 2,731 | |
Gross loss | Gross loss | (7,588) | | | (4,429) | | | (3,159) | | Gross loss | (10,371) | | | (7,791) | | | (2,580) | |
Operating expenses | Operating expenses | | Operating expenses | |
Research and development expense | Research and development expense | 3,158 | | | 2,710 | | | 448 | | Research and development expense | 4,720 | | | 4,205 | | | 515 | |
Selling, general and administrative expense | Selling, general and administrative expense | 18,576 | | | 8,660 | | | 9,916 | | Selling, general and administrative expense | 29,205 | | | 17,947 | | | 11,258 | |
Preliminary stage project costs | Preliminary stage project costs | 821 | | | 8,199 | | | (7,378) | | Preliminary stage project costs | 1,736 | | | 8,512 | | | (6,776) | |
Other operations | Other operations | 1,190 | | | — | | | 1,190 | | Other operations | 3,814 | | | — | | | 3,814 | |
Impairment loss | | Impairment loss | 24,749 | | | — | | | 24,749 | |
Loss (gain) on disposal of assets | Loss (gain) on disposal of assets | — | | | 4,954 | | | (4,954) | | Loss (gain) on disposal of assets | — | | | 5,137 | | | (5,137) | |
Depreciation and amortization | Depreciation and amortization | 737 | | | 104 | | | 633 | | Depreciation and amortization | 1,144 | | | 198 | | | 946 | |
Total operating expenses | Total operating expenses | 24,482 | | | 24,627 | | | (145) | | Total operating expenses | 65,368 | | | 35,999 | | | 29,369 | |
Loss from operations | Loss from operations | (32,070) | | | (29,056) | | | (3,014) | | Loss from operations | (75,739) | | | (43,790) | | | (31,949) | |
Other income (expense) | Other income (expense) | | | | | | Other income (expense) | | | | | |
Gain (loss) from change in fair value of derivative warrant liability | Gain (loss) from change in fair value of derivative warrant liability | 16 | | | (10) | | | 26 | | Gain (loss) from change in fair value of derivative warrant liability | 16 | | | (4) | | | 20 | |
Interest expense | Interest expense | (4) | | | (11) | | | 7 | | Interest expense | (716) | | | (78) | | | (638) | |
Interest and dividend income | Interest and dividend income | 330 | | | — | | | 330 | | Interest and dividend income | 1,204 | | | 354 | | | 850 | |
Gain on forgiveness of SBA loan | Gain on forgiveness of SBA loan | — | | | 641 | | | (641) | | Gain on forgiveness of SBA loan | — | | | 641 | | | (641) | |
Other income (expense), net | Other income (expense), net | 2,894 | | | 126 | | | 2,768 | | Other income (expense), net | 2,615 | | | 187 | | | 2,428 | |
Total other income (expense), net | Total other income (expense), net | 3,236 | | | 746 | | | 2,490 | | Total other income (expense), net | 3,119 | | | 1,100 | | | 2,019 | |
Net loss | Net loss | $ | (28,834) | | | $ | (28,310) | | | $ | (524) | | Net loss | $ | (72,620) | | | $ | (42,690) | | | $ | (29,930) | |
Revenue.There In the third quarter of 2022, our renewable natural gas production began ramping up resulting in biogas commodity sales of $0.3 million, while the activities at our Luverne Facility were no significant changes in revenue duringminimized to care and maintenance status as we have shifted focus to our Net-Zero Projects. During the threenine months ended JuneSeptember 30, 2022, compared to the threenine months ended JuneSeptember 30, 2021, revenue increased $0.2 million.
Cost of goods sold.production. Cost of goods soldproduction increased $3.1$0.3 million during the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021, primarily due to an increase in direct laborthe costs related to RNG production and utility expensessales from our RNG Project.
Idle facility costs. We incurred $2.3 million of idle facility costs during the nine months ended September 30, 2022, due to theputting our Luverne Facility not being fully staffed untilinto care and maintenance status in the third quarter of 2021 due2022. Included in idle facility costs are charges related to removing flammable and other hazardous items from the COVID-19 pandemic. The majority of oursite, writing off certain patents related to production at the Luverne Facility and costs during the six months ended June 30, 2022, were related to the workforce adjustments. We plan to utilize the Luverne Facility to advance our technology and operational knowledge to help us in achieving operational success as we scale up the production and delivery of SAF isooctane,for our customers through our Net-Zero Projects.
Depreciation and isooctene as we continue to developamortization. Depreciation and tailor our Luverne Facility demonstration operations to support our focus on advancing technology, testing and optimizing alternative feedstocks, yeast strains, and unit operations as well as partnership development for integrated GHG reductions. Costamortization in cost of goods sold also includeswas relatively flat with a $0.8minor increase of $0.1 million loss for a net realizable value adjustment made to our finished goods and work in process inventory. There were no net realizable losses recorded during the sixnine months ended JuneSeptember 30, 2021, as the Luverne Facility was temporarily shut down due2022, compared to the COVID-19 pandemic.nine months ended September 30, 2021.
Research and development expense. Research and development expense increased $0.4$0.5 million during the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021, primarily due to an increase in patent and personnel related costs, as well as lab supplies, partially offset by a reduction of laboratory expenses and additional stock-based compensation expense.consulting expenses.
Selling, general and administrative expense. Selling, general and administrative expense increased $9.9$11.3 million during the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021, primarily due to increases in personnel costs related to strategic new hiring and professional fees, as well as non-cash stock-based compensation and professional fees.which reflects higher amortization expense for the stock awards issued in the prior period with higher market value, see Note 15 to the Consolidated Financial Statements for additional information.
Preliminary stage project costs. Preliminary stage project costs in 2022 are related to our Verity and future Net-Zero Projects and Verity project and consist of employee expense, preliminary engineering and technical consulting costs. Preliminary stage project costs decreased $7.4$6.8 million during the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021, primarily because we began capitalizing our RNG Project and NZ1 project costs in 2021.
Other operations. Other operations expense increased $1.2$3.8 million during the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021. Other operations costs wereare primarily costs related to unallocated engineering personnel and consulting services.other non-capitalizable costs.
Impairment loss. The Company recorded a $24.7 million impairment loss on long-lived assets, which reduced the carrying value of certain property, plant, and equipment, and a leased ROU asset, at the Agri-Energy segment to its fair value. The impairments recorded to date relate to the determination to suspend production at the Luverne Facility and shift the plant into an idled, care and maintenance status during the third quarter of 2022. See Note 3 to the Consolidated Financial Statements for additional information.
Depreciation and amortization expense. Depreciation and amortization expense increased $0.6$0.9 million during the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021, primarily due to the amortization of our patents.
Loss from operations. Excluding the one-time charge of $24.7 million for impairment, the loss from operations increased by $7.2 million during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, primarily due to the increased activities for our Net-Zero Projects and Verity project, as well as non-capitalizable cost for NZ1.
Gain (loss) from change in fair value derivative warrant liability. We incurred a minimal change in the fair value of the derivative warrant liability in the sixnine months ended JuneSeptember 30, 2022; the2022. The last of the liability warrants expired in February 2022.
Interest expense. There were no significant changes in interestInterest expense increased $0.6 million during the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021.2021, primarily due to the interest on the RNG Project bonds and the imputed interest on our RNG-related dairy leases, both of which were capitalized into construction in process during the construction phase of our RNG Project in the prior periods.
Interest and dividend income. Interest and dividend income increased $0.3$0.9 million during the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021, primarily due to the interest earned on our investments partially offset by the amortization of the bond premiums.investments.
Other income (expense). Other income (expense) increased $2.8$2.4 million during the sixnine months ended JuneSeptember 30, 2022, compared to the sixnine months ended JuneSeptember 30, 2021, primarily due to our receipt of $2.9 million from the USU.S. Department of Agriculture's Biofuel Producer Program to support biofuel producers who faced unexpected
losses due to the COVID-19 pandemic.pandemic, partially offset by a loss on disposal of fixed assets. The Biofuel Producer Program grants are not tax-exempt.
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting policiesestimates since December 31, 2021.2021, and no significant changes to our critical accounting policies other than as described below. For a description of our other critical accounting policies and estimates that affect our significant judgments and estimates used in the preparation of our consolidated financial statements, refer to “Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” contained in our 2021 Annual Report.
Our unaudited consolidated financial statements are prepared in conformity with GAAP and require our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates, and such estimates may change if the underlying conditions or assumptions change.
Revenue Recognition
In the third quarter of 2022, we began realizing revenues from RNG provided under long-term agreements with customers. Additional revenues from environmental attributes are expected to be realized later in 2022. The revenue recognition methodology is consistent with those from other products whereas all revenue is recognized at a point in time when we satisfy our performance obligations under the contract by transferring the product to the customer, as the customer obtains control of the product upon delivery.
Revenue is measured as the amount of consideration we expect to receive in exchange for transferring our products. There is no variable consideration present in our performance obligations as consideration for the transaction is based upon current market pricing obtained from defined third party markets during the period in which the delivery was made.
RINs
We generate D3 RINs through our production of RNG used for transportation purposes as prescribed under the RFS program. We consider RINs to be a distinguishable product that is generated as an integral component of our production process of RNG, as the RINs that we generate can be separated from the underlying commodity and may be sold independently from the RNG produced. As such, we consider RINs to be a co-product of the production of RNG and accordingly allocate our costs of production based on the relative sales value of all revenue items for our RNG Project operations. Revenue is recognized on these environmental attributes when there is an agreement in place to monetize the credits at an agreed upon price with a customer based upon defined third party market prices and a transfer of control has occurred.
LCFS Credits
We generate LCFS Credits through our production of RNG used for transportation purposes as prescribed under the Low Carbon Fuel Standard in the state of California. We consider LCFS Credits to be a distinguishable product that is generated as an integral component of our production process of RNG, as the LCFS Credits that we generate can be separated from the underlying commodity and may be sold independently from the RNG produced. As such, we consider LCFS Credits to be a co-product of the production of RNG and accordingly allocate our costs of production based on the relative sales value of all revenue items for our Gevo RNG operations. Revenue is recognized on these environmental attributes when there is an agreement in place to monetize the credits at an agreed upon price with a customer based upon defined third party market prices and a transfer of control has occurred.
Off-Balance Sheet Arrangements
As of September 30, 2022, we did not have any material off-balance sheet arrangements.
Recently Adopted Accounting Pronouncements
See “Notes to Condensed Consolidated Financial Statements —2. Summary of Significant Accounting Policies” included in Part II, Item 8 of our 2021 Annual Report for a discussion of recent accounting pronouncements.
Liquidity and Capital Resources
As of JuneSeptember 30, 2022, we had cash and cash equivalents of $173.0$200.6 million, short and long-term restricted cash of $76.2$77.9 million and short-term marketable securities of $297.6$222.0 million. As of September 30, 2022, we have net working capital of $414.1 million,. with $17.6 million of current liabilities. The marketable securities are highly liquid and can be converted to cash when needed for operations and construction. We expect to use our cash, cash equivalents, restricted cash and marketable securities for the following purposes: (i) identification, development, acquisition and construction of new production facilities and to plan for expanded production to fulfill existing off-take agreements under thefor NZ1 project, includingand the Company's other Net-Zero projects;Projects; (ii) potential investment in RNG projects; (iii) potential development of the Luverne Facility; (iv) development, acquisition and operation of sustainable alcohol-to-SAF plants to produce SAF alone or with partners; (v) operating activities at the Company's corporate headquarters in Colorado, including research and development work; (vi) exploration of strategic alternatives and additional financing, including project financing; and (vii) future debt service obligations. We believe as a result of our cash and cash equivalents balances, and the performance of our current and expected operations, we will be able to meet our obligations and other potential cash requirements during the next 12 months from the date of this report.
Since our inception in 2005, we have devoted most of our cash resources to the development and commercialization of routes to efficiently produce fuels and chemicals from carbohydrates, such as renewable feedstock, using alcohols
(isobutanol (isobutanol and ethanol) as intermediates. We have incurred losses since inception, have a significant accumulated deficit, and expect to incur losses for the foreseeable future. We have financed our operations primarily with proceeds from the issuance of equity, debt securities, and borrowings under debt facilities.
The Company's transition to profitability is dependent upon, among other things, the successful development and commercialization of its product candidates, the development, acquisition and construction of commercial level production facilities to support that Company's off-take agreements, the achievement of a level of revenues adequate to support the Company's cost structure, and the ability to raise capital to finance the development, acquisition, and construction of additional productions facilities.
OnIn January 27, 2022, the Company’s stockholders voted to amend the Certificate of Incorporation to increase the total number of authorized shares of common stock from 250 million shares to 500 million shares. Management intends to fund future operations through additional private and/or public offerings of debt or equity securities. In addition, the Company may seek additional capital, on acceptable terms, through arrangements with strategic partners or from other sources. Notwithstanding, there can be no assurance that the Company will be able to raise additional funds or achieve or sustain profitability or positive cash flows from operations.
The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
| | | Six Months Ended June 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Net cash used in operating activities | Net cash used in operating activities | $ | (17,114) | | | $ | (19,468) | | Net cash used in operating activities | $ | (36,770) | | | $ | (28,693) | |
Net cash from investing activities | Net cash from investing activities | $ | (8,350) | | | $ | (436,529) | | Net cash from investing activities | $ | 44,870 | | | $ | (427,985) | |
Net cash provided by financing activities | Net cash provided by financing activities | $ | 138,565 | | | $ | 522,853 | | Net cash provided by financing activities | $ | 134,297 | | | $ | 514,513 | |
Operating Activities
Our primary uses of cash from operating activities are personnel-related expenses, and research and development-related expenses, including costs incurred under development agreements, costs of licensing of technology, legal-related costs, expenses for the development and commercialization of routes to efficiently produce fuels and chemicals from carbohydrates, such as renewable feedstock carbohydrates using alcohols (isobutanol and ethanol) as intermediates.an intermediate.
During the sixnine months ended JuneSeptember 30, 2022, net cash used for operating activities was $17.1$36.8 million compared to $19.5$28.7 million for the sixnine months ended JuneSeptember 30, 2021. Non-cash charges primarily consisted of an impairment loss of $24.7 million, depreciation and amortization of $4.5 million, non-cash interest expense of $2.8 million related to debt issuance costs, stock-based compensation expense of $12.6 million. The $2.4net cash outflow from changes in operating assets and liabilities increased $7.9 million, decrease was primarily due to increased costs associated with our productionan increase of isobutanolcash outflows of $4.0 million in prepaid expenses and hydrocarbon productsother current assets due to the payments for market development, process technologylicensing fees and related process engineering work. In addition, we had increases in personnel expensesdeposits to supportsecure long-lead equipment power transmission and distribution facilities for NZ1, partially offset by $4.2 million of decreased cash payments for the growth in business activity, partnership development and Verity development expenses.RNG Project.
Investing Activities
During the sixnine months ended JuneSeptember 30, 2022, wewe used $8.4$44.9 million in cash for investing activities, of which $169.1$243.8 million related to proceeds from sales and maturities of marketable securities, partially offset by the reinvestment of $131.3$130.4 million in marketable securities, and $46.0$68.5 million of investments in our capital projects, including $26.3$33.7 million in the RNG Project, $15.4$30.5 million in thefor NZ1, Project, as well as $4.2$4.4 million in development projects at Agri-Energy and Gevo.other projects.
We completedIn July 2022, the constructionpurchase of the RNG Projectland for NZ1 in Lake Preston, South Dakota was completed. This was followed by a groundbreaking ceremony in Lake Preston and may invest upwe believe NZ1 is on schedule with initial volumes of SAF expected to an additional $11.4 million for start-up, improvements,be delivered in 2025. Water and expansions duringwind energy development agreements were executed in the remainderthird quarter of 2022, or into 2023. Our preliminaryand other key milestones are on track for completion in accordance with our comprehensive project plan. Based on the ongoing engineering work, the installed cost for NZ1 Project's forecast of additional capital expenditures ranges fromis currently forecasted to be approximately $850 million, excluding certain contingencies and financing costs, $100 million to $120 million of which includes engineering, development, long-lead equipment deposits, infrastructure support costs associated with electricity, natural gas, raw water, and wastewater service needs, debt financing costs, and debt pre-close project construction costs.we expect to spend within the next twelve months.
In addition, we allocated approximately $25 million of capital for the next four to six months to develop our next Net-Zero Project. Gevo is in the process of identifying and performing early site development work for additional SAF production locations. These potential sites include several greenfield locations that are particularly advantageous in terms of potential economics, opportunities to decarbonize, and time to market.
Financing Activities
During the sixnine months ended JuneSeptember 30, 2022, we had $138.6had $134.3 million of net cash provided by financing activities, primarily due to $139.0 million ofnet proceeds from the issuance of common stock and common stock warrants in the June 2022 Offering, net of issuance costs, partially offset by $4.3 million of payments for finance lease liabilities and certain equipment loans and $0.3 million related to the net settlement of common stock under stock plansplans.
We are also in the process of arranging financing for NZ1. We expect the financing would occur at a subsidiary of Gevo, Inc. and $0.1 millionwould include a combination of payments for finance lease liabilitiesdebt and certain equipment loans.equity.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes since our disclosure in “Quantitative and Qualitative Disclosures About Market Risk” included in Part II, Item 7A of our 2021 Annual Report.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosures.
During the fiscal period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of JuneSeptember 30, 2022, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the required time periods and are designed to ensure that information required to be disclosed in our reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes that occurred during the three months ended JuneSeptember 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we have beenA discussion of legal matters is found in Note 17, Commitments and may again become involved in legal proceedings arisingContingencies, in the ordinary course of our business. We are not presently a party to any litigation, other disputes and regulatory proceedings that we believe to be material and we are not aware of any pending or threatened proceedings against us that we believe could have a material adverse effect on our business, operating results, financial condition or cash flows.
In February 2022, an incident occurred at one of the anaerobic digesters that is part of NW Iowa RNG that resulted in the accidental discharge of a mixture of water and manure into the environment. We promptly notified the Iowa Department of Natural Resources (the "DNR") and began mitigation work to minimize the impact of the discharge. The DNR has issued a notice of violation in connection with the discharge. This matter was resolved with the DNR in July 2022 through an administrative consent order and damages of $10,000 were assessed.
In April 2022, two separate incidents occurred at two of the anaerobic digesters that are part of NW Iowa RNG that resulted in the accidental discharge of very small amounts of water and manure into the environment. The DNR has issued notices of violation in connection with the two discharges.
There is a possibility that the DNR will initiate an enforcement action with respectaccompanying Notes to the April 2022 discharges described above that could resultFinancial Statements included in a monetary sanction being levied against Gevo for the accidental discharges. We do not believe that any such monetary sanctions would be material.Part I - Item 1. Financial Statements of this Report.
Item 1A. Risk Factors.
You should carefully consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our 2021 Annual Report, which could materially affect our business, financial condition, cash flows or future results. There have been no material changes in our risk factors included in our Annual Report. The risk factors in our 2021 Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Purchases of equity securities by the issuer: | | | | | | | | | | | | | | | | | | | | | | | |
Period | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs |
April 1 - April 30, 2022 | 11,135 | | | $ | 4.58 | | | — | | — |
May 1 - May 30, 2022 | 1,081 | | | $ | 4.02 | | | — | | — |
June 1 - June 30, 2022 | 2,299 | | | $ | 3.14 | | | — | | — |
Total | 14,515 | | | $ | 3.91 | | | — | | — |
Represents shares withheld from employees to cover tax withholding obligations upon the vesting of restricted stock awards. The average prices listed in the above table are averages of the fair market prices at which we valued shares withheld for purposes of calculating the number of shares to be withheld.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The exhibits listed below are filed or furnished as part of this report.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | | Description | | Previously Filed | | Filed Herewith |
| | | | | Form | | File No. | | Filing Date | | Exhibit | | |
| 3.1 | | | | | 10-K | | 001-35073 | | February 24, 2022 | | 3.1 | | |
| 3.2 | | | | | 8-K | | 001-35073 | | November 24, 2021 | | 3.1 | | |
| 4.1 | | | | | S-1 | | 333-168792 | | January 19, 2011 | | 4.1 | | |
| 4.2 | | | | | 8-K | | 001-35073 | | July 8, 2020 | | 4.1 | | |
| 4.3 | | | | | 8-K | | 001-35073 | | June 8, 2022 | | 4.1 | | |
| 10.1 | | | | | 8-K | | 001-35073 | | June 8, 2022 | | 10.1 | | |
| 10.2+ | | | | | | | | | | | | | X |
| 10.3+ | | | | | 8-K | | 001-35073 | | July 22, 2022 | | 10.1 | | |
| 31.1 | | | | | | | | | | | | | X |
| 31.2 | | | | | | | | | | | | | X |
| 32.1 | | | | | | | | | | | | | ** |
| 101.INS | | | Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | | | | | | | | | | X |
| 101.SCH | | | Inline XBRL Taxonomy Extension Schema | | | | | | | | | | X |
| 101.CAL | | | Inline XBRL Taxonomy Extension Calculation Linkbase | | | | | | | | | | X |
| 101.DEF | | | Inline XBRL Taxonomy Extension Definition Linkbase | | | | | | | | | | X |
| 101.LAB | | | Inline XBRL Taxonomy Extension Label Linkbase | | | | | | | | | | X |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit Number | | | Description | | Previously Filed | | Filed Herewith |
| | | | | Form | | File No. | | Filing Date | | Exhibit | | |
| 3.1 | | | | | 10-K | | 001-35073 | | February 24, 2022 | | 3.1 | | |
| 3.2 | | | | | 8-K | | 001-35073 | | November 24, 2021 | | 3.1 | | |
| 4.1 | | | | | S-1 | | 333-168792 | | January 19, 2011 | | 4.1 | | |
| 10.1* | | | | | 8-K | | 001-35073 | | July 22, 2022 | | 10.1 | | |
| 31.1 | | | | | | | | | | | | | X |
| 31.2 | | | | | | | | | | | | | X |
| 32.1 | | | | | | | | | | | | | ** |
| 101.INS | | | Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | | | | | | | | | | X |
| 101.SCH | | | Inline XBRL Taxonomy Extension Schema | | | | | | | | | | X |
| 101.CAL | | | Inline XBRL Taxonomy Extension Calculation Linkbase | | | | | | | | | | X |
| 101.DEF | | | Inline XBRL Taxonomy Extension Definition Linkbase | | | | | | | | | | X |
| 101.LAB | | | Inline XBRL Taxonomy Extension Label Linkbase | | | | | | | | | | X |
| 101.PRE | | | Inline XBRL Taxonomy Extension Presentation Linkbase | | | | | | | | | | X |
| 104 | | | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) | | | | | | | | | | X |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit
Number
| * | | Description | | Previously Filed | | Filed
Herewith
|
| | | | | Form | | File No. | | Filing Date | | Exhibit | | |
| 101.PRE | | | Inline XBRL Taxonomy Extension Presentation Linkbase | | | | | | | | | | X
|
| 104 | | | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) | | | | | | | | | | X
|
| | | | | |
+ | Certain portions of the exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is not material and is the type of information that the registrant treats as private or confidential. |
| Information that was omitted has been noted in this document with a placeholder identified by the mark “[*****]". |
** | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Gevo, Inc.
(REGISTRANT)
| | | | | |
By: | /s/ Alisher Nurmat |
| Alisher Nurmat, CPA Vice President and Controller (Principal Accounting Officer) |
Date: AugustNovember 8, 2022