XML 43 R7.htm IDEA: XBRL DOCUMENT

2. Ability to Continue as a Going Concern

3 Months Ended

Mar. 31, 2013

2. Ability to Continue as a Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced losses and negative cash flow and currently has a working capital deficit. These factors raise substantial doubt about its ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on several factors, including the ability to raise a significant amount of capital for operating expenses, capital purchases, current liabilities and debt service. The Company has been reliant on its senior secured lender to provide additional funding requirements when cash flows do not support operating expenses and the payment requirements on the Company’s debt. Although the current agreements in place with this lender do not require any payments or covenant requirements through May 2013, the continuation of the Company depends on management being able to maintain this relationship with the lender or find other financing options to provide cash as the Company expands its technologies. Management’s plans to continue to operate the Company include:

Working with the Company’s senior lender to restructure or provide additional financing as well as explore other financing arrangements including working with Advanced BioEnergy LP to attract investors for the remaining $35 million of notes available under the program, or through the issuance of additional debt or equity;

Operating profits from the April 2013 restart of the Keyes ethanol plant;

Restructuring the State Bank of India note payable to allow for additional working capital to take advantage of improved biodiesel margins from reductions in diesel subsidies from the Indian government and higher volumes of international shipments; and

Continuing to receive support from major shareholders and members of board of directors in providing cash financing.

The Company produced negative gross profit during the three months ended March 31, 2013, has less than one month of operating cash as of May 2013, has incurred cumulative losses since inception and has negative working capital (current assets less current liabilities) of approximately $82.1 million. The Company has raised approximately $31.8 million to date through the sale of preferred stock and approximately $80 million through debt facilities. The Company will have to raise significantly more capital and debt to complete its business plan and continue as a going concern. The Company has one biodiesel production facility in operation that began selling biodiesel into the domestic Indian market in November 2008 and one ethanol production facility idle for maintenance as of March 31, 2013. On April 22, 2013, the Company restarted its plant in Keyes, California. Recognizing the ethanol and biodiesel plants provide cash flow to the Company, until we are able to establish a history of profitability at our plant in Keyes, California, sufficient doubt exists around our ability to generate the cash flow necessary to allow for the completion of the Company’s business plan in fiscal 2013.

Management believes that it will be able to raise additional capital through equity offerings and debt financings. The Company’s goal is to raise additional funds needed to operate its next generation ethanol and biodiesel facilities through stock offerings and debt financings. There can be no assurance that additional financing will be available on terms satisfactory to the Company. The accompanying financial statements do not include any adjustments to the classification or carrying values of our assets or liabilities that may result should the Company be unable to continue as a going concern.