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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED September 30, 2012.

OR

 

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

FOR THE TRANSITION PERIOD FROM                    TO                    .

COMMISSION FILE NO. 001-34490

 

 

SYNTROLEUM CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   73-1565725

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

5416 S. Yale Suite 400

Tulsa, Oklahoma

  74135
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (918) 592-7900

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

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  x    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 (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x    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 “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨      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  x

At November 1, 2012, the number of outstanding shares of the issuer’s common stock was 98,286,695.

 

 

 


Table of Contents

SYNTROLEUM CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

 

 

     Page  
PART I – FINANCIAL INFORMATION   

Item 1. Financial Statements

  

Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011

     1   

Unaudited Consolidated Statements of Operations for the three-months and nine-months ended September  30, 2012 and 2011

     2   

Unaudited Consolidated Statement of Stockholders’ Equity for the nine-months ended September  30, 2012

     3   

Unaudited Consolidated Statements of Cash Flows for the nine-months ended September 30, 2012 and 2011

     4   

Notes to Unaudited Consolidated Financial Statements

     5   

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

     9   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     13   

Item 4. Controls and Procedures

     13   
PART II – OTHER INFORMATION   

Item 1. Legal Proceedings

     13   

Item 1A. Risk Factors

     13   

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

     13   

Item 3. Defaults Upon Senior Securities

     13   

Item 4. Mine Safety Disclosures

     13   

Item 5. Other Information

     13   

Item 6. Exhibits

     13   

SIGNATURES

     14   

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as well as historical facts. These forward-looking statements include statements relating to the Fischer-Tropsch (“FT”) process, Syntroleum® Process, Synfining® Process, and related technologies including, gas-to-liquids (“GTL”), coal-to-liquids (“CTL”) and biomass-to-liquids (“BTL”), our renewable fuels Bio-Synfining® Technology, plants based on the Syntroleum® Process and/or Bio-Synfining®, anticipated costs to design, construct and operate these plants, the timing of commencement and completion of the design and construction of these plants, expected production of fuel, obtaining required financing for these plants and our other activities, the economic construction and operation of Fischer-Tropsch (“FT”) and/or Bio-Synfining® plants, the value and markets for products, testing, certification, characteristics and use of plant products, the continued development of the Syntroleum® Process and Bio-Synfining® Technology and the anticipated capital expenditures, expense reductions, cash outflows, expenses, use of proceeds from our equity offerings, anticipated revenues, availability of catalyst, our support of and relationship with our licensees, and any other forward-looking statements including future growth, cash needs, capital availability, operations, business plans and financial results. When used in this document, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these kinds of statements involve risks and uncertainties. Actual results may not be consistent with these forward-looking statements. Syntroleum undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. Important factors that could cause actual results to differ from these forward-looking statements are described under “Item 1A. Risk Factors” and elsewhere in our 2011 Annual Report on Form 10-K.

As used in this Quarterly Report on Form 10-Q, the terms “Syntroleum,” “we,” “our” or “us” mean Syntroleum Corporation, a Delaware corporation, and its predecessors and subsidiaries, unless the context indicates otherwise.


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SYNTROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share)

 

     September 30,     December 31,  
     2012     2011  
     (Unaudited)        
ASSETS   

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 17,579      $ 22,601   

Restricted cash

     1,054        1,189   

Accounts receivable

     211        125   

Accounts receivable from Dynamic Fuels, LLC

     237        —     

Other current assets

     39        277   
  

 

 

   

 

 

 

Total current assets

     19,120        24,192   

ACCOUNTS RECEIVABLE FROM DYNAMIC FUELS, LLC

     —          2,624   

PROPERTY AND EQUIPMENT – at cost, net

     60        86   

INVESTMENT IN AND LOANS TO DYNAMIC FUELS, LLC

     42,682        38,643   

OTHER ASSETS, net

     1,031        1,106   
  

 

 

   

 

 

 
   $ 62,893      $ 66,651   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

CURRENT LIABILITIES:

    

Accounts payable

   $ 361      $ 220   

Accrued employee costs

     744        288   

Deposits

     1,054        1,189   
  

 

 

   

 

 

 

Total current liabilities

     2,159        1,697   

NONCURRENT LIABILITIES OF DISCONTINUED OPERATIONS

     603        603   

DEFERRED REVENUE

     15,671        24,366   

COMMITMENTS AND CONTINGENCIES

     —          —     

STOCKHOLDERS’ EQUITY:

    

Preferred stock, $0.01 par value, 5,000 shares authorized, no shares issued

     —          —     

Common stock, $0.01 par value, 150,000 shares authorized, 98,243 and 97,948 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively

     982        979   

Additional paid-in capital

     398,873        398,369   

Accumulated deficit

     (355,395     (359,363
  

 

 

   

 

 

 

Total stockholders’ equity

     44,460        39,985   
  

 

 

   

 

 

 
   $ 62,893      $ 66,651   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited consolidated statements.

 

1


Table of Contents

SYNTROLEUM CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

     For the Three months
Ended September 30,
    For the Nine Months
Ended September 30,
 
     2012     2011     2012     2011  

REVENUES:

        

Technology

   $ 3,150      $ 150      $ 9,450      $ 450   

Technical services

     516        430        1,470        1,314   

Technical services from Dynamic Fuels, LLC

     372        286        4,803        800   

Royalties from Dynamic Fuels, LLC plant production

     304        310        679        649   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     4,342        1,176        16,402        3,213   
  

 

 

   

 

 

   

 

 

   

 

 

 

COSTS AND EXPENSES:

        

Engineering

     710        562        1,900        1,706   

Depreciation and amortization

     42        49        143        148   

General, administrative and other (including non-cash equity compensation of $61 and $69 for the three months ended September 30, 2012 and 2011, respectively, and $476 and $528 for the nine months ended September 30, 2012 and 2011, respectively.)

     1,553        1,017        4,345        3,612   
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME (LOSS)

     2,037        (452     10,014        (2,253

INTEREST INCOME

     4        4        18        10   

EQUITY IN LOSS OF DYNAMIC FUELS, LLC

     (2,752     (5,348     (5,737     (12,286

OTHER INCOME

     1        2        5        6   

FOREIGN CURRENCY EXCHANGE

     (327     1,206        (304     558   
  

 

 

   

 

 

   

 

 

   

 

 

 

INCOME (LOSS) FROM CONTINUING OPERATIONS

     (1,037     (4,588     3,996        (13,965
  

 

 

   

 

 

   

 

 

   

 

 

 

LOSS FROM DISCONTINUED OPERATIONS

     (9     (9     (28     (17
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

   $ (1,046   $ (4,597   $ 3,968      $ (13,982
  

 

 

   

 

 

   

 

 

   

 

 

 

BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:

        

Income (loss) from continuing operations

   $ (0.01   $ (0.05   $ 0.04      $ (0.16

Income (loss) from discontinued operations

     0.00        0.00        0.00        0.00   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (0.01   $ (0.05   $ 0.04      $ (0.16
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

        

Basic

     98,254        91,843        98,377        87,020   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     98,676        91,843        99,489        87,020   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited consolidated statements.

 

2


Table of Contents

SYNTROLEUM CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(in thousands)

 

     Common Stock                 Total  
     Number
of Shares
    Amount     Additional
Paid-In Capital
    Accumulated
Deficit
    Stockholders’
Equity
 

Balance, December 31, 2011

     97,948      $ 979      $ 398,369      $ (359,363   $ 39,985   

Stock options exercised

     96        1        62        —          63   

Vesting of awards granted

     8        —          194        —          194   

Restricted stock purchased and retired

     (287     (3     (196     —          (199

Stock-based bonuses and match to 401(k) Plan

     478        5        444        —          449   

Net income

     —          —          —          3,968        3,968   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2012

     98,243      $ 982      $ 398,873      $ (355,395   $ 44,460   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited consolidated statements.

 

3


Table of Contents

SYNTROLEUM CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     For the Nine Months Ended September 30,  
     2012     2011  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income (loss)

   $ 3,968      $ (13,982

Loss from discontinued operations

     (28     (17
  

 

 

   

 

 

 

Net income (loss) from continuing operations

     3,996        (13,965

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

    

Depreciation and amortization

     143        148   

Foreign currency exchange

     304        (558

Non-cash compensation expense

     476        528   

Non-cash loss in equity method investee

     5,737        12,286   

Non-cash technical services revenue from Dynamic Fuels, LLC

     (3,714     —     

Changes in assets and liabilities:

    

Accounts receivable

     (86     451   

Accounts receivable from Dynamic Fuels, LLC

     (509     (1,449

Other assets

     208        (30

Accounts payable

     141        (979

Accrued liabilities and other

     457        467   

Deferred revenue

     (9,000     —     
  

 

 

   

 

 

 

Net cash used in continuing operations

     (1,847     (3,101

Net cash used in discontinued operations

     (28     (18
  

 

 

   

 

 

 

Net cash used in operating activities

     (1,875     (3,119
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Purchase of property and equipment

     (11     (37

Investment in and loans to Dynamic Fuels, LLC

     (3,000     (4,500
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,011     (4,537
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Proceeds from sale of common stock, warrants and option exercises

     63        35   

Purchase and retirement of restricted stock

     (199     —     

Proceeds from sales of common stock

     —          23,538   
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (136     23,573   
  

 

 

   

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

     (5,022     15,917   

CASH AND CASH EQUIVALENTS, beginning of period

     22,601        12,513   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, end of period

   $ 17,579        28,430   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

NON-CASH INVESTING AND FINANCING ACTIVITIES:

    

Common stock warrants

   $ 166      $ —     
  

 

 

   

 

 

 

AR contributed as Investment in Dynamic Fuels, LLC

   $ 2,896      $ —     
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited consolidated statements.

 

4


Table of Contents

SYNTROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

1. Basis of Reporting

The focus of Syntroleum Corporation and subsidiaries is the commercialization of our technologies to produce synthetic liquid hydrocarbons. Operations to date have consisted of activities related to the commercialization of a proprietary process (the “Syntroleum® Process”) and previously consisted of research and development designed to convert carbonaceous material (biomass, coal, natural gas and petroleum coke) into synthetic liquid hydrocarbons. Synthetic hydrocarbons produced by the Syntroleum® Process can be further processed using our Synfining® Process into liquid fuels, such as diesel, jet fuel (HRJ), kerosene, naphtha, and propane.

Our Bio-Synfining®Technology is a renewable application of our Synfining® Technology. This technology is applied commercially via our Dynamic Fuels, LLC (“Dynamic Fuels”) joint venture. The technology processes renewable feedstocks such as triglycerides and/or fatty acids to make renewable synthetic products.

The consolidated financial statements include the accounts of Syntroleum Corporation and our majority-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. Companies in which we own a 20 percent to 50 percent interest, but in which we do not have a controlling interest are accounted for by the equity method. We own 50 percent and have a non-controlling interest in Dynamic Fuels. The entity is accounted for under the equity method and is not consolidated in our financial statements; however, our share of the Dynamic Fuels results of operations is reflected in the Consolidated Statements of Operations and the subsidiary’s summarized financial information is reported in Note 4, “Investment in and Loans to Dynamic Fuels, LLC”. The carrying value of our investment in Dynamic Fuels is reflected in “Investment in and Loans to Dynamic Fuels, LLC” in our Consolidated Balance Sheets.

The consolidated financial statements included in this report have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these statements reflect all adjustments (consisting of normal recurring entries) which are, in the opinion of management, necessary for a fair statement of the financial results for the interim periods presented. These financial statements should be read together with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC under the Securities Exchange Act of 1934.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our financial position and results of operations are materially affected by Dynamic Fuels’ financial position and results of operations for the nine months ended June 30, 2012.

2. Operations and Liquidity

In the past we have sustained recurring losses and negative cash flows from operations. As of September 30, 2012, we had approximately $17.6 million of cash and cash equivalents available to fund operations and investing activities. We review cash flow forecasts and budgets periodically. We expect to receive partner distributions from Dynamic Fuels at some indeterminate time in the future.

On June 8, 2012 the Company received a Nasdaq Staff Deficiency Letter, indicating the Company’s common stock has closed below the minimum $1.00 per share requirement for continued inclusion under the marketplace Rule 5500(a)(2). The Company is provided 180 calendar days, or until December 5, 2012 to regain compliance.

On October 30, 2012 the Company sent a request to the Nasdaq for an additional 180-day compliance period. The Company believes that it meets all of the necessary requirements for such an extension and is awaiting a response from the Nasdaq on its request.

3. Restricted Cash

Restricted cash consists of cash held in an escrow account for the prepayment of operations and invoices for an ongoing contractual project. The account has also been recorded as a liability in current deposits on the Consolidated Balance Sheets at September 30, 2012 and December 31, 2011.

4. Investment in and Loans to Dynamic Fuels, LLC

On June 22, 2007, we entered into definitive agreements with Tyson Foods, Inc. (“Tyson”) to form Dynamic Fuels, to construct and operate facilities in the United States using our Bio-Synfining®Technology. The agreements included a technology license agreement whereby we would provide for the transfer of our Bio-Synfining® technology, provide technology support services to Dynamic Fuels, and receive payment of royalties for plant production. These agreements also included a sales agreement whereby Tyson would be paid a sourcing fee to procure feedstock. In order to induce Tyson to enter into the agreements with us, we granted Tyson warrants to purchase our common stock. On June 27, 2012, the process guarantee and performance test requirements set forth in the Master License and Site License Agreements were waived and deemed unnecessary, the warrants issued to Tyson were vested and a revised Site License Agreement was executed between Syntroleum and Dynamic Fuels. In addition, the Sales Agreement was amended whereby Tyson will be paid an additional $.01 per pound of identified types of low cost feedstock procured limited to procurement of 1.1 billion pounds.

 

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The plant has experienced mechanical issues, hydrogen supply disruptions and feedstock adulterants all of which have contributed to plant down time and higher than expected operational costs. Upgrades to the feedstock pre-treatment area are progressing with one unit installed and two additional units in the process of being installed with commissioning expected in November. The unit installed in May has provided consistent and steady service.

Throughout 2011 and 2012 Syntroleum has provided engineering and other services and paid costs for services performed by others on behalf of Dynamic Fuels. On June 27, 2012 a Settlement Agreement was reached among the owners of Dynamic Fuels’ whereby the obligations to its two members for sourcing fees, running royalty fees, line of credit or interest fees and services and expenses under technical service agreement in the amount of $6,597,000 each were contributed to Dynamic Fuels’ equity. At June 30, 2012 Syntroleum recorded previously unrecognized technical services revenue of $3,701,000 and $166,000 for the fair value of the vested warrants. Dynamic Fuels reported the financial impact of the Settlement Agreement during the fiscal quarter ended June 30, 2012 except for an additional equity contribution recorded in September 2012 to clear the final remaining unpaid invoices of $1.2 million due Tyson and $13,000 due Syntroleum.

Dynamic Fuels is organized and operated pursuant to the provisions of its Limited Liability Company Agreement between the Company and Tyson (the “LLC Agreement”). The LLC Agreement provides for management and control of Dynamic Fuels to be exercised jointly by representatives of the Company and Tyson equally with no LLC member exercising control. This entity is accounted for under the equity method and is not required to be consolidated in our financial statements; however, our share of the Dynamic Fuels net income or loss is reflected in the Consolidated Statements of Operations. Dynamic Fuels has a different fiscal year than us. The Dynamic Fuels fiscal year ends on September 30 and we report our share of Dynamic Fuels results of operations on a three month lag. As of September 30, 2012, Syntroleum’s total estimate of maximum exposure to loss as a result of its relationships with this entity was approximately $42,919,000, which represents our equity investment in and loans to this entity in the amount of $42,682,000 and accounts receivable from this entity in the amount of $237,000 which fluctuates from time to time with certain operating activities.

Dynamic Fuels, LLC Quarter Ended June 30, 2012 unaudited financials (in thousands):

 

     June 30,  

Balance Sheet

   2012  

Cash and Receivables

   $ 4,980   

Inventory

     21,135   

Property, Plant and Equipment and Other Assets

     154,679   
  

 

 

 

Total Assets

   $ 180,794   
  

 

 

 

Accounts Payable and Accrued Liabilities

   $ 4,994   

Notes and Accounts Payable to Related Parties

     31,726   

Long-Term Liabilities

     100,050   
  

 

 

 

Total Liabilities

     136,770   
  

 

 

 

Total Members’ Equity

     44,024   
  

 

 

 

Total Liabilities and Members’ Equity

   $ 180,794   
  

 

 

 

 

Statement of Operations

   For the  Quarter
Ended

June 30, 2012
    For the Nine
Months Ended
June 30, 2012
 

Revenue

   $ 24,031      $ 124,318   

Operating Expenses

     28,444        130,599   
  

 

 

   

 

 

 

Loss from Operations

     (4,413     (6,281
  

 

 

   

 

 

 

Other Income (Expense)

     (508     (1,570
  

 

 

   

 

 

 

Net Loss

   $ (4,921   $ (7,851
  

 

 

   

 

 

 

Dynamic Fuels began commercial operations in November of 2010. As of September 30, 2012, the plant had sold 63.0 million gallons of renewable products, such as diesel, jet fuel, naphtha, and LPG since it began commercial operations. Nameplate capacity for the plant is 75.0 million gallons per year. During the nine months ended June 30, 2012, the plant produced renewable products at an average rate of 47% of design capacity or a total of 26.5 million gallons compared to 25% of design capacity or 14.0 million gallons for the same period in 2011. For the quarter ended September 30, 2012, the plant produced renewable products at an average rate of 56% of design or a total of 10.6 million gallons. During the quarter ended September 30, 2012 the plant ran a total of 51 days at full rates, was down a total of 5 days due to Hurricane Isaac, down 16 days due to transition from shutdown to start up and down 20 days due to various mechanical issues related to the heat exchangers and hydrogen compressor.

 

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Table of Contents

During the nine months ended September 30, 2012 and 2011, we recognized technical services and royalty revenue from Dynamic Fuels in the amount of $5,482,000 and $1,449,000 respectively. This revenue is reported in “Technical services from Dynamic Fuels, LLC” and “Royalties from Dynamic Fuels, LLC Plant Production” in the Consolidated Statements of Operations. We had a receivable from Dynamic Fuels of $237,000 and $2,624,000 as of September 30, 2012 and December 31, 2011, respectively.

5. Deferred Revenue

Deferred Revenue primarily consists of license fee deposits received upon the sale of a license agreement. Syntroleum has entered into definitive agreements and received license fee recorded as deferred revenue on the Consolidated Balance Sheets until recognized as revenue in the consolidated statement of operations. We recognize 50 percent of license fee deposits as revenue when the following conditions are met: 1) a site license agreement has been executed, 2) the license fee deposit has been paid, and 3) the initial plant design package has been delivered. The remaining 50 percent of the licensee fee deposit is recorded as revenue once certain performance test specifics are met, or the end of the license term. We are under no obligation to return these revenues except in the case a plant does not meet certain performance tests. Currently, all nonexpired licensee obligations are recorded as deferred revenues on the Consolidated Balance Sheets, denoting the amount is a future obligation arising from past transactions or events. During the quarter ended September 30, 2012, we recognized $3.0 million as technology revenue from the expiration of one of the license agreements dating back to 1997.

6. Earnings Per Share

 

     Three months ended
September 30,
     Nine months ended
September 30,
 
     2012      2011      2012      2011  
     (in thousands, except per share
amounts)
     (in thousands, except per share
amounts)
 

Basic weighted-average shares

     98,254         91,843         98,377         87,020   

Effect of dilutive securities:

           

Stock options

     422         —           1,112         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted weighted-average shares

     98,676         91,843         99,489         87,020   
  

 

 

    

 

 

    

 

 

    

 

 

 

The table below includes information related to stock options, warrants and restricted stock that were outstanding at September 30 of each respective year but have been excluded from the computation of weighted-average stock options due to the option exercise price exceeding the quarter weighted-average market price of our common shares or their inclusion would have been anti-dilutive to our income (loss) per share.

 

     September 30,
2012
     September 30,
2011
 

Options, warrants and restricted stock excluded (in thousands)

     20,756         26,062   

Weighted-average exercise prices of options, warrants and restricted stock excluded

   $ 2.93       $ 2.49   

Nine month weighted average market price

   $ .87       $ 1.62   

7. Stock-Based Compensation

Our share-based incentive plans permit us to grant restricted stock units, restricted stock, incentive or non-qualified stock options, and certain other instruments to employees, directors, consultants and advisors of the Company. Certain stock options and restricted stock units vest in accordance with the achievement of specific Company objectives. The exercise price of options granted under the plan must be at least equal to the fair market value of our common stock on the date of grant. All options granted vest at a rate determined by the Nominating and Compensation Committee of our Board of Directors and are exercisable for varying periods, not to exceed ten years. Shares issued under the plans upon option exercise or stock unit conversion are generally issued from authorized, but previously unissued shares.

As of September 30, 2012, approximately 4,723,683 shares of common stock were available for grant under our current plan. We are authorized to issue up to approximately 12,138,888 plan equivalent shares of common stock in relation to stock options or restricted shares outstanding or available for grant under the plans.

 

7


Table of Contents

Stock Options

The number and weighted average exercise price of stock options outstanding are as follows:

 

    

Shares

Under

   

Weighted

Average Price

 
     Stock Options     Per Share  

OUTSTANDING AT DECEMBER 31, 2011

     8,007,874      $ 1.79   

Granted at market price

     —          —     

Exercised

     (96,000   $ 0.66   

Expired or forfeited

     (496,669   $ 1.53   
  

 

 

   

 

 

 

OUTSTANDING AT SEPTEMBER 30, 2012

     7,415,205      $ 1.83   
  

 

 

   

 

 

 

The following table summarizes information about stock options outstanding at September 30, 2012:

 

           Options Outstanding        Options Exercisable  

Range of

Exercise Price

          Options
Outstanding
       Weighted
Average
Exercise Price
       Weighted Average
Remaining
Contractual Life
       Options
Exercisable
       Weighted
Average
Exercise  Price

Per Share
 

$0.66 – $0.66

         4,611,481         $ 0.66           5.82           4,611,481         $ 0.66   

$1.41 – $1.55

         1,060,666           1.54           0.42           1,060,666           1.54   

$1.62 – $2.89

         817,136           2.58           2.75           817,136           2.58   

$3.19 – $6.88

         675,228           6.47           2.08           675,228           6.47   

$8.03 – $9.67

         225,694           9.43           3.13           225,694           9.43   

$10.51 – $10.51

         25,000           10.51           2.84           25,000           10.51   
      

 

 

      

 

 

           

 

 

      

 

 

 
         7,415,205         $ 1.83                7,415,205         $ 1.83   
      

 

 

      

 

 

           

 

 

      

 

 

 

A total of 3,457,300 stock options with a weighted average exercise price of $0.67/share vested on June 27, 2012 as the final vesting requirement was determined to have been met by the Nominating & Compensation Committee of the Board of Directors based on the terms of the Settlement Agreement which provided that the Geismar plant performance test was waived and deemed unnecessary. There were no stock options granted during the nine months ended September 30, 2012 or 2011.

The total intrinsic value of options exercised (i.e., the difference between the market price on the exercise date and the price paid by the employee to exercise the options) during the nine months ended September 30, 2012 and 2011 was $36,000 and $76,000, respectively. The total amount of cash received in 2012 and 2011 by the Company from the exercise of these options was $63,000 and $35,000, respectively. As of September 30, 2012, the intrinisic value of fully vested stock options was $461,148. The remaining weighted average contractual term for options exercisable is approximately 4.48 years.

Non-cash compensation cost related to stock and stock options and restricted stock recognized during the nine months ended September 30, 2012 and 2011 was $476,000 and $528,000 respectively.

Restricted Stock

We also grant common stock and restricted common stock units to employees. These awards are recorded at their fair value on the date of grant and compensation cost is recorded using graded vesting over the expected term. The weighted average grant date fair value of common stock and restricted stock units granted during the nine months ended September 30, 2012 and 2011 was $0.96 (total grant date fair value of $350,000) and $2.21 (total grant date fair value of $436,000), respectively. As of September 30, 2012, the aggregrate intrinsic value of restricted stock units that are fully vested was zero. The total fair value of restricted stock units vested during the quarter ended September 30, 2012 and 2011 was zero and $499,000, respectively. The following summary reflects restricted stock unit activity and related information.

 

     Shares /
Units
    Weighted-Average
Grant Date Fair
Value
 

NONVESTED AT DECEMBER 31, 2011

     1,047,712      $ 0.35   

Granted

     364,582      $ 0.96   

Vested

     (1,412,294   $ 0.51   

Forfeited

     —        $ —     
  

 

 

   

 

 

 

NONVESTED AT September 30, 2012

     —        $ —     
  

 

 

   

 

 

 

 

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Table of Contents

The Nominating & Compensation Committee determined the vesting of the final performance standard with respect to the outstanding restricted stock had occurred based on the terms of the Settlement Agreement which provided that the Geismar plant performance test was waived and deemed unnecessary. There was no restricted stock granted during the nine months ended September 30, 2012 or 2011.

8. Commitments and Contingencies

We have entered into employment agreements, which provide severance benefits to several key employees. Commitments under these agreements totaled approximately $2,195,000 at September 30, 2012. Expense is not recognized until an employee is severed.

On September 14, 2012, the U.S. Patent & Trademark Office (“PTO”) issued an Order granting Syntroleum’s August 17th request for inter partes reexamination of U.S. Patent No. 8,187,344 and also issued an Office Action initially rejecting all claims of the patent as obvious in view of the prior art. The ‘344 patent is the subject of a patent suit filed by Neste Oil Oyj against Syntroleum on May 29, 2012 in the District of Delaware. The ‘344 patent is related to and shares the same inventors as a prior Neste patent (U.S. Patent No. 7,279,018) and both are directed to a fuel composition for diesel engines. The PTO’s recent Order is consistent with a prior finding on March 22, 2012 by the PTO’s Board of Patent Appeals and Interferences affirming the Examiner’s rejection of the ‘018 patent’s claims because “the evidence of record as a whole supports the Examiner’s conclusion that the fuel composition as claimed would have been obvious to one of ordinary skill in the art . . .”. Neste declined to appeal this ruling and on July 31, 2012, the PTO issued a Reexamination Certificate cancelling all claims of the ‘018 patent.

Syntroleum’s Answer and Counterclaims to Neste’s First Amended Complaint regarding the ‘344 patent was filed on September 24th, wherein Syntroleum denied Neste’s infringement allegations and asserted invalidity of the ‘344 patent on prior art and other grounds. Syntroleum’s Motion to Stay the district court action in view of the PTO reexamination proceedings is pending. Syntroleum will continue to vigorously defend against the complaint’s allegations in the district court and will also pursue invalidity of the ‘344 patent via the PTO reexamination proceedings, and is confident its position will be vindicated.

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

You should read the following information together with the information presented elsewhere in this Quarterly Report on Form 10-Q and with the information presented in our Annual Report on Form 10-K for the year ended December 31, 2011 (including our audited financial statements and the accompanying notes).

Overview

Our focus is the commercialization of our technologies to produce synthetic liquid hydrocarbons. Operations to date have consisted of activities related to the commercialization of the “Syntroleum® Process” and previously consisted of research and development supporting the Syntroleum® Process designed to convert carbonaceous material (biomass, coal, natural gas and petroleum coke) into synthetic liquid hydrocarbons. Synthetic hydrocarbons produced by the Syntroleum® Process can be further processed using the Syntroleum Synfining® Process into high quality liquid fuels such as diesel, jet fuel (HRJ), kerosene, naphtha, and propane. Our Bio-Synfining® Technology is a renewable fuels application of our Synfining® Technology. This technology is applied commercially via Dynamic Fuels. The technology processes renewable feedstocks such as triglycerides and/or fatty acids to make renewable synthetic products.

Commercial and Licensee Projects

On June 22, 2007, we entered into definitive agreements with Tyson to form Dynamic Fuels, to construct and operate facilities in the United States using our Bio-Synfining® Technology pursuant to the provisions of the “LLC Agreement”. The LLC Agreement provides for management and control of Dynamic Fuels to be exercised jointly by representatives of the Company and Tyson equally with no member exercising control. This entity is accounted for under the equity method and is not required to be consolidated in our financial statements; however, our share of the Dynamic Fuels net income or loss is reflected in the Consolidated Statements of Operations. Dynamic Fuels has a different fiscal year than us. The Dynamic Fuels fiscal year ends on September 30 and we report our share of Dynamic Fuels results of operations on a three month lag. As of September 30, 2012, Syntroleum’s total estimated maximum exposure to loss as a result of its relationships with this entity was approximately $42,919,000, which represents our equity investment in and loans to this entity in the amount of $42,682,000 and accounts receivable from this entity in the amount of $237,000, which fluctuates from time to time with certain operating activities.

As of September 30, 2012, Syntroleum had contributed $50.1 million in capital contributions and an additional $14.0 million in the form of working capital loans to Dynamic Fuels. The $14.0 million non-interest bearing loan does not have a stated term but will be repaid upon Dynamic Fuels generating sufficient operating cash flow.

On October 21, 2008, Dynamic Fuels issued tax exempt bonds through the Louisiana Public Facilities Authority in the amount of $100 million at an initial interest rate of 1.3% to fund construction of the plant. The Bonds required a letter of credit in the amount of $100 million as collateral for Dynamic Fuels’ obligations under the Bonds. Tyson agreed under the terms of the Warrant Agreement to provide credit support for the entire $100 million Bond issue. The interest rate for the Bonds is a daily floating interest rate and may change significantly from this amount. In the fourth quarter of 2008, Dynamic Fuels entered into an interest rate swap, which had the effect of locking in the interest rate at 2.19% for a period of 5 years with declining swap coverage. The daily floating interest rate as of September 30, 2012 was 2.0%. Year to date the average interest rate was 1.56%. This debt funding is in addition to the equity contributions and loans provided by each member.

 

 

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Table of Contents

Renewable diesel produced by Dynamic Fuels meets ASTM D975 standard for petroleum diesel. Diesel produced by Dynamic Fuels generates 1.7 Renewable Identification Number’s, (“RIN”) per gallon. As of January 5, 2012 RIN prices were $1.55 per gallon with a 1.7 multiplier value of $2.64 per gallon. During the year RIN prices have averaged $1.21 per gallon with a 1.7 multiplier average value of $2.06 per gallon. On November 1, 2012 RIN prices were $0.58 per gallon and therefore worth $0.99 per gallon with the 1.7 multiplier.

In 2011, Dynamic Fuels announced a contract with the U.S. Navy to supply 450,000 gallons of renewable fuels. This includes 100,000 gallons of jet fuel and 350,000 gallons of marine distillate fuel. The fuel was used in the Navy’s “Green Strike Group” composed of air craft, vessels and ships powered by renewable fuels. This represents the single largest purchase of biofuel in government history, as reported by the Navy and USDA.

In 2011, we received approval for registration of our neat renewable diesel from the Environmental Protection Agency. The registration of the neat renewable diesel allows combustion in regular on-road engines of up to 100 percent renewable fuel, which means no blending of petroleum based diesel is required (previously we had registration approval for blends up to 20 percent renewable diesel). This allows Dynamic Fuels to market its fuel directly to third party fuel end-users, such as operators of on-road fleet vehicles. In 2012, Dynamic Fuels entered into strategic marketing alliance, commercial off-take and supply chain management agreements with Mansfield Oil Company (“Mansfield”) to efficiently distribute the plants renewable products to the commercial fleet vehicle market. Mansfield markets and distributes over 2.5 billion gallons of fueling product per year to thousands of commercial customers across all 50 states and Canada.

Dynamic Fuels began commercial operations in November of 2010. As of September 30, 2012, the plant had sold 63.0 million gallons of renewable products, such as diesel, jet fuel, naphtha, and LPG since it began commercial operations. Nameplate capacity for the plant is 75.0 million gallons per year. During the nine months ended June 30, 2012, the plant produced renewable products at an average rate of 47% of design capacity or a total of 26.5 million gallons compared to 25% of design capacity or 14.0 million gallons for the same period in 2011. For the quarter ended September 30, 2012, the plant produced renewable products at an average rate of 56% of design or a total of 10.6 million gallons. During the quarter ended September 30, 2012 the plant ran a total of 51 days at full rates, was down a total of 5 days due to Hurricane Isaac, down 16 days due to transition from shutdown to start up and down 20 days due to various mechanical issues related to the heat exchangers and hydrogen compressor.

The plant has experienced mechanical issues, hydrogen supply disruptions and feedstock adulterants all of which have contributed to plant down time and higher than expected operational costs. Upgrades to the feedstock pre-treatment area are progressing with one unit installed and two additional units in the process of being installed with commissioning expected in November. The unit installed in May has provided consistent and steady service.

On October 25, 2012 the plant was taken down for a standard turnaround. During this time routine maintenance will be performed.

The table below shows average revenue per gallon we receive for the renewable diesel, naphtha and LPG we sell and cost of goods sold and operating expenses and general and administrative expenses. The net operating loss per gallon listed below for the quarters ended December 31, 2011 and 2010 corresponds to “Loss from Operations” as reported in the GAAP Dynamic Fuels summarized financial information in Note 4, “Investment in and Loans to Dynamic Fuels, LLC”.

 

     Quarter
Ended
12/31/10
    Quarter
Ended
3/31/11
    Quarter
Ended
6/30/2011
    Quarter
Ended
9/30/2011
    Quarter
Ended
12/31/11
    Quarter
Ended
3/31/12
    Quarter
Ended
6/30/12
    Quarter
Ended
9/30/12
 

Renewable Products Sold (in millions)

     1.3        4.5        7.2        12.5        11.0        8.9        4.7        10.6   

% of Design Capacity

     7     23     39     67     58     47     25     56

Revenue $/Gal

   $ 6.04      $ 4.57      $ 4.84      $ 5.11      $ 4.87      $ 5.23      $ 5.13      $ 3.94   

Feedstock $/Gal

     2.67        3.05        4.11        4.26        3.83        3.93        3.94        3.62   

OPEX and General & Administrative/Gal

     6.83        3.39        2.24        1.09        1.19        1.32        2.19        1.03   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Operating Loss/ Gal

   $ (3.46   $ (1.87   $ (1.51   $ (0.24   $ (0.15   $ (0.02   $ (1.00   $ (0.71
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

Results of Operations

Consolidated Unaudited Results for the Three Months and Nine Months Ended,

 

    Three Months Ended     Nine Months Ended  

Revenues

  September 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 
    (In Thousands)  

Technology

  $ 3,150      $ 150        9,450      $ 450   

Technical Services

    516        430        1,470        1,314   

Technical Services from Dynamic Fuels

    372        286        4,803        800   

Royalties from Dynamic Fuels, LLC Plant Production

    304        310        679        649   
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 4,342      $ 1,176      $ 16,402      $ 3,213   
 

 

 

   

 

 

   

 

 

   

 

 

 

Technology Revenue.

Technology Revenue was $9,450,000 and $450,000 for the nine months ended September 30, 2012 and 2011, respectively. $9 million at September 30, 2012 relates to the recognition of unearned revenue from two expired license agreements.

Technical Services Revenue.

Revenues from engineering services for technical services and continued work on the engineering design and project management of Dynamic Fuels were $4,803,000 and $800,000 for the nine months ended September 30, 2012 and 2011, respectively. We expect to continue to earn revenues for engineering services to other customers on an individual contract basis in 2012. Revenue from Dynamic Fuels increased in 2012 due to the recognition of revenue from services billed but previously not recognized.

Royalty Revenue.

Revenues from royalties of renewable fuel production at the Dynamic Fuels plant is recognized from production of renewable products from the date of commercial operations to September 30, 2012. We will continue to recognize royalties from actual plant production of renewable products quarterly.

 

     Three Months Ended      Nine Months Ended  

Operating Costs and Expenses

   September 30,
2012
     September 30,
2011
     September 30,
2012
     September 30,
2011
 
     (In Thousands)  

Engineering

     710       $ 562       $ 1,900       $ 1,706   

Depreciation and amortization

     42         49         143         148   

Non-cash equity compensation

     61         69         476         528   

General, administrative and other

     1,492         948         3,869         3,084   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,305       $ 1,628       $ 6,388       $ 5,466   
  

 

 

    

 

 

    

 

 

    

 

 

 

Engineering.

Expenses from engineering activities were $1,900,000 for the nine months ended September 30, 2012 compared to $1,706,000 during the same period in 2011. There was no change in engineering activities during 2012 compared to 2011.

Non-cash Equity Compensation.

Non-cash equity compensation for the nine months ended September 30, 2012 was $476,000 compared to $528,000 for the same period in 2011. The expense primarily relates to the vesting schedule of performance based awards granted to all employees in 2008. The vesting of these awards is based on achieving certain milestones associated with the Bio-Synfining® Technology project. A majority of the expense associated with these awards was recognized in 2009 and 2010. We have recognized the remaining amount of equity compensation for the milestone based awards in 2012.

General, Administrative and Other.

General and administrative expenses for the nine months ended September 30, 2012 were $3,869,000 compared to $3,084,000 during the same period in 2011. The increase in general and administrative expenses primarily relates to increased legal fees.

 

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Table of Contents

Loss from Dynamic Investment.

Our 50% share of the Dynamic Fuels loss for its nine months ended June 30, 2012 decreased compared to the same period last year due to increased production revenue to offset fixed costs of the operating plant. Loss from our investment in Dynamic Fuels was $2,752,000 for the quarter ended June 30, 2012, compared to a loss of $5,348,000 for the same period in 2011. Loss for the nine months ended June 30, 2012, compared to the loss for the same period in 2011 was $5,737,000and $12,286,000 respectively. Dynamic Fuels’ revenue was $124,318,000 with operating expenditures of $130,599,000 and other expense of $1,570,000 for the nine months ended June 30, 2012. This compares to revenue of $63,101,000 with operating expenditures of $86,087,000 and other expense of $2,034,000 for the nine months ended June 30, 2011. We report our 50 percent share of Dynamic Fuels results of operations on a three month lag.

Liquidity and Capital Resources

General

As of September 30, 2012, we had approximately $17.6, million in cash and cash equivalents. At September 30, 2012, we had $448,000 in accounts receivable outstanding relating to our technical services revenue provided to Dynamic Fuels and other clients. We believe that all of the receivables currently outstanding will be collected and have not established a reserve for bad debts.

Our current liabilities totaled $2,156,000 as of September 30, 2012.

Our business plan over the next several years is to perform engineering design and services for a GTL plant. If this would ultimately lead to potential investments in additional plants we will need to raise capital. If we obtain additional funds by issuing equity, dilution to stockholders may occur. In addition, preferred stock could be issued without stockholder approval, and the terms of our preferred stock could include dividend, liquidation, conversion, voting and other rights that are more favorable than the rights of the holders of our common stock. There can be no assurance as to the availability or terms upon which such financing might be available.

Until such time the funds provided by Dynamic Fuels operations are sufficient to meet its own working capital requirements, we expect to fund additional short-term working capital needs through working capital loans. We have contributed cash in the amount of $43,500,000 to the capital of Dynamic Fuels since inception, have loaned Dynamic Fuels $14 million and have receivables due from Dynamic Fuels of $237,000. Although management remains positive about the future of Dynamic Fuels, if Dynamic Fuels fails to achieve profitability, our entire investment could be subject to loss.

If we are unable to generate funds from operations, our need to obtain funds through financing activities will be increased.

Cash Flows

Cash flows used in continuing operations were $1,847,000 during the nine months ended September 30, 2012, compared to $3,101,000 during the nine months ended September 30, 2011. The decrease in cash flows used in operations primarily relates to the payment of certain accounts payable in 2011 that were not present in 2012.

Cash flows used in investing activities were $3,011,000 during the nine months ended September 30, 2012 compared to $4,537,000 during the nine months ended September 30, 2011. We funded approximately $3 million in equity capital and $4.5 million in working capital loans to Dynamic Fuels during 2012 and 2011, respectively.

Cash flows used in financing activities during the nine months ended September 30, 2012 were $136,000 compared to cash provided of $23.6 million during the nine months ended September 30, 2011. The cash provided by financing activities during both years is due to net proceeds received from the exercise of stock options and issuance of common stock during the third quarter of 2011. $199,000 was used to purchase and retire restricted stock during the third quarter of 2012.

Contractual Obligations

Our operating leases include leases for corporate headquarters, copiers and software.

We have entered into employment agreements, which provide severance cash benefits to several key employees. Commitments under these agreements totaled approximately $2,195,000 at September 30, 2012. Expense is not recognized until an employee is severed.

We as licensor, entered into a Bio-Synfining® Master License Agreement on June 22, 2007 with Dynamic Fuels, LLC. Under this license agreement, we at the request of the licensee must execute a Site License Agreement in favor of licensee for licensee’s use of our Bio-Synfining® Technology. On June 27, 2012 the Site License Agreement was executed and process guarantee and Performance Test contained therein were waived and deemed unnecessary by Dynamic Fuels. For purposes of the Warrant Agreement dated June 22, 2007 between Syntroleum and Tyson Foods, Inc., the First Plant Commercial Operation Date as defined in the Warrant Agreement was deemed to be June 27, 2012. We may need to fund future short-term working capital needs of Dynamic Fuels on an as needed basis.

New Accounting Pronouncements

No new accounting standards have been adopted since the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 was filed.

 

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Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There have been no material changes to the Quantitative and Qualitative Disclosures about Market Risk described in our annual report on Form 10-K for the year ended December 31, 2011.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2012 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control over Financial Reporting.

There has been no change in our internal controls over financial reporting that occurred during the nine months ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors

There have been no material changes to the risk factors described in our annual report on Form 10-K for the year ended December 31, 2011.

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

Recent Sales of Unregistered Securities.

Not applicable

Use of Proceeds.

Not applicable.

Purchases of Equity Securities by the Issuer and Affiliated Purchases.

Not applicable

Item 3. Defaults Upon Senior Securities.

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information.

None.

Item 6. Exhibits.

 

31.1    Section 302 Certification of Edward G. Roth
31.2    Section 302 Certification of Karen L. Power
32.1    Section 906 Certification of Edward G. Roth
32.2    Section 906 Certification of Karen L. Power

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

SYNTROLEUM CORPORATION, a Delaware

corporation (Registrant)

Date: November 8, 2012     By:   /s/ Edward G. Roth
      Edward G. Roth
      President and Chief Executive Officer (Principal Executive Officer)
Date: November 8, 2012     By:   /s/ Karen L. Power
      Karen L. Power
      Senior Vice President and Principal Financial Officer (Principal Financial Officer)

 

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INDEX TO EXHIBITS

 

No.    Description of Exhibit
31.1    Section 302 Certification of Edward G. Roth
31.2    Section 302 Certification of Karen L. Power
32.1    Section 906 Certification of Edward G. Roth
32.2    Section 906 Certification of Karen L. Power

 

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