Nature of Business, Financial Condition, Basis of Presentation and Reverse Stock Split

Nature of Business

. Gevo, Inc. (“Gevo” or the “Company,” which, unless otherwise indicated, refers to Gevo, Inc. and its subsidiaries) is a renewable chemicals and next generation biofuels company focused on the development and commercialization of alternatives to petroleum-based products using isobutanol produced from renewable feedstocks. Gevo was incorporated in Delaware on

June 9, 2005.

Gevo formed Gevo Development, LLC (“Gevo Development”) in

September 2009

to finance and develop biorefineries through joint venture, licensing arrangements, tolling arrangements or direct acquisition (see Note

Gevo Development). Gevo Development became a wholly-owned subsidiary of Gevo in

September 2010.

Gevo Development purchased Agri-Energy, LLC (“Agri-Energy”) in

September 2010.

The Company developed proprietary technology that uses a combination of synthetic biology, metabolic engineering, chemistry and chemical engineering to make isobutanol and hydrocarbon products from isobutanol that can displace petrochemical incumbent products. The Company has been able to genetically engineer yeast, whereby the yeast produces isobutanol from carbohydrates. Through

May 2012,

Agri-Energy was engaged in the business of producing and selling ethanol and related products produced at its production facility located in Luverne, Minnesota (the “Luverne Facility”). The Company commenced the retrofit of the Luverne Facility in

2011

and commenced initial startup operations for the commercial production of isobutanol at the Luverne Facility in

May 2012.

September 2012,

the Company made the strategic decision to pause isobutanol production at the Luverne Facility to focus on optimizing specific parts of the process to further enhance isobutanol production rates.

2013,

the Company modified the Luverne Facility in order to (i) significantly reduce previously identified infections, (ii) demonstrate that its biocatalyst performs in the

one million

liter fermenters at the Luverne Facility, and (iii) confirm GIFT™ efficacy at commercial scale at the Luverne Facility.

2014,

the Company further reconfigured the Luverne Facility to enable the co-production of both isobutanol and ethanol, leveraging the flexibility of its GIFT™ technology, with

one

fermenter utilized for isobutanol production and

three

fermenters utilized for ethanol production. In line with the Company’s strategy to maximize asset utilization and site cash flows, the Company believes that this configuration of the Luverne Facility should allow it to continue to optimize its isobutanol technology at a commercial scale, while taking advantage of potentially superior ethanol contribution margins. As a result, during certain periods the Company

may

only produce ethanol at the Luverne Facility. In addition, the condition of

two

of the Luverne Facility’s oldest fermentation vessels

may

limit the Company’s ability to co-produce isobutanol and ethanol. Therefore, the Company expects to focus on the production of ethanol and produce limited volumes of isobutanol until

one

or both of these fermentation vessels have been repaired or replaced.

The Company’s technology converts its renewable isobutanol to alcohol-to-jet (“ATJ”), isooctane, isooctene, and para-xylene (building block for polyester) at its hydrocarbons demonstration plant located at South Hampton Resources located in Silsbee, Texas. In addition the Company’s Luverne Facility has production capacity of about

MGPY of ethanol,

kilotons (“KT”) of animal feed, and

million pounds of corn oil.

As of

March 31, 2018,

the Company continues to engage in research and development, business development, business and financial planning, optimizing operations for isobutanol, hydrocarbon and ethanol production and raising capital to fund future expansion of its Luverne Facility for increased isobutanol and hydrocarbon production. Ultimately, the Company believes that the attainment of profitable operations is dependent upon future events, including (i) completing its development activities resulting in commercial production and sales of isobutanol or isobutanol-derived products and/or technology, (ii) obtaining adequate financing to complete its development activities, (iii) obtaining adequate financing to build out further isobutanol and hydrocarbon production capacity, (iv) gaining market acceptance and demand for its products and services, and (v) attracting and retaining qualified personnel.

Financial Condition

. For the

three

months ended

March 31, 2018

and

2017,

the Company incurred a consolidated net loss of

$2.5

million and

$5.9

million, respectively, and had an accumulated deficit of

$403.9

million at

March 31, 2018.

The Company’s cash and cash equivalents at

March 31, 2018

totaled

$7.0

million and are expected to be used for the following purposes: (i) operating activities of the Luverne Facility; (ii) operating activities at the Company’s corporate headquarters in Colorado, including research and development work; (iii) capital improvements primarily associated with the Luverne Facility; (iv) costs associated with optimizing isobutanol production technology; (v) exploration of strategic alternatives and new financings; and (vi) debt service and repayment 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 multiple sales 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 and 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, and unless and until it does, the Company will continue to need to raise additional cash. 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, it

may

seek to restructure its debt and it will continue to address its cost structure. Notwithstanding, there can be

assurance that the Company will be able to raise additional funds, or achieve or sustain profitability or positive cash flows from operations. Existing working capital was

not

sufficient to meet the cash requirements to fund planned operations through the period that is

one

year after the date the Company’s audited

2017

year-end financial statements were issued. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s inability to continue as a going concern

may

potentially affect the Company’s rights and obligations under its senior secured debt and issued and outstanding convertible notes. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do

not

include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.

At-the-Market Offering Program.

February 2018,

the Company commenced an at-the-market offering program, which allows it to sell and issue up to

$5.0

million of shares of the Company’s common stock. In the

first

quarter of

2018,

the Company issued

104,138

shares of common stock under the at-the-market offering for gross proceeds of

$0.1

million. The Company paid commissions to its sales agent of approximately

$1,000

and incurred other offering related expenses of

$0.2

million, the majority of which were

one

-time expenses associated with the establishment of the "

At-the-Market Offering Program"

. The Company has remaining capacity to issue up to approximately

$4.9

million of additional shares of common stock under the at-the-market offering program. Net proceeds will be used for general corporate purposes.

Basis of Presentation.

The unaudited consolidated financial statements of the Company (which include the accounts of its wholly-owned subsidiaries Gevo Development and 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

March 31, 2018

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 consolidated financial statements and notes thereto included under the heading “Financial Statements and Supplementary Data” in Part II, Item

of the Company’s Annual Report on Form

-K for the year ended

December

31,

2017

(the “Annual Report”).

NASDAQ Market Price Compliance.

June 21, 2017,

the Company received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market, notifying the Company that, for the prior

consecutive business days, the closing bid price of the Company’s common stock was

not

maintained at the minimum required closing bid price of at least

$1.00

per share as required for continued listing on the Nasdaq Capital Market. In accordance with Nasdaq Listing Rules, the Company had an initial compliance period of

180

calendar days, to regain compliance with this requirement. On

December 20, 2017,

the Nasdaq Stock Market granted the Company an additional

180

calendar days, or until

June 18, 2018,

to regain compliance. To regain compliance, the closing bid price of the Company’s common stock must be

$1.00

per share or more for a minimum of

consecutive business days at any time before

June 18, 2018.

The Nasdaq determination to grant the

second

compliance period was based on our meeting of the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market, with the exception of the bid price requirement, and the Company’s written notice of its intention to cure the deficiency during the

second

compliance period by effecting a reverse stock split, if necessary.

Recent Accounting Pronouncements

Leases (“ASU

2016

02”

)

. In

February 2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2016

02,

Topic

842

Leases

. ASU-

2016

requires leases to be reported on the financial statements. The objective is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU

2016

is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Future minimum lease obligations for leases accounted for as operating leases at

March 31, 2018

totaled

$2.7

million. The Company is currently in the process of evaluating the impact of adoption of ASU

2016

on its consolidated financial statements.

Derivatives and Hedging (Topic

815

) I. Accounting for Certain Financial Instruments with Down Round Provisions (“ASU

2017

11”

July 2017,

the FASB issued Accounting Standards Update

No.

2017

11,

Derivatives and Hedging (Topic

815

) Accounting for Certain Financial Instruments with Down Round Provisions

which simplifies the accounting for certain equity-linked financial instruments and embedded features with down round features that reduce the exercise price when the pricing of a future round of financing is lower. Currently, the existence of such features require classification outside of equity and recognition of changes in the fair value of the instrument in earnings each reporting period. This standard eliminates the need to remeasure the instruments at fair value and allows classification within equity. This standard will

not

materially impact the Company’s accounting, as current liability classified financial instruments and embedded derivatives that require separation from the host instrument have features other than down-round provisions that require current accounting and classification.

Adoption of New Accounting Pronouncements

Revenue from Contracts with Customers (“ASU

2014

09”

)

. In

May 2014,

the FASB issued Accounting Standards Update

No.

2014

09,

Revenue from Contracts with Customers

. The objective of ASU

2014

is to outline a new, single comprehensive model to use in accounting for revenue arising from contracts with customers. The new revenue recognition model provides a

five

-step analysis for determining when and how revenue is recognized, depicting the transfer of promised goods or services to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services. ASU

2014

is effective for fiscal years and interim periods within those years beginning after

December 15, 2016.

Early adoption is permitted. On

July 9, 2015,

the FASB Board voted to delay the implementation of ASU

2014

one

year to

December 15, 2017.

April 2016,

the FASB issued

Accounting Standards Update

No.

2016

Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing

(“ASU

2016

10”

) which provides additional clarification regarding

Identifying Performance Obligations and Licensing

. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. As a result of the Company’s conclusions below, there is

requirement to select a transition method, as a result of the Company determining that there is

impact upon revenue recognition, historical or otherwise, as a result of adopting ASU

2014

effective

January 1, 2018.

The Company’s current and historical revenues have consisted of the following: (a) ethanol sales and related products revenue, net; (b) Hydrocarbon revenue; and (c) grant and other revenue, which primarily has historically consisted of revenues from governmental and cooperative research grants. The following provides the Company’s assessment on how this standard impacted the Company upon its adoption effective

January 1, 2018

Ethanol sales and related products revenues.

Ethanol sales and related products revenues are sold to customers on a “free-on-board, shipping point” basis. Each transaction occurs independent of any other sale, and once sold, there are

future obligations on the part of the Company to provide post-sale support or promises to deliver future goods or services. The Company has and continues to sell close to

100

percent of its ethanol production to a single customer, representing

74%

and

80%

of total revenues for the

three

months ended

March 31, 2018

and

2017,

respectively. The Company completed its review of this customer and consistent with prior assessments, does

not

expect there to be any impact on how the Company has and will continue to account for sales of ethanol to this customer. The Company further evaluated related products, including distiller’s grains, corn oil and isobutanol, and after its review, there is

significant impact either historically or prospectively upon the Company’s adoption of this standard on

January 1, 2018.

Hydrocarbon revenue.

Hydrocarbon revenues include sales of ATJ, isooctene and isooctane and is sold mostly on a “free-on-board, shipping point” basis. Each transaction occurs independent of any other sale, and once sold, there are

future obligations on the part of the Company to provide post-sale support or promises to deliver future goods or services. The Company has determined that there will be

material impact as to how the Company has historically recognized or will recognize revenues upon adopting this standard on

January 1, 2018.

Grant and other revenues.

Grant and other revenues primarily have historically consisted of governmental and cooperative research grants, of which the

Northwest Advanced Renewables Alliance

(“NARA”) grant, funded by the United States Department of Agriculture (“USDA”), comprised the majority of those revenues since

2014.

After reviewing this arrangement, the Company has concluded that this grant consists of a non-reciprocal arrangement, and therefore, does

not

qualify as a contract pursuant to Topic

606

“

Revenues from Contracts with Customers”

, which was established with the issuance of ASU

2014

09.

However, Topic

606

stipulates revenue recognition under these circumstances, and we determined that there is

change to revenues recognition upon adopting this standard on

January 1, 2018.

Statement of Cash Flows – Restricted Cash (“ASU

2016

18”

November 2016,

the FASB issued Accounting Standards Update

No.

2016

18,

Statement of Cash Flows – Restricted Cash

, which standardizes the classification and presentation of changes in restricted cash on the statement of cash flows. This amendment requires that that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This amendment is effective for public business entities for fiscal years beginning after

December 15, 2017,

but early adoption was permitted. This standard must be applied retrospectively for all periods presented. The Company’s adoption of this standard on

January 1, 2018

materially impacted the presentation of the Company’s previously presented

2017

statements of cash flows for the three, six,

nine

and

twelve

months ended

December 31, 2017,

as the Company released approximately

$2.6

million of restricted cash in

April 2017.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows (all amounts unaudited and in thousands):

	March 31,
	2018		2017
Cash and cash equivalents	$	7,029	$	20,393
Restricted cash		-		2,611
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows.	$	7,029	$	23,004