SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number: 001-35073
(Exact name of registrant as specified in its charter)
|(State or other jurisdiction of|
incorporation or organization)
345 Inverness Drive South,
Building C, Suite 310
|(Address of principal executive offices)||(Zip Code)|
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|Title of Each Class|| Trading Symbol||Name of Each Exchange on Which Registered|
|Common Stock, par value $0.01 per share||GEVO||The Nasdaq Stock Market LLC|
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
|Large accelerated filer||☐||Accelerated filer||☐|
|Non-accelerated filer||☒||Smaller reporting company||☒|
| || ||Emerging growth company||☐|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of common equity held by non-affiliates of the registrant was approximately $0.6 billion as of June 30, 2022, the last trading day of the registrant’s most recently completed second fiscal quarter, based on the closing price of the common stock as reported on the Nasdaq Capital Market on June 30, 2022. Shares of common stock held by each officer, director and holder of 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of January 31, 2023, the number of outstanding shares of the registrant’s common stock, par value $0.01 per share, was 237,166,625.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates certain information by reference from the registrant’s proxy statement for the 2023 annual meeting of stockholders to be filed no later than 120 days after the end of the registrant’s fiscal year ended December 31, 2022.
FORM 10-K—ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022
TABLE OF CONTENTS
This Annual Report on Form 10-K (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 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: our financial condition, our results of operation and liquidity, our ability to finance, develop, and construct our Net-Zero Projects (as defined below), as well as other growth projects, our ability to produce our products, our ability to meet production, financial and operational guidance, our strategy to pursue low-carbon or "net-zero" carbon renewable fuels for sale into California and elsewhere, our ability to replace our fossil-based energy sources with renewable energy sources at our Net-Zero Projects and elsewhere, our ability and plans to construct greenfield commercial hydrocarbon facilities to produce sustainable aviation fuel ("SAF") and other products, our ability to raise additional funds to finance our business, our ability to perform under our existing offtake agreements and other sales agreements we may enter into in the future, our ability to successfully operate our renewable natural gas ("RNG") project in Iowa, our ability to produce renewable hydrocarbon products at a commercial level and at a profit, the availability of, and market prices for, government economic incentives to the renewable energy market, achievement of advances in our technology platform, the availability of suitable and cost-competitive feedstocks, our ability to gain market acceptance for our products, the expected cost-competitiveness and relative performance attributes of our products, our strategy to pursue alcohol-to-SAF development and production, the impact of the novel coronavirus ("COVID-19") pandemic on our business, additional competition and changes in economic conditions and the future price and volatility of petroleum and products derived from petroleum. Important factors could cause actual results to differ materially from those indicated or implied by forward-looking statements such as those contained in documents we have filed with the United States ("U.S.") Securities and Exchange Commission (the “SEC”), including this Report in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” 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:
•We have a history of net losses, and we may not achieve or maintain profitability.
•We will require substantial additional financing 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.
•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.
•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 may be unable to successfully perform under current or future offtake and sales agreements to provide our products, which could harm our commercial prospects.
•Our offtake agreements, including our take-or-pay agreements, are subject to significant conditions precedent and, as a result, the revenues that we expect from such contracts may never be realized.
•Fluctuations in the price of corn and other feedstocks may affect our cost structure.
•Fluctuations in the price and availability of energy to power our facilities may harm our performance.
•Fluctuations in petroleum prices and customer demand patterns may reduce demand for renewable fuels.
•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.
•The technological and logistical challenges associated with producing, marketing, selling and distributing renewable hydrocarbon products are complex, and we may not be able to resolve such complexities in a timely or cost-effective manner, or at all.
•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 may be unable to produce renewable hydrocarbon products in accordance with customer specifications.
•Our experience may not be sufficient to operate commercial-scale facilities and we may encounter substantial difficulties operating commercial plants or expanding our business.
•Even if we are successful in producing our products on a commercial scale, we may not be successful in negotiating additional fuel offtake agreements or pricing terms to support the growth of our business.
•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 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 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.
•We may face substantial competition from companies with greater resources and financial strength, which could adversely affect our performance and growth.
•Our future success will depend on our ability to maintain a competitive position with respect to technological advances.
•Business interruptions may have an adverse impact on our business and our financial results.
•Our business and operations would suffer in the event of IT system failures or a cyber-attack.
•We may engage in hedging transactions, which could adversely impact our business.
•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.
•As our products have not previously been used as a commercial fuel in significant amounts, their use exposes us to product liability risks.
•We may not be able to use some or all of our net operating loss carry-forwards tax deductions to offset future taxable income.
•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.
•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.
•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 proceedings.
•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.
•We may not be able to enforce our intellectual property rights throughout the world.
•Confidentiality agreements with employees and others may not adequately prevent disclosures of trade secrets and other proprietary information.
•We have received funding from U.S. government agencies, which could negatively affect our IP rights.
•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.
•Reductions or changes to existing regulations and policies may present technical, regulatory and economic barriers, which may significantly reduce demand for renewable fuels or our ability to supply our products.
•Negative attitudes toward renewable energy projects from the U.S. government, other lawmakers and regulators, and activists could adversely affect our business, financial condition and results of operations.
•Any claims relating to improper handling, storage or disposal of hazardous 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 international activities may increase our exposure to potential liability under anti-corruption, trade protection, tax and other laws and regulations.
•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.
•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.
•Raising capital at a subsidiary, or project, level would result in lower revenues attributable back to us.
•Our stock price may be volatile, and your investment in our securities could suffer a decline in value.
•The estimates and assumptions on which our financial projections are based may prove to be inaccurate.
•Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.
•We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment.
•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 may be influenced by the research and reports that securities or industry analysts publish about us or our business.
•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.
•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.
Items 1 and 2. Business and Properties.
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 Gevo expects that by using sustainably grown feedstock (i.e., low till, no-till and dry corn cultivation), renewable and substantially decarbonized energy sources, drop-in hydrocarbon fuels can be produced that have a net-zero, full life cycle footprint measured from the capture of renewable carbon through the burning of the fuel.
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 RNG; hydrocarbons for gasoline blendstocks and diesel fuel; ingredients for the chemical industry, such as ethylene and butenes; plastics and materials; and other chemicals. The global fuel consumption by commercial airlines was an all-time high of 95 billion gallons in 2019. However, due to the COVID-19 pandemic, fuel consumption dropped to 52 billion gallons in 2020 and then reached 57 billion gallons in 2021, and throughout 2022 continued to trend back to pre-COVID levels.
We believe that there is a growing and significant market demand for SAF production based on a number of factors, including:
|The Biden administration launched a new Sustainable Aviation Fuel Grand Challenge to meet the demand for sustainable aviation fuels by working with stakeholders to reduce costs, enhance sustainability, and expand production and use of sustainable aviation fuels that achieves a minimum of a 50% reduction in life cycle GHGs compared to conventional fuel. In addition, the challenge will adopt the goal of supplying at least 3 billion gallons of SAF per year by 2030 and, by 2050, sufficient SAF to meet 100% of aviation fuel demand, which is currently projected to be around 35 billion gallons per year.|
The International Air Transport Association ("IATA") 77th Annual General Meeting approved a resolution for the global air transport industry to achieve net-zero carbon emissions by 2050. IATA has 302 airline members, including Alaska Airlines, American Airlines, Delta Air Lines, FedEx Express, United Airlines and UPS Airlines.
In March 2020, Delta Air Lines committed to spending $1 billion over the next 10 years on its objective to mitigate emissions from its global business going forward. Delta will invest in innovation, advancing clean air travel technologies, accelerating the reduction of carbon emissions and waste, and establishing new projects to mitigate the balance of emissions.
The oneworld® alliance committed to a target of 10% SAF use across the alliance by 2030 and plans to reach net-zero emissions by 2050.
|The World Economic Forum's Clean Skies for Tomorrow Coalition, a group of airlines, airports, fuel suppliers and other industry stakeholders working to advance the transition to net-zero flying, in September 2021 announced a joint goal to achieve a blend of 10% SAF in global jet fuel by 2050.|
We believe that we possess the ability to convert various carbohydrate feedstocks through a fermentation process into alcohols and then transform the alcohols into renewable fuels and materials, through a combination of licensing of technology and engineering from third parties, and our own technology, know-how, and engineering. While we expect our major capital deployments to focus on the production of SAF, we recognize there are opportunities to operate in several different renewable fuels and materials markets and we will pursue those opportunities when appropriate based on customer interest, access to capital, and expected investment returns.
Our SAF production process uses carbohydrates as a feedstock. Carbohydrates are plant matter that result from photosynthesis. Photosynthesis is the natural process by which carbon dioxide is captured from the air by plants. The carbon in carbohydrates is therefore renewable because it is already in the atmosphere. The carbohydrates are fermented to produce alcohol intermediate products (e.g., ethanol or isobutanol). The alcohol-based intermediates are then chemically processed to make renewable hydrocarbons. To achieve net-zero carbon intensity ("CI") across the whole life cycle of the products, we believe:
|●||carbohydrates with a low CI score must be used in production;|
|●||the energy (electricity and heat sources) used in production must be de-fossilized; and|
|●||the products cannot contain fossil-based carbon.|
We believe sustainably grown industrial field 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 the best feedstock to commercialize our SAF with initially because:
|●||it produces a significant amount of protein and vegetable oil for nutritional products on a per acre basis while also producing an abundance of low CI carbohydrates that can be captured and used as a feedstock for fuels and chemicals;|
|●||the protein and oil that are produced can be easily separated and sold as co-products into the food chain markets. The revenue from the protein and oil sales serve to offset the cost of the corn feedstock;|
|●||we believe that the carbon footprint of growing corn can be negative, according to calculations completed with the GREET Model, when a full suite of climate-smart agricultural practices is employed on appropriate acres of cropland;|
|●||we believe that corn can achieve lower CI scores when grown with climate-smart agricultural techniques than waste raw materials or wood; and|
|●||we believe that residual carbohydrates from corn are the lowest cost carbohydrates available as a renewable raw material, and the production is proven and scalable.|
We believe 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. We also believe that it will be possible to create an incentive structure that rewards farmers to lower the CI score of their agricultural products and create a cycle of continuous improvement to their overall sustainability footprint.
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. 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 (such as, photosynthetic, wind, renewable natural gas, and 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 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 whole life-cycle of the product as measured by the GREET Model.
In January 2021, we announced our initial greenfield Net-Zero Project, Net-Zero 1 ("NZ1"), that is currently planned to be constructed at Lake Preston, South Dakota. NZ1 is currently being designed to produce approximately 62 million gallons per year ("MGPY") of total hydrocarbon volumes, including 55 MGPY of SAF. The plant is expected to be powered by wind-based electricity. The products expected to be produced at the NZ1 include: animal feed protein products, corn oil, SAF, naptha (gasoline) and/or diesel fuel. The co-products produced at the NZ1 and destined for the food chain, on a tonnage basis, are greater than that for renewable fuels. We believe that NZ1 will be operational in 2025.
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 have signed agreements and letters of intent with multiple parties to secure access to several sites. We believe any of these sites could be utilized for a future greenfield Net-Zero Project.
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.
We believe that there are several existing ethanol plants that could be attractive for an alcohol-to-jet ("ATJ") plant that would be largely copied from our NZ1 Project.
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 is 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, Gevo RNG began start-up operations, and in the third quarter of 2022 we ramped up its production of biogas, raw biogas upgrading to RNG, and the injection of RNG into an interconnected natural gas pipeline. The majority of the revenue from the associated environmental attributes, however, is expected to commence in 2023 due to the timing of the approval and documentation process for the related credits under the federal Renewable Fuel Standard Program (“RFS Program”) and the Low Carbon Fuel Standard (“LCFS”) in California, including the verification of carbon intensity levels and other administrative requirements.
We made incremental improvements and optimizations at the Gevo RNG project by investing in capital projects that are expected to improve its CI score and expand its capacity. Gevo’s estimated share of the capital cost for these improvements is approximately $1.9 million. The improvement and optimization work will continue through 2023 as one of the dairies expands. In June 2022, we amended our lease with the expanding dairy to provide the Gevo RNG project with additional manure, which is expected to increase our RNG production.
We believe the trust and reputation we have attained in the RNG industry, in combination with our understanding of the various and complex environmental attributes, gives us a competitive advantage. We leverage our relationships to identify and execute new project opportunities. Typically, new development opportunities come from our existing relationships with dairy owners who value our reputation in the industry.
We exercise financial discipline in pursuing projects by targeting attractive risk-adjusted project returns, whether selling RNG into the markets or using it to lower CI scores at our Net-Zero Projects. We will monitor biogas supply availability across our portfolio and seek to maximize our production by expanding operations when economically feasible.
We believe that our vertically integrated set of technologies and business systems (including our extensive portfolio of several hundred patents and patent applications, trade-secrets, and proprietary production technologies) creates competitive advantage through (i) access to multiple opportunities to drive the CI score of our products down, (ii) opportunities to address needs in the chemicals, food, feed, plastics and materials markets, (iii) to drive production costs very low to maximize margins, (iv) deploy production technology that is readily scalable and robust from an operating point of view, (v) through Verity Tracking, and (vi) modular design of production facilities which can help to facilitate rapid deployment of production assets. The vertical business systems enable Gevo to capture value from the selling protein, vegetable oil, capturing biogenic carbon, generating carbon value at state and federal levels.
Carbohydrates as Feedstocks
Carbohydrate feedstocks exceed all other potential renewable carbon feedstock sources by several orders of magnitude on a worldwide basis. In the Midwest region of the U.S. 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 source that can be used as feedstock for alcohol to hydrocarbon processes to produce hydrocarbon fuels. In the future, we expect to evaluate the commercial 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, diesel fuel, naptha and chemical products. 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 current 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 Zero6 Energy, formerly Juhl Energy, to develop the technology suite for this decarbonization.
To prove out technologies, we own and operate a development scale plant in Luverne, Minnesota (the "Luverne Facility"). This development scale plant enables us to solve the practical issues involved with scale up of new technologies and testing of new unit operations. Gevo may use the Luverne Facility in the future to prove out processes, process concepts, unit operations and for other purposes in order to optimize feedstocks and the processes used for producing hydrocarbons from alcohols. Currently, the activities at the Luverne Facility are minimized to care and maintenance, as the Company has shifted focus to the Net-Zero Projects.
Verity Carbon Solutions
It is critical that we can prove the CI of our products, ensuring that these values are accurate and auditable. The mission of Verity Carbon Solutions, including Verity Tracking ("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 from data collected at the farm and field level. We plan to track these feedstocks through production at our plants where we intend to use a mix of renewable electricity, biogas, renewable hydrogen and other potentially decarbonized energy sources in production. The 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, sold and/or 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 the development of Verity Tracking.
Our Facilities and Projects
Development Scale Facility
As described above, we currently own a development scale plant, the Luverne Facility. The Luverne Facility was originally constructed in 1998 and is located on approximately 55 acres of land containing approximately 50,000 square feet of building space. During the third quarter of 2022, the activities at our Luverne Facility were transitioned to care and maintenance, as we have shifted focus to our Net-Zero Projects. The workforce adjustment resulted in us retaining key personnel and redeploying some resources to our Net-Zero 1 Project and RNG project to provide valuable knowledge and experience for the future strategic growth of the Company. As a potential development site, future operations, if any, will be tailored to support a focus on advancing our technology, process testing, optimizing alternative feedstocks and yeast strains, and unit operations as well as partnership development for integrated GHG reductions. The Luverne Facility is well equipped and positioned as a development site. The Luverne Facility also provides a unique opportunity to showcase our decarbonization and business systems and raise awareness for future partnerships, project offtakers, investors, and local communities, even though operations at the site have been minimized.
We developed Gevo's initial RNG project, Gevo RNG, in Northwest Iowa to generate RNG captured from dairy cow manure which is 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. The RNG is sold into the California market under dispensing agreements BP Canada Energy Marketing Corp. and BP Products North America Inc. (collectively, "BP") has in place with Clean Energy Fuels Corp., the largest fueling infrastructure in the U.S. for RNG. We commenced construction of the Gevo RNG project in April 2021, and in the third quarter of 2022, the Gevo RNG project ramped up production of biogas, raw biogas upgrading to RNG and the injection of RNG into an interconnected natural gas pipeline.
We have four leases for land and three fuel supply agreements related to the Gevo RNG project. Under these contracts, we lease land from dairy farmers on which we have built a gas upgrading unit, three anaerobic digesters, related equipment and pipelines. These leases expire at various dates between 2031 and 2050.
In July 2022, we purchased approximately 240 acres of land for NZ1 in Lake Preston, South Dakota, followed by a groundbreaking ceremony in Lake Preston in September 2022. We believe NZ1 is on schedule with initial volumes of SAF expected to be delivered in 2025. Water and wind energy development agreements were executed in the third quarter of 2022, and other key milestones are on track for completion in accordance with our comprehensive project plan.
Our corporate headquarters and research and development laboratories are located in Englewood, Colorado and are leased. Our lease terminates in January 2029 and the leased space is approximately 19,241 square feet.
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, 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 Inflation Reduction Act Clean Fuel Production Credit, RFS Program, California LCFS program, and programs emerging in other states such as Illinois help provide opportunities for renewable fuels producers to compete. We believe that 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 for 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. and for various terms in international jurisdictions. 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 300 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 U.S. by Axens, and
incorporates more than 60 patents, as well as proprietary production technology and know-how. Additionally, we have multiple 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 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. 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 additional improvements targeted to improve its performance.
Government Regulation - Environmental Compliance
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. 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.
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 or 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 RNG is 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 the 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
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.
As of December 31, 2022, we had 89 employees in North America. We also retain consultants, independent contractors, and 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.
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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 protect 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 are proud that we have never had a fatality at a Gevo facility. During 2022, we had two reportable injuries, no lost time incidents, and a total recordable injury rate of 2.09.
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.
In 2021, we launched our first women’s affinity group, led by one of our Board members, 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, 2022, women make up approximately 28% of our employee population and approximately 22% of our leadership roles, defined as manager and above. Further, employees identifying as diverse make up approximately 19% of our employee population and approximately 17% of our leadership roles, defined as manager and above. In 2022, we saw an increase of approximately 4% in diverse leaders within the organization. Lastly, we increased the gender diversity of the Gevo Board to 29% 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 2022 in an effort to enhance our ability to attract and retain diverse talent:
•We continued the annual talent review process to advance our internal talent placements, as well as plan for succession and growth.
•We launched our flexible work approach that balances the benefits of working remotely with the experience of working on-site.
•Our employees are enthusiastic about enriching their communities. We implemented a program to recognize their dedication and began matching community service efforts with up to 16 hours of paid time off.
We are committed to providing employment opportunities for people in our local communities. In 2022, we began 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.
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 support 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.
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.
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.
Item 1A. Risk Factors
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 $98.0 million and $59.2 million during the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $655.4 million. We expect to incur losses and negative cash flows from operating activities for the foreseeable future. We currently derive revenue primarily from the sale of RNG and related environmental attributes produced at Gevo RNG.
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, and (iii) management of operations as a public company. As a result, 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 amounts 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, developing biogas processing projects and wind projects, obtaining government and regulatory approvals, and negotiating offtake agreements for our products. In addition, other unanticipated costs may arise.
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 at the corporate and/or project level to achieve our goals. We currently expect to finance the construction of NZ1 and any other Net Zero Projects at the subsidiary level using third party capital. In addition, 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:
•the timing of and costs involved in financing and constructing our Net-Zero Projects, including NZ1;
•the timing of and costs involved in obtaining permits;
•the ability for us to deploy strains of yeast with improved performance that help to lower capital cost;
•the timing and costs associated with any future RNG projects or expansion of the Gevo RNG project;
•the costs involved in maintaining the Luverne Facility;
•our ability to gain market acceptance for our products;
•our ability to negotiate additional offtake agreements for the products we produce, and the timing and terms of those agreements, including terms related to sales price;
•our ability to negotiate sales of our products and the timing and terms of those sales, including terms related to sales price;
•our ability to establish and maintain strategic partnerships, licensing or other arrangements and the timing and terms of those arrangements; and
•the cost of preparing, filing, prosecuting, maintaining, defending and enforcing patent, trademark and other intellectual property claims, including litigation costs and the outcome of such litigation.
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 Net-Zero Projects, including NZ1;
•our plans to enter into agreements with strategic partners;
•our development of future RNG facilities or expansion of the Gevo RNG project;
•our efforts to prepare, file, prosecute, maintain and enforce patent, trademark and other intellectual property rights and defend against claims by others that we may be violating their intellectual property rights; and/or
•our activities in negotiating and performing under offtake agreements that may be necessary for the commercialization of our products.
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 NZ1, 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 offtake agreements to provide our products, which could harm our commercial prospects.
We have entered into several offtake agreements pursuant to which we agreed to sell our products. Under certain of these offtake 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 “Facility”). In order to commence construction of and complete the 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 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 offtake agreements, or future offtake agreements. If our production is slower than we expect, if demand decreases or if we encounter difficulties in successfully completing the Facility, our counterparties may terminate our existing offtake agreements and potential customers may be less willing to negotiate definitive offtake 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 offtake 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 offtake 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 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 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 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.
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 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.
The technological and logistical challenges associated with producing, marketing, selling and distributing renewable hydrocarbon products 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 renewable hydrocarbon 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 produce renewable hydrocarbon products at our Net-Zero Projects. Our assumptions, however, may prove to be incorrect. Accordingly, we cannot be certain that we can consistently produce renewable hydrocarbon products in an economical manner in commercial quantities. If we fail to consistently produce renewable hydrocarbon products economically on a commercial scale or in commercial volumes, our commercialization of 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:
•failure to properly estimate costs of engineering, materials, equipment, labor or financing;
•unanticipated technical problems with the structures, materials or services;
•unanticipated project modifications;
•changes in the costs of equipment, materials, labor or contractors;
•our suppliers' or contractors' failure to perform;
•changes in laws and regulations; and
•delays caused by weather conditions.
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.
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 an offtake agreement, the customer may have the right to seek an alternate supply of 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.
Our experience may not be sufficient to operate commercial-scale facilities and we may encounter substantial difficulties operating commercial plants or expanding our business.
We have limited experience operating commercial-scale RNG and 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. The skills and knowledge gained in operating our current facilities may prove insufficient for successful operation of a large-scale facility or the 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 Facility. Integrating new facilities with our existing operations may prove difficult. Rapid growth, resulting from our operation of, or other involvement with, 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.
Even if we are successful in producing our products on a commercial scale, we may not be successful in negotiating additional fuel offtake 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 offtake 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 offtake 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.
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:
•issue additional equity securities which would dilute our current stockholders;
•incur substantial debt to fund the acquisitions; or
•assume significant known or unknown liabilities.
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 various parties. Realizing the anticipated benefits of joint ventures 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:
•difficulties negotiating joint venture agreements with favorable terms and establishing relevant performance metrics;
•the inability to meet applicable performance targets;
•difficulties obtaining the permits and approvals required to produce and sell products in different geographic areas;
•complexities associated with managing the potential geographic separation of facilities;
•diversion of management attention from ongoing business concerns to matters related to the joint ventures;
•difficulties maintaining effective relationships with personnel from different corporate cultures; and
•the inability to generate sufficient revenue to offset retrofit costs.
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 renewable hydrocarbon products. 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.
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.
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 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.
Our business and operations would suffer in the event of IT 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:
•public attitudes about the safety and environmental hazards of, and ethical concerns over, genetic research and genetically engineered products and processes, which could influence public acceptance of our technologies, products and processes;
•public attitudes regarding and potential changes to laws governing ownership of genetic material, which could harm our intellectual property rights with respect to our genetic material and discourage others from supporting, developing or commercializing our products, processes and technologies;
•public attitudes and ethical concerns surrounding production of feedstocks on land which could be used to grow food, which could influence public acceptance of our technologies, products and processes;
•governmental reaction to negative publicity concerning genetically engineered organisms, which could result in greater government regulation of genetic research and derivative products; and
•governmental reaction to negative publicity concerning feedstocks produced on land which could be used to grow food, which could result in greater government regulation of feedstock sources.
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.
SAF has not been used as a commercial fuel in large quantities or for a long period of time. Research regarding SAF and its distribution infrastructure is ongoing. Although SAF has 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, 2022, 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, 2022 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 operate or 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:
•stop selling, incorporating, manufacturing or using our products that use the subject intellectual property;
•obtain from a third party asserting its intellectual property rights, a license to sell or use the relevant technology, which license may not be available on reasonable terms, or at all;
•redesign those products or processes that use any allegedly infringing or misappropriated technology, which may result in significant cost or delay to us, or which redesign could be technically infeasible;
•pay attorneys’ fees and expenses; or
•pay damages, including the possibility of treble damages in a patent case if a court finds us to have willfully infringed certain intellectual property rights.
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 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.
Reductions or changes to existing regulations and policies may present technical, regulatory and economic barriers, 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 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 renewable hydrocarbon products 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.
Negative attitudes toward renewable energy projects from the U.S. government, other lawmakers and regulators, and activists could adversely affect our business, financial condition and results of operations.
Parties with an interest in other energy sources, including lawmakers, regulators, policymakers, environmental and advocacy organizations or other activists may invest significant time and money in efforts to delay, repeal or otherwise negatively influence regulations and programs that promote renewable energy. Many of these parties have substantially greater resources and influence than we have. Further, changes in U.S. federal, state or local political, social or economic conditions, including a lack of legislative focus on these programs and regulations, could result in their modification, delayed adoption or repeal. Any failure to adopt, delay in implementing, expiration, repeal or modification of these programs and regulations, or the adoption of any programs or regulations that encourage the use of other energy sources over renewable energy, could adversely affect our business, financial condition and results of operations.
Any claims relating to improper handling, storage or disposal of hazardous 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.
Raising capital at a subsidiary, or project, level would result in lower revenues attributable back to us.
We operate in a capital-intensive business and in order to construct our facilities, we need to raise large amounts of capital. In order to finance the construction of NZ1 and any other Net-Zero Projects, we currently expect to raise capital at the subsidiary level using third party capital. By raising capital at a project level, any equity in that project that is sold to a third party would result in lower ownership of that project by us. Thus, we would only be entitled to the revenues and expenses that are proportionate to our level of ownership in the project. If we are required to sell a large portion of the equity in our projects to third parties, it may have a material adverse effect on our business, financial condition and operating results.
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:
•actual or anticipated fluctuations in our liquidity, financial condition and operating results;
•the position of our cash and cash equivalents;
•the capital costs required to construct our Net-Zero Projects;
•our ability to obtain certain regulatory permits or approvals for our production facilities, including our Net-Zero Projects;
•actual or anticipated changes in our growth rate relative to our competitors;
•actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rate;
•announcements of technological innovations by us, our partners or our competitors;
•announcements by us, our partners or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
•the entry into, modification or termination of licensing arrangements, marketing arrangements, and/or research, development, commercialization, supply, off-take or distribution arrangements;
•our ability to consistently produce commercial quantities of our products;
•additions or losses of customers or partners;
•our ability to obtain certain regulatory approvals for the use of our products in various fuels and chemicals markets;
•commodity prices, including oil, ethanol and corn prices;
•additions or departures of key management or scientific personnel;
•competition from existing products or new products that may emerge;
•issuance of new or updated research reports by securities or industry analysts;
•fluctuations in the valuation of companies perceived by investors to be comparable to us;
•litigation involving us, our general industry or both;
•disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
•announcements or expectations of additional financing efforts or the pursuit of strategic alternatives;
•changes in existing laws, regulations and policies applicable to our business and products, and the adoption of or failure to adopt carbon emissions regulation;
•sales of our common stock or equity-linked securities, such as warrants, by us or our stockholders;
•share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
•general market conditions in our industry; and
•general economic and market conditions, including as a result of the COVID-19 pandemic.
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.
Additionally, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation or other derivative shareholder lawsuits. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business regardless of the outcome.
The price of our common stock could also be affected by possible sales of common stock by investors who view our warrants as a more attractive means of equity participation in us and by hedging or engaging in arbitrage activity involving our common stock. The hedging or arbitrage could, in turn, affect the trading prices of our warrants, if any trading market becomes established, or any common stock that holders receive upon exercise of such warrants.
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.
Item 1B. Unresolved Staff Comments
Item 3. Legal Proceedings
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.
Item 4. Mine Safety Disclosures
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for Common Stock
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, 2023, there were approximately 33 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.”
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
Purchases of Equity Securities by the Issuer
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 (the "Securities Act"), 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, 2022. The graph assumes a $100 investment in our common stock and each index at December 31, 2017.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Gevo, Inc., The S&P Smallcap 600 Index
and the NASDAQ Clean Edge Green Energy Index
| ||December 31,|
| || || || || || || |
|Gevo, Inc.||$||100.00 ||$||16.60 ||$||19.57 ||$||36.00 ||$||36.25 ||$||16.09 |
|S&P Smallcap 600||100.00 ||91.52 ||112.37 ||125.05 ||158.59 ||133.06 |
|NASDAQ Clean Edge Green Energy||100.00 ||87.89 ||125.39 ||357.14 ||347.70 ||242.88 |
The information in the graph will not be considered solicitation material, nor will it be filed with the SEC or incorporated by reference into any future filing under the Securities Act or the Exchange Act, unless we specifically incorporate it by reference into our filing.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
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 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 sustainable aviation fuel ("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 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 Gevo expects that by using sustainably grown feedstock (i.e., low till, no-till and dry corn cultivation), renewable and substantially decarbonized energy sources, drop-in hydrocarbon fuels can be produced that have a net-zero, full life cycle footprint measured from the capture of renewable carbon through the burning of the fuel.
Our primary market focus, given current demand and growing customer interest, is SAF. We believe we also have commercial opportunities for other renewable hydrocarbon products, such as renewable natural gas ("RNG"); hydrocarbons for gasoline blendstocks and diesel fuel; ingredients for the chemical industry, such as ethylene and butenes; plastics and materials; and other chemicals. The global fuel consumption by commercial airlines was an all-time high of 95 billion gallons in 2019. However, due to the COVID-19 pandemic, fuel consumption dropped to 52 billion gallons in 2020 and then reached 57 billion gallons in 2021, and throughout 2022 continued to trend back to pre-COVID levels.
Net-Zero Projects. In early 2021, we announced the concept of "Net-Zero Projects" as a series of planned facilities to produce energy dense liquid hydrocarbons using renewable energy and our proprietary technology. Our initial Net-Zero Project, Net-Zero 1 ("NZ1"), is located in Lake Preston, South Dakota, and is being currently designed to produce approximately 62 million gallons per year ("MGPY") of total hydrocarbon volumes, including 55 MGPY of SAF, which would fulfill part of our more than 375 MGPY of SAF and hydrocarbon supply agreements. The liquid hydrocarbons when burned are expected to have a “net-zero” GHG footprint. Along with the hydrocarbons, NZ1 is expected to produce approximately 475 million pounds per year of high-value protein products for use in the food chain and more than 30 million pounds per year of corn oil. Our products will be produced in three steps: the first step is milling the corn and the production of protein, oil, and carbohydrates; the second step produces alcohols using fermentation; and the third step is the conversion of the alcohols into hydrocarbons. We have an exclusive license in the U.S. from Axens North America, Inc. ("Axens") to the technology and plant designs to convert alcohols to hydrocarbon fuels. Axens will also provide certain process guarantees for our production process. Additionally, Axens has extensive commercial experience in the technology, design, and deployment of the unit operations needed to convert alcohols to hydrocarbon fuels, based on their experience in the petrochemical industry. The fermentation side of the facility is being engineered with Fluid Quip Technologies who has extensive experience in fermentation and agriculture-based facilities. We believe that by using known commercial technologies, the plant design is substantially de-risked.
In July 2022, we completed the purchase of the land for NZ1 in Lake Preston, South Dakota, which was followed by a groundbreaking ceremony in September 2022. We believe production from NZ1 is on schedule with initial volumes of SAF expected to be delivered in 2025. Water and wind energy development agreements were executed in the third quarter of 2022, and other key milestones are on track for completion in accordance with our comprehensive project plan. Based
on the ongoing engineering work, the installed cost for NZ1 is currently forecasted to be approximately $850 million, excluding certain contingencies and financing costs.
We currently expect to finance the construction of NZ1 at the subsidiary level using third party capital. The Company expects to retain a carried equity interest in the project, and may invest equity in the project using the proceeds from the reimbursement of the Company’s NZ1 development expenditures. Cash distributions from future NZ1 earnings would be proportionate to Gevo’s minority ownership in NZ1 under this expected financing structure which would allow us to conserve and redeploy our capital on other growth projects, including our Net-Zero 2 project ("NZ2"). We currently expect to apply similar development and financing approaches to NZ2 and future Net-Zero Projects to enable rapid growth of SAF production to meet current contractual demand for SAF.
Gevo is in the process of identifying and performing early site development work for NZ2 and additional SAF production locations. These sites include several greenfield locations that are particularly advantageous in terms of potential economics, opportunities to decarbonize, and time to market. In addition, we are pursuing prospects with several existing ethanol plant sites. Existing ethanol plants need to be decarbonized with renewable energy or de-fossilized energy and/or carbon sequestration. Gevo has developed a preferred list of partners and sites with decarbonization in mind and is engaged in preliminary feasibility and development discussions with several of them. We plan to give priority to existing industrial plant sites that have attractive potential economics and high predictability of timeline for decarbonization.
Renewable Natural Gas Project. Gevo's revenue from the RNG project in Northwest Iowa (the "RNG Project") is expected to come from sales of RNG and from the environmental attributes associated with its RNG sales, including the attributes available from California's Low Carbon Fuel Standard ("LCFS") program and the U.S. Environmental Protection Agency ("EPA") Renewable Fuels Standard ("RFS") program to receive renewable identification numbers ("RINs"). Gevo has been granted registration approval by the EPA in 2022, allowing us to participate in its RFS program and expects to receive approval for LCFS during 2023.
Luverne Facility. In the third quarter of 2022, we recorded an impairment of long-lived assets, to reduce the carrying value of certain property, plant, and equipment, and a leased right of use ("ROU") asset, at our development scale plant in Luverne, Minnesota (the "Luverne Facility") to its fair value. The impairments recorded to date relate to the determination to suspend production at the Luverne Facility and shift the plant into a development scale property, which was transitioned to care and maintenance status. See Note 4 to the Consolidated Financial Statements for additional information.
U.S. Department of Agriculture. In September 2022, the U.S. Department of Agriculture tentatively selected Gevo’s Climate-Smart Farm to Flight proposal for funding with an award ceiling of up to $30 million, subject to negotiation of definitive award agreements in the coming months. The project aims to create critical structural climate-smart market incentives for low carbon-intensity corn as well as to accelerate the production of sustainable aviation fuel to reduce the sector’s dependency on fossil-based fuels.
Key Operating Metrics
Total operating revenues reflect both sales of RNG and sales of related environmental attributes. As a result, our revenues are primarily affected by unit production of RNG, production of environmental attributes, and the prices at which we monetize such production. The following table summarizes the key operating metrics described above, which metrics we use to measure performance:
|Year Ended December 31,|
|(in thousands, unless otherwise indicated)||2022|
|Natural Gas Commodity||$||640 |
|Natural Gas Environmental Attributes - RINs||214 |
|Natural Gas Environmental Attributes - LCFS ||— |
|RNG Total Revenues||$||854 |
|RNG production volumes (MMBtu)||125 |
|Plus: Prior period RNG volumes dispensed in current period||— |
|Less: RNG production volumes not dispensed||(116)|
Total RNG volumes available for RIN and LCFS generation (1)
RIN generation (x 11.727) (2)
|Less: Counterparty share (RINs)||— |
|Plus: Prior period RINs||— |
|Less: RINs carried into next period||— |
|Total RINs available for sale||101 |
|Less: RINs sold||(101)|
|RIN Inventory||— |
RNG Inventory (volumes not dispensed for RINs) (3)
|Average Realized RIN price ($)||$||2.12 |
LCFS Metrics (4)
RNG Inventory, volumes not dispensed for LCFS (5)
|RNG Operating Expenses||$||7,121 |
|RNG Operating Expenses per MMBtu (actual)||$||57.19 |
(1)RINs are generated in the month the gas is dispensed, which generally occurs the month after the gas is produced.
(2)One MMBtu of RNG has approximately the same energy content as 11.727 gallons of ethanol, and thus may generate 11.727 RINs under the RFS program.
(3)Represents gas production which has not been dispensed to generate RINs and LCFS.
(4)No LCFS credits were generated during 2022 pending regulatory approval.
(5)LCFS credits are generated in the month the gas is dispensed, which generally occurs the quarter after the gas is produced.
The COVID-19 pandemic 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 negatively impact the Company's revenue and operating results in the future, particularly as new variants of COVID-19 are discovered.
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 Annual 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 Annual 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 2022 and 2021. The complete Management’s Discussion and Analysis of Financial Condition and Results of Operations for year-to-year comparisons between 2021 and 2020 and other discussions of 2020 items can be found within Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022, 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, 2022 and 2021
| ||Year Ended December 31,|| |
| ||2022||2021||Change ($)||Change (%)|
|Total operating revenues||$||1,175 ||$||533 ||$||642 ||120 ||%|
|Cost of production||8,698 ||7,687 ||1,011 ||13 ||%|
|Depreciation and amortization||7,887 ||5,128 ||2,759 ||54 ||%|
|Research and development expense||7,427 ||6,775 ||652 ||10 ||%|
|General and administrative expense||39,941 ||25,493 ||14,448 ||57 ||%|
|Project development costs||10,061 ||10,581 ||(520)||(5)||%|
|Facility idling costs||4,599 ||— ||4,599 ||100 ||%|
|Impairment loss||24,749 ||— ||24,749 ||100 ||%|
|Loss on disposal of assets||499 ||5,137 ||(4,638)||(90)||%|
|Total operating expenses||103,861 ||60,801 ||43,060 ||71 ||%|
|Loss from operations||(102,686)||(60,268)||(42,418)||70 ||%|
|Other income (expense)|
|Interest expense||(1,167)||(251)||(916)||365 ||%|
|Investment income (loss)||3,043 ||571 ||2,472 ||433 ||%|
|Gain on forgiveness of SBA loan||— ||641 ||(641)||(100)||%|
|Other income, net||2,803 ||104 ||2,699 ||2,595 ||%|
|Total other income, net||4,679 ||1,065 ||3,614 ||339 ||%|
|Net loss||$||(98,007)||$||(59,203)||$||(38,804)||66 ||%|
Operating revenue. In the second half of 2022, our RNG production began ramping up resulting in natural gas commodity sales of $0.6 million and environmental attribute sales of $0.2 million, while the activities at our Luverne Facility were minimized to care and maintenance status as we have shifted focus to our Net-Zero Projects. During the year ended December 31, 2022, compared to the year ended December 31, 2021, revenue increased $0.6 million primarily due to the RNG sales.
Cost of production. Cost of production increased $1.0 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the costs related to RNG production and sales.
Depreciation and amortization. Depreciation and amortization increased $2.8 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to additional depreciation for RNG assets placed into service and accelerated depreciation on Agri-Energy segment assets due to shorter lives stemming from the impairment assessment during the third quarter of 2022. See Note 4 to the Consolidated Financial Statements for additional information.
Research and development expense. Research and development expense increased $0.7 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an increase in patent and personnel related costs, as well as lab supplies, partially offset by a reduction of consulting expenses.
General and administrative expense. General and administrative expense increased $14.4 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to increases in personnel costs related to strategic hiring and professional fees started in late 2021 and having a full impact on 2022, as well as non-cash stock-based compensation which reflects higher amortization expense for the stock awards issued in the prior period with higher market value. See Note 16 to the Consolidated Financial Statements for additional information.
Project development costs. Project development costs in 2022 consisted of employee expense, preliminary engineering and technical consulting costs related to our future Net-Zero Projects and Verity Tracking project, as well as other costs related to engineering personnel and non-capitalizable items. We began to capitalize a majority of the RNG and NZ1 projects' costs in 2021 which resulted in a $0.5 million decrease during the year ended December 31, 2022, compared to the year ended December 31, 2021.
Facility idling costs. Facility idling costs were $4.6 million for the year ended December 31, 2022 and related to care and maintenance of our Luverne Facility. Included in facility idling costs are ongoing care and maintenance expenses, as well as one time charges related to removing flammable and other hazardous items from the site, writing off certain patents, and reduction in the workforce. We plan to utilize the Luverne Facility as a development scale plant to advance our technology and operational knowledge to help us in achieving operational success as we scale up the production and delivery of SAF for our customers through our Net-Zero Projects.
Impairment loss. The Company recorded a $24.7 million impairment loss on long-lived assets, which reduced the carrying value of certain property, plant, and equipment, and a leased ROU asset, at the Agri-Energy segment to its fair value. The impairments recorded to date relate to the determination to suspend production at the Luverne Facility and shift the plant into an idled, care and maintenance status during the third quarter of 2022. The impact of the one-time impairment charge of $24.7 million was $0.11 of basic and diluted impairment loss per share for the year ended December 31, 2022. See Note 4 to the Consolidated Financial Statements for additional information.
Loss on disposal of assets. As a result of suspending the production of ethanol at the Luverne Facility, we wrote-off $0.5 million of costs during the year ended December 31, 2022 related to ancillary equipment and spare parts that are no longer expected to be utilized at the Luverne Facility. The equipment and spare parts had been planned to be used in ethanol production.
Loss from operations. The Company's loss from operations increased by $42.4 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the increased activities for our Net-Zero Projects and Verity Tracking project, as well as non-capitalizable costs for NZ1.
Interest expense. Interest expense increased by $0.9 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the interest on the RNG Project bonds, which was capitalized into construction in process during the construction phase of our RNG Project in the prior periods.
Interest and dividend income. Interest and dividend income increased $2.5 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to the higher interest rate earned on our investments and restricted cash.
Gain on forgiveness of SBA Loans. During the year ended December 31, 2021, the Small Business Administration ("SBA") forgave $0.6 million of the Company's SBA loans and accrued interest. See Note 15 to the Consolidated Financial Statements for additional information.
Other income. Other income increased $2.7 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to our receipt of $2.9 million from the U.S. Department of Agriculture's Biofuel Producer Program to support biofuel producers who faced unexpected losses due to the COVID-19 pandemic, partially offset by other expenses.
Sources of Our Revenues
Our current and historic revenues are primarily derived from: (i) the sale of RNG commodities and the related environmental attributes; (ii) hydrocarbon sales consisting primarily of the sale of SAF and isooctane derived from our isobutanol; (iii) the sale of isobutanol and related products; and (iv) government grants and research and development programs.
Principal Components of Our Cost Structure
Cost of Production. Our cost of production consists primarily of costs directly associated with the production of RNG and other renewable hydrocarbon products, including isobutanol, SAF, and isooctane. Such costs include direct materials, direct labor, other operating costs and certain plant overhead costs. Direct materials include 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.
Research and Development. Our research and development expense consists of costs incurred to identify, develop and test our technologies for the production of renewable hydrocarbon products and the development of downstream applications thereof. Research and development expense includes 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.
General and Administrative. General and administrative expense consists 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.
Project Development Costs. Project development 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 Net-Zero Projects.
Depreciation and Amortization. Depreciation and amortization relates to property, plant and equipment associated with the production of RNG and other renewable hydrocarbon products, including isobutanol, SAF, and isooctane, as well as that used in product development.
Liquidity and Capital Resources
As of December 31, 2022, we had cash and cash equivalents of $237.1 million, short and long-term restricted cash of $78.3 million and short-term marketable securities of $167.4 million, net of unrealized losses of $1.0 million, totaling $482.8 million in cash, cash equivalents, and marketable securities. As of December 31, 2022, we had net working capital of $390.0 million, with $25.4 million of current liabilities. The marketable securities are highly liquid and can be converted to cash when needed for operations, development, and construction. We expect to use our cash, cash equivalents, restricted cash and marketable securities for the following purposes: (i) identification, development, acquisition and construction of new production facilities and to plan for expanded production to fulfill existing offtake agreements for NZ1 and the Company's other Net-Zero Projects; (ii) potential investment in RNG projects; (iii) potential development of the Luverne Facility; (iv) development, acquisition and operation of sustainable alcohol-to-SAF plants to produce SAF alone or with partners; (v) operating activities at the Company's corporate headquarters in Colorado, including research and development work; (vi) exploration of strategic alternatives and additional financing, including project financing; and (vii) future debt service obligations. We believe as a result of our cash and cash equivalents balances, and the performance of our current and expected operations, we will be able to meet our obligations and other potential cash requirements during the next 12 months from the date of this report.
Since our inception in 2005, we have devoted most of our cash resources to the development and commercialization of routes to efficiently produce fuels and chemicals from carbohydrates, such as renewable feedstock, using alcohols (isobutanol and ethanol) as intermediates. We have incurred losses since inception, have a significant accumulated deficit, and expect to incur losses for the foreseeable future. We have financed our operations primarily with proceeds from the issuance of equity, warrants, debt securities, and borrowings under debt facilities. We may fund future operations through additional private and/or public offerings of equity or debt securities. In addition, the Company may seek additional capital, on acceptable terms, through arrangements with strategic partners or from other sources. Notwithstanding, there can be no
assurance that the Company will be able to raise additional funds or achieve or sustain profitability or positive cash flows from operations.
The Company's transition to profitability is dependent upon, among other things, the successful development and commercialization of its product candidates, the development, acquisition and construction of commercial level production facilities to support the Company's offtake agreements, the achievement of a level of revenues adequate to support the Company's cost structure, and the ability to raise capital to finance the development, acquisition, and construction of additional productions facilities.
The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
| ||Year Ended December 31,|
|Net cash used in operating activities||$||(52,613)||$||(48,271)|
|Net cash provided by (used in) investing activities||93,394 ||(411,358)|
|Net cash provided by financing activities||138,562 ||517,324 |
Our primary uses of cash from operating activities are personnel-related expenses, and research and development-related expenses, including costs incurred under development agreements, costs of licensing of technology, legal-related costs, expenses for the development and commercialization of routes to efficiently produce fuels and chemicals from renewable feedstock carbohydrates using alcohols (isobutanol and ethanol) as an intermediate.
During the year ended December 31, 2022, net cash used in operating activities was $52.6 million compared to $48.3 million for the year ended December 31, 2021. Non-cash charges primarily consisted of an impairment loss of $24.7 million, depreciation and amortization of $7.9 million, non-cash expense of $2.7 million related to the amortization of marketable securities premiums, and stock-based compensation expense of $17.4 million, which reflects higher amortization expense for the stock awards issued in the prior period with higher market value, see Note 16 to the Consolidated Financial Statements for additional information. The net cash outflow from changes in operating assets and liabilities decreased $4.9 million, primarily due to a decrease in cash outflows of $2.0 million in prepaid expenses and other current and long-term assets for licensing fees and deposits to secure long-lead equipment power transmission and distribution facilities for NZ1 as well as a decrease of $3.9 million in accounts payable and accrued liabilities, partially offset by increased outflows of $1.7 million for RNG inventories and amortization of prepaid insurance and other prepaid items.
During the year ended December 31, 2022, we had $93.4 million in cash provided by investing activities, of which $299.6 million related to proceeds from sales and maturities of marketable securities, partially offset by the reinvestment of $130.4 million in marketable securities, and $75.8 million of investments in our capital projects, including $34.7 million in the RNG Project, $35.0 million in NZ1 and $2.0 million in other Net-Zero Projects, as well as $4.1 million in other isobutanol related projects.
In July 2022, the purchase of the land for NZ1 in Lake Preston, South Dakota was completed. This was followed by a groundbreaking ceremony in Lake Preston in September 2022, and we believe NZ1 is on schedule with plant startup expected to be in 2025. Water and wind energy development agreements were executed in the third quarter of 2022, and other key milestones are on track for completion in accordance with our comprehensive project plan. Based on the ongoing engineering work, the installed cost for NZ1 is currently forecasted to be approximately $850 million, excluding certain contingencies and financing costs, $100 million to $200 million of which we expect to spend within the next 12 months prior to financial close when we expect to recover those development expenditures from permanent third-party capital.
Additionally, we allocated approximately $25 million of capital for the next four to six months to develop our next Net-Zero Project. Gevo is in the process of identifying and performing early site development work for additional SAF production locations. These potential sites include several greenfield locations that are particularly advantageous in terms of potential economics, opportunities to decarbonize, and time to market.
During the year ended December 31, 2021, we used $411.4 million in cash for investing activities, of which $425.0 million related to purchasing marketable securities and $56.8 million primarily related to construction in process attributable to the RNG Project, and to a lesser extent, the purchase of a Hydrocarbon-Process Pilot Unit for our Luverne Facility and NZ1 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, 2022, we had $138.6 million of net cash provided by financing activities, primarily due to $139.0 million of net proceeds from the issuance of common stock and common stock warrants in a registered direct offering in June 2022, offset by $0.4 million of payments primarily for net settlement of common stock under stock plans and certain equipment loans.
We currently expect to finance the construction of NZ1 at the subsidiary level using third party capital. The Company expects to retain a carried equity interest in the project, and may invest additional equity in the project using the proceeds from the reimbursement of the Company's NZ1 development expenditures. Cash distributions from future NZ1 earnings would be proportionate to Gevo’s minority ownership in NZ1 under this expected financing structure which would reduce revenue to us but allow us to conserve and redeploy capital on other growth projects, including NZ2. We expect to apply similar development and financing approaches to NZ2 and future Net-Zero Projects to enable rapid growth of SAF production to meet current contractual demand for SAF.
During the year ended December 31, 2021, we generated $517.3 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 proceeds of the bonds issued to finance the construction of the RNG Project in April 2021, offset by $35.0 million in debt and equity offering costs, $7.0 million net settlement of common stock for taxes under our stock plans and $0.2 million of payments on equipment loans and lease liabilities.
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. We have determined that we have no critical accounting estimates material to our consolidated financial position, results of operations or cash flow related to our consolidated financial statements included in this Report.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies, in Item 8. "Financial Statements and Supplemental Data," of this Report, for a discussion of recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks related to environmental attribute pricing, commodity pricing, interest rate, credit risk with our contract counterparties, and equity price risks. We currently have no foreign exchange risk and 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.
Environmental Attribute and Commodity Pricing Risk
We attempt to negotiate the best prices for our environmental attributes and to competitively price our products to reflect the fluctuations in market prices. Reductions in the market prices of environmental attributes may have a material adverse effect on our revenues and profits as they directly reduce our revenues.
The price of RNG changes in relation to the market prices of wholesale gas. Pricing for wholesale gas is volatile and we expect this volatility to continue in the future. Further, volatility of wholesale gas also creates volatility in the prices of environmental attributes.
Given the start-up status of our RNG Project and idling of Luverne Facilities we do not expect market price fluctuations to have a material impact on our financial condition or results of operations.
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 our portfolio and the low-risk profile of our investments, a hypothetical immediate 10% change in market interest rates would not have a material impact on the fair market value of our investments portfolio or on our financial condition or results of operations.
We are subject to credit risk due to concentration of our RNG receivables with a limited number of significant customers. This concentration increases our exposure to credit risk on our receivables, since the financial insolvency of these customers could have a significant impact on our results of operations.
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.
Item 8. Financial Statements and Supplementary Data
Index to Gevo, Inc. Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
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, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Change in accounting policy
As discussed in Note 9 to the financial statements, the Company has elected to change its method of accounting for certain leases in 2022 and 2021.
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 Public Company Accounting Oversight Board (United States) (“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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
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.
March 9, 2023
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
| ||Note||December 31, 2022||December 31, 2021|
|Assets|| || || |
|Current assets|| || || |
|Cash and cash equivalents|| ||$||237,125 ||$||40,833 |
|Marketable securities (current)||6, 20||167,408 ||275,340 |
|Restricted cash (current)||7||1,032 ||25,032 |
|Trade accounts receivable, net||476 ||978 |
|Inventories||10||6,347 ||2,751 |
|Prepaid expenses and other current assets||8||3,034 ||3,607 |
|Total current assets|| ||415,422 ||348,541 |
|Property, plant and equipment, net||11||176,872 ||137,742 |
|Marketable securities (non-current)||6, 20||— ||64,396 |
|Restricted cash (non-current)||7||77,219 ||70,168 |
|Operating right-of-use assets||9||1,331 ||2,414 |
|Finance right-of-use assets||9||219 ||236 |
|Intangible assets, net||12||7,691 ||8,938 |
|Deposits and other assets||13||21,994 ||12,946 |
|Total Assets||22||$||700,748 ||$||645,381 |
|Liabilities|| || || |
|Current liabilities|| || || |
|Accounts payable and accrued liabilities||14||$||24,760 ||$||28,150 |
|Operating lease liabilities (current)||9||438 ||772 |
|Finance lease liabilities (current)||9||79 ||11 |
|Loans payable - other (current)||15||159 ||158 |
|Total current liabilities|| ||25,436 ||29,091 |
|2021 Bonds payable (long-term)||15, 20||67,223 ||66,486 |
|Loans payable - other (long-term)||15||159 ||318 |
|Operating lease liabilities (long-term)||9||1,450 ||1,902 |
|Finance lease liabilities (long-term)||9||183 ||242 |
|Other long-term liabilities|| ||820 ||87 |
|Total liabilities|| ||95,271 ||98,126 |
|Commitments and Contingencies||19|
|Stockholders' Equity|| || || |
Common stock, $0.01 par value per share; 500,000,000 and 250,000,000 authorized at December 31, 2022 and 2021, respectively; 237,166,625 and 201,988,662 shares issued and outstanding at December 31, 2022 and 2021, respectively.
|2,372 ||2,020 |
|Additional paid-in capital||1,259,527 ||1,103,224 |
|Accumulated other comprehensive loss||(1,040)||(614)|
|Accumulated deficit|| ||(655,382)||(557,375)|
|Total stockholders' equity|| ||605,477 ||547,255 |
|Total Liabilities and Stockholders' Equity|| ||$||700,748 ||$||645,381 |
See the accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
| ||Note||Year Ended December 31,|
|Total operating revenues||3, 22||$||1,175 ||$||533 |
|Cost of production||16||8,698 ||7,687 |
|Depreciation and amortization||7,887 ||5,128 |
|Research and development expense||16||7,427 ||6,775 |
|General and administrative expense||16||39,941 ||25,493 |
|Project development costs||16||10,061 ||10,581 |
|Facility idling costs||4,599 ||— |
|Impairment loss||4||24,749 ||— |
|Loss on disposal of assets||10, 11||499 ||5,137 |
|Total operating expenses||103,861 ||60,801 |
|Loss from operations||22||(102,686)||(60,268)|
|Other income (expense)|
|Investment income (loss)||6||3,043 ||571 |
|Gain on forgiveness of SBA loan||15||— ||641 |
|Other income, net||2,803 ||104 |
|Total other income, net||4,679 ||1,065 |
|Net loss per share - basic and diluted||5||$||(0.44)||$||(0.30)|
|Weighted-average number of common shares outstanding - basic and diluted||5||221,537,262||195,794,606|
See the accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| ||Note||Year Ended December 31,|
|Net Loss|| ||$||(98,007)||$||(59,203)|
|Other comprehensive income loss:|| || || |
|Unrealized loss on available-for-sale securities, net of tax||6||(426)||(614)|
|Comprehensive loss|| ||$||(98,433)||$||(59,817)|
See the accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
|Note||Common Stock||Paid-In Capital||Accumulated Other Comprehensive Loss||Accumulated Deficit||Stockholders' Equity|
|Balance, December 31, 2020||128,138,311||$||1,282 ||$||643,269 ||$||— ||$||(498,172)||$||146,379 |
|Issuance of common stock, net of issuance costs||17||68,170,579||682 ||456,765 ||— ||— ||457,447 |
|Issuance of common stock upon exercise of warrants||17||1,866,758||18 ||1,103 ||— ||— ||1,121 |
|Non-cash stock-based compensation||13||— ||— ||7,700 ||— ||— ||7,700 |
|Stock-based awards and related share issuances, net||17||3,813,014||38 ||(5,613)||— ||— ||(5,575)|
|Other comprehensive loss||—||— ||— ||(614)||— ||(614)|
|Net loss||—||— ||— ||— ||(59,203)||(59,203)|
|Balance, December 31, 2021||201,988,662||$||2,020 ||$||1,103,224 ||$||(614)||$||(557,375)||$||547,255 |
|Issuance of common stock and common stock warrants, net of issuance costs||17||33,333,336||$||333 ||$||138,675 ||$||— ||$||— ||$||139,008 |
|Issuance of common stock upon exercise of warrants||17||4,677||— ||3 ||— ||— ||3 |
|Non-cash stock-based compensation||13||—||— ||17,419 ||— ||— ||17,419 |
|Stock-based awards and related share issuances, net||17||1,839,950||19 ||206 ||— ||— ||225 |
|Other comprehensive loss||—||— ||— ||(426)||— ||(426)|
|Net loss||—||— ||— ||— ||(98,007)||(98,007)|
|Balance, December 31, 2022||237,166,625||$||2,372 ||$||1,259,527 ||$||(1,040)||$||(655,382)||$||605,477 |
See the accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| ||Note||Year Ended December 31,|
|Operating Activities|| || || |
|Net loss|| ||$||(98,007)||$||(59,203)|
|Adjustments to reconcile net loss to net cash used in operating activities:|| || || |
|Impairment loss||4||24,749 ||— |
|Loss on disposal of assets||499 ||5,137 |
|(Gain) on forgiveness of SBA Loans||15||— ||(641)|
|Stock-based compensation||16||17,419 ||9,874 |
|Depreciation and amortization||11, 12||7,887 ||5,128 |
|Amortization of marketable securities premium||2,723 ||5,029 |
|Other noncash (income) expense||877 ||89 |
|Changes in operating assets and liabilities:|| || |
|Accounts receivable||502 ||(257)|
|Prepaid expenses and other current assets, deposits and other assets||7, 13||(10,893)||(12,897)|
|Accounts payable, accrued expenses and long-term liabilities||14, 15||3,635 ||(271)|
|Net cash used in operating activities||(52,613)||(48,271)|
|Investing Activities|| || |
|Acquisitions of property, plant and equipment||11||(75,775)||(56,770)|
|Acquisition of patent portfolio||12||(10)||— |
|Proceeds from sale and maturity of marketable securities||6||299,581 ||79,574 |
|Purchase of patents and license||— ||(9,170)|
|Purchase of marketable securities||6||(130,402)||(424,992)|
|Net cash provided by (used in) investing activities||93,394 ||(411,358)|
|Financing Activities|| || |
|Proceeds from issuance of 2021 Bonds||15||— ||68,995 |
|Debt and equity offering costs||21||(10,993)||(34,955)|
|Proceeds from issuance of common stock and common stock warrants||21||150,000 ||489,373 |
|Proceeds from exercise of warrants||21||3 ||1,121 |
|Net settlement of common stock under stock plans||16||(286)||(7,041)|
|Payment of loans payable - other||15||(150)||(154)|
|Payment of finance lease liabilities||9||(12)||(15)|
|Net cash provided by financing activities|| ||138,562 ||517,324 |
|Net increase in cash and cash equivalents|| ||179,343 ||57,695 |
|Cash, cash equivalents and restricted cash at beginning of period|| ||136,033 ||78,338 |
|Cash, cash equivalents and restricted cash at end of period|| ||$||315,376 ||$||136,033 |
See the accompanying Notes to the Consolidated Financial Statements.