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Credit woes put Kreido

By   /   Saturday, October 4th, 2008  /   Comments Off on Credit woes put Kreido

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Camarillo-based Kreido Biofuels has given itself two months to live.

In recent filings with the U.S. Securities and Exchange Commission, the development-stage renewable energy company said it has enough money to keep going until the end of November.

Its net losses for the six months ended June 30 soared 908 percent, from $1.7 million in 2007 to $17.8 million this year, and if the company finds no way to bolster its $1.5 million of on-hand cash, it might have to fold.

Kreido said it has suffered recurring losses and that by June 30 it had accumulated a $45 million deficit “that raises substantial doubt about its ability to continue as a going concern,” the company wrote in its most recent filings with the SEC.

Among other things, the fledgling company has found itself at the mercy of the brutal credit crunch that has made it nearly impossible for late development-stage companies to raise money needed to get facilities up and running. The company directly blamed Wall Street’s woes for its inability to get cash and shore up its balance sheet.

It’s unclear what Kreido’s fate will be if the mauling it has taken in the credit markets forces it to cease operations. Through a spokeswoman, the company declined to comment, directing the Business Times to Kreido’s press releases and public filings.

Kreido once rode high, with a market capitalization of more than $200 million and its shares trading for $5 on the OTC Bulletin Board in late 2006, shortly after the firm went public. Its proprietary technology for bolstering chemical reactions – a key component in making cellulosic biofuels competitive against fossil fuels – caught the attention of investors. One of the U.S.

Environmental Protection Agency’s largest labs was even using Kreido’s technology to develop new chemical processes.
In May, Kredio announced it was moving forward with plans to build its flagship biodiesel plant in Wilmington, N.C. The plant was expected to produce 33 million to 50 million gallons of biodiesel in its initial phases.

But by late June, the company announced the suspension of the plant, citing turmoil in the credit markets and its inability to secure financing. Its shares, which were trading for near $1 a year ago, now trade for less than 2 cents.

Kredio’s most recent quarterly report – filed Sept. 19, more than a month after it told the SEC it wouldn’t be able to file on time – reveals that the company has shifted business plans to enter talks with other firms who might buy its technology and other assets. Kreido has pared down it staff from 19 to 7, according to the filing.

Kreido’s assets declined sharply between the beginning of the year and June 30.

Its cash reserves dwindled from $6.5 million to $1.5 million. Kreido also took a hit of $13.4 million related to its plant assets and costs associated with building biodiesel reactors and buying spare parts. Altogether, its assets fell from more than $22 million to about $5.4 million, according to its most recent report.

Kreido burned through $17.3 million of net stockholder equity, which declined from $19.6 million to $2.3 million, its report said.
“Our current cash resources will enable us to continue to pursue our limited action plan through the end of November, assuming that no assets are monetized and we defer paying a majority of our vendors, advisors, accountants and attorneys,” the filing reads.

“If a transaction is delayed beyond November and we are not able to sell some of our assets to raise cash then we may not be able to retain our employees, advisors, accountants, and attorneys through the completion of our limited action plan or engaged transactions.”

Kreido is also the target of a lawsuit in federal court. On Sept. 19, Kansas-based MAC Equipment filed suit in a federal court in Los Angeles asking for more than $470,000 for breach of contract.

In its complaint, MAC alleged it made a deal with Kreido to provide equipment handling, engineering and start-up advice to the Camarillo company. MAC argued the total bill came to $637,000 and that Kreido still owes it more than $470,000 of that total, according to court documents.

Kreido has not formally responded to the complaint.

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