Gevo(US:GEVO)2020-08-10 21:02PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited financials for H1 2020 show a $15.3 million net loss and reduced cash, raising going concern doubts due to ethanol production halt Consolidated Balance Sheets Total assets declined to $80.1 million by June 30, 2020, driven by a $10 million drop in cash, while equity decreased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 (unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $6,337 | $16,302 | | Total current assets | $13,356 | $24,228 | | Total assets | $80,101 | $93,359 | | Liabilities & Equity | | | | Total current liabilities | $19,171 | $20,094 | | Total liabilities | $20,214 | $20,855 | | Total stockholders' equity | $59,887 | $72,504 | Consolidated Statements of Operations Q2 2020 revenues fell to $1.0 million due to ethanol production halt, resulting in a $6.0 million net loss for the quarter Quarterly and Six-Month Operating Results (in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $988 | $5,086 | $4,813 | $11,489 | | Gross loss | $(1,656) | $(3,366) | $(5,970) | $(5,924) | | Loss from operations | $(5,257) | $(6,493) | $(13,233) | $(12,121) | | Net loss | $(6,043) | $(7,090) | $(15,296) | $(13,226) | | Net loss per share | $(0.40) | $(0.60) | $(1.04) | $(1.20) | Consolidated Statements of Cash Flows Net cash used in operations was $10.8 million for H1 2020, leading to a $10.0 million net decrease in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,805) | $(9,653) | | Net cash used in investing activities | $(1,620) | $(4,556) | | Net cash provided by financing activities | $2,460 | $9,630 | | Net (decrease) in cash | $(9,965) | $(4,579) | | Cash at end of period | $6,337 | $29,155 | Notes to Consolidated Financial Statements Notes detail COVID-19 impact, ethanol production suspension, 81% Q2 revenue decline, going concern doubts, and a subsequent $16.2 million public offering - The COVID-19 pandemic led to the suspension of ethanol production at the Luverne Facility, resulting in an 81% revenue reduction in Q2 2020 compared to Q2 201928 - The company's financial condition, including a net loss of $15.3 million for the first six months of 2020 and limited cash reserves, raises substantial doubt about its ability to continue as a going concern4345 - In January 2020, the company exchanged its $14.1 million 2020 Notes for new 2020/21 Notes and in April 2020, obtained $1.0 million in SBA PPP loans104114 - Subsequent to the quarter end, on July 6, 2020, the company completed a public offering with net proceeds of approximately $16.2 million to be used for working capital157159 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses COVID-19's impact, leading to ethanol production suspension, an 81% Q2 revenue drop, and critical liquidity concerns, partially offset by a $16.2 million public offering COVID-19 Impact COVID-19 led to ethanol production suspension, workforce reductions, an 81% Q2 revenue drop, and an amended Fuel Sales Agreement with Delta Air Lines - Suspension of ethanol production and workforce reduction in Q1 2020 due to COVID-19 led to an 81% revenue decrease in Q2 2020 versus Q2 2019168 - The Fuel Sales Agreement with Delta Air Lines was amended, extending the commercial operation deadline for the ATJ facility to June 30, 2024, and revising credit support and pricing terms175176177 - Company executives and certain employees accepted 20% salary reductions from April 1 to July 31, 2020, compensated with restricted stock awards172 Results of Operations Q2 2020 revenue decreased by $4.1 million to $1.0 million due to ethanol sales halt, while H1 2020 net loss widened to $15.3 million Comparison of Three Months Ended June 30 (in thousands) | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $988 | $5,086 | $(4,098) | | Gross loss | $(1,656) | $(3,336) | $1,710 | | Loss from operations | $(5,257) | $(6,493) | $1,236 | | Net loss | $(6,043) | $(7,090) | $1,047 | Comparison of Six Months Ended June 30 (in thousands) | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $4,813 | $11,489 | $(6,676) | | Gross loss | $(5,970) | $(5,924) | $(46) | | Loss from operations | $(13,233) | $(12,121) | $(1,112) | | Net loss | $(15,296) | $(13,226) | $(2,070) | - The decrease in revenue was primarily due to terminating ethanol production, with zero gallons sold in Q2 2020 compared to 3.1 million gallons in Q2 2019190 Liquidity and Capital Resources Liquidity is strained with $6.3 million cash at June 30, 2020, and $10.8 million cash used in operations, but a $16.2 million public offering improved capital - Cash and cash equivalents totaled $6.3 million at June 30, 2020, with an accumulated deficit of $473.3 million218 - In July 2020, the company completed a public offering, raising approximately $16.2 million in net proceeds to fund working capital and general corporate purposes230232 - During the first six months of 2020, the company generated $2.5 million from financing activities, including $2.2 million from its at-the-market offering and a $1.0 million SBA PPP loan226 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide market risk disclosures - As a smaller reporting company, Gevo, Inc. is not required to provide quantitative and qualitative disclosures about market risk244 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective246 - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls247 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings, nor is it aware of any pending or threatened litigation - The company reports no material legal proceedings as of the filing date250 Item 1A. Risk Factors COVID-19 is a major risk, impacting revenue and financing, alongside potential delays in regulatory approvals for renewable premium gasoline - The COVID-19 pandemic is identified as a major risk, having already caused an 81% revenue reduction in Q2 2020 and potentially impacting future customer demand, cash flow, and access to financing252 - The company faces risks of substantial delays in obtaining necessary regulatory approvals from the EPA and the state of California for its renewable premium gasoline product, which could hinder commercialization259260 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2020, the company withheld 286,324 shares from employees at an average price of $1.07 per share to cover tax obligations from restricted stock vesting Issuer Purchases of Equity Securities (Q2 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 2020 | 77,768 | $1.04 | | June 2020 | 208,556 | $1.08 | | Total | 286,324 | $1.07 | - The shares purchased represent shares withheld from employees to satisfy tax withholding obligations upon the vesting of restricted stock awards263 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None264 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable265 Item 5. Other Information The company reported no other information for this item - None266 Item 6. Exhibits Key exhibits include the Indenture for 2020/21 Notes, an amendment to the Delta Air Lines Fuel Sales Agreement, and the Amended 2010 Stock Incentive Plan - Key exhibits filed include the Indenture for the 2020/21 Notes, an amendment to the Delta Air Lines Fuel Sales Agreement, and the Amended and Restated 2010 Stock Incentive Plan270271