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Filed with the Securities and Exchange Commission on July 7, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
KFX INC.
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(Exact name of registrant as specified in our charter)
Delaware 84-1079971
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1999 Broadway, Suite 3200, Denver, Colorado 80202, (303) 293-2992
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(Address, including ZIP code, and telephone number,
including area code, of registrant's principal executive offices)
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Theodore Venners
1999 Broadway, Suite 3200, Denver, Colorado 80202, (303) 293-2992
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(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
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Copies To:
Warren L. Troupe, Esq.
Melissa L. Mong, Esq.
Morrison & Foerster LLP
370 17th Street, Suite 5200, Denver, Colorado 80202
(303) 592-1500
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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, please 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, please 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 this prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Title of each class of Amount to be Proposed maximum offering Proposed maximum aggregate Amount of
securities to be registered registered(1) price per share(1) offering price(1) registration fee(1)
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Common Stock, $.001 par value
per share 4,250,000 $1.46875 $6,242,188 $1735.33
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based
on the average of the high and low sales prices on July 1, 1999.
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 that 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 Section 8(a), may
determine.
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KFX INC.
PROSPECTUS
4,250,000 Shares
Common Stock, $.001 par value
This prospectus relates to 4,250,000 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 stockholder named herein. We will not receive any proceeds
from the sale of the common stock, rather the selling stockholder will receive
all of the net proceeds from the sale of the common stock. We will receive,
however, consideration from the selling stockholder in the form of termination
of warrants to purchase common stock owned by the selling stockholder. We will
pay all expenses incident to the registration of the common stock under the
Securities Act of 1933, as amended.
The selling stockholder may sell the common stock from time to time in one or
more transactions for the selling stockholder's own account (which may include
block transactions) on the American Stock Exchange or in negotiated
transactions. Sales will be made on terms and prices negotiated between the
selling stockholder and the buyer or, if made on the American Stock Exchange, at
then current market prices.
The common stock is listed for trading on the American Stock Exchange under
the symbol "KFX." On July 1, 1999, the last reported sale price of the common
stock was $1.4375 per share.
Our corporate offices are located at 1999 Broadway, Suite 3200, Denver,
Colorado 80202. Our telephone number is (303) 293-2992.
Investing in the Common Stock involves certain risks. See the "Risk Factors"
section beginning on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission have approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is ________, 1999.
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TABLE OF CONTENTS
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Page
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THE COMPANY................................................................. 1
RISK FACTORS................................................................ 3
FORWARD LOOKING STATEMENTS.................................................. 9
HOW WE INTEND TO USE THE PROCEEDS........................................... 9
SELLING STOCKHOLDER......................................................... 10
PLAN OF DISTRIBUTION........................................................ 10
LEGAL MATTERS............................................................... 11
EXPERTS..................................................................... 11
WHERE YOU CAN FIND MORE INFORMATION......................................... 11
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You should rely only on the information contained or incorporated by reference
in this prospectus. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should assume that the information appearing in this prospectus or incorporated
by reference is accurate only as of the date on the front cover of this
prospectus. Our business and financial condition may have changed since that
date.
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THE COMPANY
We develop and deliver various technological and service solutions to
the electric power generation industry that enhance energy value while
minimizing environmental harm. As a result, our solutions not only increase our
customers' productivity but also facilitate their ability to comply with
government imposed air emission standards. In general, we offer our customers
technological solutions that enhance the output of coal-fired electric utility
boilers while also reducing any harmful environmental impact.
To date, we offer two leading technologies, K-Fuel(TM) and
NeuSight(TM), to our customers in the electric power industry. First, we offer
customers our K-Fuel(TM) technology, a patented technology that uses heat and
pressure to physically and chemically transform high-moisture, low-energy value
coal and other organic feedstocks into a low-moisture, high-energy solid clean
fuel, or K-Fuel(TM). The principal benefit of the K-Fuel(TM) technology is that
the fuel produced from the process can facilitate the efforts of electric power
producers and other large-scale users of coal to meet the clean air standards
imposed by the Clean Air Act, as amended by the Clean Air Act Amendments of
1990. Based on various analyses, the environmental benefits of burning
K-Fuel(TM) versus most other coal appear to include significant reductions in
emissions of nitrogen oxide, sulfur dioxide, carbon dioxide, mercury and
chlorine.
In February 1999, the first commercial burn of K-Fuel(TM) was
completed at Indiana-Kentucky Electric Corporation's Clifty Creek generating
station in southern Indiana. Initial results of the test burn indicate that
K-Fuel(TM) appears to produce:
. a reduction in nitrogen oxide emissions while maintaining full
capacity and reducing internal power consumption;
. no unusual deterioration of internal boiler operations;
. a reduction in the fuel preparation costs;
. no spontaneous combustion; and
. an improvement in boiler efficiency.
We plan to license our K-Fuel(TM) technology domestically and internationally to
various parties wishing to construct and operate K-Fuel(TM) production
facilities. Although we are pursuing various international opportunities,
during each of the three years ended December 31, 1998, substantially all of our
operating activities were conducted domestically.
Second, in early 1998, through the acquisition of a controlling
interest in Pegasus Technologies, Limited and our formation in mid 1998 of Net-
Power Solutions, LLC, we added NeuSIGHT(TM) to the technological solutions that
we offer to the electric power generation industry. NeuSIGHT(TM), which is a
neural network-based (i.e. artificial intelligence) software technology, is the
leading
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combustion optimization software product for coal-fired electric emissions. In
general, the NeuSIGHT(TM) software gathers operating data from the boiler and
develops a model of optimal boiler combustion, or burn, taking into account
various safety, environmental and other restraints. Electric power companies
that use the NeuSIGHT(TM) software enjoy optimal combustion efficiency, and as a
result, increase their efficiency, lower their operating costs and facilitate
their compliance with applicable environmental laws. Pegasus developed
NeuSIGHT(TM) and continues to enhance it and develop related products while NPS
focuses on the marketing and sales of NeuSIGHT(TM) licenses and related
implementation services.
NeuSIGHT(TM) provides various benefits, including:
. improved combustion performance;
. reduction in nitrogen oxide emissions;
. improvements in boiler efficiency (heat rate), which translates into
lower fuel costs, as well as lower emissions of sulfur dioxide and
carbon dioxide;
. an increase in gross generating capacity, providing more electricity
for the power company to sell;
. lower carbon in the ash waste by-product, which can convert a related
waste product disposal cost into marketable ash product; and
. improvements in opacity, which refers to the visible exhaust
discharged from an emissions stack.
We are actively exploring various options to expand our business by
adding other solutions (technologies, products and services) to meet: (a) the
needs of the electric power industry as it is transformed by deregulation into a
highly competitive industry; and (b) the increasingly stringent environmental
standards triggered by indications of global warming and other environmental
concerns. Most recently, on June 28, 1999, we executed an agreement with
Kennecott Alternative Fuels, Inc., an indirectly owned subsidiary of Kennecott
Energy Company, one of the largest coal companies in the United States, that
expands our strategic partnership with Kennecott to develop a 3 million ton per
year K-Fuel plant. Under this agreement, we received $2.0 million in license
and renewal fees in connection with licensing our K-Fuel(TM) technology to K-
Fuel LLC. We have committed $1.0 million to our partnership with Kennecott to
fund further action associated with developing the next K-fuel facility. With
this strategic partnership and our NeuSIGHT(TM) software, we expect to combine
the benefits of K-Fuel(TM) with those of the NeuSIGHT(TM) optimizing solution,
which would enable utilities to progress towards regulatory compliance.
We maintain our principal executive offices at 1999 Broadway, Suite 3200,
Denver, Colorado 80202. Our telephone number is (303) 293-2992. Our World Wide
Website is http://www.kfx.com. Information contained in our website is
specifically not incorporated herein by reference or otherwise.
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RISK FACTORS
An investment in the common stock being offered hereunder involves a high
degree of risk. Before purchasing the common stock, you should carefully
consider the following risk factors together with all other information in the
prospectus.
It is difficult to evaluate our business and prospects because we are
shifting our strategic focus to the development of Pegasus
KFx was organized in 1992 and in August 1995, we commenced the initial
application of our technology and began construction of a facility near
Gillette, Wyoming, which is owned by KFx Fuel Partners, L.P. (a limited
partnership of which we own 5%), in order to produce K-Fuel(TM). Historically,
our primary enterprise has been the business of licensing and commercializing a
technology that in general uses heat and pressure to physically and chemically
transform high-moisture, low-energy per pound coal and other organic feedstocks
into a low-moisture, high-energy solid fuel known as K-Fuel(TM). Operations at
the K-Fuel facility began in the second quarter of 1998. In March 1998 we
acquired, through our purchase of a controlling ownership interest in Pegasus,
the software product NeuSIGHT(TM). Accordingly, we have a limited operating
history upon which an evaluation of our prospects and future performance can be
made. Although we continue to believe that K-Fuel(TM) technology has
significant long term value, we believe that the software business of Pegasus
offers more near term value. Our prospects must be considered in light of the
risks, expenses and difficulties frequently encountered in the operation of a
new business based on innovative technologies in a highly competitive industry.
We have not achieved material revenue since our inception
We have not achieved material licensing, royalty or product sales revenues
since we were formed in 1992. In addition, no significant revenue was earned
prior to our formation when similar operations to ours were conducted by various
predecessor entities. We have incurred significant net operating losses,
including net losses of $6,783,817 and $5,095,160 in 1998 and 1997,
respectively. At March 31, 1999, we had an accumulated deficit of $48,316,829,
and we expect to incur additional losses in the future. We cannot assure you
that we will ever achieve profitability, or be able to generate earnings
sufficient to meet our interest and principal payment obligations.
The market for NeuSIGHT(TM) and related software depends on successful sales
and marketing strategies
The market for NeuSIGHT(TM) and related software is uncertain. In our
opinion, realization of near term value from the software business of Pegasus
requires, among other things, the successful implementation of new sales and
marketing programs. We have taken numerous steps to implement a variety of such
programs and strategies, however, any evaluation or prediction of their
effectiveness would be premature. We cannot assure you that our sales and
marketing strategies for NeuSIGHT and related software will be successful.
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We may need additional capital to fund our business and to pay interest and
principal, at maturity, on our 6% convertible debentures
We require substantial working capital to fund our business. In past years,
we have experienced operating losses and negative cash flow and expect this
situation to continue in the future. As a result, we have been dependent on
sales of our equity securities and strategic relationships to fund construction
of our K-Fuel facility and operating costs associated with our businesses.
By selling our 6% convertible debentures in July 1997, we incurred
$17,000,000 in principal amount of indebtedness. This indebtedness resulted in
a ratio of long-term debt to stockholders' equity at December 31, 1998 of
approximately 7.9 to 1.
Accordingly, we will require substantial amounts of cash to fund scheduled
payments of principal and interest on our 6% convertible debentures, future
acquisitions and capital expenditures and working capital requirements. We may
be required to raise additional funds through public or private financings,
strategic relationships or other arrangements. We cannot be assured that such
additional funding will be available or on terms satisfactory to us. A lack of
adequate financing may adversely affect our ability to:
. respond to changing business and economic conditions and competitive
pressures;
. make future acquisitions;
. absorb negative operating results; or
. 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 the
indenture related to our 6% convertible debentures. Our ability to raise
additional capital is also limited by a stock purchase agreement between us and
the selling stockholder; however the stock purchase agreement will be terminated
when the selling stockholder sells its common stock.
Our ability to take advantage of net operating losses could be limited
Under Section 382 of the Internal Revenue Code of 1986, 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 Internal Revenue
Code. The quoted market value of a stock is a factor to consider, but not
necessarily a conclusive factor, in determining the fair value of a
corporation's stock. Additional issuances of equity interests by us, including
the issuance of shares of common stock upon the conversion of
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our 6% convertible debentures or on the exercise of outstanding warrants or
options to purchase our common stock may result in an ownership change. In the
event we achieve profitable operations, any significant limitation on the use of
our net operating losses would have the effect of increasing our tax liability
and reducing net income and available cash resources.
Our general project development is uncertain
The process of developing, permitting, financing and constructing K-Fuel(TM)
production facilities is complex, lengthy and costly and subject to numerous
risks, uncertainties and factors beyond our control, including cost overruns,
delays, damage and technical delays. Only a small percentage of the projects
that we evaluate and pursue may ultimately result in operating projects. As a
result, we may not be able to recover any expenses that we incur in the
evaluation and development of certain projects.
Continued development of the existing K-Fuel facility and its future
ownership is uncertain
The existing K-Fuel facility was substantially completed in December 1996.
Thermo Ecotek Corporation, which operates the facility and owns 95% of the
partnership that owns the facility, has continued to refine and optimize
operations at the K-Fuel facility, conducting extensive testing and producing
commercially salable K-Fuel(TM) product. Thermo Ecotek has encountered
difficulties in attempting to achieve optimal and sustained operations at this
K-Fuel facility. Thermo Ecotek has also informed us that they do not intend to
provide significant amounts of additional capital to implement solutions.
Further, on May 24, 1999, Thermo Ecotek announced that its parent, Thermo
Electron Corporation, has proposed the merger of Thermo Ecotek into Thermo
Electron. In conjunction with the proposed merger, Thermo Ecotek announced that
it will record pretax restructuring and other charges partially related to its
decision to hold for sale its investment in the K-Fuel facility in Wyoming.
Further, Thermo Ecotek has ceased operations at this facility and K-Fuel(TM) is
no longer being produced. We are unable to predict the effect on us (including
the recoverability of our investment related to this facility), if any, of
Thermo Ecotek's cessation of operations at the Wyoming K-Fuel facility. We are,
however, actively assisting Thermo Ecotek in soliciting offers to purchase the
Wyoming K-Fuel facility and have begun related discussions with several
interested parties; however we cannot give you any assurance as to when or if
the Wyoming K-Fuel facility will be sold or when, if ever, it will resume
operations.
Development of future K-Fuel facilities is uncertain
We cannot assure you that any future K-Fuel facilities will not experience
technical or operational problems similar or in addition to those experienced
at the Wyoming K-Fuel facility. To the extent that other technical or
operational problems materialize, they may adversely impact our ability to
develop other K-Fuel(TM) projects or facilities.
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We rely on strategic partners
We have established relationships with strategic partners to exploit the K-
Fuel(TM) technology, enhance the application of NeuSIGHT(TM) and further
penetrate the NeuSIGHT(TM) market. Our success will depend upon our ability to
maintain existing strategic relationships and develop and maintain additional
relationships for the further development of our technologies. We are and will
continue to be dependent upon our strategic partners to, among other things,
fund the operations of the partnerships or the joint venture entities in which
we own interests and to provide necessary technical, operational, personnel and
other resources. While each of our strategic partners has an economic
motivation to further the development of their respective joint ventures or
projects with us, the amount of time and resources devoted to such joint
ventures or projects will be controlled by our strategic partners and not by us.
A decline in the financial prospects of a particular strategic partner could
adversely effect such partner's commitment to a joint venture, which could
materially harm us. Moreover, joint ventures or similar arrangements require us
to have financial and other arrangements to meet our commitments to the joint
ventures. We cannot assure you that we will be able to maintain existing
strategic relationships, develop or maintain additional strategic relationships,
meet our commitments with respect to our joint ventures or that our strategic
partners will meet their commitments to any respective joint venture or project.
We are required to pay third parties a portion of licensing and royalty
revenues
We anticipate that a significant portion of our future revenues with respect
to K-Fuel(TM) will be in the form of licensing and royalty payments from third
party licensees operating commercial-scale production facilities of K-Fuel(TM).
Pursuant to various license agreements we have executed, we are required to pay
third parties a portion of licensing and royalty revenues we receive. Amounts
due under these agreements may restrict or limit our ability to pursue other
commercialization opportunities with respect to K-Fuel(TM) because such payments
will decrease cash flow from operations.
No established market for beneficiated fuel products exist
Although we believe that a substantial market will develop both domestically
and internationally for clean coal fuel products, an established market does not
currently exist. As a result, the availability of accurate and reliable pricing
information and transportation alternatives are not fully known. Our future
success will be determined by 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. Although we have successfully
operated a K-Fuel(TM) technology demonstration plant, the market viability of
the K-Fuel(TM) technology will not be known until we complete construction of
one or more commercial-scale production facilities, either in the United States
or internationally, that produce, on a consistent basis, commercial quantities
of fuel and meets certain minimum performance specifications. We face the risk
that commercial-scale production facilities when completed will be unable to
generate sufficient market interest to
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continue in business. Further, we cannot assure you that the K-Fuel facility or
any other commercial-scale facility will be successful.
The market for software in connection with the efficiency of the combustion
of coal is new and uncertain
Combustion and other optimization software relating to the production of
coal or other similar products has only been used by the electric power business
for a few years and has just recently gained market acceptance. 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 NeuSIGHT(TM) and related software products being developed at Pegasus. There
can be no assurance, however, that NeuSIGHT(TM) or any related software products
will experience growth or market acceptance.
Our markets are competitive
We face competition from other companies in the clean coal and alternative
fuel technology industries. Some of these companies have financial and
managerial resources 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(TM), other beneficiated coal products, NeuSIGHT(TM) and other optimization
software products is the Clean Air Act, as amended by Title IV of the Clean Air
Act Amendments of 1990. The Clean Air Act 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(TM), and combustion optimization software, like
NeuSIGHT(TM). We are unable to predict future regulatory changes and their
impact on the demand for our products. A full or partial repeal or revision of
the Clean Air Act would have a material adverse effect on our prospects.
The tax credit provided by Section 29 of the Internal Revenue Code is a
significant incentive for potential joint venture partners to invest in United
States commercial-scale production facilities using the K-Fuel(TM) technology.
A repeal or revision of the amount of federal tax credits provided by Section 29
of the Code could negatively impact our ability to attract additional joint
venture partners for United States commercial-scale production facilities.
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 senior management and key technical personnel. The inability to
retain key managerial and technical
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personnel or attract and retain additional highly qualified managerial or
technical personnel in the future could harm our business or financial
condition.
Our inability to adequately protect our proprietary technology could harm
our business
Our success depends upon our proprietary technology. We rely on a
combination of patent, copyright, trademark and trade secret rights to establish
and protect our proprietary rights. We currently have a patent on our K-Fuel(TM)
technology, however, competitors may successfully challenge the validity or
scope of our patent or any future allowed patents. This patent alone and our
rights with respect to NeuSIGHT(TM) 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 products or software. The
protection of our proprietary rights may be inadequate and our competitors could
independently develop similar technology, duplicate our solutions or design
around any patents or other intellectual property rights we hold.
As is common in the software industry, we may from time to time receive
notices from third parties claiming infringement by our NeuSIGHT(TM) product or
similar software of third party patent and other property rights. At this time,
we have not filed suit against any competitor nor has another company claimed
that our products infringe on its patent or intellectual property rights. Any
claims, with or without merit, could be time-consuming or result in costly
litigation that may materially harm our business.
Year 2000 compliance
We are aware of the issues associated with the programming code in existing
computer systems as the Year 2000 approaches. We have completed a comprehensive
study of the possible effects of the Year 2000 issue on our informational
technology and non-informational technology systems at both our principal
offices and Pegasus' offices, and we believe them to be Year 2000 compliant. We
have hired a third party consultant to perform an analysis on the systems
located at our Gillette, Wyoming facility.
We have been advised that KFx Fuel Partners has undertaken appropriate Year
2000 analyses with respect to its IT and non-IT systems, including its
manufacturing equipment. These analyses are not yet complete, but we have been
advised that KFx Fuel Partners will implement any necessary remedial actions,
which based on the analyses performed to date, are estimated to be at a nominal
cost. The analyses and any remedial actions are expected to be completed in the
third quarter of 1999.
With respect to Year 2000 issue compliance of Pegasus' NeuSIGHT(TM) and
related software products, Pegasus' personnel has performed extensive analysis,
with the assistance of
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third party consultants, and believes that the products are Year 2000 compliant.
The remediation costs relative to these products was nominal.
To date, no significant concerns have been identified as far as our internal
operations. We cannot assure you, however, that Year 2000-related issues will
not have a material adverse effect on our business, financial condition or
results of operations.
In addition, we substantially completed an assessment of the impact that the
Year 2000 issue may have on other systems that support our operations,
including, but not limited to, supplier systems, shipper systems, systems of
suppliers of banking and other financial services, environmental control systems
and building security systems. This analysis was largely based on interviews,
certifications and other correspondence. At this time, we cannot determine the
effects, if any, that any non-compliant systems of third parties may have on our
business, financial condition or results of operations and we cannot assure you
that the effects, if any, would not be material. Nevertheless, based on the
analyses performed to date, we do not expect these third party systems to
present a significant Year 2000 risk to our business, financial condition or
results of operations.
We do not expect to pay cash dividends
We have never paid any cash dividends and do not anticipate paying cash
dividends in the foreseeable future. In addition, we are prohibited from paying
dividends as long as any of our 6% convertible debentures are outstanding.
FORWARD LOOKING STATEMENTS
This prospectus contains forward looking statements that have been made
under the provisions of the Private Securities Litigation Reform Act of 1995.
Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates" and variations of these words and similar expressions are intended
to identify forward looking statements. We have based these statements on our
current expectations about future events. Although we believe that our
expectations about future events are reasonable, we cannot assure you that these
expectations will be achieved. Important factors that would cause our actual
results to differ materially from the forward looking statements in this
prospectus are described in the "Risk Factors" and elsewhere in this prospectus.
We urge you to carefully consider these factors. We caution you that any
forward looking statements are not guarantees of future performance and involve
significant risks and uncertainties and that actual results may differ
materially from those projected in the forward looking statements as a result of
various factors. All forward looking statements attributable to us are
expressly qualified in their entirety by the foregoing cautionary statement.
HOW WE INTEND TO USE THE PROCEEDS
We will not receive any proceeds from the sale of the common stock by the
selling stockholder. When the selling stockholder has sold the common stock,
warrants to purchase our common stock
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owned by the selling stockholder will be cancelled and an agreement between the
selling stockholder and us will be terminated.
SELLING STOCKHOLDER
This prospectus relates to the offer and sale from time to time of up to
4,250,000 shares of common stock by Thermo Ecotek Corporation, in the manner and
under the circumstances described on the cover page of this prospectus and under
"Plan of Distribution." We do not know if, when or in what amounts the selling
stockholder may offer the common stock for sale. We expect, however, that
Thermo Ecotek Corporation will sell the common stock through one or more
negotiated private transactions. There can be no assurance that the selling
stockholder will sell any or all of the common stock offered by this prospectus.
The selling stockholder currently owns 17.8% of the total number of shares
of common stock outstanding. Because the selling stockholder may offer all or
some of the shares of common stock offered by this prospectus, no estimate can
be given as to the principal amount of the common stock that will be held by the
selling stockholder after completion of the offering.
The selling stockholder and any broker or dealer to or through whom any of
the common stock is sold may be deemed to be underwriters within the meaning of
the Securities Act with respect to the common stock offered hereby, and any
profits realized by the selling stockholder or such brokers or dealers may be
deemed to be underwriting commissions. Brokers' commissions and dealers'
discounts, taxes and other selling expenses to be borne by the selling
stockholder are not expected to exceed normal selling expenses for sales. The
registration of the common stock under the Securities Act shall not be deemed an
admission by the selling stockholder or us that the selling stockholder is an
underwriter for purposes of the Securities Act of any common stock offered under
this prospectus.
PLAN OF DISTRIBUTION
On June 12, 1999, we entered into an agreement with the selling
stockholder, Thermo Ecotek Corporation. Under this agreement, the selling
stockholder granted us authorization for a limited time period to find a buyer
for the common stock. The common stock, however, may still be offered by the
selling stockholder from time to time in one or more transactions for its own
account on the American Stock Exchange or in negotiated transactions without our
assistance. Sales will be at prices and on terms then prevailing or at prices
related to the current market price or at negotiated prices and terms. In
effecting sales, brokers or dealers engaged by the selling stockholder may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from the selling stockholder in amounts to be
negotiated prior to the sale. We will not receive commissions from the selling
stockholder; however under the agreement the selling stockholder has agreed to
cancel warrants to purchase our common stock owned by the selling stockholder
and an agreement between the selling stockholder and us will be terminated upon
the sale of the common stock. The selling stockholder and brokers or dealers,
which includes us, and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
such sales.
10
<PAGE>
Shares of common stock not sold pursuant to the registration statement on
Form S-3 of which this prospectus is a part may be subject to certain
restrictions under the Securities Act and could be sold, if at all, only under
Rule 144 or another exemption from the registration requirements of the
Securities Act. In general, under Rule 144, a person (or persons whose shares
are aggregated) who has satisfied a one-year holding period may sell within any
three-month period a number of shares that does not exceed the greater of one
percent of our outstanding common stock or the average weekly reported trading
volume of our common stock during the four calendar weeks prior to such sale. In
general, Rule 144 also permits the sale of common stock by a person who is not
our affiliate and who has satisfied a two-year holding period without any volume
limitation.
LEGAL MATTERS
Certain legal matters relating to the common stock to be offered hereby
will be passed upon for us by Morrison & Foerster, LLP, 370 17th Street, Suite
5200, Denver, Colorado 80202.
EXPERTS
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, 1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934. In accordance with those requirements, we file reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information on file at
the public reference facilities of the SEC located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at 7 World
Trade Center, Suite 1300, New York, New York 10048, and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You can request copies of those
documents upon payment of a duplicating fee, by writing to the SEC. Call the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. The SEC also maintains a website that contains reports, proxy
and information statements and other information regarding the Company. The
address of the site is http://www.sec.gov. The common stock is quoted on the
American Stock Exchange. You may inspect reports and other information
concerning us at the offices of The American Stock Exchange, Inc. at 86 Trinity
Place, New York, New York 10006.
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 hereby incorporated by reference in this
prospectus:
(1) our Annual Report on Form 10-K for the year ended December 31, 1998;
(2) our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
and
11
<PAGE>
(3) the description of the common stock contained in our 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 Exchange Act after the date of this prospectus and prior to
the termination of the offering covered by this prospectus will be deemed to be
incorporated by reference into this prospectus and to be a part of the
prospectus from the date of filing of such documents. Any statement contained in
this prospectus or in any document incorporated or deemed to be incorporated by
reference into this prospectus shall be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
We will provide, without charge to each person to whom this prospectus is
delivered, upon written or oral request of such person, a copy of any and all of
the information that has been or may be incorporated by reference in this
prospectus, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to KFx Inc. Attention: Corporate Secretary, 1999 Broadway,
Suite 3200, Denver, Colorado 80202, telephone (303) 293-2992.
12
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses to be borne by the Registrant,
other than underwriting discounts and commissions, in connection with the
issuance and distribution of the common stock hereunder.
Payable by the
Registrant
--------------
SEC registration fee $ 1,735.33
Accounting fees and expenses...................... 2,500.00
Legal fees and expenses........................... 15,000.00
Printing costs.................................... 500.00
Blue Sky fees and expenses........................ 250.00
Miscellaneous..................................... 250.00
Total............................................. $ 20,235.33
The foregoing items, except for the SEC registration fee, are estimated.
Item 15. Indemnification of Directors and Officers.
Section 102(b)(7) of the Delaware General Corporation Law, or DGCL, and our
certificate of incorporation enables a corporation in our 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
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to Section
174 of the DGCL (providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which a director derived an improper personal benefit.
Section 145 of the DGCL provides that directors and officers of Delaware
corporations may, under certain circumstances, be indemnified against expenses
(including attorneys' fees) and other liabilities actually and reasonably
incurred by them as a result of any suit brought against them in their capacity
as a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful. Section 145 also
provides that directors and officers may also be indemnified against expenses
(including attorneys' fees) incurred by them in connection with a derivative
suit if they acted in good faith and in a manner they reasonably believed to be
in or not opposed to the best interests of the corporation, except that no
indemnification may be made without court approval if such person was adjudged
liable to the corporation.
II-1
<PAGE>
We have implemented such 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(b)(7) and 145 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 complete list of exhibits filed as part of the
Registration Statement. Exhibit numbers correspond to the numbers in the Exhibit
Table of Item 601 of Regulation S-K.
5.1 Opinion of Morrison & Foerster, LLP as to the legality of the common
stock being registered.
10.1 Agreement between KFx Inc. and Thermo Ecotek Corporation, dated as of
June 12, 1999.
23.1 Consent of Morrison & Foerster, LLP (see Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
Item 17. Undertakings.
Insofar as indemnification by the Registrant for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrants has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities 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 a director, officer or controlling person in
connection with the securities being registered hereunder, 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
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
The 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:
(a) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(b) 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) that, 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 the volume of securities offered (if the total dollar value
of securities offered would not exceed what 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 SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(c) 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 (1)(a) and (1)(b) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and 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 SEC by the
undersigned pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended, that are incorporated by reference in the registration
statement.
(2) that, for the purpose of determining any liability under the
Securities Act, 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.
(4) if the Registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Securities Act need
not be furnished; provided, that the Registrant includes in the prospectus, by
means of a post-effective amendment, financial statements required pursuant to
this paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on
II-3
<PAGE>
Form F-3, a post-effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of the Securities Act or
Rule 3-19 of this chapter if such financial statements and information are
contained in periodic reports filed with or furnished to the SEC by the
Registrant pursuant to Section 13 of Section 15(d) of the Exchange Act that are
incorporated by reference in the Form F-3.
(5) the undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on our behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on the 17 day of June,
1999.
KFx Inc.
(Registrant)
By: /s/ Theodore Venners
-------------------------------------------
Name: Theodore Venners
Title: Chairman of the Board of Directors, President
and Chief Executive Officer
II-5
<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Theodore Venners and Seth L. Patterson, his true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration Statement on Form
S-3 and file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
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 in and about the
premises, to all intents and purposes and as full as they might or could do in
person, hereby ratifying and confirming all that such attorney-in-fact and
agent, or his substitute may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: June 17, 1999 By: /s/ Theodore Venners
-------------------------------------
Theodore Venners
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
Date: June 17, 1999 By: /s/ Seth L. Patterson
-------------------------------------
Seth L. Patterson
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Date: June 17, 1999 By: /s/ Stanford M. Adelstein
-------------------------------------
Stanford M. Adelstein
Director
Date: June 17, 1999 By: /s/ Vincent N. Cook
-------------------------------------
Vincent N. Cook
Director
Date: July 6, 1999 By: /s/ Brian D. Holt
-------------------------------------
Brian D. Holt
Director
Date: June 17, 1999 By:
-------------------------------------
Peter G. Martin
Director
II-6
<PAGE>
Date: June 17, 1999 By: /s/ Jack C. Pester
---------------------------
Jack C. Pester
Director
Date: June 17, 1999 By: /s/ Stanley G. Tate
---------------------------
Stanley G. Tate
Director
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<C> <S>
5.1 Opinion of Morrison & Foerster, LLP as to the legality of the common stock
being registered.*
10.1 Agreement between KFx Inc. and Thermo Ecotek Corporation, dated as of June
12, 1999.*
23.1 Consent of Morrison & Foerster, LLP (see Exhibit 5.1).*
23.2 Consent of PricewaterhouseCoopers LLP.*
</TABLE>
________________
* Filed herewith.
<PAGE>
EXHIBIT 5.1 AND EXHIBIT 23.1
OPINION OF MORRISON & FOERSTER, LLP
July 7, 1999
KFx Inc.
1999 Broadway
Suite 3200
Denver, Colorado 80202
Ladies and Gentlemen:
We have acted as your counsel in connection with the filing of the
Registration Statement on Form S-3 (the "Registration Statement") and related
prospectus under the Securities Act of 1933, as amended (the "Act"), relating to
4,250,000 shares of your common stock, $.001 par value per share (the "Shares").
In connection therewith, we have reviewed such Registration Statement, certain
of your corporate records and proceedings taken in connection with the
authorization and issuance of the Shares, and such other factual and legal
matters as we have considered necessary for purposes of this opinion.
Based on and subject to the foregoing, we are of the opinion that the Shares
will, when sold, be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in such Registration Statement. This consent does not
constitute a consent under Section 7 of the Act, and in consenting to the
reference to our firm under such heading we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or the rules and regulations
of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ MORRISON & FOERSTER, LLP
MORRISON & FOERSTER, LLP
<PAGE>
EXHIBIT 10.1
AGREEMENT
This Agreement is made this 12th day of June, 1999 by and between Thermo Ecotek
Corporation ("TCK") and KFx Inc. ("KFx").
WHEREAS, TCK and KFx entered into a Stock Purchase Agreement dated August 18,
1995 (the "Stock Purchase Agreement"); and
WHEREAS, KFx granted TCK a Stock Purchase Warrant dated August 18, 1995 to
purchase 7,750 shares of KFx common stock at $3.65 per share; and
WHEREAS, KFx granted TCK another Stock Purchase Warrant dated August 18, 1995 to
Purchase up to 51% of the common stock of KFx (hereafter, both Stock Purchase
Warrants will be referred to as the "Warrants"); and
WHEREAS, KFx desires to eliminate the $3.65 per share ceiling on the price of
its common stock; and
WHEREAS, KFx further desires to eliminate the ability of TCK to acquire a
controlling interest in KFx; and
WHEREAS, TCK desires to sell the common stock it owns in KFx subject to a
minimum market price as defined below.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereto agree as follows:
1. Authorization to KFx to Find a Buyer: TCK hereby grants KFx authorization to
------------------------------------
find a buyer (the "Buyer") for 4,250,000 shares of the common stock of KFx
owned by TCK (the "TCK Stock") on or before the Termination Date (as defined
in Section 3, below) for the consideration specified in Section 2.
2. Consideration: The price to be paid by Buyer for 100% of the TCK Stock will
-------------
be $2.00 per share.
3. Termination of Authorization: KFx's authorization to find a Buyer for the
----------------------------
TCK Stock shall expire 180 days from the effective date of the registration
statement registering the TCK stock (the "Termination Date") but, in any
event, KFx's authorization shall expire 270 days from the date of this
Agreement.
<PAGE>
4. Extension of Termination Date:
-----------------------------
A. The Termination Date may be extended by written request by KFx for up to
60 days, provided however, the $2.00 per share price shall all be
-----------------
increased by 15% to $2.30 per share.
B. If the TCK Stock is not purchased by a Buyer within such 60-day extension
of the Termination Date, KFx's authorization to find a Buyer for the TCK
Stock shall automatically terminate, and KFx shall have no further
authorization to find a Buyer for the TCK Stock.
5. Closing of the Sale of the TCK Stock: If KFx finds a Buyer willing to
------------------------------------
purchase the TCK Stock on the terms described herein, the Buyer and TCK will
negotiate in good faith agreements for the sale and transfer of the TCK
Stock. At the Closing of the purchase of the TCK Stock TCK will transfer the
Warrants to KFx for cancellation. KFx shall have no right to directly buy
the TCK Stock for its own account or to sell the TCK Stock directly to Buyer.
Such agreements with Buyer shall contain such representations, warranties,
terms, conditions, indemnities and opinions as are customary for such stock
and warrant transactions. At the Closing, in consideration of TCK's
agreement to transfer the warrants to KFx for cancellation, KFx shall provide
TCK a general release with respect to KFx and KFx Fuel Partners, L.P. TCK
shall provide to KFx a similar general release. Each release shall also
include a statement that, upon the closing, each of the Stock Purchase
Agreement and Registration Rights Agreement, dated August 18th, 1995 between
KFx and TCK will terminate and no longer be of any force or effect.
6. Opinion of Counsel: As a condition to the closing, KFx shall provide TCK
------------------
with an opinion of counsel, with respect to KFx, that this Agreement complies
with or does not violate any applicable laws, regulations or KFx agreements.
7. Information About Buyers: KFx shall keep TCK informed on at least a weekly
------------------------
basis about its progress in finding a Buyer for the TCK Stock, and KFx shall
immediately inform TCK about any offer from any Buyer to purchase the TCK
Stock.
8. Sale by TCK Without KFx Involvement: If, during the term of this Agreement,
-----------------------------------
TCK should sell all the TCK Stock to a Buyer who was not found by KFx, TCK
shall nevertheless agree to terminate the Warrants at the Closing of the sale
of the TCK Stock and the Stock Purchase Agreement and Registration Rights
Agreement shall terminate and no longer be of any force or effect.
9. Condition Precedent: It shall be a condition precedent to the effectiveness
-------------------
of this Agreement that the Board of Directors of both KFx and TCK approve the
execution and entering to of this Agreement by KFx and TCK, respectively.
<PAGE>
10. Governing Law; Prior Agreements: This Agreement shall be governed by
-------------------------------
Massachusetts law, and shall supercede all written or oral agreements and
contracts with respect to the Stock Purchase Agreement or the Warrants.
<PAGE>
IN WITNESS WHEREOF, the parties execute this Agreement by their duly authorized
officers.
KFX INCORPORATED THERMO ECOTEK CORPORATION
/s/ Seth L. Patterson /s/ Brian D. Holt
- ---------------------- ------------------
Seth L. Patterson Brian D. Holt
Executive Vice President President and Chief Executive Officer
and Chief Financial Officer
<PAGE>
EXHIBIT 23.2
INDEPENDENT ACCOUNTANTS' CONSENT
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 30, 1999, relating to the
financial statements, which appears in KFx Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1998. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
July 2, 1999
