KiOR: The Inside True Story of a Company Gone Wrong. Part 5, The Collapse 

A strike at Stamires

At the same time as Khosla and Saul were initiating an investigation from the top down, by September, Stamires had determined to have another showdown with KiOR’s top management and according to Stamires and the state of Mississippi, he:

called a meeting with Fred Cannon and Chris Artzer to discuss the disparity between the target yield of 72 gallons per BDT and the actual yields being achieved in Columbus. Stamires notified Cannon and Artzer that he had seen the actual yield data and was going to report the real yields being achieved to the Board of  Directors. 

According to the State of Mississippi, “Cannon and Artzer attempted to bribe Stamires.” The offer was straightforward. “If Stamires would avoid revealing the yield data to the Board of Directors, they would ensure that KiOR paid him the approximately $60,000 in outstanding travel expenses he was owed at the time and they would further ensure that he was paid additional shares of KiOR stock over the course of the next five years.”

Stamires rejected the offer, his contract with KiOR was not renewed, and Mark Ross stated that “he was told by Mitch Loescher to stop talking to Dennis Stamires.” Ross recalled:

“Dennis was causing a problem. I complied with Mitch’s request and later that week I noticed that Dennis’ office was cleaned out. I never saw Dennis again at KiOR.”

KiOR admits a problem with establishing steady-state operations and considers a re-design

On September 26, 2013, KiOR reported to the SEC:

In 2012, the Company completed construction of its first, initial-scale commercial production facility in Columbus, Mississippi…The Company has had limited continuous production at its Columbus facility and has not yet reached “steady state” production. The Company is currently considering two options for its next commercial-scale facility.

One option is to design, engineer and construct a second initial scale commercial facility adjacent to its current initial scale commercial facility in Columbus, Mississippi, which would have a capacity of 500 bone dry tons, or BDT, per day. The Company is considering this option because it believes that a second initial scale commercial facility in Columbus may allow it to (i) accelerate its ability to achieve overall positive cash from operations with less need for capital from external sources and risk of financing, (ii) reduce design, engineering and construction costs due to its ability to leverage its experience from the construction of the current Columbus facility, (iii) incorporate the most recent improvements to its technology into both the existing facility and the planned facility in Columbus, (iv) achieve operational synergies as a result of shared personnel, infrastructure and operational knowledge with the existing Columbus facility, and (v) leverage existing feedstock relationships while introducing other types of lower cost feedstocks such as hardwood, energy crops, and waste products such as railroad ties. 

The cost would be high. As KiOR disclosed:

The Company currently estimates on a preliminary basis that the total cost of this second initial scale commercial facility Columbus, Mississippi would be approximately $175 million to $225 million, based upon expected design and engineering savings combined with its recent experience of designing, engineering and constructing the current Columbus facility for approximately $213 million.