BioFuels Journal

Date Posted: August 16, 2016

Englewood, CO - Aug. 09, 2016 - Gevo, Inc. (NASDAQ:GEVO) today announced financial results for the three months ended June 30, 2016.

Key highlights for the quarter included:

• Gevo produced approximately 80,000 gallons of isobutanol during the quarter.

• Gevo entered into an agreement with Musket Corporation to supply isobutanol as a “non-ethanol” oxygenate, which has been identified as an unmet need in the market, for blending with gasoline.

Musket is a major, national fuel distributor under the umbrella of the Love’s Family of Companies, one of the largest fuel retailers in the U.S.

Initial target markets are expected to include the marine and off-road markets in Arizona, Nevada, and Utah.

Musket has taken delivery of its first railcar of isobutanol and is moving it through their distribution system.

• The first two commercial flights using Gevo’s renewable alcohol to jet fuel (ATJ) took place on June 7, 2016.

The flights originated in Seattle and flew to San Francisco International Airport and Ronald Reagan Washington National Airport, respectively.

The two Alaska Airlines flights utilized a 20 percent ATJ fuel blend.

• Gevo entered into an agreement with Clariant Corp., one of the world’s leading specialty chemical companies, to develop catalysts to enable Gevo’s Ethanol-To-Olefins (ETO) technology.

Gevo’s ETO technology, which uses ethanol as a feedstock, produces tailored mixes of propylene, isobutylene and hydrogen, which are valuable as standalone molecules, or as feedstocks to produce downstream derivative products such as diesel fuel, chemical intermediates, and polymers that would be drop-in replacements for their fossil-based equivalents.

Clariant is committed to the development and scale-up of the catalyst.

• On June 15, 2016, Gevo closed a best efforts public offering of 21,080,456 shares of common stock at a public offering price of $0.45 per share.

The gross proceeds to Gevo from this offering were approximately $9.5 million.

• During the quarter, Gevo received proceeds of approximately $10.8 million through the exercise of warrants.

Approximately 36.3 million shares were issued as result of these exercises.

• On April 1, 2016, Gevo completed the sale of 3,721,429 Series C units and 6,571,429 Series D units pursuant to an underwritten public offering.

Gevo received gross proceeds of approximately $3.5 million, not including future proceeds from the exercise of any of the warrants associated with the units.

Outlook for 2016

As previously disclosed, Gevo restarted production of isobutanol at its production facility in Luverne, Minnesota in March 2016.

All operations, including the distillation system, are now up and running.

During 2016, Gevo has produced approximately 168,000 gallons of isobutanol and one fermentation batch surpassed 20,000 gallons of isobutanol, slightly exceeding the high end of the range of our previously announced goal of 18,000-20,000 gallons per batch.

The fermentation process is working well.

It has, however, taken Gevo longer than expected to complete installation of some additional distillation system equipment that was needed after initial operation of the distillation system began in March 2016.

As a result, the onset of the production rate ramp-up was delayed and therefore the total annual 2016 production volume is projected to be lower than previously projected.

For the reasons discussed above, Gevo is changing its previously issued guidance in terms of production gallons in 2016 to the following:

• Gevo now expects isobutanol production at its production facility in Luverne to be in a range of 500,000 to 650,000 gallons in 2016.

At this time, based upon the results at Luverne, Gevo re-affirms that it is on track to meet the other components of its previously issued 2016 guidance as follows.

Gevo expects to:.

• Decrease the variable cost of producing isobutanol at its Luverne production facility to a range of $3.00-$3.50/gallon (assumes corn price of $3.65 per bushel and nets the value of the isobutanol distiller's grains (the "iDGs™"), enabling isobutanol to be produced at a positive contribution margin, based on an expected average selling price for isobutanol of between $3.50-$4.50/gallon.

• Increase sales of isobutanol into core markets such as the renewable ATJ fuel, marina, off-road, isooctane and solvents markets.

• Achieve an average quarterly corporate-wide EBITDA burn rate (excluding stock-based compensation) of $3.5-$4.5 million. Corporate-wide EBITDA burn rate is calculated by adding back depreciation and non-cash stock compensation to GAAP Loss From Operations.

Through the balance of 2016 and into 2017, Gevo will be focused on optimization work to improve the Luverne production facility at its current scale, but more importantly with a view towards significantly expanding the Luverne production facility.

Gevo plans to optimize the overall production processes with the intent of improving robustness and consistency of production, increasing production volumes, and potentially producing specific grades of isobutanol tailored for specific applications.

This optimization work could result in Gevo needing to add more equipment (tanks, controls, pumps, distillation columns, etc.), systems or processes in the future at the Luverne production facility.

Despite the production ramp-up delays described above, Gevo expects that by the end of 2016 to have the capability to be at a production run rate equivalent to 1.5 million gallons per year at its Luverne production facility.

Although Gevo expects to have this production capability, Gevo currently expects to run at a rate less than 1.5 million gallons per year during 2017 as it scales up and tests new process improvements to further reduce costs and optimize production in general at the Luverne production facility with a view towards significantly expanding production capacity in the future.

“The first half of 2016 has been a significant inflection point for Gevo.

"We have achieved a number of key milestones year-to date, including restarting isobutanol production at Luverne, demonstrating successful commercial airline flights using our fuel, signing a key distribution agreement with Musket targeting the specialty fuel markets, and strengthening our balance sheet to include $22.6 million in cash as of the end of the second quarter,” said Dr. Patrick Gruber, Gevo’s Chief Executive Officer.

“I am pleased that all operations, including the distillation system, at our plant in Luverne are up and running and that the fermentations are going well.

"In fact, we are seeing up to 20,000 gallons of isobutanol per batch, and we remain on track to achieve our cost targets.

"While the technologies are working, we still need to continue the plant optimization learning curve, turning our attention to shortening batch cycle times and, given the importance of jet and isooctane, tailoring specific grades for those applications, particularly as it relates to the design of a large scale hydrocarbon plant,” said Dr. Patrick Gruber, Gevo’s Chief Executive Officer.

“On the market and sales front we have made good progress. Conducting commercial airline flights using our ATJ was a tremendous milestone.

"While all the testing had previously been completed during the six years of work with ASTM International, flying actual flights with our jet fuel demonstrates to people that this really can be done commercially.

"We are grateful to Alaska Airlines for being a good partner and we continue to have positive conversations with several potential customers in the aviation industry.

"We also made further progress in the development of the gasoline blendstock markets.

"We are extremely pleased to have a national player such as Musket as a partner, and it is good to see they are already distributing isobutanol-blended fuel into their customer network,” added Dr. Gruber.

Financial Highlights

Revenues for the second quarter of 2016 were $8.1 million compared with $8.9 million in the same period in 2015.

During the second quarter of 2016, revenues derived at the Luverne plant were $7.2 million, a decrease of approximately $0.8 million from the same period in 2015.

This was primarily a result of lower ethanol production, ethanol prices and distiller grain prices in the 2nd quarter of 2016 versus the same period in 2015.

During the second quarter of 2016, hydrocarbon revenues were $0.7 million, flat as compared to the same period in 2015.

Gevo’s hydrocarbon revenues were comprised of sales of jet fuel, isooctane and isooctene.

Gevo generated grant revenue of $0.2 million during the second quarter of 2016, also flat as compared to the same period in 2015.

Gevo’s grant revenue is primarily generated through the work it is doing with the Northwest Advanced Renewables Alliance to produce isobutanol from cellulosic feedstocks, such as wood waste, which can then be converted into Gevo’s ATJ.

Cost of goods sold was flat during the three months ended June 30, 2016, compared with the same quarter in 2015.

Cost of goods sold included approximately $8.5 million associated with the production of ethanol, isobutanol and related products and approximately $1.5 million in depreciation expense.

Gross loss was $1.9 million for the three months ended June 30, 2016.

Research and development expense decreased by approximately $0.3 million during the three months ended June 30, 2016, compared with the same quarter in 2015, due primarily to a reduction in employee related expenses.

Selling, general and administrative expense decreased by $1.6 million during the three months ended June 30, 2016, compared with the same quarter in 2015, due primarily to a decrease of $1.3 million in litigation legal expenses.

Loss from operations in the second quarter of 2016 was $5.5 million, compared with $6.5 million in the same quarter in 2015.

Non-GAAP cash EBITDA loss in the second quarter of 2016 was $3.6 million, compared with $4.6 million in the same quarter in 2015.

Interest expense in the second quarter of 2016 was $2.2 million, which was an increase of $0.2 million over the same quarter last year.

During the three months ended June 30, 2016, the estimated fair value of the derivative warrant liability decreased by $10.6 million, resulting in a non-cash loss from change in fair value of derivative warrant liability, primarily associated with the increase in the price of Gevo’s common stock in the quarter.

During the three months ended June 30, 2016, Gevo also incurred a $0.9 million non-cash loss on the extinguishment of warrant liabilities, associated with adjustments to the exercise prices on certain of Gevo’s Series D and Series H warrants.

Gevo also incurred a non-cash loss of $0.9 million during the quarter due to the quarterly mark-to-market valuation of the 2017 Notes.

During the three months ended June 30, 2016, there was no change in the value of the embedded derivatives in the convertible notes issued in 2012 (the 2022 Notes), as the derivatives have had no meaningful value since the third quarter of 2014.

No holders of the 2022 Notes converted or exchanged any notes during the quarter.

During the three months ended June 30, 2016, we reported a $1.5 million loss associated with the April equity issuance primarily as a result of the estimated fair value of the common stock and warrants issued being greater than the consideration received in exchange.

The net loss for the second quarter of 2016 was $21.5 million, compared with $14.4 million during the same period in 2015.

The non-GAAP adjusted net loss for the second quarter of 2016 was $7.5 million, compared with $8.6 million during the same period in 2015.

The cash position at June 30, 2016 was $22.6 million.

For more information, please contact David Rodewald at 805-494-9508 or [email protected]

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• Gevo, Inc.

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