KFX Inc. Prospecuts Supplement No. 2

Filed pursuant to Rule No 424(b)(3)
File Number  333-87774

Prospectus Supplement No. 2

(to Prospectus dated August 28, 2002)


KFx INC.

24,595,204 Shares of Common Stock

This Prospectus Supplement No. 2 supplements our prospectus dated August 28, 2002.  The prospectus relates to the resale of share of our common stock by the selling stockholders identified in the prospectus (including their transferees, pledges, donees or other successors).  You should read this Prospectus Supplement No. 2 in conjunction with the prospectus listed above.

Amendments to Selling Stockholder Table

                The information contained in the table and in the footnotes to the table under the heading “Selling Stockholders” is hereby amended with respect to the selling stockholders listed below as follows:

Selling Stockholder

Total Common Stock
Beneficially Owned
Before Offering

Maximum
Number of
shares
Offered
Hereby

Shares of Common Stock
Beneficially Owned
After Offering

Name

(1)
Number

     

Number

     

     

(2)
Number

     

(3)
%

                                             

     

                    

                    

                    

                    

Westcliff Long/Short, L.P.

540,979

     

540,979

(12)

     

0

     

*

____________________

(12)     

Includes 62,806 shares of common stock and 150,888 shares of common stock issuable upon exercise of warrants that were transferred to Westcliff Long/Short, L.P. by Palm Trust on April 1, 2005.

The date of this prospectus is May 24, 2005.