KiOR expresses doubt about the future in Q1 filing

By Erin Voegele | May 14, 2014

On May 12, KiOR Inc. filed a quarterly report with the U.S. Securities and Exchange Commission. In the filing, the company reported that, as of March 31, it has suspended all optimization projects in order to bring the Columbus, Miss., facility to a safe, idle state.

In its March 17 annual report, KiOR expressed doubts about its ability to continue operations and noted the company required additional capital in order to avoid filing for bankruptcy. On April 1, the company and its wholly owned subsidiary KiOR Columbus LLC filed an 8-K with the SEC announcing it had entered into a senior secured promissory note and warrant purchase agreement with Vinod Khosla’s KFT Trust. Under the agreement, Khosla committed to invest up to $25 million in the monthly tranches of no more than $5 million per month. The first tranche of $5 million closed April 3. Additional tranches are subject to the achievement of certain performance milestones.

According to the May 12 filing, these performance milestones require that KiOR demonstrate it has made material progress in implementing its business, financial, operational and technology plans. The company must also demonstrate that there is a likelihood of eventual commercial success of its business plan when considered in light of both internal and external factors, including without limitation, market conditions, costs, competitive developments and an ability to secure financing for the company. Khosla must also believe that the purchase of additional notes is appropriate for the company to continue its operations.

As of March 31, KiOR said it has suspended all optimization projects and had “not demonstrated any additional research and development progress or any demonstrable progress towards achieving its financing performance milestones.”

“The company does not believe it can restart the Columbus facility on an economically viable basis at this time and therefore cannot be certain as to whether it will be able to successfully secure additional financing or the ultimate timing of such additional financing,” said KiOR in the filing.

If KiOR is able to achieve the performance milestones that will allow it to receive the full funding amount under the agreement with Khosla, it would likely be able to fund its operations and meet its obligations through August 31, but would need to raise additional funds to continue operations beyond that date. If the necessary milestones are not met or if KiOR is unable to raise additional funds beyond Aug. 31, the company will likely be forced to file for bankruptcy.

In the filing, KiOR also specifies that even it is able to achieve necessary milestones and secure additional financing, any investment may require significant changes to its current business structure. This includes, but is not limited to, a change in the focus of its business; suspension of some or all operations; delaying or scaling back its business plan, including research and development programs; reductions in headcount, overhead and other operating costs; and the longer-term or permanent closing of the Columbus plant.

On April 30, KiOR received two notifications of deficiency from the Listing Qualifications Department of the NASDAQ Stock Market LLC that indicate, based on the closing bid price for its Class A common stock during the previous 30 consecutive business days, KiOR did not comply with the $1 per share minimum bid price set required by NASDAQ. In addition, the notifications said that for the previous 30 consecutive business days, the company did not maintain the $50 million minimum market value of listed securities required by NASDAQ. On May 5, KiOR received another notification of deficiency from NASDAQ indicating that for the previous 30 consecutive business days the company did not maintain the required $15 million minimum market value of publicly held shares required by NASDAQ. According to a regulatory filing made by KiOR in early May, the company has a grace period of 180 days, or until Oct. 27, to regain compliance with the Class A common stock minimum closing price requirement for continued listing. To regain compliance, the minimum closing price per share for KiOR’s Class A common stock must be at least $1 for a minimum of 10 consecutive business days during the 180-day grace period. If compliance is not regained during the compliance period, the company could be eligible for an additional grace period if it applies to transfer the listing of its Class A common stock to the NASDAQ Capital Market. If NASDAQ staff determines that the company cannot cure the deficiency or if the company is otherwise not eligible for an additional compliance period, NASDAQ will delist the stock. KiOR also has 180 days, or until Nov. 5, to regain compliance with regard to the market value of publicly held shares. The value of those share must close at the required $15 million or more for at least 10 consecutive days in order to regain compliance. If compliance is not achieved by Nov. 3, the publicly held shares will be subject to delisting.