Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 21 E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Annual Report on Form 10-K (this “Report”), the words “expect,” “believe,” “anticipate,” “estimate,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements. These statements relate to future events or our future financial or operational performance and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. These forward-looking statements include, among other things, statements about: the impact of the novel coronavirus ("COVID-19") pandemic on our business, our financial condition, our results of operation and liquidity, our ability to finance and construct our Net-Zero Projects (as defined below), our ability to produce our products at our 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 current and future production facilities, our ability and plans to construct greenfield commercial hydrocarbon facilities to produce renewable hydrocarbons, our ability to raise additional funds to finance our business, our ability to perform under our existing offtake agreements and other supply agreements we may enter into in the future, our ability to successfully construct and operate our renewable natural gas ("RNG") project in Iowa, our ability to produce renewable hydrocarbon products at a commercial level and at a profit, 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 ethanol-to-sustainable aviation fuel ("SAF"), additional competition and changes in economic conditions and the future price and volatility of petroleum and products derived from petroleum. Important factors could cause actual results to differ materially from those indicated or implied by forward-looking statements such as those contained in documents we have filed with the U.S. Securities and Exchange Commission (the “SEC”), including this Report in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 1A. “Risk Factors” 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 “Company” refer to Gevo, Inc. and its wholly owned, direct and indirect subsidiaries.

Risk Factors Summary

Our business is subject to a number of risks and uncertainties, many of which are beyond our control, including those described in Part I, Item 1A. Risk Factors of this annual report. These risks include, but are not limited to, the following:

PART I

Company Overview

Gevo, Inc. (Nasdaq: GEVO), a Delaware corporation founded in 2005, is a growth-oriented company with the mission of solving greenhouse gas emissions for those sectors of the transportation industry that are not amenable to electrification or hydrogen. 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 1 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 (Greenhouse gases, Regulated Emissions, and Energy use in Transportation) model (the "GREET Model") to measure, predict and verify GHG emissions across the life-cycle of our products. The "net-zero" concept means that we expect to produce fuels that consume as much carbon dioxide in their manufacture as they produce when burned.

Our primary market focus, given current demand and growing customer interest, is SAF. We believe that we also have 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 global fuel consumption by commercial airlines was an all-time high of 95 billion gallons in 2019. However, due to the COVID-19 pandemic, fuel consumption dropped to only 52 billion gallons in 2020 and reached 57 billion gallons in 2021. The airline industry is looking for at least 10% of its fuel needs to be sustainable by 2030 (with the potential for up to 30% at the high end).

We believe that there is a growing and significant market demand for SAF based on a number of factors, including:

We believe we have the technology and know-how to convert various carbohydrate feeds through a fermentation process into alcohols and then transform the alcohols into renewable fuels and materials. While we expect our first major capital deployments to focus on the production of SAF, we recognize that there are opportunities to operate in several different markets and we will pursue those opportunities when appropriate based on customer interest, access to capital, and expected investment returns.

Our production processes use carbohydrates as a feedstock. Carbohydrates are plant matter that result from photosynthesis. Photosynthesis is the natural process by which carbon dioxide is captured from the air by plants. The carbon in carbohydrates is therefore renewable because it is already in the atmosphere. The carbohydrates are fermented to produce alcohol intermediate products (e.g., 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 it is required that:

We believe sustainably grown corn (i.e., corn that is grown with precision agricultural techniques and low-till or no till cultivation to conserve nutrients, prevent water runoff and erosion) is a good feedstock because:

We believe that utilizing sustainable agriculture practices to help solve GHG problems is a breakthrough that addresses the problem of GHGs without compromising sustainability or food supply.  Also, when using a product such as corn as the carbohydrate source,  the majority of the protein produced in the corn can be separated during processing and supplied as a nutritional product to the food chain. We believe it will be possible to create an incentive structure that rewards farmers to lower the CI score of their agricultural products and creates a cycle of continuous improvement to their overall sustainability footprint.

Market Traction and Financeable Customer Contracts

We have a growing portfolio of long-term sales agreements for our products. As of the date of this report, we have entered into multiple long-term sales agreements that we believe are financeable (i.e., contracts contain terms that we believe are useful for helping to secure long-term debt in support of financing new production facilities). We currently have approximately 98 million gallons per year of hydrocarbon fuel products under these sales agreements. The following is a summary of our existing sales agreements that we believe are financeable:

Building Out Production Capacity to Meet Demand

We believe that we will be able to develop the marketplace, customers and production capacity to achieve at least 1 billion gallons of sales by 2030.  Two approaches will be required to achieve this objective. The first approach, the development of greenfield sites (i.e., the development of a project on an undeveloped site), allows us to optimize production and the integration of technology. We expect that utilizing greenfield sites will have the potential to achieve lower CI scores over the long run, compared to other approaches. The second approach, leveraging installed alcohol production capacity, has the advantage that the fermentation capacity already exists via existing ethanol plants. Those existing ethanol plants would need to be decarbonized and hydrocarbon production capacity would need to be installed.

In early 2021, we announced the concept of "Net-Zero Projects" as a series of planned facilities to produce energy dense liquid hydrocarbons using renewable energy and our proprietary technology. The concept of a Net-Zero Project is to convert renewable energy (photosynthetic, wind, renewable natural gas, biogas) from a variety of sources into energy dense liquid hydrocarbons that when burned in traditional engines, have the potential to achieve net-zero GHG emissions across the whole life-cycle of the liquid fuel based on the GREET Model, the pre-eminent science-based life-cycle analysis model. The GREET Model takes into account emissions and impacts "cradle to cradle" for renewable resource-based fuels including inputs and generation of raw materials, agriculture practices, chemicals used in production processes of both feedstocks and products, energy sources used in production and transportation and the end use of the products, which for fuel products is usually burning to release energy.

Using sustainably grown corn or low CI corn as an input at a Net-Zero Project would comprise the following steps: (i) process the corn kernels to produce protein, oil and carbohydrate; (ii) ferment the carbohydrate into an alcohol; and (iii) convert the alcohol to SAF and other renewable hydrocarbon products. The combination of renewable carbon obtained from the carbohydrates, plus the reduction/elimination of fossil-based energy creates the advantage in driving the CI score to achieve net-zero. In addition to those practices, there is potential to sequester renewable carbon in the soil during corn production, and from capturing the CO2 from the production process, which should cause the CI scores to become negative across the while life-cycle of the product as measured by the GREET Model.

Greenfield Projects

In January 2021, we announced our initial greenfield Net-Zero Project ("Net-Zero 1 Project") that is currently planned to be constructed at Lake Preston, South Dakota. The Net-Zero 1 Project is expected to produce approximately 45 to 60 million gallons of hydrocarbons, with the majority of the hydrocarbons produced being SAF. The plant is expected to be powered by wind-based electricity and biogas produced from an on-site wastewater treatment plant. The products expected to be produced at the Net-Zero 1 Project include: animal feed and protein products, corn oil, SAF, naptha (gasoline) and/or diesel fuel. The co-products produced at the Net-Zero 1 Project and destined for the food chain, on a tonnage basis, are greater than that for renewable fuels.

In addition to the Lake Preston, South Dakota site, we have identified several other greenfield sites that are attractive from the standpoint of fundamental economics, access to sustainable feedstocks, deployment of renewable energy and transportation of finished product to market. We believe any of these sites could be utilized for a future greenfield Net-Zero Project or for the Net-Zero 1 Project. We believe that our first greenfield production facility will be operational in 2025.

Leveraging Existing Alcohol Production Capacity

Based upon what we have learned as we develop and engineer our Net-Zero 1 Project, we believe that it should be possible, practical and financially attractive to convert existing ethanol plants to allow for the production of SAF and other renewable hydrocarbon products. In order to accomplish this conversion, two critical things are required: (i) the energy for the converted plant needs to be de-fossilized to achieve the CI scores required for the market; and (ii) a hydrocarbon production plant needs to be built at the existing ethanol plant.

With the large number of existing ethanol plants, we have identified various opportunities for alcohol-to-SAF conversions and we are actively in discussions with multiple plants. Additionally, we signed a memorandum of understanding in October 2021 with Archer-Daniels-Midland Company with the intent of potentially converting 900 MGPY of their ethanol production plants to about 500 MGPY of hydrocarbon fuel products.

Renewable Natural Gas

We are developing RNG and biogas projects to generate incremental profit and to create a long-term option to potentially supply RNG to our Net-Zero Projects as part of our long-term strategy to decarbonize SAF and other hydrocarbon fuels. 

In 2019, we began developing RNG projects. Animal manure can be digested anaerobically to produce RNG. RNG has value in markets such as California as well as in our hydrocarbon production process by helping us achieve carbon negative GHG emissions on our renewable hydrocarbon products. The end 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. We developed our initial RNG project, Gevo NW Iowa RNG, LLC ("Gevo RNG"), to generate RNG captured from dairy cow manure which will be supplied by three dairies located in Northwest Iowa totaling over 20,000 milking cows. When fully operational, the Gevo RNG project is expected to generate approximately 355,000 MMBtu of RNG per year. We financed the construction of the Gevo RNG project 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. In January 2022, we announced that we began the process of bringing the Gevo RNG project online.

In January 2022, Gevo RNG began to start-up operations. The start-up process is expected to take a few months and reach a steady state operation in the second quarter of 2022 which will allow time for Gevo to apply for credits under the federal Renewable Fuel Standard Program (“RFS”) and the Low Carbon Fuel Standard (“LCFS”) in California, including verification of carbon intensity levels and other requirements. Depending on the timing of the qualification and approval processes for obtaining credits under RFS and LCFS,  Gevo expects to generate biogas revenue starting in the second quarter of 2022 and sales of credits under RFS and LCFS in late second quarter of 2022 and the fourth quarter of 2022, respectively.

Competitive Advantages

We believe that our vertically integrated set of technologies and business system (including our extensive portfolio of patents, technologies and processes) creates competitive advantage through (i) access to multiple opportunities to drive the CI score of our products down, and (ii) opportunities to address needs in the chemicals, food, feed, plastics and materials markets.

Carbohydrates as Feedstocks

Carbohydrate feedstocks dwarf all other potential renewable carbon feedstock sources by several orders of magnitude on a worldwide basis. In the Midwest region of the United States, corn is an ideal feedstock for multiple reasons. On a per acre basis, field corn (not food corn) is one of the most productive crops to produce protein and oil, as well as carbohydrates. The non-carbohydrate co-products from the field corn kernel represent the majority of the nutritional value of the kernel and could be delivered into the food chain.  By selling the protein, oil and animal feed into the food chain markets, it would offset a portion of the cost of acquiring the corn. We believe about 50% of the cost of corn can be offset by manufacturing valuable products for the food chain. The remaining carbohydrates are used as a feedstock for fermentation. 

We believe that in the U.S., carbohydrates produced from corn are the most sustainable and lowest cost renewable carbon sources that can be used as feedstock for alcohol to hydrocarbon processes to produce hydrocarbon fuels. In the future, we expect to evaluate the use of carbohydrates from sources other than corn (e.g., of sugar cane, molasses or other cellulosic sugars derived from wood, agricultural residues and waste) as the cost to acquire those carbohydrates becomes competitive, and the sustainability profile (and related CI scores) become acceptable. We expect our future feedstocks to be chosen on the collective basis of (i) cost, (ii) carbon and/or sustainability footprint with associated value, (iii) positive contribution to food chain where possible, and (iv) availability of the feedstock at a practical scale.

Proprietary Carbohydrate Conversion Technologies 

Three technologies are required to convert carbohydrates to SAF and other renewable hydrocarbons: (i) the fermentation process to convert carbohydrates to alcohols; (ii) the chemical processing technology to make the hydrocarbon fuel products; and (iii) the technology and know-how to mitigate the fossil based GHG emissions from the integrated fermentation and fuel production plants.

We have two ways of producing alcohols via fermentation from carbohydrates: (i) ethanol, which has two carbons, and (ii) isobutanol, which has four carbons. Ethanol can be a building block for SAF and diesel fuel. Isobutanol can be a building block for gasoline hydrocarbons, SAF and chemical products. Ethanol technology is well known and readily available. Isobutanol technology is relatively new and has yet to be scaled to the size of ethanol production, but it offers long-term potential in enabling lower CI scores and allowing for the production of chemical products, and high value gasoline hydrocarbons.

We believe that we possess proprietary know-how to integrate alcohol production and chemical processing to make SAF and other renewable hydrocarbons that should lower the CI score of our renewable hydrocarbon products.

Alcohols can be converted to hydrocarbon products with catalytic chemical processing techniques analogous to those used in the petrochemical industry. In September 2021, we signed an agreement with Axens North America, Inc. ("Axens") for their technology on this process since they have already scaled it up and they have licensed to many commercial production facilities. The agreement establishes a strategic alliance aimed at accelerating the commercialization of sustainable alcohol-to-SAF projects in the United States. As part of the alliance, Axens brings technologies with over 60 related patents, engineering packages, proprietary catalysts and certain proprietary equipment required to convert alcohols into SAF and they will provide certain process guarantees to us.

Integration of the production systems with various renewable or de-fossilized energy sources will be essential. Our Net-Zero plant concept depends upon a variety of decarbonization methods to ensure the operability of the plant while also reducing and eliminating the need for fossil-based energy. We have partnered with companies such as Juhl Energy to develop the technology suite for this decarbonization.

To prove out technologies, we operate two development scale plants. These development scale plants enable us to solve the practical issues involved with scale up of new technologies and testing of new unit operations. These plants include:

Verity Tracking

It is critical that we can prove the CI of our products, ensuring that these values are accurate and auditable. The mission of Verity Tracking is to document CI and other sustainability attributes, and then apply Distributed Ledger Technology ("DLT") (commonly referred to as the blockchain) to create an immutable record of the products throughout the entire business system. Verity Tracking would start from calculating carbon intensity of feedstocks 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 CI data would then be combined to deliver a comprehensive CI reduction in a finished renewable fuel. The resulting CI reduction value has potential to be quantified and traded in voluntary or compliance carbon markets while preventing double-counting. We believe that in the future, agricultural practices have the potential to sequester large quantities of CO2 as soil organic carbon. Verity Tracking intends to document and account for that capture in conjunction with scientifically supported measurement techniques. The potential for Verity Tracking 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. We are working with Blocksize Capital on Verity Tracking and during September 2021, we executed a joint venture agreement with them for its creation. We are working on commercializing Verity Tracking with Blocksize Capital during 2022.

Competition

We face competitors in each market that we focus on, some of which are limited to individual markets, and some of which will compete with us across all of our target markets. Many of our competitors have greater financial resources, more comprehensive product lines, broader market presence, longer standing relationships with customers, longer operating histories, greater production capabilities, stronger brand recognition and greater marketing resources than we do which could make it difficult for us to compete.

Our renewable hydrocarbons, including SAF, hydrocarbons for gasoline blendstocks and isobutanol for gasoline blendstocks, compete with the incumbent petroleum-based fuels industry, as well as renewable fuels companies. The incumbent petroleum-based fuels industry makes the vast majority of the world’s gasoline, jet and diesel fuels and blendstocks. The petroleum-based fuels industry is mature and includes a substantial base of infrastructure for the production and distribution of petroleum-derived products. However, the industry faces challenges from its dependence on petroleum. High and volatile oil prices should provide an opportunity for renewable producers relying on biobased feedstocks like corn, which in recent years have had lower price volatility than oil, to compete.

Renewable fuels companies may provide substantial competition in the hydrocarbon fuels markets. These renewable fuel competitors are numerous and include both large established companies and numerous startups. Government tax incentives for renewable fuel producers and regulations such as the RFS program and LCFS program help provide opportunities for renewable fuels producers to compete. However, we have the advantage of being able to target conversion of alcohols into specific high-value molecules such as SAF, other renewable hydrocarbons and various chemical products.

Intellectual Property and Technologies

We seek protection for our intellectual property under patent, copyright, trademark and trade secret laws.

Since the Company was founded, we have submitted hundreds of patent applications in the U.S. and in various foreign jurisdictions. These patent applications are directed to our technologies and specific methods and products that support our business. We continue to file new patent applications, for which terms extend up to 20 years from the filing date in the U.S. We expect to continue to develop and build our intellectual property portfolio to address unmet technology and market needs going forward.

We have filed and prosecuted, and intend to continue to file and prosecute, patent applications and maintain trade secrets, as is consistent with our business plan, in an ongoing effort to protect our intellectual property.

We have a strong proprietary technology position. Our technology pathway converts carbohydrates to alcohols via a fermentation process. The alcohols are then converted to hydrocarbon fuels using a catalytic chemical process. By using renewable energy across the production process, in combination with sustainable feedstocks, like low carbon non-food corn, the GHG emissions can be substantially reduced or eliminated as measured across the whole of the life-cycle. The processes used to convert carbohydrates to drop in hydrocarbons using isobutanol as the intermediate alcohol is protected by a global patent portfolio with more than 500 patents, as well as proprietary processes and know-how. Certain production technology to convert ethanol to hydrocarbons has been exclusively licensed to Gevo in the United States by Axens, and incorporates more than 60 patents, as well as proprietary production technology and know-how. Additionally, we have more than 10 patents and patent applications covering the ethanol to hydrocarbons routes.

We have a proprietary fermentation yeast biocatalyst that has been designed to consume carbohydrates and produce isobutanol as a product. Our technology team developed our proprietary biocatalyst to efficiently convert fermentable sugars of all types into isobutanol by engineering isobutanol pathways into the biocatalyst. The advantage of this biocatalyst is that it (i) works in large scale fermentation systems, and (ii) can operate in complex biological mixtures such as corn mash or molasses and produce a suitable clean isobutanol product. The technology is designed to use similar carbohydrate feedstocks, similar to ethanol technology. For example, carbohydrates from non-food corn, sugar cane, molasses or cellulosic sugars each could be used depending upon cost and availability. We have already achieved yield (percentage of the theoretical maximum percentage of isobutanol that can be made from a given amount of feedstock) and rate (how fast the sugar fed to the fermentation is converted to isobutanol) sufficient for commercialization. While we believe that the majority of the development work on a commercially viable isobutanol producing yeast is complete, we expect to continue to make incremental improvements targeted to its commercial performance.

Butamax

Between 2011 and 2015, we were involved in an intellectual property dispute with Butamax Advanced Biofuels LLC ("Butamax"). On August 22, 2015, we entered into a Settlement Agreement and Mutual Release (the "Settlement Agreement") with Butamax, E.I. du Pont de Nemours & Company ("DuPont") and BP renewable fuels North America LLC ("BP Renewable Fuels" and, together with Butamax and DuPont, the "Butamax Parties"), that resolved the various disputes, lawsuits and other proceedings between one or more of the Butamax Parties and us, and created a new business relationship pursuant to which we and Butamax granted rights to each other under certain patents and patent applications in accordance with the terms of a Patent Cross-License Agreement (the "License Agreement"), which was entered into by us and Butamax concurrently with the Settlement Agreement. On September 21, 2021, we and Butamax and its affiliate, Danisco US Inc., entered into an Asset Purchase Agreement (the "Purchase Agreement"), pursuant to which we purchased all of Butamax’s rights, title and interests in certain U.S. and foreign patents and patent applications, subject to specified conditions and encumbrances, relating to the production, recovery and use of biobutanol that were owned by Butamax (the "Purchased Assets"). The Purchased Assets were previously subject to the terms and conditions of the License Agreement. Except with respect to certain existing licenses granted by Butamax pursuant to the License Agreement and other terms set forth in the Purchase Agreement, the License Agreement was terminated as of the effective date of the Purchase Agreement. See Note 7, Intangible Assets, to out Consolidated Financial Statements included herein for further discussion.

Customers

As described in “Market Traction and Financeable Customer Contracts” above, we have a growing portfolio of long-term sales agreements for our products following completion of our full-scale production facilities.

We currently have limited production of SAF and other renewable hydrocarbons at our development scale plants, and as such, we are not dependent on any specific customers at this time. Additionally, given our production capacity compared to the overall size of the North American market and the fungible demand for our products, we do not believe that a decline in a specific customer's purchases would have a material adverse long-term effect upon our financial results.

Government Regulation - Environmental Compliance Costs

Regulation by governmental authorities in the U.S. and other countries is a significant factor in the development, manufacture and marketing of second-generation renewable fuels. Our isobutanol and the next generation products isobutanol will be used to produce may require regulatory approval by governmental agencies prior to commercialization. In particular, renewable fuels are subject to rigorous testing and premarket approval requirements by the EPA’s Office of Transportation and Air Quality and regulatory authorities in other countries. In the U.S., various federal and, in some cases, state statutes and regulations also govern or impact the manufacturing, safety, storage and use of renewable fuels. The process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations requires the expenditure of substantial resources. Regulatory approval, if and when obtained for any of the next generation products isobutanol is used to produce, may be limited in scope, which may significantly limit the uses for which our isobutanol and these next generation products may be marketed.

When built at a dry-mill facility, our GIFT™ fermentation process creates iDGs™, a potential animal feed component, as a co-product. We are currently approved to sell iDGs™ as animal feed through the self-assessed Generally Regarded as Safe ("GRAS") process of the United States Food and Drug Administration (the "FDA") via third party scientific review. While we believe we can rely on the GRAS process as we update our biocatalysts to increase isobutanol production, for further customer assurance, we also intend to pursue approval upon a completed biocatalyst from the Center for Veterinary Medicine of the FDA. Even if we receive such approval, the FDA’s policies may change and additional government regulations may be enacted that could prevent, delay or require regulatory approval of our co-products. We cannot predict the likelihood, nature or extent of adverse governmental regulations that might arise from future legislative or administrative action, either in the U.S. or abroad.

Our process contains a genetically engineered organism which, when used in an industrial process, is considered a new chemical under the EPA’s Toxic Substances Control Act program ("TSCA"). The EPA’s Biotechnology Program under TSCA requires the submission of certain information of the Office of Pollution Prevention and Toxic Substances. Due to the nature of our microorganism, we can utilize the TSCA Biotechnology Program Tier I and Tier II exemption criteria at our Luverne Facility. As we expand our business activities, we will pursue the EPA’s Microbial Commercial Activity Notice process for future plants. We do not anticipate a material adverse effect on our business or financial condition as a result of our efforts to comply with these requirements. However, the TSCA new chemical submission policies may change and additional government regulations may be enacted that could prevent or delay regulatory approval of our products. We cannot predict the likelihood, nature or extent of adverse governmental regulations that might arise from future legislative or administrative action, either in the U.S. or abroad.

There are various third-party certification organizations, such as ASTM International and Underwriters’ Laboratories, Inc. ("UL"), involved in certifying the transportation, dispensing and use of liquid fuel in the U.S. and internationally. In 2013, a specification for fuel grade isobutanol titled ASTM D7862 “Standard Specification for Butanol for Blending with Gasoline for Use as Automotive Spark-Ignition Engine Fuel” was published. In April 2016, ASTM International completed its process of approving the revision of ASTM D7566 (Standard Specification for Aviation Turbine Fuel Containing Synthesized Hydrocarbons) to include alcohol to jet synthetic paraffinic kerosene ("ATJ-SPK") derived from renewable isobutanol. Gevo’s SAF is ATJ-SPK for purposes of ASTM D7566. In addition, UL has published guidance on the use of isobutanol-gasoline blends in its UL87A fuel dispensers. When ATJ-SPK, which meets the specifications of ASTM D7566, is blended at a level of 50% or lower with petroleum-based jet fuel, which meets the specifications of ASTM D1655, the entire blended product meets the specifications of ASTM D1655, conventional jet fuel. In other words, the blend containing the ATJ-SPK is completely fungible with any conventional D1655 jet fuel. Voluntary standards development organizations may change and additional requirements may be enacted that could prevent or delay marketing approval of our products. The process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources. We do not anticipate a material adverse effect on our business or financial conditions as a result of our efforts to comply with these requirements, but we cannot predict the likelihood, nature or extent of adverse third-party requirements that might arise from future action, either in the U.S. or abroad.

We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials and the health and safety of our employees. These laws and regulations require us to obtain environmental permits and comply with numerous environmental restrictions as we construct and operate isobutanol assets. They may require expensive pollution control equipment or operation changes to limit actual or potential impacts to the environment. A violation of these laws, regulations or permit conditions can result in substantial fines, natural resource damage, criminal sanctions, permit revocations and facility shutdowns.

There is a risk of liability for the investigation and cleanup of environmental contamination at each of the properties that we own or operate and at off-site locations where we arrange for the disposal of hazardous substances. If these substances are or have been disposed of or released at sites that undergo investigation or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act or other environmental laws for all or part of the costs of investigation and remediation. We may also be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from the properties. Some of these matters may require us to expend significant amounts for investigation and cleanup or other costs. We are not aware of any material environmental liabilities relating to contamination at or from our facilities or at off-site locations where we have transported or arranged for the disposal of hazardous substances.

In addition, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant additional expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future investments in environmental controls at our facilities which cannot be estimated at this time. Present and future environmental laws and regulations applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions could all require us to make substantial expenditures. For example, our air emissions are subject to the Clean Air Act, the Clean Air Act Amendments of 1990 and similar state and local laws and associated regulations. Under the Clean Air Act, the EPA has promulgated National Emissions Standards for Hazardous Air Pollutants ("NESHAP"), which could apply to facilities that we own or operate if the emissions of hazardous air pollutants exceed certain thresholds. If a facility we operate is authorized to emit hazardous air pollutants above the threshold level, then we might still be required to come into compliance with another NESHAP at some future time. New or expanded facilities might be required to comply with both standards upon startup if they exceed the hazardous air pollutant threshold. In addition to costs for achieving and maintaining compliance with these laws, more stringent standards may also limit our operating flexibility.

As a condition to granting the permits necessary for operating our facilities, regulators could make demands that increase our construction and operations costs, which might force us to obtain additional financing. For example, unanticipated water discharge limits could sharply increase construction costs for our projects. Permit conditions could also restrict or limit the extent of our operations. We cannot guarantee that we will be able to obtain or comply with the terms of all necessary permits to complete the retrofit of an ethanol plant. Failure to obtain and comply with all applicable permits and licenses could halt our construction and could subject us to future claims.

Our products benefit from the RFS Program in that our isobutanol and ethanol are currently eligible for Renewable Identification Numbers ("RINS") that have value based on the current RFS Program. The RFS Program could change, impacting our products, positively or negatively.

Various systems are being put in place around the world to measure CI and reduction of GHGs, with the intent of creating a system to monetize the value of the reduction of carbon. In order to benefit from such systems, companies need to have their products qualified through a regulatory process. There is no guarantee that any benefit could be gained. In 2019, we submitted a design pathway application to the California Air Resources Board to gain approval for low-carbon intensity ethanol utilizing beef manure biogas as a process input under the LCFS, and we may also seek approval under similar programs in the future.

People and Culture 

Higher Purpose 

Our employees strive to make environmental and social impacts in the world. Our employees are also guided by our Code of Business Conduct and Ethics, which helps them to uphold and strengthen the standards of integrity and innovation while continuously improving our environment, health, safety and sustainability, which has defined us since our founding. Our world and business may change, but our core values are a constant in everything we do.

Employees

As of December 31, 2021, we had 99 employees in North America. We also retain consultants, independent contractors, temporary and part-time workers. None of our facilities in the U.S. are covered by collective bargaining agreements. The Gevo team is made up of scientists, research and development experts, operations, administrative and business development professionals, skilled trades and energy technicians.

Code of Business Conduct and Ethics 

We are committed to conducting business in accordance with the highest ethical standards. This means how we conduct ourselves is more than just a matter of policy and law; it is a reflection of our core values. Our Code of Business Conduct and Ethics provides specific guidance to all of our employees, outlining how they can and must uphold and strengthen the integrity that defines us. We maintain a global compliance hotline to allow for concerns to be brought forward.

Health and Safety 

We strive to achieve safety excellence through increased focus on leading indicators, risk reduction, health and safety management systems and prevention to protecting the public health and environmental quality in our communities, as well as the health and safety of our employees, customers and neighbors. We strive to comply with all health and safety laws and regulations that apply to our business. We provide site safety orientation for all employees and guests as well as periodic refresher training for employees at the level appropriate for their role. We have received no violations and our proud that we have never had a fatality at a Gevo facility. During 2021, we had one recordable injury, no lost time incidents and a Total Recordable Injury Rate of 1.5.

Throughout the COVID-19 pandemic, we have remained focused on protecting the health, safety and well-being of our employees and managing the business to preserve our workforce. We provide time off for vaccinations and illness related to COVID-19. For all positions for which remote work is possible, employees have the choice to work from their home location to minimize potential exposure and ensure business continuity. We have implemented safety plans and protocols following guidance from the Centers for Disease Control, World Health Organization, and other federal, state, local and international regulations, and we continue to evolve our corporate and site-specific crisis management teams to actively manage and ensure compliance with these plans and protocols.

We are serious about maintaining the well-being of our employees and families, paying 100% of the premiums for health, dental and vision insurance for whole families. We also pay the premiums for disability and life insurance to assist in maintaining living standards when issues arise. We continue to endeavor to be agile in addressing employee needs in the quickly evolving environment while also being transparent across the workforce.

Diversity and Inclusion 

In order to ensure that each of our employees can bring their full selves to work, we strive to foster a diverse, equitable, and inclusive workplace where all voices are heard and included. We continue to champion policies, practices and behaviors that amplify innovation on behalf of people, community and the planet. Diversity, equity and inclusion ("DEI") are critical to our success as an organization. Incorporating DEI into our business practices enhances innovation and enables our best talent to thrive in an environment where diverse perspectives are celebrated. This requires deliberate intention and action on the part of every employee and leader. We will continue to push forward on the path to a more diverse, equitable and inclusive culture and have committed to interview and consider at least one qualified woman and person of color for every open role, vice president and higher, including at the senior executive level and the Board of Directors.

We also launched our first women’s affinity group, led by our Chairman, Ruth Dreessen, to provide our women with the opportunity for mentorship from leaders throughout the organization.

We are working to improve gender and diversity at all levels of the business. As of December 31, 2021, women make up approximately 23% of our employee population and approximately 23% of our leadership roles, defined as manager and above. In 2021, we saw a decrease of approximately 6% of females in leadership roles within the organization. Further, employees identifying as diverse make up approximately 14% of our employee population and approximately 23% of our leadership roles, defined as manager and above. In 2021, we saw an increase of approximately 16% in diverse leaders within the organization. Last, we increased the gender diversity of the Gevo Board to 33% and are looking to expand the Board further to increase diversity and/or gender parity.

Attraction, Retention and Engagement

We are currently operating in an extremely challenging talent market. Market hiring surges, increased attrition and shifting work expectations have significantly impacted the attraction and retention of talent, creating a hyper-competitive marketplace. We understand that our long-term success will require a differentiated, targeted approach to talent attraction and retention. In response to these challenges, we took a number of actions in 2021 in an effort to enhance our ability to attract and retain diverse talent:

We are committed to providing employment opportunities for people in our local communities. In 2022, we will be partnering with local technical colleges and universities to offer scholarships, tuition reimbursement and internships to students in the Energy programs and partner with them in showcasing non-traditional careers to achieve gender equity.

Our employees are highly engaged with our mission. We promote discussion and alignment through monthly town hall sessions with all employees, led by our CEO, Patrick Gruber, as well as fostering open door conversations with all members of management. Gevo is proud to have a 2021 turnover rate of 22.7%.

Further, we found that our employees could be effective while working outside the Gevo offices. Gevo’s management philosophy is to lead with trust in our employees and supports a culture which enables employees to do their best work. And, as a company focused on reducing the world's carbon footprint, we hold that value for our employees as well and encourage them to reduce their personal carbon footprint and work from their homes, as their respective positions allow. This policy has allowed us to attract talent we might not otherwise have if we had restricted hiring to certain geographies.

Human Rights

Gevo honors human rights and respects the individual dignity of all persons globally. Our commitment to human rights requires that we understand and carry out our responsibilities consistent with our values and practices. We strive to ensure that human rights are upheld for our employees and all workers in our supply chain. Our commitment to human rights is defined in the Code of Business Conduct and Ethics, our supplier code of conduct, our dealer code of conduct and related policies and practices, which establish clear guidelines for our employees, suppliers and dealers while helping to inform our business decisions. We do not tolerate human rights abuses, such as forced labor, unlawful child labor or human trafficking. We are proud to contribute to the places where we work and support the residents of these places.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10‑Q, Current Reports on Form 8-K and any amendments to those reports (including related exhibits and supplemental schedules) filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available, free of charge, through our website, as soon as reasonably practicable after such reports have been filed with, or furnished to, the SEC. Our website address is www.gevo.com. Information on our website is not incorporated by reference into, and does not constitute a part of, this report.

You should carefully consider the risk factors described below before you decide to invest in our securities. The risks described below are not the only ones facing us. Our business is also subject to the risks that affect many other companies, such as competition, technological obsolescence, labor relations, general economic conditions, geopolitical changes and international operations. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business operations and our liquidity. The risks described below could cause our actual results to differ materially from those contained in the forward-looking statements we have made in this Report, the information incorporated herein by reference and those forward-looking statements we may make from time to time.

Risk Related to our Business and Strategy

We have a history of net losses, and we may not achieve or maintain profitability.

We incurred net losses of $59.2 million, $40.2 million and $28.7 million during the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of $557.4 million. We expect to incur losses and negative cash flows from operating activities for the foreseeable future. We currently derive limited revenue primarily from the sale of products produced at the Luverne and South Hampton Facilities.

Furthermore, we expect to spend significant amounts on the further development and commercial implementation of strategic plans and technology.

We also expect to spend significant amounts on (i) developing and financing our Net-Zero 1 Project and other similar growth projects, (ii) marketing, general and administrative expenses associated with our planned growth, (iii) management of operations as a public company, and (iv) debt service obligations. In addition, the cost of preparing, filing, prosecuting, maintaining and enforcing patent, trademark and other intellectual property rights and defending ourselves against claims by others that we may be violating their intellectual property rights may be significant.

In particular, over time, costs related to defending the validity of our issued patents and challenging the validity of the patents of others at the United States Patent and Trademark Office (“USPTO”) may be significant. As a result, even if our revenues increase substantially, we expect to continue to incur new losses for the foreseeable future. We do not expect to achieve profitability during the foreseeable future and may never achieve it. If we fail to achieve profitability, or if the time required to achieve profitability is longer than we anticipate, we may not be able to continue our business operations. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

We will require substantial additional financings to achieve our goals, and a failure to obtain this capital when needed or on acceptable terms could force us to delay, limit, reduce or terminate our development and commercialization efforts.

We operate in a capital-intensive industry and will need substantial amount of capital to execute on our business plans. We believe that we will continue to expend substantial resources for the foreseeable future on further growth of our business, including developing, constructing, financing and acquiring facilities necessary for the production of our products on a commercial scale. These expenditures may include costs associated with our Net-Zero Projects, research and development, modifying and expanding the Luverne Facility to produce our products, developing biogas processing projects and wind projects, obtaining government and regulatory approvals, acquiring or constructing storage facilities and negotiating supply agreements for our products. In addition, other unanticipated costs may arise. Because the costs of developing our technology at a commercial scale are highly uncertain, we cannot reasonably estimate the amounts necessary to successfully commercialize our production.

To date, we have funded our operations primarily through equity offerings and issuances of debt. Based on our current plans and expectations, we will require additional funding to achieve our goals. In addition, the cost of preparing, filing, prosecuting, maintaining and enforcing patent, trademark and other intellectual property rights and defending against claims by others that we may be violating their intellectual property rights may be significant. Moreover, our plans and expectations may change as a result of factors currently unknown to us, and we may need additional funds sooner than expected and may seek to raise additional funds through public or private debt or equity financings. We may also choose to seek additional capital sooner than required due to favorable market conditions or strategic considerations.

Our future capital requirements will depend on many factors, including:

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If needed funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate:

Our business is capital-intensive in nature and we rely on external financing to fund our growth strategy, including the development and construction of our Net-Zero Projects and other similar growth projects. Limitations on access to external financing could adversely affect our operating results.

We are in a capital-intensive business and we rely heavily on external financing for the costs of development and construction of our growth projects, such as the Net-Zero 1 Project, and other projected capital expenditures. Completion of our growth projects will require significant capital expenditures and construction costs. The recovery of the capital investment in our growth projects will generally occur over a long period of time. As a result, we must obtain funds from external sources to help develop and construct our existing project pipeline, to help finance the acquisition of system components, to help identify and develop new projects, to help fund research and development expenses and to help pay the general and administrative costs of operating our business. We may not be able to obtain the needed funds on terms acceptable to us, or at all. If we are unable to raise additional funds when needed, we could be required to delay development and construction of projects, reduce the scope of, abandon or sell some or all of our growth projects or default on our contractual commitments in the future, any of which would have a material adverse effect on our business, financial condition and operating results.

Our proposed growth projects may not be completed or, if completed, may not perform as expected. Our project development activities may consume a significant portion of our management’s focus, and if not successful, reduce our profitability.

We plan to grow our business by building multiple production facilities, including greenfield and brownfield projects. Development projects may require us to spend significant sums for engineering, permitting, legal, financial advisory and other expenses before we determine whether a development project is feasible, economically attractive or capable of being financed.

Our development projects are typically planned to be large and complex, and we may not be able to complete them. There can be no assurance that we will be able to negotiate the required agreements, overcome any local opposition, or obtain the necessary licenses, permits and financing. Failure to achieve any of these elements may prevent the development and construction of a project. If that were to occur, we could lose all of our investment in development expenditures and may be required to write-off project development assets.

We may be unable to successfully perform under current or future supply and distribution agreements to provide our products, which could harm our commercial prospects. 

We have entered into several supply agreements pursuant to which we agreed to supply our products. Under certain of these supply agreements, the purchasers agreed to pay for and receive, or cause to be received by a third party, or pay for even if not taken, the renewable hydrocarbon products under contract (a “take-or-pay” arrangement). The timing and volume commitment of certain of these agreements are conditioned upon, and subject to, our ability to complete the construction of a new or expanded production facility (the “Expanded Facility”). In order to commence construction of and complete the Expanded Facility, we must secure third-party financing. While we believe that we can secure adequate financing in order to commence construction of and complete the Expanded Facility and, in turn, perform under these agreements, we cannot assure you that we will be able to obtain adequate financing on favorable terms, or at all. Furthermore, we have not demonstrated that we can meet the production levels and specifications contemplated in certain of our current supply agreements, or future supply agreements. If our production is slower than we expect, if demand decreases or if we encounter difficulties in successfully completing the Expanded Facility, our counterparties may terminate our existing supply agreements and potential customers may be less willing to negotiate definitive supply agreements with us, and therefore cause our performance to suffer.

In addition, from time to time, we may enter into letters of intent, memoranda of understanding and other largely non-binding agreements or understandings with potential customers or partners in order to develop our business and the markets that we serve. We can make no assurance that legally binding, definitive agreements reflecting the terms of such non-binding agreements will be completed with such customers or partners, or at all.

Our supply agreements, including our take-or-pay purchase agreements, are subject to significant conditions precedent and, as a result, the revenues that we expect from such contracts may never be realized.

Our ability to realize revenue under our supply agreements, including our take-or-pay purchase agreements, is not guaranteed and is subject to significant conditions precedent. In order to actually realize revenue under such contracts, we are required to, among other things, complete the Expanded Facility or acquire, construct or retrofit a facility at another suitable location, which is, in turn, dependent on our ability to secure adequate financing. If we are unable to raise sufficient capital on acceptable terms, or at all, the revenues under such contracts may never be achieved. Our ability to obtain adequate financing will depend on, among other things, the status of our product development, our financial condition and general conditions in the capital, financial and debt markets at the time such financing is sought. In addition, any further equity or debt financings could result in the dilution of ownership interests of our then-current stockholders. Furthermore, even if we are able to satisfy all conditions precedent to our take-or-pay contracts, including completion of the Expanded Facility or acquiring, constructing or retrofitting a facility at another suitable location and securing adequate funding, we still may never realize the full amount of revenue that we expect or project to earn from such contracts. In any event, failure to realize the expected revenue thereunder would have a material adverse effect on our business, financial condition, results of operation and liquidity.

Fluctuations in the price of corn and other feedstocks may affect our cost structure.

Our approach to the renewable fuels and chemicals markets will be dependent on the price of corn and other feedstocks that will be used to produce our products. A decrease in the availability of plant feedstocks or an increase in the price may have a material adverse effect on our financial condition and operating results. At certain levels, prices may make these products uneconomical to use and produce as we may be unable to pass the full amount of feedstock cost increases on to our customers.

The price and availability of corn and other plant feedstocks may be influenced by general economic, market and regulatory factors. These factors include weather conditions, farming decisions, government policies and subsidies with respect to agriculture and international trade and global demand and supply. For example, corn prices may increase significantly in response to drought conditions in the midwestern region of the U.S. and any resulting decrease in the supply of corn could lead to the restriction of corn supplies, which in turn could cause further increases in the price of corn. The significance and relative impact of these factors on the price of plant feedstocks is difficult to predict, especially without knowing what types of plant feedstock materials we may need to use.

Fluctuations in the price and availability of energy to power our production facilities may harm our performance.

Our production facilities use significant amounts of energy to produce our products. Accordingly, our business is dependent upon electricity and natural gas produced by us or supplied by third parties. The prices and availability of energy resources are subject to volatile market conditions. These market conditions are affected by factors beyond our control, such as weather conditions, overall economic conditions and governmental regulations. Should the price of energy increase or be unavailable, our business could suffer and have a material adverse impact on our results of operations. In addition, a lack of availability of sufficient amounts of renewable energy to effectively decarbonize our facilities could have a material impact on our business and results of operations

Fluctuations in petroleum prices and customer demand patterns may reduce demand for renewable fuels and bio-based chemicals.

Our renewable fuels may be considered an alternative to petroleum-based fuels. Therefore, if the price of oil falls, any revenues that we generate from renewable fuel products could decline and we may be unable to produce products that are a commercially viable alternative to petroleum-based fuels. Additionally, demand for liquid transportation fuels, including renewable fuels, may decrease due to economic conditions or other factors outside of our control, which could have a material adverse impact on our business and results of operations.

Any decline in the value of carbon credits associated with our products could have a material adverse effect on our results of operations, cash flow and financial condition.

The sale of our products is often dependent on the value of carbon credits under the RFS Program, LCFS and other similar regulatory regimes. The value of these credits fluctuates based on market forces outside of our control. There is a risk that the supply of low-carbon alternative fuels outstrips demand, resulting in the value of carbon credits declining. Any such declines could mean that the economic benefits from our efforts to de-carbonize the Luverne Facility might not be realized. Any decline in the value of carbon credits associated with our products could have a material adverse effect on our results of operations, cash flow and financial condition.

We may not be successful in the commercialization of alcohol-to-SAF projects utilizing Axens technology.

Our future success on alcohol-to-SAF projects depends on our ability to produce commercial quantities of SAF from ethanol using Axens technology. We may encounter challenges in scaling up the Axens technology and/or the technology may not work as expected, or at all on a commercial scale. In addition, the cost to construct commercial alcohol-to-SAF facilities or the production costs associated with the operation of such facilities may be higher than we project. If we encounter such difficulties, this could significantly affect our profitability and have a material adverse impact on our business and results of operations.

We may not be successful in the development of individual steps in the production of commercial quantities of renewable hydrocarbon products from plant feedstocks in a timely or economic manner, or at all.

Our future success depends on our ability to produce commercial quantities of low-carbon isobutanol, ethanol and/or renewable hydrocarbon products in a timely and economic manner. While we have produced isobutanol using our biocatalysts at the Luverne Facility in commercial-scale fermenters, our biocatalysts have not yet produced isobutanol at fully optimized levels in fermenters typical of a full-scale commercial facility. The risk of contamination and other problems rises as we increase the scale of our production. If we are unable to successfully manage these risks, we may encounter difficulties in achieving our target production yield, rate, concentration or purity at a commercial scale, which could delay or increase the costs involved in commercializing our production.

The technological and logistical challenges associated with producing, marketing, selling and distributing isobutanol, renewable hydrocarbon products and ethanol are complex, and we may not be able to resolve any difficulties that arise in a timely or cost-effective manner, or at all.

We have limited experience operating, and have never built, a commercial isobutanol, renewable hydrocarbon or ethanol facility. We believe that we understand the engineering and process characteristics necessary to successfully build the additional facilities that we are contemplating and to scale up to larger facilities. We expect to incur additional capital expenditures to increase production of low-carbon isobutanol and renewable hydrocarbon products at our Net-Zero Projects and potentially also at the Luverne Facility. Our assumptions, however, may prove to be incorrect. Accordingly, we cannot be certain that we can consistently produce low-carbon isobutanol, ethanol or renewable hydrocarbon products in an economical manner in commercial quantities. If we fail to consistently produce low-carbon isobutanol, renewable hydrocarbon products and/or ethanol economically on a commercial scale or in commercial volumes, our commercialization of low-carbon isobutanol, ethanol or renewable hydrocarbon products and our business, financial condition and results of operations will be materially adversely affected.

Our actual costs may be greater than expected in developing our growth projects, causing us to realize significantly lower profits or greater losses on our projects.

We generally must estimate the costs of completing a specific project to prior to the construction of the project. The actual cost of labor and materials may vary from the costs we originally estimated. These variations may cause gross profit for a project to differ from those we originally estimated. Cost overruns on our growth projects could occur due to changes in a variety of factors such as:

As projects grow in size and complexity, multiple factors may contribute to reduced profit or greater losses, and depending on the size of the particular project, variations from the estimated project costs could have a material adverse effect on our business. For example, if project costs exceed our estimates, it could cause us to realize significantly lower profits or greater losses on our projects.

Our facilities and processes may fail to produce products at the volumes, rates and costs we expect.

Some or all of our future production facilities may be in locations distant from corn or other feedstock sources, which could increase our feedstock costs or prevent us from acquiring sufficient feedstock volumes for commercial production. General market conditions might also cause increases in feedstock prices, which could likewise increase our production costs.

Even if we secure access to sufficient volumes of feedstock, our production facilities may fail to perform as expected. The equipment and subsystems that we install in our production facilities may never operate as planned. Our systems may prove incompatible with the original facility or require additional modification after installation. Unexpected problems may force us to cease or delay production and the time and costs involved with such delays may prove prohibitive. Any or all of these risks could prevent us from achieving the production throughput and yields necessary to achieve our target annualized production run rates and/or to meet the volume demands or minimum requirements of our customers, including pursuant to definitive supply or distribution agreements that we may enter into, which may subject us to monetary damages. Failure to achieve these rates or meet these minimum requirements, or achieving them only after significant additional expenditures, could substantially harm our commercial performance.

In addition, if we decide to utilize the Luverne Facility for production of our products, it is important to note that the Luverne Facility was constructed in 1998. As an older production facility, the Luverne Facility may be more susceptible to maintenance issues that result in production challenges than newer production facilities. Any such production challenges may delay our ramp up of production capacity, prevent us from producing significant quantities of our products.

We may be unable to produce renewable hydrocarbon products in accordance with customer specifications.

We may be unable to produce renewable hydrocarbon products to meet customer specifications, including those defined in ASTM D7862 "Standard Specification for Butanol for Blending with Gasoline for Use as Automotive Spark-Ignition Engine Fuel," ASTM D7566 "Standard Specifications for Aviation Turbine Fuel Containing Synthesized Hydrocarbons" or specifications to carbon intensity standards. We may need to add additional processing steps or incur capital expenditures in order to meet customer specifications which could add significant costs to our production process. If we fail to meet specific product or volume specifications contained in a supply agreement, the customer may have the right to seek an alternate supply of isobutanol or renewable hydrocarbon products and/or terminate the agreement completely, and we could be required to pay shortfall fees or otherwise be subject to damages. A failure to successfully meet the specifications of our potential customers could decrease demand and significantly hinder market adoption of our products, thus having a material adverse impact on our business and results of operations.  

We lack significant experience operating commercial-scale facilities and may encounter substantial difficulties operating commercial plants or expanding our business.

We have limited experience operating commercial-scale isobutanol, ethanol, RNG and other renewable hydrocarbon facilities concurrently. Accordingly, we may encounter significant difficulties operating at a commercial scale once we expand our production capabilities, including at our Gevo RNG and Net-Zero Projects. Additionally, if we elect to produce any of our products at the Luverne Facility, we will need to successfully administer and manage this production. Although the employees at the Luverne Facility are experienced in the operation of ethanol facilities, and our future development partners or the entities that we acquire may likewise have such experience, we may be unable to manage production operations. The skills and knowledge gained in operating our current facilities may prove insufficient for successful operation of a large-scale facility or the Expanded Facility, and we may be required to expend significant time and money to develop our capabilities in large-scale facility operation. We may also need to hire new employees or contract with third parties to help manage our operations, and our performance will suffer if we are unable to hire qualified parties or if they perform poorly.

We may face additional operational difficulties as we further expand our production capacity, including our RNG facilities and the Expanded Facility. Integrating new facilities with our existing operations may prove difficult. Rapid growth, resulting from our operation of, or other involvement with, isobutanol and renewable hydrocarbon facilities or otherwise, may impose a significant burden on our administrative and operational resources. To effectively manage our growth and execute our expansion plans, we will need to expand our administrative and operational resources substantially and attract, train, manage and retain qualified management, technicians and other personnel. We may be unable to do so. Failure to meet the operational challenges of developing and managing increased production, or failure to otherwise manage our growth, may have a material adverse effect on our business, financial condition and results of operations.

We may have difficulties gaining market acceptance and successfully marketing our renewable hydrocarbon products to customers, including chemical producers, fuel distributors and refiners.

A key component of our business strategy is to market our products to chemical producers, fuels distributors, refiners and other fuel and chemical industry market participants. We have limited experience marketing our products on a commercial scale and we may fail to successfully negotiate marketing agreements in a timely manner or on favorable terms. If we fail to successfully market our products to refiners, fuels distributors, chemical producers and others, our business, financial condition and results of operations will be materially adversely affected.

A very limited market currently exists for isobutanol as a fuel or as a gasoline blendstock. Therefore, to gain market acceptance and successfully market our isobutanol to fuels distributors and refiners, we must effectively demonstrate the commercial advantages of using isobutanol over other renewable fuels and blendstocks, as well as our ability to produce isobutanol reliably on a commercial scale at a sufficiently low cost. We must show that isobutanol is compatible with existing infrastructure and does not damage pipes, engines, storage facilities or pumps. We must also overcome marketing and lobbying efforts by producers of other renewable fuels and blendstocks, including ethanol, many of whom may have greater resources than we do. If the markets for isobutanol as a fuel or as a gasoline blendstock do not develop as we currently anticipate, or if we are unable to penetrate these markets successfully, our revenue and growth rate could be materially and adversely affected.

We also intend to market our isobutanol to chemical producers for use in making various chemicals such as isobutylene, a type of butene that can be produced through the dehydration of isobutanol. Although a significant market currently exists for isobutylene produced from petroleum, which is widely used in the production of plastics, specialty chemicals, alkylate for gasoline blending and high octane aviation gasoline, no one has successfully created isobutylene on a commercial scale from bio-isobutanol. Therefore, to gain market acceptance and successfully market our isobutanol to chemical producers, we must show that our isobutanol can be converted into isobutylene at a commercial scale. As no company currently dehydrates commercial volumes of isobutanol into isobutylene, we must demonstrate the large-scale feasibility of the process and potentially reach agreements with companies that are willing to invest in the necessary dehydration infrastructure. Failure to reach favorable agreements with these companies, or the inability of their plants to convert isobutanol into isobutylene at sufficient scale, may slow our development in the chemicals market and could significantly affect our profitability.

Obtaining market acceptance in the chemicals industry is complicated by the fact that many potential chemicals industry customers have invested substantial amounts of time and money in developing petroleum-based production channels. These potential customers generally have well-developed manufacturing processes and arrangements with suppliers of chemical components and may display substantial resistance to changing these processes. Pre-existing contractual commitments, unwillingness to invest in new infrastructure, distrust of new production methods and lengthy relationships with current suppliers may all slow market acceptance of isobutanol.

We believe that consumer demand for environmentally sensitive products will drive demand among large brand owners for isobutanol, renewable hydrocarbon products and low-carbon ethanol. One of our marketing strategies is to leverage this demand to obtain commitments from large brand owners to purchase our products. We believe these commitments will, in turn, promote chemicals industry demand for our isobutanol and renewable hydrocarbon products. If consumer demand for environmentally sensitive products fails to develop at sufficient scale or if such demand fails to drive large brand owners to seek sources of renewable isobutanol or renewable hydrocarbon products, our revenue and growth rate could be materially and adversely affected.

Even if we are successful in consistently producing our products on a commercial scale, we may not be successful in negotiating additional fuel supply agreements or pricing terms to support the growth of our business.

We expect that many of our customers will be large companies with extensive experience operating in the fuels or chemicals markets. We lack significant commercial operating experience and may face difficulties in developing marketing expertise in these fields. Our business model relies upon our ability to successfully negotiate, structure and fulfill long-term supply agreements for our products. Certain agreements with existing and potential customers may initially only provide for the purchase of limited quantities from us. Our ability to increase our sales will depend in large part upon our ability to expand these existing customer relationships into long-term supply agreements. Maintaining and expanding our existing relationships and establishing new ones can require substantial investment without any assurance from customers that they will place significant orders. In addition, many of our potential customers may be more experienced in these matters than we are, and we may fail to successfully negotiate these agreements in a timely manner or on favorable terms which, in turn, may force us to slow our production, dedicate additional resources to increasing our storage capacity and/or dedicate resources to sales in spot markets. Furthermore, should we become more dependent on spot market sales, our profitability will become increasingly vulnerable to short-term fluctuations in the price and demand for petroleum-based fuels and competing substitutes.

Our isobutanol may be less compatible with existing refining and transportation infrastructure than we believe, which may hinder our ability to market our isobutanol on a large scale.

We believe that our isobutanol is fully compatible with existing refinery infrastructure. For example, when making isobutanol blends, we believe that gasoline refineries will be able to pump our isobutanol through their pipes and blend it in their existing facilities without damaging their equipment. If our isobutanol proves unsuitable for such handling, it will be more expensive for refiners to use our isobutanol than we anticipate, and they may be less willing to adopt it as a gasoline blendstock, forcing us to seek alternative purchasers.

Likewise, our plans for marketing our isobutanol are based upon our belief that it will be compatible with the pipes, tanks and other infrastructure currently used for transporting, storing and distributing gasoline. If our isobutanol or products incorporating our isobutanol cannot be transported with this equipment, we will be forced to seek alternative transportation arrangements, which will make our isobutanol and products produced from our isobutanol more expensive to transport and less appealing to potential customers. Reduced compatibility with either refinery or transportation infrastructure may slow or prevent market adoption of our isobutanol, which could substantially harm our performance.

If we engage in acquisitions, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations.

If appropriate opportunities become available, we may acquire businesses, assets, technologies or products to enhance our business in the future. In connection with any future acquisitions, we could, subject to certain limitations in the agreements governing our indebtedness at such time:

Acquisitions involve numerous risks, including problems integrating the purchased operations, technologies or products, unanticipated costs and other liabilities, diversion of management’s attention from our core business, adverse effects on existing business relationships with current and/or prospective partners, customers and/or suppliers, risks associated with entering markets in which we have no or limited prior experience and potential loss of key employees. Other than our acquisition of the Luverne Facility, we have not engaged in acquisitions in the past, and do not have experience in managing the integration process. Therefore, we may not be able to successfully integrate any businesses, assets, products, technologies or personnel that we might acquire in the future without a significant expenditure of operating, financial and management resources, if at all. The integration process could divert management time from focusing on operating our business, result in a decline in employee morale and cause retention issues to arise from changes in compensation, reporting relationships, future prospects or the direction of the business. In addition, we may acquire companies that have insufficient internal financial controls, which could impair our ability to integrate the acquired company and adversely impact our financial reporting. If we fail in our integration efforts with respect to acquisitions and are unable to efficiently operate as a combined organization, our business, financial condition and results of operations may be materially adversely affected.

If we engage in joint ventures, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations.

If appropriate opportunities become available, we may enter into joint ventures with the owners of existing ethanol production facilities in order to acquire access to additional production capacity and renewable hydrocarbon production capabilities. We currently anticipate that in each such joint venture, the ethanol producer would contribute access to its existing ethanol production facility and we would be responsible for retrofitting such facility. Upon completion of any retrofit, and in some cases the attainment of certain performance targets, we expect both parties to the joint venture would receive a portion of the profits from the sale of products, consistent with our business model. In connection with these joint ventures, we could incur substantial debt to fund the retrofit of the accessed facilities and we could assume significant liabilities.

Realizing the anticipated benefits of joint ventures, including projected increases to production capacity and additional revenue opportunities, involves a number of potential challenges. The failure to meet these challenges could seriously harm our financial condition and results of operations. Joint ventures are complex and time consuming and we may encounter unexpected difficulties or incur unexpected costs related to such arrangements, including:

Our joint venture partners may have significant amounts of existing debt and may not be able to service their existing debt obligations, which could cause the failure of a specific project and the loss by us of any investment we have made to retrofit the facilities owned by the joint venture partner. In addition, if we are unable to meet specified performance targets related to the production of our products at a facility owned by one of our joint venture partners, we may never become eligible to receive a portion of the profits of the joint venture and may be unable to recover the costs of retrofitting the facility.

If we lose key personnel, including key management personnel, or are unable to attract and retain additional personnel, it could delay our product development programs and harm our research and development efforts, make it more difficult to pursue partnerships or develop our own products or otherwise have a material adverse effect on our business.

Our business is complex and we intend to target a variety of markets. Therefore, it is critical that our management team and employee workforce are knowledgeable in the areas in which we operate. The departure, illness or absence of any key members of our management, including our named executive officers, or the failure to attract or retain other key employees who possess the requisite expertise for the conduct of our business, could prevent us from developing and commercializing our products for our target markets and entering into partnerships or licensing arrangements to execute our business strategy. In addition, the loss of any key scientific staff, or the failure to attract or retain other key scientific employees, could prevent us from developing and commercializing our products for our target markets and entering into partnerships or licensing arrangements to execute our business strategy. We may not be able to attract or retain qualified employees in the future due to the intense competition for qualified personnel among biotechnology and other technology-based businesses, particularly in the advanced renewable fuels area, or due to the limited availability of personnel with the qualifications or experience necessary for our renewable chemicals and advanced renewable fuels business. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience staffing constraints that will adversely affect our ability to meet the demands of our partners and customers in a timely fashion or to support our internal research and development programs. In particular, our product and process development programs are dependent on our ability to attract and retain highly skilled scientists. Competition for experienced scientists and other technical personnel from numerous companies and academic and other research institutions may limit our ability to do so on acceptable terms. All of our employees are at-will employees, meaning that either the employee or we may terminate their employment at any time.

Our planned activities will require additional expertise in specific industries and areas applicable to the products and processes developed through our technology platform or acquired through strategic or other transactions, especially in the end markets that we seek to penetrate. These activities will require the addition of new personnel, and the development of additional expertise by existing personnel. The inability to attract personnel with appropriate skills or to develop the necessary expertise could impair our ability to grow our business.

We may face substantial competition from companies with greater resources and financial strength, which could adversely affect our performance and growth.

We may face substantial competition in the markets for isobutanol, renewable hydrocarbon products, polyester, rubber, plastics, fibers, other polymers and ethanol. Our competitors include companies in the incumbent petroleum-based industry as well as those in the nascent renewable fuels industry. The incumbent petroleum-based industry benefits from a large established infrastructure, production capability and business relationships. The incumbents’ greater resources and financial strength provide significant competitive advantages that we may not be able to overcome in a timely manner. Academic and government institutions may also develop technologies which will compete with us in the chemicals, solvents and blendstock markets.

Our ability to compete successfully will depend on our ability to develop proprietary products that reach the market in a timely manner and are technologically superior to and/or are less expensive than other products on the market. Many of our competitors have substantially greater production, financial, research and development, personnel and marketing resources than we do. In addition, certain of our competitors may also benefit from local government subsidies and other incentives that are not available to us. As a result, our competitors may be able to develop competing and/or superior technologies and processes, and compete more aggressively and sustain that competition over a longer period of time than we could. Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors. As more companies develop new intellectual property in our markets, the possibility of a competitor acquiring patent or other rights that may limit our products or potential products increases, which could lead to litigation. Furthermore, to secure purchase agreements from certain customers, we may be required to enter into exclusive supply contracts, which could limit our ability to further expand our sales to new customers. Likewise, major potential customers may be locked into long-term, exclusive agreements with our competitors, which could inhibit our ability to compete for their business.

In addition, various governments have recently announced a number of spending programs focused on the development of clean technologies, including alternatives to petroleum-based fuels and the reduction of carbon emissions. Such spending programs could lead to increased funding for our competitors or a rapid increase in the number of competitors within those markets.

We also may face substantial competition as we develop our RNG projects and seek to work with farmers and landowners to source our biogas feedstock and lease land to install and operate RNG processing facilities. Our competitors include established companies and developers with significantly greater resources and financial strength, which may provide them with competitive advantages that we may not be able to overcome in a timely manner, or at all.

Our limited resources relative to many of our competitors may cause us to fail to anticipate or respond adequately to new developments and other competitive pressures. This failure could reduce our competitiveness and market share, adversely affect our results of operations and financial position and prevent us from obtaining or maintaining profitability.

Our future success will depend on our ability to maintain a competitive position with respect to technological advances.

The renewable fuels industry is characterized by rapid technological change. Our future success will depend on our ability to maintain a competitive position with respect to technological advances. Technological development by others may impact the competitiveness of our products in the marketplace. Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete or may use their greater resources to gain market share at our expense.

Business interruptions, including those related to COVID-19, may have an adverse impact on our business and our financial results.

We are vulnerable to natural disasters and other events that could disrupt our operations, such as riots, civil disturbances, war, terrorist acts, pandemics, such as COVID-19, floods, infections in our laboratory or production facilities or those of our contract manufacturers and other events beyond our control. We do not have a detailed disaster recovery plan. In addition, we may not carry sufficient business interruption insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect on our cash flows and success as an overall business.

The COVID-19 pandemic has had an adverse impact on global commercial activity, including the global transportation industry and its supply chain, and has contributed to significant volatility in financial markets. It resulted in travel restrictions and extended shutdowns of businesses in various industries including, among others, the airline industry, and significantly reduced overall economic output. It is possible that that the impact of the COVID-19 pandemic on general economic activity could continue to 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 could continue to result in varying demand for our transportation fuel products, which could have a material adverse effect on our business, financial condition and our prospects for the foreseeable future.

The risks generally associated with the COVID-19 pandemic could magnify other risks discussed in this Report and any of our SEC filings. For example, the evolving changes in financial markets could have a material impact on our ability to obtain additional financing, which could impact our liquidity. Volatility in the financial markets could make it more difficult to raise money from selling equity on the capital markets, the impact of COVID-19 on financial markets could limit potential lenders’ ability to provide funds for the financing of our Net-Zero Projects or the terms of any finance transactions could be worse than anticipated. In addition, the effectiveness of external parties, including governmental and non-governmental organizations, in continuing to combat the spread and severity of COVID-19 could have a material impact on demand for our business. Further, steps taken by market counterparties such as commercial airlines could have an impact on their ability to perform under agreements to which we are a party, which could impact our business. Commercial counterparties may also seek to amend supply agreements in the future as a result of COVID-19 or other similar pandemics. The full extent of the impact and effects of the COVID-19 pandemic on our business, operations, liquidity, financial condition and results of operations remain uncertain at this time.

Our business and operations would suffer in the event of information technology system failures or a cyber-attack.

Our business is dependent on proprietary technologies, processes and information that we have developed, much of which is stored on our computer systems. We also have entered into agreements with third parties for hardware, software, telecommunications and other information technology (“IT”) services in connection with our operations. Our operations depend, in part, on how well we and our vendors protect networks, equipment, IT systems and software against damage from a number of threats, including, but not limited to, cable cuts, damage to physical plants, natural disasters, intentional damage and destruction, fire, power loss, hacking, computer viruses, vandalism, theft, malware, ransomware and phishing attacks. Any of these and other events could result in IT system failures, delays, a material disruption of our business or increases in capital expenses. Our operations also depend on the timely maintenance, upgrade and replacement of networks, equipment and IT systems and software, as well as preemptive expenses to mitigate the risks of failures.

Furthermore, the importance of such information technology systems and networks and systems has increased due to many of our employees working remotely. Additionally, if one of our service providers were to fail and we were unable to find a suitable replacement in a timely manner, we could be unable to properly administer our outsourced functions.

As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. While we have implemented security resources to protect our data security and information technology systems, such measures may not prevent such events. Significant disruption to our IT system or breaches of data security could have a material adverse effect on our business, financial condition and results of operations.

We may engage in hedging transactions, which could adversely impact our business.

In the future, we may engage in hedging transactions to offset some of the effects of volatility in commodity prices. Hedging activities may cause us to suffer losses, such as if we purchase a position in a declining market or sell a position in a rising market. Furthermore, hedging would expose us to the risk that we may have under- or over-estimated our need for a specific commodity or that the other party to a hedging contract may default on its obligation. If there are significant swings in commodity prices, or if we purchase more corn for future delivery than we can process, we may have to pay to terminate a futures contract, resell unneeded corn inventory at a loss or produce our products at a loss, all of which would have a material adverse effect on our financial performance. We may vary the hedging strategies we undertake, which could leave us more vulnerable to increases in commodity prices or decreases in the prices of our products. Future losses from hedging activities and changes in hedging strategy could have a material adverse effect on our operations.

Ethical, legal and social concerns about genetically engineered products and processes, and similar concerns about feedstocks grown on land that could be used for food production, could limit or prevent the use of our products, processes and technologies and limit our revenues.

Some of our processes involve the use of genetically engineered organisms or genetic engineering technologies. Additionally, our feedstocks may be grown on land that could be used for food production, which subjects our feedstock sources to “food versus fuel” concerns. If we are not able to overcome the ethical, legal and social concerns relating to genetic engineering or food versus fuel, our products and processes may not be accepted. Any of the risks discussed below could result in increased expenses, delays or other impediments to our programs or the public acceptance and commercialization of products and processes dependent on our technologies or inventions.

Our ability to develop and commercialize one or more of our technologies, products or processes could be limited by the following factors:

The subjects of genetically engineered organisms and food versus fuel have received negative publicity, which has aroused public debate. This adverse publicity could lead to greater regulation and trade restrictions on imports of genetically engineered products or feedstocks grown on land suitable for food production.

The biocatalysts that we develop have significantly enhanced characteristics compared to those found in naturally occurring enzymes or microbes. While we produce our biocatalysts only for use in a controlled industrial environment, the release of such biocatalysts into uncontrolled environments could have unintended consequences. Any adverse effect resulting from such a release could have a material adverse effect on our business and financial condition, and we may be exposed to liability for any resulting harm.

As our products have not previously been used as a commercial fuel in significant amounts, their use subjects us to product liability risks.

Isobutanol, SAF and renewable premium gasoline have not been used as a commercial fuel in large quantities or for a long period of time. Research regarding these products and its distribution infrastructure is ongoing. Although isobutanol, SAF and renewable premium gasolines have been tested on some engines, there is a risk that they may damage engines or otherwise fail to perform as expected. If these products degrade the performance or reduce the life-cycle of engines, or cause them to fail to meet emissions standards, market acceptance could be slowed or stopped, and we could be subject to product liability claims. A significant product liability lawsuit could substantially impair our production efforts and could have a material adverse effect on our business, reputation, financial condition and results of operations.

We may not be able to use some or all of our net operating loss carry-forwards to offset future income.

We have net operating loss carryforwards due to prior period losses generated before January 1, 2021, which if not utilized will begin to expire at various times over the next 20 years. If we are unable to generate sufficient taxable income to utilize our net operating loss carryforwards, these carryforwards could expire unused and be unavailable to offset future income tax liabilities.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period) is subject to limitation on its ability to utilize its pre-change net operating loss carry-forwards, or net operating losses, to offset future taxable income. We undertook a detailed study of our net operating loss carryforwards through December 31, 2021 to determine whether such amounts are likely to be limited by Section 382 of the Code. As a result of this analysis, we currently believe any Section 382 of the Code limitations will significantly impact our ability to offset income with available net operating loss carryforwards. We have experienced more than one ownership change in prior years, and the issuance of shares in connection with our initial public offering itself triggered an ownership change. In addition, future changes in our stock ownership, which may be outside of our control, may trigger an ownership change, as may future equity offerings or acquisitions that have equity as a component of the purchase price.

Competitiveness of our products for fuel use (including RNG) depends in part on government economic incentives for renewable energy projects or other related policies that could change.

We depend, in part, on international, federal, state and local government incentives, including but not limited to RINs, LCFS credits in California, Clean Fuel Program credits in Oregon, Renewable Energy Credits (“RECs”), rebates, tax credits and other incentives to end users, distributors, system integrators and manufacturers of renewable energy projects, that promote the use of renewable energy. These government economic incentives could be reduced or eliminated altogether, or the categories of renewable energy qualifying for such government economic incentives could be changed. These renewable energy program incentives are subject to regulatory oversight and could be administratively or legislatively changed in a manner that could have a material adverse effect on our operations. Reductions in, changes to, or eliminations or expirations of governmental incentives could result in decreased demand for, and lower revenues from, our projects and products. Further, our ability to generate revenue from the various government economic incentives depends on our strict compliance with the applicable federal and state programs, which are complex and can involve a significant degree of judgment. If the agencies that administer and enforce these programs disagree with our judgments, otherwise determine that we are not in compliance, conduct reviews of our activities or make changes to the programs, then our ability to generate revenue from the economic incentives could be temporarily restricted pending completion of reviews or as a penalty, permanently limited or lost entirely, and we could also be subject to fines or other sanctions.

In addition, we may be required to register our projects or qualify our products with the federal government, various states or other countries. Delays in obtaining registration or qualification of our projects or products could delay future revenues and could adversely affect our cash flows. Further, we typically make a large investment in our projects prior to receiving registration and/or qualification. Failure of our projects or products to qualify for government economic incentives could have a material adverse effect on our business.

Risks Related to Intellectual Property

Our ability to compete may be adversely affected if we are unsuccessful in defending against any claims by competitors or others that we are infringing upon their intellectual property rights.

The various bioindustrial markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights. In addition, many companies in intellectual property-dependent industries, including the renewable energy industry, have employed intellectual property litigation as a means to gain an advantage over their competitors. As a result, we may be required to defend against claims of intellectual property infringement that may be asserted by our competitors against us and, if the outcome of any such litigation is adverse to us, it may affect our ability to compete effectively.

Litigation, interferences, opposition proceedings or other intellectual property proceedings inside and outside of the U.S. may divert management time from focusing on business operations, could cause us to spend significant amounts of money and may have no guarantee of success. Any future intellectual property litigation could also force us to do one or more of the following:

We are aware of a significant number of patents and patent applications relating to aspects of our technologies filed by, and issued to, third parties. We cannot assure you that we will ultimately prevail if any of this third-party intellectual property is asserted against us.

Our ability to compete may be adversely affected if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights through costly litigation or administrative proceedings.

Our success will depend in part on our ability to obtain patents and maintain adequate protection of our intellectual property covering our technologies and products and potential products in the U.S. and other countries. We have adopted a strategy of seeking patent protection in the U.S. and in certain foreign countries with respect to certain of the technologies used in or relating to our products and processes. We own rights to hundreds of issued patents and filed patent applications in the U.S. and in various foreign jurisdictions. When and if issued, patents would expire at the end of their term and any patent would only provide us commercial advantage for a limited period of time, if at all. Our patent applications are directed to our enabling technologies and to our methods and products which support our business in the advanced renewable fuels and renewable chemicals markets. We intend to continue to apply for patents relating to our technologies, methods and products as we deem appropriate.

Only some of the patent applications that we have filed in the U.S. or in any foreign jurisdictions, and only certain of the patent applications filed by third parties in which we own rights, have been issued. A filed patent application does not guarantee a patent will issue and a patent issuing does not guarantee its validity, nor does it give us the right to practice the patented technology or commercialize the patented product. Third parties may have or obtain rights to “blocking patents” that could be used to prevent us from commercializing our products or practicing our technology. The scope and validity of patents and success in prosecuting patent applications involve complex legal and factual questions and, therefore, issuance, coverage and validity cannot be predicted with any certainty. Patents issuing from our filed applications may be challenged, invalidated or circumvented. Moreover, third parties could practice our inventions in secret and in territories where we do not have patent protection. Such third parties may then try to sell or import products made using our inventions in and into the U.S. or other territories and we may be unable to prove that such products were made using our inventions. Additional uncertainty may result from implementation of the Leahy-Smith America Invents Act, enacted in September 2011, as well as other potential patent reform legislation passed by the U.S. Congress and from legal precedent handed down by the Federal Circuit Court and the U.S. Supreme Court, as they determine legal issues concerning the scope, validity and construction of patent claims. Because patent applications in the U.S. and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publication of discoveries in the scientific literature often lags behind the actual discoveries, there is additional uncertainty as to the validity of any patents that may issue and the potential for “blocking patents” coming into force at some future date. Accordingly, we cannot ensure that any of our currently filed or future patent applications will result in issued patents, or even if issued, predict the scope of the claims that may issue in our and other companies’ patents. Any proceedings challenging our patents may result in the claims being amended or canceled. If the claims are amended or canceled, the scope of our patent claims may be narrowed, which may reduce the scope of protection afforded by our patent portfolio. Given that the degree of future protection for our proprietary rights is uncertain, we cannot ensure that (i) we were the first to make the inventions covered by each of our filed applications, (ii) we were the first to file patent applications for these inventions, (iii) the proprietary technologies we develop will be patentable, (iv) any patents issued will be broad enough in scope to provide commercial advantage and prevent circumvention, and (v) competitors and other parties do not have or will not obtain patent protection that will block our development and commercialization activities.

These concerns apply equally to patents we have licensed, which may likewise be challenged, invalidated or circumvented, and the licensed technologies may be obstructed from commercialization by competitors’ “blocking patents.” In addition, we generally do not control the patent prosecution and maintenance of subject matter that we license from others. Generally, the licensors are primarily or wholly responsible for the patent prosecution and maintenance activities pertaining to the patent applications and patents we license, while we may only be afforded opportunities to comment on such activities. Accordingly, we are unable to exercise the same degree of control over licensed intellectual property as we exercise over our own intellectual property and we face the risk that our licensors will not prosecute or maintain it as effectively as we would like.

In addition, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Monitoring unauthorized use of our intellectual property is difficult, particularly where, as here, the end products reaching the market generally do not reveal the processes used in their manufacture, and particularly in certain foreign countries where the local laws may not protect our proprietary rights as fully as in the U.S., so we cannot be certain that the steps we have taken in obtaining intellectual property and other proprietary rights will prevent unauthorized use of our technology. If competitors are able to use our technology without our authorization, our ability to compete effectively could be adversely affected. Moreover, competitors and other parties such as universities may independently develop and obtain patents for technologies that are similar to or superior to our technologies. If that happens, the potential competitive advantages provided by our intellectual property may be adversely affected. We may then need to license these competing technologies, and we may not be able to obtain licenses on reasonable terms, if at all, which could cause material harm to our business. Accordingly, litigation may be necessary for us to assert claims of infringement, enforce patents we own or license, protect trade secrets or determine the enforceability, scope and validity of the intellectual property rights of others.

Our commercial success also depends in part on not infringing patents and proprietary rights of third parties, and not breaching any licenses or other agreements that we have entered into with regard to our technologies, products and business. We cannot be certain that patents have not or will not be issued to third parties that could block our ability to obtain patents or to operate our business as we would like, or at all. There may be patents in some countries that, if valid, may block our ability to commercialize products in those countries if we are unsuccessful in circumventing or acquiring rights to these patents. There may also be claims in patent applications filed in some countries that, if granted and valid, may also block our ability to commercialize products or processes in these countries if we are unable to circumvent or license them.

As is commonplace in the biotechnology industries, some of our directors, employees and consultants are or have been employed at, or associated with, companies and universities that compete with us or have or will develop similar technologies and related intellectual property. While employed at these companies, these employees, directors and consultants may have been exposed to or involved in research and technology similar to the areas of research and technology in which we are engaged. Though we have not received such a complaint, we may be subject to allegations that we, our directors, employees or consultants have inadvertently or otherwise used, misappropriated or disclosed alleged trade secrets or confidential or proprietary information of those companies. Litigation may be necessary to defend against such allegations and the outcome of any such litigation would be uncertain.

Under some of our research agreements, our partners share joint rights in certain intellectual property we develop. Such provisions may limit our ability to gain commercial benefit from some of the intellectual property we develop and may lead to costly or time-consuming disputes with parties with whom we have commercial relationships over rights to certain innovations.

If any other party has filed patent applications or obtained patents that claim inventions also claimed by us, we may have to participate in interference, derivation or other proceedings declared by the USPTO to determine priority of invention and, thus, the right to the patents for these inventions in the U.S. These proceedings could result in substantial cost to us even if the outcome is favorable. Even if successful, such a proceeding may result in the loss of certain claims. Even successful outcomes of such proceedings could result in significant legal fees and other expenses, diversion of management time and efforts and disruption in our business. Uncertainties resulting from initiation and continuation of any patent or related litigation could harm our ability to compete.

If our biocatalysts, or the genes that code for our biocatalysts, are stolen, misappropriated or reverse engineered, others could use these biocatalysts or genes to produce competing products.

Third parties, including our contract manufacturers, customers and those involved in shipping our biocatalysts, may have custody or control of our biocatalysts. If our biocatalysts, or the genes that code for our biocatalysts, were stolen, misappropriated or reverse engineered, they could be used by other parties who may be able to reproduce these biocatalysts for their own commercial gain. If this were to occur, it would be difficult for us to discover or challenge this type of use, especially in countries with limited intellectual property protection.

We may not be able to enforce our intellectual property rights throughout the world.

The laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Many companies have encountered significant problems in protecting and enforcing intellectual property rights in certain foreign jurisdictions, and, particularly with any future international partners, we may face new and increased risks and challenges in protecting and enforcing our intellectual property rights abroad. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to bioindustrial technologies. This could make it difficult for us to stop the infringement of our patents or misappropriation of our other intellectual property rights. Proceedings to enforce our patents and other proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to enforce our intellectual property rights in such countries may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop.

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

We rely in part on trade secret protection to protect our confidential and proprietary information and processes. However, trade secrets are difficult to protect. We have taken measures to protect our trade secrets and proprietary information, but these measures may not be effective. We require new employees and consultants to execute confidentiality agreements upon the commencement of an employment or consulting arrangement with us. These agreements generally require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. These agreements also generally provide that know-how and inventions conceived by the individual in the course of rendering services to us shall be our exclusive property. Nevertheless, these agreements may not be enforceable, our proprietary information may be disclosed, third parties could reverse engineer our biocatalysts and others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position. In addition, an unauthorized breach in our information technology systems may expose our trade secrets and other proprietary information to unauthorized parties.

We have received funding from U.S. government agencies, which could negatively affect our intellectual property rights.

Some of our research has been funded by grants from U.S. government agencies. When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents and technical data, generally including, at a minimum, a nonexclusive license authorizing the government to use the invention or technical data for noncommercial purposes. U.S. government funding must be disclosed in any resulting patent applications, and our rights in such inventions will normally be subject to government license rights, periodic progress reporting, foreign manufacturing restrictions and march-in rights. March-in rights refer to the right of the U.S. government, under certain limited circumstances, to require us to grant a license to technology developed under a government grant to a responsible applicant or, if we refuse, to grant such a license itself. March-in rights can be triggered if the government determines that we have failed to work sufficiently towards achieving practical application of a technology or if action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. If we breach the terms of our grants, the government may gain rights to the intellectual property developed in our related research. The government’s rights in our intellectual property may lessen its commercial value, which could adversely affect our performance.

Risks Related to Legal and Regulatory

The U.S. renewable fuels industry is highly dependent upon certain federal and state legislation and regulation and any changes in legislation or regulation could have a material adverse effect on our results of operations, cash flows and financial condition.

The EPA has implemented the RFS Program pursuant to the Energy Policy Act of 2005 (the “Energy Policy Act”) and the Energy Independence and Security Act of 2007. The RFS Program sets annual quotas for the quantity of renewable fuels that must be blended into motor fuels consumed in the U.S. The domestic market for renewable fuels is significantly impacted by federal mandates under the RFS Program for volumes of renewable fuels required to be blended with gasoline. Future demand for renewable fuels will be largely dependent upon incentives to blend renewable fuels into motor fuels, including the price of renewable fuels relative to the price of gasoline, the relative octane value of the renewable fuel, constraints in the ability of vehicles to use higher renewable fuel blends, the RFS Program and other applicable environmental requirements. Any significant increase in production capacity above the RFS Program minimum requirements may have an adverse impact on renewable fuel prices. Any change in government policies regarding the RFS Program could have a material adverse effect on our business and the results of our operations.

Waivers of the RFS minimum levels of renewable fuels included in motor fuels or of the requirements by obligated parties to comply with the regulations could have a material adverse effect on our results of operations. Under the Energy Policy Act, the U.S. Department of Energy, in consultation with the Secretary of Agriculture and the Secretary of Energy, may waive the renewable fuels mandate with respect to one or more states if the Administrator of the EPA determines that implementing the requirements would severely harm the economy or the environment of a state, a region or the nation, or that there is inadequate supply to meet the requirement. Additionally, the EPA has exercised the authority to waive the requirements of the RFS minimum levels for certain small refiners. Any waiver of the RFS minimum levels with respect to one or more states would reduce demand for renewable fuels and could cause our results of operations to decline and our financial condition to suffer. Further activity by the EPA to waive the requirements for small refiners could cause softening of pricing in the industry and cause our results of operations to similarly decline.

A critical state program is California's LCFS program, which is designed to reduce GHG emissions associated with transportation fuels used in California by ensuring that the fuel sold in California meets declining targets for such emissions. The regulation quantifies life-cycle GHG emissions by assigning a CI score to each transportation fuel based on that fuel’s life-cycle assessment. Each petroleum fuel provider, generally the fuel’s producer or importer (the “Regulated Party”), is required to ensure that the overall CI score for its fuel pool meets the annual CI target for a given year. A Regulated Party’s fuel pool can include gasoline, diesel and their blend stocks and substitutes. This obligation is tracked through credits and deficits. Fuels with a CI score lower than the annual standard earn a credit, and fuels that are higher than the standard result in a deficit. Several other states also have or are considering adopting this model. Oregon’s Clean Fuels Program, enacted in 2009 and implemented in 2016, operates using a credit system similar to the California LCFS program. Any changes to California’s LCFS program or failure of other states to implement similar programs could have a material adverse effect on our business and the results of our operations.

We may face substantial delays in obtaining regulatory approvals for use of our renewable premium gasoline product, which could substantially hinder our ability to commercialize our renewable premium gasoline product in the U.S.

Commercialization of our renewable premium gasoline product in the U.S. requires approvals from state and/or federal agencies. Before we can sell our renewable premium gasoline product as a fuel or as a gasoline blendstock, we must obtain certain approvals or certifications from the EPA. There can be no assurances that the EPA will grant such approvals or certifications. Any delay or failure in receiving approval will slow or prevent the commercialization of our renewable premium gasoline product, which could have a material adverse effect on our business, financial condition and results of operations.

Additionally, California requires that fuels meet both its fuel certification requirements and a separate state low-carbon fuel standard. Any delay or failure in receiving approval for our renewable premium gasoline product will slow or prevent the commercialization of our renewable premium gasoline product, which could have a material adverse effect on our business, financial condition and results of operations.

There are also various third-party certification organizations, such as ASTM International and Underwriters’ Laboratories, Inc., involved in standard-setting regarding the transportation, dispensing and use of liquid fuel in the U.S. and abroad. These organizations may change the current standards and additional requirements may be enacted that could prevent or delay approval of our renewable premium gasoline product. The process of seeking required approvals and the continuing need for compliance with applicable standards may require the expenditure of substantial resources, and there is no guarantee that we will satisfy these standards in a timely manner, if ever.

Our isobutanol product may encounter physical or regulatory issues that could limit its usefulness as a gasoline blendstock.

In the gasoline blendstock market, isobutanol can be used in conjunction with, or as a substitute for, ethanol and other widely used fuel oxygenates, and we believe our isobutanol is physically compatible with typical gasoline engines. However, there is a risk that under actual engine conditions, isobutanol will face significant limitations, making it unsuitable for use in high percentage gasoline blends. Additionally, current regulations limit gasoline blends to low percentages of isobutanol, and also limit combination isobutanol-ethanol blends. On June 12, 2018, the EPA announced that it approved the registration of isobutanol as a fuel additive for blending into gasoline at levels up to 16 volume percent for on-road automotive use. There can be no assurances that the EPA registration of isobutanol as a fuel additive for blending into gasoline at levels up to 16 volume percent will not be revoked or changed. Government agencies may maintain or even increase the restrictions on isobutanol gasoline blends. As we believe that the potential to use isobutanol in higher percentage blends than is feasible for ethanol will be an important factor in successfully marketing isobutanol to refiners, a low blend wall could significantly limit commercialization of isobutanol as a gasoline blendstock.

We may be required to obtain additional regulatory approvals for use of our iDGs as animal feed, which could delay our ability to sell iDGs increasing our net cost of production and harming our operating results.

Our production facilities and many of the ethanol plants that we might retrofit use or will use dry-milled corn as a feedstock. We plan to sell, as animal feed, the iDGs left as a co-product of fermenting isobutanol from dry-milled corn. We believe that this will enable us to offset a significant portion of the expense of purchasing corn for fermentation. We are currently approved to sell iDGs as animal feed through the self-assessed GRAS process of the FDA via third party scientific review. In order to improve the value of our iDGs, we are working with The Association of American Feed Control Officials (“AAFCO”) to establish a formal definition for our iDGs as well as clearance for the materials into animal feed. We believe obtaining AAFCO approval will increase the value of our iDGs by offering customers of our iDGs further assurance of the safety of our iDGs. If we make certain changes in our biocatalyst whereby we can no longer rely on our GRAS process, we would be required to obtain FDA approval for marketing our iDGs. While we believe we can rely on the GRAS process as we update our biocatalysts to increase isobutanol production, for further customer assurance, we also intend to pursue approval upon a completed biocatalyst from the Center for Veterinary Medicine of the FDA. FDA testing and approval can take a significant amount of time, and there is no guarantee that we will ever receive such approval. While we have sold initial quantities of our iDGs from the Luverne Facility, if FDA or AAFCO approval is delayed or never obtained, or if we are unable to secure market acceptance for our iDGs, our net cost of production will increase, which may hurt our operating results.

Reductions or changes to existing regulations and policies may present technical, regulatory and economic barriers, all of which may significantly reduce demand for renewable fuels or our ability to supply our products.

The market for renewable fuels is heavily influenced by foreign, federal, state and local government laws, regulations and policies. Changes in these laws, regulations and policies or how these laws, regulations and policies are implemented and enforced could cause the demand for renewable fuels to decline and deter investment in the research and development of renewable fuels.

Concerns associated with renewable fuels, including land usage, national security interests and food crop usage, continue to receive legislative, industry and public attention. This attention could result in future legislation, regulation and/or administrative action that could adversely affect our business. Any inability to address these requirements and any regulatory or policy changes could have a material adverse effect on our business, financial condition and results of operations.

Additionally, our isobutanol, ethanol and/or renewable hydrocarbon plants may emit GHG. Any changes in state or federal emissions regulations, including the passage of cap-and-trade legislation or a carbon tax, could limit our production of isobutanol, renewable hydrocarbon products and iDGs and increase our operating costs, which could have a material adverse effect on our business, financial condition and results of operations. The results of U.S. elections could lead to changes in federal or state laws and regulations that could have a material adverse effect on our business, prospects, financial condition and results of operations.

We use hazardous materials in our business and we must comply with environmental laws and regulations. Any claims relating to improper handling, storage or disposal of these materials or noncompliance with applicable laws and regulations could be time consuming and costly and could adversely affect our business and results of operations.

Our research and development processes involve the use of hazardous materials, including chemical, radioactive and biological materials. Our operations also produce hazardous waste. We cannot eliminate entirely the risk of accidental contamination or discharge and any resultant injury from these materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of, and human exposure to, these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets. Although we believe that our activities conform in all material respects with environmental laws, there can be no assurance that violations of environmental, health and safety laws will not occur in the future as a result of human error, accident, equipment failure or other causes. Compliance with applicable environmental laws and regulations may be expensive, and the failure to comply with past, present or future laws could result in the imposition of fines, third-party property damage, product liability and personal injury claims, investigation and remediation costs, the suspension of production or a cessation of operations, and our liability may exceed our total assets. Liability under environmental laws can be joint and several and without regard to comparative fault. Environmental laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations, which could impair our research, development or production efforts and harm our business.

Our international activities may increase our exposure to potential liability under anti-corruption, trade protection, tax and other laws and regulations.

In the course of our relationships with international partners, we may become subject to certain foreign tax, environmental and health and safety regulations that did not previously apply to us or our products. Such regulations may be unclear, not consistently applied and subject to sudden change. Implementation of compliance policies could result in additional operating costs, and our failure to comply with such laws, even inadvertently, could result in significant fines and/or penalties.

Additionally, the Foreign Corrupt Practices Act and other anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors or agents. Even with implementation of policies, training and internal controls designed to reduce the risk of corrupt payments, our employees, vendors or agents may violate our policies. Our international partnerships may significantly increase our exposure to potential liability. Our failure to comply with Anti-Corruption Laws could result in significant fines and penalties, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business, and damage to our reputation.

Risks Related to Owning Our Securities

The market price of our common stock may be adversely affected by the future issuance and sale of additional shares of our common stock or by our announcement that such issuances and sales may occur.

We cannot predict the size of future issuances or sales of shares of our common stock in connection with future acquisitions or capital raising activities, or the effect, if any, that such issuances or sales may have on the market price of our common stock. The issuance and sale of substantial amounts of shares of our common stock, or the announcement that such issuances and sales may occur, could adversely affect the market price of our common stock.

Future issuances of our common stock or instruments convertible or exercisable into our common stock may materially and adversely affect the price of our common stock and cause dilution to our existing stockholders.

Historically, we have raised capital by issuing common stock and warrants in public offerings because no other reasonable sources of capital were available. These public offerings of common stock and warrants have materially and adversely affected the prevailing market prices of our common stock and caused significant dilution to our stockholders. We have also historically raised capital or refinanced outstanding debt through the issuance of convertible notes.

We may need to raise capital through these public offerings of common stock, warrants and convertible debt in the future.

We may obtain additional funds through public or private debt or equity financings, subject to certain limitations in the agreements governing our indebtedness. If we issue additional shares of common stock or instruments convertible into common stock, it may materially and adversely affect the price of our common stock.

Our stock price may be volatile, and your investment in our securities could suffer a decline in value.

The market price of shares of our common stock has experienced significant price and volume fluctuations. We cannot predict whether the price of our common stock will rise or fall. A variety of factors may have a significant effect on our stock price, including:

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of shares of our common stock, regardless of our operating performance, and cause the value of your investment to decline.

Sales of a substantial number of shares of our common stock or securities linked to our common stock, such as our warrants (should an established market for such securities then exist), in the public market could occur at any time. These sales, or the perception in the market that such sales may occur, could reduce the market price of our common stock.

In addition, certain holders of our outstanding common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares and to include their shares in registration statements that we may file for ourselves or other stockholders.

The estimates and assumptions on which our financial projections are based may prove to be inaccurate.

Our financial projections, including any projected investment returns on projects, sales or earnings guidance or outlook that we may provide from time to time, are dependent on estimates and assumptions related to, among other things, industry growth, product and plant development, estimated capital expenses for growth development projects, market share projections, product pricing and sale, customer interest in our products, availability of government incentives, tax rates,  accruals for estimated liabilities, and our ability to raise sufficient funds or generate sufficient cash flow to continue operations and/or expand our production capabilities. Our financial projections are based on historical experience and on various other estimates and assumptions that we believe to be reasonable under the circumstances and at the time they are made, and our actual results may differ materially from our financial projections.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and licensing arrangements. To the extent that we raise additional capital through the sale or issuance of equity, warrants or convertible debt securities, the ownership interest of our existing shareholders will be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect your rights as a stockholder. If we raise capital through debt financing, it may involve agreements that include covenants further limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through strategic partnerships or licensing agreements with third parties, we may have to relinquish valuable rights to our technologies or grant licenses on terms that are not favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our development and commercialization efforts.

We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment.

We have never paid cash dividends on our common stock and we do not expect to pay cash dividends on our common stock at any time in the foreseeable future. The future payment of dividends directly depends upon our future earnings, capital requirements, financial requirements and other factors that our board of directors will consider. As a result, only appreciation of the price of our common stock, which may never occur, will provide a return to stockholders. Investors seeking cash dividends should not invest in our common stock.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline. The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us or our business.

We do not have any control over securities or industry analysts. If one or more of the analysts who cover us downgrade our common stock or change their opinion of our common stock, our common stock price would likely decline which in turn would likely cause a decline in the value of our warrants. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our common stock price and the price of our warrants to decline or the trading volume of our common stock to decline.

We are subject to anti-takeover provisions in our certificate of incorporation, our bylaws and under Delaware law that could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders.

Provisions in our certificate of incorporation and our bylaws may delay or prevent an acquisition of the Company. Among other things, our certificate of incorporation and bylaws provide for a board of directors that is divided into three classes with staggered three-year terms, provide that all stockholder action must be effected at a duly called meeting of the stockholders and not by a consent in writing, and further provide that only our board of directors may call a special meeting of the stockholders. These provisions may also frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management team. Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us. Finally, our charter documents establish advance notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings. Although we believe these provisions together provide an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer to acquire the Company may be considered beneficial by some stockholders.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware shall, unless we consent in writing to the selection of an alternative forum, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.

The exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near the State of Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition. Notwithstanding the foregoing, the exclusive forum provision shall not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the Exchange Act or the Securities Act, or the respective rules and regulations promulgated thereunder.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.

If a court were to find the exclusive forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees.

None.

From time to time, we have been and may again become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any litigation that we believe to be material and we are not aware of any pending or threatened litigation against us that we believe could have a material adverse effect on our business, operating results, financial condition or cash flows.

On February 7, 2022, an incident occurred at one of the anaerobic digesters that is part of our RNG project 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 Gevo a notice of violation in connection with the discharge.  There is a possibility that the Iowa Department of Natural Resources will initiate an enforcement action that could result in  a monetary sanction being levied against Gevo for the accidental discharge. We do not believe that any such monetary sanction would be material or exceed $300,000.

Not Applicable.

PART II

Market Information

The Company's common stock is listed and traded on the Nasdaq Capital Market under the symbol "GEVO".

Holders of Record

As of January 31, 2022, there were approximately 35 holders of record of our common stock. We believe that the number of beneficial owners is substantially greater than the number of record holders because a large portion of our common stock is held of record through brokerage firms in “street name.”

Dividends

No cash dividends have been paid on our common stock to date, nor do we anticipate paying dividends in the foreseeable future. Any future determination to declare cash dividends on our common stock will be made at the discretion of our Board of Directors, subject to compliance and limitations under our debt arrangements in effect at such time.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

None.

Purchases of Equity Securities by the Issuer

Performance Graph

The following information is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent the Company specifically incorporates it by reference into such a filing.

The following line graph compares the cumulative total shareowner return on our common stock against the cumulative total return of the S&P Smallcap 600 Index and the NASDAQ Clean Edge Green Energy Index for the each of the five years ended December 31, 2021. The graph assumes a $100 investment in our common stock and each index at December 31, 2016.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K (this “Annual Report”). Some of the information contained in this discussion and analysis and set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the section titled “Risk Factors” in Part I, Item 1A of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Company Overview

We are a growth-oriented company with the mission of solving greenhouse gas emissions for those sectors of the transportation industry that are not amenable to electrification or hydrogen. 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" 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 model to measure, predict and verify GHG emissions across the life-cycle of our products. The "net-zero" concept means that we expect to produce fuels that consume as much carbon dioxide in their manufacture as they produce when burned.

Our primary market focus, given current demand and growing customer interest, is SAF. We believe that we also have 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 global fuel consumption by commercial airlines was an all-time high of 95 billion gallons in 2019. However, due to the COVID-19, the fuel consumption dropped to only 52 billion gallons in 2020 and reached 57 billion gallons in 2021. The airline industry is looking for at least 10% of its fuel needs to be sustainable by 2030 (with the potential for up to 30% at the high end).

Our production processes use carbohydrates as a feedstock. Carbohydrates are plant matter that results from photosynthesis. Photosynthesis is the natural process by which carbon dioxide is captured from the air by plants. The carbon in carbohydrates is therefore renewable because it is already in the atmosphere. The carbohydrates are fermented to produce alcohol intermediate products (e.g., ethanol or isobutanol). The alcohol-based intermediates are then chemically processed to make renewable hydrocarbons.

We believe that we will be able to develop the marketplace, customers, and production capacity to achieve at least 1 billion gallons of sales by 2030. We believe that two approaches will be required. The first approach, the development of greenfield sites (i.e., the development of a project on an undeveloped site), allows us to optimize production and the integration of technology. We expect that utilizing greenfield sites will have the potential to achieve lower CI scores over the long run, compared to other approaches. The second approach, leveraging installed alcohol production capacity, has the advantage that the fermentation capacity already exists via existing ethanol plants. Those existing ethanol plants would need to be decarbonized and hydrocarbon production capacity would need to be installed.

In early 2021, we announced the concept of “Net-Zero Projects” as a series of planned facilities to produce energy dense liquid hydrocarbons using renewable energy and our proprietary technology. The concept of a Net-Zero Project is to convert renewable energy (photosynthetic, wind, renewable natural gas, biogas) from a variety of sources into energy dense liquid hydrocarbons that when burned in traditional engines, have the potential to achieve net-zero GHG emissions across the whole life-cycle of the liquid fuel as measured across the whole of the life-cycle based on the GREET Model, the pre-eminent science-based life-cycle analysis model. The GREET Model takes into account emissions and impacts "cradle to cradle" for renewable resource-based fuels including inputs and generation of raw materials, agriculture practices, chemicals used in production processes of both feedstocks and products, energy sources used in production and transportation and the end use of the products, which for fuel products is usually burning to release energy.

Recent Developments

At-the-Market Offering Program. In September 2021, the at-the-market offering program was amended to provide available capacity under the at-the-market offering program of $500 million.

During the year ended December 31, 2021, we issued 24,420,579 shares of common stock under the at-the-market offering program for total proceeds of $135.8 million, net of commissions and other offering related expenses totaling $3.6 million.

COVID-19

COVID-19. The COVID-19 pandemic has had an adverse impact on global commercial activity, including the global transportation industry and its supply chain, and has contributed to significant volatility in financial markets. It resulted in travel restrictions and extended shutdowns of businesses in various industries including, among others, the airline industry, and significantly reduced overall economic output. It is possible that that the impact of the ongoing COVID-19 pandemic on general economic activity could continue to negatively impact the Company's revenue and operating results, particularly as new variants of COVID-19 are discovered. In light of the current and potential future disruption to its business operations and those of its customers, suppliers and other third parties with whom the Company does business, management considered the impact of the COVID-19 pandemic on the Company's business. The impact of the COVID-19 pandemic on the global transportation industry could continue to result in less demand for the Company's transportation fuel products, which could have a material adverse effect on the Company's business, financial condition and prospects for the foreseeable future.

During the first quarter of 2020, we suspended production at our Luverne Facility due to COVID-19 and an unfavorable commodity environment. The suspension of production and a corresponding reduction in the Company's workforce that occurred during the first quarter of 2020 had an adverse impact on the Company's financial results for the year ended December 31, 2021, reducing revenue by 87% compared to the year ended December 31, 2020. Revenue was reduced by 77% for the year December 31, 2020 compared to the year ended December 31, 2019 as a result of COVID-19. The Luverne Facility re-commenced operations during July 2021. There is a risk that COVID-19 could have a material adverse impact on the development of the Company's Net-Zero 1 Project, customer demand and cash flow, depending on the extent of our future production activities.

The Company has considered multiple scenarios, with both positive and negative inputs, as part of the significant estimates and assumptions that are inherent in its financial statements and are based on trends in customer behavior and the economic environment throughout the year ended December 31, 2021 and beyond as the COVID-19 pandemic has impacted the industries in which the Company operates. These estimates and assumptions include the collectability of billed receivables and the estimation of revenue and tangible assets. With regard to collectability, the Company believes it may face atypical delays in client payments going forward, but the Company has not experienced significant delays in collection as of December 31, 2021. In addition, management believes that the demand for certain discretionary lines of business may decrease, and that such decrease will impact its financial results in succeeding periods. Non-discretionary lines of business may also be adversely affected, for example because reduced economic activity or disruption in hydrocarbon markets could reduce demand for SAF, isooctane and isooctene. 

Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the notes to those Consolidated Financial Statements appearing in this Report. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in Part I, Item 1A of this Report, our actual results may differ materially from those anticipated in these forward-looking statements.

This section of this Report discusses year-to-year comparisons between 2021 and 2020, as well as other discussions of 2021 and 2020 items. The complete Management’s Discussion and Analysis of Financial Condition and Results of Operations for year-to-year comparisons between 2020 and 2019 and other discussions of 2019 items can be found within Part II, Item 7, to our Annual Report on Form 10-K filed with the SEC on March 17, 2020, which is available free of charge on the SEC's website at www.sec.gov and our corporate website at www.gevo.com.

Comparison of the Years Ended December 31, 2021 and 2020

(in thousands)

Revenue. As a result of COVID-19 and in response to an unfavorable commodity environment, we suspended ethanol and distiller's grains production in March 2020. Revenue from the sale of ethanol, isobutanol and related products during the year ended December 31, 2021 was $0.7 million, a decrease of $4.8 million from the year ended December 31, 2020.

Hydrocarbon revenues are comprised of SAF, isooctane and isooctene sales. Hydrocarbon revenue decreased $1.0 million during the year ended December 31, 2021 primarily as a result of fewer shipments of finished products from the South Hampton Facility. The South Hampton Facility was unable to produce significant amounts of jet fuel during the second half of 2021 due to a lack of availability of isobutanol to convert into SAF renewable jet fuel after halting production due to impacts from COVID-19. The South Hampton Facility began producing renewable premium gasoline or jet fuel with supply from the Luverne Facility during the fourth quarter of 2021.

Cost of goods sold. Our cost of goods sold decreased $1.6 million during the year ended December 31, 2021 compared to the prior year primarily the result of suspending ethanol production in March 2020 as a result of COVID-19 and in response to an unfavorable commodity environment. We began producing isobutanol during the third quarter 2021 resulting in higher production costs. The cost of goods sold was significantly higher for isobutanol without the coproduction of ethanol as operated in previous years as we worked to improve and refine our production processes. Cost of goods sold included inventory write down to net realizable value of approximately $5.2 million and $1.2 million during the years ended December 31, 2021 and 2020, respectively. 

Prior to the Luverne Facility restarting production, cost of goods sold was primarily comprised of costs to process SAF, isooctane and isooctene at our South Hampton Facility, as well as costs to maintain the Luverne Facility.

Depreciation and amortization. Depreciation and amortization related to cost of goods sold decreased approximately $1.2 million during the year ended December 31, 2021 compared to the prior year as certain assets became fully depreciated during the year ended December 31, 2020. Depreciation and amortization related to cost of operating expenses increased approximately $0.4 million during the year ended December 31, 2021 compared to the prior year primarily due to $0.3 million of amortization for patents acquired in September 2021.

Research and development expense. Research and development expense increased by approximately $3.3 million during the year ended December 31, 2021 compared with to the prior year, due primarily to $2.2 million of personnel costs from increased headcount, recruiting and stock-based compensation and $0.9 million of consulting expenses as we work to improve our process for growing and fermenting yeast strains.

Selling, general and administrative expense. Selling, general and administrative expenses increased approximately $14.3 million during the year ended December 31, 2021 compared to the prior year, due primarily to $9.7 million increase in personnel costs related to increased headcount, recruiting costs and stock-based compensation, $1.7 million for increased consulting fees related to regulatory consulting and compliance with Section 404(b) of the Sarbanes-Oxley Act, $1.1 million attributable to professional fees related to new contracts and extensive shareholder outreach for the annual stockholder meeting and $1.0 million for higher costs for insurance.

Preliminary stage project costs. Preliminary stage project costs increased by approximately $8.9 million during the year ended December 31, 2021 compared with the prior year due primarily to increased consulting and research and development expenses related to our Gevo RNG and Net-Zero projects. During the year ended December 31, 2021, the preliminary stage project costs were primarily related to $5.7 million of front-end engineering costs and $2.7 million for personnel expenses to support the growth in business activity for our Gevo RNG and Net-Zero projects. During the year ended December 31, 2020, the preliminary stage project costs were primarily related to consulting for front-end engineering costs and for personnel expenses to support the growth in business activity at our Gevo RNG project. During the second quarter 2021, we began capitalizing the Gevo RNG project costs after completing certain front-end engineering studies and determining it was probable that we would build the Gevo RNG project. During the third quarter 2021, we began capitalizing our Net-Zero 1 project costs after completing certain front-end engineering studies and determining it was probable that we would build Net-Zero 1.

Loss on disposal of assets. As a result of suspending the production of ethanol at the Luverne Facility, we wrote-off $5.1 million of costs related to the installation of the fractionation equipment returned to the manufacturer during the year ended December 31, 2021. The returned equipment and related installation costs had been planned to be used in ethanol production.

Restructuring expenses. During the year ended December 31, 2020, we incurred $0.3 million of restructuring charges related to the restructuring of Agri-Energy in response to COVID-19, termination of employees at Agri-Energy and Gevo and renegotiating contracts.

Gain on forgiveness of SBA Loans. During the year ended December 31, 2021, the Small Business Administration forgave $0.6 million of the Company's SBA Loans and accrued interest.

Interest expense. Interest expense during the year ended December 31, 2021 decreased by $1.8 million compared to the prior year, due to the conversion of our 12% convertible senior secured notes due 2020/2021 (the “2020/21 Notes”) to common stock during 2020. During the year ended December 31, 2021, we capitalized $2.1 million of interest associated with the Gevo RNG project.

Interest and dividend income. Interest and dividend income increased approximately $0.5 million during the year ended December 31, 2021 compared to the prior year due to interest earned from investments in marketable securities.

(Loss) from modification of 2020 Notes. During the year ended December 31, 2020, we incurred $0.7 million of legal and professional fees to modify the 2020 Notes into the 2020/21 Notes.

(Loss) on conversion of 2020/21 Notes. During the year ended December 31, 2020, we incurred a $1.9 million loss related to the conversion of $2.0 million of 2020/21 Notes into common stock during July 2020 and $12.7 million of 2020/21 Notes into common stock during December 2020, which reflects the cost of the make-whole payments. 

(Loss) gain from change in fair value of the 2020/21 Notes and 2020 Notes embedded derivative liability. We incurred no gain (loss) from the change in fair value of the 2020/21 Notes during the year ended December 31, 2021 since the 2020/21 Notes and the 2020 Notes were converted to common stock in 2020.

Sources of Our Revenues

Our current and historic revenues are primarily derived from: (i) the sale of isobutanol and related products; (ii) hydrocarbon sales consisting primarily of the sale of SAF and isooctane derived from our isobutanol; and (iii) government grants and research and development programs.

Principal Components of Our Cost Structure.

Cost of Goods Sold. Our cost of goods sold consists primarily of costs directly associated with the production of isobutanol, SAF and isooctane. Such costs include direct materials, direct labor, other operating costs and certain plant overhead costs. Direct materials include corn feedstock, denaturant and process chemicals. Direct labor includes compensation (including stock-based compensation) of personnel directly involved in production operations. Other operating costs include utilities and natural gas and wind power usage.

Depreciation and Amortization. Depreciation and amortization associated with costs of goods sold relates to property, plant and equipment directly associated with the production of isobutanol, SAF and isooctane. Depreciation and amortization associated with operating expenses relates to property, plant and equipment used in product development and unrelated to cost of goods sold.

Research and Development. Our research and development expense consists of costs incurred to identify, develop and test our technologies for the production of isobutanol and the development of downstream applications thereof. Research and development expense include personnel costs (including stock-based compensation), consultants and related contract research, facility costs, supplies, license fees paid to third parties for use of their intellectual property and patent rights and other overhead expenses incurred to support our research and development programs.

Selling, General and Administrative. Selling, general and administrative expense consist of personnel costs (including stock-based compensation), consulting and service provider expenses (including patent counsel-related costs), legal fees, marketing costs, insurance costs, occupancy-related costs, travel and relocation expenses and hiring expenses.

Preliminary Stage Project Costs. Preliminary stage project costs consist of consulting, preliminary engineering costs, personnel expenses (including stock-based compensation) and research and development expenses to support the business activities of our Gevo RNG and Net-Zero projects.

Loss on Disposal of Assets. Loss on disposal of assets consists of costs related to the installation of the fractionation equipment returned to the manufacturer as a result of suspending the production of ethanol at the Luverne Facility. The returned equipment and related installation costs had been planned to be used in ethanol production.

Liquidity and Capital Resources

As of December 31, 2021, we had cash and cash equivalents totaling $40.8 million, short and long-term restricted cash totaling $95.2 million and short and long-term marketable securities totaling $339.7 million. The marketable securities are highly liquid and can be converted to cash when it is needed for operations.

Since our inception in 2005, we have devoted most of our cash resources to research and development, manufacturing ethanol, isobutanol and related products and selling, general and administrative activities related to the commercialization of isobutanol and related products from renewable feedstocks. We have incurred losses since inception and expect to incur losses at least until our expected large-scale hydrocarbon production capacity is fully operational. We have financed our operations primarily with proceeds from multiple sales of equity and debt securities, borrowings under debt facilities and product sales. During 2021, we invested most of those proceeds for the upgrade, development and construction of our existing facilities and new projects associated with the Luverne Facility, Gevo RNG and Net-Zero 1.

The continued operation of our business is dependent upon raising additional capital through future public and private equity offerings, debt financings or through other alternative financing arrangements. Successful attainment of profitable operations is dependent upon future events, including our ability to raise sufficient capital to expand our commercial hydrocarbon production capabilities, completion of our development activities, continued advancement of our hydrocarbon sales agreements, continued advancement of our technologies and knowhow and attracting and retaining qualified personnel.

Our transition to profitability is dependent upon, among other things, the successful development and commercialization of our product candidates, the development, acquisition and construction of additional production facilities to support our offtake agreements, the achievement of a level of revenues adequate to support our cost structure and the ability to raise capital to finance the development, acquisition and construction of additional productions facilities.

We intend to fund future operations through additional private and/or public offerings of debt or equity securities. In addition, we may seek additional capital through arrangements with strategic partners or from other sources. There can be no assurance that we will be able to raise additional funds or achieve or sustain profitability or positive cash flows from operations on acceptable terms, or at all.

The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):

Operating Activities

Our primary uses of cash from operating activities are personnel related expenses and research and development-related expenses including costs incurred under development agreements, costs of licensing of technology, legal-related costs, expenses for production of isobutanol and related products and expenses for the operation of the Luverne Facility and South Hampton Facility.

During the year ended December 31, 2021, net cash used for operating activities was $43.5 million compared to $19.3 million for the year ended December 31, 2020. The $24.2 million decrease in operating cash flows was primarily due to increased costs associated with beginning production of isobutanol during the third quarter 2021 and maintenance of the Luverne Facility, increased engineering and development fees on our Gevo RNG and Net-Zero 1 projects, increases in personnel expenses to support the growth in business activity, professional fees related to new contracts and extensive shareholder outreach for the annual stockholder meeting and consulting to support compliance with Section 404(b) of the Sarbanes-Oxley Act.

During 2022, we expect to produce isobutanol to supply the South Hampton Facility so that renewable premium gasoline and jet fuel can be produced.

In January 2022, Gevo RNG began to start-up operations. The start-up process is expected to take a few months and reach a steady state operation in the second quarter of 2022 which will allow time for Gevo to apply for credits under the federal RFS and the LCFS in California, including verification of carbon intensity levels and other requirements. Depending on the timing of the qualification and approval processes for obtaining credits under RFS and LCFS,  Gevo expects to generate biogas revenue starting in the second quarter of 2022 and sales of credits under RFS and LCFS in late second quarter of 2022 and the fourth quarter of 2022, respectively.

During the first quarter 2022, Gevo RNG will move from preliminary stage project to production when it begins producing RNG. Net-Zero 1 will continue to be reported as a preliminary stage project cost until it is placed into production.

During the year ended December 31, 2020, net cash used for operating activities was $19.3 million compared to $20.8 million for the year ended December 31, 2019. The $1.5 million decrease in operating cash flows was primarily due to reduced production at the Luverne Facility offset by increased engineering and development costs for our Gevo RNG project. During the first quarter of 2020, we terminated our ethanol production at the Luverne Facility due to COVID-19 and an unfavorable commodity environment.

Investing Activities

During the year ended December 31, 2021, we used $411.6 million in cash for investing activities, of which $422.4 million related to purchasing marketable securities and $59.7 million primarily related to construction in process attributable to the Gevo RNG project, and to a lesser extent, the purchase of a Hydrocarbon-Process Pilot Unit for our Luverne Facility and Net-Zero 1 project and $9.2 million for the purchase of patents, which was partially offset by proceeds of $79.6 million from the sale of marketable securities.

During the year ended December 31, 2020, we used $5.9 million in cash for investing activities, including $1.0 million related to capital expenditures at our Luverne Facility related to dry fractionation and hydrocarbon skid equipment and $4.5 million related to our RNG project.

We have substantially completed constructing the Gevo RNG project and expect to invest an additional $8 million in the aggregate to complete the Gevo RNG project in the first quarter of 2022. Gevo RNG start-up commenced during the first quarter 2022 and we expect to generate biogas revenue starting in the second quarter of 2022 and sales of credits under RFS and LCFS in late second quarter of 2022 and the fourth quarter of 2022, respectively. . We estimate investing approximately $100 million in Net-Zero 1 engineering, development, long-lead equipment deposits, and legal and other costs associated with obtaining a non-recourse debt financing over the next 12 months. We also estimate spending of approximately $21 million for design-engineering of our Net-Zero 2 Project and $5 million for the development of our Verity project, including the Gevo Grower Program, in 2022.

Financing Activities

During the year ended December 31, 2021, we generated $512.9 million in cash from financing activities, which primarily consisted of $490.5 million from the sale of common stock and exercise of warrants and $69.0 million from the 2021 Bonds proceeds offset by $35.0 in debt and equity offering costs, $7.0 million net settlement of common stock for taxes under our stock plans and $4.6 million of payments on equipment loans and lease liabilities.

During the year ended December 31, 2020, we generated $87.3 million in cash from financing activities, which primarily consisted of $8.4 million of net proceeds under our "at-the-market" offering program, receiving $16.1 million from the sale of common stock and warrants in a public offering in July 2020, $45.8 million from the sale of common stock and pre-funded warrants in the August 2020 Offering, $17.1 million from the exercise of Series 2020-A warrants to purchase shares of the Company’s common stock (each, a “Series 2020-A Warrant”), Series 2020-B warrants to purchase shares of the Company’s common stock (all of which were exercised as of December 31, 2020) and Series 2020-C warrants to purchase shares of the Company’s common stock (all of which were exercised as of December 31, 2021), and $1.0 million from the Small Business Administration's Paycheck Protection Program discussed below, offset by $0.5 million paid on loans payable - other.

2021 Bonds. In April 2021, the Authority issued an aggregate principal amount of $68,155,000 of its 2021 Bonds in a public offering for the benefit of Gevo RNG, a subsidiary of Gevo, to finance the construction of the Gevo RNG project.

The 2021 Bonds are reported at their amortized cost, and were issued at a premium of $0.8 million. Debt issuance costs totaled $3.0 million for the year ended December 31, 2021. The Company will amortize the debt issuance costs and the premium as a component of interest expense over the life of the related debt instrument using the interest method. The 2021 Bonds have been recorded as a long-term liability and will become current on the earlier of (i) one year prior to the Initial Mandatory Tender Date or (ii) upon the Company’s exercise of its call option to tender or redeem the Bonds. See Note 14, Debt, for further information.

January 2021 Offering. In January 2021, we completed a registered direct offering pursuant to a securities purchase agreement with certain institutional and accredited investors providing for the issuance and sale by us of an aggregate of 43,750,000 shares of our common stock at a price of $8.00 per share in a registered direct offering. The net proceeds to us from the January 2021 Offering totaled approximately $321.7 million, after deducting placement agent fees and other estimated offering expenses payable by us, and not including any future proceeds from the exercise of the Warrants. We intend to use the net proceeds from the January 2021 Offering to fund development and investment in our RNG and Net-Zero 1 projects, working capital and for other general corporate purposes. During the year ended December 31, 2021, we used approximately $72.1 of the proceeds for investment in our RNG and Net-Zero 1 projects as well as the purchase of patent portfolio from Butamax and an exclusivity license from Axens.

During the year ended December 31, 2020, we received notices of exercise from holders of our Series 2020-A Warrants to issue an aggregate of 28,042,834 shares of common stock for total gross proceeds of approximately $16.8 million. During the year ended December 31, 2021, we received notices of exercise from holders of our Series 2020-A Warrants to issue an aggregate of 1,866,558 shares of common stock for total gross proceeds of approximately $1.1 million. Following these exercises, Series 2020-A Warrants to purchase 90,608 shares of our common stock remain outstanding at an exercise price of $0.60 per share as of January 31, 2022.

At-the-Market Offering Program. In February 2018, we commenced an at-the-market offering program, which allows us to sell and issue shares of our common stock from time-to-time. In September 2021, the at-the-market offering program was amended to provide available capacity under the at-the-market offering program of $500 million.

During the year ended December 31, 2021, we issued 24,420,579 shares of common stock under the at-the-market offering program for total proceeds of $135.8 million, net of commissions and other offering related expenses. During the year ended December 31, 2020,we issued 3,518,121 shares of common stock under the at-the-market offering program for total proceeds of $8.4 million, net of commissions and other offering related expenses.

2020/21 Notes. In January 2020, we entered into an Exchange and Purchase Agreement which exchanged all of the outstanding principal amount of the 2020 Notes, which totaled $14.1 million including unpaid accrued interest, for approximately $14.4 million in aggregate principal amount of our newly created 2020/21 Notes. During the year ended December 31, 2020, we recognized an approximately $0.7 million loss on the modification of the 2020 Notes within the Consolidated Statements of Operations.

In July 2020, certain holders of the 2020/21 Notes converted $2.0 million in the aggregate principal amount of 2020/21 Notes (including the conversion of an additional $0.3 million for make-whole payment) into 4,169,426 shares of common stock pursuant to the terms of the indenture. In December 2020, certain holders of the 2020/21 Notes converted the remaining $12.7 million in aggregate principal amount of 2020/21 Notes (including the conversion of an additional $1.2 million for make-whole payment) into an aggregate of 5,672,654 shares of common stock pursuant to the terms of the 2020/21 Notes related Indenture. As a result, as of December 31, 2020, all obligations under the 2020/2021 Notes had been fully paid and satisfied, and the 2020/2021 Notes related indenture had been terminated in accordance with its terms at maturity on December 31, 2020. During the year ended December 31, 2020, we recognized an approximately $1.9 million loss on the conversion as a result of the make-whole payments of the 2020/21 Notes into common stock within the Consolidated Statements of Operations.

See Note 14, Debt, to our Consolidated Financial Statements included herein for further discussion of the 2020/21 Notes.

Loans Payable - Other. During the first quarter of 2020, we purchased equipment under a financing lease. The equipment notes and financing lease pay interest between 4% and 21%, have total monthly payments of $0.1 million and mature at various date through February 2025. The equipment loans are secured by the related equipment.

In April 2020, we entered into two loan agreements with Live Oak Banking Company, pursuant to which we obtained two unsecured loans from the Small Business Administration's Paycheck Protection Program (“SBA PPP”) totaling $1.0 million in the aggregate (the "SBA Loans"). During the year ended December 31, 2021, the Small Business Administration forgave the entire balance of $0.6 million of the Company's SBA Loans and accrued interest.

See Note 14, Debt, to our Consolidated Financial Statements included herein for further discussion.

Critical Accounting Estimates

Our Consolidated Financial Statements are based on the application of U.S. GAAP, which requires us to make estimates and assumptions about future events that affect the amounts reported in our Consolidated Financial Statements and the accompanying notes. Future events and their effects cannot be determined with certainty; therefore, the determination of estimates requires the exercise of judgment. We believe our judgments related to these accounting estimates are appropriate. However, if different assumptions or conditions were to prevail, the results could be materially different from the amounts recorded.

Leases, Right-of-Use Assets and Related Liabilities

Description: The Company enters into various arrangements which constitute a lease as defined by ASC 842, Leases, as part of its ongoing business activities and operations. Leases represent a contract or part of a contract that conveys the right to control the use of identified property, plant or equipment (an identified asset) for a period of time in exchange for consideration. Such contracts result in both (a) right-of-use assets ("ROU"), which represent the Company’s right to use an underlying asset for the term of the contract; and (b) a corresponding lease liability which represents the Company’s obligation to make the lease payments arising from the contract. The Company has elected not to recognize a ROU asset and lease liability for any lease with an original lease term of 12 months or less. Lease expense for such leases is recognized on a straight-line basis over the lease term.

Judgments and Uncertainties: Certain judgements and uncertainties related to lease liabilities and ROU assets exist as these are initially measured at the lease commencement date. The lease liability is based on the present value of lease payments over the lease term, discounted using an estimate of the Company’s incremental borrowing rate for a collateralized loan with the same term and payment as the lease. The discount rate is a significant judgement. The ROU assets are measured based on the amount of the lease liability adjusted for any lease payments made to the lessor at or before the lease commencement date less any lease incentives received. There is uncertainty related to the lease payments as re-negotiated lease payment occur and as amendments are made to the agreements. From the beginning, renewal options are included in the calculation of our ROU assets and lease liabilities when we determine that the option is reasonably certain of exercise based on an analysis of the relevant facts and circumstances.

Sensitivity of Estimate to Change: The liability relating to these operating and finance lease agreements are based on the Company’s incremental borrowing rate for a collateralized loan with the same term and payment as the lease. A 1.0% increase or a 1.0% decrease in the annual implicit rate could cause an estimated $0 to $1.0 million fluctuation in the present value calculation of the lease liability for any of the finance leases based on the size of the lease liability.

Recent Accounting Pronouncements

See Note 2 in Item 8. "Financial Statements and Supplemental Data," of this Report, for a discussion of recent accounting pronouncements.

We are exposed to market risk during the normal course of business from changes in equity price and foreign currency risks. We do not use derivative financial instruments as part of an overall strategy to manage market risk; however, we may consider such arrangements in the future as we evaluate our business and financial strategy.

Equity Price Risk

We have in the past, and may in the future, seek to acquire additional funding by sale of common stock and other equity. The price of our common stock has been volatile in the past and may also be volatile in the future. As a result, there is a risk that we may not be able to sell our common stock at an acceptable price should the need for new equity funding arise.

Foreign Currency Risk

We are exposed to foreign currency risks that arise from normal business operations. These risks include transactions denominated in currencies other than U.S. dollar. We do not have significant exposure to foreign currency exchange rates but may in the future.

Interest Rate Risk

We are exposed to market risk related to changes in interest rates. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments, including cash equivalents, are invested in money market funds and U.S. treasury or government obligations. However, because of the short-term nature of the duration of our portfolio and the low-risk profile of our investments, we believe an immediate 10% change in market interest rates would not be expected to have a material impact on the fair market value of our investments portfolio or on our financial condition or results of operations.

Index to Gevo, Inc. Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Gevo, Inc. 

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Gevo, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 24, 2022 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or
complex judgments. We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2015.

Denver, Colorado

February 24, 2022

GEVO, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)