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Cellulosic drop-in biofuels company KiOR says that to continue on, it needs capital

In its new 10-Q report filed with the SEC, struggling cellulosic diesel and gasoline company KiOR reports that it has “substantial doubts about our ability to continue as a going concern.” The company had issued a similar warning in its 10-K annual report filed in March. (Earlier post.) To continue, the company adds, it must secure additional capital for additional liquidity.

KiOR’s cellulosic gasoline and diesel are drop-in hydrocarbon fuels; its biomass-to-cellulosic fuel technology platform combines a proprietary catalyst systems with catalytic cracking processes that are used in crude oil refineries to produce gasoline.

In April 2012, it mechanically completed its Columbus, Mississippi facility. During the fourth quarter of 2012, it commissioned our proprietary BFCC (biomass fluid catalytic cracking) operation at the Columbus facility, and produced its first “on specification” cellulosic intermediate oil in limited quantities. In the first quarter of 2013, it commissioned the Columbus plant’s hydrotreater and fractionation units, and made its first cellulosic diesel and gasoline shipments in March 2013 and June 2013, respectively. During 2013, it intermittently operated our Columbus facility but did not reach “steady state” production.

In 2013, the EPA had projected that the bulk of its expected 6.00 million gallons (0.004%) of cellulosic biofuels would come from the KiOR plant in Columbus. (Earlier post.)

With the financial situation deteriorating, in July 2014 KiOR entered into a Protective Advance Loan and Security Agreement with Vinod Khosla. Khosla (and any participating lenders) agreed to make protective advance loans to KiOR in an aggregate principal amount of up to $15,000,000 until the maturity date.

KiOR has drawn down approximately $6.9 million under this as of 31 July 2014.

…we have suspended all optimization projects we began during the first quarter of 2014 in order to bring the Columbus facility to a safe, idle state. We do not believe we can restart the Columbus facility on an economically viable basis at this time and therefore cannot be certain as to whether we will be able to successfully secure additional financing or the ultimate timing of such additional financing. In addition, even if we are able to receive all of the Protective Advances available under the Protective Advance Agreement or secure any additional financing, any investment may require significant changes to our current business structure, including, but not limited to: a change in the focus of our business; suspension of some or all of our operations; delaying or scaling back our business plan, including our research and development programs; reductions in headcount, overhead and other operating costs; and the longer-term or permanent closing of our Columbus facility, each of which would have a material adverse effect on our business, prospects and financial condition.

Other than the Protective Advance Agreement, we have no other near-term sources of financing. In July 2014, we announced that, under the guidance of our board of directors, we engaged Guggenheim Securities, LLC as our financial advisor and investment banker to provide financial advisory and investment banking services and to assist us in reviewing and evaluating various financing, transactional and strategic alternatives, including a possible merger, restructuring or sale of us, which we collectively refer to as Strategic Transactions.

If we successfully receive all of the funding available under our Protective Advance Agreement, we expect to be able to fund our operations and meet our obligations until approximately September 30, 2014, but will need to raise additional funds to continue our operations beyond that date. If we are not successful in achieving our performance milestones or if we are otherwise unable to raise additional funds beyond approximately September 30, 2014, we will not have adequate liquidity to fund our operations and meet our obligations (including our debt payment obligations), in which case we will likely be forced to voluntarily seek protection under the US Bankruptcy Code (or an involuntary petition for bankruptcy may be filed against us).

—KiOR 10-Q



They have about $550k in cash, and around $2M in raw materials and inventory.

Long-term debt is roughly $250M.

"Substantial doubts"? A mastery of understatement, to be sure.

Somebody needs to drag this dog behind the barn and shoot it.

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