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Note 1 - Nature of Business and Financial Condition
12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Business Description and Basis of Presentation [Text Block]

 1. Nature of Business and Financial Condition

 

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

 

The Company is focused on transforming renewable energy into energy-dense liquid hydrocarbons that can be used as renewable fuels, such as sustainable aviation fuel ("SAF"), with the potential to achieve a “net-zero” greenhouse gas ("GHG") footprint. The Company uses the Argonne National Laboratory’s GREET (Greenhouse gases, Regulated Emissions, and Energy use in Transportation) model (the "GREET Model") to measure, predict and verify GHG emissions across the life-cycle of its products. The “net-zero” concept means that Gevo expects to produce fuels that consume as much carbon dioxide in their manufacture as the fuels produce when burned.

 

Gevo's primary market focus, given current demand and growing customer interest, is SAF. The Company believes that it also has commercial opportunities for other renewable hydrocarbon products, such as hydrocarbons for gasoline blendstocks and diesel fuel; ingredients for the chemical industry, such as ethylene and butenes; plastics and materials; and other chemicals.

 

The Company believes it has the technology and know-how to convert various carbohydrate feeds through a fermentation process into alcohols and then transform the alcohols into renewable fuels and materials. While the Company expects its first major capital deployments to focus on the production of SAF, Gevo recognizes that there are opportunities to operate in several different markets and it will pursue those opportunities when appropriate based on customer interest, access to capital and expected investment returns.

 

Gevo currently operates two development scale plants: (i) a demonstration facility in Silsbee, Texas that is operated in partnership with South Hampton Resources, Inc. (the "South Hampton Facility") and (ii) a wholly-owned development plant in Luverne, Minnesota (the "Luverne Facility"). 

 

The Luverne Facility was originally constructed in 1998 and is located on approximately 55 acres of land, which contains approximately 50,000 square feet of building space. Gevo currently plans to install a 1 million gallon per year alcohol-to-hydrocarbon process pilot unit that is expected to produce olefins and fuel products for market development and testing purposes. This pilot unit is expected to be complete and delivered to the Luverne Facility in late 2022. The pilot unit will also be used in training of employees for Net-Zero 1 and other future projects.

 

Gevo's initial renewable natural gas ("RNG") project, Gevo RNG, will generate RNG captured from dairy cow manure which will be supplied by three dairies located in Northwest Iowa totaling over 20,000 milking cows. 

 

Ultimately, the Company believes that the attainment of profitable operations is dependent upon future events, including, but not limited to (i) the successful development of the Company's initial Net-Zero Project (the "Net-Zero 1 Project") and future projects for the production of energy dense liquid hydrocarbons using renewable energy and our proprietary technology; and (ii) the achievement of a level of revenues adequate to support its 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 financial markets. 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 2022 and beyond.

 

During the first quarter of 2020, the Company suspended the ethanol production at its Luverne Facility due to COVID-19 and an unfavorable commodity environment. The suspension of ethanol production and a reduction in the Company's workforce that occurred during the first quarter of 2020 due to the impact of COVID-19 had an adverse impact on the Company's financial results for the year ended December 31, 2021 reducing revenue by 87% compared to the year ended  December 31, 2020. Revenue was reduced by 77% for the year December 31, 2020 compared to the year ended December 31, 2019 as a result of COVID-19. The Luverne Facility re-commenced operations during July 2021.

 

Financial Condition. The Company has incurred consolidated net losses since inception and had a significant accumulated deficit as of December 31, 2021. The Company’s cash and cash equivalents totaled $40.8 million, short and long-term restricted cash totaled $95.2 million and marketable securities totaled $339.7 million as of December 31, 2021. Gevo expects to use its cash, cash equivalents, restricted cash and marketable securities for the following purposes: (i) identification, development, acquisition and construction of new production facilities and to plan for expanded production to fulfill existing off-take agreements, including the Company's Net-Zero Projects; (ii) investment in RNG projects; (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; (vi) exploration of strategic alternatives and additional financings, including project financing; and (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 off-take agreement, the achievement of a level of revenues adequate to support the Company’s cost structure, and the ability to raise capital to finance the development, acquisition and construction of additional 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 on acceptable terms, or at all. Management believes it has adequate cash to fund operations for at least one year from the date the financial statements are issued.