Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended SeptemberendedSeptember 30 2020, 2021

or

For the transition period from ________________ to ________________

Commission File Number 001-35073

GEVO, INC.

(Exact name of registrant as specified in its charter)

(303) 858-8358

(Registrant's telephone number,

including area code)

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

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:

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 October 30, 2020, 119,628,203 29, 2021, 201,879,978 shares of the registrant’s common stock were outstanding.

GEVO, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 20202021

TABLE OF CONTENTS

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

Nature of Business. Gevo, Inc. (“Gevo” or the “Company,” which, unless otherwise indicated, refers to Gevo, Inc. and its subsidiaries), is a growth-oriented company focused on transforming renewable energy into energy dense liquid hydrocarbons that can be used as renewable fuels, company that is commercializingsuch as sustainable aviation fuel (“SAF”) and renewable isooctane (which the next generation of renewable low-carbon liquid transportation fuelsCompany refers to as “renewable premium gasoline”), with the potential to achieve a “net zero”“net-zero” greenhouse gas (“GHG”) footprint and address global needs of reducing GHG emissions with sustainable alternatives to petroleum fuels. Gevo currently owns one production facility in Luverne, Minnesota (the "Luverne Facility"). Gevo plans to develop, own (in whole or in part), and operate additional production facilities that use a combination of (i) renewable energy sources such a photosynthetic energy, renewable electricity, biogas, renewable hydrogen, and (ii) renewable carbon sources such as residual carbohydrates. 

As next generation renewable fuels, Gevo’sGevo's hydrocarbon transportation fuels have the advantage of being “drop-in” substitutes for conventional fuels that are derived from crude oil, working seamlessly and without modification in existing fossil-fuel based engines, supply chains and storage infrastructure. In addition, with SAF, the carbon footprint of air travel can be reduced, or in the long run, eliminated, on a net carbon basis, without changes to planes or fuel systems. In addition to the potential of net net-zero carbon emissions across the whole fuel life-cycle, Gevo’sGevo's renewable fuels should eliminate other pollutants associated with the burning of traditional fossil fuels, such as particulates and sulfur, while delivering superior performance.

Gevo uses low-carbon, renewable resource-based raw materials as feedstock. In the near-term, Gevo’s feedstocks will primarily consist of non-food corn. As Gevo’s technology is applied globally, feedstocks can consist of sugar cane, molasses or other cellulosic sugars derived from wood, agricultural residues and waste. Gevo’s patented fermentation yeast biocatalyst produces isobutanol, a four-carbon alcohol, via the fermentation of renewable plant biomass carbohydrates. The resulting renewable isobutanol has a variety of direct applications but, more importantlytechnology pathway that converts carbohydrates to Gevo’s fundamental strategy, serves asalcohols via a building blockfermentation process. The alcohols are then converted to make renewable isooctane (which we refer to ashydrocarbon fuels using a renewable premium gasoline) and renewable jet fuelcatalytic chemical process. By using simple and common chemical conversion processes. Gevo also reduces or eliminates fossil-based process energy inputs by replacing them with renewable energy suchacross the production process, in combination with sustainable feedstocks, like low carbon non-food corn, the greenhouse gas emissions are expected to be substantially reduced or eliminated as wind-powered electricitymeasured 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 patent portfolio with more than 500 patents, as well as proprietary processes and renewable natural gasknow-how. The production technology to convert ethanol to hydrocarbons has been exclusively licensed to Gevo in the United States by Axens North America, Inc. (“RNG”Axens”)., and incorporates more than 60 patents, as well as proprietary production technology and know-how. 

Ultimately, the Company believes that the attainment of profitable operations is dependent upon future events, including, but not limited to (i) completing certain capital improvements at the Company’s production facility located in Luverne, Minnesotasuccessful development of the Company's initial Net-Zero Project (the "Luverne Facility""Net-Zero 1 Project") to increaseand future projects for the production capacity of energy dense liquid hydrocarbons using renewable gasolineenergy and jet fuelour proprietary technology; and other related products that can be made from isobutanol; (ii) completing the Company's development activities resulting in commercial production and salesachievement of renewable hydrocarbon products; (iii) obtaining adequate financing to complete the Company's development activities, including the build out of isobutanol and renewable hydrocarbon capacity; (iv) gaining market acceptance and demand for the Company's products and services; (v) attracting and retaining qualified personnel; and (vi) achieving a level of revenues adequate to support the Company'sits cost structure.

COVID-19.COVID-19. The novel coronavirus ("COVID-19"COVID-19") pandemic has had an adverse impact on global commercial activity, including the global transportation industry and its supply chain, and has contributed to significant volatility in the financial markets. It resulted in travel restrictions and extended shutdowns of businesses in various industries including, among others, the airline industry, and significantly reduced overall economic output. It is possible that that the impact of the COVID-19 pandemic on general economic activity could continue to negatively impact the Company's revenue and operating results for the remainder of 2021 and beyond. In light of the current and potential future disruption to the Company'sits business operations and those of its customers, suppliers and other third parties with whom the Company does business, the Companymanagement considered the impact of the COVID-19COVID-19 pandemic on its business. This analysis considered the Company's resilience and continuity plans, financial modeling and stress testing of liquidity and financial resources.

business. The Company expects that the impact of the COVID-19COVID-19 pandemic on general economic activitythe global transportation industry could negatively impact its revenuecontinue to result in less demand for the Company's transportation fuel products, which could have a material adverse effect on the Company's business, financial condition and operating resultsprospects for the foreseeable future.

During the first quarter of 2020, we suspended our ethanol production at leastour Luverne Facility due to COVID-19 and an unfavorable commodity environment, largely the remainderresult of 2020 and beyond.greater corn costs as compared to national markets than the region has historically produced. The suspension of ethanol production at the Company's Luverne Facility and a reduction in the Company's workforce that occurred during the first quarter of 2020 due to the impact of COVID-19COVID-19 had an adverse impact on the Company’sCompany's financial results for the third quarter of 2020 nine months ended September 30, 2021, reducing revenue by 97%87% compared to the same periodnine months ended September 30, 2020. The change in 2019. The Company expects thatrevenue for the suspension of ethanol production atthree months ended September 30, 2021 was negligible compared thethree months ended September 30, 2020. The Luverne Facility re-commenced operations during July 2021 and reduction in workforceis expected to produce isobutanol that will allow itbe used as a feedstock for us to continueproduce SAF and renewable premium gasoline to reduce its cash burn during 2020.

With many of the Company’s employees working remotely, the Company faces the risk that unusual working arrangements could impact the effectiveness of its operations or controls. A potential COVID-19 infection of any of its key employees could materially and adversely impact its operations. In addition, it is possible that COVID-19 restrictions could create difficulty for satisfying the Company’s legal or regulatory filing or other obligations, including with the SEC and other regulators.

GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

fulfill existing sales contracts. There is also a risk that the COVID-19 pandemicCOVID-19 could continue to have a material adverse impact on the development of the Company's Net-Zero 1 Project, customer demand and cash flow, fordepending on the remainderextent of 2020 and beyond. The Company will continue to monitor the situation and assess possible implications to the Company's business and its stakeholders and will take appropriate actions to help mitigate adverse consequences. The extent to which COVID-19 continues to impact the Company's business and financial position will depend onour future developments, which are difficult to predict, including the severity, duration and scope of the COVID-19 outbreak as well as the types of measures imposed by governmental authorities to contain the virus or address its impact and the duration of those actions and measures.production activities.

The Company has considered multiple scenarios, with both positive and negative inputs, as part of the significant estimates and assumptions that are inherent in its financial statements and are based on trends in customer behavior and the economic environment throughout the quarterthree and nine months ended September 30, 2020 2021 and beyond as the COVID-19COVID-19 pandemic has impacted the industries in which the Company operates. These estimates and assumptions include the collectability of billed and unbilled receivables and the estimation of revenue and tangible and intangible assets. With regard to collectability, the Company believes it may face atypical delays in client payments going forward, but the Company has not experienced significant delays in collection as of September 30, 2020.2021. In addition, management believes that the demand for certain discretionary lines of business may decrease, and that such decrease will impact its financial results in succeeding periods. Non-discretionary lines of business may also be adversely affected, for example because reduced economic activity or disruption in hydrocarbon markets reducescould reduce demand for or the extent of renewable alcohol-to-jet fuel (“ATJ”),SAF, isooctane and isooctene. The Company believes that these trends and uncertainties are comparable to those faced by other registrants as a result of the COVID-19 pandemic.

In response

GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

Basis of Presentation. The unaudited consolidated financial statements of the Company (which include the accounts of its wholly-owned subsidiaries Gevo Asset, LLC, Gevo RNG Holdco, LLC, Gevo NW Iowa RNG, LLC ("Gevo RNG"), Gevo Net-Zero HoldCo, LLC, Gevo Net-Zero 1, LLC, and Agri-Energy, LLC (“Agri-Energy”)) have been prepared, without audit, pursuant to the impactrules and regulations of the COVID-19 pandemic, eachU.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of Patrick R. Gruber,management, are necessary to present fairly the Company's Chief Executive Officer, Christopher M. Ryan,financial position, results of operations and cash flows of the Company's President, Chief Operating Officer and Chief Technology Officer, L. Lynn Smull, the Company's Chief Financial Officer, Timothy J. Cesarek, the Company's Chief Commercial Officer, Geoffrey T. Williams, Jr., the Company's General Counsel and Secretary, and Carolyn M. Romero, the Company's Vice President - Controller and Principal Accounting Officer (collectively, the “Officers”) accepted 20% reductions to their base salaries. These reductions became effectiveCompany as of, and for the three and nine months ended, September 30, 2021 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 31,2020.

Reclassifications. The Company reclassified certain prior period amounts to conform to the current period presentation, including the categorization of preliminary stage project costs on the Consolidated Statements of Operations. These reclassifications had no impact on total revenues, total cost of goods sold, total operating expenses, net loss or stockholders' equity for any period.

January 2021Offering. On January 19, 2021, the Company completed a registered direct offering pursuant to a securities purchase agreement withcertain institutional and accredited investors providing for the issuance and sale by the Company of an aggregate of 43,750,000 shares of the Company’s common stock at a price of $8.00 per share (the “January 2021 Offering”). The net proceeds to the Company from the January 2021 Offering were approximately $321.9 million, after deducting placement agent fees and other estimated offering expenses payable by the Company.

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

During the nine months ended September 30, 2021, the Company issued 24,420,579 shares of common stock under the at-the-market offering program for total proceeds of $135.8 million, net of commissions and other offering related expenses totaling $3.6 million. There were 0 shares issued during the three months ended September 30, 2021.

As of September 30, 2021, the Company has remaining capacity to issue up to approximately $500 million of common stock under the at-the-market offering program.  

2021 Bonds. On April 1, 202015, 2021, the Iowa Finance Authority (the “Authority”) issued an aggregate principal amount of $68,155,000 of its Solid Waste Facility Revenue Bonds (Gevo NW Iowa RNG, LLC Renewable Natural Gas Project), Series 2021 (Green Bonds) (the “2021 Bonds”) in a public offering for the benefit of Gevo RNG (as defined below), a subsidiary of Gevo, to finance the construction of the Gevo RNG project.

The 2021 Bonds are reported at their amortized cost. The 2021 Bonds were issued at a premium of $0.8 million. Debt issuance costs totaled $3.0 million. The Company will amortize the debt issuance costs and continued until July 31, 2020. Inthe premium as a component of interest expense over the life of the related debt instrument using the interest method. The 2021 Bonds have been recorded as a long-term liability and will become current on the earlier of (i) one year prior to the Initial Mandatory Tender Date or (ii) upon the Company’s exercise of its call option to tender or redeem the Bonds. See Note 9, Debt, for further information.

Debt Issue Costs and Debt Discounts/Premiums. Debt issue costs are costs with third parties incurred in connection with the 20% salaryCompany’s debt financings that have been capitalized and are being amortized over the stated maturity period or estimated life of the related debt using the effective interest method. Debt issue costs are presented as a direct reduction of the Officers were granted Company common stockcarrying amount of the related debt. Debt discounts, including fees paid to lenders, and debt premiums are amortized over the life of the related debt using the effective interest method. Debt discounts and premiums are presented as a reduction and increase, respectively, in the formcarrying amount of restricted stock awardsthe related debt. Amortization of debt issue costs, discounts, and premiums is included in an amount equal to the 20% reduction. Certain remaining employees that earn above a certain dollar threshold also agreed to take a 20% salary reduction through July 31, 2020, with the 20% portion to be paid in the form of restricted stock awards.interest expense.

New Contracts. As previously disclosed, Gevo and Praj Industries Ltd. (“Praj”) entered into a Construction License Agreement (“CLA”) effective April 4, 2019, a Joint Development Agreement, effective as of April 1, 2018 (as amended, the “Feedstock JDA”) and a Development License Agreement, effective as of April 1, 2018. On August 13, 2020, the Company and Praj entered into a Master Framework Agreement (the “MFA”) to collaborate on providing renewable jet fuel and premium gasoline in India and neighboring countries which replaced the CLA.

Pursuant to the licenses granted by the Company to Praj under the MFA, Praj has exclusive rights to cause the Company to enter into negotiations with third-parties (each, a “Plant Operator”) that own or operate refineries for the production of Biobutanol (defined in the MFA), including conversion of ethyl alcohol to Biobutanol or for the production of isooctane, jet fuel and/or similar hydrocarbons (the “Hydrocarbon Transportation Fuel”) either in the Territory (as defined in the MFA) or who are named on the Plant List (as defined in the MFA). The MFA allows Praj to provide services (such as basic engineering and design package, supply of critical equipment, supervision services, engineering, procurement and construction services and additional related services) (the “Services”) to the applicable Plant Operator for (a) production of Biobutanol from juice, syrup, and/or molasses from sugarcane, beets, bagasse, rice straw, wheat straw or corn stover, and other additional feedstocks using the process design package developed under the Feedstock JDA and (b) for the production of Hydrocarbon Transportation Fuel using the Hydrocarbon PDPs (as defined in the MFA) for the conversion of Biobutanol to Hydrocarbon Transportation Fuel. Praj has no rights to commercially produce Biobutanol or otherwise convert Biobutanol to Hydrocarbon Transportation Fuel under the MFA.

GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

Restricted Cash and Restricted Cash Equivalents. The Company’s restricted cash and restricted cash equivalents consists of unused proceeds from the issuance of the 2021 Bonds which are restricted for the purpose of constructing the Gevo NW Iowa RNG, LLC Renewable Natural Gas Project as well as amounts pledged and assigned to Citibank, N.A., in its capacity as credit facility provider of the 2021 Bonds (the "Credit Facility Provider") as collateral for the reimbursement obligations of Gevo. As of September 30, 2021, the unused restricted bond proceeds of $48.8 million included in restricted cash is classified as current since the proceeds will be distributed within twelve months. As of September 30, 2021, the restricted collateral included in restricted cash totaled $71.2 million, $1.0 million of which secures interest payments to be made within twelve months and is classified as current. The Company willis entitled to receive certain finder’s feesinterest income on the restricted cash at an agreed rate of return of 0.10% but has no ability to direct the use of the restricted cash. See Note 9, Debt, for further information.

The proceeds from issuance of the 2021 Bonds are maintained by the Trustee under a Trust Indenture dated April 15, 2021 and released to the Company only to pay costs of the construction of the biogas facility operated by Gevo RNG. See Note 9, Debt, for further information on the Trust Indenture. As the proceeds of the 2021 Bonds are restricted, the amounts from bond trustee are also considered to be restricted cash. Restricted cash is included with cash and cash equivalents on the Statements of Cash Flows. 

The restricted cash held by the bond trustee as set forthof September 30, 2021 is made up of the following (in thousands):

Marketable Securities. The Company’s marketable securities consist of marketable debt securities and have been classified and accounted for as available-for-sale. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the classifications at each balance sheet date. The Company classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Marketable securities with maturities of 12 months or less are classified as short-term and marketable securities with maturities greater than 12 months are classified as long-term. The Company’s marketable securities are carried at fair value, with unrealized gains and losses, net of taxes, reported as a component of accumulated other comprehensive income in shareholders’ equity, with the exception of unrealized losses believed to be other-than-temporary, which are reported in earnings in the MFAcurrent period. The cost of securities sold is based upon the specific identification method. Interest receivable related to the extent onemarketable securities of $1.5 million was included within prepaid expenses and other current assets on the accompanying Consolidated Balance Sheets as of September 30, 2021.

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

A lease is classified as a finance lease when one or not located in certain specified areas, (b) uses Praj’s enfinity Technology (as defined inmore of the MFA) in concert withfollowing criteria are met: (1) the Feedstock PDP and (c)lease transfers ownership of the constructed facilities are of a certain commercial scale. The MFA contains customary representations, warranties and covenants, indemnification provisions and other terms. The MFA will continue in effect for 10 years, unless earlier terminatedasset by either party as set forth in the MFA, and automatically renews for additional one year terms until terminated or either party provides at least 30 days’ notice prior to the end of the current term. If Praj failslease term, (2) the lease contains an option to fully commission Authorized Plants (as defined inpurchase the MFA) withasset that is reasonably certain to be exercised, (3) the cumulative capacity to generate five million gallons per year of Biobutanol or Hydrocarbon Transportation Fuel by the fifth contract year, the exclusive license grants will terminate (unless otherwise mutually agreed in writing by the parties).

On August 14, 2020, Gevo entered intolease term is for a Renewable Hydrocarbons Purchase and Sale Agreement (the “Agreement”) with Trafigura Trading LLC (“Trafigura”), whereby the Company agreed to supply renewable hydrocarbons to Trafigura. The initial termmajor part of the Agreement is 10 years, and Trafigura has the option to extend the initial term. Performance under the Agreement is subject to certain conditions as set forth below, including acquiring a production facility to produce the renewable hydrocarbon products contemplated by the Agreement and closing a financing transaction for sufficient funds to acquire and retrofit the production facility contemplated by the Agreement.

If the Company does not provide to Trafigura the design, capabilities (including the expected annual production capacity), specifications, required governmental authorizations, delivery logistics and location of an additional new project that the Company plans to develop or acquire (the “Production Facility”) (collectively, the “Facility Design”) to meet the requirements set forth in the Agreement on or before December 31, 2020, either party may terminate the Agreement. The parties respective obligations under the Agreement are also subject to certain Conditions Precedent (as defined in the Agreement), including, but not limited to, the Company securing initial financing for the constructionremaining useful life of the Production Facility, andasset, (4) the Company having entered into engineering, procurement, and construction agreements for the constructionpresent value of the Production Facility, in form and substance reasonably satisfactory to the Company.

Subject to the satisfactionlease payments equals or waiver ofexceeds substantially all of the Conditions Precedent,fair value of the Companyasset, and (5) the asset is requiredof such a specialized nature that it is expected to have no alternative use commercially reasonable efforts to cause the “Commercial Operations Date”lessor at the end of the lease term. If a lease does not meet any of these criteria, the lease is classified as an operating lease.

Lease liabilities are initially measured at the lease commencement date based on the present value of lease payments over the lease term, discounted using an estimate of the Company’s incremental borrowing rate for a collateralized loan with the same term and payment as the lease. Right-of-use assets are measured based on the amount of the lease liability adjusted for any lease payments made to occur onthe lessor at or before the lease commencement date less any lease incentives received. All right-of-use assets are evaluated for impairment in accordance with accounting standards applicable to long-lived assets as further described in the significant accounting policy “Impairment of Property, Plant and Equipment” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The Commercial Operations Date will be2020.

Renewal options are included in the date on whichcalculation of our right-of-use assets and lease liabilities when the CompanyCompany’s determines that the production facilityoption is capablereasonably certain of consistently producing renewable hydrocarbons conforming to specification and in quantities set forth under the Agreement, provided that the expected annual production capability is at least equal to 85%exercise based on an analysis of the annual production capability contemplated by the Facility Design. If the Commercial Operations Date has not taken place on or before December 31, 2023 (as may be adjusted in accordance with the Agreement), then the Company will be required to pay Trafigura certain liquidated damages.

Restructuring Expenses. During the first quarter of 2020, the Company suspended its ethanol production at the Luverne Facility. In addition, due to the impactrelevant facts and circumstances. Certain of the COVID-19 pandemicCompany’s leases require variable lease payments that do not depend on an index or rate and such payments are excluded from the global economycalculation of the right-of-use asset and the Company’s industry, in March 2020, the Company reduced its workforce, impacting 26 people at the Luverne Facilitylease liability and four people at the Company's corporate headquarters. Affected employees were offered a severance package which included a one-time payment, one month of health insurance and acceleration of vesting for any unvested restricted stock awards.are recognized as variable lease cost when incurred.

The Company incurred $0.1 million relatedhas elected the practical expedient to severance costsaccount for the lease and $0.2 million related tonon-lease components as a single lease agreementscomponent for which it will no longer receive value duringour dairy lease and fuel supply asset class. This results in a significantly higher right-of-use assets and lease liabilities than if the nine months ended September 30, 2020, which are recordedCompany had not elected this practical expedient.

Lease cost for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as Restructuring expensesincurred. Lease cost for finance leases consists of amortization of the right-of-use assets on a straight-line basis over the lease term, interest expense on the Consolidated Statements of Operations. Restructuring expense totaled $0.02 millionlease liability, and $0.3 million for Gevo and Gevo Development/Agri-Energy segments, respectively, during the nine months ended September 30, 2020.variable lease payments as incurred.

GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

Intangible assets. Intangible assets consist primarily 

The Company intends to continue developing its hydrocarbon business, including the planned expansion of the Luverne Facility, and the Company expects to move forward in securing the project funding needed to expand the Luverne Facility. The expansion is designed to allow the Company to produce large quantities of low carbon isobutanol, sustainable aviation fuel and renewable isooctane. The Company also expects to continue engineering efforts for the expansion of isobutanol production and the construction of a commercial renewable hydrocarbon production facility, as well as additional decarbonization projects, at the Luverne Facility.

As of September 30, 2020, the Company had the following liabilities outstandingpatents. Costs related to patents, including legal fees, are capitalized and amortized over the restructuring expensesestimated useful lives using the straight-line method. Amortization expense is recorded in "Research and development expense" in the Consolidated Statements of Operations. For patents purchased in an asset acquisition, the useful life is determined by valuation estimates of remaining economic life. Intangible assets are included in "Accounts payable""Deposits and accrued liabilities"other assets" in the Consolidated Balance Sheets:Sheets.

The Company periodically evaluates the amortization period and carrying value of its patents to determine whether any events or circumstances warrant revised estimated useful life or reduction in value.

On September 21, 2021, the Company entered into an asset purchase agreement with Butamax Advanced Biofuels LLC and its affiliate, Danisco US Inc. (collectively, “Butamax”), pursuant to which the Company purchased all of Butamax’s rights, title and interests in certain U.S. and foreign patents and patent applications, subject to specified conditions and encumbrances, relating to the production, recovery and use of biobutanol that were owned by Butamax, for $9.0 million. Management evaluated the patents to determine whether the patents (i) supported current products; (ii) supported planned research and development (iii) prevent others from competing with Gevo's products. The Company used a valuation of the investment value of the patent portfolio performed in July 2021 to determine the relative fair value of the patents acquired. Based on the Company's estimated purchase price allocation, approximately $4.2 million of the purchase price was allocated to the purchase of patents to support current products and planned product research and $4.8 million for patents purchased for defensive purposes.  The patents are included in the Gevo Segment.

Identifiable intangible assets as of September 30, 2021 comprised the following (in thousands):

GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

The following table details the estimated net amortization of identifiable intangible assets as of September 30, 2021 (in thousands):

Total amortization of intangible assets was less than $0.1 million for the three and nine months ended September 30, 2021 as well as for the three and nine months ended September 30, 2020. 

Capitalized Internal-Use Software Costs. Software development costs are capitalized when module development begins, it is probable that the project will be completed, and the software will be used as intended. Costs associated with preliminary project stage activities, training, maintenance and all other post implementation stage activities are expensed as incurred. Internal-use software is amortized on a straight-line basis, generally over a three to five years. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. 

Borrowing Costs. The borrowing costs that are directly attributable to acquisition and construction of an asset that needs a substantially long period of time for its intended use commence to be capitalized and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalization of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use and the borrowing costs incurred thereafter are recognized in profit or loss for the current period. Capitalization of borrowing costs is suspended during periods in which the acquisition or construction of an asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed. Total interest of $0.8 million and $1.5 million was incurred during the three and nine months ended September 30, 2021, respectively. Interest of $0.4 million and $0.8 million relating to our borrowings, and interest of $0.3 million and $0.6 million relating to certain of our finance leases, was capitalized for the three and nine months ended September 30, 2021, respectively. Total interest of $0.5 million and $1.6 million was incurred and charged to expense during the three and nine months ended September 30, 2020, respectively.

Preliminary Stage Project Costs. Preliminary stage project costs consist of research and development expense in addition to selling, general and administrative expenses related to our Gevo RNG and Net-Zero projects.

Income Taxes. There is 0 provision for income taxes because the Company has incurred operating losses since inception.

Concentration of Business Risk. As of September 30, 2021, two customers, Oil & Octane and KLM Commodities LLC ("KLM") comprised approximately 61% and 38%, or approximately 98% in total, of the Company's outstanding trade accounts receivable, respectively. As of December 31,2020, HCS Group GmbH ("HCS") comprised approximately 79% of the Company's outstanding trade accounts receivable.

For the three months ended September 30, 2021, HCS, New Vision, LLC ("New Vision") and KLM accounted for approximately 66%, 17% and 11%, or approximately 94% in total, of the Company's consolidated revenue, respectively. For the three months ended September 30, 2020, Coryton Advanced Fuels Ltd ("Coryton") and Total Petrochemicals & Refining USA, Inc. ("Total") accounted for approximately 52% and 39%, or approximately 91% in total, of the Company's consolidated revenue, respectively. For the nine months ended September 30, 2021, HCS, New Vision and Titan Aviation Fuel ("Titan") accounted for approximately 57%, 26% and 10%, or approximately 93% in total, of the Company's consolidated revenue, respectively. For the nine months ended September 30, 2020, Eco-Energy, LLC ("Eco-Energy"), Purina Animal Nutrition, LLV ("Purina") and HCS accounted for approximately 57%, 17% and 15%, or approximately 89% in total, of the Company's consolidated revenue, respectively. 

Total, HCS, KLM, Coryton and Titan are customers of the Company's Gevo segment. Juhl, New Vision, Eco-Energy and Purina are customers of the Company's Agri-Energy segment (see Note 14).

Financial Condition. The Company has incurred consolidated net losses since inception and had a significant accumulated deficit as of September 30, 2020. 2021. The Company’s cash and cash equivalents totaled $16.2 million, restricted cash totaled $120.0 million and marketable securities totaled $386.2 million as of September 30, 2020 totaled $80.6 million2021. Gevo expects to use its cash, cash equivalents, restricted cash and are expected to be usedmarketable securities for the following purposes: (i) identification, development, of the Luverne Facility expansion plan; (ii) identificationacquisition and construction of new production facilities and to plan for expanded production to fulfill existing off-take agreements;agreements, including the Company's Net Zero Projects; (ii) investment in the Gevo NW Iowa RNG facility; (iii) development of the Luverne Facility; (iv) development, acquisition and operation of sustainable ethanol-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; (iv) development projects associated with the Company's RNG projects; (v)(vi) exploration of strategic alternatives and additional financings, including project financing; and (vi)(vii) future debt service obligations.

The Company expects to incur future net losses as it continues to fund the development and commercialization of its product candidates. To date, the Company has financed its operations primarily with proceeds from issuance of equity and debt securities, borrowings under debt facilities and product sales. 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 additional production facilities to support that Company’s offtake agreement, the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability or positive cash flows,structure, and unless and until it does, the Company will continue to needability to raise capital to finance the development, acquisition and construction of additional capital.productions facilities. Management intends to fund future operations through additional private and/or public offerings of debt or equity securities. In addition, the Company may seek additional capital through arrangements with strategic partners or from other sources, and it will continue to address its cost structure. 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.

July 2020 Offering. On July 6, 2020, Gevo completed a public offering (the “July 2020 Offering”) of (i) 20,896,666 Series 1 units (the “Series 1 Units”)operations on acceptable terms, or at a price of $0.60 per Series 1 Unit, and (ii) 9,103,334 Series 2 units (the “Series 2 Units”)all. Management believes it has adequate cash to fund operations for at a price of $0.59 per Series 2 Unit. The July 2020 Offering was made under a registration statement on Form S-1 filed with the Securities and Exchange Commission, declared effective on September 30, 2020.

Each Series 1 Unit consisted of least one share of the Company’s common stock and one Series 2020-A warrant to purchase one share of the Company’s common stock (each, a “Series 2020-A Warrant”). Each Series 2 Unit consists of a pre-funded Series 2020-B warrant to purchase one share of the Company’s common stock (each, a “Series 2020-B Warrant” and, together with the Series 2020-A Warrants, the “Warrants”) and one Series 2020-A Warrant. The Series 2020-A Warrants are exercisable beginning on the date of original issuance and will expire five years year from the date of issuance, at an exercise price of $0.60 per share. The pre-funded Series 2020-B Warrantsthe financial statements are exercisable beginning on the date of issuance at a nominal exercise price of $0.01 per share of common stock any time until the Series 2020-B Warrants are exercised in full. In connection with the July 2020 Offering, the Company issued Series 2020-A Warrants to purchase an aggregate of 30,000,000 shares of common stock. As of September 30, 2020, all of the Series 2020-B Warrants were exercised.issued.

GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

The net proceeds to the Company from the July 2020 Offering were approximately $16.1 million, after deducting placement agent fees and other offering expenses payable by the Company, and not including any future proceeds from the exercise of the Warrants. The Company intends to use the net proceeds from the July 2020 Offering to fund working capital and for other general corporate purposes.

During the three months ended September 30, 2020, the Company received notices of exercise from holders of our Series 2020-A Warrants to issue an aggregate of 27,317,834 shares of common stock for total gross proceeds of approximately $16.4 million. Following these exercises, Series 2020-A Warrants to purchase 2,682,166 shares of the Company's common stock remain outstanding at an exercise price of $0.60 per share.

August 2020 Offering. On August 25, 2020, the Company completed a registered direct offering pursuant to a securities purchase agreement with certain institutional and accredited investors providing for the issuance and sale by the Company of an aggregate of (i) 21,929,313 shares of the Company’s common stock (the “Shares”) at a price of $1.30 per share, and (ii) 16,532,232 pre-funded Series 2020-C warrants to purchase one share of the Company’s common stock (each, a “Series 2020-C Warrant”) at a price of $1.29 per Series 2020-C Warrant, in a registered direct offering (the “August 2020 Offering”). The pre-funded Series 2020-C Warrants are exercisable beginning on the date of issuance at a nominal exercise price of $0.01 per share of common stock any time until the Series 2020-C Warrants are exercised in full.  As of September 30, 2020, all of the Series 2020-C Warrants were exercised.

The net proceeds to the Company from the August 2020 Offering were approximately $45.8 million, after deducting placement agent fees and other estimated offering expenses payable by the Company, and not including any future proceeds from the exercise of the Warrants. The Company intends to use the net proceeds from the August 2020 Offering to fund working capital and for other general corporate purposes.

The Company evaluated the Series 2020-A, Series 2020-B and Series 2020-C Warrants for liability or equity classification in accordance with the provisions of Accounting Standards Codification 480, Distinguishing Liabilities from Equity, and determined that equity treatment was appropriate because neither the Series 2020-A, Series 2020-B or Series 2020-C Warrants met the definition of liability instruments.

The Warrants are classified as component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the Warrants do not provide any guarantee of value or return. The Company valued the Series 2020-A, Series 2020-B and Series 2020-C Warrants at issuance using the Black-Scholes option pricing model and determined the fair value of the Series 2020-A, Series 2020-B and Series 2020-C Warrants to purchase the Company’s common stock at $8.3 million, $2.9 million and $21.4 million, respectively. The key inputs to the valuation model included a weighted average volatility of 130% to 141%, risk-free rate of 0.30% to 0.31% and an expected term of five years.

Conversion of 2020/21 Notes. On July 10, 2020, certain holders of the 2020/21 Notes converted $2.0 million in aggregate principal amount of 2020/21 Notes (including the conversion of an additional $0.3 million for make-whole payment) into an aggregate of 4,169,426 shares of common stock pursuant to the terms of the 2020/21 Indenture. The Company recorded a Loss on conversion of 2020/21 Notes of $0.5 million on its Consolidated Statements of Operations.

At-the-Market Offering Program. In February 2018, the Company commenced an at-the-market offering program, which allows it to sell and issue shares of its common stock from time-to-time. In August 2019, the at-the-market offering program was amended to provide available capacity under the at-the-market offering program of $10.7 million.

During the nine months ended September 30, 2020, the Company issued 1,343,121 shares of common stock under the at-the-market offering program for total proceeds of $2.2 million, net of commissions and other offering related expenses. No shares were issued under the at-the-market offering program during the three months ended September 30, 2020.

As of September 30, 2020, the Company has remaining capacity to issue up to approximately $6.5 million of common stock under the at-the-market offering program.

GEVO, INC.

Notes to Consolidated Financial Statements

(unaudited)

Basis of Presentation. The unaudited consolidated financial statements of the Company (which include the accounts of its wholly-owned subsidiaries Gevo Development, LLC (“Gevo Development”) and Agri-Energy, LLC (“Agri-Energy”)) have been prepared, without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States (“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 at September 30, 2020 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, 2019.

Income Taxes. There is no provision for income taxes because the Company has incurred operating losses since inception.

Concentration of Business Risk.As of September 30, 2020, four customers, Coryton Advanced Fuels Ltd ("Coryton"), Total Petrochemicals & Refining USA, Inc. ("Total"), Eco-Energy, LLC ("Eco-Energy") and World Kinect Energy Services (" Kinect"), comprised approximately 27%, 20%, 14% and 12% of the Company's outstanding trade accounts receivable, respectively. As of December 31, 2019, three customers, Eco-Energy, Purina Animal Nutrition, LLC ("Purina"), and HCS Group GmbH ("HCS") comprised 57%, 13% and 15% of the Company's outstanding trade accounts receivable, respectively.

For the three months ended September 30, 2020, Coryton and Total accounted for approximately 52% and 39% of the Company's consolidated revenue, respectively. For the three months ended September 30, 2019, Eco-Energy and Purina represented approximately 73% and 16% of the Company's consolidated revenue, respectively. For the nine months ended September 30, 2020, Eco-Energy, Purina and HCS accounted for approximately 57%, 17% and 15% of the Company's consolidated revenue, respectively. For the nine months ended September 30, 2019, Eco-Energy and Purina accounted for approximately 73% and 16% of the Company's consolidated revenue, respectively. HCS, Coryton and Total Cray Valley are customers of the Company's Gevo segment. Eco-Energy and Purina are customers of the Company's Gevo Development/Agri-Energy segment (see Note 14).

Related Party Transaction. During the nine months ended September 30, 2020, Gevo paid Blocksize Capital GmbH ("Blocksize"), a company in which a director of Gevo has an indirect ownership interest, $0.1 million for block chain software development services. There were no amounts payable to Blocksize as of September 30, 2020.