KiOR announces $25 million funding agreement with Kholsa trust

By Erin Voegele | April 01, 2014

On April 1, KiOR Inc. and its wholly owned subsidiary Kior Columbus LLC filed an 8-K with the U.S. Securities and Exchange Commission announcing it has entered into a senior secured promissory note and warrant purchase agreement with Vinod Khosla’s KFT Trust. 

KiOR announced the possibility of the investment from Khosla in its annual report, which was published March 17. In that report, the company noted it received an investment commitment letter from Khosla on March 16 in which he committed to invest up to $25 million in monthly tranches of no more than $5 million per month. At the time, KiOR expressed doubts about its ability to continue operations without the funding. In its annual report, the company also announced plans to idle its Columbus, Miss., facility.

The note purchase agreement announced in the 8-K covers multiple tranches of financing of up to $25 million. The first $5 million tranche is expected to close April 3. According to the SEC filing, the tranche will consist of the purchase of $5 million of senior secured mandatorily convertible notes by KFT Trust in exchange for a like amount of cash. The remaining tranches would consist of the sale of additional 2014 notes at the beginning of each full month following the first change closing so long as the company satisfactorily achieves certain milestones. The filing also indicates that the aggregate amount of additional 2014 notes that may be sold under the 2014 note purchase agreement may not exceed $20 million.

According to information contained in the 8-K form, the 2014 notes have a maturity date that may be elected by the required purchasers at any time after July 1 provided 10 days written notice is provided. If such notice has not been delivered by March 31, 2017, the maturity date is set at April 2, 2017. The 2014 notes accrue interest at rate of 8 percent per year, and KiOR is to pay interest on the principal on the first of the month, beginning July 1, provide provided that such interest may be paid in kind at the company’s election by adding the interest then due to the unpaid principal amount of the note. The filing also specifies the notes are secured by liens on fixtures, personal property and other assets of KiOR.

A separate document filed with the SEC on March 26 announced that KiOR president and CEO Fred Cannon has resigned as president, effective immediately. Cannon, however, will continue to serve as the company’s CEO and principal executive officer. Effective March 26, Christopher Artzer, vice president, interim chief financial officer, general counsel and secretary of the company, was appointed president of the company. Artzer has served as the company’s interim chief financial officer since December 2013 and vice president, general counsel and secretary since joining the company in March 2011.