Tuesday, April 1, 2014

KIOR Vinod Throws a Floatation Device

KIOR announced that Vinod Khosla has given them $5 million to stay alive and will give them another $20 million over the next several months to stay afloat if they meet milestones. 

“2014 Note Purchase Agreement
On March 31, 2014, KiOR, Inc. ("KiOR") and its wholly-owned subsidiary Kior Columbus, LLC, ("KiOR Columbus," together, with KiOR, the "Company") entered into a Senior Secured Promissory Note and Warrant Purchase Agreement (the "2014 Note Purchase Agreement") with KFT Trust, Vinod Khosla, Trustee, ("KFT Trust" or the "2014 Note Purchaser") and KFT Trust in its capacity as agent for the 2014 Note Purchaser.
The 2014 Note Purchase Agreement contemplates multiple tranches of financing of up to $25 million. The first tranche, which we expect will close on April 3, 2014, consists of the purchase by KFT Trust of $5.0 million of Senior Secured Mandatorily Convertible Notes (the "2014 Notes") in exchange for a like amount of cash. The remaining tranches consist of the sale of additional 2014 Notes (the "Additional 2014 Notes") to the 2014 Note Purchaser in principal amounts to be mutually agreed between the 2014 Note Purchaser and the Company for a like amount of cash at the beginning of each full month following the first tranche closing, provided that in each preceding month the Company satisfactorily achieves each of the milestones set forth in Annex A to the 2014 Note Purchase Agreement. KFT Trust, or, if additional 2014 Note Purchasers become party to the 2014 Note Purchase Agreement in the future, the 2014 Note Purchasers holding a majority of the principal amount of all then-outstanding 2014 Notes (the "Required Purchasers") will determine in their sole discretion whether applicable milestones have been satisfied. The aggregate amount of Additional 2014 Notes that may be sold under the 2014 Note Purchase Agreement may not exceed $20 million. “

I have to say that Vinod is doing everything known to man to try to resuscitate the dying KIOR.  A friend from Israel told me that in Hebrew KIOR means sink or drain.  In Thermodynamics KIOR means futile.

KIOR wrote down the plant in Columbus to a value of approximately $40 million from a book value of $225 million.   They therefore think the expected output of this plant is now only 2.5 million gallons per year versus the original nameplate of some 13 million gallons per year.   How in heavens name can the company ever turn the corner?   The Magnolia State is still owed approximately $70 million and the plant is only worth $50 million in Vinod's own eyes.   My take is Vinod is trying to cover his behind in lawsuits that could be forthcoming from the Magnolia State, the Province of Alberta and other investors who all know how Vinod and his management team fibbed about the capabilities of the technology and the factory in Columbus.  Even Condi fibbed a year ago that KIOR's technology was a reality that would save America.  From the SEC filings it looks like Vinod will have approximately a two thirds stake in the company.   I hope that approximately 1.5 million gallons a year of alchemic fuel is enough to run his fleet.