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 June 30, 2022March 31, 2023
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, 2022May 9, 2023,235,165,951 shares 237,246,223 shares of the registrant’s common stock were outstanding.
GEVO, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022MARCH 31, 2023
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 March 31, 2023 | | As of December 31, 2022 |
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 | | $ | 342,283 | | | $ | 237,125 | |
Marketable securities (current) | 5 | | 297,631 | | | 275,340 | | |
Marketable securities | | Marketable securities | 4 | | 32,897 | | | 167,408 | |
Restricted cash (current) | Restricted cash (current) | 12 | | 5,894 | | | 25,032 | | Restricted cash (current) | 5 | | 1,032 | | | 1,032 | |
Accounts receivable, net | | 188 | | | 978 | | |
Trade accounts receivable, net | | Trade accounts receivable, net | | 855 | | | 476 | |
Inventories | Inventories | 7 | | 2,649 | | | 2,751 | | Inventories | 8 | | 4,355 | | | 6,347 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 4 | | 5,275 | | | 3,607 | | Prepaid expenses and other current assets | 6 | | 4,985 | | | 3,034 | |
Total current assets | Total current assets | | 484,621 | | | 348,541 | | Total current assets | | 386,407 | | | 415,422 | |
Property, plant and equipment, net | Property, plant and equipment, net | 8 | | 176,054 | | | 139,141 | | Property, plant and equipment, net | 9 | | 183,862 | | | 176,872 | |
Long-term marketable securities | 5 | | — | | | 64,396 | | |
Long-term restricted cash | 12 | | 70,256 | | | 70,168 | | |
| Restricted cash (non-current) | | Restricted cash (non-current) | 5 | | 76,736 | | | 77,219 | |
Operating right-of-use assets | Operating right-of-use assets | 6 | | 2,098 | | | 2,414 | | Operating right-of-use assets | 7 | | 1,285 | | | 1,331 | |
Finance right-of-use assets | Finance right-of-use assets | 6 | | 27,477 | | | 27,297 | | Finance right-of-use assets | 7 | | 217 | | | 219 | |
Intangible assets, net | Intangible assets, net | 9 | | 8,364 | | | 8,938 | | Intangible assets, net | 10 | | 7,400 | | | 7,691 | |
Deposits and other assets | Deposits and other assets | | 5,741 | | | 5,581 | | Deposits and other assets | 11 | | 32,787 | | | 21,994 | |
Total assets | Total assets | | $ | 774,611 | | | $ | 666,476 | | Total assets | | $ | 688,694 | | | $ | 700,748 | |
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 | 12 | | $ | 24,931 | | | $ | 24,760 | |
Operating lease liabilities (current) | Operating lease liabilities (current) | 6 | | 423 | | | 772 | | Operating lease liabilities (current) | 7 | | 421 | | | 438 | |
Finance lease liabilities (current) | Finance lease liabilities (current) | 6 | | 6,293 | | | 3,413 | | Finance lease liabilities (current) | 7 | | 59 | | | 79 | |
Loans payable - other (current) | 12 | | 158 | | | 158 | | |
Loans payable (current) | | Loans payable (current) | 13 | | 152 | | | 159 | |
Total current liabilities | Total current liabilities | | 25,624 | | | 32,631 | | Total current liabilities | | 25,563 | | | 25,436 | |
2021 Bonds payable (long-term) | 12 | | 66,853 | | | 66,486 | | |
Loans payable - other (long-term) | 12 | | 238 | | | 318 | | |
Operating lease liabilities (long-term) | 6 | | 1,786 | | | 1,902 | | |
Finance lease liabilities (long-term) | 6 | | 16,342 | | | 17,797 | | |
Other long-term liabilities | | — | | | 87 | | |
2021 Bonds payable, net | | 2021 Bonds payable, net | 13 | | 67,408 | | | 67,223 | |
Loans payable (non-current) | | Loans payable (non-current) | 13 | | 126 | | | 159 | |
Operating lease liabilities (non-current) | | Operating lease liabilities (non-current) | 7 | | 1,392 | | | 1,450 | |
Finance lease liabilities (non-current) | | Finance lease liabilities (non-current) | 7 | | 184 | | | 183 | |
Other liabilities (non-current) | | Other liabilities (non-current) | | 560 | | | 820 | |
Total liabilities | Total liabilities | | 110,843 | | | 119,221 | | Total liabilities | | 95,233 | | | 95,271 | |
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 shares authorized; 237,261,164 and 237,166,625 shares issued and outstanding at March 31, 2023, and December 31, 2022, respectively. | | Common stock, $0.01 par value per share; 500,000,000 shares authorized; 237,261,164 and 237,166,625 shares issued and outstanding at March 31, 2023, and December 31, 2022, respectively. | | 2,373 | | | 2,372 | |
Additional paid-in capital | Additional paid-in capital | | 1,249,880 | | | 1,103,224 | | Additional paid-in capital | | 1,264,203 | | | 1,259,527 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (2,256) | | | (614) | | Accumulated other comprehensive loss | | (115) | | | (1,040) | |
Accumulated deficit | Accumulated deficit | | (586,209) | | | (557,375) | | Accumulated deficit | | (673,000) | | | (655,382) | |
Total stockholders' equity | Total stockholders' equity | | 663,768 | | | 547,255 | | Total stockholders' equity | | 593,461 | | | 605,477 | |
| Total liabilities and stockholders' equity | Total liabilities and stockholders' equity | | $ | 774,611 | | | $ | 666,476 | | Total liabilities and stockholders' equity | | $ | 688,694 | | | $ | 700,748 | |
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, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Revenue and cost of goods sold | | | | | | | | | |
Ethanol sales and related products, net | 2 | | $ | 71 | | | $ | — | | | $ | 240 | | | $ | — | |
Hydrocarbon revenue | 2 | | 18 | | | 346 | | | 81 | | | 359 | |
| | | | | | | | | |
Total revenues | 2, 18 | | 89 | | | 346 | | | 321 | | | 359 | |
Cost of production (including stock-based compensation) | 13 | | 2,640 | | | 1,617 | | | 5,730 | | | 2,518 | |
Depreciation and amortization | 8, 9 | | 1,088 | | | 1,177 | | | 2,179 | | | 2,270 | |
Total cost of goods sold | | | 3,728 | | | 2,794 | | | 7,909 | | | 4,788 | |
Gross loss | | | (3,639) | | | (2,448) | | | (7,588) | | | (4,429) | |
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 | |
Preliminary stage project costs | | | 314 | | | 5,472 | | | 821 | | | 8,199 | |
Other operations (including stock-based compensation) | 13 | | 601 | | | — | | | 1,190 | | | — | |
Loss on disposal of assets | | | — | | | 4,954 | | | — | | | 4,954 | |
Depreciation and amortization | 8, 9 | | 386 | | | 46 | | | 737 | | | 104 | |
Total operating expenses | | | 12,476 | | | 16,650 | | | 24,482 | | | 24,627 | |
Loss from operations | 18 | | (16,115) | | | (19,098) | | | (32,070) | | | (29,056) | |
Other income (expense) | | | | | | | | | |
Gain (loss) from change in fair value of derivative warrant liability | | | — | | | 43 | | | 16 | | | (10) | |
Interest expense | | | (2) | | | (6) | | | (4) | | | (11) | |
Investment income (loss) | 5 | | 78 | | | — | | | 330 | | | — | |
Gain on forgiveness of SBA loan | | | — | | | 641 | | | — | | | 641 | |
Other income (expense), net | | | 2,878 | | | 167 | | | 2,894 | | | 126 | |
Total other income (expense), net | | | 2,954 | | | 845 | | | 3,236 | | | 746 | |
Net loss | | | $ | (13,161) | | | $ | (18,253) | | | $ | (28,834) | | | $ | (28,310) | |
Net loss per share - basic and diluted | 3 | | $ | (0.06) | | | $ | (0.09) | | | $ | (0.14) | | | $ | (0.15) | |
Weighted-average number of common shares outstanding - basic and diluted | | | 209,809,994 | | | 198,137,420 | | | 205,889,651 | | | 190,892,223 | |
| | | | | | | | | | | | | | | | | | | | | |
| Note | | | | Three Months Ended March 31, |
| | | | | | 2023 | | 2022 |
Total operating revenues | 2, 19 | | | | | | $ | 4,060 | | | $ | 232 | |
Operating expenses: | | | | | | | | | |
Cost of production | 14 | | | | | | 4,425 | | | 3,090 | |
Depreciation and amortization | 9, 10 | | | | | | 4,575 | | | 1,442 | |
Research and development expense | 14 | | | | | | 1,198 | | | 1,192 | |
General and administrative expense | 14 | | | | | | 10,761 | | | 9,367 | |
Project development costs | 14 | | | | | | 2,959 | | | 1,096 | |
Facility idling costs | | | | | | | 999 | | | — | |
| | | | | | | | | |
| | | | | | | | | |
Total operating expenses | 14 | | | | | | 24,917 | | | 16,187 | |
Loss from operations | | | | | | | (20,857) | | | (15,955) | |
Other income (expense) | | | | | | | | | |
Interest expense | | | | | | | (539) | | | (2) | |
Investment income | | | | | | | 3,067 | | | 252 | |
Other income, net | | | | | | | 711 | | | 32 | |
Total other income, net | | | | | | | 3,239 | | | 282 | |
Net loss | | | | | | | $ | (17,618) | | | $ | (15,673) | |
Net loss per share - basic and diluted | | | | | | | $ | (0.07) | | | $ | (0.08) | |
Weighted-average number of common shares outstanding - basic and diluted | 3 | | | | | | 237,260,681 | | | 201,925,747 | |
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, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Net loss | | | $ | (13,161) | | | $ | (18,253) | | | $ | (28,834) | | | $ | (28,310) | |
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) | |
Comprehensive loss | | | $ | (13,830) | | | $ | (18,560) | | | $ | (30,476) | | | $ | (28,617) | |
| | | | | | | | | | | | | | | | | | | | | |
| Note | | | | Three Months Ended March 31, |
| | | | | | 2023 | | 2022 |
Net loss | | | | | | | $ | (17,618) | | | $ | (15,673) | |
Other comprehensive loss | | | | | | | | | |
Unrealized gain (loss) on available-for-sale securities | 4 | | | | | | 925 | | | (973) | |
Comprehensive loss | | | | | | | $ | (16,693) | | | $ | (16,646) | |
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 |
| | | Common Stock | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Stockholders’ Equity |
| 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 | |
Non-cash stock-based compensation | 13 | | | — | | | — | | | 4,220 | | | — | | | — | | | 4,220 | |
Issuance of common stock under stock plans, net of taxes | 17 | | | 79,893 | | | 1 | | | (66) | | | — | | | — | | | (65) | |
Other comprehensive loss | | | — | | | — | | | — | | | (669) | | | — | | | (669) | |
Net loss | | | — | | | — | | | — | | | — | | | (13,161) | | | (13,161) | |
Balance, June 30, 2022 | | | 235,165,951 | | | $ | 2,353 | | | $ | 1,249,880 | | | $ | (2,256) | | | $ | (586,209) | | | $ | 663,768 | |
| | | | | | | | | | | | | |
Balance, March 31, 2021 | | | 198,050,449 | | | $ | 1,981 | | | $ | 1,101,939 | | | $ | — | | | $ | (508,229) | | | $ | 595,691 | |
Issuance of common stock and common stock warrants, net of issuance costs | 17 | | | — | | | — | | | (45) | | | — | | | — | | | (45) | |
Issuance of common stock upon exercise of warrants | 17 | | | 3,700 | | | — | | | 4 | | | — | | | — | | | 4 | |
Non-cash stock-based compensation | 13 | | | — | | | — | | | 858 | | | — | | | — | | | 858 | |
Issuance of common stock under stock plans, net of taxes | 17 | | | (89,673) | | | (1) | | | (1,824) | | | — | | | — | | | (1,825) | |
Other comprehensive loss | | | — | | | — | | | — | | | (307) | | | — | | | (307) | |
Net loss | | | — | | | — | | | — | | | — | | | (18,253) | | | (18,253) | |
Balance, June 30, 2021 | | | 197,964,476 | | | $ | 1,980 | | | $ | 1,100,932 | | | $ | (307) | | | $ | (526,482) | | | $ | 576,123 | |
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 | |
| | Common Stock | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Stockholders’ Equity | |
| | Note | | Shares | | Amount | | |
| | | | | Three Months Ended March 31, 2023 and 2022 |
| | | Common Stock | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Stockholders’ Equity |
| | | Note | | Shares | | Amount | |
Balance, December 31, 2022 | | Balance, December 31, 2022 | | | 237,166,625 | | | $ | 2,372 | | | $ | 1,259,527 | | | $ | (1,040) | | | $ | (655,382) | | | $ | 605,477 | |
| Non-cash stock-based compensation | | Non-cash stock-based compensation | 14 | | | — | | | — | | | 4,677 | | | — | | | — | | | 4,677 | |
Stock-based awards and related share issuances, net | | Stock-based awards and related share issuances, net | 18 | | | 94,539 | | | 1 | | | (1) | | | — | | | — | | | — | |
Other comprehensive income | | Other comprehensive income | | — | | | — | | | — | | | 925 | | | — | | | 925 | |
Net loss | | Net loss | | — | | | — | | | — | | | — | | | (17,618) | | | (17,618) | |
Balance, March 31, 2023 | | Balance, March 31, 2023 | | 237,261,164 | | | $ | 2,373 | | | $ | 1,264,203 | | | $ | (115) | | | $ | (673,000) | | | $ | 593,461 | |
| Balance, December 31, 2021 | Balance, December 31, 2021 | | | 201,988,662 | | | $ | 2,020 | | | $ | 1,103,224 | | | $ | (614) | | | $ | (557,375) | | | $ | 547,255 | | Balance, 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 | 17 | | | 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 | 18 | | | 4,677 | | | — | | | 3 | | | — | | | — | | | 3 | |
Non-cash stock-based compensation | Non-cash stock-based compensation | 13 | | | — | | | — | | | 8,264 | | | — | | | — | | | 8,264 | | Non-cash stock-based compensation | 14 | | | — | | | — | | | 4,044 | | | — | | | — | | | 4,044 | |
Issuance of common stock under stock plans, net of taxes | 17 | | | (160,724) | | | — | | | (286) | | | — | | | — | | | (286) | | |
Stock-based awards and related share issuances, net | | Stock-based awards and related share issuances, net | 18 | | | (240,617) | | | (1) | | | (220) | | | — | | | — | | | (221) | |
Other comprehensive loss | Other comprehensive loss | | — | | | — | | | — | | | (1,642) | | | — | | | (1,642) | | Other comprehensive loss | | — | | | — | | | — | | | (973) | | | — | | | (973) | |
Net loss | Net loss | | — | | | — | | | — | | | — | | | (28,834) | | | (28,834) | | Net loss | | — | | | — | | | — | | | — | | | (15,673) | | | (15,673) | |
Balance, June 30, 2022 | | 235,165,951 | | | $ | 2,353 | | | $ | 1,249,880 | | | $ | (2,256) | | | $ | (586,209) | | | $ | 663,768 | | |
| Balance, December 31, 2020 | | 128,138,311 | | | $ | 1,282 | | | $ | 643,269 | | | $ | — | | | $ | (498,172) | | | $ | 146,379 | | |
Issuance of common stock, net of issuance costs | 17 | | | 68,170,579 | | | 682 | | | 456,963 | | | — | | | — | | | 457,645 | | |
Issuance of common stock upon exercise of warrants | 17 | | | 1,866,758 | | | 18 | | | 1,103 | | | — | | | — | | | 1,121 | | |
Non-cash stock-based compensation | 13 | | | — | | | — | | | 1,420 | | | — | | | — | | | 1,420 | | |
Issuance of common stock under stock plans, net of taxes | 17 | | | (211,172) | | | (2) | | | (1,823) | | | — | | | — | | | (1,825) | | |
Other comprehensive loss | | — | | | — | | | — | | | (307) | | | — | | | (307) | | |
Net loss | | — | | | — | | | — | | | — | | | (28,310) | | | (28,310) | | |
Balance, June 30, 2021 | | 197,964,476 | | | $ | 1,980 | | | $ | 1,100,932 | | | $ | (307) | | | $ | (526,482) | | | $ | 576,123 | | |
Balance, March 31, 2022 | | Balance, March 31, 2022 | | 201,752,722 | | | $ | 2,019 | | | $ | 1,107,051 | | | $ | (1,587) | | | $ | (573,048) | | | $ | 534,435 | |
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 | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | | 2023 | | 2022 |
Operating Activities | Operating Activities | | | | | | Operating Activities | | | | | |
Net loss | Net loss | | $ | (28,834) | | | $ | (28,310) | | Net loss | | $ | (17,618) | | | $ | (15,673) | |
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: | |
Loss on disposal of assets | | — | | | 4,954 | | |
(Gain) on forgiveness of SBA Loans | | — | | | (641) | | |
| Stock-based compensation | Stock-based compensation | 13 | | 7,945 | | | 1,617 | | Stock-based compensation | 14 | | 4,677 | | | 4,258 | |
Depreciation and amortization | Depreciation and amortization | 8, 9 | | 2,916 | | | 2,372 | | Depreciation and amortization | 9, 10 | | 4,575 | | | 1,442 | |
Noncash interest expense | | 2,637 | | | — | | |
Other noncash (income) expense | | 352 | | | (41) | | |
Amortization of marketable securities (discount) premium | | Amortization of marketable securities (discount) premium | | (114) | | | 1,150 | |
Other noncash expense | | Other noncash expense | | 234 | | | 139 | |
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 | | (379) | | | 810 | |
Inventories | Inventories | 7 | | 102 | | | 275 | | Inventories | 8 | | 1,650 | | | 16 | |
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 | 6, 11 | | (12,852) | | | (2,367) | |
Accounts payable, accrued expenses and long-term liabilities | 5, 6, 11, 12, 13 | | (1,194) | | | 3,768 | | |
Accounts payable, accrued expenses and non-current liabilities | | Accounts payable, accrued expenses and non-current liabilities | 12 | | 381 | | | (2,269) | |
Net cash used in operating activities | Net cash used in operating activities | | (17,114) | | | (19,468) | | Net cash used in operating activities | | (19,446) | | | (12,494) | |
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 | 9 | | (11,434) | | | (31,218) | |
Acquisition of patent portfolio | Acquisition of patent portfolio | 9 | | (10) | | | — | | Acquisition of patent portfolio | 10 | | — | | | (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 | 4 | | 135,550 | | | 71,082 | |
Proceeds from sale of property, plant and equipment | | Proceeds from sale of property, plant and equipment | 9 | | 67 | | | — | |
| Purchase of marketable securities | | Purchase of marketable securities | 4 | | — | | | (31,993) | |
Net cash provided by investing activities | | Net cash provided by investing activities | | 124,183 | | | 7,861 | |
Financing Activities | | Financing Activities | | | | |
| Purchase of marketable securities | 5 | | (131,257) | | | (422,362) | | |
| Net cash used in investing activities | | (8,350) | | | (436,529) | | |
Financing Activities | | | | | |
Proceeds from issuance of 2021 Bonds | 12 | | — | | | 68,995 | | |
Debt and equity offering costs | 17 | | (10,993) | | | (34,757) | | |
Proceeds from issuance of common stock and common stock warrants | 17 | | 150,000 | | | 487,549 | | |
Proceeds from exercise of warrants | Proceeds from exercise of warrants | 17 | | 3 | | | 1,119 | | Proceeds from exercise of warrants | 18 | | — | | | 3 | |
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 | 14 | | — | | | (220) | |
Payment of loans payable - other | 12 | | (72) | | | (53) | | |
Payment of debt | | Payment of debt | 13 | | (39) | | | (103) | |
Payment of finance lease liabilities | Payment of finance lease liabilities | 6 | | (87) | | | — | | Payment of finance lease liabilities | 7 | | (23) | | | — | |
Net cash provided by financing activities | | 138,565 | | | 522,853 | | |
Net cash used in financing activities | | Net cash used in financing activities | | (62) | | | (320) | |
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 | | 104,675 | | | (4,953) | |
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 | | 315,376 | | | 136,033 | |
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 | | $ | 420,051 | | | $ | 131,080 | |
| | | Six Months Ended June 30, | | Three Months Ended March 31, |
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 | 2023 | | 2022 |
Cash and cash equivalents | Cash and cash equivalents | $ | 172,984 | | | $ | 17,085 | | Cash and cash equivalents | $ | 342,283 | | | $ | 44,626 | |
Restricted cash (current) | Restricted cash (current) | 5,894 | | | 57,645 | | Restricted cash (current) | 1,032 | | | 16,216 | |
Long-term restricted cash | 70,256 | | | 70,464 | | |
Non-current restricted cash | | Non-current restricted cash | 76,736 | | | 70,238 | |
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 | $ | 420,051 | | | $ | 131,080 | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
Supplemental disclosures of cash and non-cash investing and financing transactions | 2023 | | 2022 |
Cash paid for interest, net of amounts capitalized | $ | 515 | | | $ | (514) | |
Non-cash purchase of property, plant and equipment | $ | 13,277 | | | $ | 7,530 | |
See the accompanying Notes to the Consolidated Financial Statements.
GEVO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| | | | | | | | | | | |
| Six Months Ended June 30, |
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 | | | $ | — | |
Non-cash purchase of property, plant and equipment | $ | 11,643 | | | $ | 5,052 | |
Right-of-use asset purchased with financing leases | $ | 834 | | | $ | 27,775 | |
Right-of-use asset purchased with operating lease | $ | — | | | $ | 1,562 | |
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", "we", "us", "our", 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 ("GHG") 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 usesGHG, or even carbon negative footprint measured by 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. Thelife-cycle. Our “net-zero” concept means Gevo expects thatproduction of drop-in hydrocarbon fuels by using sustainably grown feedstock (i.e.feedstocks (e.g., low till, no-till and dry corn cultivation), renewable and substantially decarbonized energy sources, drop-in hydrocarbon fuels can be produced that haveresulting in a net-zero carbon footprint from the full life cycle footprintof the fuel 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, also known as biogas (“RNG”), (ii) hydrocarbons for gasoline blendstocks and diesel fuel, and (iii) plastics, materials and other chemicals. We are engaged in technology, process and intellectual property development targeted to large scale deployment of net-zero hydrocarbon fuels and chemicals. We are developing the marketplace and customers for SAF and other related products. We also are engaged as a developer and enabler/licensor for large scale commercial production, and we expect to be a co-investor on certain projects. Gevo's business model is that of a developer of projects, a licensor, process technology developer, and operator of certain assets in the future.
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 itconcept of a Net-Zero Project is to convert renewable energy (e.g., photosynthetic, wind, RNG) from a variety of sources into energy dense liquid hydrocarbons that, when burned in traditional engines, has 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 planes, cars, trucks and ships. As announced in February 2022, and as a result of our agreement and relationship with Axens North America, Inc. (“Axens”), Gevo made the decision to utilize Axens’ ethanol fermentation technology instead of our proprietary isobutanol fermentation technology to produce sustainable aviation fuel and know-howother renewable hydrocarbon products in our Net-Zero Projects.
Our initial Net-Zero Project, Net-Zero 1 (“NZ1"), is expected to convert various carbohydrate feedstocks through abe located in Lake Preston, South Dakota, and is being currently designed to produce approximately 65 million gallons per year ("MGPY") of total hydrocarbon volumes, including 60 MGPY of SAF. Along with the hydrocarbons, NZ1 is being designed to produce approximately 1,390 million pounds per year of high-value protein products for use in the food chain and more than 34 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 fuelshydrocarbons.
We also are developing other commercial production projects for SAF at other locations in the United States where we expect to use the design of the ethanol-to-jet plant of Lake Preston. Gevo expects to play the role of developer and materials. Whilelicensor; and, depending upon circumstances, partial owner of these projects.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
Renewable Natural Gas Facilities
Gevo's RNG facilities in Northwest Iowa ("NW Iowa RNG") are owned by Gevo NW Iowa RNG, LLC, and produce RNG captured from dairy cow manure. The manure is supplied by three local dairies that have over 20,000 milking cows in total. 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 sells the Company expects its major capital deploymentsproduced RNG to focus onthe California market through an agreement with BP Canada Energy Marketing Corp. and BP Products North America Inc. (collectively, "BP"). In addition, NW Iowa RNG generates and sells Low Carbon Fuel Standard ("LCFS") credits as well as D3 Renewable Identification Numbers ("RINs") through 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.RNG (collectively, "environmental attributes").
Luverne Facility
Gevo currently operates a wholly-ownedGevo's 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 tomay 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 has shifted focus to the Net-Zero Projects.
Gevo's renewable natural gas ("RNG") project in Northwest Iowa ("NW Iowa RNG") owned by Gevo NW Iowa RNG, LLC, generates RNG captured from dairy cow manure. The manure is supplied by 3 local dairies that have over 20,000 milking cows in total with additional milking cows expected, pursuant to agreements executed during the second quarterBasis 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 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.
Ultimately, the Company believes that 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.presentation
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 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 sixthree months ended, June 30, 2022,March 31, 2023, 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, 20212022. The financial statements at December 31, 2021,2022, 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, 20212022 (the "2021"2022 Annual Report").
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. The customer obtains control of the product upon RNG delivery into gas pipeline system, whereas the title and control for the environmental attributes are transferred to the customer subsequent to the issuance of such attributes by the relevant regulatory agency. 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.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
The following table displays the Company’s revenue by major source based on product type (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, | | |
Major Goods/Service Line | | | | | | 2023 | | 2022 | | |
Ethanol sales and related products, net | | | | | | $ | — | | | $ | 169 | | | |
Hydrocarbon revenue | | | | | | 397 | | | 63 | | | |
Renewable natural gas commodity | | | | | | 130 | | | — | | | |
Environmental attribute revenue | | | | | | 3,533 | | | — | | | |
Total operating revenue | | | | | | $ | 4,060 | | | $ | 232 | | | |
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 recorded limited revenues are derived from its development-scale plant, the Luverne Facility.Facility, during the three months ended March 31, 2023, and 2022. 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.Net lossLoss 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 58,651 and 72,434 of dilutive common stock equivalents have been excluded for the three months ended March 31, 2023 and 2022, respectively, as the Company is in a net loss position. See Notes 14 and 18 for all outstanding options and warrants that were not included in the computation of diluted weighted average common shares outstanding, as the exercise price of the options and warrants exceeded the average price of the Company’s common stock during the reporting period, and therefore are anti-dilutive.
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, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
Net loss | Net loss | $ | (13,161) | | | $ | (18,253) | | | $ | (28,834) | | | $ | (28,310) | | Net loss | | $ | (17,618) | | | $ | (15,673) | |
Basic weighted-average shares outstanding | Basic weighted-average shares outstanding | 209,809,994 | | | 198,137,420 | | | 205,889,651 | | | 190,892,223 | | Basic weighted-average shares outstanding | | 237,260,681 | | | 201,925,747 | |
Basic net loss per share | $ | (0.06) | | | $ | (0.09) | | | $ | (0.14) | | | $ | (0.15) | | |
Net loss per share - basic and diluted | | Net loss per share - basic and diluted | | $ | (0.07) | | | $ | (0.08) | |
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 | |
(1)Related to the Net-Zero 1 Project development.
5.Marketable Securities
The Company's investments in marketable securities are stated at fair value and are available-for-sale.available for sale. The following table summarizes the Company's investments in marketable securities (in thousands) as of:
| | | | June 30, 2022 | | | March 31, 2023 |
| | Maturity | | Amortized Cost Basis | | Gross Unrealized Losses | | Fair Value | | Amortized Cost Basis | | Gross Unrealized Losses | | Fair Value |
| Short-term marketable securities | | | | | | | | |
Marketable securities (current) | | Marketable securities (current) | | | | | | |
U.S. Treasury notes | U.S. Treasury notes | Within one year | | $ | 162,238 | | | $ | (800) | | | $ | 161,438 | | U.S. Treasury notes | | $ | 11,005 | | | $ | (61) | | | $ | 10,944 | |
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 | | 22,007 | | | (54) | | | 21,953 | |
Total short-term marketable securities | | $ | 299,887 | | | $ | (2,256) | | | $ | 297,631 | | |
| Total marketable securities (current) | | Total marketable securities (current) | | $ | 33,012 | | | $ | (115) | | | $ | 32,897 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 | |
| | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | Amortized Cost Basis | | Gross Unrealized Losses | | Fair Value |
Marketable securities (current) | | | | | | |
U.S. Treasury notes | | $ | 56,418 | | | $ | (344) | | | $ | 56,074 | |
U.S. Government-sponsored enterprise securities | | 112,030 | | | (696) | | | 111,334 | |
Total marketable securities (current) | | $ | 168,448 | | | $ | (1,040) | | | $ | 167,408 | |
The cost of securities sold is based upon the specific identification method. Interest receivable related to the marketable securities of $1.0$0.2 million was included within "Prepaid expenses and other current assets" on the Consolidated Balance Sheets as of June 30, 2022.March 31, 2023.
Interest income from marketable securities totaled $0.6 million and $1.6 million for the three months ended March 31, 2023 and 2022, respectively, and is included in "Investment income" in the Consolidated Statements of Operations.
5.Restricted Cash
Current and non-current restricted cash of $77.8 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 and interest earned on restricted cash.
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 (as defined below) for the development and construction of NW Iowa RNG. See Note 13, 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 March 31, 2023, 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 (as defined below) under the Indenture (as defined below) 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 March 31, 2023.
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 a 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
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
Interest income from marketable securities totaled $1.2 millionof Credit, which has a 0.3% annual fee and $2.7 million forexpires September 30, 2024 (unless terminated earlier). As of March 31, 2023, no amounts have been drawn under the three and six months ended June 30, 2022, respectively and nil for the three and six months ended June 30, 2021. Interest income from marketable securities is included in "Investment income (loss)" in the Consolidated StatementsPower Letter of Operations.
Future maturities of the Company's marketable securities are $131.4 million in 2022 and $168.6 million in 2023.Credit.
6.Prepaid Expenses and Other Current Assets
The following table sets forth the components of the Company’s prepaid expenses and other current assets (in thousands) as of:
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Prepaid insurance | $ | 1,744 | | | $ | 911 | |
Interest receivable | 1,219 | | | 514 | |
Prepaid feedstock | 1,097 | | | 1,097 | |
Prepaid other | 925 | | | 512 | |
Total prepaid expenses and other current assets | $ | 4,985 | | | $ | 3,034 | |
7.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 June 30, 2022, right-of-use assets under operating leases totaling $2.1 million are included in "Operating right-of use assets," and related lease liabilities totaling $2.2 million ($0.4 million in current and $1.8 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 June 30, 2022, right-of-use assets under finance leases totaling $27.5 million are included in "Finance right-of-use assets," and related lease liabilities totaling $22.6 million are included in the Consolidated Balance Sheets.
The following four tables present the (a) costs by lease category, (b)(i) other quantitative information and (c)(ii) future minimum payments under non-cancelable financing and operating leases as they relate to the Company’s leases (in thousands),thousands, except for weighted averages:
| | | | | | | | | | | |
| Three months Ended June 30, |
| 2022 | | 2021 |
Finance lease cost: | | | |
Amortization of right-of-use assets (1) | $ | 488 | | | $ | 447 | |
Interest on lease liabilities (1) | 251 | | | 316 | |
Operating lease cost | 139 | | | 67 | |
Short-term lease cost | 572 | | | 495 | |
Variable lease cost (2) | 73 | | | 31 | |
Total lease cost | $ | 1,523 | | | $ | 1,356 | |
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 | |
averages):
1.$1.5 million and $0.8 million of amortization and interest expense for the six months ended June 30, 2022, and 2021, respectively, were capitalized as part of construction in progress. The accumulated capitalized amounts of $3.7 million is included in "Property, plant and equipment, net" in the Consolidated Balance Sheets as the related NW Iowa RNG facilities were still under construction on June 30, 2022.
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, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
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 | $ | 23 | | $ | 1 |
Operating cash flows from operating leases | Operating cash flows from operating leases | $ | 359 | | $ | 128 | Operating cash flows from operating leases | $ | 74 | | $ | 287 |
Finance cash flows from finance leases | Finance cash flows from finance leases | $ | 87 | | $ | 3,046 | Finance cash flows from finance leases | $ | 2 | | $ | 1 |
Right-of-use asset obtained in exchange for new finance lease liabilities | $ | 834 | | $ | 27,775 | |
Right-of-use asset obtained in exchange for new operating lease liabilities | $ | — | | $ | 1,562 | |
| 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) | 308 | | 314 |
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) | 61 | | 68 |
Weighted-average discount rate - finance leases (1) | Weighted-average discount rate - finance leases (1) | 10% | | 5% | Weighted-average discount rate - finance leases (1) | 12% | | 11% |
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,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 | | |
Year Ending December 31, | | Year Ending December 31, | Operating Leases | | Finance Leases |
2023 (remaining) | | 2023 (remaining) | $ | 454 | | | $ | 30 | |
2024 | 2024 | 306 | | | 2,730 | | 2024 | 305 | | | 31 | |
2025 | 2025 | 315 | | | 1,744 | | 2025 | 315 | | | 25 | |
2026 | 2026 | 325 | | | 1,760 | | 2026 | 324 | | | 25 | |
2027 and thereafter | 707 | | | 29,583 | | |
2027 | | 2027 | 334 | | | 25 | |
2028 and thereafter | | 2028 and thereafter | 373 | | | 571 | |
Total | Total | 2,558 | | | 44,653 | | Total | 2,105 | | | 707 | |
Less: Amounts representing present value discounts | 349 | | | 22,018 | | |
Less: amounts representing present value discounts | | Less: amounts representing present value discounts | (292) | | | (464) | |
Total lease liabilities | Total lease liabilities | 2,209 | | | 22,635 | | Total lease liabilities | 1,813 | | | 243 | |
Less: current portion | Less: current portion | 423 | | | 6,293 | | Less: current portion | (421) | | | (59) | |
Long-term portion | $ | 1,786 | | | $ | 16,342 | | |
Non-current portion | | Non-current portion | $ | 1,392 | | | $ | 184 | |
7.8.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 | |
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Raw materials | | | |
| | | |
Consumables | $ | 29 | | | $ | 29 | |
Catalyst | 77 | | | 139 | |
Finished goods | | | |
SAF, Isooctane, Isooctene and other | 1,061 | | | 1,457 | |
Isobutanol | 124 | | | 124 | |
| | | |
Work in process | | | |
| | | |
Environmental attributes, net of allowance of $2,122 and $2,378, respectively | 2,656 | | | 4,193 | |
Jet fuel | 51 | | | 51 | |
Spare parts | 357 | | | 354 | |
Total inventories | $ | 4,355 | | | $ | 6,347 | |
WorkEnvironmental attributes represent distinguishable and material output from our NW Iowa RNG operations. The Company started allocating the 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 months ended March 31, 2023, the Company did not adjust its finished goods and work in process inventory, includes unfinished SAF, isooctane, and isooctene inventory.
excluding environmental attributes, to net realizable value. During the sixthree months ended June 30, March 31, 2022, the Company adjusted its finished goods and work in process inventory to net realizable value and recorded a $0.8loss of $2.9 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.production.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
8.9.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 | | | March 31, 2023 | | December 31, 2022 |
Land | Land | | | $ | 410 | | | $ | 410 | | Land | | $ | 6,452 | | | $ | 6,452 | |
Plant facilities and infrastructure | Plant facilities and infrastructure | 5 | to | 20 | | 84,117 | | | 84,117 | | Plant facilities and infrastructure | | 76,875 | | | 76,900 | |
Machinery and equipment | Machinery and equipment | 5 | to | 10 | | 25,416 | | | 25,369 | | Machinery and equipment | | 88,002 | | | 87,248 | |
Furniture and office equipment | Furniture and office equipment | 3 | to | 7 | | 2,606 | | | 2,550 | | Furniture and office equipment | | 2,990 | | | 2,977 | |
Software | Software | 3 | to | 6 | | 1,621 | | | 1,564 | | Software | | 2,217 | | | 2,217 | |
Construction in progress | Construction in progress | | | 128,080 | | | 88,990 | | Construction in progress | | 82,780 | | | 72,717 | |
Total property, plant and equipment | Total property, plant and equipment | | 242,250 | | | 203,000 | | Total property, plant and equipment | | 259,316 | | | 248,511 | |
Less accumulated depreciation and amortization | | (66,196) | | | (63,859) | | |
Less: accumulated depreciation and amortization | | Less: accumulated depreciation and amortization | | (75,454) | | | (71,639) | |
Property, plant and equipment, net | Property, plant and equipment, net | | $ | 176,054 | | | $ | 139,141 | | Property, plant and equipment, net | | $ | 183,862 | | | $ | 176,872 | |
The Company recorded depreciation expenseexpenses of $1.2$4.2 million and $2.3$1.2 million for the three and six months ended June 30,March 31, 2023 and 2022, respectively, as compared with $1.2 million and $2.4 million for the same periods ended June 30, 2021.respectively.
At June 30, 2022, construction in progress included accruals of $11.5 million.
Construction in progress includes $0.8$28.9 million for Gevo, $13.4$11.4 million for our subsidiary,the Agri-Energy LLCsegment ("Agri-Energy") $75.5related to a fractionation and hydrocarbon skid, $1.6 million for NW Iowa RNG and $38.4$40.9 million for the Net-Zero 1 ProjectNZ1 at June 30, 2022.March 31, 2023. Construction in progress includes $0.4$25.9 million for Gevo, $9.1$11.4 million for Agri-Energy, $56.9$1.0 million for NW Iowa RNG and $22.5$34.4 million for the Net-Zero 1 ProjectNZ1 at December 31, 2021.2022. Construction in progress is not subject to depreciation until the assets are placed into service. At March 31, 2023, construction in progress included accruals of $13.3 million.
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 did not capitalize interest expense during the three months ended March 31, 2023, and capitalized $0.8$0.5 million and nil of interest expense for the sixthree months endedJune 30, 2022, and June 30, 2021, respectively. March 31, 2022.
9.10.Intangible Assets
IntangibleIdentifiable 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 setstables set forth the Company’s identifiable intangible assets by classification (in thousands) as of:
| | | June 30, 2022 | | March 31, 2023 |
| | 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 | | | $ | (1,184) | | | $ | 3,396 | | | 7.4 |
Defensive assets | Defensive assets | 4,900 | | | (452) | | | 4,448 | | | 8.4 | Defensive assets | 4,900 | | | (896) | | | 4,004 | | | 8.4 |
Identifiable intangible assets | $ | 9,480 | | | $ | (1,116) | | | $ | 8,364 | | | 7.9 | |
Intangible assets | | Intangible assets | $ | 9,480 | | | $ | (2,080) | | | $ | 7,400 | | | 7.9 |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
| | | December 31, 2021 | | December 31, 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 | $ | 4,575 | | | $ | (368) | | | $ | 4,207 | | | 7.3 | Patents | $ | 4,580 | | | $ | (1,039) | | | $ | 3,541 | | | 7.4 |
Defensive assets | Defensive assets | 4,895 | | | (164) | | | 4,731 | | | 8.4 | Defensive assets | 4,900 | | | (750) | | | 4,150 | | | 8.4 |
Identifiable intangible assets | $ | 9,470 | | | $ | (532) | | | $ | 8,938 | | | 7.9 | |
Intangible assets | | Intangible assets | $ | 9,480 | | | $ | (1,789) | | | $ | 7,691 | | | 7.9 |
The Company recorded amortization expense of $0.3 million and $0.6 million for each of the three and six months ended June 30, 2022, respectively, as compared with nilMarch 31, 2023 and nil for the same periods ended June 30, 2021.2022.
The following table details the estimated amortization of identifiable intangible assets as ofJune 30, 2022 (in March 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | |
Year ending December 31, | Patents | | Defensive Assets | | Total |
2022 (remaining) | $ | 304 | | | $ | 297 | | | $ | 601 | |
2023 | 599 | | | 586 | | | 1,185 | |
2024 | 601 | | | 588 | | | 1,189 | |
2025 | 599 | | | 586 | | | 1,185 | |
2026 | 585 | | | 586 | | | 1,171 | |
2027 and thereafter | 1,228 | | | 1,805 | | | 3,033 | |
Total | $ | 3,916 | | | $ | 4,448 | | | $ | 8,364 | |
| | | | | | | | | | | | | | | | | |
Year Ending December 31, | Patents | | Defensive Assets | | Total |
2023 (remaining) | $ | 437 | | | $ | 439 | | | $ | 876 | |
2024 | 582 | | | 586 | | | 1,168 | |
2025 | 582 | | | 586 | | | 1,168 | |
2026 | 582 | | | 586 | | | 1,168 | |
2027 | 582 | | | 586 | | | 1,168 | |
2028 and thereafter | 631 | | | 1,221 | | | 1,852 | |
Total intangible assets | $ | 3,396 | | | $ | 4,004 | | | $ | 7,400 | |
10.11.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 |
Deposits (1) | $ | 991 | | | $ | 831 | |
Equity interest (2) | 1,500 | | | 1,500 | |
Exclusivity fees (3) | 3,250 | | | 3,250 | |
Total Deposits and Other Assets | $ | 5,741 | | | $ | 5,581 | |
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Deposits (1) | $ | 276 | | | $ | 276 | |
Prepaid feedstock (2) | 1,175 | | | 934 | |
Equity interest (3) | 1,500 | | | 1,500 | |
Exclusivity fees (4) | 2,522 | | | 2,522 | |
Deposits receivable (5) | 18,961 | | | 8,302 | |
Other assets, net (6) | 8,353 | | | 8,460 | |
Total deposits and other assets | $ | 32,787 | | | $ | 21,994 | |
(1)Deposits for legal services and productproducts for NZ1.
(2)Prepaid feedstock fees, non-current, for the Net-Zero 1 Project.production of RNG.
(2) (3)The Company directly holds a 4.6% interest ofinterest in the Series A Preferred Stock inof Zero6 Clean Energy Assets, Inc. ("Zero6"), formerly 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'sZero6's stock, subject to impairment. The equity interest in JuhlZero6 is also pledged as collateral against two future obligations to Rock County Wind Fuel, LLC ("RCWF"), a JuhlZero6 subsidiary, see Footnote 15,Note 16, Commitments and Contingencies, for additional information.
(3) (4)Axens North America, Inc. ("Axens") will provide certain alcohol-to-SAF technologies and services exclusively provided to the Company which may be offset against future license fees subject to the delivery of a process design package.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
11.(5)Deposits provided to a developer of certain wind-farm projects and power utility contractor to induce the contractor 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 $13.5 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.
(6)Payments which were allocated to the non-lease fuel supply, primarily related to sand separation systems, to support NW Iowa RNG fuel supply agreements prior to commencement of operations, being amortized over the life of the project.
12.Accounts Payable and Accrued Liabilities
The following table sets forth the components of the Company's accounts payable and accrued liabilities in the Consolidated Balance Sheets (in thousands) as of:
| | | June 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Accounts payable | Accounts payable | $ | 3,378 | | | $ | 4,830 | | Accounts payable | $ | 3,858 | | | $ | 5,009 | |
Accrued liabilities | Accrued liabilities | 11,519 | | | 18,345 | | Accrued liabilities | 16,193 | | | 12,594 | |
Accrued payroll and related benefits | Accrued payroll and related benefits | 3,454 | | | 4,678 | | Accrued payroll and related benefits | 4,505 | | | 5,105 | |
Other accrued liabilities | 399 | | | 435 | | |
Accrued sales and use tax | | Accrued sales and use tax | 375 | | | 2,052 | |
Total accounts payable and accrued liabilities | Total accounts payable and accrued liabilities | $ | 18,750 | | | $ | 28,288 | | Total accounts payable and accrued liabilities | $ | 24,931 | | | $ | 24,760 | |
12.13.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 beingwere used as a source of construction financing alongside equity from the Company. The bonds2021 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 bonds2021 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 5, 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 are2021 Bonds became callable and re-marketable on or after October 1, 2022. If the bonds2021 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 bonds2021 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 June 30, 2022,March 31, 2023, 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-termnon-current debt and is presented net of the premium and issuance costs, which are being amortized over the life of the bonds2021 Bonds using the interest method. As of June 30,March 31, 2023 and December 31, 2022, the premium balance and the debt issuance cost net of amortization were $0.5$0.3 million, $0.4 million, $1.0 million, and $1.9$1.3 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$0.2 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.
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 |
2021 Bonds | 1.5% | | January 2042 | | $ | 66,853 | | | $ | 66,486 | |
SBA Loans | 1.0% | | April 2025 | | 272 | | | 320 | |
Equipment | 4% | to | 5% | | February 2022 | to | December 2024 | | 124 | | | 156 | |
Total loans payable - other | | | | | | | | | 67,249 | | | 66,962 | |
Less current portion | | | | | | | | | (158) | | | (158) | |
Long-term portion | | | | | | | | | $ | 67,091 | | | $ | 66,804 | |
Future principal payments for the Company's long-term debt are as follows (in thousands):
| | | | | |
Year Ending December 31, | Total Debt |
2022 (remaining) | $ | 78 | |
2023 | 159 | |
2024 | 66,983 | |
2025 | 29 | |
2026 | — | |
Total loans payable - other | $ | 67,249 | |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
The summary of the Company's debt is as follows (in thousands) as of:
13.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Rate | | Maturity Date | | March 31, 2023 | | December 31, 2022 |
2021 Bonds, net | 1.5% | | April 2042 | | $ | 67,408 | | | $ | 67,223 | |
SBA Loans | 1.0% | | April 2025 | | 200 | | | 224 | |
Equipment | 4% | to | 5% | | December 2023 | to | December 2024 | | 78 | | | 94 | |
Total debt | | | | | | 67,686 | | | 67,541 | |
Less: current portion | | | | | | | | | (152) | | | (159) | |
Non-current portion | | | | | | | | | $ | 67,534 | | | $ | 67,382 | |
Future payments for the Company's debt are as follows (in thousands):
| | | | | |
Year Ending December 31, | Total Debt |
2023 (remaining) | $ | 120 | |
2024 | 67,537 | |
2025 | 29 | |
Total debt | $ | 67,686 | |
14.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 the 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 June 30, 2022, 7,645,467 shares remained At March 31, 2023, 4,109,441 shares were available for awardsfuture issuance 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 dates of grant during the year ended December 31, 2018. The vesting period for stock appreciation rights granted are based upon 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-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, |
| 2022 | | 2021 | | 2022 | | 2021 |
Equity Classified Awards | | | | | | | |
Stock options | | | | | | | |
Cost of goods sold | $ | 89 | | | $ | — | | | $ | 174 | | | $ | — | |
Research and development | 83 | | | — | | | 134 | | | — | |
Selling, general and administrative | 1,625 | | | — | | | 3,069 | | | — | |
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 | 141 | | | — | | | 279 | | | — | |
Total equity classified awards | 4,220 | | | 858 | | | 8,264 | | | 1,420 | |
Liability Classified Awards | | | | | | | |
Restricted stock | | | | | | | |
Selling, general and administrative | (381) | | | — | | | (188) | | | — | |
Stock appreciation rights | | | | | | | |
Research and development | (126) | | | (159) | | | (126) | | | 189 | |
Selling, general and administrative | (26) | | | (7) | | | (5) | | | 8 | |
Total liability classified awards | (533) | | | (166) | | | (319) | | | 197 | |
Total stock-based compensation | $ | 3,687 | | | $ | 692 | | | $ | 7,945 | | | $ | 1,617 | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
Equity Classified Awards | | | | | | | |
Cost of production | | | | | $ | 18 | | | $ | 193 | |
General and administrative | | | | | 3,923 | | | 3,494 | |
Other | | | | | 736 | | | 357 | |
Total equity classified awards | | | | | 4,677 | | | 4,044 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Liability Classified Awards | | | | | | | |
General and administrative | | | | | — | | | 214 | |
| | | | | | | |
Total liability classified awards | | | | | — | | | 214 | |
Total stock-based compensation | | | | | $ | 4,677 | | | $ | 4,258 | |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
Stock option award activity. Stock option activity under the Company’s stock incentive plans and changes during the sixthree months ended June 30, 2022,March 31, 2023, 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, 2022 | 5,945,321 | | | $ | 4.65 | | | 9.6 | | $ | — | |
Granted | 55,918 | | | $ | 2.12 | | | | | $ | — | |
Canceled or forfeited | (26,173) | | | $ | 8.04 | | | | | $ | — | |
Exercised | — | | | $ | — | | | | | $ | — | |
Options outstanding at March 31, 2023 | 5,975,066 | | | $ | 4.62 | | | 9.1 | | $ | — | |
Options vested and expected to vest at March 31, 2023 | 1,492,796 | | | $ | 5.26 | | | 0.5 | | $ | — | |
(1)Exercise price of options outstanding range from $2.73$2.12 to $19,620.00$11,160 as of June 30, 2022March 31, 2023. The higher range end of the range is due to historicalthe impact of several reverse stock reverse splits.splits during the years 2015 to 2018, subsequent to certain option grants, and relates to awards that expire during 2023.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
As of June 30, 2022March 31, 2023, the total unrecognized compensation expense, net of estimated forfeitures, relating to stock options was $14.6$11.6 million, which is expected to be recognized over the remaining weighted-average period of approximately 3.31.9 years.
Restricted stock. Non-vested restricted stock awards and the changes during the sixthree months ended June 30, 2022,March 31, 2023, were as follows:
| | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant-Date Fair Value |
Outstanding at December 31, 2021 | 6,882,502 | | | $ | 3.77 | |
Granted | 165,174 | | | $ | 4.45 | |
Exercised | (209,398) | | | $ | 2.63 | |
Canceled or forfeited | (252,801) | | | $ | 4.87 | |
Vested | (364) | | | $ | 2.30 | |
Non-vested at June 30, 2022 | 6,585,113 | | | $ | 4.01 | |
| | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant-Date Fair Value |
Outstanding at December 31, 2022 | 5,254,457 | | | $ | 3.94 | |
Granted | 89,334 | | | $ | 1.89 | |
Vested and issued | — | | | $ | — | |
Canceled or forfeited | (7,295) | | | $ | 3.39 | |
| | | |
Non-vested at March 31, 2023 | 5,336,496 | | | $ | 3.91 | |
The total fair value of restricted stock that vested during the six months ended June 30, 2022,was $0.6 million. As of June 30, 2022, March 31, 2023, the total unrecognized compensation expense, net of estimated forfeitures, relating to restricted stock awards was $17.2$14.3 million, which is expected to be recognized over the remaining weighted-average period of approximately 2.71.8 years. As of June 30, 2022, we had recorded a liability of $0.5 million for earned and unvestedMarch 31, 2023, there are no liability-classified restricted stock awards based on the fair value of our common stock as of June 30, 2022.awards.
14.15.Income Taxes
The Company has incurred operating losses since inception,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.
15.16.Commitments and Contingencies
Legal mattersMatters. 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.
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
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 June 30, 2022March 31, 2023, 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 liabilitiesLiabilities. 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 June 30, 2022.March 31, 2023.
In February 2022, an incident occurred at one ofFuel Supply Commitment. The Company has three long-term fuel supply contracts to source feedstock for the anaerobic digesters that is part ofat the NW Iowa RNG that resultedproject. These contracts provide an annual amount of feedstock to be used in the accidental dischargeproduction 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.RNG.
Praj Commitment. In April 2022, 2 separate incidents occurred at 2June 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 $3.6 million as 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 2 discharges.March 31, 2023.
There isZero6 Commitments. In September 2022, the Company entered into a possibility thatdevelopment agreement with Zero6 to construct and operate a wind project for the DNR will initiate an enforcement action with respectprovision of electric energy for NZ1. Pursuant to the April 2022, discharges described above that could result in a monetary sanction being levied against Gevoagreement, the Company has committed to pay Zero6 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 is not contractually obligated for the accidental discharges. We do not believe that any such monetary sanctions would be material tospecified development charges until certain milestones are met in future periods, and upon completion of the Company.project.
TheAdditionally, the Company's investment in JuhlZero6, see Note 11 above, is pledged separately as a collateral for 2two commitments related to afor the purchase of wind electricity for the Luverne Facility, as well as the purchase of 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 June 30, 2022,March 31, 2023, and thereafter are shown below:below (in thousands):
| | | | | | | | | | | |
Year ending December 31, | Electricity Above Use (estimated) | | Renewable Energy Credits |
2022 (remaining) | $ | 257 | | | $ | 150 | |
2023 | 440 | | | 150 | |
2024 | 440 | | | 150 | |
2025 | 440 | | | 150 | |
2026 | — | | | 150 | |
2027 and thereafter | — | | | 1,900 | |
Total commitments | $ | 1,577 | | | $ | 2,650 | |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, | | Total |
| 2023 (remaining) | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 and thereafter | |
Fuel Supply Payments | $ | 2,309 | | | $ | 2,408 | | | $ | 1,702 | | | $ | 1,718 | | | $ | 1,736 | | | $ | 28,263 | | | $ | 38,136 | |
Zero6 Commitment | 222 | | | 322 | | | 6,747 | | | — | | | — | | | — | | | 7,291 | |
Praj Commitment | 3,600 | | | — | | | — | | | — | | | — | | | — | | | 3,600 | |
Renewable Energy Credits | 114 | | | 152 | | | 152 | | | 152 | | | 152 | | | 1,877 | | | 2,599 | |
Electricity Above Use (Est.) | 234 | | | 321 | | | 332 | | | 345 | | | 357 | | | 5,498 | | | 7,087 | |
Total | $ | 6,479 | | | $ | 3,203 | | | $ | 8,933 | | | $ | 2,215 | | | $ | 2,245 | | | $ | 35,638 | | | $ | 58,713 | |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
16.17.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)
The carrying value and fair value, by fair value hierarchy, of the Company's financial instruments at June 30, 2022,March 31, 2023, and December 31, 2021, respectively,2022 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements at June 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) |
Recurring | | | | | | | |
Marketable securities | | | | | | | |
U.S. Treasury notes | $ | 161,438 | | | $ | 161,438 | | | $ | — | | | $ | — | |
U.S. Government-sponsored enterprise securities | 136,193 | | | 136,193 | | | — | | | — | |
Other | | | | | | | |
Liability-classified restricted stock awards | 514 | | | 514 | | | — | | | — | |
Total recurring | $ | 298,145 | | | $ | 298,145 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements at March 31, 2023 |
| Fair Value at March 31, 2023 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Cash and cash equivalents (1) | $ | 342,283 | | | $ | 342,283 | | | $ | — | | | $ | — | |
Marketable securities | $ | 32,897 | | | $ | 32,897 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | 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) |
Recurring | | | | | | | |
Marketable securities | | | | | | | |
U.S. Treasury notes | $ | 225,792 | | | $ | 225,792 | | | $ | — | | | $ | — | |
U.S. Government-sponsored enterprise securities | 113,944 | | | 113,944 | | | — | | | — | |
Other | | | | | | | |
Liability-classified restricted stock awards | 894 | | | 894 | | | — | | | — | |
Total recurring | $ | 340,630 | | | $ | 340,630 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements at December 31, 2022 |
| Fair Value at December 31, 2022 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Cash and cash equivalents (1) | $ | 237,125 | | | $ | 237,125 | | $ | — | | $ | — | | | $ | — | |
Marketable securities | $ | 167,408 | | | $ | 167,408 | | | $ | — | | | $ | — | |
There were (1)Cash and cash equivalents includes $317.3 million and $200.7 million invested in J.P Morgan U.S. government money market funds as of March 31, 2023 and December 31, 2022, respectively.
The Company had no transfers toof assets or from Level 2 or Level 3 in the six months ended June 30, 2022.liabilities between fair value hierarchy levels between December 31, 2022, and March 31, 2023.
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 June 30, 2022,March 31, 2023, are summarized as follows:follows (in thousands):
| | | | | | | | | | | |
| June 30, 2022 |
| Carrying Value | | Estimated Fair Value |
| | | |
2021 Bonds | $ | 66,853 | | | $ | 65,994 | |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
| | | | | | | | | | | |
| Carrying Value | | Estimated Fair Value |
| | | |
2021 Bonds | $ | 67,408 | | | $ | 65,334 | |
17.
18.Shareholders'Stockholders' 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 June 30, 2022,March 31, 2023, 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 June 30, 2022,March 31, 2023, 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 a 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.
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 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. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuance Date | | Expiration Date | | Exercise Price as of March 31, 2023 | | Shares Underlying Warrants on Issuance Date | | Shares Issued upon Warrant Exercises as of March 31, 2023 | | Shares Underlying Warrants Outstanding as of March 31, 2023 |
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 | |
GEVO, INC.
Notes to Consolidated Financial Statements
(unaudited)
During the six months ended June 30, 2022(1), common stock was issued as a result of the exercise of warrants as shown below (dollars in thousands):Equity-classified warrants.
| | | | | | | | | | | |
| Common Stock Issued | | Proceeds |
Series 2020-A Warrants | 4,677 | | | $ | 3 | |
During the three months ended March 31, 2023, no warrants were exercised.
18.19.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; and (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 transforming renewable energy into energy-dense liquid hydrocarbons that can be used as renewable fuels, such as SAF, with the future production of SAF,potential to achieve a “net-zero” greenhouse gas ("GHG") footprint; 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 is responsible for development and construction of our Net-Zero projects.Projects.
Agri-Energy segment. The Agri-Energy segment is currently responsible for the operation of the Company’s Luverne Facility and the development and optimization of the production of isobutanol, ethanol and related products.
Renewable Natural Gas segment. The Renewable Natural Gas segment produces low-carbonpipeline 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 March 31, 2023 |
| | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Revenues | Revenues | $ | 18 | | | $ | 71 | | | $ | — | | | $ | 89 | | Revenues | $ | 397 | | | $ | — | | | $ | 3,663 | | | $ | 4,060 | |
Loss from Operations | Loss from Operations | $ | (13,025) | | | $ | (3,113) | | | $ | 23 | | | $ | (16,115) | | Loss from Operations | $ | (15,499) | | | $ | (3,147) | | | $ | (2,211) | | | $ | (20,857) | |
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 | $ | 9,977 | | | $ | — | | | $ | 1,457 | | | $ | 11,434 | |
| | | Three Months Ended June 30, 2021 | | Three Months Ended March 31, 2022 |
| | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Revenues | Revenues | $ | 346 | | | $ | — | | | $ | — | | | $ | 346 | | Revenues | $ | 63 | | | $ | 169 | | | $ | — | | | $ | 232 | |
Loss from Operations | Loss from Operations | $ | (11,915) | | | $ | (7,183) | | | $ | — | | | $ | (19,098) | | Loss from Operations | $ | (12,124) | | | $ | (3,808) | | | $ | (23) | | | $ | (15,955) | |
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 | $ | 4,438 | | | $ | 3,947 | | | $ | 10,393 | | | $ | 18,778 | |
| | Six Months Ended June 30, 2022 | |
| Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | |
Revenues | $ | 81 | | | $ | 240 | | | $ | — | | | $ | 321 | | |
Loss from Operations | $ | (25,149) | | | $ | (6,921) | | | $ | — | | | $ | (32,070) | | |
Acquisitions of patents, plant, property and equipment | $ | 16,308 | | | $ | 4,275 | | | $ | 18,668 | | | $ | 39,251 | | |
| | Six Months Ended June 30, 2021 | |
| Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | |
Revenues | $ | 359 | | | $ | — | | | $ | — | | | $ | 359 | | |
Loss from Operations | $ | (19,678) | | | $ | (9,310) | | | $ | (68) | | | $ | (29,056) | | |
Acquisitions of patents, plant, property and equipment | $ | 841 | | | $ | 1,908 | | | $ | 17,101 | | | $ | 19,850 | | |
| | | June 30, 2022 | | March 31, 2023 |
| | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Total assets | Total assets | $ | 601,313 | | | $ | 64,940 | | | $ | 108,358 | | | $ | 774,611 | | Total assets | $ | 560,914 | | | $ | 32,109 | | | $ | 95,671 | | | $ | 688,694 | |
| | | December 31, 2021 | | December 31, 2022 |
| | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated | | Gevo | | Agri-Energy | | Renewable Natural Gas | | Consolidated |
Total assets | Total assets | $ | 484,528 | | | $ | 64,008 | | | $ | 117,940 | | | $ | 666,476 | | Total assets | $ | 573,057 | | | $ | 34,440 | | | $ | 93,251 | | | $ | 700,748 | |
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.20.Subsequent Events
Recent Agreements. On July 25, 2022,May 5, 2023, Gevo entered into a Side Agreement (the "Side Agreement") with Axens, which modifies the exclusivity provisions contained in the Company's existing agreement with Axens, permitting Axens to provide certain services and grant certain licenses relating to the conversion of ethanol to hydrocarbons fuels via dehydration, oligomerization, and saturation in certain areas of the Midwest to Phillips 66 Company closed(“P66”), Archer-Daniels-Midland Company (“ADM” and together with P66, the "Potential Partners"), or a joint venture entity between ADM and P66 (the "JV"). In connection with the Side Agreement, and as consideration for Gevo to share Axens’ technology with P66 and ADM, Gevo, P66 and ADM entered into a Technology Access Agreement, dated as of May 5, 2023 (the “TAA”). As consideration for Gevo entering into the TAA and the Side Agreement, the Potential Partners shall cause the applicable JV to pay Gevo certain milestone payments in connection with the development and production of the hydrocarbon fuels, expected to equal to $50 million if all milestones are achieved. Additionally, the Potential Partners will cause the applicable JV to make royalty payments to Gevo on such renewable hydrocarbons produced during a certain period (subject to a cap) and described in the purchaseTAA. The royalty payments are expected to equal at least $75 million if certain conditions and production milestones are achieved.
LG Chem Agreement. In April 2023, Gevo entered into a joint development agreement with LG Chem, Ltd. ("LG Chem") to develop bio-propylene for renewable chemicals using Gevo’s Ethanol-to-Olefins ("ETO") technology. Under the terms of approximately 245 acres near Lake Preston, South Dakotathe agreement, Gevo will provide the core enabling technology it has developed for renewable olefins to be produced from low-carbon ethanol and together the Net-Zero 1 Project. The total net purchase priceparties will collaborate to accelerate the pilot research, technical scale-up, and commercialization of bio-propylene. LG Chem is expected to bear all scale-up costs for chemicals, in addition to remitting certain payments to Gevo of $1.3 million in the land was approximately $6.0 million.second quarter of 2023, and $1.2 million over the next two years to help defray a portion of the costs associated with the joint development efforts.
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, develop, and construct our Net-Zero 1 ProjectProjects (as defined below), as well as other growth projects, 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 FacilityProjects 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-takeofftake agreements and other supplysales agreements we may enter into in the future, our ability to successfully construct and operate our renewable natural gas, also known as biogas ("RNG") projectfacilities 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 development and production, 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 United States ("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, 20212022 (our “2021“2022 Annual Report”), including Item 1A. "Risk Factors" of our 20212022 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 "Gevo", “we,” “us,” “our” and the “Company” refer to Gevo, Inc. and its wholly owned, direct and indirect 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 20212022 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 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 the Argonne National Laboratory’s GREET (GreenhouseGreenhouse gases, Regulated Emissions, and Energy use in Transportation)Transportation model (the "GREET Model") to measure, predict and verify GHG emissions across the life cyclelife-cycle of our products. The "net-zero"Our “net-zero” concept means we expect to producethe production of drop-in hydrocarbon fuels that could havea carbon neutral orby using sustainably grown feedstocks (e.g., low till, no-till and dry corn cultivation), renewable and substantially decarbonized energy sources, resulting in a net-zero GHGcarbon footprint acrossfrom the whole of thefull life cycle of the fuel measured from the capture of renewable carbon through production, and subsequentthe burning of the fuel in, for example, a jet engine.fuel.
Our primary market focus, given current demand and growing customer interest, is SAF. We believe we also have additional 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, duecontinues to the COVID-19 pandemic,remain strong, with global fuel consumption dropped toin the past few years ranging from 52 billion gallons in 2020 and reached 57to 60 billion gallons in 2021.gallons.
We believe that there is a growing and significant market demand for SAF production generally based on a number of factors, including:
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| ● | The Biden administration launched a new Sustainable Aviation Fuel Grand Challenge (the "Challenge") to meet the demand for sustainable aviation fuels by working with stakeholders to reduce costs, enhance sustainability, and expand production and use of sustainable aviation fuels which achieve a minimum of a 50% reduction in life cycle GHGs compared to conventional fuel. In addition, the Challenge will adopt the goal of supplying at least 3 billion gallons of SAF per year by 2030 and, by 2050, sufficient SAF to meet 100% of aviation fuel demand, which is currently projected to be around 35 billion gallons per year. |
| ● | 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 the year 2050. IATA has 288302 airline members, including Alaska Airlines, American Airlines, Delta Air Lines, FedEx Express, United Airlines and UPS Airlines. |
| ● | Starting on March 1, 2020, Delta Air Lines committed to spending $1 billion over the next 10 years on itsthrough 2030 with an objective aroundof 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 zeronet-zero emissions by 2050. |
| ● | The World Economic Forum's Clean Skies for Tomorrow Coalition, a group of airlines, airports, fuel suppliers and other industry stakeholders working to advance the transition to net-zero flying, has announced a joint goal to achieve a blend of 10% SAF in global jet fuel 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").third parties, and our own technology, know-how, and engineering. 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 itits source is already incarbon dioxide from the atmosphere. The carbohydrates are fermented to produce alcoholalcohol-based intermediate products (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.(e.g., 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:
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| ● | 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”"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., photosynthetic, wind, renewable natural gas, biogas) from a variety of sources into energy dense liquid hydrocarbons that, when burnedAs announced 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,February 2022, and burnt as a result of our agreement and relationship with Axens North America, Inc. (“Axens”), Gevo made the decision to utilize Axens’ ethanol fermentation technology instead of our proprietary isobutanol fermentation technology to produce sustainable aviation fuel for cars, planes, trucks and ships.other renewable hydrocarbon products in our Net-Zero Projects.
We announced ourOur initial Net-Zero Project, (“Net-Zero 1 ("NZ1"), is plannedexpected to be constructed atlocated in Lake Preston, South Dakota. NZ1Dakota, and is expectedbeing currently designed to produce approximately 5565 million gallons per year ("MGPY") of SAF or 62 MGPY of total hydrocarbon volumes, including 60 MGPY of SAF, which would satisfyfulfill part of the more than 350our approximately 400 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 4201,390 million pounds per year of high-value protein products for use in the food chain and more than 3034 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 andto produce the carbohydrates needed for the production of SAF while simultaneously enabling the production of protein oil, and carbohydrates,oil; the second stage involvesstep produces alcohols production by fermentationusing carbohydrate-based fermentation; and the third stagestep is the conversion of suchthe alcohols into hydrocarbons.
We have an exclusive license in the United StatesU.S. 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 risk is substantially de-risked.
The transition to an ethanol-to-SAF design from Gevo’s original isobutanol-to-SAF and isooctane design has at NZ1 resulted in an expected increase of output capacity which should result in 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.decreased.
The NZ1 project development is proceeding and engineering work for NZ1 continues. Based on schedule with initial volumescurrent information, the installed cost for NZ1 is currently forecasted to be approximately $850 million, excluding certain contingencies and financing costs. Upon receiving an invitation from the U.S. Department of SAFEnergy ("DOE"), we submitted The Part Two Application for a DOE loan guarantee for a direct lending from Federal Financing Bank. This DOE guarantee lending facility is expected to be delivered in 2025. Key NZ1 development milestones are:offer the lowest cost of debt for the project.
Through year-end 2022:
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| ● | 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 |
We currently expect to finance the construction of NZ1 at the subsidiary level using a combination of our own capital and third-party capital. The Company expects to retain a carried equity interest in the project and may invest equity in the project using the proceeds from the reimbursement of the Company’s NZ1 development expenditures. Cash distributions from future NZ1 earnings would be proportionate to Gevo’s minority ownership in NZ1 under this expected financing structure which would allow us to conserve and redeploy our capital on other growth projects, including our Net-Zero 2 project ("NZ2"). We currently expect to apply similar development and financing approaches to NZ2 and future Net-Zero Projects to enable growth of SAF production to meet demand for SAF.
ThroughIn order to achieve full construction financing for NZ1, we need to secure third-party equity and debt. Given the first-half 2023:
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| ● | Close the construction financing, including non-recourse debt |
current interest rate environment and general macroeconomic conditions, a DOE-guaranteed loan is our most attractive debt option. We expect that obtaining a DOE-guaranteed loan will have the benefit of reducing the overall amount of equity required to finance NZ1 and should result in higher project equity returns for investors which should increase the likelihood of Gevo successfully financing NZ1. However, the DOE loan application process is expected to carry into 2024. We expect that our NZ1 plant start-up date will occur twenty-four to thirty months after the financing of NZ1 closes, the timing of which is uncertain. In parallel with the DOE-guaranteed loan process, we continue to explore financing NZ1 without the benefit of the DOE-guaranteed loan.
GevoWe are doing extra engineering work on the NZ1 plant design with a focus on increasing the modularization of its component parts. This means that we expect that the process equipment would be built into modules at a factory, then the modules would be assembled onsite at NZ1, with the goal of minimizing specialized field work typical in plant construction of this type. This approach is expected to help de-risk the cost of, and access to, skilled labor at the site and reduce the supply chain constrictions for some of our long-lead equipment. Increasing the modularization of the plant design is also expected to reduce our spend in the processadvance of identifyingsecuring a third-party equity investor in NZ1.
We are evaluating and performing early site development work at several sites in the U.S. for additional SAF production locations.our second Net-Zero Project, NZ2. 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 prospectspotential Net-Zero Projects 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 potential partners and sites with decarbonization in mind and is engaged in preliminary feasibility and development discussions with several of them.these potential partners. We plan to give priority to existing industrial plant sites that have attractive potential economics and high predictability of timeline for decarbonization.
Luverne FacilityRenewable Natural Gas Facilities
The Luverne Facility continuesWe are developing RNG and biogas projects to provide valuable knowledgegenerate incremental profit and experience for the future strategic growthto create a long-term option to potentially supply RNG to our Net-Zero Projects as part of the Companyour long-term strategy to decarbonize SAF 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 Projectsother hydrocarbon fuels.
In 2019, we began developing our first RNG projects. Manure can befacilities in northwest Iowa, which were substantially completed in 2022. Animal manure is digested anaerobically to produce biogas, which is then upgraded to pipeline quality RNG. RNG has value in markets such as California when injected and shipped through a natural gas pipeline. There is also value to Gevo’sas well as in our hydrocarbon production process by givinghelping us another option to achieve carbon negative GHG emissions on our renewable hydrocarbon products. The hydrocarbonend 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 Our initial RNG project, in NorthwestGevo NW Iowa (the “RNG Project”) has been producing biogas and is now upgrading and injecting RNG, into a natural gas pipeline. TheLLC ("Gevo RNG"), was developed to generate RNG Project generates renewable natural gas captured from dairy cow manure. The manure for the RNG Projectwhich is supplied by three dairy farmsdairies located in Northwest Iowa totaling over 20,000 milking cows. When at full operational capacity,We financed the construction of the Gevo RNG Project is expectedproject in April 2021 with the $68,155,000 of Solid Waste Facility Revenue Bonds (Gevo NW Iowa RNG, LLC Renewable Natural Gas Project), Series 2021 (Green Bonds) (the "2021 Bonds") issued by the Iowa Finance Authority in a public offering for the benefit of Gevo RNG and we commenced construction in April 2021. See Note 13 to the Consolidated Financial Statements for further detail.
In January 2022, Gevo RNG began start-up operations and late in the second quarter of 2022, began producing biogas. We have been ramping up its production of biogas since the third quarter of 2022, upgrading raw biogas to RNG, and the injection of RNG into an interconnected natural gas pipeline. The Gevo RNG project was initially designed to generate approximatelyup to 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 the RNG sales, including the attributes available from California's Low Carbon Fuel Standard ("LCFS") program and the U.S. Environmental Protection Agency's Renewable Fuels Standard ("RFS"). Gevo expects to be able to get approval for Renewable Identification Numbers (“RINs”) through RFS and carbon credits from LCFS later this year or next year.
We have been makingmade incremental improvements and incremental expansions to theoptimizations at Gevo RNG Project by investing in capital projects that may significantlyare expected to improve its CI score and revenue, which in turn strengthenexpand its potential capacity to approximately 400,000 MMBtu of production capacity. It typically takes 12 months or longer for the overall economics ofproject to ramp up to our expected production level, therefore, the project.
Gevo’s current estimated share of the capital cost for those improvements is approximately $1.9 million, whichproduction levels this year are 40% complete through the second quarter of 2022. The improvement and expansion work is on budget and expected to be completed early in the third quarter of 2022. In addition, in June 2022, we amended our lease with a dairy to provide additional manure, which may increase our RNG production in the future.lower at approximately 275,000-300,000 MMBtu.
Gevo was granted registration approval by the EPA in 2022, allowing us to participate in its Renewable Fuel Standard Program (“RFS Program”) to receive renewable identification numbers ("RINs"). During the first quarter of 2023, we received approval for a temporary pathway under California's Low Carbon Fuel Standard (“LCFS”) program. We have strong relationships throughout the industry supply chain from technologyexpect to continue realizing substantial sales for our environmental attributes, for both LCFS's and equipment providers to feedstock owners, and RNG off-takers. RINs in 2023.
We believe the trust and reputation we have attained in the RNG industry, in combination with our understanding of the various and complex environmental attributes, gives us a competitive advantage. We intend to 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 TrackingSolutions
Capturing and accurately counting carbon data across the whole of the business systemIt is a critical part of Gevo’s business model, andthat we can prove the CI scores across the whole of the carbon life cycle, from feedstock through the burningour products, ensuring that these values are accurate and auditable. The mission of fuels. Through the use of the GREET Model and a field level tracking approach, our goalVerity Carbon Solutions ("VCS"), including Verity Tracking, 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 scoresCI and other sustainability attributes, using “blockchain” technology.and then apply Distributed Ledger Technology, commonly referred to as the blockchain, to create a record of the products throughout the entire business system. VCS would start from calculating carbon intensity of feedstocks from data collected at the farm and field level. We plan to track these feedstocks through production at our plants where we intend to use a mix of renewable electricity, biogas, renewable hydrogen and other potentially decarbonized energy sources in production. The benefit is having audited, transparent, immutable sustainabilityCI data attachedwould then be combined to biofuels and is expecteddeliver a comprehensive CI reduction in a finished renewable fuel. The resulting CI reduction value has potential to be valuable to our customers, colleague companies, and partners. Gevo and Blocksize have identified a series of internal milestonesquantified, sold and/or traded in voluntary or compliance carbon markets while preventing double-counting. We believe 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:
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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 |
Recent Developments
Equity Offering. On June 8, 2022, the Company completed a registered direct offering pursuant 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 warrants with an exercise price of $4.37 per share and a five-year term. If all 33,333,336 Series 2022-A warrants were to be exercised in cash at the exercise price 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 is in the process of determining additional plant sites to meet 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 expire 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.
COVID-19
The COVID-19 pandemic continues to impact 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 impact of the COVID-19 pandemic on the global transportation industry may result in less demand for our transportation fuel products in the future, agricultural practices have the potential to sequester large quantities of CO2 as soil organic carbon. VCS intends to document and account for that capture in conjunction with scientifically supported measurement techniques. The potential for VCS is broad and could be applicable to tracking the CI of various items, including, but not limited to, renewable fuels, food, feed and industrial products through the entire business system and value chain. In March 2023, we entered into a joint development framework agreement with Southwest Iowa Renewable Energy which could have a material adverse effectwill focus on our business, financial condition,implementing VCS technology and our prospectsdeveloping the market for carbon inset credits to help farmers and biofuel producers quantify 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.CI reductions for their products.
Results of OperationsLuverne Facility
Comparison ofIn 2022, the Three Months Ended June 30, 2022 and 2021 (in thousands):
| | | | | | | | | | | | | | | | | |
| Three months Ended June 30, | | |
| 2022 | | 2021 | | Change |
Revenue and cost of goods sold |
| | | | |
Ethanol sales and related products, net | $ | 71 | | | $ | — | | | $ | 71 | |
Hydrocarbon revenue | 18 | | | 346 | | | (328) | |
Total revenues | 89 | | | 346 | | | (257) | |
Cost of production | 2,640 | | | 1,617 | | | 1,023 | |
Depreciation and amortization | 1,088 | | | 1,177 | | | (89) | |
Total cost of goods sold | 3,728 | | | 2,794 | | | 934 | |
Gross loss | (3,639) | | | (2,448) | | | (1,191) | |
Operating expenses | | | | | |
Research and development expense | 1,966 | | | 1,332 | | | 634 | |
Selling, general and administrative expense | 9,209 | | | 4,846 | | | 4,363 | |
Preliminary stage project costs | 314 | | | 5,472 | | | (5,158) | |
Other operations | 601 | | | — | | | 601 | |
Depreciation and amortization | 386 | | | 46 | | | 340 | |
Total operating expenses | 12,476 | | | 16,650 | | | $ | (4,174) | |
Loss from operations | (16,115) | | | (19,098) | | | 2,983 | |
Other income (expense) | | | | | |
Gain (loss) from change in fair value of derivative warrant liability | — | | | 43 | | | (43) | |
Interest expense | (2) | | | (6) | | | 4 | |
Interest and dividend income | 78 | | | — | | | 78 | |
Other income (expense), net | 2,878 | | | 167 | | | 2,711 | |
Total other income (expense), net | 2,954 | | | 845 | | | 2,109 | |
Net loss | $ | (13,161) | | | $ | (18,253) | | | $ | 5,092 | |
Revenue. During the three months ended June 30, 2022, we sold 9 thousand gallons of SAF, isooctane, and isooctene from our Luverne Facility. Revenue decreased $0.3 million during the three months ended June 30, 2022, compared to the three months ended June 30, 2021, due to the Luverne Facility being operated for the Company's development projects on a as needed basis.
Cost of goods sold. Cost of goods increased $1.0 million during the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to an increase in direct labor and utility expenses as the Luverne Facility was not fully staffed during the second quarter of 2021 due to the COVID-19 pandemic. The majority of our costs are related to the production of SAF, isooctane, and isooctene as we continue to develop and tailoractivities at our Luverne Facility demonstrationwere transitioned to care and maintenance, as we shifted focus to our Net Zero Projects. The workforce adjustment which resulted allowed us to retain key personnel and redeploy some resources to our NZ1 and RNG projects to provide valuable knowledge and experience for the future strategic growth of the Company. The Luverne Facility is well equipped and positioned as a development site as it 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. Future operations, if any, will be tailored to support oura focus on advancing our technology, testing, and optimizing alternative feedstocks and yeast strains, and unit operations as well as partnership development for integrated GHG reductions.
Other Developments
Recent Agreements. On May 5, 2023, Gevo entered into a Side Agreement with Axens, which modifies the exclusivity provisions contained in the Company's existing agreement with Axens, permitting Axens to provide certain services and grant certain licenses relating to the conversion of ethanol to hydrocarbons fuels via dehydration, oligomerization, and saturation in certain areas of the Midwest to Phillips 66 Company (“P66”), Archer-Daniels-Midland Company (“ADM” and together with P66, the "Potential Partners"), or a joint venture entity between ADM and P66 (the "JV"). In connection with the Side Agreement, and as consideration for Gevo to share Axens’ technology with P66 and ADM, Gevo, P66 and ADM entered into a Technology Access Agreement, dated as of May 5, 2023 (the “TAA”). As consideration for Gevo entering into the TAA and the Side Agreement, the Potential Partners shall cause the applicable JV to pay Gevo certain milestone payments in connection with the development and production of the hydrocarbon fuels, expected to equal to $50 million if all milestones are achieved. Additionally, the Potential Partners will cause the applicable JV to make royalty payments to Gevo on such renewable hydrocarbons produced during a certain period (subject to a cap) and described in the TAA. The royalty payments are expected to equal at least $75 million if certain conditions and production milestones are achieved.
LG Chem Agreement. In April 2023, Gevo entered into a joint development agreement with LG Chem, Ltd. ("LG Chem") a leading global chemical company to develop bio-propylene for renewable chemicals using Gevo’s Ethanol-to-Olefins ("ETO") technology. Gevo’s proprietary ETO technology can target carbon neutral or carbon negative drop-in replacements for traditional petroleum-based building blocks called olefins, including bio-propylene, that can be used for renewable chemicals or fuels including sustainable aviation fuel. These plant-based, renewable olefins would be derived from atmospheric CO2 captured through photosynthesis and are expected to deliver the same performance in final products on the market today. Under the terms of the agreement, Gevo will provide the core enabling technology it has developed for renewable olefins to be produced from low-carbon ethanol and together the parties will collaborate to accelerate the pilot research, technical scale-up, and commercialization of bio-propylene. LG Chem is expected to bear all scale-up costs for chemicals, in addition to remitting certain payments to Gevo of $1.3 million in the second quarter of 2023, and $1.2 million over the next two years to help defray costs associated with the joint development efforts. In addition to this $2.5 million from the joint development agreement, LG Chem agreed to make certain payments to Gevo upon commencement of commercialization as follows:
•$5 million upon commencement of commercialization, to be paid ratably over a period of five years
•1% royalty on Net Sales for the first production facility beginning six years from commercial operation
•1% royalty on Net Sales for all subsequent production facilities upon commencement of operations
U.S. Department of Agriculture. In September 2022, the U.S. Department of Agriculture tentatively selected Gevo’s Climate-Smart Farm to Flight proposal for funding with an award ceiling of up to $30 million, subject to negotiation of definitive award agreements in the coming months. The project aims to create critical structural climate-smart market incentives for low CI corn as well as to accelerate the production of SAF to reduce the sector’s dependency on fossil-based fuels. In addition, this program will help provide support and incentive payments for farmers to produce, measure, report and verify low CI corn using climate smart agricultural practices, as well as accelerate development of the low-CI corn supply chain for low-carbon ethanol and SAF. We continue to negotiate the definitive award agreement and expect it to be completed in second quarter of 2023 with project activity beginning for the 2023 crop year.
Key Operating Metrics
Total operating revenues reflect both sales of RNG and sales of related environmental attributes. As a result, our revenues are primarily affected by RNG production volume, generation of environmental attributes, and the average realized prices for such products. The following table summarizes the key operating metrics, specifically for the Renewable Natural Gas Segment, which we use to measure performance:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Three Months Ended December 31, | | | | |
(in thousands, unless otherwise indicated) | 2023 | | 2022 | | Change | | Change % |
Revenues | | | | | | | |
Natural gas commodity | $ | 130 | | | $ | 330 | | | $ | (200) | | | (61) | % |
Natural gas environmental attributes - RINs | 2,730 | | | 214 | | | 2,516 | | | 1,176 | % |
Natural gas environmental attributes - LCFS | 803 | | | — | | | 803 | | | 100 | % |
Total revenues | $ | 3,663 | | | $ | 544 | | | $ | 3,119 | | | |
Production expenses (1) | $ | 3,885 | | | $ | 4,044 | | | $ | (159) | | | (4) | % |
RNG metrics | | | | | | | |
RNG production volumes (MMBtu) | 64 | | | 62 | | | 2 | | | 3 | % |
Plus: prior period RNG volumes dispensed in current period | 116 | | | 63 | | | 53 | | | 84 | % |
Less: RNG production volumes not dispensed | (64) | | | (116) | | | 52 | | | (45) | % |
Total RNG volumes available for RIN and LCFS generation (2) | 116 | | | 9 | | | 107 | | | |
RIN Metrics | | | | | | | |
RIN generation (3) | 1,356 | | | 100 | | | 1,256 | | | 1,256 | % |
| | | | | | | |
Plus: Prior period RINs | — | | | 1 | | | (1) | | | (100) | % |
| | | | | | | |
Total RINs available for sale | 1,356 | | | 101 | | | 1,255 | | | 1,243 | % |
Less: RINs sold | (1,356) | | | (101) | | | (1,255) | | | 1,243 | % |
RIN inventory | — | | | — | | | — | | | |
RNG volumes not dispensed for RINs (MMBtu) (4) | 64 | | | 116 | | | (52) | | | (45) | % |
Average realized RIN price (5) | $ | 2.01 | | | $ | 2.13 | | | $ | (0.12) | | | (6) | % |
LCFS metrics | | | | | | | |
LCFS generation (6) | 14 | | | — | | | 14 | | | 100 | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Less: LCFS sold | (14) | | | — | | | (14) | | | 100 | % |
LCFS inventory | — | | | — | | | — | | | |
RNG volumes not dispensed for LCFS (MMBtu) | 64 | | | 116 | | | (52) | | | (45) | % |
Average realized LCFS price (5) | $ | 55.36 | | | $ | — | | | $ | 55.36 | | | 100 | % |
(1)Higher per unit cost reflects lower production volumes during the commissioning and ramp-up period which can take up 12 months or longer.
(2)Represents gas production which has not been dispensed to generate RINs and LCFS.
(3)RINs are generally generated in the month following the gas being dispensed.
(4)One MMBtu of RNG has approximately the same energy content as 11.727 gallons of ethanol, and thus may generate 11.727 RINs under the RFS Program.
(5)Realized prices for environmental attributes are net of third-party commissions and thus do not correspond directly to index prices.
(6)LCFS credits are generally generated in the calendar quarter following the gas being dispensed.
Results of Operations
Comparison of the Three Months Ended March 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | |
(in thousands) | 2023 | | 2022 | | Change | | Change % |
Total operating revenues | $ | 4,060 | | | $ | 232 | | | $ | 3,828 | | | 1,650 | % |
Operating expenses: | | | | | | | |
Cost of production | 4,425 | | | 3,090 | | | 1,335 | | | 43 | % |
Depreciation and amortization | 4,575 | | | 1,442 | | | 3,133 | | | 217 | % |
Research and development expense | 1,198 | | | 1,192 | | | 6 | | | 1 | % |
General and administrative expense | 10,761 | | | 9,367 | | | 1,394 | | | 15 | % |
Project development costs | 2,959 | | | 1,096 | | | 1,863 | | | 170 | % |
Facility idling costs | 999 | | | — | | | 999 | | | 100 | % |
| | | | | | | |
| | | | | | | |
Total operating expenses | 24,917 | | | 16,187 | | | 8,730 | | | |
Loss from operations | (20,857) | | | (15,955) | | | (4,902) | | | |
Other income (expense) | | | | | | | |
Interest expense | (539) | | | (2) | | | (537) | | | 26,850 | % |
Investment income | 3,067 | | | 252 | | | 2,815 | | | 1,117 | % |
Other income, net | 711 | | | 32 | | | 679 | | | 2,122 | % |
Total other income, net | 3,239 | | | 282 | | | 2,957 | | | |
Net loss | $ | (17,618) | | | $ | (15,673) | | | $ | (1,945) | | | |
Operating revenue. During the three months ended March 31, 2023, operating revenue increased $3.8 million compared to the three months ended March 31, 2022, primarily due sales of natural gas from our RNG Project. During the three months ended March 31, 2023, we sold 63,846 MMBtu of RNG from our RNG Project, resulting in natural gas commodity sales of $0.1 million and environmental attribute sales of $3.5 million, as well as $0.4 million of isooctane.
Cost of goods sold also includes a $2.1production. Cost of production increased $1.3 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 June 30, 2021, asMarch 31, 2023, compared to the three months ended March 31, 2022, primarily due to the costs related to RNG production and sales, partially offset by lower costs from minimal production at the Luverne Facility compared to the three months ended March 31, 2022, before it was temporarily shut downput into care and maintenance.
Depreciation and amortization. Depreciation and amortization increased $3.1 million during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily due to additional depreciation for RNG assets placed into service in 2022 and accelerated depreciation on Agri-Energy segment assets due to shorter lives stemming from the COVID-19 pandemic.impairment assessment during the third quarter of 2022.
Research and development expense. Research and development expense remained flat during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, an increase in patent and personnel related costs, as well as lab work and supplies related to our ETO and other technologies was offset by a reduction of consulting expenses.
General and administrative expense. General and administrative expense increased $0.6$1.4 million during the three months ended June 30, 2022,March 31, 2023, compared to the three months ended June 30, 2021, primarily due to an increase of laboratory expenses and additional stock-based compensation expense.
Selling, general and administrative expense. Selling, general and administrative expense increased $4.4 million during the three months ended June 30,March 31, 2022, compared to the three months ended June 30, 2021, primarily due to increases in personnel costs related to hiring of highly qualified and skilled professionals for our strategic new hiring,projects, including NZ1 and NZ2 projects, as well as VCS and DOE programs. An additional contributor to the increase was non-cash stock-based compensation and professional consulting fees.
Project development costs. Project development costs are related to our future Net-Zero Projects and VCS which consist primarily of employee expenses, preliminary engineering and technical consulting costs. Project development costs increased $1.9 million during the three months ended March 31, 2023, compared to the three months ended March 31, 2022, primarily due to increases in personnel costs, consulting, and professional fees.
Preliminary stage projectFacility idling costs. Facility idling costs of $1.0 million for the three months ended March 31, 2023, is related to the care and maintenance of our Luverne Facility. We plan to utilize the Luverne Facility as a development scale plant to advance our technology and operational knowledge to help us in achieving operational success as we scale up the production and delivery of hydrocarbons and chemical products for our customers and partners.
Loss from operations. Preliminary stage project costs are related to our Verity and future Net-Zero Projects and consist primarily of employee expenses and consulting costs. Preliminary stage project costs decreased $5.2Our loss from operations increased by $4.9 million during the three months ended June 30, 2022,March 31, 2023, compared to the three months ended June 30, 2021, primarily because we began capitalizing our RNG and NZ1 project costs in 2021.
Other operations. Other operations expense increased $0.6 million during the three months ended June 30,March 31, 2022, compared to the three months ended June 30, 2021, primarily related to unallocated engineering and consulting services.
Depreciation and amortization expense. Depreciation and amortization expense increased $0.3 million during the three months ended June 30, 2022, compared to the three months ended June 30, 2021, primarily due to the amortization ofincreased activities for our patents.
Gain (loss) from change in fair value derivative warrant liability. We incurred no gain (loss) from the change in the fair value of the derivative warrant liability in the three months ended June 30, 2022. The last of the liability warrants expired in February 2022.Net-Zero Projects and VCS. See explanations for each line item above.
Interest expense. There were no significant changes in interestInterest expense increased $0.5 million during the three months ended June 30, 2022,March 31, 2023, compared to the three months ended June 30, 2021.March 31, 2022, primarily due to the interest on the 2021 Bonds, which was capitalized into construction in process during the construction phase of our RNG Project in the prior periods.
Interest and dividendInvestment income. Interest and dividendInvestment income increased $0.1$2.8 million during the three months ended June 30, 2022,March 31, 2023, compared to the three months ended June 30, 2021,March 31, 2022, primarily due to thehigher interest earned on our cash equivalent investments partially offset by the amortizationas a result of the bond premiums.higher interest rates.
Other income (expense). Other income (expense) increased $2.7$0.7 million duringfor the three months ended June 30, 2022,March 31, 2023, compared to the three months ended June 30, 2021,March 31, 2022, primarily due to our receipt of $2.9 million from the US Department 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.
Comparison of the Six Months Ended June 30, 2022 and 2021 (in thousands):
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | |
(in thousands) | 2022 | | 2021 | | Change |
Revenue and cost of goods sold | | | | | |
Ethanol sales and related products, net | $ | 240 | | | $ | — | | | $ | 240 | |
Hydrocarbon revenue | 81 | | | 359 | | | (278) | |
Total revenues | 321 | | | 359 | | | (38) | |
Cost of production | 5,730 | | | 2,518 | | | 3,212 | |
Depreciation and amortization | 2,179 | | | 2,270 | | | (91) | |
Total cost of goods sold | 7,909 | | | 4,788 | | | 3,121 | |
Gross loss | (7,588) | | | (4,429) | | | (3,159) | |
Operating expenses | | | | | |
Research and development expense | 3,158 | | | 2,710 | | | 448 | |
Selling, general and administrative expense | 18,576 | | | 8,660 | | | 9,916 | |
Preliminary stage project costs | 821 | | | 8,199 | | | (7,378) | |
Other operations | 1,190 | | | — | | | 1,190 | |
Loss (gain) on disposal of assets | — | | | 4,954 | | | (4,954) | |
Depreciation and amortization | 737 | | | 104 | | | 633 | |
Total operating expenses | 24,482 | | | 24,627 | | | (145) | |
Loss from operations | (32,070) | | | (29,056) | | | (3,014) | |
Other income (expense) | | | | | |
Gain (loss) from change in fair value of derivative warrant liability | 16 | | | (10) | | | 26 | |
Interest expense | (4) | | | (11) | | | 7 | |
Interest and dividend income | 330 | | | — | | | 330 | |
Gain on forgiveness of SBA loan | — | | | 641 | | | (641) | |
Other income (expense), net | 2,894 | | | 126 | | | 2,768 | |
Total other income (expense), net | 3,236 | | | 746 | | | 2,490 | |
Net loss | $ | (28,834) | | | $ | (28,310) | | | $ | (524) | |
Revenue. There were no significant changes in revenue during the three months ended June 30, 2022, compared to the three months ended June 30, 2021
Cost of goods sold. Cost of goods sold increased $3.1 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to an increase in direct labor and utility expenses due to the Luverne Facility not being fully staffed until the third quarter of 2021 due to the COVID-19 pandemic. The majority of our costs during the six months ended June 30, 2022, were related to the production of SAF, isooctane, and isooctene as we continue to develop 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. Cost of goods sold also includes a $0.8 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 six months ended June 30, 2021, as the Luverne Facility was temporarily shut down due to the COVID-19 pandemic.
Research and development expense. Research and development expense increased $0.4 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to an increase of laboratory expenses and additional stock-based compensation expense.
Selling, general and administrative expense. Selling, general and administrative expense increased $9.9 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to increases in personnel costs related to strategic new hiring, stock-based compensation, and professional fees.
Preliminary stage project costs. Preliminary stage project costs are related to our Verity and future Net-Zero Projects and consist of employee expense and consulting costs. Preliminary stage project costs decreased $7.4 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily because we began capitalizing our RNG and NZ1 project costs in 2021.
Other operations. Other operations expense increased $1.2 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021. Other operations costs were primarily related to unallocated engineering and consulting services.
Depreciation and amortization expense. Depreciation and amortization expense increased $0.6 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to the amortization of our patents.
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 six months ended June 30, 2022; the last of the liability warrants expired in February 2022.
Interest expense. There were no significant changes in interest expense during the six months ended June 30, 2022, compared to the six months ended June 30, 2021.
Interest and dividend income. Interest and dividend income increased $0.3 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to thehigher interest earned on our investments partially offset by the amortizationrestricted cash balances as a result of the bond premiums.
Other income (expense). Other income (expense) increased $2.8 million during the six months ended June 30, 2022, compared to the six months ended June 30, 2021, primarily due to our receipt of $2.9 million from the US Department 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.higher interest rates.
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting estimates and policies since December 31, 2021.2022. 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 20212022 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.
Liquidity and Capital Resources
As of June 30, 2022,March 31, 2023, we had cash and cash equivalents of $173.0$342.3 million, shortcurrent and long-termnon-current restricted cash of $76.2$77.8 million, and short-term marketable securities of $297.6$32.9 million,. The net of unrealized losses of $0.1 million, totaling $452.9 million in cash, cash equivalents, and marketable securities. As of March 31, 2023, we have net working capital of $360.8 million, with $25.6 million of current liabilities. Our cash equivalents primarily consist of investments in J.P Morgan U.S. government money market funds. Our marketable securities are highly liquid and can be converted to cash when needed for operations, development, and construction. We expect to use our cash, cash equivalents, restricted cash and marketable securities for the following purposes: (i) identification, development, engineering, licensing, acquisition and construction of new production facilities and to plan for expanded production to fulfill existing off-takeofftake 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)(v) exploration of strategic alternatives and additional financing, including project financing; and (vii)(vi) 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, warrants, 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.
On 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 We may fund future operations through additional private and/or public offerings of debtequity or equitydebt 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 Company's transition to profitability is dependent upon, among other things, the successful development and commercialization of its product candidates, the development, licensing, acquisition and construction of commercial level production facilities to support the Company's offtake 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, licensing, acquisition, and construction of additional productions facilities.
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, |
| 2022 | | 2021 |
Net cash used in operating activities | $ | (17,114) | | | $ | (19,468) | |
Net cash from investing activities | $ | (8,350) | | | $ | (436,529) | |
Net cash provided by financing activities | $ | 138,565 | | | $ | 522,853 | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 |
Net cash used in operating activities | $ | (19,446) | | | $ | (12,494) | |
Net cash provided by investing activities | $ | 124,183 | | | $ | 7,861 | |
Net cash used in financing activities | $ | (62) | | | $ | (320) | |
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, and other expenses for thepreliminary project development and commercialization of routes to efficiently produce fuels and chemicals from carbohydrates, such as renewable feedstock, using alcohols (isobutanol and ethanol) as intermediates.
activities.
During the sixthree months ended June 30, 2022,March 31, 2023, net cash used for operating activities was $17.1$19.4 million compared to $19.5$12.5 million for the sixthree months ended June 30, 2021.March 31, 2022. Non-cash charges primarily consisted of stock-based compensation expense of $4.7 million, depreciation and amortization of $4.6 million and other non-cash expense of $0.2 million, partially offset by non-cash amortization of discounts on marketable securities of $0.1 million. The $2.4net cash outflow from changes in operating assets and liabilities increased $7.4 million, decrease was primarily due to increased cash outflows of $10.5 million in prepaid expenses and other current assets due to deposits to secure long-lead equipment power transmission and distribution facilities for NZ1, and $1.2 million related to increases in accounts receivable primarily due to higher sales of environmental attributes. These were partially offset by $1.6 million of decreased costs associated with our productionthe sale of isobutanolenvironmental attribute inventory and hydrocarbon products for market development, process technology and related process engineering work. In addition, we had increases in personnel expenses to support the growth in business activity, partnership development and Verity development expenses.$2.7 million of accounts payable.
Investing Activities
During the sixthree months ended June 30, 2022,March 31, 2023, we used $8.4$124.2 million in cash for investing activities, of which $169.1$135.6 million related to proceeds from sales and maturities of marketable securities, offset by the reinvestment of $131.3 million in marketable securities, and $46.0$11.4 million of investments in our capital projects, including $26.3$1.5 million in the RNG Project, $15.4$8.0 million in thefor NZ1, Project, as well as $4.2$2.0 million in development projects at Agri-Energy and Gevo.other projects.
We completedThe NZ1 project development is proceeding with water and wind energy development agreements executed in the construction of the RNG Project and may invest up to an additional $11.4 million for start-up, improvements, and expansions during 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 forecastis currently forecasted to be approximately $850 million, excluding certain contingencies and financing costs. Upon receiving an invitation from the DOE, we submitted The Part Two Application for a DOE loan guarantee for a direct lending from Federal Financing Bank. This DOE guarantee lending facility is expected to offer the lowest cost of additional capital expenditures ranges from $100 milliondebt for the project. In light of this route to $120 million, 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 are working with our contractors to reduce our projected spend prior to financial close from our originally projected $100 million to $200 million range.
In 2022 we allocated approximately $25 million to develop our next Net-Zero Project, of which we have spent approximately $11 million. Based on our progress and discretion we anticipate spending the remaining $14 million in the next four to six months. 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 sixthree months ended June 30, 2022,March 31, 2023, we had $138.6$0.1 million of net cash provided byused in financing activities, primarily due to $139.0 million of proceeds from the issuance of common stock and common stock warrants in the June 2022 Offering, net of issuance costs, partially offset by $0.3 million related to the net settlement of common stock under stock plans and $0.1 million of payments for finance lease liabilities and certain equipment loans.
We currently expect to finance the construction of NZ1 at the subsidiary level using third-party capital. The Company expects to retain a carried equity interest in the project and may invest additional equity in the project using the proceeds from the reimbursement of the Company's NZ1 development expenditures. Cash distributions from future NZ1 earnings would be proportionate to Gevo’s minority ownership in NZ1 under this expected financing structure which would reduce revenue to us but allow us to conserve and redeploy capital on other growth projects, including NZ2. We expect to apply similar development and financing approaches to NZ2 and future Net-Zero Projects to enable rapid growth of SAF production to meet current contractual demand for SAF.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information required by this Item. However, we note that we are exposed to market risks in the ordinary course of our business. These risks primarily consist of environmental attribute pricing, commodity pricing, interest rate, credit risk with our contract counterparties, and equity price risks. 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 20212022 Annual Report.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 June 30, 2022,March 31, 2023, 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 June 30, 2022,March 31, 2023, 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 16, 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 20212022 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 2022 Annual Report. The risk factors in our 20212022 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.
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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 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference | | |
Exhibit No. | | Description | | Form | | File No. | | Filing Date | | Exhibit | | Filed Herewith |
| | | | | | | | | | | | |
3.1 | | | | 10-K | | 001-35073 | | February 24, 2022 | | 3.1 | | |
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3.2 | | | | 8-K | | 001-35073 | | November 24, 2021 | | 3.1 | | |
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4.1 | | | | S-1 | | 333-168792 | | January 19, 2011 | | 4.1 | | |
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10.1* | | | | 8-K | | 001-35073 | | March 15, 2023 | | 10.1 | | |
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| | | | | |
Exhibit
Number
| | | DescriptionIncorporated by Reference | | Previously Filed | | Filed
Herewith
|
Exhibit No. | | | Description | | Form | | File No. | | Filing Date | | Exhibit | | Filed Herewith |
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 |
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+* | 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. |
| |
** | 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 (Duly Authorized Officer and Principal Accounting Officer) |
Date: August 8, 2022May 10, 2023