As filed with the Securities and Exchange Commission on April 22, 2003
Registration No. _______
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
KFX INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 84-1079971
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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, (Name, address, including zip code,
and telephone number, including and telephone number, including
area code, of registrant's area code, of agent for service)
principal 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
Title of Each Class of Amount to be Price per Aggregate Amount of
Securities to be Registered Registered(1) Unit(2) Offering Price Registration Fee
--------------------------- ------------- ------- -------------- ----------------
Common Stock, $0.001 par value per share 15,842,334 $2.55 $40,397,951 $3,269
(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 (2.55) of the high and low
prices ($2.58 and $2.52, respectively) for a share of common stock as
reported on the American Stock Exchange on April 17, 2003.
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 APRIL 22, 2003
PROSPECTUS
KFx Inc.
15,842,334 Shares of Common Stock
This prospectus relates to 15,842,334 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 6,507,334 shares of common stock issuable upon the exercise of warrants
and 100,000 shares of common stock issuable upon the exercise of options. 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 14.
The common stock is listed for trading on the American Stock Exchange
under the symbol "KFX." On April 17, 2003, the last reported sale price of the
common stock was $2.55 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 3.
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.
_______________
The date of this prospectus is April 22, 2003
TABLE OF CONTENTS
Page
Number
------
Section Title
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Forward-Looking Statements......................................... 2
Risk Factors....................................................... 3
KFx Inc............................................................ 10
Use of Proceeds.................................................... 11
Selling Stockholders............................................... 11
Plan of Distribution............................................... 14
Legal Matters...................................................... 15
Experts............................................................ 15
Incorporation of Documents by Reference............................ 16
Where You Can Find More Information................................ 16
_______________
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.
FORWARD-LOOKING STATEMENTS
Some of the information presented in this prospectus constitutes
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include, but
are not limited to, statements that include terms such as "may," "will,"
"intend," "anticipate," "estimate," "expect," "continue," "believe," "plan,"
or the like, as well as all statements that are not historical facts.
Forward-looking statements are inherently subject to risks and uncertainties
that could cause actual results to differ materially from current
expectations. Although we believe our expectations are based on reasonable
assumptions within the bounds of our knowledge of our business and operations,
there can be no assurance that actual results will not differ materially from
expectations. Additional information about issues that could lead to material
changes in performance is contained in our Annual Report on Form 10-K for the
year ended December 31, 2002, which is incorporated by reference in this
prospectus.
RISK FACTORS
We have a history of losses, deficits, working capital deficits and negative
operating cash flows.
At December 31, 2002, we had a working capital deficit of $2,554,728
and an accumulated deficit of approximately $109,719,000. At December 31,
2002, after giving effect to the termination of a put option previously
granted to some of our stockholders, we had a stockholders' equity of
approximately $1,735,000. We incurred net losses of approximately $39,987,000,
$15,177,000 and $12,290,000 in 2002, 2001 and 2000, respectively, and of
approximately $23,850,000, net of accretion of redeemable common stock, at
December 31, 2002. We have experienced negative operating cash flow of
approximately $3,994,000, $6,738,000 and $5,151,000 in 2002, 2001 and 2000,
respectively. Further, the report from our former independent accountants for
the years ended December 31, 2001 and 2000 contained an explanatory paragraph
regarding our ability to continue as a going concern. We and our predecessors
have not achieved significant K-Fuel(R) licensing, royalty or product sale
revenue.
We expect to incur significant additional operating losses and
continued negative cash flows from operations for the foreseeable future. We
have made, and will continue to make, very significant expenditures well
before our revenues increase sufficiently to cover these additional costs. We
are not able to estimate when, if ever, our revenue will increase sufficiently
to cover these costs. Further, we may not achieve or maintain profitability or
generate cash from operations in future periods.
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 business. Our continuation is dependent on our
ability to generate sufficient cash flows to meet our obligations on a timely
basis, to comply with the terms of our financing agreements, to obtain
financing or refinancing as may be required, to attain profitability, or a
combination thereof. A lack of adequate financing may adversely affect our
ability to make necessary interest and principal payments on our indebtedness,
respond to changing business and economic conditions and competitive
pressures, absorb negative operating results, and fund capital expenditures or
increased working capital requirements.
We have contractual limitations on our ability to secure additional funding.
Our ability to secure additional financing is limited by the terms of
a common stock and warrant purchase agreement for the sale of 6.76 million
shares of common stock in 2002. Under the terms of this agreement and a
related investors rights agreement we are prohibited from selling and issuing
any of our preferred stock until the investors no longer hold any shares of
common stock or warrants, or obtain a waiver to sell and issue preferred stock
from at least two-thirds of the these investors. The terms of this agreement
have subsequent dilutive offering protections that are triggered if we sell
common stock at a price below $2.50 per share. The investors under this common
stock and warrant purchase agreement also have the first right of purchase
related to potential sales of our common stock until August 21, 2004.
Technical and operational problems may adversely impact our ability to develop
K-Fuel(R) projects or facilities.
There have been past significant technical and operational problems
with the construction of the K-Fuel(R) facility. The construction of the first
commercial-scale K-Fuel(R) production facility (the " KFP" Facility") began in
1995, which was completed and began operations in April 1998. The facility
experienced a series of construction problems during and after it began
operations, including a 1996 fire at the facility and issues relating to the
flow of materials within the facility and the design and operation of pressure
release equipment. Following the commencement of operations, the KFP Facility
experienced problems relating to tar and residue build-up within the system
during production and product quality issues related to product dusting. As a
result of these problems, operations at the KFP Facility were suspended. In
2000, we tested an improved K-Fuel(R) production process using Powder River
Basin ("PRB") coals, which resulted in an improved K-Fuel(R) product which is
low in sulfur dioxide, nitrogen oxide, mercury and chlorine. Analysis of this
improved K-Fuel(R) product indicated that this improved K-Fuel(R) production
process can be more reliable than the process used by the KFP Facility.
Additionally, the improved K-Fuel(R) production facilities would require less
capital and have lower operating costs than previous K-Fuel(R) plant designs.
However, there can be no assurance that any future K-Fuel(R) production
facilities will not experience technical or operational problems similar to 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(R) projects or facilities would be jeopardized.
The K-Fuel(R) Technology has not yet shown economic viability.
We have only recently finished the development of the K-Fuel(R)
Technology, and we will need to raise additional capital to build the first
commercial K-Fuel(R) production facility. Our future success depends upon our
ability to successfully construct and operate commercial K-Fuel(R) production
facilities.
The process of developing, financing and constructing K-Fuel(R)
production facilities, including obtaining necessary regulatory permits and
approvals, is complex, lengthy and costly and subject to numerous risks,
uncertainties and factors beyond our control, including cost overruns, delays,
damage and technical delays. In addition, local opposition to a particular
project can substantially increase the cost and time associated with
developing the project, and can, potentially, render a project unfeasible or
uneconomical. Future projects for the development of K-Fuel(R) production
facilities may incur substantial costs or delays or may be unsuccessful as a
result of such opposition.
Only a small percentage of the projects that are considered and
pursued may ultimately result in operating projects that are sufficiently
successful to provide us with license fee income, royalty fee income and
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.
The market for the K-Fuel(R) Technology is unclear.
Although we believe that a substantial market will develop both
domestically and internationally for clean coal fuel products, no established
market for beneficiated fuel products exists. 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(R) 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 for the K-Fuel(R) 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 that meet certain minimum performance specifications. There is a risk
that commercial-scale production facilities when completed will be unable to
generate sufficient market interest to continue in business. Further, there
can be no assurance that a commercial-scale K-Fuel(R) facility will be
economically successful. If we are unable to complete construction and
successfully operate a commercial K-Fuel(R) production facility, we will not
be able to sustain our operations or achieve future growth.
There are risks related to sale of Pegasus or transfer of assets.
On March 14, 2003 we and Kennecott Energy Company (together with its
affiliates, "Kennecott") signed a non-binding letter of intent with respect to
a potential transaction pursuant to which Kennecott will transfer to us all of
Kennecott's membership interest in K-Fuel, LLC and the full ownership of
certain related technology developed by Kennecott, in consideration for which
we will transfer to Kennecott preferred and common stock in Pegasus, having
the equivalent of $8 million in value, at a value per share to be agreed by us
and Kennecott, provided that such equivalent value shall result in the
acquisition by Kennecott of a majority interest in and control of Pegasus.
In the absence of unanticipated delay, such a transaction could be
completed in the second or third quarter of 2003. If such transaction were to
consummate, our business will change significantly, and we will be dependent
to a large extent on the K-Fuel(R) Technology, which has not yet proved to be
commercially viable. As a result of the reduction of our interest in Pegasus,
our revenues may significantly decline. These changes may have a material
adverse effect on us.
The market for NeuSIGHT(R) and related software is new and uncertain and will
depend upon successful sales and marketing strategies and product improvement
strategies.
Pegasus, which sells our NeuSIGHT(R) products, had revenues of
approximately $5.2 million in 2002 and $3.0 million in 2001. These revenues
are for the sale of licenses for NeuSIGHT(R) and Power Perfecter(TM),
installation services, maintenance and other revenue. The market for Pegasus
products is new and uncertain. Combustion and other optimization software such
as NeuSIGHT(R), Power Perfecter(TM), and other similar products have 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 will accelerate demand for, and market acceptance of,
combustion optimization products.
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(R) were released to the market in late 1999, late
2000 and in early 2002. There can be no assurance that our efforts to further
improve Pegasus software products to more fully meet our objectives will be
successful. If the market for Pegasus' NeuSIGHT(R) software products fails to
develop or if we are unable to successfully market or improve our products,
our results of operation and financial condition will be materially adversely
affected.
Pegasus' operating results depend on a limited number of customers, and the
loss of customers or Pegasus' inability to attract new customers would
seriously harm our operating results.
Pegasus has in the past derived, and may in the future derive, a
significant portion of its net revenues from a limited number of customers.
During the year ended December 31, 2002, Pegasus' top two customers were
Cinergy Corporation and TXU Generation Company LP, accounting for
approximately 32% and 26% of Pegasus' revenues, respectively, or approximately
58% in the aggregate. We expect that these two customers will continue to
account for a substantial portion of Pegasus' revenue for the duration of
their contracts, which are expected to continue through July 2004. Pegasus
will need to establish business relationships with new customers to replace
existing customers as contracts with existing customers are completed,
expired, terminated or otherwise discharged. We cannot guarantee that Pegasus
will be able to increase its customer base. If Pegasus were to lose Cinergy
Corporation or TXU Generation Company LP as customers, if either of these
customers were to significantly reduce their volume of business with Pegasus,
or if Pegasus is unable to increase its customer base, our business, results
of operations and financial condition would be materially adversely affected.
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(R) 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(R), 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(R), and combustion
optimization software, like NeuSIGHT(R) and Power Perfecter(TM). We are unable
to predict future regulatory changes and their impact on the demand for our
products. While more stringent laws and regulations, including, without
limitation, new mercury emission standards that are expected to be proposed by
December 15, 2003, may increase demand for our products. Such laws and
regulations could also result in reduced use of coal if utilities switch to
other sources of fuel. Similarly, amendments to the Clean Air Act that would
have the effect of relaxing emissions limitations, or a repeal of the Clean
Air Act would have a material adverse effect on our prospects.
Our inability to adequately protect and defend 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(R) 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(R) 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 software
products of third party patent and other property rights.
Any actions taken by us to enforce our patents or other property
rights could result in significant expense to us as well as the diversion of
management time and other resources. In addition, detecting infringement and
misappropriation of patents or intellectual property can be difficult, and
there can be no assurance that we would detect any infringement or
misappropriation of our proprietary rights. Even if we are able to detect
infringement or misappropriation of our proprietary rights, litigation to
enforce our rights could cause us to divert significant financial and other
resources from our business operations, and may not ultimately be successful.
If we are required to divert significant resources or time to the enforcement
of our proprietary rights, even if the enforcement is successful, our
business, results of operation and financial condition could be materially
adversely affected.
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.
Local opposition to K-Fuel(R) projects could substantially delay or prevent
development of new K-Fuel facilities.
Development, construction and operation of K-Fuel(R) 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. We may incur substantial costs or delays
or may be unsuccessful in developing K-Fuel(R) production facilities as a
result of such opposition.
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, or 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 with respect to K-Fuel(R) technology.
We anticipate that a significant portion of our future revenues with
respect to K-Fuel(R) will be in the form of licensing and royalty payments
from third party licensees operating commercial-scale production facilities of
K-Fuel(R). 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 K-Fuel(R)
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(R). As of December 31, 2002, the Estate of
Edward Koppelman has received $275,000 in licensing fees and royalties.
Amounts due under these agreements will decrease our revenues from the
commercialization of the K-Fuel(R) Technology.
We must maintain compliance with the American Stock Exchange ("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. In the past we have failed to comply
with Amex's listing standards. On April 10, 2003 we received notification from
the Amex that we are currently in compliance with Amex's listing standards.
Going forward, we will continue to be subject to the Amex's listing standards.
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 delisted it may, 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.
We do not pay cash dividends.
We have never paid any cash dividends and do not anticipate paying
cash dividends in the foreseeable future.
KFX INC.
We are a "clean energy" technology company with two principal
business lines. We developed a patented process, which we refer to as
K-Fuel(R) Technology, that transforms low grade, high moisture content coal
into high grade, low moisture content coal. We also provide an advanced
software package for utility boiler optimization through our majority-owned
subsidiary Pegasus Technologies, Inc. ("Pegasus"). Our technology and service
solutions are marketed to the electric power generation industry to facilitate
the industry's compliance with air emission standards, as well as its
transformation to intensive competition as the domestic power industry
undergoes deregulation and restructuring.
Our patented K-Fuel(R) Technology is a process which uses heat and
pressure to physically and chemically transform low grade (or low BTU), high
moisture content coal into a high grade (or high BTU), low-moisture content
solid clean fuel. We plan to own and operate K-Fuel(R) production facilities,
as well as license K-Fuel(R) Technology domestically and internationally to
third parties. We recently announced the completion of a series of private
equity financings, and a portion of the proceeds of these financings will be
used to construct a commercial K-Fuel(R) production facility. In January 2003,
we completed a feasibility study for the construction and operation of a
commercial K-Fuel(R) plant. This study was prepared under the guidelines of
the K-Fuel LLC Agreement. The feasibility study evaluated the construction
cost and economic returns of a potential K-Fuel(R) plant at three locations in
Wyoming. Kennecott has informed us that they will not participate in
constructing and operating a commercial K-Fuel(R) plant under the guidelines
in the feasibility study. We are currently working on the design and
engineering phases of a potential K-Fuel(R) plant to be constructed in
Wyoming.
We also offer, through our Pegasus subsidiary, NeuSIGHT(R), a leading
combustion optimization software product for coal-fired electric utility
boilers, which, in addition to improving boiler efficiency, helps reduce
nitrogen oxide emissions. NeuSIGHT(R) is a " neural network-based" (i.e.,
artificial intelligence) software, and was developed by Pegasus. Pegasus
continues to enhance NeuSIGHT(R) and develop related products and market
NeuSIGHT(R) licenses and related implementation services. Pegasus also markets
and installs Power Perfecter(TM), a complementary neural network-based
combustion optimization software product licensed exclusively to us by the
Power Optimization Division of Pavilion Technologies, Inc.
As described in our Current Report on Form 8-K filed on March 28,
2003, we signed a non-binding letter of intent with Kennecott, providing that
Kennecott will transfer to us all of its membership interest in K-Fuel, LLC
and the full ownership of certain related technology developed by Kennecott.
The contemplated transaction is subject to due diligence, definitive
documentation, to board approval by Kennecott and its parent company, and by
us, and to other conditions.
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 15,842,334 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 6,507,334 shares of common stock issuable upon the exercise of
warrants and 100,000 shares of common stock issuable upon the exercise of
options. 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 April 14, 2003, there were 46,713,012 shares of our common
stock outstanding.
COMMON STOCK COMMON STOCK TO
BENEFICIALLY COMMON STOCK BE OWNED AFTER PERCENTAGE
OWNED AS OF APRIL OFFERED IN THIS THIS OFFERING(2) OF ALL
NAME 22, 2003(1) PROSPECTUS STOCK(3) COMMON
---- ------------ ------------- ----------------- -----------
Mid Cap Value Series of Security Equity Fund 912,000 912,000 0 --
SBL Fund on behalf of Series V 1,008,000 1,008,000 0 --
Security Mid Cap Growth Fund 864,000 864,000 0 --
Series J of SBL Fund 2,016,000 2,016,000 0 --
Richard C. McKenzie, Jr., IRA 960,000 960,000 0 --
Big Cat Energy Partners, LP 480,000 480,000 0 --
LibertyView Funds, LP 264,000 264,000 0 --
LibertyView Special Oppurtunities Fund, LP 96,000 96,000 0 --
Harvest Partners II LP 240,000 240,000 0 --
Yazoo Capital Holdings I, LLC 353,334 353,334 0 --
Albert C. Chaplain Jr. 120,000 120,000 0 --
The Catalyst Fund (Bermuda), L.P. 32,309 32,309 0 --
Fleet Maritme (Catalyst) 21,166 21,166 0 --
Chamberlin Inv. Ltd 2 (Catalyst) 21,114 21,114 0 --
Green Forest (Catalyst) 18,811 18,811 0 --
Farvane, Ltd. (Catalyst) 5,060 5,060 0 --
Edenworld (Catalyst) 21,540 21,540 0 --
Phoenix Partners, L.P. 1,244,400 1,244,400 0 --
Phaeton International (BVI) Ltd. 849,600 849,600 0 --
Paul Archinard 163,500 50,000 113,500 --
Daniel Marino 100,000 100,000 0 --
Frank J.A. Cilluffo 517,500 517,500 0 --
Eastgate Capital Management, Inc. (4) 1,212,500 1,000,000 212,500 --
HMR, LLP (5) 600,000 600,000 0 --
J. Michael Reisert, Inc. (6) 146,250 50,000 96,250 --
Jefferies & Co., Inc. (7) 1,392,299 340,000 1,052,299 --
Mariella Marquez 59,000 50,000 9,000 --
Richard B. Fisher 312,500 312,500 0 --
Rocky Robinson 2,135,000 1,875,000 260,000 --
Seth L. Patterson (8) 100,000 100,000 0 --
U.S. Global, Inc. 1,075,000 1,000,000 75,000 --
William A. Boyd 209,300 50,000 159,300 --
Raymond James & Associates, Inc. (9) 270,000 270,000 0 --
TOTAL 17,817,183 15,842,334 1,977,849 --
________________
1. Includes shares issuable upon exercise of warrants issued to some of
the selling shareholders as of April 22, 2003.
2. For each selling stockholder, this number represents the number of
shares of common stock to be owned by such selling stockholder after
completion of the offering and 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 April 14, 2003 (46,713,012 shares) and
assuming (i) all warrants held by such selling stockholder have been
exercised, as applicable, and (ii) none of the warrants held by other
persons have been exercised, as applicable.
4. Since May 1, 2002, Eastgate Capital Management, Inc. and the Company
have been parties to a consulting contract.
5. From June 1, 2002 to October 31, 2002, HMR, LLP and the Company were
parties to a consulting contract.
6. From November 1, 2001 to October 31, 2002, J. Michael Reisert, Inc.
and the Company were parties to a consulting contract.
7. Jefferies & Co., Inc. had an investment banking relationship with the
Company from November 19, 2001 to November 19, 2002.
8. Seth L. Patterson is the former Executive Vice President and Chief
Financial Officer of the Company. Mr. Patterson resigned from these
positions in July 2001. This amount includes 100,000 options issued
to Mr. Patterson on July 13, 2001.
9. Raymond James & Associates, Inc., provided financial and consulting
services for the Company pursuant to an Engagement Letter which was
terminated on September 14, 2002. The shares being registered
pursuant to this registration statement represent payments for
services rendered by Raymond James & Associates, Inc.
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.
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.
EXPERTS
The consolidated financial statements as of December 31, 2002 and
for the year then ended, incorporated in this prospectus by reference from the
Company's Annual Report on Form 10-K have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report which is incorporated
herein by reference (which report expresses an unqualified opinion and
includes an explanatory paragraph referring to the adoption of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets"), and have been so included in reliance upon the reports of such firm
given their authority as experts in accounting and auditing.
The consolidated financial statements incorporated in this
Prospectus by reference to the Annual Report on Form 10-K of KFx, Inc. for the
year ended December 31, 2001 and 2000, have been so incorporated in reliance
on the report (which contains an explanatory paragraph relating to the
Company's ability to continue as a going concern as described in Note 1 to the
consolidated financial statements) of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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 for the year ended December 31,
2002;
o our Proxy Statement on Schedule 14A for the 2003 annual meeting
of stockholders;
o our current report on Form 8-K dated February 6, 2003;
o our current report on Form 8-K dated March 11, 2003;
o our current report on Form 8-K dated March 28, 2003;
o our current report on Form 8-K dated April 17, 2003; 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.
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 an Internet site 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.
We will provide, without charge to each person, including any
beneficial owner, 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 Corporate
Secretary, KFx Inc., 3300 East First Avenue, Suite 290, Denver, Colorado
80206, telephone number (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 $15,000
Accounting fees and expenses $40,000
SEC registration fee $ 3,269
Miscellaneous expenses $40,000
-------
Total $98,269
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(1) Sample Common Stock Certificate
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 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).
----------------------------------
(1) Document previously filed with the U.S. Securities and Exchange
Commission with the Company's Annual Report on Form 10-KSB, as
amended, for the year ended December 31, 1995 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 a 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, 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
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado, on the
22nd day of April 2003.
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 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 this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
By: /s/ Theodore Venners Chairman of the Board, President
------------------------------ and Chief Executive Officer April 22, 2003
Name: Theodore Venners (Principal Executive Officer)
By:/s/ Jerry A. Mitchell Vice President-Finance and Acting Chief
------------------------------ Financial Officer (Principal Financial April 22, 2003
Name: Jerry A. Mitchell and Accounting Officer)
By: /s/ Stanford M. Adelstein Director April 22, 2003
------------------------------
Name: Stanford M. Adelstein
By: /s/ Vincent N. Cook Director April 22, 2003
------------------------------
Name: Vincent N. Cook
By: /s/ Richard S. Spencer, III Director April 22, 2003
------------------------------
Name: Richard S. Spencer, III
By: /s/ Jack C. Pester Director April 22, 2003
------------------------------
Name: Jack C. Pester
By: /s/ Mark S. Sexton Director April 22, 2003
------------------------------
Name: Mark S. Sexton
By: /s/ Stanley G. Tate Director April 22, 2003
------------------------------
Name: Stanley G. Tate
By: /s/ Dr. James R. Schlesinger Director April 22, 2003
------------------------------
Name: Dr. James R. Schlesinger
By: /s/ James S. Pignatelli Director April 22, 2003
------------------------------
Name: James S. Pignatelli
Index to Exhibits
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1(1) Sample Common Stock Certificate
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 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).
-------------------------------
(1) Document previously filed with the U.S. Securities and Exchange
Commission with the Company's Annual Report on Form 10-KSB, as
amended, for the year ended December 31, 1995 and incorporated
herein by reference.
EXHIBIT 5.1
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
April 22, 2003
KFx Inc.
3300 East First Avenue, Suite 290
Denver, Colorado 80206
Re: KFx Inc. - Registration Statement on Form S-3
---------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to KFx Inc., a Delaware
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement"), filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), on April 22, 2003, relating to the
registration under the Act of 15,842,334 shares (the "Shares") of the
Company's common stock, par value $0.001 per share (the "Common Stock"), and
such additional shares of Common Stock as may thereafter be issuable as a
result of anti-dilution adjustments under the Warrants and Options (each as
defined below). The Shares consist of 9,235,000 shares of Common Stock (the
"Issued Shares") previously issued in private offerings to the selling
stockholders named in the Prospectus included in the Registration Statement
(the "Prospectus"), 6,507,334 shares of Common Stock (the "Warrant Stock")
initially issuable upon the exercise of Warrants (the "Warrants") previously
issued to several of the selling stockholders in such private offerings and
100,000 shares of Common Stock (the "Option Shares") initially issuable upon
the exercise of options (the "Options") previously issued to a selling
stockholder. The Shares are to be resold by the selling stockholders from time
to time as set forth in the Registration Statement and the Prospectus.
This opinion is being furnished in accordance with the requirements
of Item 601(b)(5) of Regulation S-K under the Act.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Registration Statement; (ii) a specimen certificate representing the Common
Stock; (iii) the form of the Warrants; (iv) the Restated Certificate of
Incorporation of the Company, as amended to date and currently in effect; (v)
the Second Amended and Restated By-laws of the Company, as currently in
effect; (vi) the Non-Qualified Stock Option Agreement, dated July 28, 2001,
between the Company and Seth L. Patterson (the "Option Agreement"); (vii)
certain resolutions of the Board of Directors of the Company; and (viii)
copies of certain resolutions of the Executive Committee of the Board of
Directors of the Company. We also have examined originals or copies, certified
or otherwise identified to our satisfaction, of such records of the Company
and such agreements, certificates of public officials, certificates of
officers or other representatives of the Company and others, and such other
documents, certificates and records as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified, conformed or photostatic copies
and the authenticity of the originals of such latter documents. In making our
examination of executed documents, we have assumed that the parties thereto,
other than the Company, had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by
such parties of such documents and the validity and binding effect thereof on
such parties. In rendering the opinion set forth in paragraph 1 below, we have
assumed that (i) the Company has received the entire amount of the
consideration contemplated by the resolutions of the Board of Directors of the
Company and the Executive Committee of the Board of Directors of the Company
authorizing the issuance of the Issued Shares; (ii) that the registrar and
transfer agent for the Common Stock duly registered the issuance of the Issued
Shares and countersigned the stock certificates evidencing such Issued Shares;
and (iii) that such stock certificates conform to the specimen certificate
examined by us. In rendering the opinion set forth in paragraph 2 below, we
have assumed that (i) the Warrant Stock will be issued upon the exercise of
the Warrants in accordance with the terms of the Warrants; (ii) the registrar
and transfer agent for the Common Stock will duly register such issuance and
countersign the stock certificates evidencing such Warrant Shares; and (iii)
such stock certificates will conform to the specimen certificate examined by
us. In rendering the opinion set forth in paragraph 3 below, we have assumed
that (i) the Option Shares will be issued upon the exercise of the Options in
accordance with the terms of the Option Agreement; (ii) the registrar and
transfer agent for the Common Stock will duly register such issuance and
countersign the stock certificates evidencing such Option Shares; and (iii)
such stock certificates will conform to the specimen certificate examined by
us. As to any facts material to the opinions expressed herein which we have
not independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Company and
others.
Members of our firm are admitted to the bar in the State of New York,
we do not express any opinion as to the laws of any jurisdiction other than
the corporate laws of the State of Delaware, and we do not express any opinion
as to the effect of any other laws on the opinions stated herein.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Issued Shares have been duly authorized by the Company and are
validly issued, fully paid and nonassessable.
2. The Warrant Shares have been duly authorized by the Company and, when
issued upon exercise of the Warrants and paid for in accordance with
the terms of the Warrants, will be validly issued, fully paid and
nonassessable.
3. The Option Shares have been duly authorized by the Company and, when
issued upon exercise of the Options and paid for in accordance with
the terms of the Option Agreement, will be validly issued, fully paid
and nonassessable.
We hereby consent to the filing of this opinion with the Commission
as an exhibit to the Registration Statement. We also consent to the reference
to our firm under the caption "Legal Matters" in the Registration Statement.
In giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission.
Very truly yours,
Skadden, Arps, Slate, Meagher & Flom LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
KFx Inc. on Form S-3 of our report dated April 11, 2003, (which report
expresses an unqualified opinion and includes an explanatory paragraph
referring to the adoption of Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets"), appearing in the Annual Report
on Form 10-K of KFx Inc. for the year ended December 31, 2002 and to the
reference to us under the heading "Experts" in the Prospectus, which is part
of this Registration Statement.
/s/ Deloitte & Touche LLP
Denver, Colorado
April 22, 2003
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of our report dated April 12, 2002 relating
to the consolidated financial statements which appear in KFx Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2002. We also consent to
the references to us under the headings "Experts" in such registration
statement.
/s/ PricewaterhourseCoopers LLP
Denver, Colorado
April 21, 2003