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 renewable fuels company that is commercializing the next generation of renewable low-carbon liquid transportation fuels with the potential to achieve a “net zero” greenhouse gas (“GHG”) footprint and address global needs of reducing GHG emissions with sustainable alternatives to petroleum fuels. As next generation renewable fuels, Gevo'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 to the potential of net

zero

carbon emissions across the whole fuel life-cycle, Gevo's renewable fuels 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 importantly to Gevo's fundamental strategy, serves as a building block to make renewable isooctane (which we refer to as a renewable premium gasoline) and renewable jet fuel using simple and common chemical conversion processes. Gevo also reduces or eliminates fossil-based process energy inputs by replacing them with renewable energy such as wind-powered electricity and renewable natural gas (“RNG”).

Ultimately, the Company believes that the attainment of profitable operations is dependent upon future events, including (i) completing certain capital improvements at the Company's production facility located in Luverne, Minnesota (the "Luverne Facility") to increase the production capacity of renewable gasoline and jet fuel and other related products that can be made from isobutanol; (ii) completing the Company's development activities resulting in commercial production and sales 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's cost structure.

COVID-

19.

The novel coronavirus ("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. In light of the current and potential future disruption to the Company's business operations and those of its customers, suppliers and other

third

parties with whom the Company does business, the Company considered the impact of the COVID-

pandemic on its business. This analysis considered the Company's resilience and continuity plans, financial modeling and stress testing of liquidity and financial resources.

The Company expects that the impact of the COVID-

pandemic on general economic activity could negatively impact its revenue and operating results for at least the remainder of

2020

and beyond. The suspension of ethanol production at the Company's Luverne Facility and reduction in the Company's workforce during the

first

quarter of

2020

due to the impact of COVID-

had an adverse impact on the Company's financial results for the

third

quarter of

2020

reducing revenue by

97%

compared to the same period in

2019.

The Company expects that the suspension of ethanol production at the Luverne Facility and reduction in workforce will allow it to continue 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-

infection of any of its key employees could materially and adversely impact its operations. In addition, it is possible that COVID-

restrictions could create difficulty for satisfying the Company's legal or regulatory filing or other obligations, including with the SEC and other regulators.

There is also a risk that the COVID-

pandemic could continue to have a material adverse impact on customer demand and cash flow for the remainder 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-

continues to impact the Company's business and financial position will depend on future developments, which are difficult to predict, including the severity, duration and scope of the COVID-

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.

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 quarter ended

September 30, 2020

and beyond as the COVID-

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 delays in collection as of

September 30, 2020.

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 reduces demand for or the extent of renewable alcohol-to-jet fuel (“ATJ”), 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-

pandemic.

In response to the impact of the COVID-

pandemic, each of Patrick R. Gruber, the Company's Chief Executive Officer, Christopher M. Ryan, 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 effective as of

April 1, 2020

and continued until

July 31, 2020.

In connection with the

20%

salary reduction, the Officers were granted Company common stock in the form of restricted stock awards 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.

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.

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

rights to commercially produce Biobutanol or otherwise convert Biobutanol to Hydrocarbon Transportation Fuel under the MFA.

The Company will receive certain finder's fees as set forth in the MFA to the extent

one

of the Company's

third

party licensees (a) is

not

previously identified in the various agreements or

not

located in certain specified areas, (b) uses Praj's enfinity Technology (as defined in the MFA) in concert with the Feedstock PDP and (c) 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

years, unless earlier terminated 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

days' notice prior to the end of the current term. If Praj fails to fully commission Authorized Plants (as defined in the MFA) with 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).

August 14, 2020,

Gevo entered into 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 term of the Agreement is

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 construction of the Production Facility, and the Company having entered into engineering, procurement, and construction agreements for the construction of the Production Facility, in form and substance reasonably satisfactory to the Company.

Subject to the satisfaction or waiver of all of the Conditions Precedent, the Company is required to use commercially reasonable efforts to cause the “Commercial Operations Date” to occur on or before

December 31, 2023.

The Commercial Operations Date will be the date on which the Company determines that the production facility is capable 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%

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 (

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 impact of the COVID-

pandemic on the global economy and the Company's industry, in

March 2020,

the Company reduced its workforce, impacting

people at the Luverne Facility 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.

The Company incurred

$0.1

million related to severance costs and

$0.2

million related to lease agreements for which it will

longer receive value during the

nine

months ended

September 30, 2020,

which are recorded as

Restructuring expenses

on the Consolidated Statements of Operations. Restructuring expense totaled

$0.02

million and

$0.3

million for Gevo and Gevo Development/Agri-Energy segments, respectively, during the

nine

months ended

September 30, 2020.

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 outstanding related to the restructuring expenses included in

"Accounts payable and accrued liabilities

" in the Consolidated Balance Sheets:

	December 31, 2019		Additions		Payments			September 30, 2020

Severance (including payroll taxes)	$	—	$	96	$	(96	)	$	—
Lease agreements		—		158		(158	)		—

Total	$	—	$	254	$	(254)		$	—

Financial Condition

. The Company has incurred consolidated net losses since inception and had a significant accumulated deficit as of

September 30, 2020.

The Company's cash and cash equivalents as of

September 30, 2020

totaled

$80.6

million and are expected to be used for the following purposes: (i) development of the Luverne Facility expansion plan; (ii) identification of new production facilities and to plan for expanded production to fulfill existing off-take agreements; (iii) 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) exploration of strategic alternatives and additional financings, including project financing; and (vi) 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 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 capital. 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

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.

July 6, 2020,

Gevo completed a public offering (the

“July 2020

Offering”) of (i)

20,896,666

Series

units (the “Series

Units”) at a price of

$0.60

per Series

Unit, and (ii)

9,103,334

Series

units (the “Series

Units”) at a price of

$0.59

per Series

Unit. The

July 2020

Offering was made under a registration statement on Form S-

filed with the Securities and Exchange Commission, declared effective on

September 30, 2020.

Each Series

Unit consisted of

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

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 from the date of issuance, at an exercise price of

$0.60

per share. The pre-funded Series

2020

-B 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

-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.

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.

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%

141%,

risk-free rate of

0.30%

0.31%

and an expected term of

five

years.

Conversion of

2020/21

Notes.

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

$0.5

million on its Consolidated Statements of Operations.

At-the-Market Offering Program.

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.

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.

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 Compan

y 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

of the Company's Annual Report on Form

-K for the year ended

December

31,

2019.

Income Taxes.

There is

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

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

amounts payable to Blocksize as of

September 30, 2020.