As filed with the Securities and Exchange Commission on August 28, 2002
Registration No. 333-87774
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 3
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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KFX INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 84-1079971
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
Organization)
Theodore Venners
3300 East First Avenue, Suite 290 3300 East First Avenue, Suite 290
Denver, Colorado 80206 Denver, Colorado 80206
(303) 293-2992 (303) 293-2992
(Address, Including Zip Code, and Telephone (Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrant's Principal Number, Including Area Code, of Agent For Service)
Executive Offices)
copy to:
Phyllis G. Korff, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box. [_]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
Proposed
Maximum
Offering Proposed Maximum Amount of
Title of Each Class of Amount to be Price per Aggregate Registration
Securities to be Registered Registered(1) Unit(2) Offering Price Fee(3)(4)
------------------------------------------------- -------------------- ------------- ------------------ -------------------
Common Stock, $0.001 par value per share 24,595,204 $2.30 $56,568,969 $520.35
(1) Pursuant to Rule 416 under the Securities Act, this registration
statement also covers such additional shares as may hereafter be
offered or issued to prevent dilution resulting from stock splits,
stock dividends, recapitalizations or certain other capital
adjustments.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of
1933, as amended, based on the average of the high and low sales prices
for a share of common stock as reported on the American Stock Exchange
on August 27, 2002.
(3) Does not include the $2,275.44 registration fee previously paid by the
Registrant upon the initial filing of the Registration Statement on May
7, 2002 for the registration of 10,054,100 shares of common stock. Such
portion of the registration fee was calculated based on a proposed
maximum offering price per share of $2.46, based on the average of the
high and low sales prices for a share of common stock as reported on
the American Stock Exchange on April 30, 2002, and a proposed maximum
aggregate offering price of $24,733,086. Pursuant to Rule 457(a), no
additional registration fee is being paid with respect to such
10,054,100 shares.
(4) Does not include $2,589.90 registration fee previously paid by the
Registrant upon the initial filing of the Registration Statement on
July 31, 2002 for the registration of an additional 12,082,000 shares
of common stock. Such portion of the registration fee was calculated
based on a proposed maximum offering price per share of $2.33, based on
the average of the high and low sales prices for a share of common
stock as reported on the American Stock Exchange on July 29, 2002.
Pursuant to Rule 457(a), no additional registration fee is being paid
with respect to such 12,082,000 shares.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
[FLAG]
This preliminary prospectus is not complete and may be changed. These shares may
not be sold until the registration statement filed with the U.S. Securities and
Exchange Commission is effective. This preliminary prospectus is not an offer to
sell nor does it seek an offer to buy these shares in any jurisdiction where the
offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 28, 2002
PROSPECTUS
KFx Inc.
24,595,204 Shares of Common Stock
This prospectus relates to 24,595,204 shares of common stock, $.001 par
value per share, of KFx Inc., a Delaware corporation, which may be offered from
time to time by the selling stockholders named herein. The shares include up to
16,891,104 shares of common stock issuable upon the exercise of warrants. We
will not receive any proceeds from the sale of the common stock, rather, each of
the selling stockholders will receive all of the net proceeds from the sale of
their respective common stock. We have agreed with the selling stockholders that
we will pay all expenses incident to the registration of the common stock under
the Securities Act of 1933, as amended.
The selling stockholders may sell the shares of common stock described
in this prospectus in a number of different ways and at varying prices. For
additional information on the methods of sale, you should refer to the section
entitled "Plan of Distribution" beginning on page 15.
The common stock is listed for trading on the American Stock Exchange
under the symbol "KFX." On August 27, 2002, the last reported sale price of the
common stock was $2.30 per share.
Our corporate offices are located at 3300 East First Avenue, Suite 290,
Denver, Colorado 80206. Our telephone number is (303) 293-2992.
---------------
Investing in our common stock involves substantial risks. See the
section entitled "Risk Factors" beginning on page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is __, 2002
TABLE OF CONTENTS
Page Number
Section Title
Where You Can Find More Information......................... 3
KFx Inc..................................................... 4
Risk Factors................................................ 5
Use of Proceeds............................................. 14
Selling Stockholders........................................ 14
Plan of Distribution........................................ 16
Forward-Looking Statements.................................. 17
Legal Matters............................................... 18
Incorporation of Documents by Reference..................... 18
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References in this prospectus to "KFx," "we," "us" or "our" refer to KFx Inc.
You should rely only on the information incorporated by reference or
provided in this prospectus and its supplement(s). We have not authorized anyone
to provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents. This prospectus does not
constitute an offer to sell or a solicitation of an offer to buy the securities
in any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC") under
the Exchange Act. The registration statement of which this prospectus forms a
part and these reports, proxy statements and other information can be inspected
and copied at the public reference room maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and at 233 Broadway, New York, New York 10279. Copies of these materials
may also be obtained from the SEC at prescribed rates by writing to the public
reference room maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the public reference room by calling the SEC at 1-800-SEC-0330.
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act with respect to this offering. This prospectus, which forms a
part of the registration statement, does not contain all the information
included in the registration statement and the attached exhibits.
The SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding us. The reports, proxy and information statements
and other information about us can be downloaded from the SEC's website and can
also be inspected and copied at the offices of the American Stock Exchange,
Inc., 86 Trinity Place, New York, New York 10006.
KFX INC.
We are engaged in developing and delivering various technology and
service solutions to the electric power generation industry to facilitate the
industry's compliance with air emission standards and transformation to
intensive competition as the domestic power industry undergoes deregulation.
Currently, we have technology solutions that enhance the output of
coal-fired electric utility boilers while simultaneously reducing the related
environmental impacts. The patented K-Fuel(R) Technology ("K-Fuel Technology")
uses heat and pressure to physically and chemically transform high-moisture,
low-energy value coal and other organic feedstocks into a low-moisture,
high-energy solid clean fuel ("K-Fuel"). We plan to license K-Fuel Technology
domestically and internationally to various parties wishing to construct and
operate K-Fuel production facilities.
In 1998, through the acquisition of a controlling interest in Pegasus
Technologies, Inc. ("Pegasus"), we added NeuSIGHT(R) ("NeuSIGHT") to our
solutions. NeuSIGHT is the leading combustion optimization product for
coal-fired electric utility boilers, which, in addition to improving boiler
efficiency, reduces NOX emissions. NeuSIGHT is a neural network-based (i.e.,
artificial intelligence) software technology. Pegasus developed NeuSIGHT and
continues to enhance NeuSIGHT, develop related products and market NeuSIGHT
licenses and related implementation services.
In 2001, Pegasus acquired certain assets and liabilities of the Power
Optimization Division of Pavilion Technologies, Inc. ("Pavilion"), including the
existing installed base, customer contact listing and exclusive rights to
license Pavilion's software in the electric utility market. The primary Pavilion
product is a neural network-based combustion optimization product that
previously competed with NeuSIGHT in the electric utility market, but is
considered complementary technology to NeuSIGHT.
RISK FACTORS
Our Historical Financial Performance and Current Financial Condition Raise
Substantial Doubt About Our Ability to Continue as a Going-Concern
The opinion to our consolidated financial statements contains an
explanatory paragraph regarding our ability to continue as a going concern.
Accordingly, our financial statements for the year ended December 31, 2001,
which are incorporated in this prospectus by reference to our current report on
Form 8-K dated June 18, 2002, have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. Our historical financial performance, obligations
coming due over the next 12 months and the need for additional financing to fund
planned growth in the business raise substantial doubt about whether the Company
can continue as a going concern. By selling our 6% convertible debentures in
July 1997, we incurred $17,000,000 in principal amount of indebtedness. On July
23, 2002, we paid $3,458,992 to satisfy our entire obligation for the debentures
that remained outstanding at the maturity date. All of our outstanding stock
appreciation rights became exercisable when we satisfied our obligations under
all of our debentures. At June 30, 2002, we recorded expense of approximately
$2,057,000 for these outstanding and exercisable stock appreciation rights.
We Need Additional Capital to Fund Our Business
We require substantial working capital to fund our business. At June
30, 2002, we had a working capital deficit of $16,695,203, an accumulated
deficit of approximately $96,513,000 and a stockholders' deficit of
approximately $22,956,000. We have incurred losses approximating $15,177,000,
$12,290,000 and $12,730,000 in 2001, 2000 and 1999, respectively, and
$10,244,000 during the first six months of 2002. We have experienced negative
operating cash flow approximating $6,738,000, $5,151,000 and $3,458,000 in 2001,
2000 and 1999, respectively, and $3,013,000 during the first six months of 2002.
We expect to incur net losses and negative operating cash flows in 2002. We
cannot assure you that we will ever achieve profitability, or be able to
generate earnings sufficient to meet our interest and principal payment
obligations. As a result, we have been and continue to be very dependent on
strategic relationships, sales of our debt and equity securities and short-term
loans from our directors and third parties to fund the operating costs
associated with our businesses.
Capital Raising Resulted In Our Granting of a Put Option
As of December 31, 2001, a total of $5,000,000 was due to Pavilion
during 2002 for installment payments on the purchase of the Power Optimization
Division. In March 2002, the Asset Purchase and License Agreement was
renegotiated and amended to reduce the total remaining base purchase price
payments to $4,500,000, with the entire payment due by March 28, 2002. On March
28, 2002, the Company issued 2 million shares of common stock at a price of
$2.50 per share and warrants, expiring eight years after the date of issuance,
exercisable for an aggregate of 2.25 million shares of KFx common stock, at a
price of $2.75 per share, subject to certain adjustments, to a group of
institutional investors, resulting in proceeds to the Company of $5 million. On
April 30, 2002, the Company issued an additional 2.4 million shares of common
stock at a price of $2.50 per share and additional warrants, expiring eight
years after the date of issuance, exercisable for an aggregate of 2.7 million
shares of KFx common stock, at a price of $2.75 per share, subject to certain
adjustments, to the same group of institutional investors, resulting in proceeds
to the Company of $6 million. On July 1, 2002, the Company issued an additional
400,000 shares of common stock at a price of $2.50 per share, subject to certain
adjustments, and additional warrants, expiring eight years after the date of
issuance, exercisable for an aggregate of 450,000 shares of KFx common stock, at
a price of $2.75 per share, subject to certain adjustments, to the same group of
institutional investors, resulting in proceeds to the Company of $1 million. On
July 19, 2002, the Company issued an additional 1.46 million shares of common
stock at a price of $2.50 per share, subject to certain adjustments, and
additional warrants, expiring eight years after the date of issuance,
exercisable for an aggregate of 3,102,500 shares of KFx common stock, at a price
of $2.75 per share, subject to certain adjustments, to the same group of
institutional investors, resulting in proceeds to the Company of $3.65 million.
As additional consideration for the total investments by the investors, as part
of the July 19, 2002 transaction, the warrants previously granted for the
purchase of 5,400,000 shares of common stock were amended and the investors
received new warrants to purchase 4,800,000 shares of common stock at a
purchase price of $2.75 per common share subject to adjustment. On August 21,
2002, the Company issued an additional 500,000 shares of common stock at a price
of $2.50 per share, subject to certain adjustments, and additional warrants,
expiring eight years after the date of issuance, exercisable for an aggregate of
1,062,500 shares of KFx common stock, at a price of $2.75 per share, subject to
certain adjustments, to the same group of institutional investors, resulting in
proceeds to the Company of $1.25 million.
The common stock issued to the institutional investors in the March,
April, July and August 2002 issuances is subject to redemption pursuant to a put
option, in whole or in part, at the option of the investors. This put option
became exercisable on July 23, 2002 when we paid $3,458,992 to satisfy our
entire obligation under our 6% convertible debentures. At the time the investors
notify KFx of their intent to exercise the put option, KFx must repurchase the
common stock at a price of $2.50 per share plus accrued interest ("Redemption
Value") within 100 days of notification. Interest for purposes of redemption
accrues at the rate of 9% per annum, beginning upon the original issuance date
of the common stock and ceases on the date on which the common stock is
repurchased. If two-thirds or more of the investors notify KFx of their plan to
exercise their put option and KFx is unable to secure the necessary funding to
satisfy these exercised put options within 100 days of notification, then KFx
would be required to transfer its interests in Pegasus to the investors. The put
option expires on December 23, 2002. As a result of the put option, the common
stock issued to the investors will be classified as redeemable common stock in
the mezzanine level of the consolidated balance sheet. Until the put option
expires, the Company is precluded from issuing, selling, transferring or
pledging any of its interest in Pegasus and Pegasus is precluded from
transferring any rights with respect to its equity and assets without approval
of at least two-thirds of the investors. Per the terms of the investment
agreements, the proceeds of these investments were used to complete the payments
of the remaining purchase price for the Pavilion Power Optimization Division
acquisition, to satisfy our obligation to repurchase Pegasus preferred stock
from private investors, to satisfy our obligations under certain bridge loans
due June 30, 2002 and to satisfy our entire obligation under our 6% convertible
debentures.
We Need Additional Capital to Fund Working Capital and Capital Expenditure
Requirements
Substantial cash will be required to fund working capital requirements
and capital expenditures. We may also need substantial amounts of cash to
repurchase redeemable common stock and the common shares that could be put back
to the Company under the terms of the March 28, April 30, July 1, July 19, and
August 21, 2002 agreements to sell common stock. We will be required to raise
additional funds through public or private financings, strategic relationships
or other arrangements. We currently do not have any commitments with respect to
any funding. We cannot be assured that such additional funding will be available
at all or on terms satisfactory to us. A lack of adequate financing may
adversely affect our ability to:
o make necessary interest and principal payments on our
indebtedness;
o respond to changing business and economic conditions and
competitive pressures;
o absorb negative operating results; or
o fund capital expenditures or increased working capital
requirements.
The Company intends to seek further capital through various means which
may include the sale of a portion of its interest in Pegasus, additional sales
of debt or equity securities, a business combination, or other means and to
further reduce expenditures as necessary. Should the Company not be successful
in achieving one or more of these actions, it is possible that the Company may
not be able to continue as a going concern.
We May Be Required to Sell Our Interest in Pegasus if More Than Two-Thirds of
the Outstanding Put Options Held by Some of Our Investors are Exercised at One
Time and We Are Unable to Secure the Necessary Funding to Satisfy Those Options
Within the Time Permitted
On March 28, 2002, we issued 2 million shares of our common stock and
warrants to purchase 2.25 million shares of our common stock. On April 30, 2002,
we issued an additional 2.4 million shares of our common stock and warrants to
purchase 2.7 million shares of our common stock. On July 1, 2002, we issued an
additional 400,000 shares of our common stock and warrants to purchase 450,000
shares of our common stock. On July 19, 2002, we issued an additional 1.46
million shares of our common stock and warrants to purchase 3,102,500 shares of
our common stock. As additional consideration for the total investments by the
investors, as part of the July 19, 2002 transaction, the warrants previously
granted for the purchase of 5,400,000 shares of common stock will be amended and
the investors will receive new warrants to purchase 4,800,000 shares of common
stock at a purchase price of $2.75 per common share subject to adjustment. On
August 21, 2002 we issued an additional 500,000 shares of our common stock and
warrants to purchase 1,062,500 shares of our common stock. The common stock
issued in these five transactions is subject to redemption pursuant to a put
option, in whole or in part, at the option of the investors. This put option
became exercisable on July 23, 2002 when we paid $3,458,992 to satisfy our
entire obligation under our 6% convertible debentures. At the time the investors
notify us of their intent to exercise the put option, we must repurchase the
common stock at a price of $2.50 per share plus accrued interest within 100 days
of notification. If two-thirds or more of the investors notify us of their plan
to exercise their put option and we are unable to secure the necessary funding
to satisfy these exercised put options within 100 days of notification, then we
would be required to transfer our interests in Pegasus to the investors. The put
option expires on December 23, 2002. Until the put option expires, we are
precluded from issuing, selling, transferring or pledging any of our interests
in Pegasus and Pegasus is precluded from transferring any rights with respect to
its equity and assets without approval of at least two-thirds of the investors.
We Are Required to Issue Additional Warrants to Some of Our Stockholders
Until this Registration Statement is Declared Effective by the Securities
and Exchange Commission (the "SEC")
On March 28, 2002, we issued 2 million shares of our common stock and
warrants exercisable for an aggregate of 2.25 million shares of our common
stock. On April 30, 2002, we issued an additional 2.4 million shares of our
common stock and warrants exercisable for an aggregate of 2.7 million shares of
our common stock. On July 1, 2002, we issued an additional 400,000 shares of our
common stock and warrants to purchase 450,000 shares of our common stock. On
July 19, 2002, we issued an additional 1.46 million shares of our common stock
and warrants to purchase 3,102,500 shares of our common stock. As additional
consideration for the total investments by the investors, as part of the July
19, 2002 transaction, the warrants previously granted for the purchase of
5,400,000 shares of common stock were amended and the investors received
new warrants to purchase 4,800,000 shares of common stock at a purchase price of
$2.75 per common share subject to adjustment. On August 21, 2002 we issued an
additional 500,000 shares of our common stock and warrants to purchase 1,062,500
shares of our common stock. Under the terms of an amended and restated
investor's rights agreement, dated as of August 21, 2002, because this
registration statement was not declared effective by the SEC by June 21, 2002,
we were required to issue warrants to acquire that number of shares of common
stock equal to ten percent (10%) of the number of shares of common stock
issuable on exercise of the warrants issued to each investor that acquired
warrants in the March 28 and April 30 transactions. Based upon the warrant
conversion rates in effect on June 21, 2002, we are required to issue
additional warrants exercisable for an aggregate of 495,000 shares of our common
stock. Following June 21, 2002, for every 30 day period that this registration
statement is not declared effective, as calculated on a daily basis, and until
the registration statement is declared effective, we are required to issue
additional warrants to acquire that number of shares of common stock equal to
ten percent (10%) of the number of shares of common stock issuable on exercise
of the warrants issued to each investor that acquired warrants in the March 28
and April 30 transactions and the penalty warrants received on June 21. As of
August 21, 2002, we were required to issue additional warrants exercisable for
an aggregate of 1,638,450 shares of our common stock.
In the event that this registration statement is not declared effective
by August 30, 2002, in addition to the penalty warrants that will continue to
accrue on the March 28 and April 30 transactions, we will also be required to
issue additional warrants to each investor that acquired warrants in the July 1
and July 19 transactions. Based upon the warrant conversion rates in effect on
August 21, 2002, we would be required to issue additional warrants exercisable
for an aggregate of 200,125 shares of our common stock to the investors that
acquired warrants in the July 1 and July 19 transactions. Following August 30,
2002, for every 30 day period that this registration statement is not declared
effective, as calculated on a daily basis, and until the registration statement
is declared effective, we are required to issue additional warrants to acquire
that number of shares of common stock equal to ten percent (10%) and five
percent (5%) of the number of shares of common stock issuable on exercise of the
warrants issued to each investor that acquired warrants in the July 1 and July
19 transactions, respectively.
In the event that this registration statement is not declared effective
by September 27, 2002, in addition to the penalty warrants that will continue to
accrue on the March 28, April 30, July 1 and July 19 transactions, we will also
be required to issue additional warrants to each investor that acquired warrants
in the August 21 transaction. Based upon the warrant conversion rates in effect
on August 21, 2002, we would be required to issue additional warrants
exercisable for an aggregate of 53,125 shares of our common stock to the
investors that acquired warrants in the August 21 transaction. Following
September 27, 2002, for every 30 day period that this registration statement is
not declared effective, as calculated on a daily basis, and until the
registration statement is declared effective, we are required to issue
additional warrants to acquire that number of shares of common stock equal to
five percent (5%) of the number of shares of common stock issuable on exercise
of the warrants issued to each investor that acquired warrants in the August 21
transaction.
We Have Not Consistently Achieved Significant K-Fuel related Revenue Since
Our Inception
We have not consistently achieved material K-Fuel licensing, royalty or
product sales revenues since we were formed in 1988. In addition, no significant
K-Fuel related revenue was earned prior to our formation when similar operations
to our K-Fuel segment were conducted by various predecessor entities.
We Have Contractual Limitations on Our Ability to Secure Additional Funding
Our ability to secure additional financing is limited by the fact that,
until the put option relating to the March 28, April 30, July 1, July 19 and
August 21, 2002 sales of common stock expires, we are precluded from issuing,
selling, transferring or pledging any of our interest in Pegasus and Pegasus is
precluded from transferring any rights with respect to its equity and assets
without approval of at least two-thirds of the investors who purchased KFx
common stock in the March 28, April 30, July 1, July 19 and August 21, 2002
transactions, collectively, as stated above.
We Rely on Strategic Partners
Kennecott Energy has been a strategic partner in the development of
K-Fuel technology since early 1996 and also became a strategic partner in
Pegasus in early 2000. Our success will depend upon our ability to maintain
existing strategic relationships with Kennecott Energy and others and develop
and maintain additional relationships for the further development of our
technologies. We are and will continue to be dependent upon our strategic
partners to, among other things, fund the operations of the partnerships or the
joint venture entities in which we own interests and to provide necessary
technical, operational, personnel and other resources. While each of our
strategic partners has an economic motivation to further the development of its
respective joint venture or project with us, the amount of time and resources
devoted to these joint ventures or projects will be controlled by our strategic
partners and not by us. A decline in the financial prospects of a particular
strategic partner could adversely affect such partner's commitment to a joint
venture, which could materially harm us. Moreover, joint ventures or similar
arrangements require us to have financial and other arrangements to meet our
commitments to the joint ventures. We cannot assure you that we will be able to
maintain existing strategic relationships, develop or maintain additional
strategic relationships, meet our commitments with respect to our joint ventures
or that our strategic partners will meet their commitments to any respective
joint venture or project.
It Is Difficult to Evaluate Our Business and Prospects Because We Added the
Development of Pegasus to Our Strategic Focus. Until 1998, Our Focus Had
Been on the Development of K-Fuel
In August 1995, we commenced the initial application of our K-Fuel
technology and began construction of a facility near Gillette, Wyoming, to
produce K-Fuel. Until early 1998, our primary business was developing, licensing
and commercializing a patented technology that, in general, uses heat and
pressure to physically and chemically transform high-moisture, low-energy per
pound coal and other organic feedstocks into a low-moisture, high-energy solid
fuel known as K-Fuel. Operations at the KFP Facility began in the second quarter
of 1998, but were suspended in the second quarter of 1999. In March 1998 we
acquired, through our purchase of a controlling ownership interest in Pegasus,
the software product NeuSIGHT. Accordingly, we have a limited operating history
upon which an evaluation of our prospects and future performance can be made.
Although we continue to believe that K-Fuel technology has significant long-term
value, we believe that the software business of Pegasus offers more near term
growth opportunity. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered in the operation of a new
business based on innovative technologies in a highly competitive and evolving
industry.
The Market for Software in Connection with the Efficiency of the Combustion
of Coal Is New and Uncertain
Combustion and other optimization software relating to the production
of coal or other similar products has only been used by the electric power
business for a few years. We believe that market pressures caused by the
developing deregulation of the electric power industry and the Clean Air Act, as
amended, will accelerate demand for and market acceptance of combustion
optimization and related software products being developed at Pegasus. There can
be no assurance, however, that these software products will experience growth or
market acceptance.
The Market for NeuSIGHT and Related Software Depends on Successful Sales
and Marketing Strategies and Product Improvement Strategies
The market for Pegasus combustion optimization and related software is
uncertain. In our opinion, realization of near term value from the software
business of Pegasus requires, among other things, the successful implementation
of new sales and marketing programs. We cannot assure you that our sales and
marketing strategies for Pegasus combustion optimization and related software
will continue to be successful.
Additionally, we believe that increased market acceptance of Pegasus
software is dependent, in part, on our ability to simplify and streamline its
installation process. Product improvements directed at this objective have been
made and new versions of NeuSIGHT were released to the market in late 1999 and
again in late 2000. We will continue to evaluate additional improvements for
development. We cannot assure you that our efforts to further improve Pegasus
software products to more fully meet our objectives will be successful.
No Established Market for Beneficiated Fuel Products Exists
Although we believe that a substantial market will develop both
domestically and internationally for clean coal fuel products, an established
market does not currently exist. As a result, the availability of accurate and
reliable pricing information and transportation alternatives is not fully known.
The future success of our K-Fuel technology will depend on our ability to
establish a market for clean coal fuel products among potential customers such
as electrical utility companies and industrial coal users. Further, potential
users of our fuel products may be able to choose among alternative fuel
supplies. The market viability of the K-Fuel technology will not be known until
we complete construction of one or more commercial-scale production facilities,
either in the United States or internationally, that produce, on a consistent
basis, commercial quantities of fuel and meet certain minimum performance
specifications. We face the risk that commercial-scale production facilities
when completed will be unable to generate sufficient market interest to continue
in business. Further, we cannot assure you that any commercial-scale K-Fuel
facility will be successful.
Deregulation in the United States Power Industry May Result in Increased
Competition for Our Products
We expect that deregulation in the United States power industry will
result in utilities and other power generators placing a high emphasis on
reducing costs in their operations. This situation may, in turn, result in
increased competition from other producers of beneficiated coal products, other
clean fuel sources, other developers of combustion optimization software and
other products, services and technologies designed to provide environmental and
operating cost benefits similar to those which we believe are available from our
K-Fuel technology and Pegasus' combustion optimization technology and related
software.
Our Markets Are Competitive
We face competition from other companies in the clean coal and
alternative fuel technology industries as well as the emission control equipment
industry. Many of these companies have financial and managerial resources much
greater than ours and, therefore, may be able to offer products more
competitively priced and more widely available than ours. Also, competitors'
products may make our technology and products obsolete or non-competitive. Our
future success may depend on our ability to adapt to such changing technologies
and competition.
We Are Subject to Risks of Changing Laws
A significant factor driving the creation of the United States market
for K-Fuel, other beneficiated coal products, Pegasus combustion optimization
and related software products is the Clean Air Act, as amended, which specifies
various air emission requirements for electrical utility companies and
industrial coal users. We believe that compliance with the air emission
regulations by these coal users can be fully or partially met through the use of
clean-burning fuel technologies, like K-Fuel, and combustion optimization
software, like NeuSIGHT and Power Perfecter. We are unable to predict future
regulatory changes and their impact on the demand for our products. A full or
partial repeal or revision of the Clean Air Act, as amended, would have a
material adverse effect on our prospects.
Our Inability to Adequately Protect Our Proprietary Technology Could Harm
Our Business
Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights to establish
and protect our proprietary rights. We currently have a series of patents on our
K-Fuel technology, however, competitors may successfully challenge the validity
or scope of one or more of our patents or any future allowed patents. These
patents alone, our trade secret rights with respect to NeuSIGHT and
indemnification by the licensors of various Pegasus software products may not
provide us with any significant competitive advantage.
Third parties could copy or otherwise obtain and use our products or
technology without authorization or develop similar technology independently. We
cannot easily police unauthorized use of our technologies. The protection of our
proprietary rights may be inadequate and our competitors could independently
develop similar technology, duplicate our solutions or design around any patents
or other intellectual property rights we hold.
As is common in the software industry, we may, from time to time
receive notices from third parties claiming infringement by our NeuSIGHT product
or similar software of third party patent and other property rights.
We Rely on Key Personnel and Must Be Able to Retain or Attract Qualified
Personnel
We believe that our performance is substantially dependent on the
performance of a small group of senior managers and key technical personnel. The
inability to retain key managerial and technical personnel or attract and retain
additional highly qualified managerial or technical personnel in the future
could harm our business or financial condition.
Technical and Operational Problems May Adversely Impact Our Ability to
Develop K-Fuel Projects or Facilities
We cannot assure you that any K-Fuel facilities under consideration by
Kennecott Energy or third parties will not experience technical or operational
problems similar or in addition to those experienced at the KFP Facility. To the
extent that other technical or operational problems materialize, our ability to
develop other K-Fuel projects or facilities would be jeopardized.
Local Opposition to K-Fuel Projects Could Substantially Delay or Prevent
Development of New K-Fuel Facilities
Development, construction and operation of K-Fuel production facilities
require numerous environmental and other permits. The process of obtaining these
permits can be lengthy and expensive. In addition, local opposition to a
particular project can substantially increase the cost and time associated with
developing a project, and can, potentially, render a project unfeasible or
uneconomical. Kennecott Energy or others that may consider the development of
K-Fuel facilities may incur substantial costs or delays or may be unsuccessful
in developing K-Fuel production facilities as a result of such opposition.
Our General Project Development Is Uncertain
The process of developing, permitting, financing and constructing
K-Fuel production facilities is complex, lengthy and costly and subject to
numerous risks, uncertainties and factors beyond our control, including cost
overruns, delays, damage and technical delays. Only a small percentage of the
projects that are considered and pursued, by us, Kennecott Energy or other third
parties, may ultimately result in operating projects that are sufficiently
successful to provide us with license fee income, royalty fee income and/or
equity participation income. As a result, we may not be able to recover any
expenses that we incur in the evaluation and development of certain projects.
A Significant Portion of the Potential of the K-Fuel and Pegasus Businesses
Is Subject to International Risks
Although our current operations are primarily in the United States, we
believe a significant portion of the growth opportunity for both our Pegasus and
K-Fuel businesses lies outside the United States. Doing business in foreign
countries exposes us to many risks that are not present in the United States and
with which we lack significant experience, including political, military,
privatization, technology piracy, currency exchange and repatriation risks, and
higher credit risks associated with customers. In addition, it may be more
difficult for us to enforce legal obligations in foreign countries and we may be
at a disadvantage in any legal proceeding within the local jurisdiction. Local
laws may also limit our ability to hold a majority interest in the projects that
we develop.
Our Ability to Take Advantage of Net Operating Losses if We Achieve
Profitability Could be Limited
Under Section 382 of the Internal Revenue Code ("IRC"), the use of
prior net operating losses is limited after an "ownership change," as defined in
Section 382. The limitation, if applicable, is equal to the value of the loss
corporation's outstanding stock immediately before the date of the ownership
change multiplied by a long-term interest rate specified by the IRC. The quoted
market value of a stock is a factor to consider, but not necessarily a
conclusive factor, in determining the fair value of a corporation's stock.
Additional issuances of equity interests by us, including on the exercise of
outstanding warrants or options to purchase our common stock, may result in an
ownership change that is large enough to trigger the Section 382 limitations. In
the event we achieve profitable operations and taxable income, any significant
limitation on the use of our net operating losses to offset taxable income would
have the effect of increasing our tax liability and reducing net income and
available cash resources.
We Are Required to Pay Third Parties a Significant Portion of Licensing and
Royalty Revenues
We anticipate that a significant portion of our future revenues with
respect to K-Fuel will be in the form of licensing and royalty payments from
third party licensees operating commercial-scale production facilities of
K-Fuel. Pursuant to various agreements we have executed, we are required to pay
third parties a substantial portion of licensing and royalty revenues that we
receive. The Estate of Edward Koppelman is entitled to 25 percent of all license
fees and royalties, with a maximum of approximately $75.2 million, Fort Union
Ltd. is entitled to 20 percent of royalties from production in the United
States, Canada and Mexico, not to exceed $1.5 million, and Ohio Valley Electric
is entitled to 0.5 percent of royalties derived from the sale of K-Fuel. Amounts
due under these agreements may restrict or limit our ability to pursue other
commercialization opportunities with respect to K-Fuel because such payments
will decrease cash flow from operations.
Our Common Stock Could be Delisted from the American Stock Exchange
("Amex") if We Do Not Comply with the Amex Continued Listing Standards
Our common stock is listed on the Amex and to maintain our listing we
must meet certain continued listing standards. Specifically, pursuant to Section
1003(a)(iii) of the Amex Company Guide, the Amex will consider delisting a
company that has stockholders' equity of less than $6 million if such company
has sustained losses from continuing operations and/or net losses in its five
most recent fiscal years. At June 30, 2002, our stockholders' deficit was
approximately $23 million and we sustained net losses for five consecutive
fiscal years. If we do not increase our stockholders' equity to meet this
continued listing standard, our common stock may be delisted. Although we will
develop and pursue a plan to meet the continued listing requirements, there can
be no assurance that our common stock will remain listed on the Amex. If our
common stock were delisted from the Amex for any reason, it would reduce our
liquidity and could seriously reduce the value of our common stock, reduce our
ability to raise additional financing, limit our use of equity instruments to
satisfy outstanding obligations and limit our ability to attract qualified
employees.
If Our Common Stock is Deemed to be "Penny Stock," Compliance With the
Penny Stock Regulations May Adversely Affect the Market for Our Common
Stock
Our common stock may, at some future time, be deemed to be "penny
stock" as that term is defined in Rule 3a51-1 of the Exchange Act of 1934 and
would be subject to additional disclosure requirements for penny stocks mandated
by the Securities Enforcement Remedies and Penny Stock Reform Act of 1990. The
SEC regulations generally define a penny stock to be an equity security that has
a market price of less than $5.00 per share and is not quoted in the National
Association of Securities Dealers' Automated Quotation system (Nasdaq) or is not
registered on a national securities exchange.
If our common stock were deemed a penny stock, section 15(g) and Rule
3a51-1 of the Exchange Act of 1934 would require broker-dealers dealing in our
common stock to provide potential investors with a document disclosing the risks
of penny stocks and to obtain a manually signed and dated written receipt of the
document before effecting any transaction in a penny stock for the investor's
account. Potential investors are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 of the Exchange Act of 1934 Commission requires
broker-dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker-dealer to:
o obtain from the investor information concerning his or her
financial situation, investment experience and investment
objectives;
o reasonably determine, based on that information, that
transactions in penny stocks are suitable for the investor and
that the investor has sufficient knowledge and experience as to
be reasonably capable of evaluating the risks of penny stock
transactions;
o provide the investor with a written statement setting forth the
basis on which the broker-dealer made the determination in (ii)
above; and
o receive a signed and dated copy of such statement from the investor,
confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives.
If our common stock were deemed a penny stock, compliance with these
requirements may make it more difficult for investors in our common stock to
resell their shares to third parties or to otherwise dispose of them.
We Do Not Pay Cash Dividends
We have never paid any cash dividends and do not anticipate paying cash
dividends in the foreseeable future.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling stockholders.
SELLING STOCKHOLDERS
This prospectus relates to the offer and sale from time to time of up
to 24,595,204 shares of common stock by the selling stockholders in the manner
and under the circumstances described under "Plan of Distribution." The shares
include up to 16,891,104 shares of common stock issuable upon the exercise of
warrants. There can be no assurance that the selling stockholders will sell any
or all of their common stock offered by this prospectus. We do not know if,
when, or in what amount the selling stockholders may offer the common stock for
sale.
The following table sets forth:
o the names of the selling stockholders;
o any relationship they may have had with us during the last three
years;
o the number of shares of common stock owned by each of the selling
stockholders;
o the number of shares of common stock being offered by the selling
stockholders in this prospectus; and
o the number of shares of common stock held by the selling
stockholders and (if 1% or more) the percentage of the class of
common stock owned by each of the selling stockholders after the
completion of the offering described in this prospectus.
This table is based on information furnished to us by or on behalf of
the selling stockholders and for purposes of presenting beneficial ownership
data in the table, we have assumed that the selling stockholders sell all of the
shares offered under this prospectus and that no selling stockholder acquires
additional shares after the date on the cover page of this prospectus. As of
August 28, 2002, there were 37,800,879 shares of our common stock outstanding.
COMMON STOCK PERCENTAGE
BENEFICIALLY COMMON STOCK COMMON STOCK TO OF ALL
OWNED AS OF AUGUST OFFERED IN THIS BE OWNED AFTER COMMON
NAME 30, 2002(1) PROSPECTUS THIS OFFERING(2) STOCK(3)
---- ----------- --------- ---------------- --------
Jefferies & Company, Inc.(4) 996,699 282,900 713,799 1.89%
Credit Agricole Indosuez (Suisse) SA 100,000 100,000 0 --
Frank J. A. Cilluffo 517,500 517,500 0 --
Richard B. Fisher 312,500 312,500 0 --
Eastgate Management Corporation 312,500 312,500 0 --
Westcliff Aggressive Growth, L.P. 242,352 242,352 0 --
Westcliff Energy Partners, L.P. 898,484 898,484 0 --
Westcliff Partners, L.P. 565,741 565,741 0 --
Westcliff Long/Short, L.P. 159,919 159,919 0 --
Westcliff Public Ventures Fund, L.P. 1,404,257 1,404,257 0 --
Westcliff Public Ventures -- KFx, L.P. 3,731,250 3,731,250 0 --
Westcliff Small Cap Fund, L.P. 188,690 188,690 0 --
Cancer Center of Santa Barbara 128,647 128,647 0 --
Westcliff Master Fund, L.P. 1,287,779 1,287,779 0 --
Parker Foundation 254,421 254,421 0 --
Palm Trust 246,746 246,746 0 --
University of San Francisco 256,032 256,032 0 --
Westcliff Foundation 110,224 110,224 0 --
Westcliff Profit Sharing and Money
Purchase Pension Plan 38,224 38,224 0 --
Noranda Finance, Inc. Retirement Plan
for Affiliated Companies Trust 2,149,277 2,149,277 0 --
Peninsula Fund, L.P. 949,335 949,335 0 --
Common Sense Partners, L.P. 467,583 467,583 0 --
RAM Trading, Ltd. 3,851,115(5) 9,990,843 0 --
TOTAL 19,209,168 24,595,204 713,799 1.89%
----------------
1. Includes shares issuable upon exercise of warrants including
additional warrants issued or issuable to some of the selling
shareholders as of August 30, 2002, as a result of the
registration statement, of which this prospectus is a part, not
being declared effective by the Securities and Exchange Commission
by June 21, 2002.
2. Assumes that the selling stockholders will sell all shares of common
stock offered by them under this prospectus.
3. For each selling stockholder, this number represents the percentage of
common stock to be owned by such selling stockholder after completion
of the offering, based on the number of shares of common stock
outstanding as of August 28, 2002 (37,800,879 shares) and assuming
(i) all warrants held by such selling stockholder have been converted
or exercised, as applicable, and (ii) none of the warrants held by
other persons have been converted or exercised, as applicable.
4. Jefferies & Company, Inc. has acted as investment banker for the
Company commencing November 2001.
5. As of July 22, 2002, RAM Trading was issued 2,930,000 shares of our
common stock and warrants exercisable for 6,698,750 shares of our
common stock. Pursuant to the terms of an agreement between RAM
Trading, Ltd. and us, RAM Trading, Ltd. cannot be the "beneficial
owner" of more than 9.99% of our common stock within the meaning of
Rule 13d-1 of the Securities Exchange Act of 1934. Therefore, warrants
exercisable for 6,139,728 shares of our common stock are not included
in the number of shares of common stock beneficially owned by RAM
Trading.
PLAN OF DISTRIBUTION
We are registering the shares of common stock covered by this
prospectus on behalf of the selling stockholders. The "selling stockholders" as
used in this section of the prospectus shall refer to the selling stockholders,
or their pledgees, donees, transferees, or any of their successors in interest.
All costs, expenses and fees in connection with the registration of the shares
offered hereby will be borne by us. Brokerage commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by the
selling stockholders. Sales of shares may be effected by the selling
stockholders from time to time in one or more types of transactions (which may
include block transactions) on the American Stock Exchange or any other
organized market or quotation system where the shares may be traded, in the
over-the-counter market, in transactions otherwise than on the American Stock
Exchange or any other organized market or quotation system where the shares may
be traded or the over-the-counter market, in negotiated transactions, through
put or call options transactions relating to the shares, through short sales of
shares, or a combination of such methods of sale, at market prices prevailing at
the time of sale, or at negotiated prices. The shares may also be transferred
pursuant to a gift or pledge. Such transactions may or may not involve brokers
or dealers. Each of the selling stockholders has advised us that it has not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, nor is
there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling stockholders.
The selling stockholders may effect such transactions by selling
shares directly to purchasers or to or through broker-dealers, which may
act as agents or principals. Such broker-dealers may receive compensation
in the form of discounts, concessions, or commissions from the selling
stockholders and/or the purchasers of shares for whom such broker-dealers
may act as agents or to whom they sell as principal, or both (which
compensation as to a particular broker-dealer might be in excess of
customary commissions).
The selling stockholders may enter into hedging transactions. For
example, the selling stockholders may, among other things:
o enter into transactions involving short sales of the shares by
broker-dealers;
o sell the shares themselves and deliver the shares registered
hereby to settle such short sales or to close out stock loans
incurred in connection with their short positions;
o enter into options or other transactions with broker-dealers or
other financial institutions which require the delivery to such
broker-dealer or other financial institution of shares offered
hereby, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction);
o loan or pledge the shares to a broker-dealer or other person, who
may sell the loaned shares or, in the event of default, sell the
pledged shares; or
o any combination of the foregoing.
Because the selling stockholders may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act,
the selling stockholders will be subject to the prospectus delivery
requirements of the Securities Act, which may include delivery through the
facilities of the American Stock Exchange pursuant to Rule 153 under the
Securities Act. We have informed the selling stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange
Act may apply to their sales in the market.
The selling stockholders also may resell all or a portion of the
shares in open market transactions in reliance upon and in compliance with
Rule 144 under the Securities Act.
Upon being notified by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, we will file a
supplement to this prospectus, if required, pursuant to Rule 424(b) under
the Securities Act, disclosing:
o the name of such selling stockholder and of the participating
broker-dealer(s);
o the number of shares involved;
o the price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus; and
o other facts material to the transaction.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this prospectus, excluding historical
information, include forward-looking statements -- statements that discuss our
expected future results based on current and pending business operations. We
make these forward-looking statements in reliance on the safe harbor protections
provided under the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by words such as
"anticipates," "believes," "expects," "planned," "scheduled" or similar
expressions. Although we believe these forward-looking statements are based on
reasonable assumptions, statements made regarding future results are subject to
a number of assumptions, uncertainties and risks that could cause future results
to be materially different from the results stated or implied in this
prospectus. Additional information about issues that could lead to material
changes in performance is contained in our Annual Report on Form 10-K/A for the
year ended December 31, 2001, which is incorporated by reference in this
prospectus.
LEGAL MATTERS
Certain legal matters relating to the common stock to be offered by
this prospectus will be passed upon for us by Skadden, Arps, Slate, Meagher &
Flom LLP.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" certain of our publicly
filed documents into this prospectus, which means that information included in
these documents is considered part of this prospectus. The following documents
filed by us with the SEC are incorporated by reference into this prospectus:
o our annual report on Form 10-K/A for the year ended December 31,
2001, excluding the company's consolidated financial statements
for the year ended December 31, 2001, which have been filed on
our current report on Form 8-K dated June 18, 2002;
o our quarterly reports on Form 10/Q for the quarters ended March
31, 2002 and June 30, 2002;
o our current report on Form 8-K dated April 2, 2002;
o our current report on Form 8-K/A dated May 3, 2002;
o our current report on Form 8-K dated May 7, 2002;
o our current report on Form 8-K/A dated May 20, 2002;
o our current report on Form 8-K dated June 18, 2002;
o our current reports on Forms 8-K/A dated June 18, 2002 (two filed
on this date);
o our current report on Form 8-K dated June 19, 2002;
o our current report on Form 8-K dated July 3, 2002;
o our current report on Form 8-K dated July 24, 2002;
o our current report on Form 8-K dated August 28, 2002; and
o the description of our common stock contained in the Registration
Statement on Form 10-SB filed with the SEC on July 11, 1994.
All documents filed by us with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act after the date of this
prospectus and prior to the termination of the offering covered by this
prospectus will be deemed to be incorporated by reference into this prospectus
and to be a part of the prospectus from the date of filing of such documents.
Any statement contained in this prospectus or in any document incorporated or
deemed to be incorporated by reference into this prospectus shall be deemed to
be modified or superseded for purposes of this prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
We will provide, without charge to each person to whom this prospectus
is delivered, upon written or oral request of such person, a copy of any and all
of the information that has been or may be incorporated by reference in this
prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to:
KFx Inc.
3300 East First Avenue, Suite 290
Denver, Colorado 80206
Attention: Corporate Secretary
Telephone: (303) 293-2992
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by the
registrant in connection with the sale of the shares of common stock being
registered. All amounts are estimates except the Securities and Exchange
Commission registration fee.
Legal fees and expenses $25,000.00
Accounting fees and expenses $20,000.00
SEC registration fee $ 5,385.69
Miscellaneous expenses $ 2,000.00
-----------
Total $52,385.69
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law, or DGCL, allows a
corporation, in its original certificate of incorporation or an amendment
thereto, to eliminate or limit the personal liability of a director for
violations of the director's fiduciary duty, except where the director breached
his duty of loyalty, failed to act in good faith, engaged in intentional
misconduct or knowingly violated a law, authorized the payment of a dividend or
approved a stock repurchase or redemption in violation of the DGCL or obtained
an improper personal benefit.
Section 145 of the DGCL empowers a Delaware corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise. The
indemnity may include expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. A Delaware corporation may indemnify directors, officers,
employees and other agents of such corporation in an action by or in the right
of a corporation under the same conditions against expenses (including
attorney's fees) actually and reasonably incurred by the person in connection
with the defense and settlement of such action or suit, except that no
indemnification is permitted without judicial approval if the person to be
indemnified has been adjudged to be liable to the corporation. Where a present
or former director or officer of the corporation is successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to above or
in defense of any claim, issue or matter therein, the corporation must indemnify
such person against the expenses (including attorneys' fees) which he or she
actually and reasonably incurred in connection therewith.
Section 174 of the DGCL provides, among other things, that a director
who willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption, may be held liable for such actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her dissent to such
actions to be entered into the books containing the minutes of the meetings of
the board of directors at the time such action occurred or immediately after
such absent director receives notice of the unlawful acts.
We have implemented indemnification provisions in our certificate of
incorporation, providing that officers and directors shall be entitled to be
indemnified by us to the fullest extent permitted by law against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
incurred in connection with any action, suit or proceeding by reason of the fact
that he or she is or was an officer or director of us.
The above discussion of our certificate of incorporation and Sections
102, 145 and 174 of the DGCL is not intended to be exhaustive and is qualified
in its entirety by such certificate of incorporation and statutes.
Under Section 145(g) of the DGCL, we maintain insurance on behalf of
the directors and officers serving at our request.
ITEM 16. EXHIBITS
The following is a list of all exhibits filed as part of this
Registration Statement, including those incorporated by reference.
EXHIBIT
NUMBER DESCRIPTION
4.1** Sample Common Stock Certificate
4.2(1) Indenture dated July 25, 1997 by and between the Company and
Colorado National Bank
4.7(2) Statement Respecting Rights of Series B Preferred Stock of Pegasus
Technologies, Inc.
4.8(2) Statement Respecting Rights of Series C Preferred Stock of Pegasus
Technologies, Inc.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
23.1 Consent of Independent Accountants
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).
24.1** Powers of Attorney (included in the signature page of this
Registration Statement).
--------------------------------------------------------------------------------
** Previously filed.
(1) Document previously filed with the Securities and Exchange Commission
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference.
(2) Document previously filed with the Securities and Exchange Commission
with the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 and incorporated herein by reference.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) of 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (i) and (ii) above do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13
or Section 15(d) of the Exchange Act of 1934 that are incorporated by
reference in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 3 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 28th day of August 2002.
KFX INC.
By:/s/ Theodore Venners
--------------------
Name: Theodore Venners
Title: Chairman of the Board of Directors,
President and Chief Executive Officer
Each person whose signature appears below hereby severally constitute
and appoint Theodore Venners, as true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution for him and in his name, place and
stead, and in any and all capacities to sign any and all amendments (including
pre-effective and post-effective amendments) to this Amendment No. 3 to the
Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 3 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
Chairman of the Board, President and Chief
By: /s/ Theodore Venners Executive Officer August 28, 2002
--------------------
Name: Theodore Venners (Principal Executive Officer)
By:/s/ Patrick S. Flaherty Vice President and Chief Financial Officer August 28, 2002
-----------------------
Name: Patrick S. Flaherty (Principal Financial and Accounting Officer)
By: /s/ Stanford M. Adelstein Director August 28, 2002
-------------------------
Name: Stanford M. Adelstein
By: /s/ Vincent N. Cook Director August 28, 2002
-------------------
Name: Vincent N. Cook
By: /s/ Richard S. Spencer, III Director August 28, 2002
---------------------------
Name: Richard S. Spencer, III
By: /s/ Jack C. Pester Director August 28, 2002
------------------
Name: Jack C. Pester
By: /s/ Mark S. Sexton Director August 28, 2002
------------------
Name: Mark S. Sexton
By: /s/ Stanley G. Tate Director August 28, 2002
-------------------
Name: Stanley G. Tate
By: /s/ David H. Russell Director August 28, 2002
--------------------
Name: David H. Russell
By: /s/ James S. Pignatelli Director August 28, 2002
-----------------------
Name: James S. Pignatelli
Index to Exhibits
EXHIBIT
NUMBER DESCRIPTION
4.1** Sample Common Stock Certificate
4.2(1) Indenture dated July 25, 1997 by and between the Company and
Colorado National Bank
4.7(2) Statement Respecting Rights of Series B Preferred Stock of Pegasus
Technologies, Inc.
4.8(2) Statement Respecting Rights of Series C Preferred Stock of Pegasus
Technologies, Inc.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
23.1 Consent of Independent Accountants
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).
24.1** Powers of Attorney (included in the signature page of this
Registration Statement).
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** Previously filed.
(1) Document previously filed with the Securities and Exchange Commission
with the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference.
(2) Document previously filed with the Securities and Exchange Commission
with the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 and incorporated herein by reference.