KFX INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2004

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

For the transition period from to

Commission File Number: 0-23634

KFX INC.

(Exact name of registrant as specified in its charter)


Delaware		84-1079971
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

55 Madison Street, Suite 745 Denver, Colorado		80206
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (303) 293-2992

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes x No ¨

On August 2, 2004 there were 59,946,903 shares of the registrant’s common stock, $.001 par value, outstanding.

KFX INC.

FORM 10-Q QUARTERLY REPORT

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

TABLE OF CONTENTS


		Page No.
PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	Consolidated Balance Sheets – June 30, 2004 (Unaudited) and December 31, 2003	3

	Consolidated Statements of Operations - Three Months Ended June 30, 2004 and 2003 (Unaudited)	4

	Consolidated Statements of Operations – Six Months Ended June 30, 2004 and 2003 (Unaudited)	5

	Consolidated Statements of Changes in Stockholders’ Equity – Year Ended December 31, 2003 and Six Months Ended June 30, 2004 (Unaudited)	6

	Consolidated Statements of Cash Flows – Six Months Ended June 30, 2004 and 2003 (Unaudited)	7

	Notes to Consolidated Financial Statements (Unaudited)	9

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23

ITEM 4.	CONTROLS AND PROCEDURES	23

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	25

ITEM 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS	25

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	25

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	25

ITEM 5.	OTHER INFORMATION	26

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	26

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KFX INC.

CONSOLIDATED BALANCE SHEETS


	JUNE 30, 2004 (Unaudited)			DECEMBER 31, 2003
	(Dollars and shares in thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	30,877		$	23,701
Prepaid expenses		306			104
Other current assets		40			238
Current portion of note receivable (Note 3)		851			1,006

Total current assets		32,074			25,049

Restricted cash		2,729			—
Plant construction in progress		10,158			6,315
Property and equipment, net of accumulated depreciation		3,579			334
Patents, net of accumulated amortization		1,224			1,266
Note receivable (Note 3)		1,455			1,486
Prepaid royalty		514			517
Other assets		37			37

TOTAL ASSETS	$	51,770		$	35,004

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,006		$	3,084
Accrued expenses		732			568
Interest payable		15			9
Deferred revenue		19			19
Current maturity of long-term debt and note payable		180			170

Total current liabilities		1,952			3,850
Long-term liabilities:
Long-term portion of note payable		38			—
Asset retirement obligation		2,729			—
Long-term portion of deferred revenue		47			56

Total liabilities	$	4,766		$	3,906
Minority interest		27			—
Commitments and Contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $.001 par value, 20,000 shares authorized, none issued
Common stock, $.001 par value, 120,000 shares authorized; 55,779 and 52,952 shares issued and outstanding, respectively		56			53
Stock subscription receivable		(3,427	)		—
Additional paid-in capital		170,795			149,047
Accumulated deficit		(120,447	)		(118,002	)

Total stockholders’ equity	$	46,977		$	31,098

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	51,770		$	35,004

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

KFX INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	UNAUDITED THREE MONTHS ENDED JUNE 30,
	2004			2003
	(Dollars and shares in thousands, except per share amounts)
OPERATING REVENUES
Contract and license revenue	$	5		$	27

Total operating revenues		5			27

OPERATING COSTS & EXPENSES

Marketing, general & administrative		1,462			2,264
Engineering and technical services		98			313
Depreciation and amortization		94			67
Asset impairment		45			—

Total operating costs and expenses		1,699			2,644

OPERATING LOSS	$	(1,694	)	$	(2,617	)
Other income		168			—
Interest income (expense), net		116			(61	)

Loss from continuing operations before minority interest	$	(1,410	)	$	(2,678	)

Minority interest		13			—

Loss from continuing operations	$	(1,397	)	$	(2,678	)

Loss from discontinued operations (Note 2)		—			(448	)

NET LOSS	$	(1,397	)	$	(3,126	)

BASIC AND DILUTED NET LOSS PER COMMON SHARE
Loss from continuing operations	$	(0.03	)	$	(0.06	)
Loss from discontinued operations		—			(0.01	)

Basic and diluted loss per share	$	(0.03	)	$	(0.07	)

Weighted-average common shares outstanding, basic and diluted		55,518			46,993

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

KFX INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	UNAUDITED SIX MONTHS ENDED JUNE 30,
	2004			2003
	(Dollars and shares in thousands, except per share amounts)
OPERATING REVENUES
Contract and license revenue	$	17		$	31

Total operating revenues		17			31

OPERATING COSTS & EXPENSES

Marketing, general & administrative		2,525			3,442
Engineering and technical services		125			820
Depreciation and amortization		181			129
Asset impairment		45			—

Total operating costs and expenses		2,876			4,391

OPERATING LOSS	$	(2,859	)	$	(4,360	)

Other income (expense)		168			(1	)
Interest income (expense), net		233			(176	)

Loss from continuing operations before minority interest	$	(2,458	)	$	(4,537	)

Minority interest		13			—

Loss from continuing operations	$	(2,445	)	$	(4,537	)

Loss from discontinued operations (Note 2)		—			(776	)

NET LOSS	$	(2,445	)	$	(5,313	)

BASIC AND DILUTED NET LOSS PER COMMON SHARE
Loss from continuing operations	$	(0.04	)	$	(0.10	)
Loss from discontinued operations		—			(0.02	)

Basic and diluted loss per share	$	(0.04	)	$	(0.12	)

Weighted-average common shares outstanding, basic and diluted		54,681			43,777

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

KFX INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars and Shares in Thousands)


	Common Stock				Additional Paid-in Capital		Note and Stock Subscription Receivable			Retained Earnings			Total Stockholders’ Equity
	Shares		Amount		Additional Paid-in Capital		Note and Stock Subscription Receivable			Retained Earnings			Total Stockholders’ Equity
Balance at December 31, 2002	38,968		$	39	$	111,510	$	(95	)	$	(109,719	)	$	1,735

Common stock and warrants issued for services	338			—		2,398		—			—			2,398

Common stock and warrants issued in a private placement	7,745			8		18,276		—			—			18,284
Common stock issued on exercise of options and warrants	5,480			5		14,467		—			—			14,472
Stock returned and cancelled	(450	)		—		—		—			—			—
Stock appreciation rights	—			—		2		—			—			2

Issuance of common stock for note receivable	871			1		2,394		—			—			2,395
Payment of note receivable for services	—			—		—		95			—			95
Net loss	—			—

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