28 March, 2002 – KFx Inc. today reported preliminary unaudited results for 2001. The estimated 2001 consolidated net loss of $14,834,000 ($.57 per share) compares to a 2000 net loss of $12,290,000 ($.49 per share).

The estimated 2001 net loss includes $7,897,000 of non-cash charges, principally for depreciation and amortization and debenture premium accretion and $3,678,000 of interest expense. The 2000 loss includes $5,796,000 of non-cash charges, principally for depreciation and amortization and debenture premium accretion and $1,294,000 of interest expense.

The estimated consolidated net loss for the fourth quarter of 2001 was $5,320,000 ($.20 per share) compared to net loss for the fourth quarter of 2000 of $4,186,000 ($.16 per share). The estimated fourth quarter 2001 net loss includes $3,456,000 of non-cash charges, principally for depreciation and amortization and debenture premium accretion and $1,977,000 of interest expense.

Estimated consolidated operating loss for 2001 was $9,283,000 compared to 2000 operating loss of $8,998,000. Estimated consolidated operating loss for the fourth quarter of 2001 was $2,844,000 compared to an operating loss of $2,913,000 in the fourth quarter of 2000.

Pegasus posted estimated 2001 revenues of $2,753,000, an increase of 45% over 2000. Pegasus estimated revenues for the fourth quarter of 2001 were $870,000, an increase of 196% over the fourth quarter of 2000. During 2001, Pegasus realized increased order volume over the prior year, principally due to winning a contract to install the NeuSIGHT™ neural network software at 23 of Cinergy’s coal-fired electric utility plants. The settlement of a patent infringement lawsuit filed by a competitor and subsequent acquisition of that competitor’s power optimization segment also had a positive impact on 2001 order intake and revenue. Total Pegasus order backlog as of December 31, 2001 was $8,285,000.

“We have focused on retiring debt and bringing in new orders for Pegasus. Based on current backlog and new orders, Pegasus should be producing positive cash flows for KFx in the fourth quarter,” stated Ted Venners, KFx Chairman & CEO. “The debentures were originally $17 million and today there are $3 million outstanding. This will not only have a dramatic positive effect on our balance sheet, but also removes over one million dollars per year in interest costs. The Company has a final payment to be made for the purchase of Pavilion’s power optimization segment. When that is completed, the Company will be well positioned for the future,” concluded Venners.

The financial information above is preliminary. The Company plans to file its Form 10-K for the year ended December 31, 2001 by April 15, 2002 to allow management to finalize the preliminary unaudited results for 2001.

KFx provides total fuel solutions for the power industry. Its patented K-Fuel® process converts low heating value coal into clean, high-energy fuel. KFx’s web site address is www.kfx.com . Pegasus Technologies, Inc., a majority-owned subsidiary of KFx, is the industry leader in neural network based smart applications for the power generation market. The Pegasus suite of combustion optimization applications reduces emissions and increases the efficiency of fossil-fueled electric generating units. The Pegasus web site address is www.pegasustec.com .