KiOR provides update in Q2 report

By Erin Voegele | August 12, 2014

KiOR Inc. has filed its second quarter financial report with the U.S. Securities and Exchange Commission, providing an update of the company’s financial and operational status.

According to the quarterly report, which was filed on Aug. 11, KiOR has encountered several significant difficulties at the Columbus, Mississippi, facility because of structural bottlenecks, reliability, mechanical issues and cost and catalyst performance. As previously announced, the company elected to suspend optimization work at the facility earlier this year and bring the plant to a safe, idle state, which KiOR believes will enable it to restart the facility upon the achievement of additional research and development milestones, and if it is able to raise additional working capital.

KiOR also previously announced that in July it entered into a protective advance loan and security agreement, referred to as the protective advance agreement, with Vinod Khosla’s KFT Trust. Under the agreement, KiOR said the lenders have agreed to make protective advance loans in an aggregate principal amount of up to $15 million until the maturity date, which the filing indicates is Oct. 31. According to the filing, the protective advance agreement is intended to replace the company’s senior secured promissory note and warrant purchase agreement with Khosla. Under that agreement, originally announced in April, Khosla agreed to invest up to $25 million in monthly tranches of no more than $5 million per month. Within the second quarter filing, KiOR said the agreement was amended on July 3 to provide for the sale of issuance of protective advance notes and to reduce the maximum principal amount of notes permitted outstanding at any one time, other than protective advanced notes, from $25 million to $10 million. According to KiOR, it currently has $10 million in notes outstanding and therefore cannot draw down additional notes under this facility.  

Within the filing, KiOR said that if it successfully receives all the available protective advances, it expects to be able to fund its operations and meet its obligations until approximately Sept. 30, but will need to raise additional funds to continue its operations beyond that date. If the company is not successful in receiving all of the available protective advances or if it is otherwise unable to raise additional funds beyond approximately Sept. 30, it will likely be forced to seek voluntary bankruptcy protection.

On July 9, KiOR announced it has entered into a forbearance agreement with the Mississippi Development Authority in connection to a 2011 loan agreement with the state of Mississippi. At that time, the company also announced it has engaged Guggenheim Securities LLC as its financial advisor and investment banker to provide financial advisory and investment banking services to assist in reviewing and evaluating various financing, transactional and strategic alternatives, including a possible merger, restructuring or sale of the company.

As of June 30, the close of the second quarter, KiOR said it had accumulated deficit of $629.3 million and expects to continue to incur operating losses until it has constructed its first standard commercial production facility and it is operational. KiOR also said it expects to incur additional costs and expenses related to research and development, optimization projects and upgrades at its Columbus facility, and other overheard and operating costs. The company expects to have little revenue in 2014. In addition, KiOR said it will need to raise additional funds to continue its operations, restart the Columbus facility, build its next commercial production facility and subsequent facilities, continue the development of its technology and products, commercialize any products resulting from its research and development efforts, and satisfy its debt service obligations.

A full copy of the quarterly report can be downloaded from the SEC’s website.