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Note 1 - Nature of Business, Financial Condition, Basis of Presentation and Reverse Stock Split
6 Months Ended
Jun. 30, 2018
Notes to Financial Statements  
Business Description and Basis of Presentation [Text Block]
1.
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 "low-carbon" fuel company focused on the development and commercialization of renewable alternatives to petroleum-based products. Low-carbon fuels reduce the carbon intensity, or the level of greenhouse gas emissions, compared to standard fossil-based fuels across their lifecycle. The most common low-carbon fuels are renewable fuels. Gevo is focused on the development and production of mainstream fuels like gasoline and jet fuel using renewable feedstocks that have the potential to lower greenhouse gas emissions at a meaningful scale and enhance agricultural production, including food and other related products. In addition to serving the low-carbon fuel markets, through Gevo's technology, Gevo can also serve markets for the production of chemical intermediate products for solvents, plastics and building block chemicals.
 
In addition to its ethanol production capabilities, 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. 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 production facility located in Luverne, Minnesota (the "Luverne Facility") has production capacity of about
20
MGPY of ethanol,
45
-
50
kilotons (“KT”) of animal feed, and
3
million pounds of corn oil.
 
As of
June 30, 2018,
the Company continues to engage in research and development, business development, business and financial planning, optimizing operations for low-carbon ethanol, isobutanol, and related hydrocarbons production and raising capital to fund future expansion of its Luverne Facility. Ultimately, the Company believes that the attainment of profitable operations is dependent upon future events, including (i) completing certain capital improvements at the Luverne Facility to produce low-carbon ethanol side-by-side with low-carbon isobutanol; (ii) 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 low-carbon ethanol capacity and 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
six
months ended
June 30, 2018
and
2017,
the Company incurred a consolidated net loss of
$14.0
 
million and
$16.1
 
million, respectively, and had an accumulated deficit of
$415.3
 
million at
June 30, 2018
.
The Company’s cash and cash equivalents at
June 30, 2018 
totaled
$27.0
million (does
not
include gross proceeds of
$14.9
million received under the at-the-market offering program after
June 30, 2018
due to timing of settlement of sales under the at-the-market offering program) 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
no
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 outstanding senior secured 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.
In
February 2018,
the Company commenced an at-the-market offering program, which initially allowed it to sell and issue up to
$5.0
million of shares of the Company’s common stock. During the
three
months ended
June 30, 2018,
the Company amended the at-the-market offering program and increased the available capacity by approximately
$84.9
million.
 
During the
six
months ended
June 30, 2018,
the Company issued
6,286,617
shares of common stock (after giving effect to the
one
-for-
twenty
reverse stock split effected on
June 1, 2018)
under the at-the-market offering for gross proceeds of
$37.4
million, of which
$14.5
million was
not
received until
July 3, 2018.
The Company paid commissions to its sales agent of approximately
$0.9
million and incurred other offering related expenses of approximately
$0.4
million during the
six
months ended
June 30, 2018.
 
During the
three
months ended
June 30, 2018,
the Company issued
6,281,409
shares of common stock (after giving effect to the
one
-for-
twenty
reverse stock split effected
June 1, 2018)
under the at-the-market offering for gross proceeds of
$37.4
million during the
three
months ended
June 30, 2018,
of which
$14.5
million was
not
received until
July 3, 2018.
The Company paid commissions to its sales agent of approximately
$0.9
million and the incurrence of other offering related expenses of
$0.2
million during the
three
months ended
June 30, 2018.
 
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
June 30, 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 
8
of the Company’s Annual Report on Form
10
-K for the year ended
December 
31,
2017
(the “Annual Report”).
 
       Reverse Stock Split.
On
May 30,
20
18,
after receipt of stockholder approval, the Board of Directors approved an amendment to the Company's Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock, par value
$0.01
per share, by a ratio of
one
-for-twenty. The reverse stock split became effective
June 1, 2018.
Unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split.
 
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
-
02
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
-
02
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
June 30, 2018
totaled
$2.3
million. The Company is currently in the process of evaluating the impact of adoption of ASU
2016
-
02
on its consolidated financial statements.
 
Derivatives and Hedging (Topic
815
). Accounting for Certain Financial Instruments with Down Round Provisions (“ASU
2017
-
11”
).
In
July 2017,
the FASB issued ASU
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, as the Company's 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 ASU
No.
2014
-
09,
Revenue from Contracts with Customers
. The objective of ASU
2014
-
09
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
-
09
is effective for fiscal years and interim periods within those years beginning after
December 15, 2016.
On
July 9, 2015,
the FASB Board voted to delay the implementation of ASU
2014
-
09
by
one
year to
December 15, 2017.
In
April 2016,
the FASB issued
ASU
No.
2016
-
10
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
no
impact upon revenue recognition, historical or otherwise, due to the adoption of ASU
2014
-
09
effective
January 1, 2018, and accordingly, there is no requirement to select a transition method.
 
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, net.
Ethanol sales and related products revenues, net 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
no
future obligations on the part of the Company to provide post-sale support or promises to deliver
future goods or services. The Company has sold and continues to sell close to
100
% of its ethanol production to a single customer, representing
69%
and
75%
of total revenues for the
three
months ended
June 30, 2018
and
2017,
respectively,
and
71%
and
77%
of total revenues for the
six
months ended
June 30, 2018
and
2017,
resp
ectively,. 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
no
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
no
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
no
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 these 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 the Company determined that there is
no
change to revenue recognition upon adopting this standard on
January 1, 2018.
 
Statement of Cash Flows – Restricted Cash (“ASU
2016
-
18”
).
In
November 2016,
the FASB issued ASU
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 was 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. Prior to the adoption of this standard, the 2017 beginning of period cash and cash equivalents totaled $27.9 million. After adoption of this standard, the 2017 beginning period of cash, cash equivalents,
and restricted cash
totaled
$30.5
million.