GEVO, INC. Forward-Looking Statements
This Quarterly Report on Form 10-Q (this "Report") contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). When used anywhere in this Report, the
words "expect," "believe," "anticipate," "estimate," "intend," "plan" and
similar expressions are intended to identify forward-looking statements. These
statements relate to future events or our future financial or operational
performance and involve known and unknown risks, uncertainties and other factors
that could cause our actual results, levels of activity, performance or
achievements to differ materially from those expressed or implied by these
forward-looking statements. These statements reflect our current views with
respect to future events and are based on assumptions and subject to risks and
uncertainties. These forward-looking statements include, among other things,
statements about: the impact of the novel coronavirus ("COVID-19") pandemic on
our business, our financial condition, our results of operation and liquidity,
our ability to finance and construct our Net-Zero 1 Project (as defined below),
our ability to produce our products at our demonstration facility in Luverne,
Minnesota (the "Luverne Facility") or elsewhere, our ability to meet production,
financial and operational guidance, our strategy to pursue low-carbon or
"net-zero" carbon renewable fuels for sale into California and elsewhere, our
ability to replace our fossil-based energy sources with renewable energy sources
at our Net-Zero 1 Project, our Luverne Facility and elsewhere, our ability and
plans to construct greenfield commercial hydrocarbon facilities to produce
sustainable aviation fuel ("SAF") and renewable premium gasoline/isooctane, our
ability to raise additional funds to finance our business, our ability to
perform under our existing off-take agreements and other supply agreements we
may enter into in the future, our ability to successfully construct and operate
our renewable natural gas ("RNG") project in Iowa , our ability to produce
renewable hydrocarbon products at a commercial level and at a profit, the
availability of, and market prices for, government economic incentives to the
renewable energy market, achievement of advances in our technology platform, the
availability of suitable and cost-competitive feedstocks, our ability to gain
market acceptance for our products, the expected cost-competitiveness and
relative performance attributes of our products, our strategy to pursue
alcohol-to-SAF, additional competition and changes in economic conditions and
the future price and volatility of petroleum and products derived from
petroleum. Important factors could cause actual results to differ materially
from those indicated or implied by forward-looking statements such as those
contained in documents we have filed with the U.S. Securities and Exchange
Commission (the "SEC"), including this Report in Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations," our
Annual Report on Form 10-K for the year ended December 31, 2021 (our "2021
Annual Report"), including Item 1A. "Risk Factors" of our 2021 Annual Report and
subsequent reports on Form 10-Q. All forward-looking statements in this Report
are qualified entirely by the cautionary statements included in this Report and
such other filings. These risks and uncertainties or other important factors
could cause actual results to differ materially from results expressed or
implied by forward-looking statements contained in this Report. These
forward-looking statements speak only as of the date of this Report. We
undertake no intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
and readers should not rely on the forward-looking statements as representing
the Company's views as of any date subsequent to the date of the filing of this
Report.
Unless the context requires otherwise, in this Report the terms "we," "us,"
"our" and the "Company" refer to
The following discussion should be read in conjunction with our unaudited consolidated financial statements and the related notes and other financial information appearing elsewhere in this Report. Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including, without limitation, the disclosures in our 2021 Annual Report.
Company Overview
Gevo, Inc. (Nasdaq: GEVO), aDelaware corporation founded in 2005, is a growth-oriented company with the mission of solving the problem of greenhouse gas emissions for those sectors of the transportation industry that are not amenable to electrification or hydrogen. We believe that the market size for hydrocarbon fuels will continue to remain significant in the long-term even with the rapid adoption of electric vehicles and hydrogen technologies. We also believe that we can achieve at least one billion gallons of hydrocarbon production and sales by 2030. 29 -------------------------------------------------------------------------------- We are focused on transforming renewable energy into energy-dense liquid hydrocarbons that can be used as renewable fuels, such as SAF, with the potential to achieve a "net-zero" greenhouse gas ("GHG") footprint. We believe that this addresses the global need of reducing GHG emissions with "drop in" sustainable alternatives to petroleum fuels. We useArgonne 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 our products. The "net-zero" concept means we expect to produce fuels that could have a carbon neutral or a net-zero GHG footprint across the whole of the life cycle of the fuel from capture of renewable carbon, through production, and subsequent burning of the fuel in, for example, a jet engine. Our primary market focus, given current demand and growing customer interest, is SAF. We believe we also have commercial opportunities for other renewable hydrocarbon products, such as RNG, hydrocarbons for gasoline blendstocks and diesel fuel; ingredients for the chemical industry, such as ethylene and butenes; plastics and materials; and other chemicals. The global fuel consumption by commercial airlines was an all-time high of 95 billion gallons in 2019. However, due to the COVID-19 pandemic, fuel consumption dropped to 52 billion gallons in 2020 and reached 57 billion gallons in 2021.
We believe that there is a growing and significant market demand for SAF based on a number of factors, including:
? The
approved a resolution for the global air transport industry to achieve net-zero carbon
emissions by 2050. IATA has 288 airline members, including
Airlines, Delta Air Lines,
? Starting on
10 years on its objective around mitigating emissions from its global business going
forward. Delta will invest in driving innovation, advancing clean air travel
technologies, accelerating the reduction of carbon emissions and waste, and
establishing new projects to mitigate the balance of emissions.
? The oneworld® alliance committed to a target of 10% SAF use across the alliance by 2030
and plans to reach net zero emissions by 2050.
We believe we possess the ability to convert various carbohydrate feedstocks through a fermentation process into alcohols and then transform the alcohols into renewable fuels and materials, through a combination of our own technology, know-how, engineering, and licensing of technology and engineering fromAxens North America, Inc. ("Axens"). While we expect our major capital deployments to focus on the production of SAF, we recognize there are opportunities to operate in several different renewable fuels and materials markets and we will pursue those opportunities when appropriate based on customer interest, access to capital, and expected investment returns. Our production processes use carbohydrates as a feedstock. Carbohydrates are plant matter that result from photosynthesis. Photosynthesis is the natural process by which carbon dioxide is captured from the air by plants. The carbon in carbohydrates is therefore renewable because it is already in the atmosphere. The carbohydrates are fermented to produce alcohol intermediate products (e.g., ethanol or isobutanol). The alcohol-based intermediates are then chemically processed to make renewable hydrocarbons. To achieve net-zero carbon intensity ("CI") across the whole life cycle of the products, we believe:
? carbohydrates with a low CI score must be used in production;
? the energy (electricity and heat source) used in production must be de-fossilized; and
? the products cannot contain fossil-based carbon.
We believe sustainably grown industrial field corn (i.e., corn that is grown with precision agricultural techniques and low-till or no till cultivation to conserve nutrients, prevent water runoff, and erosion) is the best feedstock to commercialize initially because:
? it produces a significant amount of protein and vegetable oil for nutritional products on
a per acre basis while also producing an abundance of low CI carbohydrates that can be
captured and used as a feedstock for fuels and chemicals;
? the protein and oil that are produced, easily separated, and sold as co-products into the
food chain markets. The protein and oil revenue serves to offset the cost of the corn
feedstock;
30
--------------------------------------------------------------------------------? we believe the carbon footprint of growing corn can be negative, according to
calculations completed with the GREET Model, when a full suite of climate-smart
agricultural practices is employed on appropriate acres of cropland;
? we believe the corn can achieve lower CI scores when grown with climate-smart
agricultural techniques than waste raw materials or wood; and
? we believe that residual carbohydrates from corn are the lowest cost carbohydrates
available as a renewable raw material, and the production is proven and scalable.
We believe utilizing sustainable agriculture practices to help solve GHG problems is a breakthrough that addresses the problem of GHGs without compromising sustainability or food supply. We also believe that it will be possible to create an incentive structure that rewards farmers to lower the CI score of their agricultural products and create a cycle of continuous improvement to their overall sustainability footprint.
Net-Zero Projects In early 2021, we announced the concept of "Net-Zero Projects" as a series of planned facilities to produce energy dense liquid hydrocarbons using renewable energy and our proprietary technology. The concept of aNet-Zero Project is to convert renewable energy (e.g., photosynthetic, wind, renewable natural gas, biogas) from a variety of sources into energy dense liquid hydrocarbons that, when burned in traditional engines, have the potential to achieve net-zero GHG emissions across the whole lifecycle of the liquid fuel: from the way carbon is captured from the atmosphere, processed to make liquid fuel products, and burnt as a fuel for cars, planes, trucks and ships. We announced our initialNet-Zero Project ("NZ1") is planned to be constructed atLake Preston, South Dakota . NZ1 is expected to produce approximately 55 million gallons per year ("MGPY") of SAF or 62 MGPY of total hydrocarbon volumes, which would satisfy part of the more than 350 MGPY of financeable SAF and hydrocarbon supply agreements that are currently in place. The liquid hydrocarbons when burned are expected to have a "net-zero" GHG footprint. Along with the hydrocarbons, we expect to produce approximately 420 million pounds per year of high-value protein products for use in the food chain and more than 30 million pounds per year of corn oil. Our products will be produced in three stages; the first stage is the milling of the corn and production of protein, oil, and carbohydrates, the second stage involves alcohols production by fermentation and the third stage is the conversion of such alcohols into hydrocarbons. We have an exclusive license inthe United States fromAxens to the technology and plant designs to convert alcohols to hydrocarbon fuels.Axens will also provide certain process guarantees for the production process. Additionally,Axens has extensive commercial experience in the technology, design, and deployment of the unit operations needed to convert alcohols to hydrocarbon fuels, based on their experience in the petrochemical industry. The fermentation side of the facility is being engineered with companies that have extensive experience in fermentation and agriculture-based facilities. We believe that by using known commercial technologies, the plant design is substantially de-risked. The transition to an ethanol-to-SAF design from Gevo's original isobutanol-to-SAF and isooctane design has at NZ1 resulted in an expected increase of output capacity which should result in increased cash flow. Gevo's ethanol-to-SAF engineering design work to date has resulted in a significant uplift in volumes and cash flows per unit of capital invested.
The NZ1 project is on schedule with initial volumes of SAF expected to be delivered in 2025. Key NZ1 development milestones are:
31
--------------------------------------------------------------------------------Through year-end 2022:
? Complete the purchase of the land for NZ1 in
purchase was completed in
? Execute commercial development, build, own and operate agreements for water, wind
energy and green hydrogen
? Select engineering, procurement, and construction ("EPC") contractor
? Select fabricator for hydrocarbon plant modules
? Substantial completion of front-end engineering design ("FEED")
? Break ground and begin site preparation at Lake Preston
? Order long lead equipment
Through the first-half 2023:
? Close the construction financing, including non-recourse debt
Gevo is also in the process of identifying and performing early site development work for additional SAF production locations. These sites include several greenfield locations that are particularly advantageous in terms of potential economics, opportunities to decarbonize, and time to market. In addition, we are pursuing prospects with several existing ethanol plant sites. Existing ethanol plants need to be decarbonized with renewable energy or de-fossilized energy and/or carbon sequestration. Gevo has developed a preferred list of partners and sites with decarbonization in mind and is engaged in preliminary feasibility and development discussions with several of them. We plan to give priority to existing plant sites that have attractive potential economics and high predictability of timeline for decarbonization.
Luverne Facility
The Luverne Facility continues to provide valuable knowledge and experience for the future strategic growth of the Company and its billion-gallon initiative. As a development site, operations will continue to be tailored to support a focus on advancing our technology, testing, and optimizing alternative feedstocks, yeast strains, and unit operations as well as partnership development for integrated GHG reductions. It is well equipped and positioned for optimization of the decarbonization and business cycle from feedstock to energy solutions. The site provides a unique opportunity to showcase our decarbonization and business systems and raise awareness for future partnerships, investors, and local communities. As a development site, theLuverne plant may operate intermittently between projects and activities.
Renewable Natural Gas Projects
In 2019, we began developing RNG projects. Manure can be digested anaerobically to produce biogas, which is then upgraded to pipeline quality RNG. RNG has value in markets such asCalifornia when injected and shipped through a natural gas pipeline. There is also value to Gevo's hydrocarbon production process by giving us another option to achieve carbon negative GHG emissions on our renewable hydrocarbon products. The hydrocarbon products resulting from such a decarbonization process have lower CI scores and increased market value, in addition to having a more positive impact on the environment. Gevo's RNG project inNorthwest Iowa (the "RNG Project ") has been producing biogas and is now upgrading and injecting RNG into a natural gas pipeline.The RNG Project generates renewable natural gas captured from dairy cow manure. The manure for theRNG Project is supplied by three dairy farms located inNorthwest Iowa totaling over 20,000 milking cows. When at full operational capacity, theRNG Project is expected to generate approximately 355,000 MMBtu of RNG per year. Gevo's revenue from theRNG Project is expected to come from sales of RNG and from the environmental attributes associated with the RNG sales, including the attributes available fromCalifornia's Low Carbon Fuel Standard ("LCFS") program and theU.S. Environmental Protection Agency's Renewable Fuels Standard ("RFS"). Gevo expects to be able to get approval for Renewable Identification Numbers ("RINs") through RFS and carbon credits from LCFS later this year or next year. We have been making improvements and incremental expansions to theRNG Project by investing in capital projects that may significantly improve its CI score and revenue, which in turn strengthen the overall economics of the project. 32 -------------------------------------------------------------------------------- Gevo's current estimated share of the capital cost for those improvements is approximately$1.9 million , which are 40% complete through the second quarter of 2022. The improvement and expansion work is on budget and expected to be completed early in the third quarter of 2022. In addition, inJune 2022 , we amended our lease with a dairy to provide additional manure, which may increase our RNG production in the future. We have strong relationships throughout the industry supply chain from technology and equipment providers to feedstock owners, and RNG off-takers. We believe the trust and reputation we have attained in combination with our understanding of the various and complex environmental attributes gives us a competitive advantage. We leverage our relationships to identify and execute new project opportunities. Typically, new development opportunities come from our existing relationships with dairy owners who value our reputation in the industry. We exercise financial discipline in pursuing projects by targeting attractive risk-adjusted project returns, whether selling RNG into the markets or using it to lower CI scores at our Net-Zero Projects. We will monitor biogas supply availability across our portfolio and seek to maximize production at existing projects by expanding operations when economically feasible.
Verity and Carbon Tracking
Capturing and accurately counting carbon data across the whole of the business
system is a critical part of Gevo's business model, and the CI scores across the
whole of the carbon life cycle, from feedstock through the burning of fuels.
Through the use of the GREET Model and a field level tracking approach, our goal
is to obtain carbon credits for the improved agricultural practices related to
climate-smart agriculture such as precision agriculture and tillage practices
(i.e., low till and no-till cultivation). We believe there is an opportunity to
document, verify, and monetize that carbon value which is not otherwise counted
and reward value chain partners, including farmers, for improving
sustainability. Gevo's current economic projections do not take into account
this upside in value.
Verity Tracking ("Verity") is a joint venture between Gevo and Blocksize Capital
GmbH ("Blocksize") to develop and commercialize carbon value and other
sustainable attributes. Verity is developing the tools, techniques, software,
data access to track carbon scores and other sustainability attributes using
"blockchain" technology. The benefit is having audited, transparent, immutable
sustainability data attached to biofuels and is expected to be valuable to our
customers, colleague companies, and partners. Gevo and Blocksize have identified
a series of internal milestones that Verity will need to achieve over the next
few quarters to expand the joint venture into a stand-alone business unit,
either as part of Gevo or as a separate entity.
Verity has continued to develop third-party partnerships that will contribute to
its development objectives over the coming quarters. Verity and Gevo partnered
with Farmers Edge Inc. ("Farmers Edge"), a company dedicated to helping farmers
track data and improve agricultural decision making. As of March 31, 2022 ,
Farmers Edge reported over 17.3 million subscribed acres having implemented
their solutions.
Gevo has begun to develop the agricultural Climate-Smart Data for some of the
key farms that would supply its NZ1 plant. Gevo intends to work with Verity to
accurately account for and determine value for the carbon reductions captured in
feedstocks, both during fuel production and in final products, to help our
customers and value chain partners achieve their sustainability goals.
Market Development
Gevo now has more than 350 MGPY of financeable SAF and hydrocarbon fuel supply agreements, which are expected to support project debt financing. This level of demand would require three additional plants equal in size to the expected capacity of NZ1 to be built over the next four years to satisfy those agreements. Based on current market projections and operating assumptions, these agreements collectively represent approximately$2.1 billion in expected 33 --------------------------------------------------------------------------------
revenue per year, inclusive of the environmental benefits value. A list of the recently announced supply agreements is noted below:
Recently Announced Supply Agreements
Date Signed Customer Product Volume (MGPY) Term (Years)
June 2022 Finnair SAF 7.0 5
June 2022 Japan Airlines SAF 5.3 5
July 2022 Aer Lingus SAF 6.3 5
July 2022 Alaska Airlines SAF 37.0 5
July 2022 American Airlines SAF 100.0 5
Recent Developments
Equity Offering. On June 8, 2022 , the Company completed a registered direct
offering pursuant to a securities purchase agreement with certain institutional
investors and received net proceeds of $139.0 million (after placement agent
fees, advisory fees and estimated offering expenses) to fund future operations
and capital projects. As part of the offering, the Company issued 33,333,336
Series 2022-A warrants with an exercise price of $4.37 per share and a five-year
term. If all 33,333,336 Series 2022-A warrants were to be exercised in cash at
the exercise price of 4.37 per share, the Company would receive additional net
proceeds of approximately $145.7 million .
The recent offering has further strengthened the Company's balance sheet, which
is expected to facilitate the financing of the Company's NZ1 project and to
provide financial resources for the Company's numerous growth opportunities.
Gevo is in the process of determining additional plant sites to meet the demand
under its existing SAF and hydrocarbon supply agreements, and some of the
proceeds are expected to be used to advance those efforts.
Chevron . The letter of intent between Gevo and Chevron signed in September of
2021 and scheduled to expire on March 31, 2022 , has been extended until August
31, 2022 . Chevron and the Company mutually agreed upon the extension, which
allows discussions and negotiations to continue.
COVID-19
The COVID-19 pandemic continues to impact 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 the impacts of
the COVID-19 pandemic on general economic activity could negatively impact our
revenue and operating results for 2022 and beyond. In light of the current and
potential future disruption to our business operations and those of its
customers, suppliers and other third parties with whom we do business, we
considered the impact of the COVID-19 pandemic on our business. The impact of
the COVID-19 pandemic on the global transportation industry may result in less
demand for our transportation fuel products in the future, which could have a
material adverse effect on our business, financial condition, and our prospects
for the foreseeable future.
There is also a risk that COVID-19 could have a material adverse impact on the
development of our NZ1 project, customer demand and cash flow, depending on the
extent of our future production activities.
34
--------------------------------------------------------------------------------Results of Operations
Comparison of the Three Months Ended
Three months Ended
2022 2021 Change
Revenue and cost of goods sold
Ethanol sales and related products, net $ 71 $ - $ 71
Hydrocarbon revenue 18 346 (328)
Total revenues 89 346 (257)
Cost of production 2,640 1,617 1,023
Depreciation and amortization 1,088 1,177 (89)
Total cost of goods sold 3,728 2,794 934
Gross loss (3,639) (2,448) (1,191)
Operating expenses
Research and development expense 1,966 1,332 634
Selling, general and administrative expense 9,209 4,846 4,363
Preliminary stage project costs 314 5,472 (5,158)
Other operations 601 - 601
Depreciation and amortization 386 46 340
Total operating expenses 12,476 16,650 $ (4,174)
Loss from operations (16,115) (19,098) 2,983
Other income (expense) Gain (loss) from change in fair value of derivative warrant liability
- 43 (43)
Interest expense (2) (6) 4
Interest and dividend income 78 - 78
Other income (expense), net 2,878 167 2,711
Total other income (expense), net 2,954 845 2,109
Net loss $ (13,161) $ (18,253) $ 5,092
Revenue. During the three months ended June 30, 2022 , we sold 9 thousand gallons
of SAF, isooctane, and isooctene from our Luverne Facility. Revenue decreased
$0.3 million during the three months ended June 30, 2022 , compared to the three
months ended June 30, 2021 , due to the Luverne Facility being operated for the
Company's development projects on a as needed basis.
Cost of goods sold. Cost of goods increased $1.0 million during the three months
ended June 30, 2022 , compared to the three months ended June 30, 2021 , primarily
due to an increase in direct labor and utility expenses as the Luverne Facility
was not fully staffed during the second quarter of 2021 due to the COVID-19
pandemic. The majority of our costs are related to the production of SAF,
isooctane, and isooctene as we continue to develop and tailor our Luverne
Facility demonstration operations to support our focus on advancing technology,
testing and optimizing alternative feedstocks, yeast strains, and unit
operations as well as partnership development for integrated GHG reductions.
Cost of goods sold also includes a $2.1 million net realizable gain adjustment
made to our finished goods and work in process inventory. There were no
inventory net realizable value adjustments recorded during the three months
ended June 30, 2021 , as the Luverne Facility was temporarily shut down due to
the COVID-19 pandemic.
Research and development expense. Research and development expense increased
$0.6 million during the three months ended June 30, 2022 , compared to the three
months ended June 30, 2021 , primarily due to an increase of laboratory expenses
and additional stock-based compensation expense.
35
--------------------------------------------------------------------------------
Selling, general and administrative expense. Selling, general and administrative
expense increased $4.4 million during the three months ended June 30, 2022 ,
compared to the three months ended June 30, 2021 , primarily due to increases in
personnel costs related to strategic new hiring, stock-based compensation, and
professional fees.
Preliminary stage project costs. Preliminary stage project costs are related to
our Verity and future Net-Zero Projects and consist primarily of employee
expenses and consulting costs. Preliminary stage project costs decreased $5.2
million during the three months ended June 30, 2022 , compared to the three
months ended June 30, 2021 , primarily because we began capitalizing our RNG and
NZ1 project costs in 2021.
Other operations. Other operations expense increased $0.6 million during the
three months ended June 30, 2022 , compared to the three months ended June 30,
2021 , primarily related to unallocated engineering and consulting services.
Depreciation and amortization expense. Depreciation and amortization expense
increased $0.3 million during the three months ended June 30, 2022 , compared to
the three months ended June 30, 2021 , primarily due to the amortization of our
patents.
Gain (loss) from change in fair value derivative warrant liability. We incurred
no gain (loss) from the change in the fair value of the derivative warrant
liability in the three months ended June 30, 2022 . The last of the liability
warrants expired in February 2022 .
Interest expense. There were no significant changes in interest expense during
the three months ended
Interest and dividend income. Interest and dividend income increased
Other income (expense). Other income (expense) increased$2.7 million during the three months endedJune 30, 2022 , compared to the three months endedJune 30, 2021 , primarily due to our receipt of$2.9 million from theUS Department of Agriculture's Biofuel Producer Program to support biofuel producers who faced unexpected losses due to the COVID-19 pandemic. The Biofuel Producer Program grants are not tax-exempt. 36 --------------------------------------------------------------------------------
Comparison of the Six Months Ended
Six Months Ended June 30,
(in thousands) 2022 2021 Change
Revenue and cost of goods sold
Ethanol sales and related products, net $ 240 $ - $ 240
Hydrocarbon revenue 81 359 (278)
Total revenues 321 359 (38)
Cost of production 5,730 2,518 3,212
Depreciation and amortization 2,179 2,270 (91)
Total cost of goods sold 7,909 4,788 3,121
Gross loss (7,588) (4,429) (3,159)
Operating expenses
Research and development expense 3,158 2,710 448
Selling, general and administrative expense 18,576 8,660 9,916
Preliminary stage project costs 821 8,199 (7,378)
Other operations 1,190 - 1,190
Loss (gain) on disposal of assets - 4,954 (4,954)
Depreciation and amortization 737 104 633
Total operating expenses 24,482 24,627 (145)
Loss from operations (32,070) (29,056) (3,014)
Other income (expense) Gain (loss) from change in fair value of derivative warrant liability
16 (10) 26
Interest expense (4) (11) 7
Interest and dividend income 330 - 330
Gain on forgiveness of SBA loan - 641 (641)
Other income (expense), net 2,894 126 2,768
Total other income (expense), net 3,236 746 2,490
Net loss $ (28,834) $ (28,310) $ (524) Revenue. There were no significant changes in revenue during the three months
ended
Cost of goods sold. Cost of goods sold increased$3.1 million during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , primarily due to an increase in direct labor and utility expenses due to the Luverne Facility not being fully staffed until the third quarter of 2021 due to the COVID-19 pandemic. The majority of our costs during the six months endedJune 30, 2022 , were related to the production of SAF, isooctane, and isooctene as we continue to develop and tailor our Luverne Facility demonstration operations to support our focus on advancing technology, testing and optimizing alternative feedstocks, yeast strains, and unit operations as well as partnership development for integrated GHG reductions. Cost of goods sold also includes a$0.8 million loss for a net realizable value adjustment made to our finished goods and work in process inventory. There were no net realizable losses recorded during the six months endedJune 30, 2021 , as theLuverne Facility was temporarily shut down due to the COVID-19 pandemic. Research and development expense. Research and development expense increased$0.4 million during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , primarily due to an increase of laboratory expenses and additional stock-based compensation expense. 37 -------------------------------------------------------------------------------- Selling, general and administrative expense. Selling, general and administrative expense increased$9.9 million during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , primarily due to increases in personnel costs related to strategic new hiring, stock-based compensation, and professional fees. Preliminary stage project costs. Preliminary stage project costs are related to our Verity and future Net-Zero Projects and consist of employee expense and consulting costs. Preliminary stage project costs decreased$7.4 million during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , primarily because we began capitalizing our RNG and NZ1 project costs in 2021. Other operations. Other operations expense increased$1.2 million during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . Other operations costs were primarily related to unallocated engineering and consulting services. Depreciation and amortization expense. Depreciation and amortization expense increased$0.6 million during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , primarily due to the amortization of our patents. Gain (loss) from change in fair value derivative warrant liability. We incurred a minimal change in the fair value of the derivative warrant liability in the six months endedJune 30, 2022 ; the last of the liability warrants expired inFebruary 2022 . Interest expense. There were no significant changes in interest expense during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . Interest and dividend income. Interest and dividend income increased$0.3 million during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , primarily due to the interest earned on our investments partially offset by the amortization of the bond premiums. Other income (expense). Other income (expense) increased$2.8 million during the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , primarily due to our receipt of$2.9 million from theUS Department of Agriculture's Biofuel Producer Program to support biofuel producers who faced unexpected losses due to the COVID-19 pandemic. The Biofuel Producer Program grants are not tax-exempt.
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting policies sinceDecember 31, 2021 . For a description of our other critical accounting policies and estimates that affect our significant judgments and estimates used in the preparation of our consolidated financial statements, refer to our 2021 Annual Report.
Liquidity and Capital Resources
As ofJune 30, 2022 , we had cash and cash equivalents of$173.0 million , short and long-term restricted cash of$76.2 million and short-term marketable securities of$297.6 million . The marketable securities are highly liquid and can be converted to cash when needed for operations and construction. We expect to use our 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 under the NZ1 project, including the Company's Net-Zero projects; (ii) potential investment in RNG projects; (iii) potential development of the Luverne Facility; (iv) development, acquisition and operation of sustainable alcohol-to-SAF plants to produce SAF alone or with partners; (v) operating activities at the Company's corporate headquarters inColorado , including research and development work; (vi) exploration of strategic alternatives and additional financing, including project financing; and (vii) future debt service obligations. We believe as a result of our cash and cash equivalents balances, and the performance of our current and expected operations, we will be able to meet our obligations and other potential cash requirements during the next 12 months from the date of this report. Since our inception in 2005, we have devoted most of our cash resources to the development and commercialization of routes to efficiently produce fuels and chemicals from carbohydrates, such as renewable feedstock, using alcohols 38 -------------------------------------------------------------------------------- (isobutanol and ethanol) as intermediates. We have incurred losses since inception, have a significant accumulated deficit, and expect to incur losses for the foreseeable future. We have financed our operations primarily with proceeds from the issuance of equity, debt securities, and borrowings under debt facilities. 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 commercial level production facilities to support that Company's off-take agreements, 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. OnJanuary 27, 2022 , the Company's stockholders voted to amend the Certificate of Incorporation to increase the total number of authorized shares of common stock from 250 million shares to 500 million shares. 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, on acceptable terms, through arrangements with strategic partners or from other sources. 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.
The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
Six Months Ended June 30,
2022 2021
Net cash used in operating activities$ (17,114) $
(19,468)
Net cash from investing activities$ (8,350) $
(436,529)
Net cash provided by financing activities$ 138,565 $
522,853
Operating Activities Our primary uses of cash from operating activities are personnel-related expenses, research and development-related expenses, including costs incurred under development agreements, costs of licensing of technology, legal-related costs, expenses for the development and commercialization of routes to efficiently produce fuels and chemicals from carbohydrates, such as renewable feedstock, using alcohols (isobutanol and ethanol) as intermediates. During the six months endedJune 30, 2022 , net cash used for operating activities was$17.1 million compared to$19.5 million for the six months endedJune 30, 2021 . The$2.4 million decrease was primarily due to increased costs associated with our production of isobutanol and hydrocarbon products for market development, process technology and related process engineering work. In addition, we had increases in personnel expenses to support the growth in business activity, partnership development and Verity development expenses.
Investing Activities
During the six months endedJune 30, 2022 , we used$8.4 million in cash for investing activities, of which$169.1 million related to proceeds from sales and maturities of marketable securities, offset by the reinvestment of$131.3 million in marketable securities, and$46.0 million of investments in our capital projects, including$26.3 million in theRNG Project ,$15.4 million in theNZ1 Project , as well as$4.2 million in development projects at Agri-Energy and Gevo. We completed the construction of theRNG Project and may invest up to an additional$11.4 million for start-up, improvements, and expansions during the remainder of 2022 or into 2023. Our preliminaryNZ1 Project's forecast of additional capital expenditures ranges from$100 million to$120 million , which includes engineering, development, long-lead equipment deposits, infrastructure support costs associated with electricity, natural gas, raw water, and wastewater service needs, debt financing costs, and debt pre-close project construction costs. 39 --------------------------------------------------------------------------------
Financing Activities
During the six months endedJune 30, 2022 , we had$138.6 million of net cash provided by financing activities, primarily due to$139.0 million of proceeds from the issuance of common stock and common stock warrants in theJune 2022 Offering, net of issuance costs, partially offset by$0.3 million related to the net settlement of common stock under stock plans and$0.1 million of payments for finance lease liabilities and certain equipment loans.
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