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As filed with the Securities and Exchange Commission on June 22, 2011

Registration No. 333-173440

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 7

Form S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

KiOR, Inc.

(Exact name of registrant as specified in charter)


Delaware (State or other jurisdiction of incorporation or organization)		2860 (Primary Standard Industrial Classification Code Number)		51-0652233 (I.R.S. Employer Identification Number)

13001 Bay Park Road
Pasadena, Texas 77507
(281) 694-8700
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Christopher A. Artzer
Vice President, General Counsel and Secretary
13001 Bay Park Road
Pasadena, Texas 77507
(281) 694-8700
(Address, including zip code, and telephone number, including area code, of agent for service)

With a copy to:


Felix P. Phillips Troy S. Lee Baker Botts L.L.P. One Shell Plaza 910 Louisiana Houston, Texas 77002-4995 (713) 229-1234		Andrew S. Williamson Latham & Watkins LLP 140 Scott Drive Menlo Park, California 94025 (650) 328-4600

Approximate date of commencement of proposed sale to the public: As soon as practicable on or after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o

(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

Proposed Maximum

Title of Each Class of

Amount to be

Offering Price Per

Proposed Maximum Aggregate

Amount of

Securities to be Registered

Registered(1)

Share(2)

Offering Price(1)(2)

Registration Fee(3)

Class A common stock, par value $0.0001 per share

11,500,000

21.00

241,500,000

28,039


(1)		Includes 1,500,000 shares of Class A common stock issuable upon exercise of the underwriters’ option to purchase additional shares to cover over-allotments, if any.
(2)		Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
(3)		$28,039 previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

SUBJECT TO COMPLETION, DATED JUNE 22, 2011

10,000,000 Shares

Class A Common Stock

Prior to this offering, there has been no public market for KiOR, Inc. Class A common stock. We anticipate that the initial public offering price will be between $19.00 and $21.00 per share. Our Class A common stock has been approved for listing on The Nasdaq Global Select Market under the symbol “KIOR.”

Upon completion of this offering, we will have two classes of authorized common stock: Class A common stock and Class B common stock. The rights of the holders of our Class A common stock and our Class B common stock are identical, except with respect to voting and conversion. Each share of our Class A common stock is entitled to one vote per share and will not convert into any other shares of our capital stock. Each share of our Class B common stock is entitled to 10 votes per share and will convert into one share of our Class A common stock upon the occurrence of specified events. Please read “Description of Capital Stock — Common Stock — Conversion.”

Entities affiliated with Khosla Ventures and Artis Capital Management, L.P., two of our principal stockholders, have indicated an interest in purchasing shares of our Class A common stock in this offering at the initial public offering price up to an aggregate of 3,500,000 shares. Because this indication of interest is not a binding agreement or commitment to purchase, these existing investors may elect not to purchase shares in this offering. The underwriters will receive the same discount from any shares of our Class A common stock purchased by these existing investors as they will from any other shares of our Class A common stock sold to the public in this offering.

Entities affiliated with Khosla Ventures will, following the completion of this offering and assuming the purchase of 3,500,000 shares of our Class A common stock that may be acquired by them in this offering, own shares of our Class A common stock and Class B common stock representing approximately 72% of the combined voting power of our outstanding common stock. Khosla Ventures II, L.P. has agreed not to sell any of the 46,259,738 shares of our common stock that it beneficially owns, representing approximately 47% of our outstanding common stock immediately prior to this offering, for a period of 360 days after the date of this prospectus.

We are selling 10,000,000 shares of our Class A common stock through the underwriters.

The underwriters have an option to purchase a maximum of 1,500,000 additional shares to cover over-allotments of shares, if any.

Investing in our Class A common stock involves risks. Please read “Risk Factors” on page 13.


		Underwriting
	Price to	Discounts and	Proceeds to
	Public	Commissions	KiOR

Per Share	$	$	$
Total	$	$	$

Delivery of the shares of Class A common stock will be made on or about , 2011.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


Credit Suisse	UBS Investment Bank	Goldman, Sachs & Co.


Piper Jaffray	Citi	Deutsche Bank Securities

The date of this prospectus is , 2011.

TABLE OF CONTENTS


	Page

Prospectus Summary		1
Risk Factors		13
Special Note Regarding Forward-Looking Statements		32
Market, Industry and Other Data		33
Use of Proceeds		34
Dividend Policy		34
Capitalization		35
Dilution		39
Selected Consolidated Financial Data		42
Management’s Discussion and Analysis of Financial Condition and Results of Operations		44
Industry		67
Business		76
Management		93
Executive Compensation		102
Certain Relationships and Related Person Transactions		118
Principal Stockholders		121
Description of Capital Stock		125
Shares Eligible for Future Sale		131
Material United States Federal Income Tax Consequences		133
Underwriting		138
Notice to Canadian Residents		142
Legal Matters		144
Experts		144
Where You Can Find More Information		144
Index to Consolidated Financial Statements		F-1
EX-23.1
EX-99.1

You should rely only on the information contained in this prospectus. We and the underwriters have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front cover of this prospectus, or such other dates as are stated in this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Class A common stock.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including “Risk Factors,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and our consolidated financial statements and related notes before deciding whether to purchase shares of our Class A common stock. Unless the context otherwise requires, the terms “KiOR,” “the Company,” “we,” “us” and “our” in this prospectus refer to KiOR, Inc. and its subsidiaries.

Overview

We are a next-generation renewable fuels company.

Our mission is to produce renewable fuels in a profitable yet sustainable manner. We strive to achieve net environmental and social benefits by achieving a negative carbon footprint, responsibly managing our land use and water resources, and preserving our forests and food sources, while promoting energy independence, job creation and community investment. Our strategy is generally predicated on feedstock sources consisting of unirrigated crops that can be harvested on a sustainable basis on non-food or degraded lands in rural areas where our investment will result in welcomed new jobs and economic revitalization.

We have developed a proprietary technology platform to convert low-cost, abundant and sustainable non-food biomass into hydrocarbon-based oil. We process our renewable crude oil using standard refinery equipment into gasoline and diesel blendstocks that can be transported using the existing fuels distribution system for use in vehicles on the road today. According to a February 2011 analysis performed by TIAX LLC, a leading technology processing and commercialization company, using data we provided, gasoline and diesel blendstocks produced from our proprietary biomass fluid catalytic cracking, or BFCC, process in our planned commercial production facilities are projected to reduce direct lifecycle greenhouse gas emissions by over 80% compared to the petroleum-based fuels they displace.

We are fundamentally different from traditional oil and biofuels companies. Unlike traditional oil companies, we generate hydrocarbons from renewable sources rather than depleting fossil fuel reserves. At the same time, we differ from most traditional biofuels companies because our end products are fungible gasoline and diesel blendstocks rather than alcohols or fatty acid methyl esters, or FAME, such as ethanol or biodiesel. As compared to ethanol, the energy density of one gallon of our renewable blendstocks equates to 1.7 gallons of ethanol equivalent. While we are a development stage company that has not generated any revenue and has experienced net losses since inception, through our proprietary technology platform, we expect to provide new domestic sources of liquid transportation fuels — sustainably — using a variety of renewable natural resources to help further energy independence and reduce greenhouse gas emissions.

Based on the technological and operational milestones we have achieved to date, we believe that when we are able to commence commercial production at our planned first standard commercial production facility, primarily using Southern Yellow Pine whole tree chips, we will be able to produce gasoline and diesel blendstocks without government subsidies on a cost-competitive basis with petroleum-based blendstocks produced from various crude oil resources on- and offshore worldwide at current pricing. Our proprietary catalyst systems, reactor design and refining processes have achieved yields of renewable fuel products of approximately 67 gallons per bone dry ton of biomass, or BDT, in our demonstration unit that we believe would allow us to produce gasoline and diesel blendstocks today at a per-unit unsubsidized production cost below $1.80 per gallon, if produced in a standard commercial production facility with a feedstock processing capacity of 1,500 BDT per day. This unsubsidized production cost equates to less than $550 per metric ton, $0.50 per liter and $1.10 per gallon of ethanol equivalent. This per-unit cost assumes a price of $72.30 per BDT for Southern Yellow Pine clean chip mill chips and anticipated operating expenses at the increased scale and excludes cost of financing and facility depreciation. Over time, we expect to improve our overall process yield by enhancing our technology and to significantly reduce our feedstock costs by using lower grade chips, logging residues, branches and bark and lower our operating expenses through various initiatives. For the month of May 2011, the average U.S. Gulf Coast spot prices for conventional gasoline and ultra-low sulfur

diesel were $3.024 and $3.001 per gallon, respectively. For the month of May 2011, market prices for corn ethanol, biodiesel and sugarcane ethanol were $2.587, $5.148 and $3.889 per gallon, respectively.

We believe that the solution to the world’s growing transportation fuel demands must be:


	•	Real. Our technology produces high-quality hydrocarbon blendstocks that we believe will “drop in” to the existing transportation fuels infrastructure for use in vehicles on the road today. Our fuels are not ethanol or FAME diesel. Unlike ethanol, which is generally subject to a 10% to 15% blend wall, we believe that our gasoline and diesel blendstocks can be used as components in formulating a variety of fuel products meeting specifications of ASTM International for finished gasoline and diesel derived from petroleum-based blendstocks.

	•	Renewable. Our proprietary technology platform allows us to convert a variety of low-cost, abundant and sustainable non-food biomass, including woody biomass, such as whole tree chips, logging residues, branches and bark, agricultural residues, such as sugarcane bagasse, and energy crops, such as switchgrass and miscanthus, into renewable transportation fuels that we believe will help to satisfy mandates under the Renewable Fuel Standard program, or RFS2.

	•	Rural. We plan to locate our commercial production facilities in rural areas near sources of low-cost, abundant and sustainable non-food biomass, which we believe will help revitalize rural communities impacted by closed paper mills.

	•	Repeatable. We plan to employ a “copy exact” modular design for our standard commercial production facilities that can be replicated in numerous locations with abundant and sustainable non-food feedstock in the southeastern United States and beyond, which we believe will help us reduce our capital costs. After we commercialize our technology, our repeatable renewable crude oil production process will effectively eliminate the exploration risk experienced by traditional exploration and production companies.

We expect that our renewable fuels will offer several environmental benefits compared to traditional petroleum-based fuels. According to a February 2011 analysis performed by TIAX LLC using data we provided, gasoline and diesel blendstocks produced from our proprietary BFCC process in our planned commercial production facilities are projected to reduce direct lifecycle greenhouse gas emissions by over 80% compared to the fuels they displace. In addition, we are designing our planned standard commercial production facilities to meet the criteria for minor sources under the Clean Air Act.

Under RFS2, a renewable fuel must reduce direct lifecycle greenhouse gas emissions by at least 20%, an advanced biofuel must reduce lifecycle greenhouse gas emissions by at least 50%, a biomass-based diesel must reduce lifecycle greenhouse gas emissions by at least 50% and a cellulosic biofuel must reduce lifecycle greenhouse gas emissions by at least 60%. Under the Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions and Energy Use in Transportation, or GREET, model, the estimated default reductions in direct lifecycle greenhouse gas emissions of certain renewable fuels and the projected reductions in direct lifecycle greenhouse gas emissions of our renewable gasoline and diesel blendstocks are as follows:


Renewable Fuel Category	% Lifecycle GHG Reduction

Corn ethanol (renewable fuel)		25	%
Sugarcane ethanol (advanced biofuel)		71	%
Biodiesel (biomass-based diesel)		76	%
KiOR gasoline blendstocks (cellulosic biofuel)		82	%
KiOR diesel blendstocks (cellulosic diesel)		83	%

Our Technology

We have developed a process that converts cellulosic biomass into a renewable crude oil that can be refined in a conventional hydrotreater into light refined products, such as gasoline and diesel blendstocks. Our biomass-to-renewable fuel technology platform combines our proprietary catalyst systems with well-established fluid catalytic cracking, or FCC, processes that have been used in crude oil refineries to produce

gasoline for over 60 years. Our BFCC process operates at moderate temperatures and pressures to convert biomass in a matter of seconds into the renewable crude oil that we process using standard refining equipment into our gasoline and diesel blendstocks. As of June 9, 2011, we had 70 pending original patent application families containing over 2,000 pending claims.

Our Facilities

After an initial research and development effort, we successfully converted biomass into a renewable crude oil in a laboratory program that validated the technical feasibility of our BFCC process. Building on the success of this program, we constructed a pilot unit outside of Houston, Texas to continue developing and validating our technology. This pilot unit has amassed over 9,000 hours of operation and evaluated more than 250 catalyst systems. We subsequently commenced operation of a larger demonstration unit also outside of Houston that is designed to process 10 BDT per day and represents a 400-times scale-up from our pilot unit. Our demonstration unit has amassed over 3,000 hours of operation and produced over 32,000 gallons of our renewable crude oil.

We commenced construction of our initial-scale commercial production facility in Columbus, Mississippi in the first quarter of 2011, which we are financing with a combination of existing cash on hand, including $55 million of proceeds from the April 2011 sale of our Series C convertible preferred stock to existing investors, and a $75 million interest-free loan from the Mississippi Development Authority. We estimate that the total cost to construct this facility, including a hydrotreater, and place it into service will be approximately $190 million, with an estimated 15% to 20% of these costs attributable to the hydrotreater. We engaged KBR, Inc., a global engineering, construction and services company, to conduct the engineering, design and construction of this initial-scale commercial production facility. We are designing this facility to process 500 BDT per day, representing an additional 50-times scale-up from our demonstration unit.

Going forward, we intend to construct our larger standard commercial production facilities beginning in the third quarter of 2012 with our first planned facility in Newton, Mississippi. These facilities are being designed to process approximately 1,500 BDT of feedstock per day, approximately three times the size of our Columbus facility, in order to take advantage of economies of scale. Moreover, these standard commercial production facilities are being designed to utilize a centralized hydrotreating facility rather than dedicated, standalone hydrotreaters such as the one being constructed at our Columbus facility. Our two-train centralized hydrotreaters will be constructed in phases, with each train expected to support up to two standard commercial production facilities. By employing larger plant designs and shared hydrotreating facilities, we expect to be able to more effectively allocate our fixed costs and stage our capital program to reduce the capital intensity of our commercial expansion. By staging the expansion of our standard commercial facilities in discrete facility-by-facility projects that are independently viable, we believe that we will have flexibility to plan our growth in response to capital availability and market conditions.

In selecting sites for our facilities, we plan to consider the carbon emissions, land use, air pollution and water impact of our facilities.

Our Feedstock Strategy

Our technology platform is feedstock flexible and has been successfully tested on a variety of biomass. We have selected Southern Yellow Pine whole tree chips as our primary feedstock because of its abundant, sustainable supply and its generally stable pricing history. This non-food feedstock has a low cost relative to traditional renewable feedstocks and a long lifecycle that we believe significantly dampens price volatility compared to seasonal feedstocks that depend more on weather and other short-term supply and demand dynamics. Based on data from the USDA Forest Service from 2005 to 2008, there was an estimated 18% surplus of softwood in the South, over 95% of which is Southern Yellow Pine. This surplus represents an excess supply of nearly 60,000 BDT per day, which we believe far exceeds what is necessary to execute our initial commercialization plan. Each of our planned standard commercial production facilities is expected to use 1,500 BDT per day, or approximately 500,000 BDT per year.

explore co-feeding other types of renewable cellulosic biomass, including other woody biomass, such as poplar and eucalyptus tree chips, agricultural residues, such as sugarcane bagasse, and energy crops, such as sorghum, switchgrass and miscanthus. Ideal crops vary by region and climate. For example, certain energy crops like sorghum are more appropriate in drier regions with low rainfall, while others like miscanthus are higher yielding but also require more rain and may be sensitive to cold; however, both offer significant opportunities for per-acre yield improvements. Over time, we expect to investigate a variety of feedstock opportunities in other parts of the United States and in Canada, Brazil and other international locations. We currently intend to emphasize non-food, rain-fed feedstocks to minimize the environmental impact and water use from irrigation. We generally expect the feedstocks we use to be grown on land that is not in use for food production. In the long term, we believe that crops will be developed for marginal or degraded lands that can no longer be used for economic food production. We believe millions of acres of agricultural lands previously used for food production have been degraded. In addition, a U.S. Department of Energy, or DOE, study in 2005 estimated that in the United States alone, almost a billion tons of unutilized biomass may be available. Eventually, we expect that our technology’s ability to accept mixed feedstocks will allow feedstock producers to increase biodiversity in cultivating biomass.

We believe that our feedstock flexibility will allow us to expand the geographic scope of our business both domestically and internationally, identify locations with proximity to multiple feedstocks and use the most cost-effective feedstock or combination of feedstocks at a given location. Initially, we expect to investigate many site opportunities in the United States focusing on the locations of numerous paper mills that have closed in the United States over the past 20 years.

We recently entered into a feedstock supply agreement with Catchlight Energy, LLC, or Catchlight, for all of the supply of pulpwood, whole tree chips and forest residuals for our initial-scale commercial production facility. Subject to the terms and conditions of the agreement, Catchlight has agreed to supply all of the specified feedstock for the facility.

Our Distribution Plan

We believe that we will be able to sell the output from our planned commercial production facilities to a range of potential customers, including refiners, terminal and rack owners and fleet users. Unlike ethanol, which is generally subject to a 10% to 15% blend wall, we believe that our gasoline and diesel blendstocks can be used as components in formulating a variety of fuel products meeting specifications of ASTM International for finished gasoline and diesel derived from petroleum-based blendstocks. We currently are performing motor vehicle fuel tests as we seek to register our gasoline and diesel blendstocks with the U.S. Environmental Protection Agency, or EPA. We also intend to seek certification of our blendstocks for use in jet fuel.

We recently entered into agreements with Hunt Refining Company, or Hunt, Catchlight and FedEx Corporate Services, Inc., or FedEx, for the purchase of blendstocks to be produced from our initial-scale commercial production facility. We are also in negotiations with these companies and additional prospective customers for the purchase of blendstocks to be produced from our planned standard commercial production facilities.

Production and sale of our fuel products pursuant to our agreements with Hunt, Catchlight and FedEx and our other potential customer relationships will depend on the satisfaction of contract-specific conditions, including establishing product specifications and satisfying commercial and production requirements.

Our Market

The global transportation fuels market represents one of the world’s largest markets at over $2 trillion. According to the U.S. Energy Information Administration, or EIA, for 2009, there was a 138 billion gallon market for gasoline and a 49 billion gallon market for diesel in the United States alone. Over time, we expect to compete in the broader market for crude oil. We also expect our products to have “drop in” compatibility with traditional hydrocarbons, unlike conventional biofuels such as FAME diesel, corn ethanol and sugarcane ethanol.

Although we expect that our blendstocks will be marketable into the global transportation fuels market, their renewable nature also allows us to benefit from government programs and incentives. In 2007, the Energy Independence and Security Act, or EISA, was adopted to move the United States toward greater energy independence and security and to increase the production of clean renewable fuels domestically. EISA updated the Renewable Fuel Standard program to require the use of cellulosic biofuel, a renewable fuel derived from renewable cellulosic biomass that produces at least 60% lower lifecycle greenhouse gas emissions compared to a 2005 baseline.

We believe that our gasoline and diesel blendstocks will qualify as cellulosic biofuel under RFS2, which will provide an opportunity to obtain premium pricing for our renewable blendstocks. We expect that this designation will make our blendstocks attractive to fuel producers because our blendstocks can be used to satisfy specific volume requirements for cellulosic biofuel, as well as the volume requirements for both advanced biofuel and renewable fuel under RFS2. This provides cellulosic biofuel producers like our company an opportunity to compete with producers of advanced biofuel and other renewable fuels, but not vice versa. Accordingly, the potential size of the mandated market for cellulosic biofuel in 2022 under RFS2 encompasses the 36.0 billion gallon mandate for all renewable fuels, which includes the 21.0 billion gallon mandate for advanced biofuel, which also includes the 16.0 billion gallon mandate for cellulosic biofuel. Under the EISA mandates, by 2022 renewable fuels are expected not only to make up an increasing percentage of liquid transportation fuels in the United States, but also are expected to contribute to an approximately 15% reduction in net imports of crude oil from 2009 levels. At May 2011 per gallon market prices of $2.587 for ethanol as renewable fuel pricing, $3.889 for sugarcane ethanol as advanced biofuel pricing, $5.148 for biodiesel as biomass-based diesel pricing and $1.130 cellulosic waiver as the premium to advanced biofuels, the 36.0 billion gallon RFS2 mandated market for 2022 would be worth approximately $138 billion. Additional renewable fuel mandates exist in Europe and other countries with varying mandates and volume requirements for premium renewable fuels.

Our Competitive Strengths

We believe that our business benefits from a number of competitive strengths, including the following:


	•	Our renewable fuel products are hydrocarbons compatible with the existing transportation fuels infrastructure. Unlike other renewable fuels such as ethanol or biodiesel, our gasoline and diesel blendstocks are compatible hydrocarbons that can “drop in” to the existing petroleum-based transportation fuels infrastructure interchangeably with their petroleum-based counterparts to produce various fuel products. In addition, due to the higher energy content of our gasoline and diesel blendstocks, we believe that our transportation fuels will sell at a premium to ethanol. Currently, we expect to compete in the mandated renewable fuels market against corn ethanol, sugarcane ethanol and biodiesel, as well as in the general market for gasoline and diesel fuels.


	•	We combine proprietary technology with well-established FCC and other refining processes. We have developed a technology platform that uses our proprietary catalyst systems, process design and know-how, while leveraging well-established FCC and other refining processes, to convert a variety of cellulosic biomass into high-quality gasoline and diesel blendstocks. As of June 9, 2011, we had 70 pending original patent application families containing over 2,000 pending claims.


	•	Our BFCC process provides product flexibility and higher yields of more valuable products. Our BFCC process affords us flexibility to tailor our blendstock product spectrum to attain higher overall product yields, as well as higher proportions of valuable transportation fuels. Our realized yield of gasoline and diesel blendstocks from our renewable crude oil is approximately 90%, which is higher than the yields that are typically attained when refining petroleum-based crude oil.

	•	Our technology is feedstock flexible, and we have identified low-cost, abundant and sustainable feedstock. Our technology platform is feedstock flexible and has been successfully tested on a variety of biomass. We believe that our feedstock flexibility will allow us to use the most cost-effective feedstock or combination of feedstocks at a given location. We have selected Southern Yellow Pine whole tree chips as our primary feedstock because of their abundant, sustainable supply and generally


		stable pricing history. We expect that our ability to use logging residues, branches and bark will enable us to lower our feedstock costs.


	•	We have secured or identified strategic locations for our commercial production facilities. The site for our initial-scale commercial production facility and the sites that we have identified for our next four planned standard commercial production facilities are situated in the Southeast near abundant Southern Yellow Pine feedstock and a number of potential significant customers and have access to rail, pipelines (including the Colonial pipeline, which transports approximately 100 million gallons of fuels per day to the Northeast), inland and gulf waterways and other transportation channels. We believe that former workers dislodged by the closings of paper mills in the Southeast could provide an available skilled labor force for us.

	•	We believe that we have a better use for woodchip feedstock. Based on current prices, and if we meet our target production cost metrics, and if competition for feedstock develops in a region, we believe that we may be able to afford higher prices for feedstock than paper mills.

	•	We have an experienced management team. Our executive officers and senior operational managers have extensive experience in research and development, new product development, capital project execution, feedstock procurement, plant operations and technology commercialization across the catalyst, refining, chemicals and forest products industries.

Our Strategy

Our mission is to leverage our proprietary technology platform to provide gasoline and diesel blendstocks at prices that are competitive with petroleum-based transportation fuels. Key elements of our strategy include the following:


	•	We have adopted a build, own and operate strategy. We plan to build, own and operate our commercial production facilities in the United States. We began constructing our 500 BDT per day initial-scale commercial production facility in Columbus, Mississippi in the first quarter of 2011, with production expected to begin in the second half of 2012. We intend to construct our 1,500 BDT per day standard commercial production facilities, beginning in the third quarter of 2012 with our first planned facility in Newton, Mississippi.

	•	We plan to deploy BFCC facilities using “copy exact” principles. We plan to employ a modular design that can be replicated for our subsequent standard commercial production facilities. Utilizing learning from our initial commercial production facilities, we plan to deploy a “copy exact” strategy of standardized modular 1,500 BDT per day designs to reduce our capital costs, implement best practices, reduce operating costs, increase personnel flexibility and facilitate fast deployment of new production facilities. We also expect to develop a remote electronic facilities management control center in Houston, Texas. We believe that commercially available feedstock sources exist to support significant expansion opportunities in biomass-rich regions in the United States and globally. At a later date, we may consider larger or smaller standardized facility sizes to optimize the scale for local feedstock availability and transportation costs.

	•	We plan to expand our base of prospective customers. We believe that we will be able to sell our renewable hydrocarbon-based products to a variety of potential customers, including independent refiners, integrated oil companies, distributors of finished products, such as terminal or rack owners, and end users of petroleum products, such as transportation companies, fleets or petrochemical operators. We also intend to seek certification of our blendstocks for use in jet fuel.

	•	We intend to maximize our feedstock flexibility and reduce costs. Our technology platform has been successfully tested on a variety of biomass. We plan to reduce our feedstock costs by increasing our use of lower grade woody biomass, such as logging residues, branches and bark, at our planned commercial production facilities. Longer term, we believe that the flexibility of our proprietary catalyst systems will enable us to co-feed many of our plants with a variety of other types of renewable cellulosic biomass,


		including other woody biomass, such as poplar and eucalyptus tree chips, agricultural residues, such as sugarcane bagasse, and energy crops, such as sorghum, switchgrass and miscanthus.


	•	We intend to leverage our technology and expertise to increase our yields and the efficiency of our process. We have focused on enhancing our proprietary technology and processes through each stage of development. This effort focuses on continuously improving our proprietary catalyst systems, optimizing the reactor design and operating conditions and enhancing our renewable crude oil processing technology. We have increased our overall process yield of biomass to renewable fuel from approximately 17 gallons per BDT to approximately 67 gallons per BDT. Our research and development efforts are focused on increasing this yield to approximately 92 gallons per BDT.

	•	We believe that we will be able to compete with petroleum-based transportation fuels. Although we benefit from mandated policies such as RFS2, we expect that our standard commercial production facilities will be able to produce our gasoline and diesel blendstocks on a cost-competitive basis with existing petroleum-based counterparts without government subsidies at current pricing. We also expect to be able to compete in non-mandated international transportation fuels markets, as well as mandated international transportation fuels markets, such as the European biodiesel market, that have historically commanded higher prices per gallon.

	•	We plan to expand internationally through a variety of structures. Over time, we intend to expand internationally through direct operations and joint venture structures. We are actively exploring opportunities to expand internationally in countries with abundant, sustainable, non-food feedstocks available at costs lower than or competitive with domestic feedstocks. In March 2011, we hired a President of International with executive experience in international operations to lead our global expansion efforts.

	•	We plan to drive brand loyalty for “KiOR.” We plan to capitalize on the increasing global trend in green awareness to differentiate our renewable transportation fuels from petroleum-based alternatives. In the long term, we believe that we will have a substantial marketing opportunity with a variety of large, fuel-intensive prospective customers seeking sustainable, renewable transportation fuel options.

Risks Affecting Us

Our business is subject to a number of risks and uncertainties that you should understand before making an investment decision. These risks are discussed more fully in the section entitled “Risk Factors” following this prospectus summary. These risks include the following:


	•	we are a development stage company with a limited operating history, have not generated any revenue and have a history of net losses, and we expect significant increases in our costs and expenses to result in continuing losses as we seek to commercialize our renewable transportation fuels;

	•	we have no experience producing renewable transportation fuels at the scale needed for the development of our business or in building the facilities necessary for such production, and we will not succeed if we cannot effectively scale our proprietary technology platform and process design;

	•	the actual cost of constructing, operating and maintaining the facilities necessary to produce our renewable transportation fuels in commercial volumes may be significantly higher than we plan or anticipate;

	•	we will need substantial additional capital in the future in order to finance the construction of our planned standard commercial production facilities and to expand our business, and we may be unable to obtain such capital on terms acceptable to us or at all;

	•	the production of our renewable transportation fuels will require significant amounts of feedstock, and we may be unable to obtain amounts of feedstock sufficient to satisfy our commitments to our potential customers at the costs we anticipate or at all;


	•	existing alternative uses for biomass may increase feedstock prices to uneconomic levels or otherwise limit feedstock availability;

	•	we may be unable to obtain patent or other protection for our proprietary technologies and, even if we obtain such protection, we may be unable to prevent other parties from infringing on our patents and other proprietary rights; and

	•	we face challenges in obtaining EPA fuel registration and market acceptance of our renewable transportation fuels, and our business would be harmed if they are not registered by the EPA and accepted by prospective customers in the transportation fuels market.

Our Dual Class Capital Structure

We currently have two classes of common stock: Class A common stock and common stock (which will be redesignated as Class B common stock as discussed below). Upon completion of this offering, we will continue to have two classes of common stock: Class A common stock and Class B common stock. The rights of the holders of our Class A common stock and our Class B common stock are identical, except with respect to voting and conversion. Each share of our Class A common stock is entitled to one vote per share and is not convertible into any other shares of our capital stock. Each share of our Class B common stock is entitled to 10 votes per share, is convertible at any time into one share of our Class A common stock at the option of the holder of such share and will convert automatically into one share of our Class A common stock upon the occurrence of certain specified events, including a transfer of such shares (other than to such holder’s family members, descendants or certain affiliated persons or entities).

In connection with this offering, we intend to redesignate all of the shares of our common stock as Class B common stock while our Class A common stock will continue to be designated as Class A common stock. Any rights to acquire shares of common stock prior to the redesignation will become rights to acquire shares of our Class B common stock. We refer to our Class A common stock and our Class B common stock collectively as our common stock. Please read “Description of Capital Stock — Common Stock.”

Corporate Information

We were incorporated in Delaware in July 2007. Our principal executive offices are located at 13001 Bay Park Road, Pasadena, Texas 77507, and our telephone number at that location is (281) 694-8700. Our corporate website address is http://www.kior.com. The information contained in or accessible from our corporate website is not part of this prospectus.

The “KiOR” name and related images and symbols are our properties, trademarks and service marks. All other trade names, trademarks and service marks appearing in this prospectus are the property of their respective owners.

Conversion Metrics

This prospectus contains references to metric tons, barrels, gallons and liters. In the United States, blendstock fuels are typically measured and sold in barrels and gallons. In other parts of the world, the standard unit is metric tons and liters. In addition, a portion of the U.S. biofuels investment community references biofuels to ethanol on an energy content basis using gallons of ethanol equivalent. The following table sets forth the conversion factor between these metrics.

Gallons of Ethanol

Gallons

Equivalent (GEE)*

Barrels

Metric tons**

Liters

1.70

0.0238

0.00333

3.79


*		Based on energy content of 130,000 btu/gallon average for gasoline and diesel blendstocks

**		Based on density of 0.88 g/mL

THE OFFERING


Shares of Class A common stock offered by us		10,000,000 shares

Conversion		Upon completion of this offering, all outstanding shares of our Series A and Series A-1 convertible preferred stock will convert automatically into shares of our common stock (which will be redesignated as Class B common stock) and all outstanding shares of our Series B and Series C convertible preferred stock will convert automatically into shares of our Class A common stock.

Shares of our common stock to be outstanding after this offering:

Class A common stock		37,987,302 shares

Class B common stock		61,848,696 shares

Option to purchase additional shares of Class A common stock		We have granted the underwriters a 30-day option to purchase up to 1,500,000 additional shares of our Class A common stock at the initial public offering price to cover over-allotments, if any.

Use of proceeds		We estimate that the net proceeds we will receive from this offering, after deducting estimated underwriting discounts and other estimated offering expenses payable by us, will be approximately $185.6 million, or approximately $213.8 million if the underwriters’ option to purchase additional shares is exercised in full. We plan to use the net proceeds we will receive from this offering to fund a portion of the capital expenditures, including front-end engineering and procurement services and long-lead equipment, for our planned first standard commercial production facility in Newton, Mississippi. We intend to use any remaining net proceeds for general corporate purposes, including the costs associated with being a public company. Please read “Use of Proceeds.”


Nasdaq Global Select Market symbol		“KIOR”


Risk factors		You should carefully read and consider the information set forth under the heading “Risk Factors” and all other information set forth in this prospectus before investing in our Class A common stock.

The common stock to be outstanding after the completion of this offering is based on 27,987,302 shares of our Class A common stock and 61,848,696 shares of Class B common stock outstanding as of March 31, 2011, which numbers reflect the conversion of all of our convertible preferred stock into an aggregate of 27,917,302 shares of our Class A common stock and 44,571,576 shares of Class B common stock and excludes the following:


	•	as of March 31, 2011, 8,041,880 shares of Class A common stock issuable upon the exercise of outstanding stock options at a weighted-average exercise price of $1.98 per share;

	•	as of March 31, 2011, 7,049,454 shares of Class B common stock issuable upon the exercise of outstanding stock options at a weighted-average exercise price of $0.08375 per share;


	•	456,822 shares of our Class A common stock issuable upon the exercise of warrants outstanding as of March 31, 2011, at a weighted-average exercised price of $2.152 per share;


	•	18,750 shares (assuming a conversion price that is 80% of an assumed initial public offering price of $20.00 per share, the midpoint of the price range set forth on the cover page of this prospectus) of our Class A common stock issuable upon the exercise of 61,200 warrants that we were required to issue as of March 31, 2011 at a weighted-average exercise price of $4.902 per share;


	•	411,312 shares of our Class B common stock issuable upon the exercise of warrants outstanding as of March 31, 2011, at a weighted-average exercise price of $0.4863 per share;

	•	2,199,936 shares of Class A common stock reserved for future issuance as of March 31, 2011 under our amended and restated 2007 Stock Option/Stock Issuance Plan;

	•	1,708,266 shares of our Class B common stock reserved for future issuance as of March 31, 2011 under our amended and restated 2007 Stock Option/Stock Issuance Plan; and

	•	9,983,600 shares of Class A common stock reserved for future issuance under our 2011 Long-Term Incentive Plan, which will become effective upon the completion of this offering, as more fully described in “Executive Compensation — 2011 Long-Term Incentive Plan.”

Except as otherwise indicated, the information in this prospectus:


	•	gives effect to a 4-for-1 stock split in April 2010 and a 2-for-1 stock split, which was completed on June 9, 2011;

	•	gives effect to the automatic conversion effective upon the completion of this offering of all shares of our Series A convertible preferred stock and Series A-1 convertible preferred stock into shares of our Class B common stock on a 1-to-1 basis;

	•	gives effect to the automatic conversion effective upon the completion of this offering of all shares of our Series B convertible preferred stock into shares of our Class A common stock on a 1-to-1 basis;

	•	gives effect to the automatic conversion upon the completion of this offering of all shares of our Series C convertible preferred stock (issued in April 2011) into shares of our Class A common stock, assuming a conversion price that is 80% of an assumed initial public offering price of $20.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) (see “Capitalization — Conversion of Our Series C Convertible Preferred Stock” for conversion ratio adjustments that may be applicable upon future events, such as the completion of this offering);

	•	assumes the adoption of our amended and restated certificate of incorporation and our amended and restated bylaws upon the completion of this offering; and

	•	assumes the underwriters do not exercise their option to purchase up to 1,500,000 additional shares of our Class A common stock.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table presents our summary consolidated financial data for the periods indicated. The summary consolidated statement of operations data for the years ended December 31, 2008, 2009 and 2010 are derived from our audited consolidated financial statements that are included elsewhere in this prospectus. The summary consolidated statement of operations data for the three months ended March 31, 2010 and 2011 and the summary condensed consolidated balance sheet data as of March 31, 2011 are derived from our unaudited interim condensed consolidated financial statements that are included elsewhere in this prospectus. You should read the summary of our consolidated financial data set forth below together with the more detailed information contained in “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our financial statements and related notes appearing elsewhere in this prospectus. Our historical results presented below are not necessarily indicative of financial results to be achieved in the future.


										Three Months Ended
	Years Ended December 31,									March 31,
	2008			2009			2010			2010			2011
	(In thousands, except per share amounts)

Consolidated Statement of Operations Data:
Research and development expenses	$	(3,643	)	$	(9,961	)	$	(22,042	)	$	(4,381	)	$	(7,271	)
General and administrative expenses		(1,867	)		(2,987	)		(8,083	)		(1,226	)		(4,189	)
Depreciation and amortization expense		(178	)		(688	)		(1,656	)		(279	)		(523	)

Loss from operations		(5,688	)		(13,636	)		(31,781	)		(5,886	)		(11,983	)

Interest income		71			65			34			—			—
Beneficial conversion feature expense		—			—			(10,000	)		—			—
Interest expense, net of amounts capitalized		—			(242	)		(1,812	)		(367	)		—
Foreign currency gain (loss)		(236	)		(215	)		—			8			—
Loss from change in fair value of warrant liability		—			—			(2,365	)		—			(1,410	)

Loss before income taxes		(5,853	)		(14,028	)		(45,924	)		(6,245	)		(13,393	)
Income tax expense		(13	)		(31	)		(3	)		—			—

Net loss	$	(5,866	)	$	(14,059	)	$	(45,927	)	$	(6,245	)	$	(13,393	)

Net loss per share of common stock, basic and diluted(1)	$	(0.10	)	$	(0.24	)	$	(0.56	)	$	(0.11	)	$	(0.16	)

Weighted-average common shares outstanding, basic and diluted(1)		14,400			14,400			15,382			14,774			16,330

Pro forma net loss per share of common stock, basic and diluted (unaudited)(1)	$	(0.13	)	$	(0.24	)	$	(0.61	)	$	(0.11	)	$	(0.16	)

Weighted-average common shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)(1)		45,084			58,972			74,722			59,346			85,381


	As of March 31, 2011
				As			As Further
	Actual			Adjusted(2)			Adjusted(3)

Consolidated Balance Sheet Data
Cash and cash equivalents	$	21,947		$	103,560			289,135
Property, plant and equipment, net		55,969			55,969			55,969
Total assets		82,213			163,826			349,660
Long-term debt, including current portion		9,234			35,847			35,847
Convertible preferred stock		134,384			189,384			—
Total stockholders’ equity (deficit)		(74,807	)		(74,807	)		305,047


(1)		See Note 2 to our consolidated financial statements appearing elsewhere in this prospectus for an explanation of the method used to calculate (a) net loss per share of common stock, basic and diluted, (b) pro forma net loss per share of common stock, basic and diluted and (c) weighted-average number of shares used in the computation of the per share amounts.

(2)		On an as adjusted basis to reflect borrowings under our interest-free loan from the Mississippi Development Authority from April 1, 2011 through May 13, 2011 of $26.6 million and issuance of Series C convertible preferred stock in April 2011 in the amount of $55.0 million. For further discussion, please read “Capitalization.”

(3)		On an as adjusted basis to reflect borrowings under our interest-free loan from the Mississippi Development Authority from April 1, 2011 through May 13, 2011 of $26.6 million and issuance of Series C convertible preferred stock in April 2011 in the amount of $55.0 million and on an as further adjusted basis to reflect the conversion of our Series A, Series A-1, Series B and Series C convertible preferred stock into Class A common stock and Class B common stock as described in “— The Offering — Conversion,” the issuance by us of 10,000,000 shares of Class A common stock in this offering and the application of our estimated net proceeds from this offering as set forth under “Use of Proceeds” as if this offering occurred on March 31, 2011. For further discussion, please read “Capitalization.”

RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the following risks and all other information contained in this prospectus, including our consolidated financial statements and the related notes, before investing in our Class A common stock. If any of the following risks materialize, our business, prospects, financial condition and operating results could be materially harmed. In such case, the price of our Class A common stock could decline, and you may lose some or all of your investment.

Risks Related to Our Business and Industry

We are a development stage company and have not generated any revenue, and our business will not succeed if we are unable to commercialize successfully our renewable transportation fuels.

We are a development stage company with a limited operating history, and we have not yet commercialized our renewable transportation fuels nor have we generated any revenue. We are subject to the substantial risk of failure facing businesses seeking to develop new products. Certain factors that could, alone or in combination, prevent us from successfully commercializing our products include:


	•	technical challenges developing our commercial production processes that we are unable to overcome;

	•	our ability to finance the roll-out of our planned standard commercial production facilities, including securing private or public debt and/or equity financing, project financing and/or federal, state and local government incentives;

	•	our ability to achieve commercial-scale production of renewable transportation fuels on a cost-effective basis and in the time frame we anticipate;

	•	our ability to secure and maintain customers to purchase any renewable transportation fuels we produce from our planned commercial production facilities;

	•	our ability to produce renewable transportation fuels that meet our potential customers’ specifications;

	•	our ability to secure access to sufficient feedstock quantities at economic prices;

	•	our ability to secure and maintain all necessary regulatory approvals for the production, distribution and sale of our renewable transportation fuels and to comply with applicable laws and regulations; and

	•	actions of direct and indirect competitors that may seek to enter the renewable transportation fuels markets in competition with us or that may seek to impose barriers to one or more aspects of the renewable transportation fuels business that we are pursuing.

We have a history of net losses, and we expect significant increases in our costs and expenses to result in continuing losses as we seek to commercialize our renewable transportation fuels.

We have incurred substantial net losses since our inception, including net losses of $5.9 million, $14.1 million and $45.9 million for the years ended December 31, 2008, 2009 and 2010, respectively, and $13.4 million for the three months ended March 31, 2011. We expect these losses to continue. As of March 31, 2011, we had an accumulated deficit of $79.7 million. We expect to incur additional costs and expenses related to the continued development and expansion of our business, including our research and development expenses, continued testing and development at our pilot and demonstration units and engineering and design work and construction of our planned commercial production facilities. We have not yet commercialized our renewable transportation fuels nor have we generated any revenue. We cannot assure you that we will ever achieve or sustain profitability on a quarterly or annual basis.

We have no experience producing renewable transportation fuels at the scale needed for the development of our business or in building the facilities necessary for such production, and we will not succeed if we cannot effectively scale our proprietary technology platform and process design.

We must demonstrate our ability to apply our proprietary technology platform and process design at commercial scale to convert biomass into renewable crude oil and to produce renewable transportation fuels on an economically viable basis. Such production will require that our proprietary technology platform and process design be scalable from our demonstration unit to commercial production facilities. We have not yet completed construction of or operated a commercial-scale production facility, and our technology may not perform as expected when applied at the scale that we plan or we may encounter operational challenges for which we are unable to devise a workable solution. In particular, our initial-scale commercial production facility under construction in Columbus, Mississippi is a first-of-kind project, and we cannot assure you that it will be completed on the schedule that we intend or at all. If and when completed, our initial-scale commercial production facility may not process biomass at designed levels or produce our gasoline and diesel blendstocks at acceptable yields, and we may be unable to improve its performance. As a result of these risks, we may be unable to achieve commercial-scale production in a timely manner, or at all. If these risks materialize, our business and ability to commercialize our renewable transportation fuels would be adversely affected.

The actual cost of constructing, operating and maintaining the facilities necessary to produce our renewable transportation fuels in commercial volumes may be significantly higher than we plan or anticipate.

The production of commercial volumes of our renewable transportation fuels will require the construction of commercial-scale facilities. The construction of these new facilities will require the expenditure of significant amounts of capital, which may exceed our estimates. We may be unable to complete these facilities at the planned costs, on schedule or at all. The construction of new facilities may be subject to construction cost overruns due to labor costs, labor shortages or delays, costs of equipment and materials, weather delays, inflation or other factors, which could be material. In addition, the construction of our facilities may be subject to the receipt of approvals and permits from various regulatory agencies. Those agencies may not approve the projects in a timely manner or may impose restrictions or conditions on a production facility that could potentially prevent construction from proceeding, lengthen its expected completion schedule and/or increase its anticipated cost.

If and when our facilities are constructed, our operating and maintenance costs may be significantly higher than we anticipate. In addition, our facilities may not operate as efficiently as we expect and may experience unplanned downtime, which may be significant. As a result, our initial-scale commercial production facility under construction in Columbus, Mississippi or one or more of the planned standard commercial production facilities may be unable to achieve our expected investment return, which could adversely affect our business and results of operations.

We will need substantial additional capital in the future in order to expand our business.

We require substantial additional capital to grow our business, particularly as we continue to design, engineer and construct our commercial production facilities. The extent of our need for additional capital will depend on many factors, including our ability to obtain equity and debt financing from various public or private sources and to meet any related equity contribution requirements, whether we succeed in producing renewable transportation fuels at commercial scale, our ability to control costs, the progress and scope of our research and development projects, the effect of any acquisitions of other businesses or technologies that we may make in the future and the filing, prosecution and enforcement of patent claims.

We will need to raise additional funds to build our planned standard commercial production facilities and subsequent facilities, continue the development of our technology and products and commercialize any products resulting from our research and development efforts. Future financings that involve the issuance of equity securities would cause our existing stockholders to suffer dilution. In addition, debt financing sources may be unavailable to us and any debt financing may subject us to restrictive covenants that limit our ability

to conduct our business. We may be unable to raise sufficient additional funds on acceptable terms, or at all. If we are unable to raise sufficient funds, our ability to fund our operations, take advantage of strategic opportunities, develop products or technologies, or otherwise respond to competitive pressures could be significantly limited. If this happens, we may be forced to delay the construction of commercial production facilities, delay, scale back or terminate research or development programs or the commercialization of products resulting from our technologies, curtail or cease operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights or grant licenses on terms that are unfavorable to us. If adequate funds are unavailable, we will be unable to execute successfully our business plan or to continue our business.

We may be unable to obtain regulatory approval for the registration of our products as transportation fuels or as cellulosic biofuel under applicable regulatory requirements. The denial or delay of any of such approvals could delay our commercialization efforts and adversely impact our potential customer relationships, business and results of operations.

We are seeking to commence commercial sales of renewable transportation fuels from our initial-scale commercial production facility in the second half of 2012. Our renewable transportation fuels will be subject to government regulation in our target markets. The U.S. Environmental Protection Agency, or EPA, administers the Clean Air Act, which regulates the commercial registration, distribution and use of fuel products or fuel additives. Before an entity can introduce a fuel or fuel additive into commerce, it must register that fuel or fuel additive with the EPA. Our gasoline and diesel blendstocks have not been registered with the EPA as a fuel.

In addition, in order for our gasoline or diesel blendstocks to qualify as a renewable fuel, advanced biofuel or cellulosic biofuel for the purpose of satisfying the mandates of the Renewable Fuel Standard program, or RFS2, upon petition the EPA will conduct its own assessment of the greenhouse gas emissions associated with the production and use of our gasoline or diesel blendstocks and must verify that our feedstocks qualify as renewable cellulosic biomass. The EPA may not complete this assessment in a timely manner, which could delay or increase the costs of the commercialization of our products, or it may determine that our gasoline or diesel blendstocks do not reduce greenhouse gas emissions in a sufficient amount to qualify as a renewable fuel, advanced biofuel or cellulosic biofuel under RFS2. The EPA could also decide that our feedstocks do not meet the definition of renewable biomass, and thus our products would be ineligible for RFS2 credits. A decision by the EPA that our products do not qualify as a renewable fuel, advanced biofuel or cellulosic biofuel for purposes of satisfying renewable fuel mandates would significantly reduce demand for our product, which would materially and adversely affect our business.

Our offtake agreements for the sale and purchase of the gasoline, diesel and fuel oil blendstocks from our initial-scale commercial production facility under construction are subject to the satisfaction of certain technical, commercial and production requirements. If we fail to meet these requirements, our commercialization plan could be delayed or harmed.

Currently, our offtake agreements for the sale and purchase of the gasoline, diesel and fuel oil blendstocks to be produced at our initial-scale commercial production facility under construction are subject to the satisfaction of certain technical, commercial and production requirements. These agreements do not affirmatively obligate our counterparties to purchase specific quantities of any products from us at this time, and these agreements contain important conditions that must be satisfied before any such purchases are made. These conditions include that we and our counterparties agree on product specifications for our gasoline, diesel and fuel oil blendstocks and that our products conform to those specifications. If we do not satisfy these contractual requirements and if we subsequently are unable to renegotiate those terms, our counterparties may terminate the agreements and our commercialization plan could be delayed or harmed if we need to find other counterparties.

We face challenges in obtaining market acceptance of our renewable transportation fuels, and our business would be harmed if they are not accepted by prospective customers in the transportation fuels market.

We intend to market our renewable transportation fuels as gasoline and diesel blendstocks to refiners, terminal and rack owners and end users. These potential customers frequently impose lengthy and complex product qualification procedures on new blendstocks, influenced by finished product specifications, processing considerations, regulatory issues and other factors. Potential customers may be reluctant to adopt new products due to a lack of familiarity with our blendstocks even though our gasoline and diesel blendstocks meet industry specifications. In addition, our renewable transportation fuels may need to satisfy product certification requirements of equipment manufacturers. For example, fleet owners may need to certify that the use of our renewable transportation fuels in their vehicles will not invalidate product warranties. If we are unable to convince prospective customers that our gasoline and diesel blendstocks are compatible with their existing processes or that the use of our products is otherwise to their benefit, our business will be adversely affected.

We have limited experience in structuring arrangements with prospective customers for the purchase of our renewable transportation fuels, including price mechanisms that allow us to realize the benefit of any government incentives our renewable transportation fuels generate for ourselves or our potential customers, and we may not succeed in this essential aspect of our business.

We have not yet completed the commercial development of our renewable transportation fuels, and we have limited experience structuring arrangements with potential customers that would allow us to benefit from new government incentives for renewable fuels. Our pricing formula with these potential customers must be designed to allow us to realize the benefits of cellulosic biofuel renewable identification number, or RIN, credits, cellulosic biofuel tax credits and other government incentives we generate for ourselves or our customers. Markets that value cellulosic biofuel RIN credits and other government incentives may take a long period of time to develop or may not materialize at all. These events could delay our ability to capitalize on the opportunities presented to us by our technology, including preventing us from achieving commercialization of our renewable transportation fuels.

Further, we plan to sell large amounts of our products to specific potential customers, and this will require that we effectively negotiate contracts for these relationships. The companies with which we expect to have customer arrangements generally are much larger and have substantially greater bargaining power than us. As a result, we may be ineffective in negotiating the terms of our relationships with these companies, which could adversely affect our future results of operations.

The price of renewable fuel credits may reduce demand for our products.

RFS2 allows additional RIN credits to be granted to obligated parties who blend into their fuel more than the required percentage of renewable fuels in a given year. These credits may be traded to other parties or may be used in subsequent years to satisfy RFS2 requirements. The trading prices of renewable fuel and advanced biofuel RIN credits are influenced by, among other factors, the transportation costs associated with renewable fuels, the mandated level of renewable fuel use for a specific year, the possibility of waivers of renewable fuel mandates and the expected supply of renewable fuel products. Any reduction in the cost of RIN credits could reduce the demand for our renewable transportation fuels.

Our future success may depend on our ability to produce our renewable transportation fuels without government incentives on a cost-competitive basis with petroleum-based fuels. If current or anticipated government incentives are reduced significantly or eliminated and petroleum-based fuel prices are lower or comparable to the cost of our renewable transportation fuels, demand for our products may decline, which could adversely affect our future results of operations.

Changes in government regulations, including mandates, tax credits, subsidies and other incentives, could have a material adverse effect upon our business and results of operations.

The market for renewable fuels is heavily influenced by foreign, federal, state and local government regulations and policies. Changes to existing, or adoption of new foreign, federal, state and local legislative and regulatory initiatives that impact the production, distribution or sale of renewable fuels may harm our business. For example, RFS2 currently calls for 14 billion gallons of liquid transportation fuels sold in 2011 to come from renewable fuels, a mandate that grows to 36 billion gallons by 2022. Of this amount, 16 billion gallons of renewable fuels used annually by 2022 must be cellulosic biofuel. In the United States and in a number of other countries, regulations and policies like RFS2 have been modified in the past and may be modified again in the future. In the United States, the Administrator of the EPA, in consultation with the Secretary of Energy and the Secretary of Agriculture, may waive certain renewable fuels standards, on his or her own motion or in response to a petition requesting such waiver, to avert economic harm or in response to inadequate supply. The Administrator of the EPA is also required to reduce the mandate for cellulosic biofuel use if projected supply for a given year falls below a minimum threshold for that year. Any reduction in, or waiver of, mandated requirements for fuel alternatives and additives to gasoline may cause demand for renewable biofuels to decline and deter investment in the research and development of renewable fuels. The Administrator could also revise qualification standards for renewable fuels in ways that increase our expenses by requiring different feedstocks, imposing extensive tracking and sourcing requirements, or prevent our process from qualifying as a renewable fuel under RFS2.

In addition, the U.S. Congress has passed legislation that extends tax credits for, among other things, the production of certain renewable fuel products as contemplated by our current process design. However, we cannot assure you that this or any other favorable legislation will remain in place. Any reduction in or phasing out or elimination of existing tax credits, subsidies and other incentives in the United States and foreign markets for renewable fuels, or any inability of us or our prospective customers to access such credits, subsidies and other incentives, may adversely affect demand for, and increase the overall cost of our renewable transportation fuels, which would adversely affect our business. In addition, market uncertainty regarding future policies may also affect our ability to develop new renewable products and to sell products to our potential customers. Any inability to address these requirements and any regulatory or policy changes could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to realize expected economies of scale, reduce our feedstock costs, increase our overall yields and optimize the composition of our renewable transportation fuels, which could limit our ability to sell our products at competitive prices and materially and adversely affect our business and prospects.

We may be unable to realize expected economies of scale, reduce our feedstock costs, increase our overall yields and optimize the composition of our renewable crude oil in order to produce our renewable fuel products on a cost-competitive basis with existing petroleum-based fuel products without government incentives. In particular, we may be unsuccessful in incorporating lower grade woody biomass, such as logging residues, branches and bark, in our process to reduce our feedstock costs or maintain our yields. In addition, our research and development efforts may fail to increase the yield of our BFCC process such that we may be unable to produce renewable transportation fuels at the costs or in the quantities that we anticipate. Our failure to achieve these efficiencies or improvements over time could limit our ability sell our products at competitive prices and materially and adversely affect our business and prospects.

The production of our renewable transportation fuels will require significant amounts of feedstock, and we may be unable to acquire sufficient amounts of feedstock to produce the amount of our products that we commit to sell to potential customers, or we may experience difficulties or incur costs obtaining such feedstock.

The successful commercialization of our renewable transportation fuels will require us to acquire and process large amounts of feedstock, which primarily will be Southern Yellow Pine whole tree chips. We may experience difficulties in obtaining access to feedstock and transporting feedstock to our commercial production facilities. Our access to feedstock may be adversely affected by weather or actions by landowners,

sellers or competing buyers of feedstock. In addition, fires or other natural disasters in the vicinity of our commercial production facilities could affect the availability of feedstock. We may be unable to secure access to feedstock or to secure the transportation of feedstock to our planned commercial production facilities on terms acceptable to us or at all. If we are unable to secure cost-effective access to feedstock, our ability to produce our renewable transportation fuels would be adversely affected.

The price of woody biomass and other renewable feedstock could increase or become volatile, or their availability could be reduced, which would increase the production costs of our renewable transportation fuels.

The price of woody biomass and other renewable feedstock may increase or become volatile due to changes in demand, such as the increased use of such feedstock in the generation of renewable electricity. Such changes would result in higher feedstock prices and/or a significant decrease in the volume of woody biomass and other renewable feedstock available for the production of the renewable transportation fuels we plan to sell, which could adversely affect our business and results of operations.

We may be unable to locate facilities near low-cost, abundant and sustainable sources of biomass and adequate infrastructure, which may affect our ability to produce cost-effective renewable transportation fuels.

Our business model and the successful commercialization of our renewable transportation fuels will depend on our ability to locate commercial production facilities near low-cost, abundant and sustainable sources of renewable biomass and in proximity to adequate infrastructure. Our ability to place facilities in locations where we can economically produce our renewable transportation fuels from nearby feedstock and transport those fuels to potential customers will be subject to the availability and cost of land, the availability of adequate infrastructure and skilled labor resources in such areas, and to legal and regulatory risks related to land use, permitting and environmental regulations. If we are unable to locate facilities at sites that allow economical production and transport of our products, our ability to produce renewable transportation fuels cost-effectively could be adversely affected.

A disruption in our supply chain for components of our proprietary catalyst system could materially disrupt or impair our ability to produce renewable transportation fuels.

We rely on third parties to supply the components of our proprietary catalyst system and, although we currently prepare finished catalyst ourselves, we may require third parties to provide commercial supply of finished catalyst. Our operations could be materially disrupted if we lose any of these suppliers or if any supplier experiences a significant interruption in its manufacturing and is unable provide an adequate supply of these components to meet our demand. Any such disruptions or delays could have a material adverse effect on our business and results of operations.

Our business will be subject to fluctuations in commodity prices.

We believe that some of the present and projected demand for renewable fuels results from relatively recent increases in the cost of petroleum. We intend to market our gasoline and diesel blendstocks as alternatives to corresponding petroleum-based fuels. If the price of petroleum-based fuels declines, we may be unable to produce gasoline and diesel blendstocks that are cost-effective alternatives to their petroleum-based counterparts. Declining oil prices, or the perception of a future decline in oil prices, would adversely affect the prices we can obtain from our potential customers or prevent us from entering into agreements with potential customers for our products.

Petroleum prices have been extremely volatile. Lower petroleum prices over extended periods of time may change the perceptions in government and the private sector that cheaper, more readily available energy alternatives should be developed and produced. If petroleum prices were to decline from present levels and remain at lower levels for extended periods of time, the demand for renewable fuels could be reduced, and our results of operations and financial condition may be adversely affected.

In addition, our commercial production facilities may use significant amounts of natural gas to operate. Accordingly, our business depends on natural gas supplied by third parties. An increase in the price of natural gas could adversely affect our results of operations and financial condition.

Growth may place significant demands on our management and our infrastructure.

We have experienced, and may continue to experience, expansion of our business as we continue to make efforts to develop and bring our products to market. Our growth and operations have placed, and may continue to place, significant demands on our management and our operational and financial infrastructure. Managing our growth will require significant expenditures and allocation of valuable management resources. If we fail to achieve the necessary level of efficiency in our organization as it grows, our business, results of operations and financial condition would be harmed.

We may incur significant costs complying with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities.

The production of renewable fuels involves the emission of various airborne pollutants. As a result, we are subject to several different environmental laws, regulations and permitting requirements administered by the EPA and the states where our facilities are and may be located, including Clean Air Act, or CAA, requirements. These laws, regulations and permitting requirements may restrict our emissions, affect our ability to make changes to our operations, and otherwise impose limitations on or require controls on our operations. In addition to costs that we expect to incur to achieve and maintain compliance with these laws, new or more stringent CAA standards or other environmental requirements in the future also may limit our operating flexibility or require the installation of new controls at our facilities.

We also use, transport and produce hazardous chemicals and materials in our business and are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials. Our safety procedures for handling, transporting and disposing of these materials and waste products may be incapable of eliminating the risk of accidental injury or contamination from the use, storage, transporting, handling or disposal of hazardous materials. In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our insurance coverage. We may not be insured against all environmental accidents that might occur, some of which may result in toxic tort claims. There can be no assurance that violations of environmental, health and safety laws will not occur in the future as a result of human error, accident, equipment failure or other causes. Compliance with applicable environmental laws and regulations may be expensive, and the failure to comply with past, present or future laws could result in the imposition of fines, third party property damage, product liability and personal injury claims, investigation and remediation costs, the suspension of production or a cessation of operations, and our liability may exceed our total assets. Liability under environmental laws can be joint and several and without regard to comparative fault. Environmental laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations, which could impair our research, development or production efforts and harm our business. Later-enacted federal and state governmental requirements may substantially increase our costs or delay or prevent the construction and operation of our facilities, which could have a material adverse effect on our business, financial condition and result of operations. Consequently, considerable resources may be required to comply with future environmental regulations.

Climate change legislation, regulatory initiatives and litigation could result in increased operating costs.

In recent years, the U.S. Congress has been considering legislation to restrict or regulate emissions of greenhouse gases, or GHGs, such as carbon dioxide and methane, that are understood to contribute to global warming. In addition, almost half of the states, either individually or through multi-state regional initiatives, have begun to address GHG emissions. Independent of Congress, the EPA has adopted regulations controlling GHG emissions under its existing CAA authority. For example, on December 15, 2009, the EPA officially published its findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to human health and the environment because emissions of such gases are, according to the EPA, contributing to

warming of the earth’s atmosphere and other climatic changes. In 2009, the EPA adopted rules regarding regulation of GHG emissions from motor vehicles. In addition, on September 22, 2009, the EPA issued a final rule requiring the reporting of greenhouse gas emissions from specified large greenhouse gas emission sources in the United States beginning in 2011 for emissions occurring in 2010. In June 2010, the EPA also issued a final rule, known as the “Tailoring Rule,” that makes certain large stationary sources and modification projects subject to permitting requirements for greenhouse gas emissions under the CAA. Furthermore, legislation to delay or reduce the EPA’s ability to proceed with the regulation of GHGs continues to be considered by Congress.

At this time, the projected GHG emissions from our facilities, including our initial-scale commercial production facility under construction in Columbus, Mississippi, would not meet the applicable thresholds for GHG permitting or reporting requirements. Although it is not possible at this time to accurately estimate how potential future laws or regulations addressing GHG emissions would impact our business, any future federal laws or implementing regulations that may be adopted to address GHG emissions could require us to incur increased operating costs. The potential increase in the costs of our operations resulting from any legislation or regulation to restrict emissions of GHGs could include new or increased costs to operate and maintain our facilities, install new emission controls on our facilities, acquire allowances to authorize our GHG emissions, pay any taxes related to our GHG emissions and administer and manage a GHG emissions program. We cannot predict with any certainty at this time how these possibilities may affect our operations.

Loss of key personnel, including key management personnel and key technical personnel, or failure to attract and retain additional personnel could delay our product development programs and harm our research and development efforts and our ability to meet our business objectives.

Our business requires a management team and employee workforce that is knowledgeable in the technological and commercial areas in which we operate. The loss of any key member of our management or key technical and operational employees, or the failure to attract or retain such employees could prevent us from developing and commercializing our products and executing our business strategy. We may be unable to attract or retain qualified employees in the future due to the intense competition for qualified personnel among catalyst, refining, alternative and renewable fuel businesses, or due to the unavailability of personnel with the qualifications or experience necessary for our business. In particular, our process development program depends on our ability to attract and retain highly skilled technical and operational personnel with particular experience and backgrounds. Competition for such personnel from numerous companies and academic and other research institutions may limit our ability to hire individuals with the necessary experience and skills on acceptable terms. In addition, we expect that the execution of our strategy of constructing multiple commercial production facilities to bring our products to market will require the expertise of individuals experienced and skilled in managing complex, first-of-kind capital development projects.

All of our employees are at-will employees, which means that either the employee or we may terminate their employment at any time. If we are unable to attract and retain the necessary personnel to accomplish our business objectives, we may experience staffing constraints that will adversely affect our ability to commercialize our products, meet the demands of our potential customers in a timely fashion or to support our internal research and development programs, which could impair our ability to meet our business objectives and adversely affect our results of operations and financial condition.

Weather, natural disasters and accidents may significantly affect our results of operations and financial condition.

Our corporate headquarters, pilot plant and demonstration unit are located outside of Houston, Texas, which is an area exposed to and affected by hurricanes. Major hurricanes may cause significant disruption in our operations on the U.S. Gulf Coast, logistics across the region and the supply of feedstock, which could have an adverse impact on our operations. We do not have a detailed disaster recovery plan. In addition, we may not carry sufficient business insurance to compensate us for losses that may occur. We are not insured against environmental pollution resulting from environmental accidents that occur on a sudden and accidental

basis, some of which may result in toxic tort claims. Any losses or damages could have a material adverse effect on our cash flows and success as an overall business.

We may be subject to product liability claims and other claims of our potential customers.

The design, development, production and sale of our renewable transportation fuels involve an inherent risk of product liability claims and the associated adverse publicity. We may be named in product liability suits relating to our gasoline and diesel blendstocks or the finished gasoline and diesel fuel containing our blendstocks, even for defects resulting from errors of our potential customers. These claims could be brought by various parties, including potential customers who are purchasing our products directly from us or other users who purchase our products from our customers.

In addition, our potential customers may bring suits against us alleging damages for the failure of our products to meet specifications or other requirements. Any such suits, even if unsuccessful, could be costly and disrupt the attention of our management and damage our negotiations with other potential customers.

Although we seek to limit our product liability in contracts with our potential customers, including indemnification from customers for such product liability claims, such limits may not be enforceable or may be subject to exceptions. Our insurance coverage may be inadequate to cover all potential liability claims. Insurance coverage is expensive and may be difficult to obtain. Also, insurance coverage may not be available in the future on acceptable terms and may not be sufficient to cover potential claims. We cannot assure you that our potential customers will have adequate insurance coverage to cover against potential claims. If we experience a large insured loss, it might exceed our coverage limits, or our insurance carrier may decline to further cover us or may raise our insurance rates to unacceptable levels, any of which could impair our financial position.

Our quarterly operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline.

Our financial condition and operating results may vary significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this prospectus:


	•	our ability to achieve or maintain profitability;

	•	the feasibility of producing our renewable transportation fuels on a commercial scale;

	•	our ability to manage our growth;

	•	fluctuations in the price of and demand for petroleum-based products;

	•	the availability of cost-effective renewable feedstock sources;

	•	the existence of government programs and incentives or regulation;

	•	potential issues related to our ability to report accurately our financial results in a timely manner;

	•	our dependence on, and the need to attract and retain, key management and other personnel;

	•	our ability to obtain, protect and enforce our intellectual property rights;

	•	potential advantages that our competitors and potential competitors may have in securing funding or developing projects;

	•	our ability to obtain additional capital that may be necessary to expand our business;

	•	business interruptions such as hurricanes, natural disasters and accidents;

	•	our ability to comply with laws and regulations;

	•	our ability to properly handle and dispose of hazardous materials used in our business; and

	•	our ability to use our net operating loss carryforwards to offset future taxable income.

Due to the various factors mentioned above, and other factors described in this prospectus, the results of any prior quarterly or annual periods should not be relied upon as indications of our future operating performance.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating loss carryforwards, or NOLs, to offset future taxable income. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the Internal Revenue Code has occurred after each of our previous issuances of common stock, preferred stock and convertible debt. In addition, if we undergo an ownership change in connection with or after this public offering, our ability to utilize NOLs could be limited by Section 382 of the Internal Revenue Code. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Internal Revenue Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations.

If we fail to maintain an effective system of internal controls, we might be unable to report our financial results accurately or prevent fraud; in that case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. In addition, Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, will require us and our independent registered public accounting firm to evaluate and report on our internal control over financial reporting beginning with our Annual Report on Form 10-K for the year ending December 31, 2012. The process of implementing our internal controls and complying with Section 404 will be expensive and time consuming, and will require significant attention of management. We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Even if we conclude, and our independent registered public accounting firm concurs, that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, because of its inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to fail to meet our reporting obligations. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our stock price. In addition, a delay in compliance with Section 404 could subject us to a variety of administrative sanctions, including Securities and Exchange Commission, or SEC, action, ineligibility for short form resale registration, the suspension or delisting of our Class A common stock from The Nasdaq Global Select Market and the inability of registered broker-dealers to make a market in our Class A common stock, which would further reduce our stock price and could harm our business.

Implementing a new enterprise resource planning system could interfere with our business or operations and could adversely impact our financial position, results of operations and cash flows.

We are in the process of implementing a new enterprise resource planning, or ERP, system. This project requires significant investment of capital and human resources, the re-engineering of many processes of our business, and the attention of many employees who would otherwise be focused on other aspects of our business. Any disruptions, delays or deficiencies in the design and implementation of the new ERP system could result in potentially much higher costs than we had anticipated and could adversely affect our ability to develop and commercialize products, provide services, fulfill contractual obligations, file reports with the SEC in a timely manner and/or otherwise operate our business, or otherwise impact our controls environment. Any of these consequences could have an adverse effect on our results of operations and financial condition.

International expansion is one of our growth strategies, and international operations will expose us to additional risks that we do not face in the United States, which could have an adverse effect on our operating results.

We expect to focus our initial business and operations in the United States; however, international expansion is one of our growth strategies. If and when we expand internationally, our operations will be subject to a variety of risks that we do not face in the United States including:


	•	building and managing experienced foreign workforces and overseeing and ensuring the performance of foreign subcontractors;

	•	increased travel, infrastructure and legal and compliance costs associated with multiple international locations;

	•	additional withholding taxes or other taxes on our foreign income, and tariffs or other restrictions on foreign trade or investment;

	•	imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, many of which differ from those in the United States;

	•	increased exposure to foreign currency exchange rate risk;

	•	longer payment cycles for sales in some foreign countries and potential difficulties in enforcing contracts and collecting accounts receivable;

	•	difficulties in repatriating overseas earnings;

	•	general economic conditions in the countries in which we operate; and

	•	political unrest, war, incidents of terrorism or responses to such events.

Our overall success in international markets will depend, in part, on our ability to succeed in differing legal, regulatory, economic, social and political conditions. We may not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each country where we do business. Our failure to manage these risks successfully could harm our international operations, reduce our international sales and increase our costs, thus adversely affecting our business, financial condition and operating results.

Risks Related to Our Intellectual Property

There are many companies developing technology in this area of business, and other parties may have intellectual property rights which could limit our ability operate freely.

Our commercial success depends on our ability to operate without infringing the patents and proprietary rights of other parties and without breaching any agreements we enter. We are aware of other parties applying various technologies, including FCC, to make renewable transportation fuels from biomass. We cannot determine with certainty whether patents of other parties may materially affect our ability to conduct our business. Because patent applications can take several years to issue, there may currently be pending applications, unknown to us, that may result in issued patents that cover our technologies or product candidates. We are aware of a significant number of patents and patent applications relating to aspects of our technologies filed by, and issued to, third parties. The existence of third-party patent applications and patents could significantly reduce the scope of coverage of any patents granted to us and limit our ability to obtain meaningful patent protection.

If a third party asserts that we infringe upon its patents or other proprietary rights, we may need to obtain a license, if a license is available, or redesign our technology. We could otherwise face a number of other issues that could seriously harm our competitive position, including:


	•	infringement and other intellectual property claims, which could be costly and time consuming to litigate, whether or not the claims have merit, and which could delay getting our products to market and divert management attention from our business;

	•	substantial damages for past infringement, which we may have to pay if a court determines that our products or technologies infringe upon a competitor’s patent or other proprietary rights;

	•	a court prohibition from selling or licensing our technologies or future products unless the holder licenses the patent or other proprietary rights to us, which it would not be required to do; and

	•	if a license is available from a third party, an obligation to pay substantial royalties or grant cross licenses to our patents or proprietary rights.

Many of our employees were previously employed at specialty chemical, oil and forest products companies, including our competitors or potential competitors. We may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel and be enjoined from certain activities. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize our products, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and demand on management resources.

Our patent applications may not result in issued patents, which may allow competitors to more easily exploit technology similar to ours.

Part of our expected market advantage depends in part on our ability to maintain adequate protection of our intellectual property for our technologies and products and potential products in the United States and other countries. We have adopted a strategy of seeking patent protection in the United States and in foreign countries with respect to certain of the technologies used in or relating to our products and processes. As of June 9, 2011, we had 70 pending original patent application families containing over 2,000 pending claims. These intellectual property claims cover different aspects of our technology, and many of them have been or will be filed both in the United States and in various foreign jurisdictions. These patent applications and granted patent are directed to aspects of our technology and/or to our methods and products that support our business. However, the issuance and enforcement of patents involves complex legal and factual questions. Accordingly, we cannot be certain that the patent applications that we file will result in patents being issued, or that our patent and any patents that may be issued to us will cover our technology or the methods or products that support our business, or afford protection against competitors with similar technology. Moreover, the issuance of a patent is not conclusive as to its validity, scope or enforceability, and competitors might successfully challenge the validity, scope or enforceability of any issued patents should we try to enforce them. In addition, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications will be granted even if U.S. patents are issued.

Our ability to compete may decline if we are required to enforce or defend our intellectual property rights through costly litigation or administrative proceedings.

Unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Identifying unauthorized use of our intellectual property is difficult, because we may be unable to monitor the processes and materials employed by other parties, and the end products of our proprietary technology may be commodities from which it would be difficult to ascertain the methods or materials used in their manufacture. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology,

particularly in foreign countries where enforcement of intellectual property rights is more difficult than in the United States. Proceedings to enforce or defend our intellectual property rights could result in substantial costs, even if the eventual outcome were favorable to us, and would divert both funds and other of our resources from our business objectives. If the outcome of any such proceedings is unfavorable and competitors are able to use our technology without payment to us, our ability to compete effectively could be harmed. Furthermore, the nature of any protection against foreign competition that may be afforded by any patents we may have is often difficult to predict and varies significantly from country to country. Moreover, others may independently develop and obtain patents for technologies that are similar or superior to our technologies. If that happens, we may need to license these technologies, and we may not be able to obtain licenses on reasonable terms, if at all, which could cause harm to our business.

Confidentiality agreements with employees and others may not adequately prevent disclosures of trade secrets and other proprietary information.

We rely in part on trade secret protection to protect our confidential and proprietary information and processes. However, trade secrets are difficult to protect. We have taken measures to protect our trade secrets and proprietary information, but these measures may not be effective. We require new employees and consultants to execute confidentiality agreements upon the commencement of an employment or consulting arrangement with us. These agreements generally require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. Nevertheless, our proprietary information may be disclosed, third parties could reverse engineer our catalyst systems and others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that compete with ours or may use their greater resources to gain market share at our expense.

Our ability to compete successfully will depend on our ability to develop proprietary technologies that produce interchangeable products in large volumes and at costs below the prevailing market prices for our products. Many of our competitors have substantially greater production, financial, research and development, personnel and marketing resources than we do. In addition, certain of our competitors may also benefit from local government programs and incentives that are not available to us. As a result, our competitors may be able to develop competing and/or superior technologies and processes, and compete more aggressively and sustain that competition over a longer period of time than we could. Our technologies and products may be rendered uneconomical or otherwise obsolete by technological advances or entirely different approaches developed by one or more of our competitors. As more companies develop new intellectual property in our markets, the possibility of a competitor acquiring patent or other rights that may limit our products or potential products increases, which could lead to litigation.

In addition, various governments have recently announced a number of spending programs focused on the development of clean technology, including alternatives to petroleum-based fuels and the reduction of carbon emissions. Such spending programs could lead to increased funding for our competitors or the rapid increase in the number of competitors within those markets.

Our limited resources relative to many of our competitors may cause us to fail to anticipate or respond adequately to new developments and other competitive pressures. This failure could reduce our competitiveness and market share, adversely affect our results of operations and financial position, and prevent us from achieving or maintaining profitability.

Risks Related to Securities Markets and Investments in Our Class A Common Stock

No public market for our Class A common stock currently exists and an active trading market may not develop or be sustained following this offering.

Prior to this offering, there has been no public market for our Class A common stock. An active trading market may not develop following the completion of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

Our share price may be volatile and you may be unable to sell your shares at or above the offering price.

The initial public offering price for our shares will be determined by negotiations between us and representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. The market price of shares of our Class A common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:


	•	actual or anticipated fluctuations in our financial condition and operating results;

	•	the position of our cash, cash equivalents and marketable securities;

	•	actual or anticipated changes in our growth rate relative to our competitors;

	•	actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rate;

	•	announcements of technological innovations by us, our collaborators or our competitors;

	•	announcements by us, our customers or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

	•	the entry into, modification or termination of customer contracts;

	•	additions or losses of customers;

	•	additions or departures of key management, scientific or other personnel;

	•	competition from existing technologies and products or new technologies and products that may emerge;

	•	issuance of new or updated research reports by securities or industry analysts;

	•	fluctuations in the valuation of companies perceived by investors to be comparable to us;

	•	disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

	•	changes in existing laws, regulations and policies applicable to our business and products, including RFS2, and the adoption or failure to adopt carbon emissions regulation;

	•	announcement or expectation of additional financing efforts;

	•	sales of our common stock by us, our insiders or our other stockholders;

	•	share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

	•	general market conditions in our industry; and

	•	general economic and market conditions, including the recent financial crisis.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations

often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of shares of our Class A common stock. If the market price of shares of our Class A common stock after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.

Holders of our Class A common stock, which is the stock we are selling in this offering, are entitled to one vote per share, and holders of our Class B common stock are entitled to 10 votes per share. The lower voting power of our Class A common stock may negatively affect the attractiveness of our Class A common stock to investors and, as a result, its market value.

Upon completion of this offering, we will have two classes of common stock: Class A common stock, which is the stock we are selling in this offering and which is entitled to one vote per share, and Class B common stock, which is entitled to 10 votes per share. The difference in the voting power of our Class A common stock and Class B common stock may have the effect of delaying or preventing a change in control of our company otherwise favored by stockholders otherwise holding a majority of our common stock and could diminish the market value of our Class A common stock because of the superior voting rights of our Class B common stock and the power those rights confer.

For the foreseeable future, Khosla Ventures will be able to control the selection of all members of our Board of Directors, as well as virtually every other matter that requires stockholder approval, which will severely limit the ability of other stockholders to influence corporate matters.

Except in certain limited circumstances required by applicable law, holders of Class A common stock and Class B common stock vote together as a single class on all matters to be voted on by our stockholders. Immediately following the completion of this offering, entities affiliated with Khosla Ventures will own 74.8% of our Class B common stock, which, together with the Class A common stock held by them, assuming the purchase of 3,500,000 shares of our Class A common stock that may be acquired in this offering by entities affiliated with Khosla Ventures, will represent 72.4% of the combined voting power of our outstanding Class A common stock and Class B common stock. Under our amended and restated certificate of incorporation that will become effective prior to the completion of this offering, holders of shares of Class B common stock may generally transfer those shares to affiliated entities, without having the shares automatically convert into shares of Class A common stock. Therefore, Khosla Ventures will, for the foreseeable future, be able to control the outcome of the voting on virtually all matters requiring stockholder approval, including the election of directors and significant corporate transactions such as an acquisition of our company, even if they come to own, in the aggregate, as little as 10% of the economic interest of the outstanding shares of our Class A common stock and Class B common stock. Moreover, Khosla Ventures may take actions in their own interests that you or our other stockholders do not view as beneficial. Please read “Principal Stockholders” and “Description of Capital Stock.”

As an example of how Khosla Ventures’ interests may differ from other stockholders, Khosla Ventures has advised us as follows: Khosla Ventures believes that promoting energy independence and a sustainable environment are the most important issues facing society today. Khosla Ventures’ goal is to invest in products and services that will better the lives of as many people as possible by fundamentally altering the way the world produces and consumes energy. In pursuing that goal, Khosla Ventures makes investments and decisions that may give priority to long-term financial returns over short-term financial returns. Khosla Ventures believes that considering environmental, social and other consequences are important in maximizing stockholder value over the long term and that high risk projects may generate the highest long term returns. Further, the objectives and goals of Khosla Ventures relating to its investments may change over time. As a result of the

foregoing, you should be aware that Khosla Ventures may vote its shares of common stock in a way our other stockholders do not view as beneficial.

Investors in our Class A common stock will not have the same protections generally available to stockholders of other Nasdaq-listed companies because we are a “controlled company” within the meaning of the Nasdaq Listing Rules.

Khosla Ventures controls a majority of our outstanding common stock and will continue to control a majority of our common stock upon completion of this offering. As a result, we are a “controlled company” within the meaning of Nasdaq Listing Rule 5615(c). As a controlled company, we qualify for, and our Board of Directors may and intends to rely upon, exemptions from several corporate governance requirements, including requirements that:


	•	a majority of the Board of Directors consist of independent directors;

	•	compensation of officers be determined or recommended to the Board of Directors by a majority of the Board’s independent directors or by a compensation committee comprised solely of independent directors; and

	•	director nominees be selected or recommended to the Board of Directors by a majority of the Board’s independent directors or by a nominating committee that is composed entirely of independent directors.

Additionally, Khosla Ventures will be able to have its nominees represented on our compensation committee and our corporate governance and nominating committee. Accordingly, investors in our Class A common stock will not be afforded the same protections generally as stockholders of other Nasdaq-listed companies for so long as Khosla Ventures’ designees to our Board of Directors represent a majority of our board and determine to rely upon such exemptions. Please read “— For the foreseeable future, Khosla Ventures will be able to control the selection of all members of our Board of Directors, as well as virtually every other matter that requires stockholder approval, which will severely limit the ability of other stockholders to influence corporate matters” for more information on the risks we face in connection with our initial investors’ ability to control the outcome of virtually all stockholder votes.

A significant portion of our total outstanding shares of common stock is restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our Class A common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our Class A common stock. As of April 30, 2011, entities affiliated with Khosla Ventures, entities affiliated with Artis Capital Management, L.P., entities affiliated with Alberta Investment Management Corporation and BIOeCON B.V. beneficially own, collectively, approximately 97.3% of our outstanding common stock. If one or more of them were to sell a substantial portion of the shares they hold, it could cause our stock price to decline. Based on shares outstanding as of April 30, 2011, upon completion of this offering, we will have approximately 38 million outstanding shares of Class A common stock and approximately 62 million outstanding shares of Class B common stock, assuming no exercise of the underwriters’ over-allotment option to purchase additional shares. As of the date of this prospectus, assuming the purchase of 3.5 million shares of our Class A common stock in this offering by entities affiliated with Khosla Ventures, approximately 93 million shares of common stock will be subject to a 180-day contractual lock-up with the underwriters and approximately 46 million shares of common stock will be subject to a 360-day contractual lock-up with the underwriters. Of the shares subject to a contractual lock-up with the underwriters, approximately 43 million shares of common stock also will be subject to a 180-day contractual lock-up with us.

After this offering, holders of an aggregate of approximately 73 million shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

In addition, as of April 30, 2011, there were 14,793,200 shares subject to outstanding options granted under our amended and restated 2007 Stock Option/Stock Issuance Plan that will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements, the lock-up agreements and Rules 144 and 701 under the Securities Act of 1933. We intend to register the shares of Class A common stock issuable upon exercise of these options, plus any additional shares Class A of common stock reserved for future grant that remain unissued under our amended and restated 2007 Stock Option/Stock Issuance Plan. We also intend to register all 9,983,600 shares of Class A common stock that we may issue under the 2011 Long-Term Incentive Plan that we intend to adopt. Once we register these shares, they can be freely sold in the public market upon issuance and once vested, subject to the 180-day lock-up periods under the lock-up agreements described in the “Underwriting” section of this prospectus.

Participation in this offering by entities affiliated with Khosla Ventures would reduce the available public float for our shares.

Entities affiliated with Khosla Ventures and Artis Capital Management, L.P., two of our principal investors, have indicated an interest in purchasing shares of our Class A common stock in this offering at the initial public offering price up to an aggregate of 3,500,000 shares. Because this indication of interest is not a binding agreement or commitment to purchase, these existing investors may elect not to purchase shares in this offering. Assuming an initial public offering price of $20.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, if these existing investors were to purchase all of these shares, they would purchase $70 million of our Class A common stock in this offering.

If entities affiliated with Khosla Ventures are allocated all or a portion of the shares in which they have indicated an interest in this offering and purchase any such shares, such purchase would reduce the available public float for our shares because they would be restricted from selling the shares by lock-up agreements they have entered into with our underwriters and by restrictions under applicable securities laws. As a result, any purchase of shares by entities affiliated with Khosla Ventures in this offering may reduce the liquidity of our Class A common stock relative to what it would have been had these shares been purchased by investors that were not affiliated with us.

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The initial public offering price will be substantially higher than the tangible book value per share of shares of our common stock based on the total value of our tangible assets less our total liabilities immediately following this offering. Therefore, if you purchase shares of our Class A common stock in this offering, you will experience immediate and substantial dilution of approximately $16.97 per share in the price you pay for shares of our Class A common stock as compared to its tangible book value, assuming an initial public offering price of $20.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus. To the extent outstanding options and warrants to purchase shares of common stock are exercised, there will be further dilution. For further information on this calculation, please read “Dilution” elsewhere in this prospectus.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.

The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We have broad discretion in the use of net proceeds from this offering and may not use them effectively.

Although we currently intend to use the net proceeds from this offering in the manner described in “Use of Proceeds,” we will have broad discretion in the application of the net proceeds. Our failure to apply these net proceeds effectively could affect our ability to continue to develop and sell our products and grow our business, which could cause the value of your investment to decline.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

We have never operated as a stand-alone public company. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as related rules implemented by the SEC and The Nasdaq Global Select Market, imposes various requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more expensive for us to maintain director and officer liability insurance.

We do not anticipate paying any cash dividends in the foreseeable future, and accordingly, stockholders must rely on stock appreciation for any return on their investment.

After the completion of this offering, we do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not invest our Class A common stock.

Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our amended and restated certificate of incorporation and our amended and restated bylaws to be effective upon the completion of this offering will contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:


	•	dual class of common stock with each share of Class B common stock entitled to 10 votes while each share of Class A common stock is entitled only to one vote;

	•	authorizing the Board of Directors to issue, without stockholder approval, preferred stock with rights senior to those of our common stock;

	•	authorizing the Board of Directors to amend our bylaws and to fill board vacancies until the next annual meeting of the stockholders;

	•	prohibiting stockholder action by written consent;

	•	limiting the liability of, and providing indemnification to, our directors and officers;

	•	not authorizing our stockholders to call a special stockholder meeting; and

	•	requiring advance notification of stockholder nominations and proposals.

As a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law, which, subject to some exceptions, prohibits “business combinations” between a Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock, for a three-year period following the date that the stockholder became an interested stockholder.

These and other provisions in our amended and restated certificate of incorporation and our amended and restated bylaws to be effective upon the completion of this offering and under Delaware law could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions. Please read “Description of Capital Stock — Common Stock — Voting Rights,” “— Preferred Stock” and “— Anti-Takeover Provisions.”

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs.

In particular, forward-looking statements in this prospectus include statements about:


	•	the size of the potential markets for our gasoline and diesel blendstocks;

	•	the expected production costs and cost-competitiveness of our gasoline and diesel blendstocks;

	•	the anticipated performance attributes of our renewable crude oil and gasoline and diesel blendstocks;

	•	the accuracy of our estimates regarding expenses, future revenue and capital requirements;

	•	the timing of the construction and commencement of operations at our planned commercial production facilities;

	•	achievement of advances in our technology platform and process design, including improvements to our yield;

	•	our ability to produce renewable crude oil and blendstocks at commercial scale;

	•	our ability economically to obtain feedstock;

	•	our ability to locate production facilities near low-cost, abundant and sustainable feedstock;

	•	the future price and volatility of petroleum-based products and of our current and future feedstocks;

	•	government regulatory certification, including certification of our gasoline and diesel blendstocks as cellulosic biofuels and registration of our blendstocks with the U.S. Environmental Protection Agency as fuels, and industry acceptance of our gasoline and diesel blendstocks, as well as certification, registration and acceptance of our blendstocks for use in jet fuel;

	•	government policymaking and incentives relating to renewable fuels;

	•	our ability to obtain and retain potential customers for our gasoline and diesel blendstocks;

	•	our ability to hire and retain skilled employees;

	•	our ability to obtain and maintain intellectual property protection for our products and processes; and

	•	the ability of our competitors, many of whom have greater resources than we do, to offer alternatives to our gasoline and diesel blendstocks.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a competitive and rapidly changing environment in which new risks emerge from time to time. It is not possible for our management to predict all risks. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee that the events and circumstances reflected in the forward-looking statements will occur or be achieved. Moreover, neither we nor any other person assumes responsibility for the accuracy and

completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus, except to the extent required by law.

You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity and performance may be materially different from what we expect.

MARKET, INDUSTRY AND OTHER DATA

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market opportunity and market size, is based on the most recently available information of which we are aware from various publicly available sources that are not affiliated with us, including the U.S. Energy Information Administration, PIRA Energy Group, RISI, Inc. and Timber Mart-South, on assumptions that we have made that are based on those data and other similar sources and on our knowledge of the markets for our renewable crude oil and gasoline and diesel blendstocks. We believe that the market opportunity and market size information included in this prospectus is generally reliable; however, these data involve a number of assumptions and limitations. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

USE OF PROCEEDS

We estimate that our net proceeds from the sale of 10,000,000 shares of Class A common stock in this offering will be approximately $185.6 million, or approximately $213.8 million if the underwriters’ option to purchase additional shares is exercised in full, based on an assumed initial public offering price of $20.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting estimated underwriting discounts and commissions and estimated offering expenses that we must pay in connection with this offering. Each $1.00 increase or decrease in the assumed initial public offering price would increase or decrease, as applicable, our cash and cash equivalents, working capital, total assets and total stockholders’ equity by approximately $9.4 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds of this offering to fund a portion of the capital expenditures, including front-end engineering and procurement services and long-lead equipment, for our planned first standard commercial production facility in Newton, Mississippi. We intend to use any remaining net proceeds for general corporate purposes, including the costs associated with being a public company. Until we use the net proceeds of this offering, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our capital stock, and we do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently expect to retain all future earnings, if any, in the operation and expansion of our business and debt repayment. Any future determination relating to our dividend policy will be at the discretion of our Board of Directors and will depend on our results of operations, financial condition, capital requirements and other factors deemed relevant by our Board of Directors.

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2011:


	•	on an actual basis;

	•	on an as adjusted basis to give effect to:


	•	borrowings under our interest-free loan facility from the Mississippi Development Authority from April 1, 2011 through June 9, 2011 of $26.6 million; and


	•	the issuance of our Series C convertible preferred stock in April 2011 in the amount of $55.0 million; and


	•	on an as further adjusted basis to give additional effect to:


	•	the automatic conversion of all outstanding shares of our Series A and Series A-1 convertible preferred stock into 44,571,576 shares of Class B common stock and of all outstanding shares of our Series B and Series C convertible preferred stock into 27,917,302 shares of Class A common stock upon the completion of this offering;


	•	the effectiveness of our amended and restated certificate of incorporation in Delaware upon the completion of this offering; and


	•	the issuance by us of 10,000,000 shares of Class A common stock in this offering and the application of our estimated net proceeds from this offering as set forth under “Use of Proceeds” as if this offering occurred on March 31, 2011.

You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.


	March 31, 2011
				As			As Further
	Actual			Adjusted			Adjusted
	(In thousands, except share and per share data) (Unaudited)

Cash and cash equivalents(1)	$	21,947		$	103,560		$	289,135

Convertible preferred stock warrant liability	$	4,895		$	4,895		$	—
Long-term debt, including current portion, net of discount		9,234			35,847			35,847
Series A convertible preferred stock, $0.0001 par value, 24,000,000 shares authorized, 24,000,000 shares issued and outstanding, actual and as adjusted; no shares authorized, issued or outstanding, as further adjusted		4,360			4,360			—
Series A-1 convertible preferred stock, $0.0001 par value, 25,600,000 shares authorized, 20,571,576 shares issued and outstanding, actual and as adjusted; no shares authorized, issued or outstanding, as further adjusted		10,024			10,024			—
Series B convertible preferred stock, $0.0001 par value, 25,000,000 shares authorized, 24,479,802 shares issued and outstanding, actual and as adjusted; no shares authorized, issued or outstanding, as further adjusted		120,000			120,000			—
Series C convertible preferred stock, $0.0001 par value, no shares and 13,000,000 shares authorized, actual and as adjusted, respectively; no shares and 11,219,908 issued and outstanding, actual and as adjusted, respectively; no shares authorized, issued or outstanding, as further adjusted		—			55,000			—
Stockholders’ equity (deficit):
Class A common stock, $0.0001 par value, 112,100,000 shares authorized, 70,000 shares issued and outstanding, actual and as adjusted; 250,000,000 shares authorized and 37,987,302 shares issued and outstanding, as further adjusted		—			—			4
Class B common stock (formerly common stock), $0.0001 par value, 72,000,000 shares authorized, 17,277,120 shares issued and outstanding, actual and as adjusted; 72,000,000 shares authorized and 61,848,696 shares issued and outstanding, as further adjusted		2			2			6
Preferred stock, $0.0001 par value, no shares authorized, issued and outstanding, actual; 2,000,000 shares authorized and no shares issued and outstanding, as adjusted and as further adjusted		—			—			—
Additional paid-in capital(1)		4,908			4,908			384,754
Deficit accumulated during the development stage		(79,717	)		(79,717	)		(79,717	)

Total stockholders’ equity (deficit)(1)		(74,807	)		(74,807	)		305,047

Total capitalization(1)	$	73,706		$	155,319		$	340,894


(1)		A $1.00 increase (decrease) in the assumed initial public offering price of $20.00 per share, (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization


		by $9.4 million, assuming no change in the number of shares offered by us as set forth on the cover page of this prospectus and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The table above excludes the following:


	•	8,041,880 shares of our Class A common stock issuable upon the exercise of options to purchase shares of Class A common stock outstanding as of March 31, 2011, at a weighted average exercise price of $1.98 per share;

	•	7,049,454 shares of our Class B common stock issuable upon the exercise of options to purchase shares of Class B common stock outstanding as of March 31, 2011, at a weighted average exercise price of $0.08375 per share;

	•	456,822 shares of our Class A common stock issuable upon the exercise of warrants outstanding as of March 31, 2011, at a weighted average exercise price of $2.152 per share;


	•	18,750 shares (assuming a conversion price that is 80% of an assumed initial public offering price of $20.00 per share, the midpoint of the price range set forth on the cover page of this prospectus) of our Class A common stock issuable upon the exercise of 61,200 warrants that we were required to issue as of March 31, 2011 at a weighted-average exercise price of $4.902 per share;


	•	411,312 shares of our Class B common stock issuable upon the exercise of warrants outstanding as of March 31, 2011 at a weighted-average exercise price of $0.4863 per share;

	•	2,199,936 shares of our Class A common stock reserved for future issuance as of March 31, 2011 under our amended and restated 2007 Stock Option/Stock Issuance Plan;

	•	1,708,266 shares of our Class B common stock reserved for future issuance as of March 31, 2011 under our amended and restated 2007 Stock Option/Stock Issuance Plan; and

	•	9,983,600 shares of our Class A common stock reserved for future issuance under our 2011 Long-Term Incentive Plan, which will become effective upon the completion of this offering.

Conversion of Our Series C Convertible Preferred Stock

Upon completion of this offering, all outstanding shares of our Series A and Series A-1 convertible preferred stock will convert automatically into shares of our Class B common stock and all outstanding shares of our Series B and Series C convertible preferred stock will convert into shares of our Class A common stock. In this prospectus, we have assumed that our Series C convertible preferred stock will convert into shares of our Class A common stock a conversion price that is 80% of an assumed initial public offering price of $20.00 per share (the midpoint of the price range set forth on the cover page of this prospectus).

Each share of Series C convertible preferred stock is convertible into the number of shares of Class A common stock determined by dividing the original issue price of the Series C convertible preferred stock of $4.902 per share by the conversion price of the Series C convertible preferred stock in effect at the time of conversion. The initial conversion price for the Series C convertible preferred stock is $4.902, resulting in an initial conversion ratio that is one share of Series C convertible preferred stock for one share of Class A common stock. However, in addition to the conversion price adjustments that are applicable to the other series of preferred stock, including adjustments in connection with stock splits and dilutive events, the conversion price of the Series C convertible preferred stock adjusts upon the closing of a qualifying initial public offering or a deemed liquidation event, which we refer to as a pricing event. If the qualifying initial public offering or pricing event closes on or before October 31, 2011, the conversion price of the Series C convertible preferred stock will be adjusted to equal 80% of the offering price per share or price per share paid by investors in the qualifying initial public offering or pricing event; however, the conversion price will be not less than $4.902 per share.

By way of example, the following table shows the effect of various initial public offering prices within the price range set forth on the cover page of this prospectus, on the Series C convertible preferred stock

conversion ratio and on our capitalization following this offering on an as further adjusted basis to reflect the applicable conversion ratio adjustments and as further adjusted assumptions set forth in the capitalization table above. The initial public offering prices shown below are hypothetical and illustrative, and assume that this offering is completed on or before October 31, 2011.


						March 31, 2011
						As Further Adjusted
						Total Shares of
		Series C				Class A Common
		Convertible		Series C		Stock Issuable
		Preferred Stock		Convertible		upon Conversion
		to Class A		Preferred Stock		of Series C		Total Shares
		Common Stock		to Class A		Convertible		of Class A
Assumed Initial Public		Conversion Price		Common Stock		Preferred Stock(2)		Common Stock
Offering Price($)		($)(1)		Conversion Ratio		(e) = (c)*		Outstanding After
(a)		*(b) = (a)80%**		(c) = $4.902/(b)		11,219,908		This Offering(3)

$	19.00	$	15.20		1:0.32250		3,618,420		38,168,222
$	19.50	$	15.60		1:0.31423		3,525,640		38,075,442
$	20.00	$	16.00		1:0.30638		3,437,500		37,987,302
$	20.50	$	16.40		1:0.29890		3,353,657		37,903,459
$	21.00	$	16.80		1:0.29179		3,273,808		37,823,610


(1)		For purposes of the table set forth above, we have assumed that the offering will close on or before October 31, 2011, and have therefore assumed that the conversion price of the Series C convertible preferred stock will be adjusted to an amount equal to 80% of the offering price per share or price per share paid by investors in the offering.

(2)		Pursuant to our amended and restated certificate of incorporation, the number of shares of Class A common stock that each holder of Series C convertible preferred stock will be entitled to receive upon conversion thereof will be rounded down to the nearest whole share and each holder will receive cash in lieu of any fractional share that it would otherwise be entitled to receive. For purposes of the table set forth above, the number of shares of Class A common stock issuable to each holder upon conversion has been rounded down to the nearest whole share to eliminate such fractional shares.

(3)		Excludes:


	•	8,041,880 shares of our Class A common stock issuable upon the exercise of options to purchase shares of Class A common stock outstanding as of March 31, 2011, at a weighted average exercise price of $1.98 per share;

	•	456,822 shares of our Class A common stock issuable upon the exercise of warrants outstanding as of March 31, 2011, at a weighted average exercise price of $2.152 per share; and


	•	18,750 shares (assuming a conversion price that is 80% of an assumed initial public offering price of $20.00 per share, the midpoint of the price range set forth on the cover page of this prospectus) of our Class A common stock issuable upon the exercise of 61,200 warrants that we were required to issue as of March 31, 2011 at a weighted-average exercise price of $4.902 per share.

DILUTION

If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our Class A common stock and the pro forma as adjusted net tangible book value per share of our Class A common stock and Class B common stock after this offering.

Our pro forma net tangible book value as of March 31, 2011 was $62.1 million, or $0.69 per share of Class A common stock and Class B common stock. Pro forma net tangible book value per share represents total tangible assets less total liabilities, divided by the number of outstanding shares of Class A common stock and Class B common stock on March 31, 2011, after giving effect to the conversion of all outstanding shares of convertible preferred stock into shares of Class A common stock and Class B common stock as if the conversion occurred on March 31, 2011 (including our Series C convertible preferred stock issued in April 2011).

Our pro forma as adjusted net tangible book value as of March 31, 2011, as adjusted for the issuance of $55 million of our Series C convertible preferred stock in April 2011, after giving effect to the sale by us of 10,000,000 shares of Class A common stock in this offering at an assumed initial public offering price of $20.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, would have been approximately $302.7 million, or $3.03 per share of Class A common stock and Class B common stock. This represents an immediate increase in pro forma as adjusted net tangible book value of $2.34 per share to existing stockholders and an immediate dilution of $16.97 per share to new investors, or approximately 84.9% of the assumed initial public offering price of $20.00 per share. The following table illustrates this per share dilution:


Assumed initial public offering price per share			$	20.00
Pro forma net tangible book value per share of Class A common stock and Class B common stock as of March 31, 2011, before giving effect to this offering	$	0.69
Increase in pro forma net tangible book value per share attributed to new investors purchasing shares in this offering		2.34

Pro forma as adjusted net tangible book value per share after this offering				3.03

Dilution per share to investors in this offering			$	16.97

A $1.00 increase (decrease) in the assumed initial public offering price of $20.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) our pro forma as adjusted net tangible book value by $9.4 million, the pro forma as adjusted net tangible book value per share by $0.10 per share and the dilution in the pro forma net tangible book value to new investors in this offering to $17.87 per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value will increase to $3.27 per share, representing an immediate increase to existing stockholders of $2.58 per share and an immediate dilution of $16.73 per share to new investors.

The following table summarizes, on a pro forma basis as of March 31, 2011 (giving effect to the conversion of all shares of our convertible preferred stock into shares of Class A common stock and Class B common stock), the number of shares of Class A common stock and Class B common stock purchased from us, the total consideration paid to us and the average price paid per share by existing stockholders and by new investors purchasing Class A common stock in this offering at an assumed initial public offering price of

$20.00 per share (the midpoint of the price range set forth on the cover page of this prospectus), before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.


	Shares Purchased					Total Consideration					Average Price
	Number		Percent			Amount		Percent			per Share
	(In thousands other than percentages and per share data)

Existing stockholders		89,836		90	%	$	119,472		37.4	%	$	1.33
Investors participating in this offering		10,000		10			200,000		62.6			20.00

Total		99,836		100	%	$	319,472		100	%

A $1.00 increase (decrease) in the assumed initial public offering price of $20.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) total consideration paid by new investors by $10.0 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own 88.7% and our new public investors would own 11.3% of the total number of shares of our Class A common stock and Class B common stock outstanding upon the completion of this offering.

The discussion and tables in this section regarding dilution are based on 27,987,302 shares of Class A common stock and 61,848,696 shares of Class B common stock issued and outstanding as of March 31, 2011, which numbers reflect the conversion of all of our Series A and Series A-1 convertible preferred stock into an aggregate of 44,571,576 shares of our Class B common stock and the conversion of all of our Series B and Series C convertible preferred stock (issued in April 2011) into an aggregate of 27,917,302 shares of our Class A common stock, assuming that the Series C convertible preferred stock converts into shares of Class A common stock a conversion price that is 80% of an assumed initial public offering price of $20.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) (see “Capitalization — Conversion of Our Series C Convertible Preferred Stock” for conversion ratio adjustments that may be applicable upon future events, such as the completion of this offering). The number of shares of our Class A common stock and Class B common stock to be outstanding after this offering excludes:


	•	8,041,880 shares of our Class A common stock issuable upon the exercise of options to purchase shares of Class A common stock outstanding as of March 31, 2011, at a weighted average exercise price of $1.98 per share;

	•	7,049,454 shares of our Class B common stock issuable upon the exercise of options to purchase shares of Class B common stock outstanding as of March 31, 2011, at a weighted average exercise price of $0.08375 per share;

	•	456,822 shares of our Class A common stock issuable upon the exercise of warrants outstanding as of March 31, 2011, at a weighted average exercise price of $2.152 per share;


	•	18,750 shares (assuming a conversion price that is 80% of an assumed initial public offering price of $20.00 per share, the midpoint of the price range set forth on the cover page of this prospectus) of our Class A common stock issuable upon the exercise of 61,200 warrants that we were required to issue as of March 31, 2011 at a weighted-average exercise price of $4.902 per share;


	•	411,312 shares of our Class B common stock issuable upon the exercise of warrants outstanding as of March 31, 2011 at a weighted-average exercise price of $0.4863 per share;

	•	2,199,936 shares of our Class A common stock reserved for future issuance as of March 31, 2011 under our amended and restated 2007 Stock Option/Stock Issuance Plan;

	•	1,708,266 shares of our Class B common stock reserved for future issuance as of March 31, 2011 under our amended and restated 2007 Stock Option/Stock Issuance Plan; and

SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents our selected consolidated financial data for the periods indicated. The summary consolidated statement of operations data for the years ended December 31, 2008, 2009 and 2010 and the summary consolidated balance sheet data as of December 31, 2009 and 2010 are derived from our audited consolidated financial statements that are included elsewhere in this prospectus. The summary consolidated statement of operations data for the three months ended March 31, 2010 and 2011 and the summary condensed consolidated balance sheet data as of March 31, 2010 are derived from our unaudited interim condensed consolidated financial statements that are included elsewhere in this prospectus. The summary consolidated statement of operations data for the period from July 23, 2007 (date of inception) through December 31, 2007 and the summary consolidated balance sheet data as of December 31, 2007 and 2008 are derived from our audited consolidated financial statements not included elsewhere in this prospectus. You should read the summary of our consolidated financial data set forth below together with the more detailed information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes appearing elsewhere in this prospectus. Our historical results presented below are not necessarily indicative of financial results to be achieved in the future.


	July 23, 2007
	(Date of
	Inception)												Three Months
	through												Ended
	December 31,			Years Ended December 31,									March 31,
	2007			2008			2009			2010			2010			2011
	(In thousands, except per share amounts)

Consolidated Statement of Operations Data:
Research and development expenses	$	(196	)	$	(3,643	)	$	(9,961	)	$	(22,042	)	$	(4,381	)	$	(7,271	)
General and administrative expenses		(277	)		(1,867	)		(2,987	)		(8,083	)		(1,226	)		(4,189	)
Depreciation and amortization expense		(15	)		(178	)		(688	)		(1,656	)		(279	)		(523	)

Loss from operations		(488	)		(5,688	)		(13,636	)		(31,781	)		(5,886	)		(11,983	)

Interest income		—			71			65			34			—			—
Beneficial conversion feature expense		—			—			—			(10,000	)		—			—
Interest expense, net of amounts capitalized		—			—			(242	)		(1,812	)		(367	)		—
Foreign currency gain (loss)		16			(236	)		(215	)		—			8			—
Loss from change in fair value of warrant liability		—			—			—			(2,365	)		—			(1,410	)

Loss before income taxes		(472	)		(5,853	)		(14,028	)		(45,924	)		(6,245	)		(13,393	)
Income tax expense		—			(13	)		(31	)		(3	)		—			—

Net loss	$	(472	)	$	(5,866	)	$	(14,059	)	$	(45,927	)	$	(6,245	)	$	(13,393	)

Net loss per share of common stock, basic and diluted(1)	$	(0.02	)	$	(0.10	)	$	(0.24	)	$	(0.56	)	$	(0.11	)	$	(0.16	)

Weighted-average shares of common stock outstanding, basic and diluted(1)		14,400			14,400			14,400			15,382			14,774			16,330

Pro forma net loss per share of common stock, basic and diluted (unaudited)(1)	$	(0.02	)	$	(0.13	)	$	(0.24	)	$	(0.61	)	$	(0.11	)	$	(0.16	)

Weighted-average common shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)(1)		29,040			45,084			58,972			74,722			59,346			85,381


												As of
	As of December 31,											March 31,
	2007		2008			2009			2010			2011
	(In thousands)

Consolidated Balance Sheet Data
Cash and cash equivalents	$	1,310	$	7,061		$	5,176		$	51,350		$	21,947
Property, plant and equipment, net		—		2,506			10,526			34,880			55,969
Total assets		3,956		12,718			18,522			88,841			82,213
Long-term convertible promissory note to stockholder		—		—			15,000			—			—
Long-term debt, including current portion		—		—			4,049			9,517			9,234
Convertible preferred stock		1,444		14,384			14,384			134,384			134,384
Total stockholders’ equity (deficit)		2,127		(3,646	)		(17,252	)		(62,123	)		(74,807	)


(1)		See Note 2 to our consolidated financial statements appearing elsewhere in this prospectus for an explanation of the method used to calculate (a) net loss per share of common stock, basic and diluted, (b) pro forma net loss per share of common stock, basic and diluted and (c) weighted-average number of shares used in the computation of the per share amounts.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the other financial information appearing elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors, including those discussed below and those discussed in the section entitled “Risk Factors” included elsewhere in this prospectus. Due to the fact that we have not generated any revenue, we believe that the financial information contained in this prospectus is not indicative of, or comparable to, the financial profile that we expect to have if and when we begin to generate revenue. Except to the extent required by law, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Overview

We were incorporated and commenced operations in July 2007. Since our inception, we have operated as a development stage company, performing extensive research and development to develop, enhance, refine and commercialize our biomass-to-renewable fuel technology platform. During this time, we have demonstrated the efficacy and scalability of our biomass fluid catalytic cracking, or BFCC, process, attaining progressive technology milestones through laboratory, pilot unit and demonstration unit environments.

To demonstrate the scalability of our BFCC process from pilot scale, we have constructed a demonstration scale unit that represents a 400 times capacity increase over our pilot unit. Our demonstration unit has amassed over 3,000 hours of operation and produced over 32,000 gallons of renewable crude oil to date. We have increased our overall process yield of biomass-to-renewable fuel from approximately 17 gallons of blendstock per bone dry ton of biomass, or BDT, to approximately 67 gallons per BDT. Our research and development efforts are focused on increasing this yield to approximately 92 gallons per BDT.

We have entered our commercialization phase and commenced construction of our initial-scale commercial production facility in Columbus, Mississippi in the first quarter of 2011. Going forward, we intend to construct our larger standard commercial production facilities, beginning in the third quarter of 2012 with our first planned facility in Newton, Mississippi. These standard commercial production facilities are being designed to utilize a centralized hydrotreating facility rather than dedicated, standalone hydrotreaters such as the one being constructed at our Columbus facility. By employing larger plant designs and shared hydrotreating facilities, we expect to be able to more effectively allocate our fixed costs and stage our capital program to reduce the capital intensity of our commercial expansion. However, these projects will entail significant capital investment. Our initial-scale commercial production facility will be financed in part through a $75 million interest-free loan from the Mississippi Development Authority. We have entered into agreements with Hunt Refining Company, or Hunt, Catchlight Energy LLC, or Catchlight, and FedEx Corporate Services, Inc., or FedEx, for the purchase of the gasoline, diesel and fuel oil blendstocks produced from our initial-scale commercial production facility. We intend to utilize proceeds from this offering to fund a portion of the capital expenditures for our first standard commercial production facility in Newton. We plan to fund the remaining construction costs of the Newton facility with debt from one or more public or private sources. Please read “— Liquidity and Capital Resources.”

Until recently, we have focused our efforts on research and development, and we have yet to generate revenue. As a result, we had generated $63.6 million of operating losses and an accumulated deficit of

$79.7 million from our inception through March 31, 2011. We expect to continue to incur operating losses through at least 2013 as we continue into the commercialization stage of our business.

Based on the technological and operational milestones we have achieved to date, we believe that when we are able to commence commercial production at our planned first standard commercial production facility, primarily using Southern Yellow Pine whole tree chips, we will be able to produce gasoline and diesel blendstocks without government subsidies on a cost-competitive basis with petroleum-based blendstocks at current pricing. Our proprietary catalyst systems, reactor design and refining processes have achieved yields of renewable fuel products of approximately 67 gallons per BDT in our demonstration unit that we believe would allow us to produce gasoline and diesel blendstocks today at a per-unit unsubsidized production cost below $1.80 per gallon, if produced in a standard commercial production facility with a feedstock processing capacity of 1,500 BDT per day. This unsubsidized production cost equates to less than $550 per metric ton, $0.50 per liter and $1.10 per gallon of ethanol equivalent. This per-unit cost assumes a price for Southern Yellow Pine clean chip mill chips of $72.30 per BDT and anticipated operating expenses at the increased scale and excludes cost of financing and facility depreciation. Over time, we expect to improve our overall process yield by enhancing our technology and to significantly reduce our feedstock costs by using lower grade chips, logging residues, branches and bark and lower our operating expenses through various initiatives. For the month of May 2011, the average U.S. Gulf Coast spot prices for conventional gasoline and ultra-low sulfur diesel were $3.024 and $3.001 per gallon, respectively. For the month of May 2011, market prices for corn ethanol, biodiesel and sugarcane ethanol were $2.587, $5.148 and $3.889 per gallon, respectively.

Our Commercialization Plan

We commenced construction of our initial-scale commercial production facility in Columbus, Mississippi in the first quarter of 2011. This facility is designed to process 500 BDT of feedstock per day. We expect that constructing our Columbus facility will provide us with a practical basis for optimizing our future standard commercial production facilities, which we anticipate will be approximately three times larger than our Columbus facility to allow for optimal allocation of our fixed costs.

Although we expect that this initial-scale commercial production facility ultimately will be able to accept a wide variety of biomass types, we have selected Southern Yellow Pine whole tree chips because of their abundant, sustainable supply and generally stable pricing history. We estimate that this initial-scale commercial production facility, including a hydrotreater, will cost approximately $190 million to complete and place into service, with an estimated 15% to 20% of these costs attributable to the hydrotreater. We are financing our initial-scale commercial production facility with a combination of existing cash on hand, including $55 million of proceeds from the April 2011 sale of our Series C convertible preferred stock to existing investors, and a $75 million interest-free loan from the Mississippi Development Authority. Please read “— Liquidity and Capital Resources” for more information.

Our Newton facility is being designed to host a two-train centralized hydrotreater that will be constructed in phases, with each train expected to support up to two standard commercial production facilities. Based on future market conditions and operational metrics achieved at Columbus and Newton, our plan is to construct additional standard commercial production facilities in Mississippi and other Southeastern states. These facilities are expected to be located near our Newton facility and to share the Newton hydrotreater trains to maximize the efficiency of our gasoline, diesel and fuel oil blendstock finishing and distribution process.

We estimate that the construction costs for each of our planned standard commercial production facilities will average approximately $350 million, depending on each facility’s unique design requirements. We estimate that construction costs for our hydrotreaters will average approximately $110 million per train. By staging the expansion of our standard commercial facilities in discrete facility-by-facility projects that are independently viable, we believe that we will have flexibility to plan our growth in response to capital availability and market conditions.

We intend to utilize proceeds from this offering to fund a portion of the capital expenditures, including front-end engineering and procurement services and long-lead equipment, for our planned first standard commercial production facility in Newton. We plan to fund the remaining construction costs of the Newton facility with debt from one or more public or private sources, including commercial banks, existing investors and federal, state and local governments.

Over the longer term, we plan to accelerate our expansion through the use of “copy exact” principles predicated on the use of pre-engineered, modular, skid-mounted components that can be assembled quickly in a limited number of preset configurations. We expect that our copy exact strategy will enable us to implement operational efficiencies systematically across all of these facilities since they will involve substantially similar components assembled in familiar configurations.

Fundamentals of Our Business

Our biomass-to-renewable fuel technology platform converts biomass into hydrocarbon-based oil by combining our proprietary catalyst systems with well-established fluid catalytic cracking, or FCC, processes. Expanding on FCC processes routinely employed in the petroleum refining industry, our biomass fluid catalytic cracking, or BFCC, process allows us to introduce solid biomass into a modified FCC system where it contacts our proprietary catalyst. The result is a hydrocarbon-based oil that can be upgraded through standard hydrotreating equipment into transportation fuels, including gasoline and diesel blendstocks, that are fungible with petroleum blendstocks.

Although we have not generated any revenue to date, we expect to generate revenue from sales of our gasoline and diesel blendstocks from our planned commercial production facilities. We may also generate revenue from the sale of renewable identification numbers, or RINs, that we will retain if we sell our fuel blendstocks to customers who are not obligated parties under the Renewable Fuel Standard program, or RFS2. We expect that our gasoline and diesel blendstocks will have an equivalence value of between 1.5 to 1.7. Equivalence value equates to the number of RIN credits per gallon.

We expect that our cost of goods sold will consist of the following:


	•	Feedstock. The largest component of our cost of goods sold will be the cost of procuring and preparing the biomass we feed into our BFCC process. Our BFCC process can convert a variety of biomass feedstock, including woody biomass, such as whole tree chips, logging residues, branches and bark, agricultural residues, such as sugarcane bagasse, and energy crops, such as switchgrass and miscanthus. Our feedstock prices are a function of feedstock acquisition, harvesting, transportation and processing costs. We have selected Southern Yellow Pine whole tree chips as our primary feedstock because of their abundant supply and generally stable pricing history. For the first quarter of 2011, the average cost of delivered, clean chip mill chips from Southern Yellow Pine was $72.30 per BDT, according to Timber Mart-South. Our actual feedstock costs may be higher or lower, depending on then-prevailing market conditions. We plan to reduce our feedstock costs by increasing our use of lower grade woody biomass, such as logging residues, branches and bark, at our initial commercial production facilities.

	•	Facility-related fixed costs. As an industrial process, our facilities will require a baseline level of staffing consisting of process engineering, monitoring staff, testing personnel, health safety and environmental personnel and maintenance personnel. Other fixed costs include maintenance materials and casualty and liability insurance, as well as ad valorem and property taxes.


	•	Other variable costs. We expect to use natural gas in our BFCC process. We also expect to incur other variable costs for our catalysts for our biomass conversion and hydrotreating processes.

Our largest expenditures are the capital costs associated with the construction of our initial commercial production facilities and planned facility turnarounds. These costs are comprised of land acquisition, site preparation, utilities, permitting, facility construction, start-up and contingency costs and related financing costs. We expect that the depreciation of these facilities costs will be included in cost of goods sold.

Our operating expenses currently consist primarily of research and development expenses and general and administrative expenses.

We expect that the principal drivers of our gross and operating margins will be the following:


	•	Economies of scale. We expect to realize incidental cost savings benefits as a result of the increased scale of our planned standard commercial production facilities. We plan to expand the throughput capacity from 500 BDT per day in our initial-scale commercial production facility to 1,500 BDT per day in our subsequent planned standard commercial production facilities. As a result, we expect to be able to spread the fixed baseline facilities costs and personnel costs across a larger volume of production, achieving a lower per-unit labor cost.

	•	Learning curve efficiencies. Engineering principles indicate a downward trend in costs and construction time of like-kind capital projects completed in progression. As we begin construction of our planned commercial production facilities, we expect to identify cost and time savings that we can employ in subsequent projects to reduce our overall capital investment per unit over time. In the long term, by largely replicating our subsequent commercial production facilities, we hope to further reduce our capital investment and operating costs through replication and familiarity.

	•	Conversion yield. Conversion yield is the barrel of saleable products achieved from our process for each BDT of feedstock. Conversion yield is maximized primarily through optimization of our catalyst systems that increase the proportion of hydrogen and carbon in the biomass feedstock that are converted into saleable products rather than coke, water or gaseous byproducts. We have increased our overall process yield of blendstocks from approximately 17 gallons per BDT to approximately 67 gallons per BDT. Our research and development efforts are focused on increasing this yield to approximately 92 gallons per BDT.

	•	Composition of blendstock fractions. Blendstock fractions refer to the relative composition of the blendstocks derived from processing crude oils. Within limits, we can adjust the fractions of gasoline, diesel and fuel oil blendstocks produced from our renewable crude oil, which may be tailored to potential customer requirements and pricing opportunities for these components. In our demonstration unit, we have varied the volume output of gasoline blendstock from 37% to 61%, diesel blendstock from 31% to 55% and fuel oil blendstock from 8% to 9%.

Financial Operations Overview

Revenue and cost of goods sold. To date, we have not generated any revenue or incurred any cost of goods sold, and we do not expect to do so until at least the second half of 2012.

Research and Development Expenses. Research and development expenses consist primarily of expenses for personnel focused on increasing the scale of our operations and the yield of our blendstocks. These expenses also consist of facilities costs and other related overhead and lab materials. We expense all of our research and development costs as they are incurred. In the near term, we expect to hire additional employees, as well as incur contract-related expenses, as we continue to invest in the development of our proprietary biomass-to-renewable fuel technology platform. Accordingly, we expect that our research and development expenses will continue to increase.

General and Administrative Expenses. General and administrative expenses consist primarily of personnel-related expenses related to our executive, legal, finance, human resource and information technology functions, as well as fees for professional services and allocated facility overhead expenses. These expenses

also include costs related to our sales function, including marketing programs and other allocated costs. Professional services consist principally of external legal, accounting, tax, audit and other consulting services. We expect general and administrative expenses to increase as we incur additional costs related to operating as a public company, including increased legal and accounting fees, costs of compliance with securities, corporate governance and other regulations, investor relations expenses and higher insurance premiums, particularly those related to director and officer insurance. In addition, we expect to incur additional costs as we hire personnel and enhance our infrastructure to support the anticipated growth of our business.

Depreciation and Amortization Expense. Depreciation and amortization expense consists of depreciation of our property, plant and equipment over their estimated useful lives and amortization of our intangible assets, consisting primarily of purchased biomass conversion technology and technology licenses, which are amortized using the straight-line method over their estimated useful lives.

Interest Income. Interest income consists primarily of interest income earned on investments and cash balances. We expect our interest income to fluctuate in the future with changes in average investment balances and market interest rates.

Beneficial Conversion Feature Expense. In August 2009, we entered into a $15.0 million non-interest bearing convertible promissory note, or the Note, which included a beneficial conversion feature, with our principal stockholder, Khosla Ventures. The value of the beneficial conversion feature was not readily determinable upon issuance of the Note because the conversion feature was contingent upon the occurrence of an undetermined future financing transaction and neither the timing nor value of such transaction could be estimated at the time the Note was issued. In April 2010, we executed a financing transaction that required the Note to be converted into 2.6 million shares of our Series B convertible preferred stock. We recorded a $10.0 million expense at the time of that conversion to reflect the beneficial conversion feature associated with the conversion of the Note to convertible preferred stock.

Interest Expense. We incur interest expense in connection with our outstanding equipment and business loans. We capitalize interest on long-term construction projects relating to operating assets with a total expected expenditure generally in excess of $10.0 million. We capitalized interest relating to the construction of our initial-scale commercial production facility in Columbus, Mississippi of approximately $0.1 million for the year ended December 31, 2010 and $0.3 million for the three months ended March 31, 2011. To the extent our planned commercial production facilities are funded with debt, we anticipate capitalizing most of the interest costs that we incur.

Foreign Currency Loss. All of our foreign currency gains and losses were incurred in relation to our subsidiary KiOR B.V. (in liquidation). The functional currency of KiOR B.V. (in liquidation) is the Euro. As of December 31, 2010, all of the operations of KiOR B.V. were combined with the operations of KiOR, Inc., and KiOR B.V. is in the process of liquidation. At this time, we have no other foreign operations.

Loss from Change in Fair Value of Warrant Liability. Our outstanding warrants to purchase shares of our convertible preferred stock are required to be classified as current liabilities and to be adjusted to their fair value at the end of each reporting period. Any changes in the fair value of these warrant liabilities are required to be recorded as income or expense, as applicable, in the period that the change in value occurs.

Income Tax Expense. Since inception, we have incurred net losses and have not recorded any U.S. federal and state income tax provisions. We have a full valuation allowance for our net deferred tax assets because we have incurred losses since inception. Our income tax provision relates to current taxes payable in the Netherlands with respect to KiOR B.V. (in liquidation).

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. We base our estimates and assumptions on historical experience and on various other

factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. The results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies involve significant areas of management’s judgments and estimates in the preparation of our financial statements.

Impairment of Long-Lived Assets and Intangible Assets

We assess impairment of long-lived assets, including intangible assets, on at least an annual basis and test long-lived assets for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to, significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; a forecast of continuing losses associated with the use of the asset; or expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.

Recoverability is assessed by using undiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets. If the undiscounted future net cash flows are less than the carrying amount of the asset, the asset is deemed impaired. The amount of the impairment is measured as the difference between carrying value and the fair value of the asset.

The majority of our long-lived assets, other than intangible assets, consist of our pilot unit and demonstration unit. Both of these units are variations of common refinery equipment used in technology development and scale-up of processes that have been scaled and modified for our research and development purposes. Our intangible assets consist of purchased biomass conversion technology and technology licenses. Given our history of operating losses, we evaluated the recoverability of the book value of our property, plant and intangible assets by performing an undiscounted forecasted cash flow analysis. Based on our analysis, the sum of the undiscounted cash flows is in excess of the book value of the property, plant and equipment and intangible assets. Accordingly, no impairment charges have been recorded during the period from July 23, 2007 (date of inception) through March 31, 2011.

Our undiscounted cash flow analysis involves significant estimates and judgments. Although our cash flow forecasts are based on assumptions that are consistent with our plans, there is significant exercise of judgment involved in determining the cash flow attributable to a long-lived asset over its estimated remaining useful life. Our estimates of anticipated cash flows could be reduced significantly in the future. As a result, the carrying amounts of our long-lived assets could be reduced through impairment charges in the future. Changes in estimated future cash flows could also result in a shortening of the estimated useful life of long-lived assets, including intangibles, for depreciation and amortization purposes.

Stock-Based Compensation

From time to time, we issue stock option awards to our employees, consultants and directors. The determination of the fair value of our stock option awards is estimated using the Black-Scholes option-pricing model and requires the use of highly subjective assumptions relating to potential minimum and maximum range of values at which holders of common stock, convertible preferred stock and debt may receive value. The option-pricing model also requires inputs such as the expected term of the grant, expected volatility and risk-free interest rate. Further, the forfeiture rate also affects the amount of aggregate compensation that we are required to record as an expense.

The fair value of stock options was estimated using the following weighted-average assumptions:


	2009	2010	2011

Risk-free interest rate	0.8% – 1.1%	0.5% – 0.8%	2.13%
Expected volatility	95.4% – 137.2%	98.8% – 137.2%	84.0%
Expected lives (in years)	1.8 – 3.8	1.4 – 1.8	5.5
Expected forfeiture rate	0.0%	0.0%	0.0%
Expected dividend yield	0.0%	0.0%	0.0%

Our risk-free interest rate is based on U.S. Treasury instruments with terms consistent with those of our stock options.

Our expected volatility is derived from the historical volatilities of several unrelated public companies within our industry over a period equal to the expected term of our options because we do not have any trading history to use for calculating the volatility of our own common stock. We based our analysis of expected volatility on reported data for comparable companies that issued options with substantially similar terms using an average of the historical volatility measures of this group of comparable companies.

Our expected lives is derived from a comparable group of public companies that have a similar industry, life cycle, revenue and market capitalization profile.

We estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Quarterly changes in the estimated forfeiture rate can have a significant effect on reported stock-based compensation expense, as the cumulative effect of adjusting the rate for all expense amortization is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the consolidated financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the consolidated financial statements.

Our expected dividend yield was assumed to be zero as we have not paid, and do not anticipate paying, cash dividends on our shares of common stock.

We will continue to use judgment in evaluating the expected volatility, lives, forfeiture and dividend rate related to our stock-based compensation on a prospective basis and incorporating these factors into our option-pricing model.

Each of these inputs is subjective and generally requires significant management and director judgment to determine. If, in the future, we determine that another method for calculating the fair value of our stock options is more reasonable, or if another method for calculating these input assumptions is prescribed by authoritative guidance, and, therefore, should be used to estimate expected volatility or expected term, the fair value calculated for our stock options could change significantly. Higher volatility and longer expected terms generally result in an increase to stock-based compensation expense determined at the date of grant.

The following table summarizes the options granted from 2009 (the first year share-based awards were granted) through the date of this prospectus with their exercise prices, the fair value of the underlying common stock and the intrinsic value per share, if any:


		Number of
	Grant	Options		Exercise					Intrinsic
Grant Type	Date	Granted		Price		Fair Value			Value

Employee	April 23, 2009		6,644,120	$	0.0838	$	0.0838	(1)		—
Nonemployee	April 23, 2009		360,000	$	0.0838	$	0.0838	(2)		—
Employee	December 30, 2009		3,355,200	$	0.09	$	0.09	(3)		—
Employee	March 17, 2010		575,200	$	0.09	$	0.09	(3)		—
Nonemployee	March 17, 2010		40,000	$	0.09	$	0.09	(4)		—
Employee	July 28, 2010		3,992,918	$	1.98	$	1.98	(5)		—
Nonemployee	July 28, 2010		725,740	$	1.98	$	1.98	(6)		—
Employee	December 2, 2010		346,400	$	1.98	$	1.98	(3)		—
Nonemployee	December 2, 2010		558,660	$	1.98	$	1.98	(3)		—
Employee	March 18, 2011		2,428,262	$	1.98	$	7.0245	(7)	$	5.045


(1)		1,165,712 of these options vested immediately. The remaining options vest according to our standard vesting conditions, which provide for vesting of 20% of the options after one year of service and 1/60^th of the options vesting each month thereafter. All options fully vest after five years of service.


(2)		240,000 of these options vest quarterly over four years. The remaining options vest according to our standard vesting conditions, which provide for vesting of 20% of the options after one year of service and 1/60^th of the options vesting each month thereafter. All options fully vest after five years of service.


(3)		All of these options vest according to our standard vesting conditions, which provide for vesting of 20% of the options after one year of service and 1/60^th of the options vesting each month thereafter. All options fully vest after five years of service.

(4)		All of these options vested immediately.


(5)		1,064,048 of these options vest upon meeting certain milestones determined by the Board of Directors and 1,170,470 vest monthly over four years.


(6)		66,920 of these options vested immediately and 461,740 vest at 5% per quarter over five years.


(7)		All of these options vest 100% on the fifth anniversary of the grant date. We will record the fair value of the awards, totaling $14.6 million, as compensation expense ratably on a quarterly basis over the five-year vesting period.

In addition, we have agreed to issue William K. Coates options to purchase 354,220 shares of our Class A common stock and 708,440 shares of our restricted stock. Please read “Executive Compensation — Employment Arrangements with Executives.” Such options will be priced at the final price to public in this offering and will vest 20% after one year and 1/60th of the options vesting each month thereafter, and such restricted stock will vest ratably over five years.

In the absence of a public market for our common stock, the fair value of our common stock underlying our stock options has historically been determined by our Board of Directors using methodologies consistent with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. In connection with making this determination, we have engaged independent third-party valuation advisors to assist us. In each case, our Board of Directors has made the ultimate fair value determination.

We based each of our valuations on an implied business enterprise value estimated using one or more of the three generally accepted approaches to value: the asset-based approach, the market approach and the income approach. The asset-based approach measures the value of a company based on tangible assets and calculates the fair market value of assets less the fair market value of liabilities. The market approach measures the value of a company through an analysis of recent sales or offerings of comparable investments.

The income approach measures the value of the company based on the present value of expected future benefits.

For each valuation, we prepared financial forecasts that considered our past experience and future expectations. There is inherent uncertainty in these estimates because the assumptions used are highly subjective and subject to changes as a result of new operating data and economic and other conditions that impact our business. We balanced the uncertainty associated with achieving the forecasts through the selection of a discount rate.

Once the enterprise value was computed under the various approaches, we calculated a weighted average of the methods. We then allocated the total equity value between all classes of equity using a probability-weighted expected return method accepted by the American Institute of Certified Public Accountants. We considered four exit events: (1) an initial public offering, (2) a sale or merger of the company, (3) continuing as a private company and (4) dissolution of the company. We calculated the residual common stock value under each scenario and based on our estimate of the probability of the various expected outcomes of each of the four events. The aggregate value of the common stock was then divided by the number of shares of common stock outstanding to arrive at the per share value. The value per share was then adjusted for the discount attributable to a lack of marketability.

In connection with each valuation, our Board of Directors and management reviews numerous objective and subjective factors viewed as determinate of the value of our common stock, including the considerations and milestones below, as well as all other facts and circumstances deemed relevant.

Subjective considerations and objective milestones taken into account in determining stock value at any point in time include the following:


	•	any recent arms’ length transactions in any of our common or preferred equity securities;

	•	the likelihood and timing of our potential initial public offering, including accomplishment of identified milestones required for such a transaction;

	•	prospects for a liquidity event, including an initial public offering or a company sale, liquidation or other terminal transaction;

	•	prospects for, and potential magnitude of future cash flows from our operations as determined by customary cash flow discounting methodologies;

	•	anticipated future capital needs, including the potential dilution attendant any forecast future capital requirements;

	•	achievement of any product certifications requisite to commercial sale of our products;

	•	the market for biofuels company equity securities, as reflected in the recent stock price performance of the class;

	•	recent changes in the risks inherent in execution of our business plan;

	•	success of our research and development activities;

	•	general trends in the renewable fuels industry; and

	•	macro-economic events affecting the value of equity investments generally.

If our Board of Directors determines that any material intervening developments have occurred since the most recent valuation that are deemed likely to appreciably impact on the prior valuation, then the Board of

Directors reassesses the valuation of the common stock. Pursuant to this methodology, our Board of Directors reassessed the estimated fair market value of our common stock on four previous occasions:


	Estimated Fair Market
Valuation Date	Value per Share

December 31, 2008	$	0	.0838
September 30, 2009	$	0	.0900
May 31, 2010	$	1	.9800
March 18, 2011	$	7	.0245

Factors that the Board considered in valuing our common stock at $0.09 per share on September 30, 2009, were as follows:


	•	we issued Series A convertible preferred stock and Series A-1 convertible preferred stock generating an aggregate of $14.4 million in net proceeds at $0.1813 per share and $0.4863 per share, respectively;


	•	we successfully achieved “proof of concept” of our biomass-to-renewable fuel technology platform and planned to construct a demonstration facility;

	•	our business plan was predicated on manufacturing and selling our intermediate renewable oil product directly into the refinery market, thereby avoiding the capital intensity of installing hydrotreating equipment at our BFCC plants;

	•	our capital requirements were predicated on a 500 BDT per day facility cost without a hydrotreating unit;

	•	we had entered into a letter of intent with a significant industry partner for their joint testing of our renewable crude oil, possible involvement in feedstock supply and funding of production facilities;

	•	we had filed 50 original patent applications relating to our BFCC technology platform;

	•	we internally assessed our probability of an initial public offering at 25% and of a residual dissolution or other non-favorable terminal event at 70%; and

	•	we had established several milestones, including:


	•	constructing our demonstration unit capable of processing 10 BDT per day;

	•	raising an additional $40 million of equity in the third quarter of 2010 to help build a commercial production facility; and

	•	obtaining a Department of Energy, or DOE, loan guarantee to help build a commercial production facility.

Based on intervening developments since the September 30, 2009 valuation, on May 31, 2010, the Board increased the valuation of our common stock from $0.09 per share to $1.98 per share based on the following developments:


	•	we completed construction of our demonstration unit and commenced operations at that unit;


	•	we issued Series B convertible preferred stock in two separate, arms’ length transactions during April 2010 generating an aggregate $110 million in net proceeds at an equivalent of $4.902 per share;


	•	we arranged a subsequent $45 million Series B financing round expected to close in July 2010;

	•	we had filed additional patent applications relating to our BFCC technology platform;

	•	we internally assessed our probability of an initial public offering at 60% (up from 25% previously) and of a residual dissolution or other non-favorable terminal event at 40% (down from 70% previously);


	•	we had established several substantial milestones, including:


	•	a probable $55 million Series C financing round in the first quarter of 2011;

	•	a $9 million capital finance facility from a private financial institution in September 2010;

	•	receipt of a DOE term sheet for a loan guarantee to help build a commercial production facility; and

	•	entering into one or more offtake agreements for our product.

In granting options at year-end 2010, our Board determined that no material intervening developments had occurred since the May 31, 2010 valuation that were viewed as likely to appreciably impact the prior valuation. In reaching its conclusion, the Board considered the following:


	•	the financings contemplated in May 2010 had not occurred;

	•	the interest in and demand for alternative fuels was unchanged during this period because crude oil prices and supplies were relatively stable;

	•	our business plan evolved to contemplate substantial additional capital costs for the construction of hydrotreating facilities decreasing the future cashflows expected to be generated from each project relative to our prior plan and creating additional financing risk;

	•	we had yet to attain any of the following milestones making it unlikely we would be able to access the public capital markets in the near term:


	•	entering into one or more offtake agreements for our product;

	•	submission of our EPA fuel registration petition;

	•	entering into engineering arrangements for our initial-scale commercial production facility in Columbus, Mississippi;

	•	obtaining a final $75 million loan agreement for the Columbus, Mississippi facility;

	•	closing a $60 million private financing round to fund the equity portion of the Columbus, Mississippi facility;

	•	updating the strategic plan for commercial viability without government programs or incentives; and

	•	receipt of a DOE term sheet for a loan guarantee to help build a commercial production facility.

Based on intervening developments since the December 31, 2010 valuation and March 18, 2011, the Board increased the valuation of our common stock from $1.98 per share to $7.0245 per share based on the following developments:


	•	the $60 million private financing round to fund the equity portion of our Columbus, Mississippi facility had not occurred;

	•	the interest in and demand for alternative fuels remained strong because crude oil prices and supplies were beginning to be affected by potential impacts on the supply chain from the Middle East due to internal conflicts in Egypt and Libya; and

	•	we had attained, or were very near to attaining, certain milestones deemed necessary to our ability to access the capital markets, including:


	•	we executed an offtake agreement with Hunt for the gasoline, diesel and fuel oil blendstocks produced from our Columbus, Mississippi facility;

	•	we submitted our RFS2 pathway petition to the EPA;

	•	we executed an agreement with KBR for the engineering, procurement and construction of our Columbus facility;


	•	we signed our $75 million loan agreement with the State of Mississippi to fund a portion of our Columbus facility;

	•	we received a term sheet from the DOE for a loan guarantee to fund a portion of our planned standard commercial production facilities; and

	•	we updated our strategic plan to provide for commercial viability without government programs or incentives beyond 2022.

Since our March 18, 2011 valuation, our common stock valuation has increased as reflected by the midpoint of the price range on the cover page of this prospectus. We believe that the factors set forth below contributed substantially to further reducing the technical and operational risks attendant our long-term growth plan, as well as increasing the prospects for significant future capital raising activities to fund construction of our planned standard commercial production facilities, which we believe supported a significant increase in the enterprise value of our company:


	•	our perceived likelihood of a successful initial public offering increased materially due to our filing of a registration statement with the SEC on April 11, 2011 for an IPO, the continued favorable IPO market for renewable fuel offerings, including a successful peer company offering, and our achievement of all of our pertinent IPO milestones;


	•	we closed a $75 million interest-free loan with the Mississippi Development Authority and had drawn $26.6 million under the loan to help fund construction of our initial-scale commercial production facility in Columbus, Mississippi;


	•	we closed a $55 million Series C round of financing with existing investors, further validating the continued support of our equity investors to fund our future growth;


	•	we broke ground on the Columbus facility and construction was proceeding on schedule and on budget;


	•	we signed offtake agreements for the Columbus facility with two additional counterparties, Catchlight Energy LLC and FedEx Corporate Services, Inc., further validating the customer demand for our blendstock products;


	•	we believe that satisfactory sources of additional or alternative financing to the DOE loan would be available to fund the construction of our planned standard commercial production facilities beginning in the second half of 2012; and


	•	we believe that we could successfully increase the size of this offering to $200 million, providing the reasonable prospect for our successfully raising substantial additional equity capital to partially fund our future construction plans, thereby reducing our expected need to rely on debt financing.

We recognized a total of $331,000 in stock-based compensation expense during 2009, of which $80,000 was recorded as general and administrative expenses and $251,000 was recorded as research and development expenses. During 2010, we recognized a total of $930,000 in stock-based compensation expense, of which $702,000 was recorded as general and administrative expenses, and $228,000 was recorded as research and development expenses. We recognized a total of $49,000 in stock-based compensation expense during the three months ended March 31, 2010, of which $34,000 was recorded as general and administrative expenses and $15,000 was recorded as research and development expenses. During the three months ended March 31, 2011, we recognized a total of $604,000 in stock-based compensation expense, of which $536,000 was recorded as general and administrative expenses and $68,000 was recorded as research and development expenses. Stock-based compensation expense is recorded in general and administrative expenses or research and development expenses based on the duties of the employee receiving the stock-based award.

In future periods, our stock-based compensation expense is expected to increase as a result of our existing unrecognized stock-based compensation still to be recognized and as we issue additional stock-based awards in order to attract and retain employees and nonemployee consultants.

Fair Value of Warrants Issued In Connection with Equipment and Business Loans

In connection with our equipment and business loans, we issued warrants to purchase an aggregate of 411,312 shares of our Series A-1 convertible preferred stock at an exercise price of $0.487 per share and warrants to purchase an aggregate of 308,000 shares of our Series B convertible preferred stock at exercise prices ranging from $2.9410 to $4.902 per share. The warrants are exercisable upon issuance, expire seven to 10 years from the issuance date and are subject to redemption. The issuance date fair value of these warrants was recorded as a current liability because of the redemption feature. The warrants are adjusted to their fair value at the end of each reporting period. Any changes in the fair value of our warrant liabilities are recorded as a non-cash charge to income or expense, as applicable, in the period that the change in value occurs. We determined the fair value of the warrants as of the date of issuance and at each reporting date using the Black-Scholes pricing model. The Black-Scholes pricing model requires a number of variables that require management judgment including the estimated price of the underlying instrument, the risk-free interest rate, the expected volatility, the expected dividend yield and the expected exercise period of the warrants. We consider the estimate of fair value of the warrants issued in connection with equipment and business loans to be Level 3 within the hierarchy of fair value measurements because of the significance of unobservable inputs to fair value used in the Black-Scholes pricing model.

During 2010, we recorded an increase in the fair value of the warrants issued in connection with equipment and business loans of $2.4 million due primarily to management’s change in the estimated fair value of the underlying instruments, changes in estimated volatility and estimated exercise period of the options. As of December 31, 2010, we estimated the fair value of the warrants issued in connection with equipment and business loans to be approximately $3.2 million, which represented approximately 19.2% of our total liabilities. As of March 31, 2011, we estimated the fair value of the warrants issued to be approximately $4.9 million, which represented approximately 21.6% of our total liabilities. These warrants were our only asset or liability within the Level 3 hierarchy. Upon conversion of our Series A-1 and Series B convertible preferred stock into our Class B common stock and Class A common stock, respectively, the warrants will be reclassified to additional paid-in capital at fair value as of the date of conversion. The change in fair value will be recorded in earnings.

In February 2011, we amended Equipment Loan #1 and our business loan. Pursuant to the terms of the amendments, we agreed to issue warrants to purchase $300,000 of securities issued in a next-round equity financing resulting in gross proceeds of at least $35 million that is completed prior to March 31, 2011. In April 2011, we amended the loans to change this date from March 31, 2011 to May 15, 2011. The Series C convertible preferred stock issued in April 2011 in the aggregate amount of $55.0 million met the next-round equity financing requirement and, as a result, warrants to purchase 61,200 shares of our Series C convertible preferred stock at an exercise price of $4.902 per share are required to be issued in connection with the equipment and business loan amendments. As of March 31, 2011, no warrants had been issued. We recorded a liability of $300,000 in connection with the warrants that are required to be issued.

We expect that the warrants ultimately will be exercised on a net exercise basis, resulting in no cash proceeds to us.

Income Taxes

We are subject to income taxes in United States. Prior to December 31, 2010, our wholly owned subsidiary, KiOR B.V (in liquidation) was subject to income taxes in the Netherlands. As of December 31, 2010, all of the operations of KiOR B.V. (in liquidation) were combined with the operations of KiOR, Inc. We use the liability method of accounting for income taxes, whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income.

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, benefits and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of

revenue and expenses for tax and financial statement purposes. Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.

Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. We recognize a valuation allowance against our net deferred tax assets if it is more likely than not that some portion of the deferred tax assets will not be fully realizable. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction. At December 31, 2009 and 2010 and at March 31, 2011, we had a full valuation allowance against all of our deferred tax assets, including our net operating loss carryforwards.

We make estimates and judgments about our future taxable income that are based on assumptions that are consistent with our plans and estimates. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted. Any adjustment to the deferred tax asset valuation allowance would be recorded in the income statement for the periods in which the adjustment is determined to be required.

We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available. We believe that it is more likely than not that our income tax positions and deductions will be sustained following an audit. Therefore, we have not recorded any liabilities in any of the periods presented in the consolidated financial statements resulting from uncertain tax positions taken or expected to be taken in our tax returns.

Results of Operations

The following table sets forth our consolidated results of operations for the periods shown:


										Three Months Ended
	Years Ended December 31,									March 31,
	2008			2009			2010			2010			2011
	(Amounts in thousands)

Consolidated Statement of Operations Data:
Operating expenses:
Research and development expenses	$	(3,643	)	$	(9,961	)	$	(22,042	)	$	(4,381	)	$	(7,271	)
General and administrative expenses		(1,867	)		(2,987	)		(8,083	)		(1,226	)		(4,189	)
Depreciation and amortization expense		(178	)		(688	)		(1,656	)		(279	)		(523	)

Loss from operations		(5,688	)		(13,636	)		(31,781	)		(5,886	)		(11,983	)
Interest income		71			65			34			—			—
Beneficial conversion feature expense		—			—			(10,000	)		—			—
Interest expense, net of amounts capitalized		—			(242	)		(1,812	)		(367	)		—
Foreign currency loss		(236	)		(215	)		—			8			—
Loss from change in fair value of warrant liability		—			—			(2,365	)		—			(1,410	)

Loss before income taxes		(5,853	)		(14,028	)		(45,924	)		(6,245	)		(13,393	)
Income tax expense		(13	)		(31	)		(3	)		—			—

Net loss	$	(5,866	)	$	(14,059	)	$	(45,927	)	$	(6,245	)	$	(13,393	)

Comparison of Three Months Ended March 31, 2010 and 2011

Operating Expenses


	Three Months Ended						Increase/
	March 31,						(decrease)
	2010			2011			$		%
	(Dollars in thousands)

Operating expenses:
Research and development expenses	$	(4,381	)		(7,271	)	$	2,890		66	%
General and administrative expenses		(1,226	)		(4,189	)		2,963		242	%
Depreciation and amortization expense		(279	)		(523	)		244		87	%

Total operating expenses	$	(5,886	)	$	(11,983	)	$	6,097

Research and Development Expenses. Our research and development expenses increased by $2.9 million, or 66%, for the three months ended March 31, 2011 as compared to the same period in 2010. During the three months ended March 31, 2011, we expanded our research and development efforts as we focused more on commercialization of our technology. In March 2010, we brought our demonstration unit on-line and commenced testing of feedstocks, catalyst formulations and other process variables under a simulated commercial production environment. Operating costs associated with our demonstration unit, which include repairs, utilities and supplies, increased approximately $0.9 million from $2.4 million in the first quarter of 2010 to $3.3 million in the first quarter of 2011. Research and lab testing costs increased from $0.4 million in the first quarter of 2010 to $1.3 million in the first quarter of 2011 as a result of our use of independent lab testing and validation services and specialized research consultants. Operating costs associated with our pilot plant, which include repairs, utilities and supplies, increased approximately $1.1 million from $1.2 million in the first quarter of 2010 to $2.3 million in the first quarter of 2011.

General and Administrative Expenses. Our general and administrative expenses increased by $3.0 million, or 242%, for the three months ended March 31, 2011 as compared to the same period in 2010. This increase was primarily the result of $1.0 million of higher payroll and related expenses due to hiring additional personnel for business development and support staff, a $0.4 million increase in legal expenses incurred in 2011 in connection with financing and regulatory activities and a $1.5 million increase in expenses for consultants engaged to assist us with applications to various federal governmental agencies for grants and loan guarantees.

Depreciation and Amortization Expense. Our depreciation and amortization expense increased by $0.2 million, or 87%, for the three months ended March 31, 2011 as compared to the same period in 2010 due to additional depreciation expense associated with our demonstration unit.

Other Income (Expense), Net

Interest Expense. Interest expense decreased by approximately $0.4 million, or 100%, for the three months ended March 31, 2011 as compared to the same period in 2010. This decrease is primarily due to capitalized interest of $0.3 million recorded in the first quarter of 2011 as compared to zero in the first quarter of 2010, which was associated with equipment purchases for the construction of our initial-scale commercial production facility in Columbus, Mississippi.

Foreign Currency Loss. Our foreign currency loss in 2010 was attributable to our wholly owned subsidiary, KiOR B.V. (in liquidation), whose operations were combined with those of KiOR, Inc. in 2010. During the three months ended March 31, 2011, we did not enter into any foreign currency transactions.

Comparison of Years Ended December 31, 2009 and 2010

Operating Expenses


	Years Ended
	December 31,						Increase in 2010
	2009			2010			$		%
	(Dollars in thousands)

Operating expenses:
Research and development expenses	$	(9,961	)	$	(22,042	)	$	12,081		121	%
General and administrative expenses		(2,987	)		(8,083	)		5,096		171	%
Depreciation and amortization expense		(688	)		(1,656	)		968		141	%

Total operating expenses	$	(13,636	)	$	(31,781	)	$	18,145

Research and Development Expenses. Our research and development expenses increased by $12.1 million, or 121%, for the year ended December 31, 2010 as compared to the same period in 2009. During 2010, we expanded our research and development efforts as we focused more on commercialization of our technology. In March 2010, we brought our demonstration unit on-line and commenced testing of feedstocks, catalyst formulations and other process variables under a simulated commercial production environment. Increased operating costs associated with our demonstration unit, including repairs, utilities and supplies, accounted for $5.4 million of our increase in research and development expenses. During 2010, we increased our research and development staff to 75 full-time equivalents, or FTEs, as compared to 30 FTEs at December 31, 2009. Research and development employee costs increased from $3.5 million in 2009 to $6.5 million in 2010 as a result of the increased staff, including a patent attorney and related support staff. Research and technical consulting and contract employee costs increased from $2.6 million in 2009 to $6.6 million in 2010 as a result of our use of independent lab testing and validation services and specialized research consultants. Research and development legal expenses decreased from $1.4 million in 2009 to $1.1 million in 2010 as we employed a full-time patent attorney, which decreased our reliance on third-party patent attorneys in 2010.

General and Administrative Expenses. Our general and administrative expenses increased by $5.1 million, or 171%, for the year ended December 31, 2010 as compared to the same period in 2009. This increase was primarily the result of $2.5 million of higher payroll and related expenses due to hiring additional personnel for business development and support staff, a $1.1 million increase in legal expenses incurred in 2010 in connection with financing and regulatory activities, and a $0.8 million increase in expenses for consultants engaged to assist us with applications to various federal governmental agencies for grants and loan guarantees. The balance of the increase of $0.7 million was due to increased insurance, office costs and other costs associated with our expanded operations.

Depreciation and Amortization Expense. Our depreciation and amortization expense increased by $1.0 million in 2010 due to additional depreciation expense associated with our demonstration unit.

Other Income (Expense), Net

Beneficial Conversion Feature Expense. Beneficial conversion feature expense increased by $10.0 million for the year ended December 31, 2010 as compared to the same period in 2009. This increase is due to the non-cash charge we recorded in April 2010 in connection with the Note converting into Series B convertible preferred stock. Please read “— Liquidity and Capital Resources” for more information.

Interest Expense. Interest expense increased by approximately $1.6 million for the year ended December 31, 2010 as compared to the same period in 2009. This increase primarily is due to the additional equipment loan and business loans we entered into causing higher interest expense in 2010. The increase in interest expense was partially offset by capitalized interest recorded in 2010 of $118,000 that was associated with equipment purchases for the construction of our initial-scale commercial production facility in Columbus, Mississippi.

Foreign Currency Loss. Our foreign currency loss in 2009 was attributable to our wholly owned subsidiary, KiOR B.V. (in liquidation), whose operations were combined with those of KiOR, Inc. in 2010. During 2010, we did not enter into any foreign currency transactions.

Loss from Change in Fair Value of Warrant Liability. The $2.4 million incurred during 2010 relates to the change in fair value of our convertible preferred stock warrants, which are recorded as derivatives and reflected on our consolidated balance sheets as a current liability.

Comparison of Years Ended December 31, 2008 and 2009

Operating Expenses


	Years Ended
	December 31,						Increase in 2009
	2008			2009			$		%
	(Dollars in thousands)

Operating expenses:
Research and development expenses	$	(3,643	)	$	(9,961	)	$	6,318		173	%
General and administrative expenses		(1,867	)		(2,987	)	$	1,120		60	%
Depreciation and amortization expense		(178	)		(688	)	$	510		287	%

Total operating expenses	$	(5,688	)	$	(13,636	)	$	7,948

Research and Development Expenses. Our research and development expenses increased by $6.3 million, or 173%, for the year ended December 31, 2009 as compared to the same period in 2008. The majority of the increase was due to bringing our pilot unit online in February 2009. During 2009, we increased research and development staff to 30 FTEs as compared to 7 FTEs at December 31, 2008. Research and development employee costs increased by $2.0 million, from $1.5 million in 2008 to $3.5 million, in 2009 as a result of the increased staff. Research and technical consulting costs increased $1.2 million, from $1.4 million to $2.6 million, in 2009 as a result of our use of independent lab testing and validation services and specialized research consultants. Research and development legal expenses increased by $1.2 million from $0.2 million in 2008 to $1.4 million in 2009. Since inception, we have sought to protect our intellectual property by applying for patents and other protective measures. The balance of the increase of $1.9 million was attributable to increased operating costs associated with our pilot unit.

General and Administrative Expenses. Our general and administrative expenses increased by approximately $1.1 million, or 60%, for the year ended December 31, 2009 as compared to the same period in 2008, in part due to a $0.5 million increase from hiring additional personnel to support the continued development of our business. The remainder of the increase of $0.6 million was primarily attributable to additional legal expenses in 2009 in connection with our debt financing and corporate governance, as well as increased information technology costs associated with expanding our corporate office.

Depreciation and Amortization Expense. Our depreciation and amortization expense increased by approximately $0.5 million in 2009 as compared to the same period in 2008. This increase is primarily the result of the additional depreciation for our pilot unit.

Other Income (Expense), Net

Interest Expense. Interest expense increased by $0.2 million in 2009 as compared to 2008 due to the commencement of the equipment loans and the debt discount amortization of the warrants issued in connection with the equipment loan.

Foreign Currency Loss. We incur certain operating expenses in currencies other than the U.S. dollar in relation to our subsidiary located in the Netherlands. The decrease in foreign currency loss in 2009 as compared to 2008 of approximately $21,000 was primarily due to fluctuations in spending associated with the Netherlands entity.

Liquidity and Capital Resources

Since inception, we have generated significant losses. As of March 31, 2011, we had an accumulated deficit of approximately $79.7 million. We have never generated any revenue. We expect to continue to incur operating losses through at least 2013 as we continue into the commercialization stage of our business. Commercialization of our technology will require significant capital expenditures.

We anticipate that our material liquidity needs in the near and intermediate term will consist of the following:


	•	Funding the construction and startup of our initial-scale commercial production facility under construction in Columbus, Mississippi. We estimate that this initial-scale commercial production facility, including a hydrotreater, will cost approximately $190 million to complete, of which we had paid $29.1 million as of March 31, 2011. We expect to spend approximately $150 million over the next 12 months to complete construction of this facility. We expect our Columbus facility to commence production by the second half of 2012.

	•	Funding the construction and startup of our planned first commercial production facility in Newton, Mississippi at an estimated cost of approximately $350 million and the first train of our two-train centralized hydrotreating facility at an estimated cost of approximately $110 million. We expect to begin construction of this facility in the third quarter of 2012. We expect to spend between approximately $50 million and $70 million over the next 12 months on capital expenditures, including front-end engineering and procurement services and long-lead equipment, for this facility.

	•	Funding our anticipated continued operating losses through at least 2013.

Issuance of Series C Convertible Preferred Stock

In April 2011, we issued 11,219,908 shares of Series C convertible preferred stock for total consideration of $55 million. Each share of Series C convertible preferred stock has the same voting rights as our Series A, Series A-1 and Series B convertible preferred stock. Each share of Series C convertible preferred stock is convertible at the option of the holder at any time without payment of additional consideration into such number of fully paid and non-assessable shares of our Class A common stock as is determined by dividing the original issue price of the Series C convertible preferred stock by the Series C convertible preferred stock conversion price, which is initially $4.902. The conversion price will be adjusted to 80% of the issuance price of our Class A common stock in our initial public offering, if we complete an initial public offering of our Class A common stock with aggregate proceeds greater than $50 million and at a price in excess of $4.902 per share by October 31, 2011. The conversion price is also subject to adjustment upon issuance of additional shares of our Class A common stock or Class B common stock.

We believe that our current cash and cash equivalents, proceeds of $55 million from the sale of our Series C convertible preferred stock, borrowings under our $75 million interest-free loan from the Mississippi Development Authority and the net proceeds from this offering will be sufficient to fund our current operations for the next 12 months and to fund completion of our initial-scale commercial production facility in Columbus, Mississippi. We will need substantial additional capital resources to complete our subsequent standard commercial production facilities we plan to build in Mississippi and other Southeastern states. If we are unable to obtain sufficient additional financing, we will have to delay, scale back or eliminate construction plans for some or all of these facilities, any of which could harm our business, financial condition and results of operations.

Mississippi Development Authority Loan

On March 17, 2011, our subsidiary, KiOR Columbus LLC, or KiOR Columbus, entered into a loan agreement with the Mississippi Development Authority, or MDA, pursuant to which the MDA has agreed to make disbursements to KiOR Columbus from time to time in a principal amount not to exceed $75 million in the aggregate to reimburse costs incurred by KiOR Columbus to purchase land, construct buildings and to purchase and install equipment for use in the manufacturing of our renewable crude oil from Mississippi-

grown biomass. Principal payments on the loan are due semiannually on June 30 and December 31 of each year, commencing on the earlier of (a) December 31, 2012 and (b) the next scheduled payment date that is at least six months after we commence commercial production of renewable crude oil at our initial-scale commercial production facility for sale to customers in the ordinary course of business. On each such payment date, we are required to pay an amount equal to the lesser of an amount sufficient to repay the total loan within (a) a period of time determined by the weighted-average life of the equipment being purchased with the proceeds thereof or (b) 20 years. Under this loan, we committed to employing at least 30 employees, with aggregate salaries of at least $1.0 million, once our initial-scale commercial production facility is fully operational. In addition, we are required to pay the entire outstanding principal amount of the loan, together with all other applicable costs, charges and expenses no later than the date 20 years from the date of our first payment on the loan. This loan is non-interest bearing.

The loan agreement contains no financial covenants, and events of default include a failure by KiOR Columbus to make specified investments within Mississippi by December 31, 2015, including an aggregate $500.0 million investment in property, plant and equipment located in Mississippi and expenditures for wages and direct local purchases in Mississippi totaling $85.0 million. If an event of default occurs and is continuing, the MDA may accelerate amounts due under the loan agreement. The loan is secured by certain equipment, land and buildings of KiOR Columbus.

In April 2011, we received $26.6 million of the Mississippi loan to reimburse us for expenses incurred in the construction of our commercial production facility located in Columbus, Mississippi.

Additional Financing Requirements

We will need substantial additional capital resources to fund our operations and to construct our standard commercial production facilities, beginning with our first planned facility in Newton, Mississippi in the third quarter of 2012.

We estimate that the construction costs for each of our standard commercial production facilities will average approximately $350 million, depending on each facility’s unique design requirements. Our two-train centralized hydrotreaters will be constructed in phases, with each train expected to support up to two standard commercial production facilities. We estimate that construction costs for our hydrotreaters will average approximately $110 million per train. By staging the expansion of our standard commercial facilities in discrete facility-by-facility projects that are independently viable, we believe that we will have flexibility to plan our growth in response to capital availability and market conditions.

We intend to utilize proceeds from this offering to fund our operations and a portion of the capital expenditures for our first standard commercial production facility in Newton. We plan to fund the remaining construction costs of the Newton facility with debt from one or more public or private sources.

Long-Term Debt

Long-term debt consists of the following:


	December 31,						March 31,
	2009			2010			2011
	(Amounts in thousands)

Long-Term Debt:
Equipment loans	$	4,165		$	3,710		$	3,507
Business loan		—			6,327			6,194
Less: unamortized debt discounts		(116	)		(520	)		(467	)

Long-term debt, net of discount		4,049			9,517			9,234
Less: current portion		(1,667	)		(4,480	)		(667	)

Long-term debt, less current portion, net of discount	$	2,382		$	5,037		$	8,567

Convertible promissory note to stockholder	$	15,000		$	—		$	—

Equipment Loans

Equipment Loan #1. On December 30, 2008, we entered into an equipment loan agreement with Lighthouse Capital Partners VI, L.P. The loan agreement provides for advances at $100,000 minimum increments up to $5.0 million in the aggregate for purchases of equipment. During 2009, we borrowed all $5.0 million available under the loan. Each advance represents a separate loan tranche that is payable monthly over a three-year period from the date of issuance of the advance at an annual interest rate of 7.5%. In addition, at loan maturity, we are required to make a payment equal to 7.5% of the total principal on the loan. The loans mature at dates from March 2012 to October 2012.

The loan tranches are collateralized by certain of our pilot unit, lab equipment and office equipment valued at approximately $5.0 million.

Equipment Loan #2. On March 17, 2010, we entered into an equipment loan agreement with Silicon Valley Bank with total availability of $1.0 million, limited to two advances of at least $500,000 each. The full amount of the availability under the loan agreement was drawn down in a single advance of $1.0 million. The loan is payable monthly over a three-year period at an annual interest rate of 10%. The loan is collateralized by the equipment purchased with the advances valued at approximately $1.3 million.

Business Loan

On January 27, 2010, we entered into a business loan agreement with Lighthouse Capital Partners VI, L.P. and Leader Lending, LLC for an amount up to $7.0 million. Advances are payable monthly over a three-year period at an annual interest rate of 12% commencing on the date of the advance. In addition, at loan maturity, we are required to make a payment equal to 7.5% of the total amount drawn on the loan. During 2010, we borrowed $7.0 million under the loan agreement. The loan is collateralized by our assets not previously pledged as collateral on the equipment loans described above.

Amendments of Equipment and Business Loans

In February 2011 and April 2011, we amended Equipment Loan #1 and the Business Loan to waive certain covenant restrictions to allow us to enter into the Mississippi Loan Agreement. In addition, the amendments provided for a deferral of principal payment for one year, included prepayment penalties and extended the maturities of the loans to January 2014. All other terms were unchanged. Interest during the principal deferral period is paid at 1% to 2.5% over the original stated interest rate and reverts to the original interest rate upon expiration of the deferral period. In connection with the amendments, we paid aggregate fees of $60,000 and $240,000 payable upon execution of the amendments and upon maturity, respectively. In addition, we agreed to issue warrants to purchase $300,000 of securities issued in a next-round equity

financing, if such equity financing of at least $35 million is completed prior to May 15, 2011. The Series C convertible preferred stock issued in April 2011 in the aggregate amount of $55.0 million met the next-round equity financing requirement and, as a result, warrants to purchase 61,200 shares of our Series C convertible preferred stock at an exercise price of $4.902 per share are required to be issued in connection with the equipment and business loan amendments. As of March 31, 2011, no warrants had been issued. We recorded a liability of $300,000 in connection with the warrants that are required to be issued.

Convertible Promissory Note to Stockholder

In April 2010, the Note, which was outstanding with one of our stockholders, was non-interest bearing and due to mature on August 4, 2011, with no principal payments required prior to maturity. Under the terms of the Note, if we were to sell on or before the maturity date at least $10.0 million of our convertible preferred stock in a sale or series of related sales, pursuant to which we received gross proceeds of at least $10.0 million, excluding any amounts as a result of conversion of the Note, the Note would be convertible into the same class and series of convertible preferred stock just sold at a price per share equal to 60% of the price paid by the investors participating in the sale. Our Series B convertible preferred stock issuance triggered this conversion option, and the holder of the Note subsequently exercised the right to convert.

We recorded a $10.0 million expense to beneficial conversion feature expense associated with the conversion of the Note into Series B convertible preferred stock. The $10.0 million reflects the value assigned to the beneficial conversion feature. The value of the beneficial conversion feature was not readily determinable upon issuance of the Note because the conversion feature was contingent upon the occurrence of a qualified financing transaction. Neither the timing nor value of such transaction could be estimated at the time the Note was issued. Therefore, we recorded the entire amount of the beneficial conversion feature on the consolidated statements of operations at the time the conversion occurred and value for the beneficial conversion feature could be determined.

Cash Flows


										Three Months Ended
	Years Ended December 31,									March 31,
	2008			2009			2010			2010			2011
	(Amounts in thousands)

Net cash provided by (used in):
Operating activities	$	(4,416	)	$	(12,401	)	$	(30,505	)	$	(6,194	)	$	(12,455	)
Investing activities	$	(3,116	)	$	(8,438	)	$	(23,488	)	$	(4,997	)	$	(16,641	)
Financing activities	$	12,940		$	19,164		$	100,382		$	7,608		$	(307	)

Operating activities. Net cash used in operating activities for the year ended 2010 was $30.5 million compared with $12.4 million for the year ended 2009 and $4.4 million for the year ended 2008. The increase in cash used in 2010 is attributed primarily to increased research and development and general and administrative expenses when compared to 2009. The increase in cash used in 2009 is attributed primarily to increased research and development and general and administrative expenses when compared to 2008. Net cash used in operating activities for the three months ended March 31, 2011 was $12.5 million compared with $6.2 million in the same period in 2010. This increase in cash used was attributable to running the demonstration unit and increased employee costs, as well as increased costs for research and development.

Investing Activities. Net cash used in investing activities for the year ended 2010 was $23.5 million compared with net cash used in investing activities of $8.4 million for the year ended 2009 and $3.1 million for the year ended 2008. The increase in net cash used in investing activities during this period is attributed to costs incurred in connection with the construction of our demonstration unit. Our demonstration unit was constructed in late 2009 to early 2010. The increase in cash used in investing activities for the year ended 2009 when compared to the same period in 2008 is attributed to increased capital expenditures associated with our demonstration unit. Net cash used in investing activities for the three months ended March 31, 2011 was $16.6 million compared to $5.0 million in the same period in 2010. This increase in cash used is directly related to the construction of the production facility in Columbus, Mississippi.

Financing Activities. For the year ended 2010, cash provided by financing activities was $100.4 million, which was attributable to $95.0 million in net proceeds from the issuance of Series B convertible preferred stock and proceeds from two business loans amounting to $7.0 million, as well as proceeds from our second equipment loan amounting to $1.0 million. Principal payments on our equipment and business loans aggregated to $2.7 million during 2010. For the year ended 2009, cash provided by financing activities was $19.2 million, which was attributable to $15.0 million from the issuance of the Note and $5.0 million in net proceeds from our first equipment loan. Principal payments on our first equipment loans was $0.8 million during 2009. For the year ended 2008, cash provided by financing activities was $12.9 million, which was attributable to $10.0 million from the issuance of Series A-1 convertible preferred stock and $2.9 million of proceeds from the issuance of Series A convertible preferred stock. Net cash used in financing activities was $0.3 million for the three months ended March 31, 2011 as compared to cash provided by financing activities of $7.6 million in the same period in 2010. The difference was primarily attributable to borrowings under our equipment loan ($1.0 million) and business loan ($7.0 million) that were received during the three months ended March 31, 2010. We did not enter into any debt or equity transactions during the three months ended March 31, 2011.

Contractual Obligations

The following is a summary of our contractual obligations as of December 31, 2010:


			Less Than		1 - 3		4 - 5		After
	Total		1 Year		Years		Years		5 Years
	(Amounts in thousands)

Equipment loans
Principal	$	3,797	$	2,080	$	1,717	$	—	$	—
Interest(1)		254		193		61		—		—
Business loans
Principal		6,607		2,400		4,207		—		—
Interest(1)		852		571		281		—		—
Operating leases		773		540		233		—		—
Purchase commitments(2)		28,657		28,657		—		—		—

Total contractual obligations	$	40,940	$	34,441	$	6,499	$	—	$	—


(1)		Interest rates are more fully described in Note 6 of our consolidated financial statements.

(2)		Purchase commitments related to the construction of our initial-scale commercial production facility in Columbus, Mississippi.

Off-Balance Sheet Arrangements

During the periods presented, we did not, nor do we currently have, any off-balance sheet arrangements, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our consolidated balance sheets.

Seasonality

We do not expect that commercial production of our gasoline and diesel blendstocks will be subject to seasonality.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board, or FASB, issued an amendment to an accounting standard which requires new disclosures for fair value measures and provides clarification for existing disclosure requirements. Specifically, this amendment requires an entity to disclose separately the

amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers; and to disclose separately information about purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs, or Level 3 inputs. This amendment clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and require disclosure about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The adoption of this amendment did not have a material impact on our consolidated financial statements.

There have been no other recent accounting pronouncements or changes in accounting pronouncements which we expect to have a material impact on our financial statements, nor do we believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on our financial statements.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We generally invest our cash in investments with short maturities or with frequent interest reset terms. Accordingly, our interest income fluctuates with short-term market conditions. As of March 31, 2011, our investment portfolio consisted primarily of money market funds. Due to the short-term nature of our investment portfolio, our exposure to interest rate risk is minimal.

Foreign Currency Risk

Prior to December 31, 2010 we incurred certain operating expenses in currencies other than the U.S. dollar in relation to our subsidiary located in the Netherlands and, therefore, are subject to volatility in cash flows due to fluctuations in exchange rates between the U.S. Dollar and the Euro. This subsidiary is in the process of liquidation.

INDUSTRY

We are a next-generation renewable fuels company. We have developed a proprietary technology platform to convert low-cost, abundant and sustainable non-food biomass into hydrocarbon-based renewable crude oil. We process our renewable crude oil using standard refinery equipment into gasoline and diesel blendstocks, which can be transported using the existing fuels distribution system for use in vehicles on the road today. Our gasoline and diesel blendstocks are projected to reduce direct lifecycle greenhouse gas emissions by over 80% compared to the petroleum-based fuels they displace. Our proprietary technology platform allows us to convert a wide variety of low-cost, abundant and sustainable non-food biomass into renewable transportation fuels. We have selected Southern Yellow Pine whole tree chips as our primary feedstock.

Industries that are important to our business include the traditional oil industry, from exploration and production to refining, renewable fuels and forest products.

The Traditional Oil Industry

Overview

According to international energy statistics from the U.S. Energy Information Administration, or EIA, global crude oil production in 2009 was 72.3 million barrels per day, which equates to a market size of over $2 trillion. Transportation alone accounts for more than 50% of world consumption of liquid fuels, and its share is projected to increase through 2035.

Crude oil is produced in 31 U.S. states and U.S. coastal waters. In 2009, 50% of U.S. crude oil production came from Texas (21%), Alaska (12%), California (11%), North Dakota (4%) and Louisiana (3.5%). According to the EIA, although total U.S. crude oil production has generally decreased each year since it peaked in 1970, it increased by 7% in 2009 from 2008, in large part due to a 35% increase in production in federal waters of the Gulf of Mexico.

The market for crude oil depends on a broad array of economic, demographic, political and technological factors; however, the crude oil industry is influenced most heavily by economic activity, pricing and government regulations. Healthy economic conditions tend to spur demand for crude oil, placing upward pressures on crude prices. Profitability for these producers is tied closely to the price of crude. Recent political instability in oil producing regions of the world may also continue to contribute to market volatility for crude oil.

Exploration & Production

Oil and gas exploration encompasses the processes and methods involved in locating and discovering potential sites for oil and gas drilling and extraction. This is the first stage of oil and gas production. Many uncertainties exist during the exploration process, and costs can vary dramatically. Geological surveys are conducted using various means from testing subsoil for onshore exploration to employing sophisticated technology such as seismic imaging for offshore exploration. The U.S. oil and gas exploration and production industry consists of a large number of companies that target a variety of strategies and niches within the space. These include oil-focused versus gas-focused, onshore versus offshore, resource plays, major independents and the exploration and production divisions of large integrated oil companies.

Development costs include the cost of drilling, production facilities and any systems required for transporting the resources. Capital costs for developing an oil and gas production facility can amount to several billion dollars depending on size and type. Projections of production trends assist in characterizing well performance over its predicted life and its potential economic profitability.

As a well is produced, the pressure, which was highest when the well first produced, begins to diminish. As a consequence, the flow rate of the well also diminishes. Without assistance, the well’s production will eventually slow to a trickle, and finally cease. This decline could take days, years or decades to occur. Typically, production rates decline over time, driving up operations costs while revenue shrinks. This scenario continues until the well fails and/or becomes uneconomic to operate or repair.

The crude oil and refining industry provides a vast array of products, including diesel and gasoline. Roughly two-thirds of crude oil products are used for transportation fuels, while the remainder is spread across industrial, manufacturing and other sectors of the U.S. economy. Given the importance of crude oil products to

the U.S. economy, demand for diesel and gasoline has grown steadily over the past 15 years. According to the EIA, the United States consumed 18.8 million barrels per day of petroleum products during 2009, making it the world’s largest petroleum consumer. U.S. crude oil consumption is projected to reach 22 million barrels per day by 2035. Understanding the dynamics of consumption, production, supply and demand of crude oil is critical to understanding the industry in which our company operates.

Refining

The market is comprised of integrated and independent oil refiners whose primary business involves converting crude oil into its various end products, including gasoline, diesel, jet fuel, liquefied petroleum gas, bunker fuel, asphalt and carbon black oil. Crude oil undergoes three primary steps in a refinery before it is fully converted into its marketed end products. First, crude oil is separated into its individual components from a light to heavy spectrum through fractional distillation. Next, the less economically valuable components of fractional distillation, such as light gases and heavy gasoil, are converted into more economically valuable products. This can occur through cracking, alkylation or reforming. Cracking involves breaking large hydrocarbon chains into smaller pieces. Alkylation combines smaller molecules to make larger ones. Reforming is the rearranging of various molecules to increase octane levels. Finally, after the components are converted, they undergo finishing. In this step, the components are treated to remove impurities such as sulfur and nitrogen to create blendstocks, which are blended together to make various on-specification end products, such as gasoline and diesel, ready for the market.

According to the EIA, as of January 1, 2010, there were 137 oil refineries operating in the United States with a total capacity of 16.9 million barrels per day.

Refining Economics

Profit margins in the refining industry are often referred to as “crack spreads.” The crack spread is the difference between the price of the crude oil and the value realized from the end products. Refiners look to maximize crack spreads by producing a slate of end products with as much value as possible. Compared to heavy refined products, such as bunker fuel, carbon black oil, asphalt and petroleum coke, light refined products, such as liquefied petroleum gas, gasoline, jet fuel and diesel, are generally more valuable. Accordingly, refiners are willing to pay more for crude oil that yields a lighter product slate and can be produced at lower cost, requiring less complex and expensive equipment.

Refining is a capital-intensive business. In addition, both crude oil and the end products are volatile commodities, and the lack of perfect correlation between them leads to crack spread volatility. These two facts necessitate high utilization rates to cover refiners’ substantial fixed operating costs.

The Renewable Fuels Industry

Overview

According to the EIA, U.S. crude oil demand in 2009 was 14.3 million barrels per day, of which approximately 63% was supplied by foreign imports. The U.S. Congress passed the Energy Independence and Security Act of 2007, or EISA, which sought to move the United States toward greater energy independence, to improve national security and to increase the production of clean renewable fuels by accelerating the development and commercialization of renewable fuels. Among other things, EISA updated the Renewable Fuel Standard program, which we refer to as RFS2, to (a) increase the total volume of renewable fuel required to be used in transportation fuel, (b) establish four renewable fuel categories and (c) set separate volume requirements for next-generation renewable fuels.

The four renewable fuel categories are as follows:


	•	Renewable Fuel: A fuel produced from renewable biomass that replaces or reduces the quantity of fossil fuel present in transportation fuel, heating oil or jet fuel. A renewable fuel must also reduce lifecycle greenhouse gas emissions by at least 20% compared to a 2005 baseline for the fuel it supplants. The EISA requirement for the volume of all renewable fuel was 12.95 billion gallons in 2010, increasing to 20.5 billion gallons in 2015 and reaching 36.0 billion gallons in 2022.


	•	Advanced Biofuel: A renewable fuel, other than corn ethanol, that reduces lifecycle greenhouse gas emissions by at least 50%. Advanced biofuel is a subset of renewable fuel. Of the total EISA requirement for the volume of renewable fuel, at least 950 million gallons of renewable fuel was required to be advanced biofuel in 2010, increasing to 5.5 billion gallons in 2015 and reaching 21.0 billion gallons in 2022.

	•	Biomass-based Diesel: A renewable fuel meeting the definition of either biodiesel or non-ester renewable diesel that reduces lifecycle greenhouse gas emissions by at least 50%. Biomass-based diesel is a subset of advanced biofuel and cannot be co-processed with petroleum. Of the total EISA requirement for the volume of renewable fuel, at least 650 million gallons of advanced biofuel was required to be biomass-based diesel in 2010, with volumes for 2015 and 2022 to be established by the U.S. Environmental Protection Agency, or EPA, but in no event less than 1.0 billion gallons.

	•	Cellulosic Biofuel: A renewable fuel derived from any cellulose, hemicellulose or lignin that reduces lifecycle greenhouse gas emissions by at least 60%. Cellulosic biofuel is a subset of advanced biofuel. Of the total EISA requirement for the volume of renewable fuel, at least 100 million gallons of advanced biofuel was required to be cellulosic biofuel in 2010, increasing to 3.0 billion gallons in 2015 and reaching 16.0 billion gallons in 2022.

Cash Cost and Market Price for Renewable Fuels


			Sugarcane		Biodiesel
	Corn ethanol		ethanol		(biomass-based
	(renewable fuel)		(advanced biofuel)		diesel)

Cash cost	$	2.412		Unavailable	$	4.770(1	)
Market price	$	2.587		$3.889	$	5.148(1	)

Sources: Cash costs and market prices presented on a per-gallon basis from data from PIRA Energy Group. Cash costs and market prices are estimated by PIRA Energy Group for May 2011. Cash cost is all fixed and variable operating costs associated with producing the fuel. Cash cost excludes financing and capital recovery costs.


(1)		On a per gallon of ethanol equivalent basis, this equates to a production cost of $3.180 and market price of $3.432.

The following graphics illustrate the RFS2 mandates for the categories of renewable fuel and the overlapping relationship of the fuel categories:

We believe that our gasoline and diesel blendstocks will qualify as cellulosic biofuel. Cellulosic biofuel is a subset of advanced biofuel, which is a subset of renewable fuel, and cellulosic biofuel satisfies the requirements for both of these other fuel categories. In contrast, only cellulosic biofuel satisfies the requirements for cellulosic biofuel, which provides cellulosic biofuel producers with an opportunity to compete with producers of advanced biofuel and other renewable fuel, but not vice versa. Accordingly, the potential size of the renewable fuel market for cellulosic biofuel in 2022 under RFS2 is 16.0 billion gallons to 36.0 billion gallons. The impact of EISA mandates is that by 2022, renewable fuels are expected not only to make up an increasing percentage of liquid transportation fuels in the United States, but also are expected to contribute to an approximately 15% reduction in net imports of crude oil from 2009 levels. However, as of 2010, the EPA expects a significant shortfall in production of cellulosic biofuel. The EIA’s Annual Energy Outlook 2010 forecasts an overall renewable fuel shortfall as well. Total production of renewable fuels is

projected to be 25.7 billion gallons versus 36.0 billion gallons required under the EISA mandate. The figure below illustrates the increasing RFS2 mandates for cellulosic biofuel and the EIA’s projections for production.

Additional renewable fuels mandates exist in Europe and other countries with varying mandates and volume requirements for premium renewable fuels.

Government Programs, Incentives and Regulations

The renewable fuels industry benefits from government programs, incentives and regulations that seek to promote the development and commercialization of renewable fuel technologies, including RFS2, the Cellulosic Biofuel Tax Credit, the U.S. Department of Energy, or DOE, loan guarantee program and other state and local government programs and incentives.

RFS2, RINs and Waiver Credits

Under RFS2, any refiner or importer of gasoline or diesel fuel in the United States (other than Alaska or U.S. territories, which may petition to opt-in) is an obligated party, and must comply on an annual basis with volume requirements for both renewable fuels as a whole as well as those for each renewable fuel category. Although EISA outlines initial volume requirements for each year through 2022, it requires the EPA to perform a market analysis each year to set final “standards” for the following year. For cellulosic biofuel, the EPA sets the final volume standards based on projected production volumes for the following year. If the projected production volume is less than the EISA target, the EPA has the authority to lower the final volume standard to address the projected shortfall. The EPA then takes into account total projected transportation fuel production volumes for the ensuing year to calculate standards for cellulosic biofuel as a percentage of total transportation fuel production, to which each obligated party must adhere.

By way of example, because the supply of cellulosic biofuel was projected to be very limited in 2011, the EPA determined that the final volume standard for cellulosic biofuel for 2011 would be 6.0 million gallons, well below the 250 million gallon volume requirement target specified in EISA. This 6.0 million gallons represented 0.003% of total projected transportation fuel production for 2011. Thus, each obligated party is required to ensure 0.003% of its total transportation fuel production consisted of cellulosic biofuel, which translated to its respective volume obligations.

The EPA assigns renewable identification numbers, or RINs, to each batch of qualified renewable fuel produced or imported. RINs demonstrate compliance with, and are the credit currency of, RFS2. Each fuel category has a unique set of RINs. Each obligated party must obtain the requisite number of RINs for each fuel category based on that party’s annual volume obligations. If an obligated party meets or exceeds its RIN volume obligations, that obligated party may either sell its excess RINs or use its excess RINs to satisfy its RIN volume obligations in subsequent years.

For a compliance year in which the EPA lowers the final volume requirement target set forth in EISA for cellulosic biofuel due to a projected shortfall, the EPA will also issue cellulosic biofuel waiver credits, or

Waiver Credits, equal to the reduced cellulosic biofuel volume established by EPA for that compliance year to ensure that obligated parties have the ability to meet their cellulosic biofuel RIN volume obligations. The Waiver Credits are valid for use only in the compliance year in which they are made available and only may be purchased by an obligated party with a RIN volume obligation at the time the obligated party submits its annual compliance report. Obligated parties may purchase Waiver Credits for a given compliance year only up to the level of their cellulosic biofuel RIN volume obligations for that year, less the number of cellulosic biofuel RINs they own.

Waiver Credits for cellulosic biofuel are sold at an inflation-adjusted price that is the higher of (a) $0.25 per gallon, which as adjusted for inflation equals $0.26, or (b) the amount by which $3.00 per gallon, which as adjusted for inflation equals $3.10, exceeds the average wholesale price of a gallon of gasoline in the United States for the last 12 months. From an economic standpoint, an obligated party should be indifferent between purchasing:


	•	a Waiver Credit, which only meets an obligated party’s cellulosic renewable volume obligation, or RVO, plus an advanced RIN, which meets their advanced and renewable RVOs; or

	•	a cellulosic RIN, which meets their cellulosic, advanced and renewable RVOs.

For the year 2011, Waiver Credits are priced at $1.13 per gallon, and for the month of May 2011, the price at which an advanced biofuel RIN sold ranged from $0.58 to $0.78 per gallon.

To continue with the above example, because the EPA lowered the cellulosic biofuel standard to 6.0 million gallons in 2011, the EPA is making available 6.0 million gallons of Waiver Credits in 2011. Because the prior 12 months’ average wholesale price of a gallon of gasoline in the United States, as calculated by the EPA, was $1.97, the EPA is selling these Waiver Credits for $1.13 per gallon. Thus in order to satisfy both its cellulosic biofuel and advanced biofuel volume obligations, for the 2011 compliance year, an obligated party could either (a) purchase Waiver Credits from the EPA for $1.13 per gallon and an advanced biofuel RIN, which traded between $0.49 to $0.55 per gallon for the week ended April 29, 2011, or (b) purchase cellulosic biofuel RINs from a producer of cellulosic biofuel or any third party willing to sell its excess cellulosic biofuel RINs.

As noted, the availability and use of Waiver Credits is limited, and as such Waiver Credits are intended only to be used by the obligated party who purchases the credits to meet cellulosic biofuel RIN shortfalls in a given compliance year. Accordingly, in order to prevent abuse, Waiver Credits will only be made available by the EPA during years in which the EISA volume requirement target for cellulosic biofuel is reduced by the EPA due to a projected production shortfall. The Waiver Credits made available by the EPA are only valid for use in the compliance year they are made available and may not be used by obligated parties to meet a prior year shortfall in a volume obligation or carried over to the next compliance year. Waiver Credits are only available to obligated parties up to the level needed to meet compliance obligations for the compliance year and are nontransferable and nonrefundable.

Cellulosic Biofuel Tax Credit

The Internal Revenue Code provides to taxpayers that produce cellulosic biofuel a non-refundable federal income tax credit generally in an amount equal to $1.01 per gallon of qualified cellulosic biofuel produced in the United States by such taxpayers and used as a fuel in the United States. For purposes of this Cellulosic Biofuel Tax Credit, the term “cellulosic biofuel” means any liquid fuel that is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis, such as woody biomass, and that meets certain registration requirements established by the EPA. The Cellulosic Biofuel Tax Credit applies to qualified cellulosic biofuel produced after December 31, 2008 and before January 1, 2013, unless extended.

U.S. Department of Energy Loan Guarantee Program

The DOE administers a loan guarantee program. The Energy Policy Act of 2005, or EPAct, authorizes the DOE to provide loan guarantees to qualified projects to accelerate commercial use of innovative technologies

that will sustain economic growth, yield environmental benefits and produce a more stable and secure energy supply. Section 1703 of the loan guarantee program is intended to support promising viable technologies by transitioning such technologies to full commercialization, and it is not intended to fund research and development projects or projects based on technology that is in general use in the commercial marketplace in the United States.

The American Recovery and Reinvestment Act of 2009 amended the EPAct by adding Section 1705 to appropriate an additional $6 billion to support loan guarantees for the rapid deployment of renewable energy projects that generate electricity and facilities that manufacture related components, electric power transmission systems and biofuel projects. Under the Section 1705 loan guarantee program, the DOE can issue guarantees, backed by the full faith and credit of the U.S. government, for up to 100% of a loan borrowed to finance construction of an eligible project, subject to a maximum guarantee amount of 80% of the aggregate project costs. The project sponsor must commit to provide a significant cash equity contribution to the project. Loans for eligible projects are made either by the Federal Financing Bank or other lenders deemed eligible under the DOE regulations. Eligible projects must commence construction no later than September 30, 2011. As of March 2011, the DOE has approved approximately $26.5 billion of loan guarantees for the entire DOE program.

California Low Carbon Fuel Standard

California’s Governor issued Executive Order S-1-07 on January 18, 2007, which ordered the establishment of a low-carbon fuel standard, or LCFS, for California. The LCFS was approved for adoption by the California Air Resources Board, or CARB, and took effect on January 12, 2010, with reporting requirements that began in 2010 and carbon intensity standards that took effect on January 1, 2011. Fuel carbon intensity, measured in terms of full lifecycle carbon dioxide-equivalent per unit of fuel energy, is the currency for the LCFS. The LCFS requires all refiners, blenders, producers or importers of transportation fuels, which we refer to as providers, to ensure that the mix of transportation fuel they sell, supply or offer for sale in the California market meets the established declining annual limits for greenhouse gas emissions measured in carbon intensity. The LCFS directive calls for a reduction of at least 10% in the carbon intensity of California’s transportation fuels between 2011 and 2020, with gradual reductions in the early years, starting with a 0.25% reduction for 2011, and increasingly more stringent standards in subsequent years. The LCFS may be met through any combination of approved fuels with carbon intensity above or below the limit as well as through the purchase or banking of credits. Providers earn credits when their aggregate fuel carbon intensities during an annual compliance period fall below the annual regulatory limit for that period. Credits earned can be sold to other providers, or banked for future sale or use.

For refiners with significant capacity in California, such as Chevron, BP, Tesoro and ConocoPhillips, the LCFS represents a major challenge. However, the regulations allow refiners to import and use lower emission fuels produced outside of California as a component of the fuel portfolio used to achieve the annual carbon intensity standards. As a result, biofuel producers located outside California could also benefit from the market created by the LCFS. CARB is actively reviewing and adding fuel pathways and associated carbon intensities under the LCFS, including fuels produced outside of California. In its approval of carbon intensity for a fuel pathway, CARB looks at full lifecycle direct and indirect greenhouse gas emissions associated with the pathway, which includes emissions associated with the transportation of the fuel. As a result, fuels that are produced in or in close proximity to California would be expected to have a lower carbon intensity than the same fuel produced at a more distant refinery.

The Forest Products Industry

Overview

We have selected Southern Yellow Pine whole tree chips as our primary feedstock. Accordingly, supply and procurement of feedstock for our biomass-to-renewable fuel technology platform relies on the forest products industry. The forest products industry includes planting, cultivating and harvesting trees and other organic forest products for commercial use. Biomass, a source of renewable energy, is treated as a fundamental measure of organic material on forest land. Woody materials in tree boles, forks, limbs, branches and tops are classified as aboveground biomass.

Trees are classified broadly as softwood or hardwood. To qualify as cellulosic biofuel under RFS2, products derived from trees generally must be sourced from tree plantations or logging slash and thinnings from private land. Softwood trees, of which over 95% in the South are Southern Yellow Pine, are further classified as either sawtimber or pulpwood, depending on their size. Sawtimber is typically a log or tree that is large enough (usually 10 to 12 inches in diameter and at least eight feet in length) to be sawed into lumber and is generally used for higher grade products. Pulpwood is comprised of less straight, smaller diameter trees. Pulpwood is less expensive and is used to make pulp for paper production or oriented strand board, or OSB, which consists of layered wooden strips compressed and bonded together. Pulpwood accounts for approximately 45% of the harvest of Southern softwood.

Typical buyers of softwood pulpwood include pulp and paper mills and OSB mills. Additionally, RISI, Inc., a leading information provider for the forest products industry, expects biomass consuming power plants, wood pellet plants and cellulosic biofuel facilities to also consume pulpwood in the future.

Abundant Supply

The United States has approximately 751 million acres of forest lands, of which 28.6%, or 215 million acres, is located in the South (defined as Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia). Based on data from the USDA Forest Service from 2005 to 2008, the amount of aboveground biomass in the South was 8.67 billion dry tons, representing roughly 36% of the U.S. total.

In recent years, there has been a growing surplus of plantation pine trees and excess logging and wood chipping capacity. Surplus is defined as the proportion by which growth exceeds harvest. For softwood in the South, over 95% of which is Southern Yellow Pine, surplus was 18% in 2007, which represents excess supply of nearly 60,000 dry tons per day. If growth is equal to harvest, the supply of timber is stabilized. Thus, growth in excess of harvest indicates that timber inventory is increasing.

The surplus of Southern Yellow Pine has been driven by both supply and demand factors. Government incentives such as the USDA’s Conservation Reserve Program, led to aggressive planting of fast growing pine plantations by forest products companies and private timberland owners in the late 1980s and 1990s. Genetically enhanced seeds and enriched genotypes allowed foresters to increase the productivity of their land. In addition, demand for pine diminished as many paper mills and OSB plants closed due to weak paper and housing markets.

The following table sets forth the historical and projected inventory of Southern softwood:

Source: RISI, Inc.

Going forward, although demand is anticipated to trend modestly upward, driven by increased demand from the OSB manufacturers and bio-energy companies, paper demand is expected to remain weak. As a

result, Southern softwood growth is expected to outpace removals and the average annual surplus is projected to be 7.9 million dry tons through 2024.

Source: RISI, Inc. Converted from billions of cubic feet using 0.0178 dry tons per cubic foot.


(1)		Approximately annual average.

(2)		Harvests from operable forests only.

Favorable Feedstock Economics

Logging and chipping costs are generally stable, and hauling costs vary with diesel prices. The stumpage price, or the price of standing timber, is the only component of cost that varies with the timber market. Historically, stumpage prices have been generally stable due to a long production cycle and the resulting large standing inventories. This cycle, which may last from 10 to 30 years or more, better enables timber producers to meet short-term demand shocks. When pricing is above or below normalized levels, foresters often adjust their harvests, increasing or decreasing their inventory to adjust the supply of timber. This dynamic leads to relative price stabilization, when supply-demand imbalances have occurred due to wet weather, diseases or other natural incidents.

Since 1976, the 2010 inflation-adjusted stumpage price of Southern pulpwood has hovered around $20 per dry ton and has ranged between $14 to $33 per dry ton. Historical data shows that spikes are more likely to occur when harvests exceed growth but tend to normalize within a few years. The price of delivered woodchips has been much less volatile than other food-based biofuel feedstock or product markets. For example, from 1992 to 2010 the maximum 12-month price increase was 15% for pine woodchips versus 67% for corn and 139% for West Texas Intermediate crude according to average quarterly data from Timber Mart-South, the USDA and the EIA.

Sources:

Timber Mart-South for Stumpage data (nominal dollars per green ton adjusted assuming 2.5% annual inflation to base year 2010 and 50% moisture content). USDA Forest Service for Growth and Removals. Net growth is gross growth minus loss of volume due to mortality. Includes Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia. Dry ton is defined as 2,000 pounds of woody material at 0% moisture content.

BUSINESS

Overview

We are a next-generation renewable fuels company.

Based on the technological and operational milestones we have achieved to date, we believe that when we are able to commence commercial production at our planned first standard commercial production facility, primarily using Southern Yellow Pine whole tree chips, we will be able to produce gasoline and diesel blendstocks without government subsidies on a cost-competitive basis with petroleum-based blendstocks produced from various crude oil resources on- and offshore worldwide at current pricing. Our proprietary catalyst systems, reactor design and refining processes have achieved yields of renewable fuel products of approximately 67 gallons per bone dry ton of biomass, or BDT, in our demonstration unit that we believe would allow us to produce gasoline and diesel blendstocks today at a per-unit unsubsidized production cost below $1.80 per gallon, if produced in a standard commercial production facility with a feedstock processing capacity of 1,500 BDT per day. This unsubsidized production cost equates to less than $550 per metric ton, $0.50 per liter and $1.10 per gallon of ethanol equivalent. This per-unit cost assumes a price of $72.30 per BDT for Southern Yellow Pine clean chip mill chips and anticipated operating expenses at the increased scale and excludes cost of financing and facility depreciation. Over time, we expect to improve our overall process yield by enhancing our technology and to significantly reduce our feedstock costs by using lower grade woody biomass and other biomass feedstocks and lower our operating expenses through various initiatives. For the month of May 2011, the average U.S. Gulf Coast spot prices for conventional gasoline and ultra-low sulfur diesel were $3.024 and $3.001 per gallon, respectively. For the month of May 2011, market prices for corn ethanol, biodiesel and sugarcane ethanol were $2.587, $5.148 and $3.889 per gallon, respectively.

We believe that the solution to the world’s growing transportation fuel demands must be:


	•	Real. Our technology produces high-quality hydrocarbon blendstocks that we believe will “drop in” to the existing transportation fuels infrastructure for use in vehicles on the road today. Our gasoline and diesel blendstocks can be used as components in formulating a wide variety of fuel products meeting specifications of ASTM International for finished gasoline and diesel derived from petroleum-based blendstocks. Our fuels are not ethanol or FAME diesel. Unlike ethanol, which is generally subject to a 10% to 15% blend wall, our gasoline and diesel blendstocks can be used as components in formulating a variety of fuel products meeting specifications of ASTM International for finished gasoline and diesel derived from petroleum-based blendstocks.


	•	Renewable. Our proprietary technology platform allows us to convert a wide variety of low-cost, abundant and sustainable non-food biomass, including woody biomass, such as whole tree chips, logging residues, branches and bark, agricultural residues, such as sugarcane bagasse, and energy crops, such as switchgrass and miscanthus, into renewable transportation fuels. In this regard, we believe that transportation fuels produced from our process will help to satisfy mandates under the Renewable Fuel Standard program, or RFS2. We have selected Southern Yellow Pine whole tree chips as our primary feedstock because of their abundant, sustainable supply and generally low-cost and stable pricing history compared to feedstocks used by traditional biofuels companies.

	•	Rural. We plan to locate our commercial production facilities in rural areas near sources of low-cost, abundant and sustainable biomass. We also consider the proximity of a potential site to our prospective customers, the adequacy of infrastructure, the availability of labor to operate our facilities and the award of any state or local incentives. We believe that our rural focus not only will help us reduce our operating costs, but also will revitalize rural economies impacted by closed paper mills.

	•	Repeatable. We plan to employ a modular design for our standard commercial production facilities that can be replicated in numerous locations with abundant and sustainable non-food feedstock in the southeastern United States and beyond. We believe that this “copy exact” design will help us to reduce our capital costs, implement learned best practices and facilitate rapid deployment of new production facilities. After we commercialize our technology, our repeatable renewable crude oil production process will effectively eliminate the exploration risk experienced by traditional exploration and production companies.

Our biomass-to-renewable fuel technology platform combines our proprietary catalyst systems with well-established fluid catalytic cracking, or FCC, processes that have been used in crude oil refineries to produce gasoline for over 60 years. This biomass fluid catalytic cracking, or BFCC, process operates at moderate temperatures and pressures to convert biomass in a matter of seconds into the renewable crude oil that we process using standard refining equipment into our gasoline and diesel blendstocks. In the future, we plan to explore opportunities to reduce our capital costs by outsourcing the hydrotreating of our renewable crude oil to the traditional refining infrastructure.

We were incorporated in Delaware and commenced operations in July 2007. Since our inception, we have operated as a development stage company, performing extensive research and development to develop, enhance, refine and commercialize our biomass-to-renewable fuel technology platform. During this time, we have demonstrated the efficacy and scalability of our BFCC process, attaining progressive technology milestones through laboratory, pilot unit and demonstration unit environments.

To demonstrate the scalability of our BFCC process from pilot scale, we have constructed a demonstration scale unit that represents a 400-times capacity increase over our pilot unit. Our demonstration unit has amassed over 3,000 hours of operation and produced over 32,000 gallons of renewable crude oil at our demonstration unit to date. In the first quarter of 2011, we began construction on our initial-scale commercial production facility that is designed to process 500 BDT per day, which represents a 50-times capacity increase over our demonstration unit. In the third quarter of 2012, we intend to begin construction of our first standard commercial production facility in Newton, Mississippi. Our standard commercial production facilities are being designed to process approximately 1,500 BDT of feedstock per day, approximately three times the size of our Columbus facility, in order to take advantage of economies of scale. By staging the expansion of our standard commercial facilities in discrete facility-by-facility projects that are independently viable, we believe that we will have flexibility to plan our growth in response to capital availability and market conditions.

We expect that our renewable fuels will offer several environmental benefits compared to traditional petroleum-based fuels. According to a February 2011 analysis performed by TIAX LLC, a leading technology processing and commercialization company, using data we provided, gasoline and diesel blendstocks produced from our proprietary BFCC process in our planned commercial production facilities are projected to reduce direct lifecycle greenhouse gas emissions by over 80% compared to the fuels they displace. In addition, we are

designing our planned standard commercial production facilities to meet the criteria for minor sources under the Clean Air Act.


Renewable Fuel Category	% Lifecycle GHG Reduction

Corn ethanol (renewable fuel)		25	%
Sugarcane ethanol (advanced biofuel)		71	%
Biodiesel (biomass-based diesel)		76	%
KiOR gasoline blendstocks (cellulosic biofuel)		82	%
KiOR diesel blendstocks (cellulosic diesel)		83	%

Our Market

Although we expect our blendstocks will be marketable not only into the global transportation fuels market, their renewable nature also allows us to benefit from government programs and incentives. In 2007, the Energy Independence and Security Act, or EISA, was adopted to move the United States toward greater energy independence and security and to increase the production of clean renewable fuels domestically. EISA updated the Renewable Fuel Standard program, which we refer to as RFS2, to require the use of cellulosic biofuel, a renewable fuel derived from renewable cellulosic biomass that produces at least 60% lower lifecycle greenhouse gas emissions compared to a 2005 baseline. According to a February 2011 analysis performed by TIAX LLC using data we provided, gasoline and diesel blendstocks produced from our proprietary BFCC process in our planned commercial production facilities are projected to reduce direct lifecycle greenhouse gas emissions by over 80% compared to the fuels they displace.

We believe that our gasoline and diesel blendstocks will qualify as cellulosic biofuel under RFS2. We expect that our gasoline and diesel blendstocks will have an equivalence value of between 1.5 to 1.7. Equivalence value equates to the number of RIN credits per gallon. We expect that this designation, together with the higher energy content of our renewable fuels than ethanol, will make our blendstocks attractive to fuel producers because our blendstocks can be used to satisfy specific volume requirements for cellulosic biofuel, as well as the volume requirements for both advanced biofuel and renewable fuel under RFS2. This provides cellulosic biofuel producers like our company an opportunity to compete with producers of advanced biofuel and other renewable fuel, but not vice versa. Accordingly, the potential size of the mandated market for cellulosic biofuel in 2022 under RFS2 encompasses the 36.0 billion gallon mandate for all renewable fuels, which includes the 21.0 billion gallon mandate for advanced biofuel, which also includes the 16.0 billion gallon mandate for cellulosic biofuel. Under the EISA mandates, by 2022 renewable fuels are expected not only to make up an increasing percentage of liquid transportation fuels in the United States, but also are expected to contribute to a 15% reduction in net imports of crude oil from 2009 levels. At May 2011 per gallon market prices of $2.587 for ethanol as renewable fuel pricing, $3.889 for sugarcane ethanol as advanced biofuel pricing, $5.148 for biodiesel as biomass-based diesel pricing and $1.130 cellulosic waiver as the premium to advanced biofuels, the 36.0 billion gallon RFS2 mandated market for 2022 would be worth

approximately $138 billion. Additional renewable fuels mandates exist in Europe and other countries with varying mandates and volume requirements for premium renewable fuels.

Our Competitive Strengths

We believe that our business benefits from a number of competitive strengths, including the following:


	•	Our renewable fuel products are hydrocarbons compatible with the existing transportation fuels infrastructure. Unlike other renewable fuels such as ethanol, which is alcohol-based, or biodiesel, which is composed of fatty acids, our gasoline and diesel blendstocks are compatible hydrocarbons that can “drop in” to the existing petroleum-based transportation fuels infrastructure, including pipelines, interchangeably with their petroleum-based counterparts to produce various fuel products, including finished gasoline and diesel. In addition, due to the higher energy content of our gasoline and diesel blendstocks, we believe that our transportation fuels will sell at a premium to ethanol. Currently, we expect to compete in the mandated renewable fuels market against corn ethanol, sugarcane ethanol and biodiesel and in the general market for gasoline and diesel fuels.


	•	We combine proprietary technology with well-established FCC and other refining processes. We have developed a technology platform that uses our proprietary catalyst systems, process design and know-how, while leveraging well-established FCC and other refining processes, to convert a variety of cellulosic biomass into high-quality gasoline and diesel blendstocks. We believe that our in-house catalytic development program affords us a significant advantage in terms of developmental lifecycle time and efficacy of our research and development investment. As of June 9, 2011, we had 70 pending original patent application families containing over 2,000 pending claims covering different aspects of our technology, including our proprietary catalyst systems and process design. By leveraging our technological innovations with well-established FCC processes with their long and successful track record and demonstrated scale-up cost, we believe we have significantly reduced our operating risk.


	•	Our BFCC process provides product flexibility and higher yields of more valuable products. Our BFCC process affords us flexibility to tailor our blendstock product spectrum to attain higher overall product yields, as well as higher proportions of valuable transportation fuels. Our realized yield of gasoline and diesel blendstocks from our renewable crude oil is approximately 90%, which is higher than the yields that are typically attained when refining petroleum-based crude oil. Our proprietary catalyst systems also afford us the flexibility to vary our light product mix between gasoline and diesel blendstocks based on market conditions and prices, customer requirements and proximity to end markets.

	•	Our technology is feedstock flexible, and we have identified low-cost, abundant and sustainable feedstock. Our technology platform is feedstock flexible and has been successfully tested on a variety of biomass. We believe that our feedstock flexibility will allow us to use the most cost-effective feedstock or combination of feedstocks at a given location. We have selected Southern Yellow Pine whole tree chips as our primary feedstock because of their abundant supply and generally stable pricing history. This non-food feedstock has a low cost relative to other traditional renewable biomass and a long lifecycle that we believe significantly dampens price volatility compared to seasonal feedstocks that depend more on weather and other short-term supply and demand dynamics. We expect that our ability to use logging residues, branches and bark will enable us to lower our feedstock costs.

	•	We have secured or identified strategic locations for our commercial production facilities. The site for our initial-scale commercial production facility and the sites that we have identified for our next four planned standard commercial production facilities are situated in the Southeast near abundant Southern Yellow Pine feedstock and have access to rail, pipelines (including the Colonial pipeline, which transports approximately 100 million gallons of fuels per day to the Northeast), inland and gulf waterways and other transportation channels. We also have identified four additional potential site locations for subsequent standard commercial production facilities in the southeastern United States. We believe that former workers dislodged by the closings of paper mills in the Southeast could provide an available skilled labor force for us.


	•	We believe that we have a better use for woodchip feedstock. Based on current prices, and if we meet our target production cost metrics, and if competition for feedstock develops in a region, we believe that we may be able to afford higher prices for feedstock than paper mills.

	•	We have an experienced management team. Our executive officers and senior operational managers have extensive experience in research and development, new product development, capital project execution, feedstock procurement, plant operations and technology commercialization across the catalyst, refining, chemicals and forest products industries. We believe that the experience of our management team provides us with valuable relevant experience, which we believe will enhance our ability to commercialize our products, grow our business and improve our technology.

Our Strategy


	•	We have adopted a build, own and operate strategy. We plan to build, own and operate our commercial production facilities in the United States. We began constructing our 500 BDT per day initial-scale commercial production facility in Columbus, Mississippi in the first quarter of 2011, with production expected to begin in the second half of 2012. We intend to construct our 1,500 BDT per day standard commercial production facilities, which are designed to have three times the capacity of our initial-scale commercial production facility, beginning in the third quarter of 2012 with our first planned facility in Newton, Mississippi.

	•	We plan to deploy BFCC facilities using “copy exact” principles. We are designing our initial-scale commercial production facility to process 500 BDT per day and our subsequent standard commercial production facilities to process 1,500 BDT per day, and we plan to employ a modular design that can be replicated for our subsequent standard commercial production facilities. Utilizing learning from our initial commercial production facilities, we plan to deploy a “copy exact” strategy of standardized modular designs to reduce our capital costs, implement best practices, reduce operating costs, increase personnel flexibility and facilitate fast deployment of new production facilities. We also expect to develop a remote electronic facilities management control center in Houston, Texas. We believe that commercially available feedstock sources exist to support significant expansion opportunities in biomass-rich regions in the United States and globally. At a later date, we may consider larger or smaller standardized facility sizes to optimize the scale for local feedstock availability and transportation costs.

	•	We plan to expand our base of prospective customers. We believe that we will be able to sell our renewable hydrocarbon-based products to a variety of potential customers, including independent refiners, integrated oil companies, distributors of finished products, such as terminal or rack owners, and end users of petroleum products, such as transportation companies, fleets or petrochemical operators. We also intend to seek certification of our blendstocks for use in jet fuel. We believe that this broad potential customer base will allow us to maximize the value we receive for our products, as well as make us less dependent on any one customer or market.

	•	We intend to maximize our feedstock flexibility and reduce costs. Our technology platform is feedstock flexible and has been successfully tested on a variety of biomass. We plan to reduce our feedstock costs by increasing our use of lower grade woody biomass, such as logging residues, branches and bark, at our planned commercial production facilities. Longer term, we believe that the flexibility of our proprietary catalyst systems will enable us to co-feed many of our plants with a variety of other types of renewable cellulosic biomass, including other woody biomass, such as poplar and eucalyptus tree chips, agricultural residues, such as sugarcane bagasse, and energy crops, such as sorghum, switchgrass and miscanthus. We believe that our feedstock flexibility will allow us to expand the geographic scope of our business, identify locations with proximity to multiple feedstocks and use the most cost-effective feedstock or combination of feedstocks at a given location.


	•	We intend to leverage our technology and expertise to increase our yields and the efficiency of our process. We have focused on enhancing our proprietary technology and processes through each stage of development. This effort focuses on continuously improving our proprietary catalyst systems, optimizing the reactor design and operating conditions and enhancing our renewable crude oil processing technology. We have increased our overall process yield of biomass renewable fuel from approximately 17 gallons of blendstocks per BDT to approximately 67 gallons per BDT. Our research and development efforts are focused on increasing this yield to approximately 92 gallons per BDT. We believe that as we build and operate our initial-scale commercial production facility and subsequent standard commercial production facilities, we will also be able to realize operational efficiencies and reduce our production costs on a per-unit basis.

	•	We believe that we will be able to compete with petroleum-based transportation fuels. Over time, our goal is to achieve commercial viability without reliance on government incentives, mandates or tariffs. Although we benefit from mandated policies such as RFS2, we expect that our standard commercial production facilities will be able to produce our gasoline and diesel blendstocks on a cost-competitive basis with existing petroleum-based counterparts without government subsidies at current pricing. We also expect to be able to compete in non-mandated international transportation fuels markets, as well as mandated international transportation fuels markets, such as the European biodiesel market, that have historically commanded higher prices per gallon.

	•	We plan to expand internationally through a variety of structures. Over time, we intend to expand internationally through direct operations and joint venture structures. We are actively exploring opportunities to expand internationally in countries with abundant, sustainable, non-food feedstocks available at costs lower than or competitive with domestic feedstocks. In March 2011, we hired a President of International with executive experience in international operations to lead our global expansion efforts.

	•	We plan to drive brand loyalty for “KiOR.” We believe our products will provide new domestic sources of liquid transportation fuels, sustainably utilizing local renewable resources to help further energy independence and reduce greenhouse gas emissions. We plan to capitalize on the increasing global trend in green awareness to differentiate our renewable transportation fuels from petroleum-based alternatives. In the long term, we believe that we will have a substantial marketing opportunity with a variety of large, fuel-intensive prospective customers seeking sustainable, renewable transportation fuel options. These potential customers may include distributors of finished products, such as terminal or rack owners, and end users of petroleum products such as transportation companies, fleets or municipalities that would place a premium on environmentally friendly products.

Our Technology

We have developed a process that converts cellulosic biomass into a renewable crude oil that can be refined in a conventional hydrotreater into light refined products, such as gasoline and diesel blendstocks. Our biomass-to-renewable fuel technology platform combines our proprietary catalyst systems with existing fluid catalytic cracking, or FCC, processes that have been used in crude oil refineries to produce gasoline for over 60 years. This biomass fluid catalytic cracking, or BFCC, process operates at moderate temperatures and pressures to convert biomass in a

matter of seconds into the renewable crude oil that we process using standard refining equipment into our gasoline and diesel blendstocks. The following diagram illustrates the process of producing our fuel products.

Our process design starts with harvesting biomass. Once the biomass arrives at our facility, it undergoes biomass processing and conditioning. We then feed the processed biomass into our BFCC reactor where it interacts with our proprietary catalyst systems and, in a matter of seconds, produces renewable crude oil as a primary product, as well as light gases, water and coke as byproducts.

Once the renewable crude oil, byproducts and proprietary catalyst exit the reactor, they enter a separator, where the catalyst is separated from the renewable crude oil, water and light gases. The renewable crude oil and other byproducts proceed to the next step of the conversion process, and the catalyst moves to a catalyst regenerator where the coke that was created during the reaction and deposited on the catalyst is burned off. The clean, or regenerated, catalyst is then recycled back into the reactor where it will once again interact with incoming biomass. This regeneration step creates a loop that is standard in FCC.

Meanwhile, the renewable crude oil and byproducts created in the reactor are transferred from the separator unit to a product recovery unit where they are cooled and separated. The renewable crude oil condenses into liquid, while the light gases are transferred to the cogeneration unit where they are burned to generate steam and produce electricity that we use to power our process, allowing for anticipated utility cost savings and reduced environmental impact.

Our renewable crude oil is then transferred from the product recovery unit to a hydrotreating unit for further processing into blendstocks. In the hydrotreating unit, which uses standard refining equipment, our renewable crude oil undergoes a reaction with hydrogen, or hydrotreating, to remove oxygen from the renewable crude oil. The deoxygenated renewable crude oil is then separated into gasoline, diesel and fuel oil blendstocks for sale to our potential customers. In our demonstration unit, we have varied the volume output of gasoline blendstock from 37% to 61%, diesel blendstock from 31% to 55% and fuel oil blendstock from 8% to 9%. The focus of our commercialization efforts are with respect to our gasoline and diesel blendstocks. Our realized yield of gasoline and diesel blendstocks from our renewable crude oil is approximately 90%, which is higher than the yields that are typically attained when refining petroleum-based crude oil.

Scaling Our Technology

this program, we constructed a pilot unit outside of Houston, Texas to continue developing and validating our technology. This pilot unit has amassed over 9,000 hours of operation and evaluated more than 250 catalyst systems. We subsequently commenced operation of a larger demonstration unit also outside Houston that is designed to process 10 BDT per day and represents a 400-times scale-up from our pilot unit. Our demonstration unit has amassed over 3,000 hours of operation and produced over 32,000 gallons of our renewable crude oil.

We commenced construction of our initial-scale commercial production facility in Columbus, Mississippi in the first quarter of 2011, which we are financing with a combination of existing cash on hand, including $55 million of proceeds from the April 2011 sale of our Series C convertible preferred stock to existing investors, and a $75 million interest-free loan from the Mississippi Development Authority. We estimate that the total cost to construct this facility, including a hydrotreater, and place it in service will be approximately $190 million, with an estimated 15% to 20% of these costs attributable to the hydrotreater. We engaged KBR, Inc., a global engineering, construction and services company, to conduct the engineering, design and construction of this initial-scale commercial production facility. We are designing this unit to process 500 BDT per day, representing an additional 50-times scale-up from our demonstration unit. Our initial-scale commercial production facility will include the conventional hydrotreater to process our renewable crude oil into gasoline and diesel blendstocks.

Going forward, we intend to construct our larger standard commercial production facilities, beginning in the third quarter of 2012 with our first planned facility in Newton, Mississippi. These facilities are being designed to process approximately 1,500 BDT of feedstock per day, approximately three times the size of our Columbus facility, in order to take advantage of economies of scale. Moreover, these standard commercial production facilities are being designed to utilize a centralized hydrotreating facility rather than dedicated, standalone hydrotreaters such as the one being constructed at our Columbus facility. By employing larger plant designs and shared hydrotreating facilities, we expect to be able to more effectively allocate our fixed costs and stage our capital program to reduce the capital intensity of our commercial expansion. We estimate that the construction costs for each of our standard commercial production facilities will average approximately $350 million, depending on each facility’s unique design requirements. Our two-train centralized hydrotreaters will be constructed in phases, with each train expected to support up to two standard commercial production facilities. We estimate that construction costs for our hydrotreaters will average approximately $110 million per train. By staging the expansion of our standard commercial facilities in discrete facility-by-facility projects that are independently viable, we believe that we will have flexibility to plan our growth in response to capital availability and market conditions.

Increasing Our Yield

Through each stage of development, we have focused on improving our technology platform to maximize overall yields and optimize the composition of our renewable crude oil. Our research efforts have focused on developing our proprietary catalyst systems, optimizing the reactor design and operating conditions and enhancing our renewable crude oil processing technology. We have increased our overall process yield from approximately 17 gallons per BDT to approximately 67 gallons per BDT of gasoline, diesel and fuel oil blendstocks. Our research and development efforts are focused on increasing this yield to approximately 92 gallons per BDT.

Our catalyst development team is working to further advance our understanding of catalyst science and develop advanced solutions through the application of this complex chemistry. This team develops many potential catalyst options to address the challenge of converting biomass to renewable crude oil. We implement these concepts through the development of laboratory catalyst system formulations, which we test in small-scale laboratory reactors. These catalyst systems are also fully characterized through state-of-the-art analytical testing tools. Based on the results of the lab testing and characterization, we fully test promising catalyst system candidates in our pilot unit. In most cases, we use an iterative approach to define viable and improved catalyst solutions. Our strategy is then to test the most promising catalyst systems in our demonstration unit.

Our reactor optimization team seeks to define the optimal reactor design and operating conditions through the development of advanced reactor mathematical models, based on a fundamental understanding of the heat and mass transfer of the system, particle hydrodynamics and reactions kinetics. We develop, test and improve these

models at both our pilot and demonstration units. We then employ selected reactor models to develop the physical reactor design and dimensions, as well as temperature and residence time profiles, for use in larger scale units.

Our product processing team is focused on optimizing the technology to process our renewable crude oil into fuels within the refining environment. In both the catalyst and reactor systems, we are working to develop more efficient methods for processing our renewable crude oil into fuels.

Our Feedstock Strategy

Aggressive planting of fast-growing pine plantations by forest products companies and private timberland owners in the late 1980s and 1990s due to state and federal incentives, combined with the closings of paper mills in this region, has resulted in a surplus of plantation pine fiber, significant logging capacity and excess wood chipping capacity. Based on data from the USDA Forest Service from 2005 to 2008, there was an estimated 18% surplus of softwood in the South, over 95% of which is Southern Yellow Pine. This surplus represents an excess supply of nearly 60,000 BDT per day, which we believe far exceeds what is necessary to execute our initial commercialization plan. Each of our planned standard commercial production facilities is expected to use 1,500 BDT per day, or approximately 500,000 BDT per year.

We plan to reduce our feedstock costs by increasing the use of lower grade woody biomass, such as logging residues, branches and bark, at our commercial production facilities. Over time, we also plan to explore co-feeding other types of renewable cellulosic biomass, including other woody biomass, such as poplar and eucalyptus tree chips, agricultural residues, such as sugarcane bagasse, and energy crops, such as switchgrass and miscanthus. Ideal crops vary by region and climate. For example, certain energy crops like sorghum are more appropriate in drier regions with low rainfall, while others like miscanthus are higher yielding but also require more rain and may be sensitive to cold; however, both offer significant opportunities for per-acre yield improvements. Over time, we expect to investigate a variety of feedstock opportunities in other parts of the United States and in Canada, Brazil and other international locations. We currently intend to emphasize non-food, rain-fed feedstocks to minimize the environmental impact and water use from irrigation. We generally expect the feedstocks we use to be grown on land that is not in use for food production. In the long term, we believe that crops will be developed for marginal or degraded lands that can no longer be used for economic food production. We believe millions of acres of agricultural lands previously used for food production have been degraded. In addition, a DOE study in 2005 estimated that in the United States alone, almost a billion tons of unutilized biomass may be available. Eventually, we expect that our technology’s ability to accept mixed feedstocks will allow feedstock producers to increase biodiversity in cultivating biomass.

We believe that our feedstock flexibility will allow us to expand the geographic scope of our business, identify locations with proximity to multiple feedstocks and use the most cost-effective feedstock or a combination of feedstocks at a given location. Initially, we expect to investigate many site opportunities in the United States focusing on the locations of numerous paper mills that have closed in the United States over the past 20 years.

We recently entered into a feedstock supply agreement with Catchlight Energy, LLC, or Catchlight, a 50-50 joint venture between subsidiaries of Chevron Corporation and Weyerhaeuser Company, for all of the supply of pulpwood, whole tree chips and forest residuals for our initial-scale commercial production facility under construction in Columbus, Mississippi. Subject to the terms and conditions of the agreement, Catchlight has agreed to supply all of the specified feedstock for the facility. The initial term of the supply agreement expires two years after the date we select for the commencement of deliveries and is subject to automatic renewal for successive one-year periods until either party provides notice of termination at least six months prior to the end of the then-current term. This agreement is conditioned upon, among other things, the parties’ mutual agreement on certain feedstock specifications.

Our Site Strategy

We plan to locate our commercial production facilities near sources of low-cost, abundant and sustainable feedstock. We also consider the proximity of a potential site to our prospective customers, the adequacy of infrastructure, the time required to construct our facilities, the availability of labor to operate our facilities and the award of any state or local incentives, as well as potential competing feedstock purchasers.

We have the right to use, and expect to acquire, the site for our initial-scale commercial production facility under construction and have identified the sites in Mississippi and other Southeastern states for our next four standard commercial production facilities. We also have identified four additional potential site locations in the southeastern United States. Each of the planned and potential sites for our standard commercial production facilities is located in a wood basin that we believe has sufficient sustainable Southern Yellow Pine whole tree chips to support a supply of 1,500 BDT per day. These sites also afford access to rail, pipelines, inland and gulf waterways or other transportation channels. Former workers dislodged by the closings of paper mills in the Southeast could provide an available skilled labor force for us.

We are actively exploring opportunities to expand the geographic scope of our business both domestically and internationally in regions with abundant feedstocks available at costs lower than or competitive with domestic feedstocks.

In selecting sites for our facilities, we plan to consider the carbon emissions, land use, air pollution and water impact of our facilities.

Our Distribution Plan

We believe that we will be able to sell the output from our planned commercial production facilities to a range of potential customers, including refiners, terminal and rack owners and fleet users. Unlike ethanol, which is generally subject to a 10% to 15% blend wall, we believe that our gasoline and diesel blendstocks can be used as components in formulating a variety of fuel products meeting specifications of ASTM International for finished gasoline and diesel derived from petroleum-based blendstocks. We are currently performing motor vehicle fuel tests as we seek to register our gasoline and diesel blendstocks with the U.S. Environmental Protection Agency, or EPA. We also intend to seek certification of our blendstocks for use in jet fuel.

We have recently entered into agreements with Hunt Refining Company, or Hunt, Catchlight and FedEx Corporate Services, Inc., or FedEx, for the purchase of blendstocks to be produced from our initial-scale commercial production facility. We are also in negotiations with these companies and additional potential customers for the purchase of blendstocks to be produced from our planned standard commercial production facilities.

Our offtake agreement with Hunt establishes terms under which Hunt has agreed to purchase all of the gasoline, diesel and fuel oil blendstocks to be produced from our initial-scale commercial production facility, which is expected to commence production in the second half of 2012. We may, however, sell to other firm customers or use for market development purposes up to two-thirds of the quarterly production from this facility. The initial term of this offtake agreement expires five years from the date that our first commercial production facility reaches specified average production levels and is subject to automatic renewal for successive one-year periods until either party provides notice of termination at least 180 days prior to the end of the then-current term. During the initial term of the agreement, Hunt may exercise an option to commit to purchase specified volumes of gasoline, diesel and fuel oil blendstocks on a firm commitment basis from the second commercial production facility that we construct.

Our offtake agreement with Catchlight establishes terms under which Catchlight may purchase gasoline and diesel blendstocks to be produced from our initial-scale commercial production facility. The initial term of this offtake agreement expires two years from the date that we deliver a specified volume of gasoline and diesel blendstocks to Catchlight, and automatically renews for up to two additional years unless either party provides notice of termination at least 12 months prior to the end of the then-current term. This agreement is conditioned upon, among other things, the entry into certain other feedstock supply and testing arrangements

between the parties. We have also entered into a testing and optimization agreement with Catchlight to optimize the compatibility of our blendstocks with Chevron’s facilities.

Our master ground fuel supply agreement with FedEx establishes terms under which affiliates of FedEx may purchase at least one-third (up to a specified amount) of the diesel blendstocks to be produced from our initial-scale commercial production facility. The initial term of this agreement expires two years from the date of the first delivery to FedEx of product from this facility and may be terminated at any time by FedEx or us upon 60 days’ or 180 days’ notice, respectively, to the other party.

Intellectual Property

Our success depends, at least in part, on our ability to protect our proprietary technology and intellectual property. To accomplish this, we rely on a combination of patent applications, trade secrets, including know-how, employee and third party nondisclosure agreements, trademarks, intellectual property licenses and other contractual rights to establish and protect our proprietary rights in our technology. As of June 9, 2011, we had 70 pending original patent application families containing over 2,000 pending claims. These intellectual property claims cover different aspects of our technology, and many of them have been or will be filed both in the United States and in various foreign jurisdictions. We intend to continue to file additional patent applications with respect to our technology with a particular emphasis on protecting our core technologies. As is the case with all patent application filings, we do not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims. Although there can be no assurance that these pending patent applications, if granted, will provide us with protection, our management of these filings is focused on maximizing the likelihood of acquiring strong patent protection.

With respect to proprietary know-how that may not be patentable, or that we believe is best protected by means that do not require public disclosure, and processes for which patents are difficult to enforce, we rely on, among other things, trade secret protection and confidentiality agreements to protect our interests. All of our employees and consultants have entered into non-disclosure and proprietary information and inventions assignment agreements with us. These agreements address intellectual property protection issues and require our employees and consultants to assign to us all of the inventions, designs and technologies they develop during the course of their employment or consulting engagement with us. We also control access to sensitive information by limiting access to only those employees and consultants with a need to know the information and who have agreed contractually to maintain the confidentiality of that information. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that other third parties will not otherwise gain access to our trade secrets and other intellectual property.

Our precautions may not prevent misappropriation or infringement of our intellectual property. Third parties could infringe or misappropriate our patents, copyrights, trademarks, trade secrets and other proprietary rights. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement, invalidity, misappropriation or other claims. Any such litigation could result in substantial costs and diversion of our resources. Moreover, any settlement of or adverse judgment resulting from such litigation could restrict or prohibit our use of the technology. Our failure or inability to adequately protect our intellectual property or to defend against third-party infringement claims could materially harm our business.

If any of our processes, products or technology is covered by third party patents or other intellectual property rights, we could be subject to various legal actions. We cannot assure you that our technology and products do not infringe patents held by others or that they will not in the future. Litigation is costly and time-consuming, and there can be no assurance that our litigation expenses will not be significant in the future or that we will prevail in any such litigation.

Regulatory Approvals

In order to be able to realize the material regulatory benefits of our renewable transportation fuels, our BFCC process must be within a cellulosic biofuel pathway under RFS2, as approved by the EPA. In addition, our products must be registered as a motor fuel with the EPA, and we must be registered as a producer of cellulosic biofuel with the Internal Revenue Service in order to qualify for the Cellulosic Biofuel Tax Credit.

Cellulosic Biofuel

According to a February 2011 analysis performed by TIAX LLC using data we provided, gasoline and diesel blendstocks produced from our proprietary BFCC process in our planned commercial production facilities are projected to reduce direct lifecycle greenhouse gas emissions by over 80% compared to the fuels they displace. Such emissions reductions would qualify our renewable fuels as cellulosic biofuel under RFS2. For our fuel pathways that are approved by the EPA and assigned a Renewable Identification Number, or RIN, we would generate a cellulosic biofuel RIN credit for each gallon of transportation fuel we produce from our renewable crude oil. The credits are based on the BTU content of the fuel, with one RIN approximately equal to one gallon of ethanol. Our fuels are expected to have a higher BTU content and therefore a higher RIN value per gallon.

In order to qualify for treatment as a cellulosic biofuel that can generate RINs to satisfy an obligated party’s volume requirements under RFS2, a fuel pathway must be evaluated and approved by the EPA. This qualification is based on a demonstration that the fuel pathway meets certain minimum greenhouse gas reduction standards, based on a lifecycle assessment, in comparison to the petroleum fuels they displace. The fuel pathway is defined by three components: the type of fuel, the feedstock and the production process. Our production of diesel blendstock using wood residuals fits within an approved pathway for cellulosic diesel. Neither diesel nor gasoline blendstocks produced from planted trees has been approved as a fuel pathway for cellulosic biofuel under RFS2, but the EPA is currently evaluating cellulosic diesel produced from wood pulp.

RFS2 allows the EPA to evaluate additional fuel pathways and to allow a party to petition the EPA for a renewable fuel pathway not previously evaluated by the EPA. We have petitioned the EPA for gasoline and diesel blendstocks produced from wood residuals using our process. Where the requested pathway does not involve a new product or a new feedstock, as is the case with our petition, the petition review process can be handled without rulemaking, potentially expediting the approval process.

Part 79 Registration of Our Fuels

Pursuant to the Clean Air Act, or CAA, and the Code of Federal Regulations, a manufacturer of a motor vehicle fuel or fuel additive generally must register the fuel or fuel additive with the EPA prior to introducing the product into commerce. The Part 79 registration process involves providing a chemical description of the product and certain technical, marketing and health-effects information. The registration process includes three levels of potential testing and reviews, known as Tier 1, Tier 2 and Tier 3. Tier 1 requires the manufacturer to provide the EPA with information concerning the identity and concentration of certain emission products and available health effects information. Tier 2 requires the manufacturer to conduct health effects testing or to use applicable group data, if available, which generally requires cost sharing with the parties that funded the health effects testing that yielded the group data. The EPA can impose additional Tier 3 testing on a case-by-case basis.

Our gasoline and diesel blendstocks have not been registered with the EPA as a fuel. To secure EPA registration of our fuels, we will need to satisfy at least the Tier 1 and Tier 2 requirements of Part 79. We are in the process of conducting the Tier 1 review for our products. To satisfy Tier 2, we will need to conduct health effects testing or provide the EPA with adequate existing information to comply with the Tier 2 requirements.

Cellulosic Biofuel Tax Credit

Upon the registration of our gasoline and diesel blendstocks as a fuel with the EPA and our registration with the Internal Revenue Service as a producer of cellulosic biofuel, we would be entitled to the Cellulosic Biofuel Tax Credit of $1.01 per gallon of our gasoline and diesel blendstocks that we produce until January 1, 2013, unless this deadline is extended.

Research and Development

Our research and development team is focused on the continued advancement of our technology platform to maximize the value of our renewable crude oil by increasing the overall yield of our BFCC process and improving the composition of our renewable crude oil. We believe that we will achieve this by developing our advanced catalysts systems, optimizing our reactor design and operating conditions and refining our renewable crude oil processing technology.

We devote significant expenditures to research and development. We spent $3.6 million, $10.0 million and $22.0 million on research and development activities in 2008, 2009 and 2010, respectively, and $4.4 million and $7.3 million for the three months ended March 31, 2010 and 2011, respectively. The following table shows our research and development costs by functional area during 2008, 2009, 2010 and 2011.


	Years Ended December 31,						Three Months Ended
	2008		2009		2010		2010		2011
	(In thousands)

Laboratory research	$	3,419	$	4,373	$	2,819	$	359	$	1,337
Pilot plant		—		3,936		6,145		1,178		2,348
Demonstration unit		—		—		11,374		2,361		3,325
Intellectual property		224		1,652		1,704		483		261

Total	$	3,643	$	9,961	$	22,042	$	4,381	$	7,271

Competition

In the near-term, we expect that our gasoline and diesel blendstocks will compete with other cellulosic biofuels, advanced biofuels and renewable fuels developed by established enterprises and new companies that seek to produce these renewable fuels to satisfy RFS2 mandates. In the longer term, we believe that our gasoline and diesel blendstocks will compete with petroleum-based blendstocks in the transportation fuels market.

We believe that the primary competitive factors in the renewable fuels market are:


	•	the scope of qualification of fuels under RFS2;

	•	compatibility with the existing liquid fuels infrastructure;

	•	product performance and other measures of quality;

	•	price;

	•	ability to produce meaningful volumes; and

	•	reliability of supply.

We believe that the primary competitive factors in the global transportation fuels market are:


	•	product performance and other measures of quality;

	•	price;

	•	ability to produce meaningful volumes; and


	•	reliability of supply.

Given the size of the traditional transportation fuels markets and the developing stage of alternative fuels markets, we do not believe that the success of other renewable products will prevent our gasoline and diesel blendstocks from being successful. However, with the wide range of renewable fuels products under development, we must be successful in reaching potential customers and convincing them that our products are effective and reliable alternatives. Our potential competitors include integrated oil companies, independent refiners, large chemical companies and well-established agricultural products companies that are much larger than we are, in many cases have well-developed distribution systems and networks for their products, have historical relationships with the potential customers we are seeking to serve and have sales and marketing programs in place to promote their products.

Environmental and Other Regulatory Matters

Our operations are subject to a variety of federal, state and local environmental laws and regulations that govern the discharge of materials into the environment or otherwise relate to environmental protection. Examples of these laws include:


	•	the federal Clean Air Act, or CAA, and analogous state laws that impose obligations related to air emissions;

	•	the federal Comprehensive Environmental Response, Compensation, and Liability Act, also known as CERCLA or the Superfund law, and analogous state laws that regulate the cleanup of hazardous substances that may be or have been released at properties currently or previously owned or operated by us or at locations to which our wastes are or have been transported for disposal;

	•	the federal Water Pollution Control Act, also known as the Clean Water Act, and analogous state laws that regulate discharges from our facilities into state and federal waters, including wetlands;

	•	the federal Resource Conservation and Recovery Act, also known as RCRA, and analogous state laws that impose requirements for the storage, treatment and disposal of solid and hazardous waste from our facilities;

	•	the Endangered Species Act; and

	•	the Toxic Substances Control Act and analogous state laws that impose requirements on the use, storage and disposal of various chemicals and chemical substances at our facilities.

These laws and regulations may impose numerous obligations that are applicable to our operations, including the acquisition of permits to conduct regulated activities, the incurrence of capital or operating expenditures to limit or prevent releases of materials from our facilities, and the imposition of substantial liabilities and remedial obligations for pollution resulting from our operations. Numerous governmental authorities, such as the EPA and analogous state agencies, have the power to enforce compliance with these laws and regulations and the permits issued under them, often requiring difficult and costly corrective actions. Most of these statutes include citizen suit provisions, which enable private parties to sue in lieu of the government, alleging violations of environmental law. Failure to comply with these laws, regulations and permits may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations and the issuance of injunctions limiting or preventing some or all of our operations. In addition, we may experience a delay in obtaining or be unable to obtain required permits, which may cause us to lose potential and current customers, interrupt our operations and limit our growth and revenue.

We believe that our current operations are in substantial compliance with existing environmental laws, regulations and permits. New laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant additional expenditures. Continued government and public emphasis on environmental issues can be expected to result in increased future investments for environmental controls at our ongoing and future operations. Present and future environmental laws and regulations and related interpretations applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial capital and other expenditures.

Clean Air Act Regulation. Our operations and the products we manufacture are subject to certain specific requirements of the CAA and similar state and local regulations and permitting requirements. These laws, regulations and permitting requirements may restrict our emissions, affect our ability to make changes to our operations, and otherwise impose limitations on or require controls on our operations. For example, our renewable fuel products will be subject to government regulation under the CAA, which requires the registration of fuel products or fuel additives and regulates the distribution and use of certain fuel products or fuel additives. We are currently at the beginning stages of the registration process for gasoline and diesel fuel containing blendstocks derived from our renewable crude oil with the EPA, as required by the CAA. Additionally, if the EPA were to determine that our feedstock is not a “fuel” under the CAA, it could require us to implement additional pollution controls on our operations. Our initial-scale commercial production facility under construction has been deemed a “minor source” under the CAA and our planned standard commercial production facilities are designed to meet the criteria for minor sources and require minor source permits under applicable state laws. It is possible that additional facilities that we construct in the future may be considered “major sources” and be subject to more stringent permitting requirements, including requirements of Title V of the CAA. In addition to costs that we expect to incur to achieve and maintain compliance with these laws, new or more stringent CAA standards in the future also may limit our operating flexibility or require the installation of new controls at our facilities and future facilities. Because other domestic alternative fuel manufacturers will be subject to similar restrictions and requirements, however, we believe that compliance with more stringent air emission control or other environmental laws and regulations is not likely to materially affect our competitive position.

Hazardous Substances and Wastes. There is a risk of liability for the investigation and cleanup of environmental contamination at each of the properties that we own or operate now and in the future and at off-site locations where we may arrange for the disposal of hazardous substances. If these substances have been or are disposed of or released at sites that undergo investigation and/or remediation by regulatory agencies, we may be responsible under CERCLA or other environmental laws for all or part of the costs of investigation and/or remediation and for damage to natural resources. We may also be subject to related claims by private parties alleging property damage and personal injury due to the presence of or exposure to hazardous or other materials at or from these properties. Some of these matters may require us to expend significant amounts for investigation and/or cleanup or other costs. We are unaware of any material environmental liabilities relating to contamination at or from our facilities.

We also generate solid wastes, including hazardous wastes, that are subject to the requirements of RCRA and comparable state statutes. Although RCRA regulates both solid and hazardous wastes, it imposes strict requirements on the generation, storage, treatment, transportation and disposal of hazardous wastes. The EPA and various state agencies have limited the approved methods of disposal for certain hazardous and non-hazardous wastes.

Water Discharges. The Clean Water Act and analogous state laws impose restrictions and strict controls regarding the discharge of pollutants into state waters as well as waters of the United States and to conduct construction activities in waters and wetlands. Certain state regulations and the general permits issued under the Federal National Pollutant Discharge Elimination System, or NPDES, program prohibit any discharge into surface waters, ground waters, injection wells and publicly owned treatment works except in strict conformance with permits, such as pre-treatment permits and NPDES permits, issued by federal, state and local governmental agencies. We anticipate that our process waste water will not be directly discharged into state or U.S. waters, but rather will be sent to a publicly owned treatment works. In addition, the Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. These regulations and permits may require us to monitor and sample the storm water runoff from certain of our facilities or our discharges to publicly owned treatment works. Some states also maintain groundwater protection programs that require permits for discharges or operations that may impact groundwater conditions. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations. We believe that compliance with existing

permits and compliance with foreseeable new permit requirements will not have a material adverse effect on our financial condition, results of operations or cash flow.

Construction Permits. Our business is also subject to sewer, electrical and construction permitting requirements. As a condition to granting necessary permits, regulators could make demands that increase our costs of construction and operations, in which case we could be forced to obtain additional debt or equity capital. Permit conditions could also restrict or limit the extent of our operations. We cannot assure you that we will be able to obtain and comply with all necessary permits to construct our commercial production facilities. Failure to obtain and comply with all applicable permits and licenses could halt our construction and could subject us to future claims.

Safety. The hazards and risks associated with producing and transporting our renewable transportation fuels, such as fires, natural disasters, explosions and pipeline ruptures, also may result in personal injury claims or damage to property and third parties. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses. Our coverage includes physical damage to assets, employer’s liability, comprehensive general liability, automobile liability and workers’ compensation. We are not insured against pollution resulting from environmental accidents that occur on a sudden and accidental basis, some of which may result in toxic tort claims. We believe that our insurance is adequate and customary for our industry, but losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. We are not currently aware of pending material claims for damages or liability to third parties relating to the hazards or risks of our business.

OSHA. We are subject to the requirements of the federal Occupational Safety and Health Act and comparable state statutes, laws and regulations. These laws and the implementing regulations strictly govern the protection of the health and safety of employees. The Occupational Safety and Health Administration’s, or OSHA, hazard communication standard, the EPA’s community right-to-know regulations under Title III of CERCLA and similar state laws require that we organize and/or disclose information about hazardous materials used or produced in our operations.

Our operations are also subject to standards designed to ensure the safety of our processes, including OSHA’s Process Safety Management standard. The Process Safety Management standard imposes requirements on regulated entities relating to the management of hazards associated with highly hazardous chemicals. Such requirements include conducting process hazard analyses for processes involving highly hazardous chemicals, developing detailed written operating procedures, including procedures for managing change, and evaluating the mechanical integrity of critical equipment.

TSCA. We are subject to the requirements of the Toxic Substances Control Act, or TSCA, which regulates the commercial use of chemicals. Before an entity can manufacture a chemical, it needs to determine whether that chemical is listed in the TSCA inventory. If a substance is listed, then manufacture can commence immediately. If not, then a “Chemical Abstracts Service” number registration and pre-manufacture notice must be filed with the EPA, which has 90 days to review. We will submit a pre-manufacture notice and a notice of commencement to the EPA prior to commercial production. While we expect to obtain approval of the pre-manufacture notice and notice of commencement prior to commercial production, there can be no assurance that the EPA will approve these submissions or that our products will be listed on the TSCA inventory. The failure to comply with TSCA could have a material adverse effect on our results of operations and financial condition. However, the TSCA new chemical submission policies may change and additional government legislation or regulations may be enacted that could prevent or delay regulatory approval of our products.

Climate Change. In the United States, legislative and regulatory initiatives are underway to limit greenhouse gas, or GHG, emissions, including emissions by facilities such as our planned commercial production facilities. In 2010, the EPA issued a final rule, known as the “Tailoring Rule,” that makes certain large stationary sources and modification projects subject to permitting requirements for GHG emissions under the CAA. In addition, in September 2009, the EPA issued a final rule requiring the reporting of GHGs from specified large GHG emission sources in the United States, beginning in 2011 for emissions in 2010. At this time, projected GHG emissions from our initial-scale commercial production facility would not meet the

applicable thresholds for GHG reporting or permitting requirements. Our future commercial production facilities may be required to comply with GHG reporting or permitting requirements if they emit over 100,000 tons per year of GHGs. Complying with greenhouse gas reporting and permitting requirements may result in materially increased compliance costs, increased capital expenditures, increased operating costs and additional operating restrictions for our business.

Because regulation of GHG emissions is relatively new, further regulatory, legislative and judicial developments are likely to occur. Such developments may affect how these GHG initiatives will impact the demand for our products and our operating results. Due to the uncertainties surrounding the regulation of and other risks associated with GHG emissions, we cannot predict the financial impact of related developments on us. Because other domestic alternative fuel manufacturers will be subject to similar restrictions and requirements, however, we believe that compliance with GHG reporting or emission requirements is not likely to materially affect our competitive position.

Facilities

Our corporate headquarters are located in Pasadena, Texas, where we lease approximately two acres for our offices, pilot plant and demonstration plants, test laboratories and research and development facilities. Approximately 16,000 square feet of building space are dedicated to office space, approximately 9,000 square feet are dedicated to laboratory space and approximately 28,000 square feet are dedicated to production and storage space. The lease for this property expires on October 31, 2011, and we have two three-year renewal options.

We have obtained the right to use a 22-acre property near Columbus, Mississippi and, in the first quarter of 2011, we began constructing our initial-scale commercial production facility at that site. We expect to acquire this site subject to the seller’s option to repurchase it from us for a nominal fee if we cease construction, manufacturing or commercial activity on the site for an uninterrupted period of two years. If the seller were to exercise its option in that case, we would be required to remove all of our improvements from the property and restore it to marketable condition. We also lease and expect to acquire approximately seven acres adjacent to this site.

Employees

As of March 31, 2011, we had 107 full-time employees, including over 80 scientists and technical support personnel, all of whom are located in the United States. We plan to continue to expand our manufacturing and operations as we build initial commercial production facilities, which will require us to hire a significant number of additional employees. None of our employees is represented by a labor union or covered by a collective bargaining agreement. We have never experienced any employment-related work stoppages, and we consider our employee relationships to be good.

Legal Proceedings

We are not a party to any material litigation or proceeding and are not aware of any material litigation or proceeding, pending or threatened against us.

MANAGEMENT

Executive Officers, Directors and Key Employees

Our directors, executive officers and other key persons and their ages and their positions as of June 6, 2011 are as follows:


Name	Age		Position

*Executive Officers*
Fred Cannon		59	President, Chief Executive Officer and Director
John H. Karnes		49	Chief Financial Officer
William K. Coates		44	Chief Operating Officer
Joseph S. Cappello		45	President of International
John Kasbaum		52	Senior Vice President of Commercial
Christopher A. Artzer		39	Vice President, General Counsel and Secretary

*Non-Employee Directors*
Ralph Alexander		56	Director
Jagdeep Singh Bachher		38	Director
Samir Kaul		37	Director
John Melo		44	Director
Paul O’Connor		55	Director
Condoleezza Rice		56	Director*
William Roach		54	Director
Gary L. Whitlock		61	Director

*Key Employees*
Michael J. Adams		62	Vice President of Process Engineering
Andre Ditsch		34	Vice President of Strategy
John Hacskaylo		51	Vice President of Research and Development
Michael P. McCollum		56	Vice President of Supply
Edward J. Smith		62	Vice President of Engineering and Construction
Daniel J. Strope		62	Vice President of Technology


*		Has agreed to become a director beginning July 2011.

Executive Officers

Fred Cannon is our President and Chief Executive Officer and a member of our Board of Directors. Mr. Cannon joined KiOR as President and Chief Operating Officer and as a director in June 2008 and was elected Chief Executive Officer in July 2010. He brings to the company strong leadership skills, technical expertise and a 30-year track record of successful international business management in the fuels and chemicals industries, with a particular focus on catalyst and fluidic catalytic cracking (FCC) technologies. Prior to KiOR, Mr. Cannon led a distinguished 30 year career at AkzoNobel, a global leader in refining catalysts and specialty chemicals manufacturing. Mr. Cannon was president of AkzoNobel Catalysts LLC from 1997 until the divestment of the business in August 2004. In his role, Mr. Cannon had full profit and loss responsibilities for the company’s Americas business and managed various joint ventures around the world. In August 2004, AkzoNobel’s refinery catalyst business was sold to Albemarle Corporation. Mr. Cannon served in several executive roles in transitioning the business to ensure continued smooth operations and integration across the new company until June 2008 when he joined KiOR. In all, Mr. Cannon has over 20 years in the refining catalyst business, where he has managed the development, scaling and commercialization of new catalyst technologies, including FCC and hydro-processing catalysts. Mr. Cannon holds an MBA and a B.S. in Engineering from the University of South Alabama.

John H. Karnes has been our Chief Financial Officer since joining us in February 2011. From February 2010 until February 2011, Mr. Karnes was Chief Financial Officer of Highland Oil & Gas, LLC. From

September 2006 to November 2009, he served as Senior Vice President, Chief Financial Officer and Treasurer of Mariner Energy, Inc. From January 2006 to September 2006, Mr. Karnes provided advisory services in a variety of industries, including oil and gas. He served as Chief Financial Officer of The Houston Exploration Company from 2002 until December 2005. Earlier in his career, Mr. Karnes served in Chief Financial Officer and in other senior management roles with several other public growth companies including Encore Acquisition Company, CyberCash, Inc., Snyder Oil Company and Apache Corporation. He began his career in the securities industry and also practiced law with the national firm of Kirkland & Ellis LLP where he focused on mergers and acquisitions and capital markets transactions. Mr. Karnes holds a BBA in Accounting from The University of Texas at Austin and a J.D. from Southern Methodist University School of Law.

William K. Coates has been our Chief Operating Officer since joining us in June 2011. From January 2010 to June 2011, Mr. Coates served as Vice President, Marketing for Schlumberger Limited, the world’s leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry worldwide. From March 2006 to January 2010, Mr. Coates was President of Schlumberger North America. From October 2003 to March 2006, he served as GeoMarket Manager of Schlumberger Oilfield Services Gulf of Mexico. Mr. Coates began his career with Schlumberger in 1988. Mr. Coates has a B.S. in Mechanical Engineering from Virginia Polytechnic Institute and State University and has studied Executive Finance at IMD in Lausanne, Switzerland.

Joseph S. Cappello has been our President of International since joining us in March 2011. Mr. Cappello has more than 20 years of business experience split between industry and equity research on Wall Street. Prior to joining KiOR, Mr. Cappello spent nearly 15 years with Praxair, one of the largest industrial gases companies worldwide. From October 2008 to March 2011, Mr. Cappello was President of Praxair Asia, responsible for the growth and profitability of Praxair’s businesses in China, India, South Korea and Thailand as well as several joint ventures, including Singapore. Mr. Cappello joined Praxair in October 1996 and subsequently held roles with increasing responsibility, including director of Praxair’s carbon dioxide business from October 1999 to January 2001, Vice President of Global Helium and Rare Gases from January 2001 to January 2006 and Vice President of Product Management and Service for North America from January 2006 to October 2008. His experience includes the expansion of global product lines, replication of business capabilities to other countries and the acquisition of service and technology companies. As an equity analyst, Mr. Cappello covered several sectors of the chemical industry. Mr. Cappello holds a B.S. in Accounting from Montclair State University in New Jersey.

John Kasbaum has been our Senior Vice President of Commercial since joining us in June 2010. Previously, Mr. Kasbaum served as Division Vice President of the Fluid Catalytic Cracking (FCC) division of Albemarle Corporation, a leader in refining catalysts and specialty chemicals manufacturing, from September 2009 to May 2010. He also served on the Board of Directors for Albemarle’s joint venture with PetroBras, the Brazilian energy company, for the manufacture, sales and marketing of FCC catalysts in South America. In a previous role at Albemarle, Mr. Kasbaum was Division Vice President of Alternative Fuel Technologies from December 2007 to August 2009. He served as Alliance Director for Albemarle’s petroleum refining Hydroprocessing Alliance with Honeywell’s UOP division from 2006 to December 2007. Mr. Kasbaum has more than 20 years of experience in catalysis business strategy, sales, marketing, manufacturing and technology. Mr. Kasbaum holds an MBA from the McCombs School of Business at the University of Texas at Austin, as well as bachelors degrees in Engineering and Business Management, also from the University of Texas at Austin.

Christopher A. Artzer has been our Vice President, General Counsel and Secretary since joining us in March 2011. From December 2004 to March 2011, Mr. Artzer served as Vice President, General Counsel & Secretary of TPC Group, Inc. Prior to joining TPC Group in December 2004, Mr. Artzer was counsel at the law firm of Akin Gump Strauss Hauer & Feld LLP in Houston, Texas. Mr. Artzer received a B.A. in Government from Dartmouth College and a J.D. from the University of Texas School of Law.

Non-Employee Directors

Ralph Alexander has been a member of our Board of Directors since February 2011. He has been a Managing Director of Riverstone Holdings, LLC, a private equity fund focused on the energy and power sectors, since September 2007. During 2007, Mr. Alexander served as a consultant to TPG Capital. For nearly

25 years, Mr. Alexander served in various senior management positions with subsidiaries and affiliates of BP plc, most recently as Chief Executive Officer of Innovene, BP’s olefins and derivatives subsidiary, from 2004 to December 2005, as Chief Executive Officer of BP’s Gas, Power and Renewables and Solar segment from 2001 to 2004, and as a Group Vice President in BP’s Exploration and Production segment and BP’s Refinery and Marketing segment. He also has been a director of Amyris, Inc. and Stein Mart Corporation, in each case since May 2007. He previously served on the board of Foster Wheeler from May 2006 to February 2007 and Anglo-American plc from April 2005 to October 2007. He holds a B.S. and M.S. in nuclear engineering from Brooklyn Polytech (now NYU Polytechnic) and holds an M.S. in management science from Stanford University. He is currently Chairman of the Board of NYU Polytechnic. Mr. Alexander’s extensive experience with the energy industry generally and renewable fuels in particular enables him to provide important insight and guidance to our management team and Board of Directors.

Jagdeep Singh Bachher, Ph.D., has been a member of our Board of Directors since July 2010. Dr. Bachher has served as Chief Operating Officer of Alberta Investment Management Corporation since January 2009. He previously served as the President and General Manager of JH Investments (Delaware) LLC, a fixed-income asset manager owned by Manulife Financial Corporation, from April 2008 to January 2009. From 2004 to April 2008, Dr. Bachher served as Assistant Vice President of Manulife Asset Management, investing in alternative assets (timber, agriculture, oil and gas and infrastructure). Dr. Bachher holds a Ph.D. and an M.A.Sc. in Management Sciences as well as a B.A.Sc. in Mechanical Engineering from the University of Waterloo in Waterloo, Canada. Dr. Bachher brings to the Board of Directors extensive experience in operations, timber and infrastructure investments.

Samir Kaul has been a member of our Board of Directors since November 2007. Mr. Kaul has been a General Partner at Khosla Ventures, a venture capital firm focusing on clean technologies, since February 2006. Previously, Mr. Kaul was a member of Flagship Ventures, a venture capital firm, from 2002 to May 2006. Prior to Flagship, Mr. Kaul worked at The Institute for Genomic Research. Mr. Kaul currently serves on the board of directors of Amyris, Inc. and on the boards of directors of several private companies. Mr. Kaul holds a B.S. in Biology from the University of Michigan, an M.S. in Biochemistry from the University of Maryland and an MBA from Harvard Business School. Mr. Kaul provides our Board of Directors with wide-ranging experience in clean technology companies and insight in the management of startup companies and the building of companies from early stage to commercial scale.

John Melo has been a member of our Board of Directors since July 2010. Mr. Melo has served as President and Chief Executive Officer of Amyris, Inc. since January 2007. Before joining Amyris, Mr. Melo served in various senior management positions at BP plc, one of the world’s largest energy firms, from 1997 to 2006, most recently as President of U.S. Fuels Operations from 2004 until December 2006, and previously as Chief Information Officer of the refining and marketing segment from 2001 to 2003, Senior Advisor for e-business strategy to Lord Browne, BP’s Chief Executive Officer, from 2000 to 2001, and Director of Global Brand Development from 1999 to 2000. Before joining BP, Mr. Melo was with Ernst & Young, an accounting firm, from 1996 to 1997, and a member of the management teams of several startup companies, including Computer Aided Services, a management systems integration company, and Alldata Corporation, a provider of automobile repair software to the automotive service industry. Mr. Melo currently serves on the board of directors of U.S. Venture, Inc. and Amyris, Inc. Mr. Melo’s experience as a senior executive at one of the world’s largest energy companies provides critical leadership in designing the fuels value chain, shaping strategic direction and business transactions, and in building teams to drive innovation.

Paul O’Connor has been a member of our Board of Directors since November 2007. From June 2008 until November 2009, he was our Chief Technology Officer. He has been the Director of Science and Technology of BIOeCON B.V., which is focused on the conversion of biomass to renewable fuels and energy, since he founded BIOeCON in 2005. Prior to founding BIOeCON, Mr. O’Connor led the long-term development strategy for Albemarle Catalysts and worked in marketing, research management and technology development of refining catalysts at AkzoNobel prior to its acquisition by Albemarle. Prior to AkzoNobel, he worked in heavy oil conversion processes in design, process and refinery operations. He holds an M.S. in Chemical Engineering from the Eindhoven University of Technology in the Netherlands. As a leading expert

in catalytic cracking processes, Mr. O’Connor brings to our Board significant knowledge about our technical processes.

Condoleezza Rice, Ph.D., has been elected to our Board of Directors and has agreed to join our Board of Directors beginning July 2011. Secretary Rice has been a professor of political economy in the Stanford Graduate School of Business since September 2010. Secretary Rice has also served as a senior fellow of public policy at the Hoover Institution and a professor of political science at Stanford University since March 2009. Prior to returning to academia, from January 2005 to January 2009, she served as the 77th Secretary of State of the United States. Secretary Rice also served as Chief National Security Advisor to the President from January 2001 to January 2005. Secretary Rice is currently on the board of Makena Capital, a private endowment firm, and C3, an energy software company. She has also served on the boards of directors for the Chevron Corporation, the Charles Schwab Corporation, the Transamerica Corporation and the International Advisory Council of J.P. Morgan. Secretary Rice will provide our Board of Directors with expertise in global business as we pursue our international strategy, and she brings deep experience from her prior roles as a director of multiple public companies, including a large integrated oil company.

William Roach, Ph.D., has been a member of our Board of Directors since July 2010. Dr. Roach currently serves as Chief Executive Officer and a director of Calera Corporation, a green energy company, a position he has held since October of 2010. From June 2004 to October 2010, Dr. Roach served as President, Chief Executive Officer and Director of UTS Energy Corporation, a Canadian oil sands exploration and development company. Prior to joining UTS Energy, Dr. Roach served in international project management roles with Husky Energy, British-Borneo Oil & Gas and Shell. Dr. Roach currently serves on the board of Sonde Resources, a natural gas development company, and Porto Energy Corp., an international oil and gas company, both of which trade on the Toronto Stock Exchange, and on the boards of several private companies engaged in oil and gas production and transportation. He is a professional engineer in Canada and the U.K. and holds a B.S. in metallurgy and a Ph.D. in physical metallurgy from the University of Swansea in the U.K. Dr. Roach brings to the Board of Directors extensive experience developing and managing capital-intensive projects, including experience with first-of-kind projects.

Gary L. Whitlock has been a member of our Board of Directors since December 2010. Mr. Whitlock serves as Executive Vice President and Chief Financial Officer of CenterPoint Energy, Inc., a position he has held since September 2002. He served as Executive Vice President and Chief Financial Officer of the Delivery Group of Reliant Energy, Incorporated, from July 2001 to September 2002. Prior to joining Reliant, Mr. Whitlock served as the Vice President of Finance and Chief Financial Officer of Dow AgroSciences, a subsidiary of The Dow Chemical Company, from 1998 to 2001. He began his career with Dow in 1972, where he held a number of financial leadership positions, both in the United States and globally. Mr. Whitlock is a Certified Public Accountant and received a BBA from Sam Houston State University. Mr. Whitlock brings to the Board of Directors extensive experience in public company financial management and reporting.

Key Employees

Michael J. Adams is our Vice President of Process Engineering. Mr. Adams has over 38 years of experience in oil and gas production, gas processing, refining, petrochemicals and chemicals. Prior to joining KiOR in January 2011, Mr. Adams spent 28 years with Fluor Corporation, a global engineering and construction firm, where he was most recently the Department Manager for Process Technology from February 2009 to December 2010. From September 2008 to February 2009, Mr. Adams was the downstream technology focus leader responsible for support of business development and project execution. From April 2006 to August 2008, he was the process manager responsible for technical oversight of contractors and licensors executing a major refinery expansion project in Cartagena, Spain. From January 2005 to March 2006, he was the process manager responsible for technical oversight, front-end engineering and design (FEED) and development for a new refinery project in Kuwait. In addition, Mr. Adams has worked as a consultant dealing with technology, execution and project management. Mr. Adams holds a B.S. with honors in Chemical Engineering from the University of Texas at Austin.

Andre Ditsch, Ph.D., is our Vice President of Strategy. He is responsible for the strategic direction of various facets of the business including financing, business development, risk management and process economics. He previously served as our Strategy Director and our Strategy and Projects Manager from June 2008 to February 2011. Prior to joining KiOR in June 2008, Dr. Ditsch was a consultant for McKinsey and Company, where he was a consultant for the petrochemical, energy and pharmaceutical industries from August 2005 to May 2008. Dr. Ditsch also has worked at Archer Daniels Midland as a process engineer and foreman in their ethanol facility in Decatur, Illinois, where he improved procedures and was responsible for people leadership and process optimization. Dr. Ditsch holds a B.S. in Chemical Engineering from the University of Nebraska-Lincoln and obtained his Ph.D. in Chemical Engineering from the Massachusetts Institute of Technology.

John Hacskaylo, Ph.D., is our Vice President of Research and Development. Prior to joining KiOR in May 2010, Dr. Hacskaylo spent more than 20 years at The Dow Chemical Company, one of the world’s largest chemical manufacturers, where he served most recently as Global R&D Director for Dow’s basic plastics business from September 2008 to May 2010. Dr. Hacskaylo also served as Vice President/Global R&D Director for Dow’s Automotive and Engineering Plastics businesses from 2004 to 2008. He also has served on the Advisory Board of the University of Virginia’s Department of Chemical Engineering. Dr. Hacskaylo received his Ph.D. and M.S. in Chemical Engineering as well as a B.S. in Chemistry from the University of Virginia at Charlottesville.

Michael P. McCollum, Ph.D., is our Vice President of Supply. He has over 30 years of experience in the forest products industry. From 2006 until joining KiOR in January 2010, Dr. McCollum was most recently President of United States Forest Consulting LLC, a provider of consulting services to the forest products industry. From June 1996 until his retirement in December 2005, Dr. McCollum led the Wood and Fiber Supply Division of Georgia-Pacific Corporation, a leading manufacturer and distributor of tissue, pulp, paper, packaging, building products and related chemicals, and in January 2001, he became President of the Fiber Supply Division. From July 1992 to June 1996, Dr. McCollum served in positions of increasing responsibility at Georgia-Pacific in the areas of forest management, wood and fiber supply, technical support, and strategic planning. Dr. McCollum started his career in the Wood Products Division of Manville Forest Products Corporation and served in various positions at Temple-Inland Inc., a major forest products corporation. Dr. McCollum holds a B.S. in Forest Science from the University of Arkansas at Monticello and obtained his M.S. in Wood Chemistry and Ph.D. in Forest Resources from Texas A&M University. He currently serves on the board of directors of Wells Timberland REIT, a position he has held since June 2005.

Edward J. Smith is our Vice President of Engineering and Construction. From the time he joined KiOR in July 2009 to December 2010, he was our Director of Engineering. Mr. Smith has 36 years of experience in the chemical and catalyst industries, where he has designed, constructed and operated various chemical facilities in the United States and abroad. Prior to joining KiOR, Mr. Smith was Albemarle’s General Manager and Director of Manufacturing at facilities in China and Jordan from October 2005 to July 2009. Mr. Smith spent 33 years with AkzoNobel, whose refinery catalyst business was acquired by Albemarle in 2004. Earlier in his career, he worked at Pioneer Chemicals, where he developed a number of products and specialty chemicals that were used in the industrial paper making industry. Mr. Smith holds a B.S. in Chemical Engineering from Drexel University and a B.S. in Chemistry from Villanova University.

Daniel J. Strope, Ph.D., is our Vice President of Technology. He manages our technology with a focus on engineering, regulatory and commercial development. Between September 2008 and May 2009, before joining KiOR, Dr. Strope was the President of Refining Services, LLC, where he consulted in areas of hydrocarbon processing and alternate fuels. Before September 2006, Dr. Strope spent more than 30 years in research and technology management with ConocoPhillips. Between August 2006 and September 2008 he managed technology development and support for ConocoPhillips worldwide refining business. He also managed 50 people in two research centers with a $45 million annual budget and started a new Advanced Fuels group focused on alternate fuels issues and developments. Dr. Strope also served as a technology member of a specialty carbon business steering committee. From May 2001 to August 2006, Dr. Strope was the Manager, Licensing Technology Development at ConocoPhillips where he managed process package development and improvement, projects oversight and service for worldwide licensees of coking, alkylation and sulfur removal

projects. He also developed and negotiated contracts and relationships with major engineering partners and suppliers. Dr. Strope has a B.S. in Chemistry from Rockhurst College and an M.S. and a Ph.D. in Inorganic Chemistry from Northwestern University.

Board of Directors

Our Board of Directors currently consists of eight members. We have determined that five of these directors, Messrs. Alexander, Melo and Whitlock and Drs. Bachher and Roach, are independent in accordance with the listing requirements of The Nasdaq Global Select Market. All of our current directors were elected or appointed in accordance with the terms of an amended and restated voting agreement among us and certain of our stockholders. The amended and restated voting agreement will terminate upon the completion of this offering, and there will be no further contractual obligations regarding the election of our directors. Our current directors will continue to serve as directors until their resignation or until their successors are duly elected by the holders of our common stock, despite the fact that the amended and restated voting agreement will terminate upon the completion of this offering.

Upon the completion of this offering, entities affiliated with Khosla Ventures will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” under The Nasdaq Global Select Market corporate governance standards. As a controlled company, exemptions under The Nasdaq Global Select Market standards will free us from the obligation to comply with certain Nasdaq Global Select Market corporate governance requirements, including the requirements:


	•	that a majority of our Board of Directors consists of “independent directors,” as defined under the rules of The Nasdaq Global Select Market;


	•	that the compensation of our executive officers be determined, or recommended to the Board of Directors for determination, by independent directors constituting a majority of the independent directors of the board in a vote in which only independent directors participate or by a compensation committee comprised solely of independent directors; and

	•	that director nominees be selected, or recommended to the Board of Directors for selection, by independent directors constituting a majority of the independent directors of the board in a vote in which only independent directors participate or by a nomination committee comprised solely of independent directors.

Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of The Nasdaq Global Select Market corporate governance requirements. In the event that we cease to be a controlled company, we will be required to comply with these provisions within the transition periods specified in the rules of The Nasdaq Global Select Market.

These exemptions do not modify the independence requirements for our audit committee, and we intend to comply with the applicable requirements of the Sarbanes-Oxley Act and Nasdaq Global Select Market rules with respect to our audit committee within the applicable time frame.

At each annual meeting of stockholders, all of our directors will be elected for a one-year term.

Audit Committee

Our audit committee is comprised of Messrs. Alexander and Whitlock and Dr. Roach. Our board has determined that Messrs. Alexander and Whitlock are independent directors as defined under and required by the Securities Exchange Act of 1934, or the Exchange Act, and the listing requirements of The Nasdaq Global Select Market. Rule 10A-3 under the Exchange Act and the listing requirements of The Nasdaq Global Select Market require that our audit committee be composed of a minimum of three members and that it be composed of a majority of independent directors within 90 days of the effectiveness of the registration statement of which this prospectus is a part and that it be composed solely of independent directors within one year of such date. Mr. Whitlock has been designated as the audit committee financial expert, as defined under

SEC rules. The principal duties of the audit committee, which will also be chaired by Mr. Whitlock, will be as follows:


	•	to review our external financial reporting;

	•	to engage our independent auditors; and

	•	to review our procedures for internal auditing and the adequacy of our internal accounting controls.

Our Board of Directors has adopted a written charter for the audit committee that will be available on our website, http://www.kior.com, after the completion of this offering.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee is comprised of Messrs. Alexander and Kaul and Dr. Roach. Our board has determined that Messrs. Alexander and Roach are independent as required by the listing requirements of The Nasdaq Global Select Market. Upon the completion of this offering, we will be a “controlled company” under The Nasdaq Global Select Market corporate governance standards and we will qualify for, and expect to rely on, exemptions from The Nasdaq Global Select Market corporate governance requirements that require our nominating and corporate governance committee to be composed entirely of independent members. The principal duties of the nominating and corporate governance committee, which will be chaired by Mr. Alexander, will be as follows:


	•	to recommend to the Board of Directors proposed nominees for election to the Board of Directors by the stockholders at annual meetings, including an annual review as to the renominations of incumbents and proposed nominees for election by the Board of Directors to fill vacancies that occur between stockholder meetings; and

	•	to make recommendations to the Board of Directors regarding corporate governance matters and practices.

Our Board of Directors has adopted a written charter for the corporate governance and nominating committee that will be available on our website, http://www.kior.com, after the completion of this offering.

Compensation Committee

Our compensation committee is comprised of Messrs. Kaul and Melo and Dr. Bachher. Our board has determined that Mr. Melo and Dr. Bachher are independent as defined by the rules of The Nasdaq Global Select Market. Upon the completion of this offering, we will be a “controlled company” under The Nasdaq Global Select Market’s corporate governance standards and we will qualify for, and expect to rely on, exemptions from The Nasdaq Global Select Market corporate governance requirements that require our compensation committee to be composed entirely of independent members. The principal duties of the compensation committee, which will be chaired by Mr. Melo, will be as follows:


	•	to administer our stock plans and incentive compensation plans, including our stock incentive plans, and in this capacity, make all option grants or awards to our directors and employees under such plans;

	•	to make recommendations to the Board of Directors with respect to the compensation of our chief executive officer and our other executive officers; and

	•	to review key employee compensation policies, plans and programs.

Our Board of Directors has adopted a written charter for the compensation committee that will be available on our website, http://www.kior.com, after the completion of this offering.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serve as a member of the Board of Directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our Board of Directors or compensation committee.

Mr. Kaul has pecuniary interests in Khosla Ventures and may be deemed to have an interest in certain transactions with us, as more fully described in “Certain Relationships and Related Person Transactions” below.

Code of Business Conduct and Ethics

Our Board of Directors has adopted a code of business conduct and ethics in connection with this offering. The code will apply to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions), including directors and consultants. Upon the effectiveness of the registration statement of which this prospectus forms a part, the full text of our code of business conduct and ethics will be posted on our website at http://www.kior.com. The inclusion of our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus.

Compensation of Directors

Our directors who are affiliated with certain of our other stockholders, Messrs. Kaul and O’Connor and Dr. Bachher, and our employee director, Mr. Cannon, have not received any compensation in connection with their service as directors. For information about the compensation that we pay to Mr. Cannon for his service as an executive officer, please read “Executive Compensation.”

We pay our non-employee directors who are not affiliated with any of our other stockholders a cash retainer of $2,500 per month, and we compensate them for the reasonable expenses that they incur in connection with their attendance of meetings. This policy currently applies to Messrs. Alexander, Melo and Whitlock and Dr. Roach. Except for this monthly retainer, we have not paid any cash compensation to any of our directors for their service on the Board of Directors or on committees of the Board of Directors. Each of our non-employee directors who is not affiliated with any of our other stockholders has also been awarded options as set forth in the table below.

The following table sets forth a summary of the compensation we paid to our non-employee directors during the year ended December 31, 2010:

Director Compensation for the Year Ended December 31, 2010


	Fees Earned or		Option
Name	Paid in Cash		Awards(1)(2)		Total

Ralph Alexander	$	5,000	$	202,542	$	207,542
Jagdeep Singh Bachher		—		—		—
Samir Kaul		—		—		—
John Melo	$	12,500	$	202,542	$	215,042
Paul O’Connor