Gevo, Inc. - SEC Filing

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35073

GEVO, INC.

(Exact name of registrant as specified in its charter)


Delaware		87-0747704
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


345 Inverness Drive South, Building C, Suite 310 Englewood, CO		80112
(Address of principal executive offices)		(Zip Code)

(303) 858-8358

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	GEVO	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 13, 2023, 240,304,735 shares of the registrant’s common stock were outstanding.

Table of Contents

GEVO, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (unaudited)	4
	Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022 (unaudited)	5
	Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)	6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44

	Signatures	45

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements.

GEVO, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share and per share amounts)


	Note	September 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents		$	323,510	$	237,125
Marketable securities	5		—		167,408
Restricted cash	6		77,759		1,032
Trade accounts receivable, net			2,242		476
Inventories	9		3,688		6,347
Prepaid expenses and other current assets	7		4,032		3,034
Total current assets			411,231		415,422
Property, plant and equipment, net	10, 20		238,117		185,174
Restricted cash	6		—		77,219
Operating right-of-use assets	8		1,386		1,331
Finance right-of-use assets	8		212		219
Intangible assets, net	11		6,816		7,691
Deposits and other assets	12		11,759		13,692
Total assets		$	669,521	$	700,748
Liabilities
Current liabilities
Accounts payable and accrued liabilities	13, 20	$	27,895	$	24,760
Operating lease liabilities	8		521		438
Finance lease liabilities	8		28		79
Loans payable	14		137		159
2021 Bonds payable, net	14		67,780		—
Total current liabilities			96,361		25,436
2021 Bonds payable, net	14		—		67,223
Loans payable	14		54		159
Operating lease liabilities	8		1,376		1,450
Finance lease liabilities	8		199		183
Other liabilities			—		820
Total liabilities			97,990		95,271
Stockholders' Equity
Common stock, $0.01 par value per share; 500,000,000 shares authorized; 240,252,707 and 237,166,625 shares issued and outstanding at September 30, 2023, and December 31, 2022, respectively.			2,403		2,372
Additional paid-in capital			1,272,248		1,259,527
Accumulated other comprehensive loss			—		(1,040)
Accumulated deficit			(703,120)		(655,382)
Total stockholders' equity			571,531		605,477
Total liabilities and stockholders' equity		$	669,521	$	700,748

See the accompanying Notes to the Consolidated Financial Statements.

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GEVO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share amounts)


		Three Months Ended September 30,				Nine Months Ended September 30,
	Note	2023		2022		2023		2022
Total operating revenues	2, 21	$	4,528	$	309	$	12,826	$	630
Operating expenses:
Cost of production	15		2,480		575		8,836		5,499
Depreciation and amortization	10, 11		4,994		1,657		14,323		4,573
Research and development expense	15		1,558		1,562		4,716		4,720
General and administrative expense			10,522		11,144		31,891		29,205
Project development costs	15		4,789		2,218		10,635		5,550
Facility idling costs			911		2,330		2,923		2,330
Impairment loss	3		—		24,749		—		24,749
Total operating expenses	15		25,254		44,235		73,324		76,626
Loss from operations			(20,726)		(43,926)		(60,498)		(75,996)
Other income (expense)
Interest expense			(540)		(455)		(1,615)		(459)
Interest and investment income	5, 18		5,261		896		14,083		1,226
Other income (expense), net			305		(301)		292		2,609
Total other income, net			5,026		140		12,760		3,376
Net loss		$	(15,700)	$	(43,786)	$	(47,738)	$	(72,620)
Net loss per share - basic and diluted		$	(0.07)	$	(0.19)	$	(0.20)	$	(0.34)
Weighted-average number of common shares outstanding - basic and diluted	4		239,537,811		236,649,805		238,100,986		216,255,710

See the accompanying Notes to the Consolidated Financial Statements.

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GEVO, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,
	Note	2023		2022		2023		2022
Net loss		$	(15,700)	$	(43,786)	$	(47,738)	$	(72,620)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities	5		—		88		1,040		(1,554)
Comprehensive loss		$	(15,700)	$	(43,698)	$	(46,698)	$	(74,174)

See the accompanying Notes to the Consolidated Financial Statements.

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GEVO, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except share amounts)


		For the Three Months Ended September 30, 2023 and 2022
		Common Stock					Accumulated Other		Accumulated		Stockholders’
	Note	Shares	Amount		Paid-In Capital		Comprehensive Loss		Deficit		Equity
Balance, June 30, 2023		237,647,431	$	2,377	$	1,268,142	$	—	$	(687,420)	$	583,099
Non-cash stock-based compensation	15	—		—		4,132		—		—		4,132
Stock-based awards and related share issuances, net	19	2,605,276		26		(26)		—		—		—
Net loss		—		—		—		—		(15,700)		(15,700)
Balance, September 30, 2023		240,252,707	$	2,403	$	1,272,248	$	—	$	(703,120)	$	571,531

Balance, June 30, 2022		235,165,951	$	2,353	$	1,249,880	$	(2,256)	$	(586,209)	$	663,768
Non-cash stock-based compensation	15	—		—		4,361		—		—		4,361
Stock-based awards and related share issuances, net		2,055,781		19		492		—		—		511
Other comprehensive income		—		—		—		88		—		88
Net loss		—		—		—		—		(43,786)		(43,786)
Balance, September 30, 2022		237,221,732	$	2,372	$	1,254,733	$	(2,168)	$	(629,995)	$	624,942


		For the Nine Months Ended September 30, 2023 and 2022
		Common Stock					Accumulated Other		Accumulated		Stockholders’
	Note	Shares	Amount		Paid-In Capital		Comprehensive Loss		Deficit		Equity
Balance, December 31, 2022		237,166,625	$	2,372	$	1,259,527	$	(1,040)	$	(655,382)	$	605,477
Non-cash stock-based compensation	15	—		—		12,752		—		—		12,752
Stock-based awards and related share issuances, net	19	3,086,082		31		(31)		—		—		—
Other comprehensive income		—		—		—		1,040		—		1,040
Net loss		—		—		—		—		(47,738)		(47,738)
Balance, September 30, 2023		240,252,707	$	2,403	$	1,272,248	$	—	$	(703,120)	$	571,531

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	19	33,333,336		333		138,675		—		—		139,008
Issuance of common stock upon exercise of warrants	19	4,677		—		3		—		—		3
Non-cash stock-based compensation	15	—		—		12,625		—		—		12,625
Stock-based awards and related share issuances, net	19	1,895,057		19		206		—		—		225
Other comprehensive loss		—		—		—		(1,554)		—		(1,554)
Net loss		—		—		—		—		(72,620)		(72,620)
Balance, September 30, 2022		237,221,732	$	2,372	$	1,254,733	$	(2,168)	$	(629,995)	$	624,942

See the accompanying Notes to the Consolidated Financial Statements.

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GEVO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


		Nine Months Ended September 30,
	Note	2023		2022
Operating Activities
Net loss		$	(47,738)	$	(72,620)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment loss	3		—		24,749
Stock-based compensation	15		12,752		12,624
Depreciation and amortization	10, 11		14,323		4,452
Amortization of marketable securities (discount) premium			(102)		2,755
Other noncash expense (income)			655		(153)
Changes in operating assets and liabilities:
Accounts receivable			(1,766)		626
Inventories	9		1,137		(338)
Prepaid expenses and other current assets, deposits and other assets	7, 12		(816)		(5,078)
Accounts payable, accrued expenses and non-current liabilities	13		427		207
Net cash used in operating activities			(21,128)		(32,776)
Investing Activities
Acquisitions of property, plant and equipment	10, 20		(61,413)		(76,837)
Acquisition of patent portfolio	11		—		(10)
Proceeds from maturity of marketable securities	5		168,550		243,817
Purchase of marketable securities	5		—		(130,402)
Proceeds from sale of property, plant and equipment	10		34		-
Net cash provided by investing activities			107,171		36,568
Financing Activities
Debt and equity offering costs	19		—		(10,993)
Proceeds from issuance of common stock and common stock warrants	19		—		150,000
Proceeds from exercise of warrants	19		—		3
Net settlement of common stock under stock plans	15		—		(285)
Payment of loans payable	14		(128)		(112)
Payment of finance lease liabilities	8		(22)		(8)
Net cash (used in) provided by financing activities			(150)		138,605
Net increase in cash and cash equivalents			85,893		142,397
Cash, cash equivalents and restricted cash at beginning of period			315,376		136,033
Cash, cash equivalents and restricted cash at end of period		$	401,269	$	278,430


	Nine Months Ended September 30,
Schedule of cash, cash equivalents and restricted cash	2023		2022
Cash and cash equivalents	$	323,510	$	200,564
Restricted cash (current)		77,759		1,024
Restricted cash (non-current)		—		76,842
Total cash, cash equivalents and restricted cash	$	401,269	$	278,430


	Nine Months Ended September 30,
Supplemental disclosures of cash and non-cash investing and financing transactions	2023		2022
Cash paid for interest, net of amounts capitalized	$	1,028	$	770
Non-cash purchase of property, plant and equipment		15,593		11,136
Right-of-use asset purchased with operating lease	$	199	$	—

See the accompanying Notes to the Consolidated Financial Statements.

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GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

1.	Nature of Business, Financial Condition and Basis of Presentation

Nature of business.

Gevo, Inc. (Nasdaq: GEVO) (“Gevo”, “we”, “us”, “our”, or the “Company,” which, unless otherwise indicated, refers to Gevo, Inc. and its subsidiaries), a Delaware corporation founded in 2005, is a growth-oriented company with the mission of solving greenhouse gas (“GHG”) emissions for those sectors of the transportation industry that are not amenable to electrification or hydrogen.

The Company is focused on transforming renewable energy into energy-dense liquid drop-in hydrocarbons that can be used as renewable fuels, such as sustainable aviation fuel (“SAF”) and other fuels and chemicals, with the potential to achieve a “net-zero” GHG, or even carbon negative footprint measured by the Argonne National Laboratory’s GREET (Greenhouse gases, Regulated Emissions, and Energy use in Transportation) model (the “GREET Model”) to measure, predict and verify GHG emissions across the life-cycle. Our “net-zero” concept means production of drop-in hydrocarbon fuels by using sustainably grown feedstocks (e.g., low till, no-till and dry corn cultivation), renewable and substantially decarbonized energy sources, resulting in a net-zero carbon footprint from the full life cycle of the fuel measured from the capture of renewable carbon through the burning of the fuel.

Gevo’s primary market focus, given current demand and growing customer interest, is SAF. The Company believes that SAF from carbohydrates to alcohol is the most economically viable approach for carbon abatement. The Company also has commercial opportunities for other renewable hydrocarbon products, such as (i) renewable natural gas, also known as biogas (“RNG”), (ii) hydrocarbons for gasoline blendstocks and diesel fuel, and (iii) plastics, materials and other chemicals. We are engaged in technology, process and intellectual property development targeted to large scale deployment of net-zero hydrocarbon fuels and chemicals. We are developing the marketplace and customers for SAF and other related products. We also are engaged as a developer and enabler/licensor for large scale commercial production, and we expect to be a co-investor on certain projects. Gevo’s business model is that of a developer of projects, a licensor, process technology developer, and operator of certain assets in the future.

Net-Zero Projects

In early 2021, we announced our proprietary “Net-Zero Projects” that we developed and engineered as a series of planned facilities to produce energy dense liquid hydrocarbons using renewable energy and our proprietary technology. Our Net-Zero Projects will convert renewable energy (e.g., photosynthetic, wind, RNG) from a variety of sources into energy dense liquid hydrocarbons that, when burned in traditional engines, has the potential to achieve net-zero GHG emissions across the whole lifecycle of the liquid fuel: from the way carbon is captured from the atmosphere, processed to make liquid fuel products, and burned as a fuel for planes, cars, trucks, and ships. Gevo has engineered, developed, and owns our Net-Zero plant designs, and the overall Gevo Net-Zero process (i.e., the process to enable carbon-negative olefins, and hydrocarbon fuels with an anticipated net-zero or better carbon footprint measured across the lifecycle of the whole processes). The proprietary Gevo Net-Zero processes and plant designs are based upon the conversion of carbohydrates to alcohols, then the conversion of the alcohols to olefins (i.e., building blocks for chemicals, plastics, and fuels), and then the conversion of the olefins into fuels, all optimized and integrated to achieve a net-zero carbon footprint. We’ve taken what we believe are the best of proven unit operations from the fermentation and petrochemical industry. In the fermentation section of our plant design, we work with Fluid Quip Technologies, LLC and PRAJ Industries Limited (“PRAJ”), as well as other suppliers of unit operations, and using Axens North America, Inc. (“Axens”) as the unit operation technology supplier for producing olefins and fuels. Gevo has developed and owns the overall proprietary plant designs, engineering details, integration technologies, and has filed patents on several process improvements.

In November 2021, Gevo entered into an agreement to exclusively utilize Axens’ technology for isobutanol conversion into hydrocarbons. In February of 2022, Gevo and Axens entered into a second exclusive agreement to specifically cover the process steps for ethanol to finished jet fuel.

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GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

Our initial Net-Zero Project, Net-Zero 1 (“NZ1”), is expected to be located in Lake Preston, South Dakota, and is being currently designed to produce approximately 65 million gallons per year (“MGPY”) of total hydrocarbon volumes, including 60 MGPY of SAF. Along with the hydrocarbons, NZ1 is being designed to produce approximately 1,390 million pounds per year of high-value protein products for use in the food chain and more than 34 million pounds per year of corn oil. Our products will be produced in three steps; the first step is milling the corn and the production of protein, oil, and carbohydrates, the second step produces alcohols using fermentation and the third step is the conversion of the alcohols into hydrocarbons.

We also are developing other commercial production projects for SAF at other locations in the United States where we expect to use our Net-Zero plant designs based on work done for NZ1 at Lake Preston. Gevo expects to play the role of project developer, plant design and technology licensor, and investor, based on traditional developer business models where the developer gets a partial ownership stake for developing the project. We may also co-invest in projects to increase our equity ownership in those projects.

Renewable Natural Gas Facilities

Gevo’s RNG facilities in Northwest Iowa (“NW Iowa RNG”) are owned by Gevo NW Iowa RNG, LLC, and produce RNG captured from dairy cow manure supplied by three local dairies. Animal manure can be digested anaerobically to produce biogas, which is then upgraded to pipeline quality gas referred to as RNG. The original design capacity for this project was 355,000 MMBtu. Gevo NW Iowa RNG, LLC sells the produced RNG to the California market through an agreement with BP Canada Energy Marketing Corp. and BP Products North America Inc. (collectively, “BP”). In addition, NW Iowa RNG generates and sells Low Carbon Fuel Standard (“LCFS”) credits as well as D3 Renewable Identification Numbers (“RINs”) through the production of RNG (collectively, “environmental attributes”).

Luverne Facility

Gevo’s development plant in Luverne, Minnesota (the “Luverne Facility”), recorded in the Agri-Energy segment, was originally constructed in 1998 and is located on approximately 55 acres of land, which contains approximately 50,000 square feet of building space. Gevo may use the Luverne Facility in the future to prove our processes, process concepts, unit operations and for other purposes in order to optimize feedstocks and the processes used for producing hydrocarbons from alcohols. Currently, the activities at the Luverne Facility are minimized to care and maintenance, market development, and customer education.

Basis of presentation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) along with the instructions to Form 10-Q and Article 10 of Regulation S-X assuming the Company will continue as a going concern. Accordingly, they do not include the information and footnotes required by GAAP for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company as of, and for the nine months ended, September 30, 2023, and are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included under the heading “Financial Statements and Supplementary Data” in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The financial statements at December 31, 2022, have been derived from the audited financial statements as of that date. For further information, refer to our audited financial statements and notes thereto included for the year ended December 31, 2022 (the “2022 Annual Report”).

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GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

Prior Period Financial Statement Immaterial Adjustment. The Company has entered into agreements with Zero6 Energy Development, Inc. (“ZEDI”), a national clean energy expert that provides expertise in capital management, development, engineering, and asset management, to develop and construct facilities to provide carbon neutral power to NZ1 via the two limited liability companies: Kingsbury Country Wind Fuel, LLC (“KCWF”) and Dakota Renewable Hydrogen, LLC (“DRH”) (collectively, the “Project LLCs”), respectively, to induce the design and construction of the power generation, transmission and distribution facilities that will serve NZ1. The Project LLCs formed to govern the projects are VIEs. In determining whether the Company was the primary beneficiary of the VIEs, the Company considered both qualitative and quantitative factors regarding the nature, size and form of the involvement with the VIE, such as the role in establishing the VIEs and the ongoing rights and responsibilities; the economic interests deemed to be variable interests in the VIEs; the design of the VIEs, including the capitalization structure, subordination of interests, and payment priority. During the third quarter of 2023, the Company identified that the governance structure and operating procedures of the Project LLCs resulted in the Company having the power to control certain significant activities of the Project LLCs, as defined by Accounting Standards Codification 810 (“ASC 810”), Consolidations. Therefore, the Company is the primary beneficiary of the VIEs, and per ASC 810, must consolidate the VIEs. Prior to the third quarter of 2023, the Company did not consolidate the Project LLCs. The Company assessed the materiality of this correction on the previously issued interim and annual financial statements in accordance with SEC Staff Accounting Bulletin No. 99. The Company concluded that the changes were not material to any of the previously issued consolidated financial statements. The Company’s primary involvement with the VIEs is to fund the deposits in order to induce the contractor to design and construct the power generation, transmission and distribution facilities that will serve NZ1. These amounts funded will be either fully reimbursed upon completion of the project or used as an investment into the Project LLC. Gevo has contractual priority liens against the equipment and constructed facilities under the contracts.

A summary of the impact of the adjustment on the Consolidated Balance Sheets for each of the periods ended December 31, 2022, March 31, 2023, and June 30, 2023, respectively, is as follows: an increase to property, plant, and equipment of $8.3 million, $19.0 million, and $19.7 million, and a corresponding decrease in deposits and other assets of $8.3 million, $19.0 million, and $19.7 million. For the period ended March 31, 2023, a summary of the impact of the adjustment on the Consolidated Balance Sheets is as follows: an increase in trade accounts receivable, net, of $0.1 million and an increase is accounts payable and accrued liabilities of $0.1 million. For the period ended June 30, 2023, a summary of the impact of the adjustment on the Consolidated Balance Sheets is as follows: a decrease in accounts payable and accrued liabilities of $0.3 million and a corresponding decrease to deposits and other assets.

Additionally, the following immaterial adjustments were made to the consolidated statements of cash flows associated with the above changes for each of the periods ended September 30, 2022, December 31, 2022, March 31, 2023, and June 30, 2023, respectively, as follows: a decrease in the net cash used in operating activities of $8.3 million, $8.3 million, $10.7 million, and $11.4 million, and a corresponding decrease in the net cash provided by investing activities reported for the periods then ended, respectively, as a result of these changes. The reclassification was made for presentation purposes and had no impact on the consolidated statements of operations and comprehensive income.

Reclassifications. The Company reclassified certain prior period amounts to conform to the current period presentation. The reclassifications included the categorization of depreciation and amortization on the Consolidated Statements of Operations and had no impact on total revenues, total operating expenses, net loss or stockholders’ equity for any period.

Significant Accounting Policies

Variable Interest Entities. The Company enters into agreements with special purpose entities (“SPEs”), some of which are variable interest entities (“VIEs”), in the ordinary course of business. A legal entity is considered a VIE if it has either a total equity investment that is insufficient to finance its operations without additional subordinated financial support or whose equity holders lack the characteristics of a controlling financial interest. The Company’s variable interests arise from contractual or other monetary interests in the entity. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as VIEs, through arrangements that do not involve controlling voting interests.

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GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

The Company consolidates a VIE if it is deemed to be the primary beneficiary. The Company determines it is the primary beneficiary if it has the power to direct the activities that most significantly impact the VIEs’ economic performance and has the obligation to absorb losses or has the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with its VIEs on an ongoing basis to determine whether it is the primary beneficiary. See Footnote 20 below for further information.

2.	Revenues from Contracts with Customers and Other Revenues

RNG Revenue

The Company’s revenues are primarily comprised of the sale of RNG and related environmental attributes produced at the NW Iowa RNG facility under long-term contracts with customers. Revenue is recognized at a point in time when the Company transfers the product to its customer. The customer obtains control of the product upon RNG delivery into gas pipeline system, whereas the title and control for the environmental attributes are transferred to the customer subsequent to the issuance of such attributes by the relevant regulatory agency. The Company generally has a single performance obligation in our arrangements with customers. The Company’s performance obligation related to the sales of RNG and related environmental attributes are satisfied at a point in time upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring its products. There is no variable consideration present in the Company’s performance obligations. Consideration for each transaction is based upon quoted market prices at the time of delivery.

Licensing and Development Revenue

The Company’s licensing and development revenue is related to a joint development agreement with LG Chem, Ltd. ("LG Chem") to develop bio-propylene for renewable chemicals using Gevo’s Ethanol-to-Olefins ("ETO") technology. As the contractually promised intellectual properties (“IP”) are not individually distinct, the Company combined each individual IP noted in the contract into a bundle of IP (“IP Rights”) that is distinct and accounted for all of the IP Rights promised in the contract as a single performance obligation. The IP Rights granted were “functional IP rights” that have significant standalone functionality. The Company’s subsequent activities do not substantively change that functionality and do not significantly affect the utility of the IP to which the licensee has rights. The Company has no further obligation with respect to the grant of IP Rights, including no expressed or implied obligation to maintain or upgrade the technology, or provide future support or services. Licensees legally obtain control of the IP Rights upon execution of the contract. As such, the earnings process is complete and revenue is recognized upon the execution of the contract, when collectability is probable and all other revenue recognition criteria have been met.

Other Hydrocarbon Revenue

The Company recorded limited revenues from its development-scale plant, the Luverne Facility, during the three and nine months ended September 30, 2023 and 2022. These revenues were promotional in nature and from customer contracts for ethanol sales and related products and hydrocarbon revenues, which included SAF, isooctene, and isooctane. These products were sold mostly on a free-on-board shipping point basis (recognized at a point in time), were independent transactions, did not provide post-sale support or promises to deliver future goods, and were single performance obligations.

The following table displays the Company’s revenue by major source based on product type (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
Major Goods/Service Line	2023		2022		2023		2022
Renewable natural gas commodity	$	187	$	309	$	457	$	309
Environmental attribute revenue		4,330		—		10,640		—
Licensing and development revenue		—		—		1,300		—
Other hydrocarbon revenue - ethanol, isooctane, IBA		11		—		429		321
Total operating revenue	$	4,528	$	309	$	12,826	$	630

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GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

3.	Asset Impairment

During the three and nine months ended September 30, 2022, the Company recorded a $24.7 million impairment loss on long-lived assets, to reduce the carrying value of certain property, plant, and equipment, and a leased right of use ("ROU") asset, at the Agri-Energy, LLC ("Agri-Energy") segment to its fair value. The impairments recorded to date relate to the determination to suspend production at the Luverne Facility and shift the plant into an idled, care and maintenance status during the three months ended September 30, 2022. As a result of this change in use, combined with a sustained history of operating losses, the Company assessed that indicators of impairment were present for long-lived assets within its Agri-Energy reporting segment. The Company therefore performed impairment testing and determined that, as of September 30, 2022, the carrying amounts of certain property plant and equipment, and the leased ROU asset exceeded estimated fair values. The Company estimated the fair value of these asset groups generally using a cost approach which is based on replacement or reproduction costs of the assets and is considered a Level 2 measurement and recorded a corresponding impairment loss under Operating Expenses within the Consolidated Statements of Operations.

4.	Net Loss Per Share

Basic net loss per share is calculated based on the weighted average number of common shares outstanding for the period. Diluted net loss per share is calculated based on the assumption that stock options and other dilutive securities outstanding, which have an exercise price less than the average market price of the Company’s common shares during the period, would have been exercised on the later of the beginning of the period or the date granted, and that the funds obtained from the exercise were used to purchase common shares at the average market price during the period. None of the Company’s stock options or other dilutive securities are considered to be dilutive in periods with net losses.

The effect of the Company’s dilutive securities is calculated using the treasury stock method and only those instruments that result in a reduction in net income per common share are included in the calculation. Diluted net loss per share excluded common stock equivalents because the effect of their inclusion would be anti-dilutive or would decrease the reported net loss per share. Therefore 83,988, 83,733, 80,954, and 80,846 of dilutive common stock equivalents have been excluded for the three and nine months ended September 30, 2023 and 2022, respectively, as the Company is in a net loss position. See Notes 15 and 19 for all outstanding options and warrants that were not included in the computation of diluted weighted average common shares outstanding, as the exercise price of the options and warrants exceeded the average price of the Company’s common stock during the reporting period, and therefore are anti-dilutive.

Basic and diluted net loss per share is calculated as follows (net loss in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net loss	$	(15,700)	$	(43,786)	$	(47,738)	$	(72,620)
Basic weighted-average shares outstanding		239,537,811		236,649,805		238,100,986		216,255,710
Net loss per share - basic and diluted	$	(0.07)	$	(0.19)	$	(0.20)	$	(0.34)

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GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

5.	Marketable Securities

The Company’s investments in marketable securities are stated at fair value and are available for sale. During the nine months ended September 30, 2023, all remaining investments in marketable securities matured with no realized gain or loss. The following table summarizes the Company’s investments in marketable securities (in thousands) as of:


	December 31, 2022
	Amortized		Gross
	Cost		Unrealized
	Basis		Losses		Fair Value
Marketable securities (current)
U.S. Treasury notes	$	56,418	$	(344)	$	56,074
U.S. Government-sponsored enterprise securities		112,030		(696)		111,334
Total marketable securities (current)	$	168,448	$	(1,040)	$	167,408

The cost of securities sold is based upon the specific identification method. The Company did not record investment income during the three months ended September 30, 2023, and recorded investment income from marketable securities totaling $0.8 million for the nine months ended September 30, 2023, and $1.2 million and $3.9 million for the three and nine months ended September 30, 2022, respectively. It is included in “Interest and investment income” in the Consolidated Statements of Operations.

6.	Restricted Cash

As of September 30, 2023, current restricted cash of $77.8 million consists of amounts held as collateral for letters of credit to provide financing support for development and construction of the NW Iowa RNG and NZ1 projects.

The Company entered into an irrevocable direct pay letter of credit (the “Bond Letter of Credit”) with Citibank N.A (“Citibank”) in April 2021 to support the 2021 Bonds (as defined below) for the development and construction of NW Iowa RNG. See Note 14, Debt, for additional information on the 2021 Bonds. The Bond Letter of Credit has a 0.5% annual fee and expires April 4, 2024 (unless terminated earlier). The Company deposited $71.2 million with Citibank as restricted cash to secure any amounts drawn under the Bond Letter of Credit. The Company is entitled to receive interest income on the restricted cash. As of September 30, 2023, no amounts have been drawn under the Bond Letter of Credit.

In September 2022, the Company entered into a Pledge and Assignment agreement with Citibank to provide credit support in the form of a letter of credit (the “Power Letter of Credit”) from Citibank to a local electric utility company in order to induce the utility company to design and construct the power transmission and distribution facilities that will serve NZ1. The Company deposited $6.6 million of restricted cash in an account with Citibank to collateralize the Power Letter of Credit, which has a 0.3% annual fee and expires September 30, 2024 (unless terminated earlier). As of September 30, 2023, no amounts have been drawn under the Power Letter of Credit.

7.	Prepaid Expenses and Other Current Assets

The following table sets forth the components of the Company’s prepaid expenses and other current assets (in thousands) as of:


	September 30, 2023		December 31, 2022
Prepaid insurance	$	693	$	911
Interest receivable		1,396		514
Prepaid feedstock		1,105		1,097
Other current assets		838		512
Total prepaid expenses and other current assets	$	4,032	$	3,034

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GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

8.	Leases, Right-of-Use Assets and Related Liabilities

The Company is party to an operating lease contract for the Company’s office and research facility in Englewood, Colorado, which expires in January 2029, and an operating lease contract for additional office space in Albuquerque, New Mexico, which expires in 2025. These leases contain options to extend the leases, which management does not reasonably expect to exercise, so they are not included in the length of the terms. The Company also has one production line piece of equipment with an operating lease that expires in 2024.

The Company has four finance leases for land under arrangements related to NW Iowa RNG. Under these contracts, the Company leases land from dairy farmers on which it has built three anaerobic digesters, and related equipment and pipelines to condition raw biogas from cow manure provided by the farmers. The partially conditioned biogas is transported from the three digester sites to a central gas upgrade system located at the fourth site that upgrades the biogas to pipeline-quality RNG for sale. These leases expire at various dates between 2031 and 2050.

The following tables present the (i) other quantitative information and (ii) future minimum payments under non-cancelable financing and operating leases as they relate to the Company’s leases (in thousands, except for weighted averages):


	Nine Months Ended September 30,
	2023			2022
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	22		$	29
Operating cash flows from operating leases	$	236		$	625
Finance cash flows from finance leases	$	2		$	2
Right-of-use asset obtained in exchange for new operating lease liabilities	$	199		$	—
Weighted-average remaining lease term, finance lease (months)		309			310
Weighted-average remaining lease term, operating leases (months)		65			61
Weighted-average discount rate - finance leases⁽¹⁾		12	%		11	%
Weighted-average discount rate - operating leases⁽¹⁾		6	%		5	%

(1)

Our leases do not provide an implicit interest rate; we calculate the lease liability at lease commencement as the present value of unpaid lease payments using our estimated incremental borrowing rate. The incremental borrowing rate represents the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and is determined using a portfolio approach based on information available at the commencement date of the lease.


Year Ending December 31,	Operating Leases		Finance Leases
2023 (remaining)	$	325	$	22
2024		386		30
2025		398		25
2026		367		25
2027		335		26
2028 and thereafter		344		549
Total		2,155		677
Less: amounts representing present value discounts		258		450
Total lease liabilities		1,897		227
Less: current portion		521		28
Non-current portion	$	1,376	$	199

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GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

9.	Inventories

The following table sets forth the components of the Company’s inventory balances (in thousands) as of:


	September 30, 2023		December 31, 2022
Raw materials	$	126	$	168
Finished goods
SAF, Isooctane, Isooctene and other		1,175		1,581
Work in process
Environmental attributes, net of allowance of $792 and $2,378, respectively		2,001		4,193
Jet fuel		—		51
Spare parts		386		354
Total inventories	$	3,688	$	6,347

10.	Property, Plant and Equipment

The following table sets forth the Company’s property, plant and equipment by classification (in thousands) as of:


	September 30, 2023		December 31, 2022
Land	$	6,505	$	6,452
Plant facilities and infrastructure		77,305		76,900
Machinery and equipment		95,016		87,248
Furniture and office equipment		2,828		2,977
Software		2,374		2,217
Construction in progress		137,231		81,019
Total property, plant and equipment		321,259		256,813
Less: accumulated depreciation and amortization		(83,142)		(71,639)
Property, plant and equipment, net	$	238,117	$	185,174

The Company recorded depreciation expenses of $5.2 million and $13.3 million for the three and nine months ended September 30, 2023, respectively, as compared with $1.3 million and $3.6 million for the same periods ended September 30, 2022.

Construction in progress includes $