<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 0-23634
KFX INC.
(Exact name of small business issuer as specified in its charter)
Delaware 84-1079971
-------- ----------
(State or Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1999 Broadway, Suite 3200
Denver, Colorado 80202
(303) 293-2992
(Address and telephone number of
principal executive offices)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
(X) Yes ( ) No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of November 11, 1996:
Common Stock, $.001 par value
22,531,040 shares
<PAGE>
KFX INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
INDEX
- --------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - September 30, 1996 (Unaudited)
and December 31, 1995 .......................................... 3
Consolidated Statements of Operations - Three Months Ended
September 30, 1996 and 1995 (Unaudited) ........................ 4
Consolidated Statements of Operations - Nine Months Ended
September 30, 1996 and 1995 (Unaudited) ........................ 5
Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 1996 and 1995 (Unaudited) ........................ 6,7
Notes to Consolidated Financial Statements (Unaudited) ........... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 10
PART II. OTHER INFORMATION ......................................... 13
SIGNATURES .......................................................... 14
<PAGE>
KFX INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
ASSETS (UNAUDITED)
------
<S> <C> <C>
Current:
Cash and cash equivalents..................... $ 1,480,780 $ 2,870,039
Reclamation deposit........................... - 1,503,032
Accounts receivable........................... 410,332 26,002
Prepaid expenses.............................. 160,316 281,711
------------ ------------
Total current assets......................... 2,051,428 4,680,784
------------ ------------
Property, plant and equipment, net of
accumulated depreciation..................... 5,068,105 5,619,546
Patents, net of accumulated amortization....... 3,832,919 4,273,583
Investment in KFX Fuel Partners, L.P........... 2,792,304 2,792,304
Investment in K-Fuel, L.L.C.................... 194,047 -
Property held for sale......................... 1,032,012 1,032,012
Advance royalty payment........................ 500,000 -
Other assets................................... 307,948 213,264
------------ ------------
$ 15,778,763 $ 18,611,493
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current:
Accounts payable.............................. $ 939,800 $ 836,538
Accrued expenses and other liabilities........ 279,214 698,765
Due to related parties........................ 333,296 585,814
Interest payable.............................. 59,235 91,985
Current maturities of long-term debt.......... 110,000 214,000
------------ ------------
Total current liabilities.................... 1,721,545 2,427,102
------------ ------------
Long-term debt, less current maturities........ 1,140,000 1,399,851
Mine reclamation liability..................... 1,032,012 1,032,012
------------ ------------
Total liabilities............................ 3,893,557 4,858,965
------------ ------------
Commitments and contingent liabilities (Note 2)
Stockholders' equity:
Preferred stock, $.001 par value,
20,000,000 shares authorized;
none issued................................. - -
Common stock, $.001 par value,
80,000,000 shares authorized;
22,531,040 and 22,159,374 shares
issued and outstanding, respectively........ 22,531 22,159
Additional paid-in capital.................... 43,833,238 42,293,556
Accumulated deficit........................... (31,970,563) (28,563,187)
------------ ------------
Total stockholders' equity................... 11,885,206 13,752,528
------------ ------------
$ 15,778,763 $ 18,611,493
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
KFX INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED SEPTEMBER 30,
1996 1995
<S> <C> <C>
Contract revenue............................ $ 310,370 $ 44,763
Interest and other income................... 21,414 105,441
------------ ------------
Total revenue............................ 331,784 150,204
------------ ------------
Marketing, general and administrative
expenses.................................. 510,043 2,613,549
Depreciation and amortization............... 490,058 411,273
Research and development.................... 109,333 67,122
Demonstration plant and laboratory
operations................................ 251,441 72,155
Interest expense............................ 36,108 135,080
------------ ------------
Total expenses........................... 1,396,983 3,299,179
------------ ------------
Net Loss Before Income Taxes and
Extraordinary Item........................ (1,065,199) (3,148,975)
Income Tax Benefit.......................... - 872,851
Net Loss Before Extraordinary Item.......... (1,065,199) (2,276,124)
Extraordinary Item:
Gain From Debt Settlement, Net of
Income Taxes........................... - 1,694,358
------------ ------------
Net Loss.................................... $ (1,065,199) $ (581,766)
============ ============
Per Share Information:
Net Loss Before Income Taxes and
Extraordinary Item..................... $ (.05) $ (.17)
============ ============
Net Loss Before Extraordinary Item....... $ (.05) $ (.12)
============ ============
Net Loss................................. $ (.05) $ (.03)
============ ============
Weighted Average Common Shares
Outstanding............................ 22,531,000 19,023,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
KFX INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
<S> <C> <C>
K-Fuel, L.L.C. joint venture fee........... $ 1,000,000 $ -
Contract revenue........................... 318,781 178,034
Interest and other income.................. 149,651 116,249
----------- -----------
Total revenue......................... 1,468,432 294,283
----------- -----------
Marketing, general and administrative
expenses.................................. 2,434,839 3,993,864
Depreciation and amortization.............. 1,420,423 1,218,817
Research and development................... 309,333 204,122
Demonstration plant and laboratory
operations................................ 588,964 215,259
Litigation settlement...................... - 800,000
Interest expense........................... 36,108 618,231
----------- -----------
Total expenses........................ 4,875,808 7,050,293
----------- -----------
Net Loss Before Income Taxes and
Extraordinary Item........................ (3,407,376) (6,756,010)
----------- -----------
Income Tax Benefit......................... - 872,851
----------- -----------
Net Loss Before Extraordinary Item......... (3,407,376) (5,883,159)
Extraordinary Item:
Gain From Debt Settlement, Net of
Income Taxes......................... - 1,694,358
----------- -----------
Net Loss................................... $(3,407,376) $(4,188,801)
=========== ===========
Per Share Information:
Net Loss Before Income Taxes and......
Extraordinary Item................... $ (.15) $ (.38)
=========== ===========
Net Loss Before Extraordinary Item.... $ (.15) $ (.33)
=========== ===========
Net Loss.............................. $ (.15) $ (.23)
=========== ===========
Weighted Average Common Shares
Outstanding.......................... 22,427,000 17,864,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
KFX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................ $(3,407,376) $(4,188,801)
Adjustments to reconcile net loss to cash used for operating activities:
Income tax benefit and extraordinary gain from debt settlement........................ - (2,567,209)
Depreciation and amortization......................................................... 1,420,423 1,218,817
Amortization of notes payable issuance discount....................................... - 273,000
Litigation settlement................................................................. - 800,000
Common stock, stock options and warrants exchanged for services....................... - 1,653,384
Promissory note exchanged for services................................................ - 110,000
Other................................................................................. 19,283 (92,089)
----------- -----------
Changes in assets and liabilities:
Increase in accounts receivable and prepaid expenses.................................. (632,788) (19,343)
Decrease (increase) in reclamation deposit............................................ 1,503,032 (1,503,032)
Increase (decrease) in accounts payable and other liabilities......................... 119,059 64,997
----------- -----------
Cash used for operating activities........................................................ (978,367) (4,250,276)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Development costs credited to KFX Fuel Partners, L.P.................................... - (237,851)
Investments in K-Fuel, L.L.C............................................................ (245,762) -
Patents acquisition..................................................................... (26,110) (1,000,000)
Advance royalty payment................................................................. (300,000) -
Purchases of equipment.................................................................. (127,549) -
Other................................................................................... - (58,022)
----------- -----------
Cash used for investing activities........................................................ (699,421) (1,295,873)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net of placement fees............................... 852,380 7,096,875
Proceeds from issuance of notes payable................................................. - 1,490,000
Payments on notes payable............................................................... (563,851) (2,131,447)
----------- -----------
Cash provided from financing activities................................................... 288,529 6,455,428
----------- -----------
Net increase (decrease) in cash and cash equivalents...................................... (1,389,259) 909,279
Cash and cash equivalents, beginning of period............................................ 2,870,039 79,264
Cash and cash equivalents, end of period.................................................. $ 1,480,780 $ 988,543
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
KFX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
UNAUDITED
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest .............. $ 154,849 $ 229,985
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Nine Months Ended September 30, 1996
- ------------------------------------
During January 1996, the Company issued 41,426 shares of common stock under
its Restricted Stock Plan in payment of 1995 board of director fees totaling
$209,780 that were included in due to related parties at December 31, 1995.
During January 1996, the Company issued 93,240 shares of common stock, and
issued a common stock purchase warrant for 100,000 shares of common stock for
$4.00 per share, in exchange for professional service fee obligations totaling
$477,894 that were included in accrued expenses at December 31, 1995.
In June 1996, the Company entered into a royalty amendment agreement
whereby the Company issued a promissory note in the amount of $200,000, payable
in June 1998. See Note 5.
Nine Months Ended September 30, 1995
- ------------------------------------
During January 1995, the Company issued 40,312 shares of common stock under
its Restricted Stock Plan in payment of 1994 board of director fees totaling
$167,315.
During January 1995, the Company issued 53,798 shares of common stock in
exchange for professional service fee obligations totaling $265,294 that were
included in accounts payable and accrued expenses at December 31, 1994.
In February 1995, the Company issued 254,460 shares of common stock in
exchange for obligations existing under certain promissory notes totaling
approximately $1,035,000.
In May 1995, the Company issued 10,000 shares of common stock to settle a
legal claim against the Company.
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
KFX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of KFX Inc. ("KFX" or the "Company") and its wholly-owned subsidiary,
KFX Wyoming Inc. ("KFXW"), and its majority-owned subsidiaries, KFX Technology
Inc. ("KFXT", formerly Energy Brothers Technology, Inc.), Atlantic Partners Ltd.
("APL"), and Heartland Fuels Corporation ("HFC"). The Company's 51 percent
interest in K-Fuel, L.L.C. ("K-Fuel") is not consolidated as the net loss of K-
Fuel, which is primarily comprised of research and development expenses, is
allocated (by written agreement) 100 percent to Kennecott Energy and Coal
Company during the intial research and development period of K-Fuel, which is
expected to be until approximately the fourth quarter of 1997. All significant
intercompany transactions have been eliminated in consolidation.
The consolidated financial statements at September 30, 1996, and for the
nine-month and three-month periods ending September 30, 1996 and 1995 have been
prepared without audit. In the opinion of the Company's management, all
adjustments, consisting of only normal recurring adjustments necessary for a
fair statement of the results for the interim periods, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the audited financial statements and notes to financial
statements for the year ended December 31, 1995 included in the Company's Form
10-KSB. The accounting policies used in the preparation of these unaudited
quarterly financial statements are the same as those policies used in the
preparation of the audited annual financial statements except as modified for
appropriate interim accounting policies. The results of operations for the nine
months and three months ended September 30, 1996 are not necessarily indicative
of the results of operations expected for the year ended December 31, 1996.
Net loss per common share for the nine months and three months ended
September 30, 1996 and 1995 are based on the weighted average number of shares
of common stock outstanding during the period, and excludes common equivalent
shares (common stock options and warrants) as the effect would be anti-dilutive.
Certain reclassifications have been made to the 1995 financial statements
to conform to the current year presentation.
NOTE 2. COMMITMENTS AND CONTINGENT LIABILITIES
In November 1995, the Company filed a lawsuit against Fru-Con Construction
Corporation and Fru-Con Engineering, Inc. (collectively, "Fru-Con") in the
Wyoming State Court, 6th Judicial District. The action has been moved to the
United States District Court for the District of Wyoming. The Company's lawsuit
requests that the court enter a declaratory judgment that Fru-Con has no
interest or claim in or against the Company or any of the Company's property or
interests, or that Fru-Con is barred from such claims. Fru-Con had asserted
claims for approximately $1.8 million for engineering services and an interest
in K-Fuel plants built in North America by virtue of contractual arrangements
with a limited partnership sponsored by corporations in which a predecessor
entity to the Company had a partnership interest. The Company believes that
the ultimate resolution of this action will not have a material adverse impact
on the Company's financial position or results of operations.
-8-
<PAGE>
KFX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
(CONTINUED)
NOTE 3. K-FUEL, L.L.C.
In April 1996, the Company and Kennecott Alternative Fuels, Inc.
("KECC"), a wholly-owned subsidiary of Kennecott Energy and Coal Company, formed
K-Fuel, L.L.C., a Delaware limited liability company ("K-Fuel LLC"). The purpose
of K-Fuel LLC is to further develop the K-Fuel Technology, market K-Fuel
products, develop plant projects for the commercial production of K-Fuel
products ("Commercial Projects), form entities to construct and own Commercial
Projects ("Project Entities"), and grant sublicenses to Project Entities. The
license granted to K-Fuel LLC specifies minimum terms and provisions for license
fees and production royalties to be paid by Project Entities directly to the
Company and provides that Commercial Projects be built through Project Entities
rather than by K-Fuel LLC. The Company retained the right to develop its own
Project Entities in the event KECC declines participation, and K-Fuel LLC must
grant sublicenses to such entities.
Initially, the Company will have a 51 percent interest in K-Fuel LLC
and KECC will have a 49 percent interest, except to the extent of certain
research and development costs, which by written agreement are allocated 100
percent to KECC. At such time as entities in which KECC has an equity interest
have placed into service Commercial Projects with a collective design capacity
equal to or in excess of 3 million tons of K-Fuel product per annum, KECC will
have a 51 percent interest in K-Fuel LLC and the Company will have a 49 percent
interest. The initial capital contributions to K-Fuel LLC by KECC and the
Company were $1,001,000 and $1,000, respectively. Subsequently, K-Fuel LLC made
a payment of $1,000,000 of such capital contribution to the Company in
consideration for the Company entering into the Agreement, which was recorded by
the Company as joint venture fee revenue in the quarter ended June 30, 1996.
Subject to certain conditions, KECC has also agreed to pay to K-Fuel LLC such
amounts as may be necessary for all research and development costs incurred by
K-Fuel LLC, up to $4,000,000.
-9-
<PAGE>
KFX INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements contained in this report, if not historical, are forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, and involve risks and uncertainties that could cause actual
results to differ materially from the financial results described in such
forward looking statements. These risks and uncertainties include, among
others, the ability of the Company to generate revenue from the K-Fuel
Technology, and the ability of the Company to achieve earnings per share growth
through strategic alliances, joint ventures and other methods. The success of
the Company's business operations is in turn dependent on factors such as the
successful completion of the KFX Fuel Partners project, effectiveness of the
Company's marketing strategies to market fuel product if and when the Project
begins commercial operations, the appeal of the Company's mix of products, the
Company's success at entering into and collaborating with others to conduct
effective strategic alliances and joint ventures, general competitive conditions
within the industry, and general economic conditions. Further, any forward-
looking statement speaks only as of the date on which such statement is made,
and the Company undertakes no obligation to update any forward looking statement
or statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of anticipated events.
Therefore, forward-looking statements should not be relied upon as a prediction
of actual future results.
Since its inception, the Company has not generated any material revenues
from the licensing of the K-Fuel Technology to third party licensees or the
direct manufacturing of beneficiated fuel products. Substantially all revenues
have been derived from ancillary sources not directly related to the Company's
efforts to commercialize the K-Fuel Technology. Until the Company successfully
negotiates additional third-party licensing and royalty agreements and/or
independently constructs and operates its own production facilities, net
operating losses will continue. As such, the Company may be dependent on non-
operating funding sources to sustain its operations in the near term.
LIQUIDITY AND CAPITAL RESOURCES
The current near-term funding sources available to the Company are (1)
cash in banks, which as of November 11, 1996 was approximately $1.1 million; (2)
a stock purchase option granted to Thermo Ecotek Corporation providing for the
sale of up to 1.25 million shares of the Company's common stock during a two-
month period beginning in December 1996 for proceeds to the Company of up to
$2.5 million; (3) the anticipated start-up of the KFX Fuel Partners, L.P.
production facility near Gillette, Wyoming in the fourth quarter 1996, which is
anticipated to result in royalty payments to the Company; (4) the anticipated
exercise of certain outstanding common stock purchase warrants, which could
result in proceeds to the Company in the fourth quarter 1996 of up to
approximately $0.5 million; and (5) certain cost reimbursements from K-Fuel LLC
relating to a collective research and development program conducted by the
Company in conjunction with KECC, the Company's joint venture partner in K-Fuel
LLC. See Note 3 to the consolidated financial statements.
The Company feels that the current cash in banks, the anticipated warrant
exercises in the fourth quarter 1996, and the anticipated cost reimbursements
from K-Fuel LLC will be sufficient to fund the Company's current operating
requirements until the second quarter of 1997. In the event Thermo Ecotek
Corporation does not exercise its option, under certain conditions, to purchase
up to 1.25 million shares of the Company's common stock in December 1996 or
January 1997 for proceeds to the Company of up to $2.5 million, the Company will
be required to seek additional funding in 1997. Additionally, the Company is
actively pursuing other K-Fuel project development opportunities in the U.S. and
internationally. However, the Company does not expect any material operating
revenues (i.e., license fees, royalties and operating profits) to materialize
from such projects, if at all, until at least the second quarter of 1997 based
on currently known facts and circumstances. The Company may be required to
obtain additional financing for an equity participation interest, if any, in any
future K-Fuel production facilities. The Company does not currently have any
-10-
<PAGE>
KFX INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
commitments with respect to additional financing, and there can be no assurance
that such financing would be available on terms acceptable to the Company, if at
all.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1995
The increase in contract revenue, research and development expenses, and
demonstration plant and laboratory operations in the 1996 period is attributable
to the K-Fuel LLC research and development activities discussed below for the
nine months ended September 30.
The decrease in marketing, general and administrative expenses is for
similar reasons as discussed below for the nine months ended September 30.
The decrease in interest expense in the 1996 period is generally
attributable to the substantially lower debt balances outstanding in the 1996
period.
The income tax benefit and extraordinary gain from debt settlement in the
1995 period was attributable to a one-time debt settlement agreement. No
further debt settlement transactions are anticipated by the Company.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1996 VS. NINE MONTHS
ENDED SEPTEMBER 30, 1995
The $1 million K-Fuel, L.L.C. joint venture fee was realized in April 1996
upon the completion of the joint venture agreement with KECC. The increase in
contract revenue in the 1996 period is attributable to certain research and
development work done for K-Fuel LLC beginning in the third quarter of 1996.
Marketing, general and administrative expenses decreased by approximately
$1.6 million in the 1996 period over the 1995 period. The decrease is generally
attributable to certain legal, investment banking, and other performance fees
incurred in the third quarter of 1995 relating to the successful start-up of
construction of the KFX Fuel Partners production facility, and the investment in
the Company by Thermo Ecotek Corporation in the same period. The aggregate
decrease in such expenses totaled approximately $1.6 million. Additionally, the
Company incurred approximately $0.3 million in specific promotional and investor
relations expenses in the third quarter of 1995 which were not repeated in 1996.
The indentified decreases in marketing, general and administrative expenses in
1996 were partially offset by approximately $0.3 million in legal fees
attributable to the K-Fuel LLC joint venture agreement reached in April 1996.
The increase in depreciation and amortization expense in the 1996 period is
attributable to the Series "C" patents acquisition for approximately $1.3
million in August 1995, which is being amortized over a fifteen year period, as
well as the amortization of certain advance insurance premium payments in the
1996 period that were not made in the 1995 period.
-11-
<PAGE>
KFX INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The increase in research and development expenses and demonstration plant
and laboratory operations in the 1996 period is attributable to increased
efforts associated with overall project development activities, with particular
emphasis on proposed K-Fuel projects in Indonesia, Turkey and the KFX Fuel
Partners project currently under construction adjacent to the demonstration
plant and laboratory facility, as well as work associated with K-Fuel LLC. A
substantial portion of the increased reseach and development expenses in 1996
have been reimbursed to the Company by K-Fuel LLC.
The decrease in interest expense in the 1996 period is generally
attributable to the substantially lower debt balances outstanding in the 1996
period.
The income tax benefit and extraordinary gain from debt settlement in the
1995 period was attributable to a one-time debt settlement agreement. No
further debt settlement transactions are anticipated by the Company.
-12-
<PAGE>
KFX, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to Note 2 of the consolidated financial statements regarding the
Company's current litigation action against Fru-Con.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT NO. EXHIBIT DESCRIPTION
------------- -------------------
27 Financial Data Schedule
-13-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KFX Inc.
/s/ Jeffrey A. Hansen
----------------------------------
Jeffrey A. Hansen
Controller and Chief Accounting Officer
Date: November 11, 1996
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,480,780
<SECURITIES> 0
<RECEIVABLES> 410,332
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,051,428
<PP&E> 11,094,851
<DEPRECIATION> (6,026,746)
<TOTAL-ASSETS> 15,778,763
<CURRENT-LIABILITIES> 1,611,545
<BONDS> 1,250,000
0
0
<COMMON> 22,531
<OTHER-SE> 11,862,675
<TOTAL-LIABILITY-AND-EQUITY> 15,778,763
<SALES> 0
<TOTAL-REVENUES> 1,468,432
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,839,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,108
<INCOME-PRETAX> (3,407,376)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,407,376)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
</TABLE>
