10-Q 1 kior20130630_10q.htm FORM 10-Q kior20130630_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  


 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

   
 

For the quarterly period ended: June 30, 2013 

  

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

   
  For the transition period from              to     

   

Commission file number: 001-35213 

 


 KiOR, INC.

(Exact name of registrant as specified in its charter)

 

Delaware 

 

51-0652233 

(State or other jurisdiction of

incorporation or organization) 

 

(I.R.S. Employer

Identification No.) 

 

13001 Bay Park Road

Pasadena, Texas 77507

(Address of principal executive offices) (Zip Code)

 

Tel: (281) 694-8700

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

     

Title of class 

 

Name of each exchange on which registered  

Class A Common Stock, $0.0001 par value

 

Nasdaq Global Select Market

 

Securities registered pursuant to Section 12(g) of the Exchange Act: None

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes       No  

 

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.

 

             

Large accelerated filer

 

  

Accelerated filer

 

       

Non-accelerated filer

 

   (Do not check if a smaller reporting company)

  

Smaller reporting company

 

   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

 

There were 55,122,484 and 51,511,234 shares of the registrant’s Class A and Class B common stock, respectively, outstanding on August 2, 2013.

  

 
1

 

  

TABLE OF CONTENTS

 

   

PART I. FINANCIAL INFORMATION 

ITEM 1. Financial Statements (Unaudited)

 

Condensed Consolidated Balance Sheets — June 30, 2013 and December 31, 2012 

5

Condensed Consolidated Statements of Operations and Comprehensive Loss — Three and Six Months Ended June 30, 2013 and 2012 

6

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) 

7

Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2013 and 2012 

10

Notes to Condensed Consolidated Financial Statements 

12

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 

32

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 

47

ITEM 4. Controls and Procedures 

47

 

PART II. OTHER INFORMATION 

ITEM 1. Legal Proceedings 

48

ITEM 1A. Risk Factors 

48

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 

51

ITEM 6. Exhibits 

51

   

 
2

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report, 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,” “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 Quarterly Report include statements about:

 

 

 

our ability to obtain additional debt and/or equity financing on acceptable terms, if at all;

 

 

 

the sufficiency of our cash to meet our liquidity needs;

 

 

 

our ability to continue as a going concern;

 

 

the timing of and costs related to achieving steady-state operations at our initial scale commercial production facility in Columbus, Mississippi;

 

 

 

 

our ability to continuously operate our facilities without delay or shutdowns;

 

 

the timing of and costs related to production and generation of revenues at our initial scale commercial production facility in Columbus;

 

 

 

the timing of and costs related to the construction and commencement of operations at our next commercial production facility;

 

 

 

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

 

 

 

the expected production costs of our cellulosic gasoline, diesel and fuel oil, including our ability to produce cellulosic gasoline and diesel without government subsidies and on a cost-effective basis;

 

 

 

the anticipated performance attributes of our cellulosic gasoline, diesel and fuel oil;

 

 

 

 

our projected yield for our fuels produced by our catalyst platform;

 

 

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

 

 

 

our ability to produce cellulosic gasoline and diesel at commercial scale;

 

 

 

our ability to obtain feedstock at commercially acceptable terms;

 

 

 

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

 

 

 

the future price and volatility of petroleum-based products and competing renewable fuels and of our current and future feedstocks;

 

 

 

government policymaking and incentives relating to renewable fuels;

 

 

 

our ability to obtain and retain potential customers for our cellulosic gasoline, diesel and fuel oil; and

 

 

 

our ability to hire and retain skilled employees.

  

 
3

 

 

These forward-looking statements are subject to a number of important risks, uncertainties and assumptions. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. The following important factors, among others, could cause actual results to differ materially and adversely from those contained in forward-looking statements made in this Quarterly Report: our ability to raise additional capital in order to fund our current operations, build our next commercial production facility and expand our business; the availability of cash to invest in the ongoing needs of our business; our ability to successfully commercialize our cellulosic gasoline, diesel and fuel oil; our ability to effectively scale our proprietary technology platform and process design; the cost of constructing, operating and maintaining facilities necessary to produce our cellulosic gasoline, diesel and fuel oil in commercial volumes; the ability of our initial-scale commercial production facility, in which we are in the process of bringing to “steady state” operations, to satisfy the technical, commercial and production requirements under offtake agreements relating to the sale of cellulosic gasoline, diesel and fuel oil; market acceptance of our cellulosic gasoline, diesel and fuel oil; the ability of our initial-scale commercial production facility to produce fuel on time and at expected yields; changes to the existing governmental policies and initiatives relating to renewable fuels; and our ability to obtain and maintain intellectual property protection for our products and processes, as well as other risks and uncertainties described in “Risk Factors” in Item 1A of Part II below and in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2012. 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.

 

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 Quarterly Report, except to the extent required by law.

 

References

 

Unless the context requires otherwise, references to "KiOR," "we," the "company," "us" and "our" in this Quarterly Report on Form 10-Q refers to KiOR, Inc., and its subsidiaries.

  

 
4

 

 

KiOR, Inc.

(A development stage enterprise)

 

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share data)

 

(Unaudited)

 

 

   

June 30,

2013

   

December 31,

2012

 

Assets

               

Current assets:

               

Cash and cash equivalents

  $ 11,495     $ 40,887  

Restricted cash

    200        

Inventories

    3,295       3,239  

Prepaid expenses and other current assets

    1,775       1,528  

Total current assets

    16,765       45,654  

Property, plant and equipment, net

    253,140       246,410  

Intangible assets, net

    2,228       2,332  

Other assets

    1,434       1,641  

Total assets

  $ 273,567     $ 296,037  
                 

Liabilities, Preferred Stock and Stockholders’ Equity

               

Current liabilities:

               

Current portion of long-term debt

  $ 5,006       5,124  

Accounts payable

    2,752       4,175  

Accrued capital expenditures

    282       953  

Other accrued liabilities

    8,422       5,753  

Total current liabilities

    16,462       16,005  

Related party long-term debt with Alberta Lenders/Khosla, net of discount of $15,836 and $8,171 at June 30, 2013 and December 31, 2012, respectively

    109,899       79,843  

Long-term debt, less current portion, net of discount of $27,670 and $28,954 at June 30, 2013 and December 31, 2012, respectively

    39,830       41,035  

Other liabilities

    91       146  

Total liabilities

    166,282       137,029  
                 

Commitments and contingencies (Note 9)

               
                 

Stockholders’ equity:

               

Preferred stock — $0.0001 par value; 2,000,000 shares authorized at June 30, 2013 and December 31, 2012; none issued and outstanding

           

Class A common stock, $0.0001 par value; 250,000,000 shares authorized at June 30, 2013 and December 31, 2012; 54,017,913 and 51,873,679 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively

    4       4  

Class B common stock, $0.0001 par value; 70,800,000 shares authorized at June 30, 2013 and December 31, 2012; 52,532,234 and 53,510,301 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively

    6       6  

Additional paid-in capital

    403,918       385,812  

Deficit accumulated during the development stage

    (296,643 )     (226,814 )

Total stockholders’ equity

    107,285       159,008  

Total liabilities, convertible preferred stock and stockholders’ equity

  $ 273,567     $ 296,037  

 

See accompanying notes to consolidated financial statements

  

 
5

 

 

KiOR, Inc.

(A development stage enterprise)

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

 

(Unaudited)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

   

Period from July 23, 2007 (Date of Inception) through

 
   

2013

   

2012

   

2013

   

2012

   

June 30, 2013

 
                                         

Revenues:

                                       

Product revenue

  $ 189     $     $ 257     $     $ 342  

Renewable identification number revenue

    50             53             55  

Total revenues

    239             310             397  
                                         

Operating expenses:

                                       

Cost of product revenue

  $ 15,088     $     $ 20,496     $     $ 20,564  

Research and development expenses

    8,572       9,280       17,738       17,711       125,855  

General and administrative expenses

    7,865       13,694       22,541       21,813       119,359  

Total operating expenses

    31,525       22,974       60,775       39,524       265,778  

Loss from operations

    (31,286 )     (22,974 )     (60,465 )     (39,524 )     (265,381 )
                                         

Other income (expense), net:

                                       

Interest income

          7       1       9       192  

Beneficial conversion feature expense related to convertible promissory note

                            (10,000 )

Interest expense, net of amounts capitalized

    (7,208 )           (9,365 )     (274 )     (11,693 )

Foreign currency loss

                            (435 )

Loss from change in fair value of warrant liability

                            (9,279 )

Other income (expense), net

    (7,208 )     7       (9,364 )     (265 )     (31,215 )
                                         

Loss before income taxes

    (38,494 )     (22,967 )     (69,829 )     (39,789 )     (296,596 )

Income tax expense:

                                       

Income tax expense – current

                            (47 )
                                         

Net loss

  $ (38,494 )   $ (22,967 )   $ (69,829 )   $ (39,789 )   $ (296,643 )
                                         

Net loss per share of Class A common stock, basic and diluted

  $ (0.36 )   $ (0.22 )   $ (0.66 )   $ (0.38 )        
                                         

Net loss per share of Class B common stock, basic and diluted

  $ (0.36 )   $ (0.22 )   $ (0.66 )   $ (0.38 )        
                                         

Weighted-average Class A and B common shares outstanding, basic and diluted

    106,210       104,318       105,893       103,722          
                                         

Other comprehensive loss:

                                       

Other comprehensive loss

                             
                                         

Comprehensive loss

  $ (38,494 )   $ (22,967 )   $ (69,829 )   $ (39,789 )   $ (296,643 )

 

See accompanying notes to consolidated financial statements

  

 
6

 

 

KiOR, Inc.

(A development stage enterprise)

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Amounts in thousands, except per share data)

 

(Unaudited)

 

   

Convertible
Preferred Stock

   

Class A Common
Stock

   

Class B Common
Stock, formerly
common stock

   

Addt’l
Paid-in-
Capital

   

Deficit
Accum
During the
Dev. Stage

   

Acc.
Other
Comp.
Income

   

Total
Stockholders’
Equity(Deficit)

 
   

Shrs

       $    

Shrs

       $    

Shrs

                                       

Issuance of Series A convertible preferred stock

    14,400     $ 2,599                                               $  

Receivable from Series A convertible preferred stockholder

          (1,155

)

                                               

Issuance of common stock

                            14,400       1       2,598                   2,599  

Net loss

                                              (472

)

          (472

)

                                                                                 

Balance at December 31, 2007

    14,400     $ 1,444           $       14,400     $ 1     $ 2,598     $ (472

)

  $     $ 2,127  

Collection of receivable from Series A convertible preferred stockholder

          1,155                                                  

Issuance of Series A convertible preferred stock

    9,600       1,761                                                  

Issuance of Series A-1 convertible preferred stock

    20,572       10,024                                                  

Net loss

                                              (5,866

)

          (5,866

)

Other comprehensive income

                                                    93       93  
                                                                                 

Balance at December 31, 2008

    44,572     $ 14,384           $       14,400     $ 1     $ 2,598     $ (6,338

)

  $ 93     $ (3,646

)

Stock-based compensation- options

                                        331                   331  

Net loss

                                              (14,059

)

          (14,059

)

Other comprehensive income

                                                    122       122  
                                                                                 

Balance at December 31, 2009

    44,572     $ 14,384           $       14,400     $ 1     $ 2,929     $ (20,397

)

  $ 215     $ (17,252

)

Stock-based compensation- options

                                        730                   730  

Stock options exercised

                            524             43                   43  

Stock-based compensation- Common and Class A common stock

                60             896             200                   200  

Issuance of Series B convertible preferred stock

    24,480       120,000                                                  

Issuance of warrants on common stock

                                        298                   298  

Net loss

                                              (45,927

)

          (45,927

)

Other comprehensive loss

                                                    (215

)

    (215

)

                                                                                 

Balance at December 31, 2010

    69,052     $ 134,384       60     $       15,820     $ 2     $ 4,199     $ (66,324

)

  $     $ (62,123

)

 

 

See accompanying notes to consolidated financial statements

  

 
7

 

  

KiOR, Inc.

(A development stage enterprise)

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (continued)

(Amounts in thousands, except per share data)

 

(Unaudited)

 

   

Convertible
Preferred Stock

   

Class A Common
Stock

   

Class B Common
Stock, formerly common stock

   

Addt’l

   

Deficit
Accum

During  

   

Acc.
Other

   

Total

Stockholders’

 
   

Shrs

       $    

Shrs

         

Shrs

         

Paid-in-

Capital

   

the Dev. Stage

   

Comp.

Income

   

Equity(Deficit)

 

Balance at December 31, 2010

    69,052     $ 134,384       60     $       15,820     $ 2     $ 4,199     $ (66,324

)

  $     $ (62,123

)

Issuance of Class A Common Stock

                                                                               

- Public Offering, net of offering costs

                10,800       1                   148,643                   148,644  

Common Stock Issued - Restricted

                70                                            

Stock Based Compensation - Options

                                        3,607                   3,607  

Stock Based Compensation - Restricted

                                        2,547                   2,547  

Stock Options/Warrants Exercised

                330             1,526             336                   336  

Exercised options converted from class B to class A

                492             (492

)

                             

Issuance of Series C Convertible Preferred Stock

    11,220       55,000                                                  

Conversion of Series A Convertible Preferred Stock

    (24,000

)

    (4,360

)

                24,000       2       4,358                   4,360  

Conversion of Series A-1 Convertible Preferred Stock

    (20,572

)

    (10,024

)

                20,572       2       10,022                   10,024  

Conversion of Series B Convertible Preferred Stock

    (24,480

)

    (120,000

)

    24,480       2                   119,998                   120,000  

Conversion of Series C Convertible Preferred Stock

    (11,220

)

    (55,000

)

    4,583       1                   54,999                   55,000  

Conversion of Convertible Preferred Stock Warrants Liability

                                        10,399                   10,399  

Beneficial Conversion Feature on Issuance of Series C Convertible Preferred Stock and Stock Warrants

                                        19,669                   19,669  

Deemed Dividend Related to the Beneficial Conversion Feature on Series C Convertible Preferred Stock and Stock Warrants

                                        (19,669

)

                (19,669

)

Net loss

                                              (64,055

)

          (64,055

)

                                                                                 

Balance at December 31, 2011

        $       40,815     $ 4       61,426     $ 6     $ 359,108     $ (130,379

)

  $     $ 228,739  

Common Stock Issued - Restricted

                252                                            

Equity Bonus Grant

                45                         420                   420  

Stock Based Compensation - Options

                                        4,285                   4,285  

Stock Based Compensation - Restricted

                                        9,068                   9,068  

Stock Options/Warrants Exercised

                796             2,050             1,577                   1,577  

Shares converted from class B to class A

                9,966             (9,966

)

                             

Issuance of warrants on common stock

                                        11,354                   11,354  

Net loss

                                              (96,435

)

          (96,435

)

                                                                                 

Balance at December 31, 2012

        $       51,874     $ 4       53,510     $ 6     $ 385,812     $ (226,814

)

  $     $ 159,008  

 

See accompanying notes to consolidated financial statements

  

 
8

 

  

KiOR, Inc.

(A development stage enterprise)

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) (continued)

(Amounts in thousands, except per share data)

 

(Unaudited)

 

   

Convertible

Preferred Stock 

   

Class A Common

Stock

   

Class B Common

Stock, formerly

common stock

         

Deficit

Accum

   

Acc.

   

Total

 
   

Shrs

         

Shrs

       $    

Shrs

         

Addt'l

Paid-in-

Capital

   

During

the Dev. Stage

   

Other

Comp.

Income

   

Stockholders' Equity (Deficit)

 

Balance at December 31, 2012

    -     $ -       51,874     $ 4       53,510     $ 6     $ 385,812     $ (226,814 )   $ -     $ 159,008  

Common Stock Issued - Restricted

    -       -       929       -       -       -       -       -       -       -  

Stock Based Compensation - Options

    -       -       -       -       -       -       1,885       -       -       1,885  

Stock Based Compensation - Restricted

    -       -       -       -       -       -       5,314       -       -       5,314  

Stock Options/Warrants Exercised

    -       -       116       -       163       -       364       -       -       364  

Shares converted from class B to class A

    -       -       1,141       -       (1,141 )     -       -       -       -       -  

Issuance of warrants on common stock

    -       -       -       -       -       -       10,543       -       -       10,543  

Net loss

    -       -       -       -       -       -       -       (69,829 )     -       (69,829 )

Balance at June 30, 2013

    -     $ -       54,060     $ 4       52,532     $ 6     $ 403,918     $ (296,643 )   $ -     $ 107,285  
 

See accompanying notes to consolidated financial statements 

 

 
9

 

  

KiOR, Inc.

(A development stage enterprise)

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

   

Six Months Ended June 30,

   

Period from July 23, 2007 (Date of Inception) through

 
   

2013

   

2012

   

June 30, 2013

 

Cash flows from operating activities

                       

Net loss

  $ (69,829 )   $ (39,789 )   $ (297,277 )

Adjustments to reconcile net loss to cash used in operating activities:

                       

Depreciation and amortization

    4,689       1,380       12,573  

Stock-based compensation

    7,199       5,837       27,967  

Non cash compensation from warrants issued on common stock

                298  

Beneficial conversion feature

                10,000  

Derivative fair value adjustments

                9,279  

Interest expense

    5,359             5,893  

Amortization of debt discount

    3,971             4,271  

Non cash equity bonus

          133       133  

Amortization of prepaid insurance

    1,209       630       2,522  

Changes in operating assets and liabilities

                       

Inventories

    (56 )     (846 )     (3,295 )

Prepaid expenses and other current assets

    (1,372 )     (166 )     (3,258 )

Accounts payable

    (616 )     435       400  

Accrued liabilities

    1,365       3,308       5,107  

Net cash used in operating activities

    (48,801 )     (29,078 )     (224,753 )

Cash flows from investing activities

                       

Purchases of property, plant and equipment

    (9,663 )     (63,009 )     (268,822 )

Purchases of intangible assets

                (727 )

Restricted cash

    (200 )           (200 )

Net cash used in investing activities

    (9,863 )     (63,009 )     (269,749 )

Cash flows from financing activities

                       

Proceeds from issuance of convertible promissory note to stockholder

                15,000  

Proceeds from equipment loans

                6,000  

Payments on equipment loans

    (744 )     (565 )     (5,154 )

Proceeds from business loans

                7,000  

Payments on business loans

          (6,370 )     (7,478 )

Proceeds from stock option exercises / warrants

    286       1,003       2,172  

Proceeds from issuance of Series A convertible preferred stock

                4,360  

Proceeds from issuance of Series A-1 convertible preferred stock

                10,024  

Proceeds from issuance of Series B convertible preferred stock

                95,000  

Proceeds from issuance of Series C convertible preferred stock

                55,000  

Proceeds from issuance of common stock in initial public offering, net of offering costs

                148,644  

Borrowings under the Mississippi Development Authority loan

                75,000  

Payments on Mississippi Development Authority loan

    (1,875 )           (3,750 )

Borrowings under the Alberta Lenders/Khosla term loan

    30,000       75,000       105,000  

Debt issuance costs

          (1,586 )     (1,624 )

Financing of insurance premium

    885             885  

Net cash provided by financing activities

    28,552       67,482       506,079  

Effect of exchange rate on cash and cash equivalents

                (82 )

Net increase (decrease) in cash and cash equivalents

    (29,392 )     (24,605 )     11,495  

Cash and cash equivalents

                       

Beginning of period

    40,887       131,637